UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary Proxy Statement | |
| ☐ | Confidential, for Use of the Commission Only (as permitted by Rule14a-6(e)(2)) | |
| ☒ | Definitive Proxy Statement | |
| ☐ | Definitive Additional Materials | |
| ☐ | Soliciting Material Pursuant to§240.14a-12 | |
Clear Channel Outdoor Holdings, Inc.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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| ☒ | No fee | |||
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| ☐ | Fee paid previously with preliminary materials. | |||
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| A LETTER FROM OUR CEO AND INDEPENDENT CHAIR OF OUR BOARD |
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Dear Fellow Stockholders:
On behalf of Clear Channel Outdoor Holdings, Inc.’s Board of Directors, it is our pleasure to invite you to our annual meeting of stockholders.
It is the first time we write to you as a leadership team after Scott assumed the position of President and Chief Executive Officer on January 1, 2022. We look forward to a fruitful partnership in the coming years as we build on our strong foundation and pursue new growth and market opportunities.
We would like to express our immense gratitude to William Eccleshare for his years of service to Clear Channel Outdoor, and we appreciate his continued engagement as the Executive Vice Chairman of our Board of Directors.
While 2021 brought its own share of challenges, it was also a year of recovery and resilience. The steps that we took in 2020 to adjust to the impacts of the COVID-19 pandemic positioned us well to return to growth in 2021, and the lessons learned from this uncertain time will only strengthen our organization in the future. With the support of our Board of Directors and talented team of employees, we remain focused on pursuing our ongoing priorities of revenue expansion, strengthening our balance sheet, free cash flow generation and investments in profitable growth.
Thank you for your continued support and confidence in Clear Channel Outdoor. We hope you will join us for our Annual Meeting webcast on May 4, 2022.
Sincerely,
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| Scott R. Wells | W. Benjamin Moreland | |
| Chief Executive Officer and Director | Chair of the Board of Directors |
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NOTICE OF
2022
ANNUAL
MEETING OF
STOCKHOLDERS
AND
PROXY
STATEMENT
Wednesday, May 4, 2022
9:00 a.m. Eastern Time
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
20880 Stone Oak Parkway4830 North Loop 1604W, Suite 111
San Antonio, Texas 78258
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 22, 201878249
As a stockholder of Clear Channel Outdoor Holdings, Inc. (“Clear Channel Outdoor” or the “Company”), you are hereby given notice of and invited to attend, in person or by proxy,that the annual meeting of stockholders of Clear Channel Outdoor towill be held in the Lonestar Ballroomby means of a live webcast, at the Hilton San Antonio Airport, located at 611 NW Loop 410, San Antonio, Texas 78216,meetnow.global/MKGDU6F, on June 22, 2018,May 4, 2022 at 9:00 a.m. local time,Eastern Time for the following purposes:
| 1. | to elect |
| 2. | to approve an advisory resolution on executive compensation; |
| 3. | to ratify the selection of Ernst & Young LLP as the independent registered public accounting firm of Clear Channel Outdoor for the year ending December 31, |
to transact any other business |
Only stockholders of record at the close of business on May 9, 2018March 8, 2022 are entitled to notice of, and to vote at, the annual meeting.
Twocut-out admission tickets are included on the back cover of this document and are required for admission to the annual meeting. Please contact Clear Channel Outdoor’s Secretary at Clear Channel Outdoor’s corporate headquarters if you need additional tickets. If you plan to attend the annual meeting, please note that space limitations make it necessary to limit attendance to stockholdersfollow the voting and one guest per each stockholder. Admission toregistration instructions set forth in the annual meeting will be on a first-come, first-served basis. Registration and seating will begin at 8:45 a.m. local time. Each stockholder may be asked to present valid picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the record date. Cameras (including mobile telephones with photographic capabilities), recording devices and other electronic devices will not be permitted at the annual meeting. The annual meeting will begin promptly at 9:00 a.m. local time.accompanying proxy statement.
Your attention is directed to the accompanying proxy statement. In addition, although mere attendance atparticipation in the annual meeting will not revoke your proxy, if you attendparticipate in the annual meeting webcast, you may revoke your proxy and vote in person.during the meeting. To ensure that your shares are represented at the annual meeting, please complete, date, sign andsubmit your vote by Internet, telephone or mail, whether or not you plan to attend the enclosed proxy card inannual meeting.
By Order of the return envelope provided for that purpose.Board of Directors:
Lynn A. Feldman |
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Executive Vice President, General Counsel and Secretary |
San Antonio, Texas
May 17, 2018March 16, 2022
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF ANNUAL MEETING OF
The Proxy Statement and Annual Report
|
2018 ANNUAL MEETING OF STOCKHOLDERS
NOTICE OF ANNUAL MEETING AND PROXY STATEMENT
TABLE OF CONTENTSTable of Contents
 | Notice and Proxy Statement 2022 |
This summary highlights information you will find in this Proxy Statement. As it is only a summary, please review the complete Proxy Statement before you vote.
2022 Annual Meeting Information
 |  |  |  | |||
Wednesday, May 4, 2022 at 9:00 a.m. Eastern Time | Location: meetnow.global/MKGDU6F | Record Date: March 8, 2022 | Proxy Mail Date: On or about March 23, 2022 | |||
HOW TO VOTE
By Internet: Visit the website listed on your proxy card | By Phone: Call the telephone number on your proxy card | By Mail: Sign, date and return your proxy card in the enclosed envelope | During the Annual Meeting: Participate in the Annual Meeting webcast |
| Voting: | Each share of common stock is entitled to one vote for each director nominee and one vote for each of the other proposals to be voted on. | |
| Admission: | Admission to the annual meeting is limited to stockholders as of the record date. If you plan to attend the annual meeting, please follow the registration instructions set forth in this proxy statement. | |
ANNUAL MEETING AGENDA AND VOTE RECOMMENDATIONS
Matter | Board Vote Recommendation | Page Reference (for more details) | ||||
| Proposal 1 | Election of Directors | FOR | 19 | |||
| Proposal 2 | Advisory Resolution on Executive Compensation | FOR | 73 | |||
| Proposal 3 | Ratification of the selection of Ernst & Young LLP as the independent registered public accounting firm for the year ending December 31, 2022 | FOR | 74 |
In this Proxy Statement, “we”, “our”, “us”, “Clear Channel Outdoor” and the “Company” refer to Clear Channel Outdoor Holdings, Inc., and the “annual meeting” refers to the 2022 Annual Meeting of Stockholders. We will begin mailing this Proxy Statement and form of proxy card to stockholders on or about March 23, 2022.
2021 BUSINESS HIGHLIGHTS
Over 1,500 Digital Billboards part of Over 4,000 Digital | ||||||||
| Over 17,500 Digital | |||||||
Deployed 90 TOTAL DIGITAL DISPLAY REVENUE ACCOUNTS FOR 35% OF AMERICAS REVENUE | DIGITAL COVERAGE IN ALL TOP 20 DMAs | Deployed 1,355 Digital Displays in Europe in 2021 ACCOUNTS FOR 35% OF EUROPE REVENUE |
STRONG EXECUTION AND IMPROVING RESULTS
| ||||||||
COMMITMENT TO DRIVING PROFITABLE GROWTH AND STRENGTHENING OUR BALANCE SHEET
| WELL-POSITIONED TO DELIVER IMPROVED RESULTS IN 2022 | |||||||
- Completed smooth transition to new CEO with support of united team focused on pursuing clear vision. - Strengthened our relationships with our advertising partners and continued to invest in our digital transformation. - Navigated impacts of the COVID-19 pandemic and delivered improved results with each passing quarter, culminating in our strong fourth quarter performance. | - Maintained healthy liquidity position and focus on expense management. - Refinanced our 9.25% Senior Notes and repaid the $130 million outstanding balance under our revolving credit facility. - Evaluating strategic alternatives for our European business as part of our focus on optimizing our portfolio. | - The outdoor advertising industry has returned to growth, and we believe we can grow revenue in excess of real GDP and traditional media as a result of our business transformation efforts. - Focused on continuing to execute strategic roadmap, including accelerating our digital transformation, improving customer-centricity and driving executional excellence. - The pool of potential advertising partners we can pursue is growing as we leverage our platform investments to serve them in new and innovative ways. |
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DIRECTOR NOMINEES
Below is information about each of our director nominees:
Name | Age | Independent Director | Committee Memberships | |||||||||||
Thomas C. King | 61 | Operating Partner at Atlas Merchant Capital | ✓ | CC | ||||||||||
| 58 | Director at Crown Castle International Corp. | ✓ | None | ||||||||||
Jinhy Yoon | 50 | Executive Vice President, Credit Research at PIMCO | None | |||||||||||
CC = Compensation Committee
CORPORATE GOVERNANCE HIGHLIGHTS
The Board of Directors (the “Board”) of Clear Channel Outdoor believes that good governance is key to achieving long-term stockholder value and that the Company’s long-term success requires the Company’s commitment to a robust framework of guidelines and practices that serve the best interests of the Company and all of our stockholders. Below are some key highlights of our corporate governance framework:
Board Practices ✓ 7 out of 10 of our directors are independent. ✓ The Board is led by an independent, non-executive Chair. ✓ Commencing with our 2023 annual meeting, all of our directors will be elected annually. ✓ All members of our Audit, Compensation and Nominating and Corporate Governance Committees are independent as defined by the NYSE listing standards and applicable SEC rules. ✓ Each Board committee operates under a written charter that has been approved by the Board and is reviewed annually. ✓ The Board conducts periodic executive sessions, where non-executive directors meet without management. ✓ The Nominating and Corporate Governance Committee oversees an annual self-evaluation process for the Board and each standing committee of the Board and is responsible for proposing any modification or alterations to Board or committee practices or procedures. | Compensation Practices ✓ Robust annual risk assessment of executive compensation programs, policies and practices. ✓ Comprehensive cash and equity claw-back policy for senior executives. ✓ Significant stock ownership requirements for senior executives and directors. Stockholder Matters ✓ Robust stockholder engagement. ✓ Annual Say-on-Pay voting. ✓ Rights Plan in effect will expire on April 15, 2022. Other Governance Practices ✓ Our Code of Business Conduct and Ethics, which applies to all employees, as well as all officers and all directors, reinforces our core values and helps drive our workplace culture of compliance with ethical standards, integrity and accountability. ✓ We have made a strong commitment to Corporate Social Responsibility and strengthening the Company’s Environmental, Social and Governance (“ESG”) program. For more details, please see our 2021 ESG Report, which is available on our website at www.investor.clearchannel.com. | |
| Notice and Proxy Statement 2022 iii |
CORPORATE SOCIAL RESPONSIBILITY AND ENVIRONMENTAL, SOCIAL AND GOVERNANCE INITIATIVES
Clear Channel Outdoor’s Board and management team are committed to the Company’s guiding principle of making a difference in the communities we serve.
Despite the worldwide health and socio-economic crises we faced in 2020 and 2021, we remain determined to serve stakeholders, cities and citizens worldwide in a way that anchors ESG within our business model and demonstrates that, with preparation and commitment, we believe that combining digital transformation, economic growth and sustainable business is increasingly possible. Our commitment to Creating a Better World through our People-Powered Platform has developed through 2020, when we published our Human Rights Policy and launched our Global Environment Program; 2021, when we joined the UN Global Compact and completed Life Cycle Assessments of several key products; and will continue into 2022, when we plan to provide expanded carbon emission reporting through the Carbon Disclosure Project and analyze the environmental data we have collected through divisional materiality assessments (in line with the Global Reporting Initiative).
In 2021, Clear Channel Outdoor produced its first ESG Report, which details how we strive to behave ethically and responsibly as a company, an employer and a business partner and how we endeavor to use our resources and products to drive meaningful change. Please see our 2021 ESG Report, which is available on Clear Channel Outdoor’s website at www.investor.clearchannel.com. Neither our 2021 ESG Report nor our website is a part of, or incorporated by reference into, this proxy statement.
We believe addressing the challenges that affect people’s daily lives is critical for influencing greater societal change. In furtherance of our goal to drive change, we donate public service advertising on an annual basis to non-profit and governmental organizations for their use in communicating information that is intended to positively affect the lives of those within our communities. In addition, our support extends to both local and national organizations as we intend to help:
improve health and public safety;
ensure a sustainable environment;
promote arts, education and cultural diversity; and
support market-by-market advertising standards.
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This collaboration works to inspire citizens to make a difference within their own communities and helps us to meet our commitment to being a responsible business that creates value for our clients, our communities, our people and, ultimately, our stockholders.
Health and Safety Highlights |
We aid non-profits and law enforcement agencies as they make our communities safer. • Since 2007, we have partnered with federal and local law enforcement, which has led to the direct apprehension of fugitives. • Since 2013, we have partnered with Polaris to combat human trafficking with campaigns in cities across America. • We use our billboards to communicate emergency information to the mass public instantly. As examples, we use media across America to help recover abducted children through the distribution of AMBER alerts and continue to run public health messages during the COVID-19 pandemic encouraging health and safety measures. • Since 2017, Clear Channel Scandinavia has used its platform and presence to assist homeless persons in finding shelter on cold nights. • In 2021, the Health Promotion Board in Singapore launched its third season of the National Steps Challenge, with part of its campaign utilizing our out-of-home advertising platforms to, firstly, raise island-wide awareness and, secondly, encourage commuters to adopt a healthier lifestyle. • In 2021, we partnered with No Kid Hungry to launch a U.S. nationwide digital billboard campaign to help connect kids to the food they need during the holiday season. • In 2021, we continued to partner with the Texas Center for the Missing to raise awareness about local missing children in four major Texas markets: Houston, Dallas, San Antonio and El Paso. Three children featured in our Texas campaigns were returned home safely. |
Arts, Education and Diversity Highlights |
As an ethical business, we are delighted to help address critical issues affecting the communities we serve, such as education and literacy and music and art. • We have an ongoing partnership with The Female Quotient, an organization committed to advancing gender equality in the workplace. • In 2021, we continued to partner with the National League of Cities, the National Summer Learning Association and the Afterschool Alliance for the annual Lights on Afterschool rally to highlight the critical need for afterschool programs. • In 2021, we supported World AIDS Day across our nationwide digital network. • In 2021, Clear Channel France continued its work for people with disabilities with the Perce-Neige Foundation by supporting its campaigns, running joint virtual sessions for our employees and launching the Sharing Factory program. Our French team also partnered with the H’Up awards for entrepreneurs with disabilities and supported the #Wethe15 global campaign, calling for the rights of disabled people to be better recognized. • In 2021, we took our celebration of LGBT Pride, in partnership with Spotify, international for the month of June. |
Advertising Standards Highlights |
We remain committed to delivering our advertisers’ messages to the consumer. This requires both a defense of free speech and a sensitivity to contemporary standards and concerns. We recognize the need to balance these demands and adhere to a high standard of advertising. • We have established exclusionary zones, which prohibit advertisements of all products illegal for sale to minors. • We continue our traditional commitment at both the national and local levels to display public service messages for certain community causes. • We encourage diversity of advertised goods and services in all markets. • We continue to assert the right to reject creative content that is misleading, sexually explicit or overly suggestive or that in any way negatively reflects upon the character, integrity or standing of any organization or individual. |
| Notice and Proxy Statement 2022 v |
Commitment to Environmental Sustainability
We are focused on operating our business in ways that minimize the potential for causing harm to the environment, and as part of our Global Environmental Program, we are committed to Carbon Net Zero by 2050 (with many of our business units on target to reach this goal by 2030) and are committed to employing ecologically friendly materials and operational procedures.
100% of our posters and bulletins across the U.S. are made from recyclable Polyethylene Substrates. We converted over 98% of our illuminated display panels and over 75% of our illuminated transit shelter displays in the U.S. to LED lighting, decreasing energy consumption by more than 60% across a three-year period, and are working toward full conversion in 2022.
In 2021, Clear Channel United Kingdom diverted 99.7% of waste from landfill.
Up to 98% of our U.S. digital billboard components are recyclable.
Our UK and Belgian businesses became carbon neutral in 2021.
35% of our business by revenue is certified or benchmarked against ISO 14001 standards, and continued adoption of this standard is a goal of our Global Environmental Program.
Clear Channel Europe is committed to purchasing 100% renewable electricity in all new contracts from 2021 onwards to reduce our Scope 2 emissions.
In 2021, all business units across Clear Channel Outdoor came together to run our most substantial global campaign to date, offering free advertising space on our digital panels and billboards worldwide to Conservation International. The “Hear me while you can” campaign aimed to ensure that nature was heard at COP26 and to inspire world leaders, delegates and people around the world to understand what will be lost if we fail to protect nature.
Ethics and Compliance
Clear Channel Outdoor is committed to maintaining the highest standards of compliance, ethics, honesty, openness and accountability in our business operations. We maintain a Code of Business Conduct & Ethics (the “Code”) that sets forth standards for our officers, directors, employees, interns, contractors and agents throughout our corporate structure. Training on the Code is mandatory upon commencement of employment by Clear Channel Outdoor, and we require completion of additional trainings covering certain topics contained in the Code on a periodic basis. Highlights from our Code, and its underlying policies and procedures, include:
No-Retaliation Policy for anyone who, acting in good faith, notifies us of a possible violation of the Code, our policies or the law.
Human Rights Policy that sets forth our commitment to human rights and labor protections across all of our operations—and the expectation that our business partners uphold the same standards.
Anti-Corruption Policy that prohibits offering, attempting to offer, authorizing or promising any bribe or kickback for the purpose of obtaining or retaining business or an unfair advantage; imposes restrictions on government official interaction; and seeks to mitigate risk in our gifts, entertainment and travel approval processes.
Due Diligence procedures and contractual provisions, mitigating risk areas in our supply chain, including bribery and corruption, sanctions breaches and human rights matters.
Conflict of Interest Policy that requires the disclosure of matters that could potentially lead to a conflict of interest through an independent approval process.
Supplier Code of Conduct and contractual clauses used across our business, requiring key suppliers to operate at a high ethical standard.
We set standards and controls across the Company relating to corporate social responsibility, financial and economic crime controls, transparency, integrity and the mitigation of compliance risk, and we require that our leaders regularly report fraud risk and adhere to the standards that we set. We reflect our understanding of compliance risk through regular risk assessment, audit and assurance processes.
vi Notice and Proxy Statement 2022 | |
We are also committed to safeguarding and maintaining the privacy of personal information (“PII”), and we honor the California Consumer Privacy Act, the General Data Protection Regulation, other similar laws and regulations and data privacy rights requests. We maintain policies and procedures and conduct training to ensure that we protect PII wherever we may process or control it, and our websites include Privacy & Cookie Notices describing how we collect, protect, store, use, anonymize, aggregate and/or dispose of PII automatically collected and/or voluntarily provided and offer those with privacy concerns the right to object to any processing, to request that we change their PII or to request that we not sell their PII. We honor such requests within legally prescribed time frames. In addition, we subject our supply chain to data privacy impact assessments where appropriate.
OUR PEOPLE
Advancing Diversity and Inclusion
Clear Channel Outdoor is an equal opportunity employer and is committed to providing a work environment that is free of discrimination and harassment. We respect and embrace diversity of thought and experience and believe that a diverse workforce produces more innovative insights and solutions, resulting in better products and services for our customers. As we bring brands face-to-face with people, we believe our teams need to be as diverse in their composition and outlook as the audiences we reach every day, and we work together to create an inclusive environment where everyone can bring their true selves to work and has the opportunity to enhance partnerships where we live, work and serve.
Enhancing diversity of our workforce remains an ongoing priority for the Company, and we have implemented diversity and inclusion strategies across our global business. Amidst calls for sociopolitical change that we have seen play out in all corners of the world, we have reinforced our commitment to our people and to promoting diversity and inclusion, and we acknowledge the need to do more to continue improving and evolving as an organization. In an effort to further promote a diverse and inclusive environment, we launched the Executive Diversity Advisory Council in the U.S. in 2020, which remains ongoing in 2021; implemented the International Fairness program in Europe and Latin America, as well as the “Bring You Shape Us” employee value proposition, which encourages our people to bring their true selves to work; and surveyed employees globally to gather insights on diversity and inclusion preferences to help guide and prioritize our efforts.
Commitment to Safety and Wellness
Safety is one of our core values, and we are committed to providing our employees with a safe workplace and to prioritizing the physical health, mental health and well-being of our employees. One of the ways in which we do so is by offering an Employee Assistance Program (“EAP”), which gives employees access to licensed professional counselors and other specialists, at no cost, for help with balancing work and life issues. We have also implemented an Employee Relief Fund to help employees facing financial hardship immediately after a disaster or during unanticipated and unavoidable personal emergencies.
For Clear Channel Outdoor, 2021 required an increased focus on training and benefits provision relating to mental health across all of our divisions. Furthermore, in response to the COVID-19 pandemic, we implemented significant changes that we determined were in the best interest of our employees and the communities in which we operate, all of which comply with government regulations. This included transitioning the vast majority of our employees to work-from-home for large portions of 2020 and 2021 while implementing additional safety measures for employees continuing critical on-site work. We are now executing on our phased Return-to-Office plan on an office-by-office basis, ensuring compliance with applicable regulations, as well as local health authority guidance, and implementing robust safety procedures and protocols to protect our employees. Given the evolving-nature of the COVID-19 pandemic, our Return-to-Office plan is nimble, allowing each office the flexibility to return to work-from-home directives as necessary based on local conditions.
In line with our priority of protecting the safety, health and well-being of our employees, we surveyed our employees in 2021 to determine how we could more effectively provide them with support. This survey, administered by a third party, focused on the following areas: concern and connection; virtual work effectiveness; senior leadership response and communication; and employee wellness, health and safety. Utilizing the results of this survey, we developed an action plan to face the challenges presented by the COVID-19 pandemic, and we remain engaged and
| Notice and Proxy Statement 2022 vii |
productive, including communicating the availability of counseling under the EAP through company-wide notifications and HR portal updates; providing COVID-19 resources on locating vaccines, work-from-home health tips and COVID-19 trainings, among other things; and regular communication of our progress through all-hands meetings, regional and departmental meetings and other forms of communication.
Compensation and Benefits Programs
Our compensation and benefits programs are designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders. We provide employees with compensation packages that include base salary and annual incentive bonuses tied to Company and division performance, in line with our pay-for-performance philosophy. Our sales employees are incentivized through sales commission programs, with our highest performing individuals further awarded through formal recognition programs. Our executives and certain other employees receive long-term equity awards that vest based on our relative total shareholder return or over a defined period. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests. We also provide our employees and their families with access to a variety of healthcare and insurance benefits, qualified spending accounts, retirement savings plans and various other benefits.
EXECUTIVE COMPENSATION HIGHLIGHTS
Our Compensation Committee, with support from our independent compensation consultant, periodically evaluates our compensation practices to ensure that they support the objectives of our business, align with market practices and provide incentive to deliver key financial metrics that are explicitly linked with stockholder value creation. Certain highlights for 2021 include:
| • | We continued our practice of annual incentive plan awards tied to Company and division performance and individual performance targets. |
| • | Our long-term incentive (“LTI”) program provides for annual equity awards for our executive team members made up of 50% restricted stock units and 50% performance stock units that vest based on our relative total shareholder return over a three-year period. |
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| • | The compensation determinations for our NEOs for 2021 reflect the strong overall performance of Clear Channel Outdoor and the contributions of our leaders to driving the year’s successes. Even having adjusted our annual incentive payout curve so that achieving a maximum payout for our executives would be more challenging than under our traditional payout curve, our named executive officers (“NEOs”) earned payouts between 170% and 173% of their individual target opportunities as a result of strong business and individual performance. This is in contrast to 2020, when as a result of the negative impact of COVID-19 on our financial results, we did not meet our 2020 financial targets and annual incentive payouts were below 50% of each NEO’s individual target opportunities. |
| • | In accordance with the retention awards made to the broader employee base earlier in the year, the Company awarded additional LTI grants to the NEOs. This grant was intended to help foster retention and the continuity of our team through the ongoing COVID-19 pandemic and senior leadership transition in early 2022. |
| • | The Company entered into amended and restated employment agreements with Mr. Scott R. Wells and Mr. C. William Eccleshare in connection with their respective new roles as President and Chief Executive Officer and Executive Vice Chairman of the Board. |
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Clear Channel Outdoor Holdings, Inc.
PROXY STATEMENT2022 Proxy Statement
This proxy statement contains information related to the annual meeting of stockholders (the “annual meeting”) of Clear Channel Outdoor Holdings, Inc. (referred to herein as “Clear(“Clear Channel Outdoor,” “CCOH,” “Company,” “we,”Outdoor”, “CCOH”, the “Company”, “we”, “our” or “us”) to be held on Friday, June 22, 2018,Wednesday, May 4, 2022, beginning at 9:00 a.m. local time, in the Lonestar BallroomEastern Time, at the Hilton San Antonio Airport, located at 611 NW Loop 410, San Antonio, Texas 78216,meetnow.global/MKGDU6F, and at any postponements or adjournments thereof. ThisOn or about March 23, 2022, we will begin to mail to our stockholders either a notice containing instructions on how to access this proxy statement is first being sent to stockholders onand our annual report online or about May 23, 2018.a printed copy of these proxy materials. The Company will bear the costs of preparing and mailing thisthe proxy statementmaterials and other costs of the proxy solicitation made by the Board of Directors of Clear Channel Outdoor (the “Board”).
QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
| Q: | WHY AM I |
| A: | Clear Channel Outdoor is |
| Q: | WHY DID I RECEIVE A NOTICE IN THE MAIL REGARDING THE INTERNET AVAILABILITY OF PROXY MATERIALS INSTEAD OF A FULL SET OF PROXY MATERIALS? |
| A: | As permitted by Securities and Exchange Commission (“SEC”) rules, we are making this proxy statement |
| Q: | WHAT PROPOSALS WILL BE VOTED ON AT THE ANNUAL MEETING? |
| A: | There are |
the election of the nominees for director named in this proxy statement;
the approval of an advisory resolution on executive compensation; and
the ratification of the selection of Ernst & Young LLP as Clear Channel Outdoor’s independent registered public accounting firm for the year ending December 31, 2018.2022.
| Q: | WHICH OF MY SHARES MAY I |
| A: | All shares of |
| Q: | WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND AS A BENEFICIAL OWNER? |
| A: | Most stockholders of Clear Channel Outdoor hold their shares through a |
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Stockholder of Record:Record: If your shares are registered directly in your name with Clear Channel Outdoor’s transfer agent, Computershare Trust Company, N.A. (“Computershare”), you are considered, with respect to those shares, the stockholder of record, and these proxy materials are being sent directly to you by Computershare on behalf of Clear Channel Outdoor. As the stockholder of record, you have the right to grant your voting proxy directly to Clear Channel Outdoor or to vote in person atduring the annual meeting. Clear Channel Outdoor has enclosed a proxy card for you to use. Please sign and return your proxy card.
Beneficial Owner:Owner: If your shares are held in a stock brokerage account or by a bankbroker or other nominee, you are considered the beneficial owner of shares held in “street name,”name”, and these proxy materials are being forwarded to you by your broker or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker on how to vote and also are invited to attend the annual meeting. However, since you are not the stockholder of record, you may not vote these shares in person atduring the annual meeting, unless you obtain and present at the meeting a signedlegal proxy from the record holderyour broker, bank or other nominee giving you the right to vote the shares. Your broker or nominee has enclosed a voting instruction cardshares and register for you to usethe meeting in directingaccordance with the broker or nominee regarding how to vote your shares. Please sign and return your voting instruction card.instructions set forth below.
| Q: | WHAT CONSTITUTES A QUORUM? |
| A: | The holders of a majority of the total voting power of Clear Channel Outdoor’s |
| Q: | IF MY SHARES ARE HELD IN “STREET NAME” BY MY BROKER, WILL MY BROKER VOTE MY SHARES FOR ME? |
| A: | Under New York Stock Exchange (“NYSE”) rules, brokers have discretion to vote the shares of customers who fail to provide voting instructions on “routine |
As described above, if you do not provide your broker with voting instructions and the broker is not permitted to vote your shares on a proposal, a “brokernon-vote” occurs. Brokernon-votes will be counted for purposes of establishing a quorum at the annual meeting and will have no effect on the vote on any of the proposals at the annual meeting.
| Q: | HOW CAN I ATTEND THE ANNUAL MEETING? |
| A: | We are hosting the annual meeting by means of a live webcast due to the ongoing effects and uncertainties stemming from the COVID-19 pandemic and to enable attendance by a large number of stockholders. You will not be able to attend the meeting in person. You are entitled to participate in the annual meeting only if you were a stockholder of record of Clear Channel Outdoor as of the close of business on the Record Date or if you hold a legal proxy from the record holder for the annual meeting. |
Stockholder of Record: You will be able to listen to the annual meeting, submit questions and vote by going to meetnow.global/MKGDU6F.
Beneficial Owner: If you wish to attend the annual meeting, you must register in advance. See “HOW DO I REGISTER TO ATTEND THE ANNUAL MEETING?” below.
We encourage you to access the meeting website prior to the start time to allow ample time for check in. The virtual annual meeting will begin promptly at 9:00 a.m. Eastern Time.
| Q: | HOW DO I REGISTER TO ATTEND THE ANNUAL MEETING? |
| A: | Stockholder of Record: You do not need to register. Follow the instructions on your Notice of Internet Availability of Proxy Materials or proxy card. See “HOW CAN I ATTEND THE ANNUAL MEETING?” above. |
2 Notice and Proxy Statement 2022 | |
Beneficial Owner: If you wish to register to attend the annual meeting, you must provide our transfer agent, Computershare, with your name, email address and a copy of a legal proxy from your broker, bank or other nominee reflecting your beneficial stock ownership in Clear Channel Outdoor. Registration requests must be in writing and be mailed to:
By Regular Mail
PO BOX 505000
Louisville, KY 40233-5000
UNITED STATES
By Overnight Delivery
462 South 4th Street
Suite 1600
Louisville, KY 40233-5000
UNITED STATES
Requests for registration must be labeled “Legal Proxy” and be received no later than 5:00 p.m. Eastern Time on April 29, 2022. You will receive an email from Computershare acknowledging your registration along with a Control Number.
| Q: | HOW CAN I PARTICIPATE IN THE VIRTUAL ANNUAL MEETING? |
| A: | If you are a stockholder as of the Record Date and have logged in using your control number, you may submit a question at any point during the meeting (until the floor is closed to questions) by typing your question on the Q&A tab and clicking “Send.” Shareholder questions or comments are welcome, but we will only answer questions pertinent to annual meeting matters, subject to time constraints. Questions regarding personal matters and statements of advocacy are not pertinent to annual meeting matters and therefore will not be addressed. Questions or comments that are substantially similar may be grouped and answered together to avoid repetition. Rules of Conduct applicable to the annual meeting will be accessible on the virtual meeting website during the annual meeting. The audio broadcast of the annual meeting will be archived at edge.media-server.com/mmc/p/sewomgfy for at least one year. |
| Q: | WHAT IF I RUN INTO TECHNICAL ISSUES WHILE TRYING TO ACCESS THE ANNUAL MEETING? |
| A: | The virtual meeting platform is supported across browsers and devices running the most updated version of applicable software and plug-ins. Participants should give themselves plenty of time to log in and ensure that they have a strong internet connection and that they can hear streaming audio prior to the start of the annual meeting. |
If you encounter technical difficulties with the virtual meeting platform on the annual meeting day, please call the technical support number that will be posted on the annual meeting website. Technical support will be available starting at 8:45 a.m. Eastern Time and until the end of the annual meeting.
| Q: | HOW CAN I |
| A: |
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| • | By Internet: If you have Internet access, you may submit your proxy by going to www.envisionreports.com/cco and following the instructions on how to complete an electronic proxy card. You will need the 16-digit number included on your Notice of |
| • | By Telephone: If you have access to a touch-tone telephone, you may submit your proxy by calling the |
| • | By Mail: You may authorize a proxy to vote by mail by requesting a proxy card from us, indicating your vote by completing, signing and dating the proxy card where indicated on the proxy card and by mailing or otherwise returning the proxy card in the envelope that will be |
| Notice and Proxy Statement 2022 3 |
your name exactly as it appears on the proxy |
If you planhold your shares in street name, you may submit voting instructions to attend the annual meeting, please note that space limitations make it necessary to limit attendance to stockholders and one guest per each stockholder. Admission to the annual meetingyour broker, bank or other nominee. In most instances, you will be able to do this over the Internet, by telephone or by mail. Please refer to information from your broker, bank or other nominee on a first-come, first-served basis. Registration and seating will begin at 8:45 a.m. local time. Each stockholder may be askedhow to present valid picture identification, such as a driver’s license or passport. Stockholders holding stock in brokerage accounts (“street name” holders) will need to bring a copy of a brokerage statement reflecting stock ownership as of the Record Date. Cameras (including mobile telephones with photographic capabilities), recording devices and other electronic devices will not be permitted at the annual meeting.submit voting instructions.
| Q: | WHAT IF I |
| A: |
For participants in the 401(k) plan who own shares of Clear Channel Outdoor through the plan, the plan permits you to direct the plan trustee on how to vote the Clear Channel Outdoor shares allocated to your account. Your instructions to the plan trustee regarding how to vote your shares will be delivered via the enclosed proxy card. Your proxy card for shares held in the 401(k) must be received by 11:59 p.m. Eastern Time on June 19, 2018. The trustee will vote shares as to which no instructions are received in proportion to voting directions received by the trustee from all plan participants who vote.
| If your proxy card is signed and returned without specifying choices, the shares will be voted as recommended by the Board. |
| Q: | WHAT IF I |
| A: | If you withhold your vote on the election of directors, it will have no effect on the outcome of the vote on the election of directors. |
If you abstain from voting on (i) the approval of an advisory resolution on executive compensation or (ii) the ratification of the selection of Ernst & Young LLP as our independent registered public accounting firm for the year ending December 31, 2018,2022, it will have the same effect as a vote “against” this proposal.these proposals.
Abstentions are counted as present for purposes of determining a quorum.
| Q: | WHAT DOES IT MEAN IF I |
| A: | It means that your shares are registered differently or are in more than one account. Please provide voting instructions for all notices, proxy cards and voting instruction cards you receive. |
| Q: | WHAT ARE CLEAR CHANNEL OUTDOOR’S VOTING RECOMMENDATIONS? |
| A: | The Board recommends that you vote your shares “FOR”: |
the nominees for director named in this proxy statement;
the approval of an advisory resolution on executive compensation; and
| Q: | WHAT VOTE IS REQUIRED TO ELECT THE DIRECTORS AND APPROVE EACH PROPOSAL? |
| A: | The directors will be elected by a plurality of the votes properly cast. |
| Q: | WHERE CAN I |
| A: | A list of stockholders of record entitled to vote at the annual meeting will be accessible on the virtual meeting website during the annual meeting for those attending the annual meeting, and for ten days prior to the annual meeting, at our corporate offices at 4830 North Loop 1604W, Suite 111, San Antonio, Texas 78249. |
| Q: | MAY I CHANGE MY VOTE OR REVOKE MY PROXY? |
| A: | If you are a stockholder of record, you may change your vote or revoke your proxy at any time before your shares are voted at the annual meeting by (i) sending the Secretary of Clear Channel Outdoor a proxy card dated later than your last submitted proxy card, (ii) authorizing a new proxy to vote on a later date on the Internet or by telephone (it being understood that only your latest Internet or telephone proxy submitted prior to the annual meeting will be counted), (iii) notifying the Secretary of Clear Channel Outdoor in writing or (iv) voting |
4 Notice and Proxy Statement 2022 | |
| Q: | WHERE CAN I |
| A: | Clear Channel Outdoor will announce preliminary voting results at the annual meeting and will then publish final results in a Current Report on Form8-K, which we anticipate filing with the |
| Q: | MAY I |
| A: | Yes. These materials are available atwww.envisionreports.com/ |
| Notice and Proxy Statement 2022 5 |
THE BOARD OF DIRECTORSThe Board of Directors and Corporate Governance
Our Board which currently consists of eight members, is responsible for overseeing the direction of Clear Channel Outdoor and for establishing broad corporate policies. However, inIn accordance with corporate legal principles, itour Board is not involved inday-to-day operating details.activities of the Company. Members of the Board are kept informed of Clear Channel Outdoor’s business through discussions with the Chairman andCompany’s Chief Executive Officer, the Chief Financial Officer and other executive officers, by reviewing analyses and reports sent to them, by receiving updates from Board committees and by otherwise participating in Board and committee meetings.
Our director, RobertBoard is currently comprised of ten directors: W. Pittman, has not been nominated forre-election to our Board at the annual meeting but will continue to serve for the remainder of his term until the annual meeting. Effective as of the date of the annual meeting, the number of directors on the Board will be reduced to seven. Mr. Pittman will continue to serve as ourBenjamin Moreland (our Chair), C. William Eccleshare (our Executive Vice Chairman), Scott R. Wells (our Chief Executive Officer after the annual meeting.Officer), John Dionne, Lisa Hammitt, Andrew Hobson, Thomas C. King, Joe Marchese, Mary Teresa Rainey and Jinhy Yoon.
COMPOSITION OF THE BOARD OF DIRECTORS
Our Board is currently divided into three classes, serving staggered three-year terms. Atterms, each of which will expire at our 2023 annual meeting of our stockholders, directorsthe stockholders. Our amended Certificate of Incorporation provides for a phase out of the classification of the Board. Directors elected at this annual meeting will be elected for a one-year term expiring at our 2023 annual meeting of stockholders.
From and after our 2023 annual meeting of stockholders, the Board will no longer be classified, and each director will be elected for a one-year term annually. Prior to succeedour 2023 annual meeting of stockholders, in the classevent of any increase or decrease in the number of directors, whose terms have expired. As longother than those who may be elected by the holders of any series of preferred stock under specified circumstances, the number of directors added to, or eliminated from, each class will be apportioned such that the number of directors in each class thereafter shall be as iHeartMedia continues to indirectly own sharesnearly equal as possible, but in no case will a decrease in the number of our common stock representing more than 50%directors constituting the Board shorten the term of any incumbent director or an increase in the total voting powernumber of our common stock, it will havedirectors constituting the ability to directBoard extend the electionterm of allany director beyond the members2023 annual meeting of our Board, the composition of our Board committees and the size of the Board.
Because iHeartMedia controls more than 50% of the voting power of Clear Channel Outdoor, we have elected to be treated as a “controlled company” under the NYSE’s Corporate Governance Standards. Accordingly, we are exempt from the provisions of the Corporate Governance Standards requiring that: (1) a majority of our Board consists of independent directors; (2) we have a nominating and governance committee composed entirely of independent directors and governed by a written charter addressing the nominating and governance committee’s purpose and responsibilities; and (3) we have a compensation committee composed entirely of independent directors with a written charter addressing the compensation committee’s purpose and responsibilities. However, notwithstanding this exemption, as described more fully below, we have a Compensation Committee composed entirely of independent directors with a written charter addressing the Compensation Committee’s purpose and responsibilities.
During 2017,In 2021, the Board held 22 meetings.six meetings and also acted by written consent. All of Clear Channel Outdoor’sour incumbent directors attended at least 75%more than 90% of the aggregate of all meetings of the Board held duringand the periods in which they served during 2017. All of Clear Channel Outdoor’s directors also attended at least 75%committees of the aggregate of all meetings of the Board committees on which they served during 2017.2021.
STOCKHOLDER MEETING ATTENDANCE
Clear Channel Outdoor encourages, but does not require, its directors to attend the annual meeting of stockholders. NoneAll of theour directors attended the annual meeting of stockholders in 2017.2021.
TheOur Board currently consists of ten directors, one of whom currently serves as our Chief Executive Officer. For a director to be independent, the Board must determine that such director does not have any direct or indirect material relationship with Clear Channel Outdoor. Pursuant to our governance guidelines (the “Governance Guidelines”), the Board has adopted a setundertaken its annual review of Governance Guidelines addressing, among other things, standards for evaluating the independence of Clear Channel Outdoor’s directors. The full text of the Governance Guidelines can be found on the investor relations section of Clear Channel Outdoor’s website at www.clearchanneloutdoor.com.director independence.
6 Notice and Proxy Statement 2022 | |
The Board has adopted the following standards for determining the independence of its members:
1.A director must not be, or have been within the last three years, an employee of Clear Channel Outdoor. In addition, a director’s immediate family member (“immediate family member” is defined to include a person’s spouse, parents, children, siblings, |
2.A director or immediate family member must not have received, during any |
3.A director must not be a current partner or employee of a firm that is Clear Channel Outdoor’s internal or external auditor. In addition, a director must not have an immediate family member who is (a) a current partner of such firm or (b) a current employee of such a firm and personally works on Clear Channel Outdoor’s audit. Finally, neither the director nor an immediate family member of the director may have been, within the last three years, a partner or employee of such a firm and personally worked on Clear Channel Outdoor’s audit within that time. |
4.A director or an immediate family member must not be, or have been within the last three years, employed as an executive officer of another company where any of Clear Channel Outdoor’s present executive officers at the same time serve or served on that company’s compensation committee. |
5.A director must not be a current employee, and no director’s immediate family member may be a current executive officer, of a material relationship party (“material relationship party” is defined as any company that has made payments to, or received payments from, Clear Channel Outdoor for property or services in an amount |
6.A director must not own, together with ownership interests of his or her family, ten percent (10%) or more of a material relationship party. |
7.A director or immediate family member must not be, or have been during the last three years, an executive officer of a charitable organization (or hold a similar position), to which Clear Channel Outdoor makes contributions in an amount |
8.A director must be “independent” as that term is defined from time to time by the rules and regulations promulgated by the SEC, by the listing standards of the NYSE and, with respect to at least two members of the compensation committee, by the applicable provisions of, and rules promulgated under, the Internal Revenue Code of 1986, as amended (collectively, the “Applicable Rules”). For purposes of determining independence, the Board will consider relationships with Clear Channel Outdoor and any parent or subsidiary in a consolidated group with Clear Channel Outdoor or any other company relevant to an independence determination under the Applicable Rules. |
The above independence standards conform to, or are more exacting than, the director independence requirements of the NYSE applicable to Clear Channel Outdoor. The above independence standards are set forth on Appendix A of the Governance Guidelines.
Our Board currently consists of eight directors, one of whom currently serves as our Chairman and Chief Executive Officer. For a director to be independent, the Board must determine that such director does not have any direct or indirect material relationship with Clear Channel Outdoor. Pursuant to the Governance Guidelines, the Board has undertaken its annual review of director independence.
OurThe Board has affirmatively determined that Harvey L. Tepner, Paul Keglevic,all current directors (other than Messrs. Wells and Dale W. TremblayEccleshare and Ms. Yoon) are independent under the listing standards of the NYSE, as well as Clear Channel Outdoor’s independence standards set forth above. In addition, the Board has determined that each member ofcurrently serving on the Compensation Committee is independent under the heightened independence standards for compensation committee members under the listing standards of the NYSE and the rules and regulations of the SEC and that each member ofcurrently serving on the Audit Committee is independent under the heightened independence standards required for audit committee members by the listing standards of the NYSE and the rules and regulations of the SEC. In making these determinations, ourthe Board reviewed information provided by the directors and by Clear Channel Outdoor with regard to the directors’ business and personal activities as they relate to Clear Channel Outdoor and its affiliates.
In the ordinary course of business during 2017, we2021, Clear Channel Outdoor entered into purchase and sale transactions for products and services with certain entities affiliated with members of ourthe Board, as described below, and the following transactions were considered by ourthe Board in making their independence determinations with respect to Messrs. Keglevic, TepnerDionne, Hobson, Marchese and Tremblay:Moreland:
| Notice and Proxy Statement 2022 7 |
a subsidiary of a company for which Mr. TepnerDionne previously served as a director paid us approximately $1,200,079 during 2021 for outdoor advertising services;
a company for which Mr. Hobson serves as a director paid CCOA (as defined below) approximately $265,000us $60,938 during 20172021 for outdoor advertising services; and
a company for which an immediate family member of Mr. TepnerMarchese serves as a partner/co-founder paid us approximately $321,021 during 2021 for outdoor advertising services;
a company for which Mr. Marchese serves as a director paid our affiliatesus approximately $53,000$123,270 during 20172021 for outdoor advertising services;
a client of a consulting company for which Mr. Marchese serves as chief executive officer paid us approximately $13,950 during 2021 for outdoor advertising services;
a company for whom we provided outdoor advertising services in 2021 also paid Mr. Marchese severance payments in 2021;
a company for which Mr. Moreland serves as a director paid us approximately $102,641 during 2021 for ordinary course easements, and we paid that company approximately $2,400 for ordinary course site leases; and
a hospital system for which Mr. Moreland serves as a director paid us approximately $2,549,795 during 2021 for outdoor advertising services.
All of the payments described above arewere for arms-length, ordinary course of business transactions, and we generally expect transactions of a similar nature to occur during 2018. Our2022. The Board has concluded that such transactions or relationships do not impair the independence of the director.Messrs. Dionne, Hobson, Marchese and Moreland.
The rules of the NYSE require thatnon-management or independent directors of a listed company meet periodically in executive sessions. In addition, the rules of the NYSE require listed companies to schedule an executive session including only independent directors at least once a year. Clear Channel Outdoor’s independent directors met separately in executive session at least one time during 2017.
The Board has created2021. Mr. Moreland, the office of Presiding Director to serve as the leadnon-management director of the Board. The office of the Presiding Director at all times will be held by an “independent” director, as that term is defined from time to time by the listing standards of the NYSE and as determined by the Board in accordance with the Board’s Governance Guidelines. The Presiding Director has the power and authority to do the following:
The Presiding Director position is rotated among the independent directors, in alphabetical order of last name, effective the first day of each calendar quarter. As of the date of this proxy statement, Harvey L. Tepner is serving as the Presiding Director. We currently expect that Mr. Tepner as will continue serving as our Presiding Director following the annual meeting.presides over all such executive sessions.
The Board historically has had twothree standing committees: (i) the Audit Committee, and(ii) the Compensation Committee and (iii) the Nominating and Corporate Governance Committee. Each committee hasconsists solely of independent directors and is governed by a written charter, which guides its operations.charter. The writtencommittee charters of the Audit Committee and the Compensation Committee are available on Clear Channel Outdoor’sour website at www.clearchanneloutdoor.com.www.investor.clearchannel.com.
The table below sets forth the current members ofprovides membership information for each of these committees and the Intercompany Note Committee, which was established in accordance with the termscommittee of the settlementBoard as of certain derivative litigation relating to a promissory note (the “Due from iHeartCommunications Note”) between iHeartCommunications, Inc., our indirect parent entity (“iHeartCommunications”), as maker, and Clear Channel Outdoor, as payee, for the specific purpose of monitoring the Due from iHeartCommunications Note.March 8, 2022:
Board Committee Membership
| Director Name | Audit Committee | Compensation Committee | Nominating and Corporate Governance Committee | ||||||||||||
Scott R. Wells
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John Dionne
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C. William Eccleshare
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Lisa Hammitt
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Andrew Hobson
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Thomas C. King
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Joe Marchese
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W. Benjamin Moreland «
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Mary Teresa Rainey
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Jinhy Yoon
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Meetings Held in 2021
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5
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7
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4
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« = Chair of the Board = Committee Chair 
= Committee member
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| | |||||
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* = Chairman
X =The Audit Committee member
The Audit Committee
consists of Andrew Hobson, Mary Teresa Rainey and John Dionne, each of whom is independent as defined under the rules of the NYSE and Rule 10A-3 of the Exchange Act. Mr. Hobson has been designated as an “audit committee financial expert”, as such term is defined in Item 407(d)(5) of Regulation S-K.The Audit Committee assists the Board in its oversight of the quality and integrity of the accounting, auditing and financial reporting practices of Clear Channel Outdoor. Paul Keglevic has been designated by our
Board as an “Audit Committee Financial Expert,” as defined by the SEC. The Audit Committee met four times during 2017. All current members of the Audit Committee are independent as defined by the listing standards of the NYSE and Clear Channel Outdoor’s independence standards and satisfy the other requirements for audit committee membership, including the heightened independence standards, of the NYSE and the SEC.
The Audit Committee’s primary responsibilities, which are discussed in detail within its charter, include the following, subject to the consent of our corporate parent:following:
be responsible for the appointment, compensation, retention and oversight of the work of the independent registered public accounting firm and any other registered public accounting firm engaged for the purpose of preparing an audit report or to perform other audit, review or attest services and all fees and other terms of their engagement;
review and discuss reports regarding the independent registered public accounting firm’s independence;
review with the independent registered public accounting firm the annual audit scope and plan;
review with management, the director of internal audit and the independent registered public accounting firm the budget and staffing of the internal audit department;
review and discuss with management and the independent registered public accounting firm the annual and quarterly financial statements and the specific disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” prior to the filing of the Annual Report on Form10-K and Quarterly Reports onForm 10-Q;
review with the independent registered public accounting firm the critical accounting policies and practices used;
review with management, the independent registered public accounting firm and the director of internal audit Clear Channel Outdoor’s internal accounting controls and any significant findings and recommendations;
discuss guidelines and policies with respect to risk assessment and risk management;
oversee Clear Channel Outdoor’s policies with respect to related party transactions; and
review with management and the General Counsel the status of legal and regulatory matters that may have a material impact on Clear Channel Outdoor’s financial statements and compliance policies.
The full text of the Audit Committee’s charter can be found on our website at www.clearchanneloutdoor.com.www.investor.clearchannel.com.
The Compensation Committee
The Compensation Committee
consists of Thomas C. King, Lisa Hammitt and Joe Marchese, each of whom is independent under the rules of the NYSE and further qualifies as a non-employee director for purposes of Rule 16b-3 under the Exchange Act. The members of the Compensation Committee are not current or former employees of Clear Channel Outdoor, are not eligible to participate in any of Clear Channel Outdoor’s executive compensation programs, do not receive compensation that would impair their ability to make independent judgments about executive compensation and are not “affiliates” of the Company, as defined under Rule 10C-1 under the Exchange Act. The Compensation Committee administers Clear Channel Outdoor’s incentive-compensation plans and equity-based plans, determines compensation arrangements for all executive officers other than our Chairman and Chief Executive Officer, Chief Financial Officer, Senior Vice President—Corporate Finance, General Counsel and Chief Accounting Officer, and makes recommendations to the Board concerning compensation for directors of Clear Channel Outdoor and its subsidiaries.our directors. The Compensation Discussion and Analysis section of this proxy statement provides additional details regarding the basis on which the Compensation Committee determines executive compensation.
The Compensation Committee’s primary responsibilities, which are discussed in detail within its charter, are to:
assist the Board in ensuring that a proper system of long-term and short-term compensation is in place to provide performance-oriented incentives to management and that compensation plans are appropriate and competitive and properly reflect the objectives and performance of management and Clear Channel Outdoor;
review and approve corporate goals and objectives relevant to the compensation of Clear Channel Outdoor’s executive officers, evaluate the performance of the executive officers in light of those goals and objectives and, either as a committee or together with the other independent directors (as directed by the Board), determine and approve the compensation level of the executive officers based on this evaluation;
| Notice and Proxy Statement 2022 9 |
review and adopt, and/or make recommendations to the Board with respect to, incentive-compensation plans for executive officers and equity-based plans;
review and discuss with management the Compensation Discussion and Analysis to be included in Clear Channel Outdoor’s annual proxy statement and determine whether to recommend to the Board the inclusion of the Compensation Discussion and Analysis in the annual proxy statement;
prepare the Compensation Committee met 4 times during 2017. Allreport for inclusion in Clear Channel Outdoor’s annual proxy statement; and
recommend to the Board the appropriate compensation for the non-employee members of the Compensation Committee are independent as defined by the listing standards of the NYSE and Clear Channel Outdoor’s independence standards and meet the heightened independence standards for compensation committee membership of the NYSE and the SEC.Board.
The Compensation Committee has the ability, under its charter, to select and retain, at the expense of Clear Channel Outdoor, independent legal and financial counsel and other consultants necessary to assist the Compensation Committee as the Compensation Committee may deem appropriate, in its sole discretion. The Compensation Committee also has the authority to select and retain any compensation consultant to be used to survey the compensation practices in Clear Channel Outdoor’s industry and to provide advice so that Clear
Channel Outdoor can maintain its competitive ability to recruit and retain highly qualified personnel. The Compensation Committee has the sole authority to approve related fees and retention terms for any of its counsel and consultants.
The Compensation Committee’s primary purposes, which are discussed in detail within its charter, are to:
Our Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel, Chief Accounting Officer and Senior Vice President—Corporate Finance simultaneously hold the same positions at iHeartCommunications and iHeartMedia, our indirect parent entities. The compensation of those officers is set by the board of directors and the Compensation Committee of the board of directors of iHeartMedia, and we are allocated a portion of the cost of the services of certain of those officers pursuant to the Corporate Services Agreement, dated November 16, 2005, by and between iHeartMedia Management Services, Inc.consultant, Willis Towers Watson (“iHMMS”Willis”), an indirect subsidiary of iHeartMediato provide executive compensation benchmarking data and us (the “Corporate Services Agreement”). Accordingly, our Compensation Committee charter does not govern theincentive and retention compensation arrangements, policies and practices of our Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel, Chief Accounting Officer and Senior Vice President—Corporate Finance. The term “executive officer” used above in the description of the Compensation Committee’s purposes refers to our employees (other than our Chairman and Chief Executive Officer, Chief Financial Officer, General Counsel, Chief Accounting Officer and Senior Vice President—Corporate Finance) who are (1) subject to the requirements of Section 16 of the Securities Exchange Act of 1934, as amended (the “Securities Exchange Act”), governing insider trading reporting or (2) covered by the regulations under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), governing qualified performance-based compensation. See the Compensation Discussion and Analysis section of this proxy statement.design advice. The Compensation Committee has the authority to delegaterequested and evaluated responses from Willis addressing its responsibilities to subcommittees if the Compensation Committee determines such delegation would beindependence in the bestaccordance with applicable NYSE rules and concluded that Willis’ work does not raise any conflict of interest of Clear Channel Outdoor.or independence concerns.
The full text of the Compensation Committee’s charter can be found on our website at www.clearchanneloutdoor.com.www.investor.clearchannel.com.
The Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee consists of Mary Teresa Rainey, Joe Marchese, Lisa Hammitt and John Dionne, each of whom is independent under the rules of the NYSE. The Nominating and Corporate Governance Committee’s primary responsibilities, which are discussed in detail within its charter, include the following:
identify individuals qualified to become members of the Board, consistent with criteria approved by the Board;
recommend director nominees to the Board for the next annual meeting of stockholders;
oversee the organization of the Board to discharge the Board’s duties and responsibilities properly and efficiently;
develop and recommend corporate governance guidelines;
oversee the evaluation of the Board and management; and
oversee, review with management and report to the Board on the Company’s ESG, policies and practices in order to manage risk, lay a foundation for sustainable growth and effectively communicate ESG initiatives to stakeholders.
The full text of the Nominating and Corporate Governance Committee’s charter can be found on our website at www.investor.clearchannel.com.
DIRECTOR NOMINATING PROCEDURES
The Board oversees the identificationNominating and consideration of candidates for membership on the Board, and each member of the Board participates in this process. It is the view of the Board that this function has been performed effectively by the Board, and that it is appropriate for Clear Channel Outdoor not to have a separate nominating committee or charter for this purpose.
The BoardCorporate Governance Committee is responsible for identifying individuals qualified to become Board members, developing qualification standards and other criteria for selecting Board member nominees and reviewing background information for candidates for the Board, including those recommended by stockholders. OurThe Nominating and Corporate Governance Committee believes that all directors playmust, at a critical roleminimum, meet the criteria set forth in guiding Clear Channel Outdoor’s strategic directionthe Governance Guidelines, which specify, among other things, that the Board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and overseeing the management of Clear Channel Outdoor. Clear Channel Outdoor doesexpertise with a reputation for integrity. While we do not have a formal policy on diversity, when considering the selection of director nominees, the Nominating and Corporate Governance Committee considers individuals with regard to the consideration ofdiverse viewpoints, accomplishments, cultural backgrounds, professional expertise and diversity in identifying director nominees, butgender, ethnicity, race, skills and geographic representation that, when considered as a group, provide a sufficient mix of perspectives to allow the Board to best fulfill its responsibilities to,
10 Notice and Proxy Statement 2022 | |
and advocate for the long-term interests of, our shareholders. Furthermore, our Board is committed to include qualified women and individuals from underrepresented minority groups in any pool for selection of new candidates for the Board in case the size of the Board were increased or as a result of a vacancy. The Board strives to nominate directors with a variety of complementary skills sosuch that, as a group, the Board will possess the appropriate mix of experience, skills and expertise to oversee Clear Channel Outdoor’sthe Company’s businesses. Director candidates shouldDirectors should: (i) have experience in positions with a high degree of responsibility,responsibility; (ii) be leaders in the organizations with whichwhom they are affiliated andaffiliated; (iii) have the time, energy, interest and willingness to serve as a member of the Board.Board; and (iv) be selected based upon contributions they can make to the Board and management. Our directors play a critical role in guiding our strategic direction and overseeing our management. The BoardNominating and Corporate Governance Committee evaluates each individual in the context of the Board as a whole, with the objective of recommending a group that can best perpetuate the success of our business and represent stockholder interests through the exercise of sound judgment using its diversity of experience. The BoardNominating and Corporate Governance Committee evaluates each incumbent director to determine whether heshe or shehe should be nominated to stand forre-election, reelection based on the types of criteria outlined above as well as the director’s contributions to the Board during their current term.
The BoardNominating and Corporate Governance Committee will consider as potential nominees individuals properly recommended by stockholders. Recommendations concerning individuals proposed for consideration should be addressed to the Board, c/o Secretary, Clear Channel Outdoor Holdings, Inc., 20880 Stone Oak Parkway,4830 North Loop 1604W, Suite 111, San Antonio, Texas 78258.78249. Each recommendation should include a personal biography of the suggested nominee, an indication of the background or experience that qualifies the person for consideration and a statement that the person has agreed to serve if nominated and elected. The Board evaluates candidates recommended by stockholders in the same manner in which it evaluates other nominees. Stockholders who themselves wish to effectively nominate a person for election to the Board, as contrasted with recommending a potential nominee to the Board for its consideration, are required to comply with the advance notice and other requirements set forth in our bylaws,By-laws.
The Board exercises its discretion in combining or separating the position of Chair of the Board and Chief Executive Officer as described below under “Stockholder Proposals for 2019 Annual Meeting and Advance Notice Procedures.”
Our director, Robert W. Pittman, has not been nominated forre-election to our Board at the annual meeting but will continue to serve for the remainderit deems appropriate in light of his term until the annual meeting.prevailing circumstances. Mr. Pittman will continue to serveWells currently serves as our Chief Executive Officer, after the annual meeting.
On October 2, 2011, Robert W. Pittman was appointedand Mr. Moreland currently serves as our independent Chair of the Board. The Chief Executive ChairmanOfficer is responsible for the strategic direction, day-to-day leadership and performance of the Company, while the Chair of the Board provides overall leadership to our Board. This leadership structure allows the Chief Executive Officer to focus on his operational responsibilities, while keeping a membermeasure of independence between the oversight function of our Board and on March 2, 2015, Mr. Pittman was appointed as our Chairman and Chief Executive Officer. Mr. Pittman has not been nominated forre-election to our Board at the annual meeting but will continue to serve as our Chief Executive Officer after the annual meeting. The Board intends to appoint a new Chairman of the Board prior to, or as promptly as practicable after, the annual meeting. The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board as thethose operating decisions. Our Board believes it isthat this leadership structure has historically provided an appropriate allocation of roles and responsibilities and has been in the best interests of Clear Channel Outdoorstockholders and believes that it continues to make that determination basedbe appropriate and in the best interests of stockholders at this time given Mr. Wells’ recent transition to the Chief Executive Officer role, effective as of January 1, 2022.
Our Board conducts an annual self-evaluation process to determine whether the Board, its committees and the directors are functioning effectively. This includes survey materials as well as individual, private conversations between directors and the Chair of the Board, as needed, and a report to, and discussion of survey results with, the Nominating and Corporate Governance Committee and the full Board. The survey materials solicit feedback on organizational matters, business strategy, financial matters, board structure and meeting administration. The directors use discussions with the position and direction of Clear Channel Outdoor, the membershipChair of the Board and the individuals who occupy those roles.full Board to provide feedback, identify themes for the Board to consider, suggest specific action steps and review Board agendas. In addition, focus areas identified through the evaluation are incorporated into the Board’s agendas for the following year to monitor progress. The annual Board performance evaluation is a primary determinant for Board tenure. Annually, the Nominating and Corporate Governance Committee reviews progress against focus areas identified in the self-evaluation. Each committee also conducts its own annual self-evaluation to assess the functioning of the committee and the effectiveness of the committee members, including the committee chair.
| Notice and Proxy Statement 2022 11 |
Our Board has overall responsibility for the oversight of our enterprise risk management process, which is guided by the COSO Enterprise Risk Management Framework three lines of defense model, including Operational Management as the First Line of Defense, Compliance and Information Security as the Second Line of Defense and Internal and External Audit as the Third Line of Defense. The Board sets the tone at the top as it relates to enterprise risk management and encourages management to promote a corporate culture that incorporates risk management into our corporate strategy and day-to-day operations.
Our risk management philosophy strives to:
timely identify the material risks that Clear Channel Outdoor faces;we face;
communicate necessary information with respect to material risks to senior management and, as appropriate, to the Board or relevant Board committee;
implement appropriate and responsive risk management strategies consistent with Clear Channel Outdoor’sour risk profile; and
integrate risk management into Clear Channel Outdoor’sour decision-making.
The Board has designated the Audit Committee to broadly oversee enterprise risk management.management in accordance with its charter. Under the oversight of the Audit Committee, and with the support of the Company’s compliance function and the Company’s internal and external audit functions, we operate an enterprise-wide risk management governance framework that sets standards and provides guidance for the identification, assessment, monitoring and control of the most significant risks facing the Company and that have the potential to affect stockholder value, our customers and colleagues, the communities in which we operate and the safety and soundness of the Company. The Audit Committee reports to the Board regarding briefings provided by management and advisors, as well as the Audit Committee’s own analysis and conclusions regarding the adequacy of Clear Channel Outdoor’sour risk management processes. In
12 Notice and Proxy Statement 2022 | |
addition,
The Board also exercises its oversight with support from the Compensation Committee and the Nominating and Corporate Governance Committee, each of which has oversight responsibilities for risks that may fall within their areas of responsibility and expertise. The Board receives independent reports from each committee at its quarterly meetings.
The Board’s oversight of risk management requires close interaction between the full Board, each of its committees and executive management. The Company’s risk oversight framework and key areas of responsibility are illustrated below:
| Notice and Proxy Statement 2022 13 |
SUCCESSION PLANNING AND 2022 LEADERSHIP TRANSITION
At least annually, the Compensation Committee reviews the Company’s talent management and succession plan, including with respect to the Chief Executive Officer and other executive positions. This includes the review and evaluation of development plans for potential successors to the Chief Executive Officer role and other executive positions. As part of the Board’s ongoing succession planning processes, the Board, after recommendation from the Compensation Committee, had identified Mr. Pittman (asWells, our current Chief Executive Officer, as successor to Mr. Eccleshare. On July 27, 2021, the Board unanimously appointed Mr. Wells as our successor Chief Executive Officer and a director, effective January 1, 2022. Effective December 31, 2021, Mr. Eccleshare assumed the role of Executive Vice Chairman of the Board. Among the qualifications, skills and attributes that the Compensation Committee and Board considered to appoint Mr. Wells as our Chief Executive Officer)Officer were his proven and successful leadership of the Company’s Americas business division and his deep knowledge of the business, strategic vision, leadership and moral integrity.
Developing talent at all levels of the Company is able to provide oura priority for us. We are focused on providing the Board with valuable insight intoadditional opportunities to interact with senior management, including providing informal feedback sessions where directors meet with groups of senior management below the executive level, which gives management unique access to the Board and also facilitates a deeper understanding of the organization among the Board. The Company also offers various talent development programs throughout the organization focused on building leadership and management skills, career development and other areas.
Our corporate governance practices are established and monitored by the Board. The Board, with assistance from the Nominating and Corporate Governance Committee, periodically assesses our risk profilegovernance practices in light of legal requirements and governance best practices.
Our primary governing documents include:
Governance Guidelines
Board Committee Charters
| ○ | Audit Committee Charter |
| ○ | Compensation Committee Charter |
| ○ | Nominating and Corporate Governance Committee Charter |
Code of Business Conduct and Ethics
These documents are available on our website at www.investor.clearchannel.com. We encourage our stockholders to read these documents, as we believe they illustrate our commitment to good governance practices. Certain key provisions of these documents are summarized below.
14 Notice and Proxy Statement 2022 | |
We operate under Governance Guidelines that set forth our corporate governance principles and practices on a variety of topics, including director qualifications, the responsibilities of the Board, independence requirements and the optionscomposition and functioning of the Board. Our Governance Guidelines are designed to mitigatemaximize long-term stockholder value, align the interests of the Board and addressmanagement with those of our risks basedstockholders and promote high ethical conduct among our directors. The Governance Guidelines include the following key practices to assist the Board in carrying out its responsibilities in connection with the business and affairs of Clear Channel Outdoor:
| 1. | Director Responsibilities | |
| The basic responsibility of a director is to exercise his or her business judgment and act in what she or he reasonably believes to be in the best interests of Clear Channel Outdoor and its stockholders. Directors are expected to attend Board meetings and meetings of committees on which they serve and to spend the time needed, and meet as frequently as necessary, to properly discharge their responsibilities. | ||
 | ||
| 2. | Self-Evaluation Process | |
| The Board and each standing committee of the Board will conduct an annual self-evaluation to determine whether it and its committees are functioning effectively. The Nominating and Corporate Governance Committee is responsible for overseeing the self-evaluation process and for proposing any modification or alterations in Board or committee practices or procedures. | ||
| ||
| 3. | Executive Sessions of Non-Management Directors | |
| The non-management directors and/or the independent directors meet periodically in executive session without management participation. | ||
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| 4. | Board Access to Senior Management | |
| Directors have complete access to Clear Channel Outdoor’s management, employees and its independent advisors and can initiate contact or meetings through the Chief Executive Officer or any other executive officer. | ||
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| 5. | Board Access to Independent Advisors | |
| The Board and each Board committee have the power to retain independent legal, financial or other advisors as they may deem necessary, at our expense. | ||
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| 6. | Board Tenure | |
| The Board believes that term limits on director service and a predetermined retirement age impose arbitrary restrictions on Board membership. Instead, the Board believes directors who, over a period of time, develop an insight into Clear Channel Outdoor and its operations provide an increasing contribution to Clear Channel Outdoor as a whole. The annual board performance evaluation is a primary determinant for Board tenure. | ||
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| 7. | Directors Who Change Their Current Job Responsibilities | |
| A director who changes the nature of the job she or he held when she or he was elected to the Board shall promptly notify the Board of any such change. This does not mean that such director should necessarily leave the Board. There should, however, be an opportunity for the Board to review the continued appropriateness of Board membership under these new circumstances. | ||
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| 8. | Service on Multiple Boards | |
| To enable the Board to assess a director’s effectiveness and any potential conflicts of interest, any director who serves on more than three other public company boards must advise the Chair in advance of accepting an invitation to serve as a member of another public company board. | ||
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| 9. | Management Development and Succession Planning | |
| The Board or a committee of the Board will periodically consider management development and succession planning, including short-term succession planning for certain of Clear Channel Outdoor’s most senior management positions. |
| Notice and Proxy Statement 2022 15 |
RIGHTS PLAN EXPIRES APRIL 15, 2022
On May 19, 2020, the Board adopted a shareholder rights plan (the “Rights Plan”) to protect the interests of all Company stockholders. In adopting the Rights Plan, the Board took note of the substantial impact of the COVID-19 pandemic on the Company’s global business and the significant decline in the Company’s stock price. The Rights Plan was designed to allow the Company’s stockholders to realize the expected benefits of the long-term value of their investment by reducing the likelihood that any person or group would gain control of the Company through open market accumulation during the market dislocation caused by COVID-19 without appropriately compensating the Company’s stockholders for such control or providing the Board sufficient time to make informed judgments. On May 13, 2021, the Board approved an eleven-month extension to the Rights Plan. In approving the extension, the Board considered the heightened potential for one or more persons or groups to gain undue influence over or control of the Company through open market accumulation, seek to acquire control of the Company without paying an appropriate control premium, or employ other coercive tactics in light of, among other things, the substantial ongoing impact of the COVID-19 pandemic on the Company’s global business, the Company’s stock price, which was trading below pre-pandemic prices, and the continued accumulation of the Company’s shares by various non-passive parties.
The Rights Plan expires on April 15, 2022. At this time, the Board does not intend to further extend the Rights Plan.
Each standing committee of the Board operates under a written charter that has been adopted by the Board. We have three standing committees: the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. Each committee charter sets forth the purpose, responsibilities of the respective committee and discusses matters such as committee membership requirements, number of meetings and the setting of meeting agendas. The charters are assessed at least every year, or more frequently as the applicable committee may determine, and are updated as needed. More information on the Board’s standing committees, their respective experiences with the daily managementroles and responsibilities and their charters can be found under “The Board of our business. The Board encourages management to promote a corporate culture that incorporates risk management into Clear Channel Outdoor’s corporate strategyDirectors andday-to-day operations.
STOCKHOLDER AND INTERESTED PARTY COMMUNICATION WITH THE BOARD
Stockholders and other interested parties may contact an individual director, the Presiding Director, Corporate Governance—Committees of the Board as a group or a specified Board committee or group, including thenon-management directors as a group, by sending regular mail to the following address:above.”
Board of Directors
c/o Secretary
Clear Channel Outdoor Holdings, Inc.
20880 Stone Oak Parkway
San Antonio, Texas 78258
CODE OF BUSINESS CONDUCT AND ETHICS
Our Code of Business Conduct and Ethics (the “Code of Conduct”“Code”) applies to all of our officers, directors, and employees including(including our principal executive officer, principal financial officer and principal accounting officer.officer), interns, contractors and agents throughout our corporate structure. Our Code of Conduct constitutes a “code of ethics”, as defined by Item 406(b) of RegulationS-K. Our Code of Conduct is publicly available on our Internet website atwww.clearchanneloutdoor.comwww.investor.clearchannel.com. We intend to satisfy the disclosure requirements of Item 5.05 of Form8-K regarding any amendment to, or waiver from, a provision of the Code of Conduct that applies to our principal executive officer, principal financial officer or principal accounting officer and relates to any element of the definition of code of ethics set forth in Item 406(b) of RegulationS-K by posting such information on our website at www.clearchanneloutdoor.comwww.investor.clearchannel.com.
STOCKHOLDER AND INTERESTED PARTY COMMUNICATION WITH THE BOARD
Stockholders and other interested parties may contact an individual director, the Chair of the Board, the Board as a group or a specified Board committee or group, including the non-management directors as a group, by sending regular mail to the following address:
Board of Directors
c/o Secretary
Clear Channel Outdoor Holdings, Inc.
4830 North Loop 1604W, Suite 111
San Antonio, Texas 78249
16 Notice and Proxy Statement 2022 | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTSecurity Ownership of Certain Beneficial Owners and Management
Except as otherwise stated, the table below sets forth information concerning the beneficial ownership of Clear Channel Outdoor’s common stock as of May 9, 2018March 8, 2022 for: (1) each director currently serving on our Board and each of the nominees for director; (2) each of our named executive officers; (3) our directors and executive officers as a group; and (4) each person known to Clear Channel Outdoor to beneficially own more than 5% of any class of Clear Channel Outdoor’s outstanding shares of common stock. At the close of business on May 9, 2018,March 8, 2022, there were 49,005,310471,347,483 shares of Clear Channel Outdoor’s Class A common stock outstanding and 315,000,000 shares of Clear Channel Outdoor’s Class B common stock outstanding. In addition, information concerning the beneficial ownership of common stock of iHeartMedia, our indirect parent entity, by: (1) each director currently serving on our Board and each of the nominees for director; (2) each of our named executive officers; and (3) our directors and executive officers as a group is set forth in the footnotes to the table below. At the close of business on May 9, 2018, there were 31,904,544 shares of iHeartMedia’s Class A common stock, 555,556 shares of iHeartMedia’s Class B common stock, 58,967,502 shares of iHeartMedia’s Class C common stock outstanding and no shares of iHeartMedia’s Class D common stock outstanding. Except as otherwise noted, each stockholder has sole voting and investment power with respect to the shares beneficially owned.
Each share of Clear Channel Outdoor Class A common stock is entitled to one vote on matters submitted to a vote of the stockholders and each share of Clear Channel Outdoor Class B common stock is entitled to 20 votes on matters submitted to a vote of the stockholders. Each share of our Class B common stock is convertible at the option of the holder thereof into one share of Class A common stock. Each share of our common stock is entitled to share equally on a per shareper-share basis in any dividends and distributions by us.
| Amount and Nature of Beneficial Ownership | ||||||||||||||||
Name and Address of | Number of Shares of Class A Common Stock | Number of Shares of Class B Common Stock | Percent of Class A Common Stock(b) | Percent of Class B Common Stock(b) | Percent of Outstanding Common Stock on an As-Converted Basis(b) | |||||||||||
Holders of More than 5%: | ||||||||||||||||
iHeartCommunications, Inc.(c) | 10,726,917 | 315,000,000 | 21.9% | 100.0% | 89.5% | |||||||||||
JPMorgan Chase & Co.(d) | 4,398,770 | — | 9.0% | — | 1.2% | |||||||||||
GAMCO Asset Management Inc. and affiliates(e) | 5,386,718 | — | 11.0% | — | 1.5% | |||||||||||
Mason Capital Management LLC(f) | 4,172,946 | — | 8.5% | — | 1.1% | |||||||||||
Abrams Capital Management, L.P. and affiliates(g) | 3,354,390 | — | 6.8% | — | * | |||||||||||
The Vanguard Group, Inc.(h) | 3,184,635 | — | 6.5% | — | * | |||||||||||
Named Executive Officers, Executive Officers and Directors: |
| |||||||||||||||
Richard J. Bressler(i) | 146,219 | — | * | — | * | |||||||||||
C. William Eccleshare(j) | 733,559 | — | 1.5% | — | * | |||||||||||
Blair E. Hendrix(k) | — | — | — | — | — | |||||||||||
Daniel G. Jones(l) | — | — | — | — | — | |||||||||||
Paul Keglevic(m) | 27,722 | — | * | — | * | |||||||||||
Steven J. Macri(n) | — | — | — | — | — | |||||||||||
Vicente Piedrahita(l) | — | — | — | — | — | |||||||||||
Robert W. Pittman(o) | 356,936 | — | * | — | * | |||||||||||
Olivia Sabine(k) | — | — | — | — | — | |||||||||||
Harvey L. Tepner | — | — | * | — | * | |||||||||||
Dale W. Tremblay(p) | 171,507 | — | * | — | * | |||||||||||
Scott R. Wells(q) | 597,758 | — | 1.2% | — | * | |||||||||||
All directors and executive officers as a group (14 individuals)(r) | 2,284,369 | — | 4.7% | — | * | |||||||||||
* Means less than 1%.
Name and Address of Beneficial Owner(a) | Number of Shares of Common Stock | Percent of Common Stock(b) | ||||||
Holders of More than 5%: | ||||||||
PIMCO(c) | 104,258,819 | 22.1 | % | |||||
Ares Management(d) | 39,021,278 | 8.3 | % | |||||
The Vanguard Group(e) | 35,290,300 | 7.5 | % | |||||
BlackRock, Inc.(f) | 33,658,771 | 7.1 | % | |||||
Named Executive Officers, Executive Officers and Directors: |
| |||||||
Scott R. Wells(g) | 1,498,759 | * | ||||||
C. William Eccleshare(h) | 3,644,255 | * | ||||||
Brian D. Coleman(i) | 690,271 | * | ||||||
Lynn A. Feldman(j) | 513,821 | * | ||||||
Jason A. Dilger(k) | 166,577 | * | ||||||
John Dionne(l) | 239,305 | * | ||||||
Lisa Hammitt(m) | 123,304 | * | ||||||
Andrew Hobson(n) | 391,511 | * | ||||||
Thomas King(o) | 293,307 | * | ||||||
Joe Marchese(p) | 305,142 | * | ||||||
W. Benjamin Moreland(q) | 1,145,066 | * | ||||||
Mary Teresa Rainey(r) | 191,511 | * | ||||||
Jinhy Yoon | — | — | ||||||
All directors and executive officers as a group (13 individuals)(s) | 9,202,829 | 1.9% | ||||||
Means less than 1%. |
| (a) | Unless otherwise indicated, the address for all beneficial owners is c/o Clear Channel Outdoor Holdings, Inc., |
| (b) | Percentage of ownership calculated in accordance with Rule13d-3(d)(1) under the Securities Exchange Act. |
| (c) |
|
| As reported on a Schedule 13D/A filed |
| (d) | As reported on Schedule 13D/A filed on March 2, 2022, 39,021,278 shares of Clear Channel Outdoor’s common stock reported in the Schedule 13D/A may be deemed owned |
| Notice and |
| L.P., Ares Holdco LLC, Ares Holdings Inc., Ares Management Corporation, Ares Voting LLC, Ares Management GP LLC and |
As reported on a Schedule 13G/A filed with respect to Clear Channel Outdoor’s |
As reported on a Schedule 13G/A filed with respect to Clear Channel Outdoor’s common stock on February 4, 2022. The shares of Clear Channel Outdoor’s |
| (g) | Represents 667,009 shares of |
|
Represents 815,977 shares of common stock, vested stock options representing 2,279,781 shares of common stock and 548,497 unvested RSUs that will vest within 60 days of March 8, 2022. Excludes 315,126 unvested performance units that could vest within 60 days of March 8, 2022, assuming they are earned at target payout. |
| (i) | Represents 267,641 shares of common stock, 104,602 shares of restricted stock and 318,028 unvested RSUs that will vest within 60 days of March 8, 2022. Excludes 170,168 unvested performance units that could vest within 60 days of March 8, 2022, assuming they are earned at target payout. |
| (j) | Represents 204,462 shares of common stock, 64,014 shares of restricted stock, vested stock options representing 11,043 shares of common stock and 234,302 unvested RSUs that will vest within 60 days of March 8, 2022. Excludes 132,352 unvested performance units that could vest within 60 days of March 8, 2022, assuming they are earned at target payout. |
| (k) | Represents 77,307 shares of common stock, 9,250 shares of restricted stock, vested stock options representing 12,410 shares of common stock and 67,610 unvested RSUs that will vest within 60 days of March 8, 2022. Excludes 28,361 unvested performance units that could vest within 60 days of March 8, 2022, assuming they are earned at target payout. |
| (l) | Represents 239,305 shares of common stock held by Mr. Dionne as of March 8, 2022. |
| (m) | Represents 123,304 shares of common stock held by Ms. Hammitt as of March 8, 2022. |
| (n) | Represents 391,511 shares of common stock held by Mr. Hobson as of March 8, 2022. |
| (o) | Represents 286,302 shares of common stock and 7,005 unvested RSUs that will vest within 60 days of March 8, 2022. |
| (p) | Represents 298,321 shares of common stock and 6,821 unvested RSUs that will vest within 60 days of March 8, 2022. |
| (q) | Represents 1,135,848 shares of common stock and 9,218 unvested RSUs that will vest within 60 days of March 8, 2022. |
| (r) | Represents 191,511 shares of common stock, held by Ms. Rainey as of March 8, 2022. |
| (s) | As of |
18 Notice and Proxy Statement 2022 | |
PROPOSAL 1: ELECTION OF DIRECTORS
The Board has nominated the persons listed as nominees below for election as directors at the annual meeting of stockholders.meeting. Messrs. PiedrahitaKing and TremblayMoreland and Ms. Yoon are currently directors and are standing forre-election. Mr. Pittman has not been nominated forre-electionPursuant to our Certificate of Incorporation adopted in May 2019 following our separation from iHeartCommunications, Inc., our Board is currently classified into three classes of directors. Class I directors were re-elected at the annual meeting but will continue to serveof stockholders in 2020, Class II directors were re-elected at the annual meeting of stockholders in 2021, and the Class III directors are nominated for the remainder of his term untilre-election at the annual meeting. Effective asPursuant to our Certificate of the date ofIncorporation, from and after the annual meeting the number of directors onstockholders in 2023, our Board of Directors will no longer be classified, and each director will thereafter be elected for a one-year term annually. Accordingly, the Board will be reduced to seven. The directors elected at the annual meeting will serve a three yearone-year term until the annual meeting of stockholders in 2023 or until her or his successor shall have been elected and qualified, subject to earlier death, resignation or removal. The directors are to be elected by a plurality of the votes cast at the annual meeting. Each nominee has indicated a willingness to serve as directorsdirector if elected. Should any nominee become unavailable for election, discretionary authority is conferred on the proxies to vote for a substitute. Management has no reason to believe that any nominee will be unable or unwilling to serve if elected.
Our directors, including our director nominees, are from diverse professional backgrounds and possess the relevant combination of experience, skills and qualifications that contribute to a well-functioning board that is equipped to oversee the Company’s business and represent stockholder interests through sound judgment and utilizing the group’s varied experience. The diversity of characteristics, expertise, skill and experience that the Nominating and Corporate Governance Committee and the Board seek in the composition of the Board, as well as the individual experiences, skills and characteristics of our Board members, are highlighted in the following charts and director qualifications matrix.
| Notice and Proxy Statement 2022 19 |
DIRECTOR EXPERIENCE AND CORE COMPETENCIES
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| Accounting and Financial Reporting | 6 | |||||||||||||||||||||||
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| Senior Executive Management | 10 | |||||||||||||||||||||||
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| Business Development and Investments | 6 | |||||||||||||||||||||||
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| Media Industry | 7 | |||||||||||||||||||||||
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| Technology Executive | 3 | |||||||||||||||||||||||
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| Advertising and Research | 6 | |||||||||||||||||||||||
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| Banking and Financial Services | 3 | |||||||||||||||||||||||
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| Risk Management | 6 | |||||||||||||||||||||||
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| Public Company Governance | 4 | |||||||||||||||||||||||
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| International | 3 |
20 Notice and Proxy Statement 2022 | |
The following information, which is as of May 9, 2018,March 8, 2022, is furnished with respect to each of the nominees for election at ourthe annual meeting and each of the other continuing members of our Board.
The Board recommends that you vote “For”“FOR” the Class III director nominees named below. Properly submitted proxies will be so voted unless stockholders specify otherwise.
NOMINEES FOR DIRECTORS FOR TERMS EXPIRING IN 20212023 (CLASS III)
Vicente Piedrahita, age 36, joined THL in March 2012 and is currently a Principal in the firm’s Strategic Resources Group. Prior to joining THL, Mr. Piedrahita worked at Clear Channel Outdoor as Director of Strategic Projects and Initiatives from August 2010 until March 2012 and Monitor Group, a global strategic advisory firm (“Monitor Group”), as a consultant / case team leader from September 2004 until August 2008. Mr. Piedrahita has been a member of our Board since January 2014. Mr. Piedrahita holds a B.A.,cum laude, in Sociology from Princeton University and an M.B.A. from Harvard Business School. Mr. Piedrahita was selected to serve as a member of our Board because of his strategic and operational knowledge gained through his experience working at Clear Channel Outdoor, as well as Monitor Group and THL.
Dale W. Tremblay, age 59, has served as President and Chief Executive Officer of C.H. Guenther & Son, Inc., a food marketing and manufacturing company (“C.H. Guenther”), since July 2001. Prior to joining C.H. Guenther, Mr. Tremblay was an officer at the Quaker Oats Company, where he was responsible for all Worldwide Foodservice Businesses. Mr. Tremblay has been a member of our Board since November 2005. He also currently serves on the boards of directors of C.H. Guenther, Texas Capital Bank and NatureSweet Ltd. Mr. Tremblay has a B.A. in Finance from Michigan State University, and served on the Advisory Board for the Michigan State University Financial Analysis Lab and the Business and Community Advisory Council of the Federal Reserve Bank of Dallas. Mr. Tremblay was selected to serve as a member of our Board based on his operational and managerial expertise gained through building and managing a large privately-held company and his international business experience.
Title: Chair Age: 58 Board Committees: • None | W. Benjamin Moreland Professional Experience: Mr. Moreland is a private investor and retired CEO of Crown Castle International Corp. (NYSE: CCI), a provider of wireless infrastructure in the U.S., where he remains a member of the board of directors. Prior to his retirement, Mr. Moreland served as Executive Vice Chairman from June 2016 through December 2017 and was President and Chief Executive Officer from July 2008 through May 2016. From 2000 through 2008, Mr. Moreland was Chief Financial Officer. Mr. Moreland joined Crown Castle in 1999, after 15 years with Chase Manhattan Bank and predecessor banks, primarily in corporate finance and real estate investment banking. Mr. Moreland is a former board member and Chairman of the Board of WIA-The Wireless Infrastructure Association and former member of the Executive Board of the National Association of Real Estate Investment Trusts (NAREIT). He also served on the board of directors of Calpine Corporation (NYSE: CPN) from 2009 until its privatization in March 2018, and Monogram Residential Trust (NYSE: MORE) from 2016 until its privatization in September 2017. Mr. Moreland is also a former member of the executive board of the Greater Houston Partnership. Mr. Moreland serves as a director on the board of directors of Houston Methodist Hospital. He holds a BBA from The University of Texas at Austin and an MBA from The University of Houston. Qualifications: Mr. Moreland was selected to serve as a director for his varied executive experience, financial and transactional acumen and strategic insight. | |
Title: Director Age: 61 Board Committees: • Compensation | Thomas C. King Professional Experience: Mr. King has served as an Operating Partner at Atlas Merchant Capital, a private equity fund, since November 2018. From December 2009 through March 2016, Mr. King held several senior roles at Barclays, an investment banking firm, including serving as Chief Executive Officer of Investment Banking and Chairman of the Investment Banking Executive Committee. Mr. King was also a member of the Barclays Group Executive Committee which oversees all of the Barclays plc businesses. Mr. King served as a director of Leerink Partners until its sale in January 2019. Since December 2018, Mr. King has also served on the board of directors of Panmure Gordon, a British corporate and institutional investment bank. Mr. King has served as a director of Concord Acquisition Corp since March 2020, a director of Concord Acquisition Corp II since September 2021, a director of Concord Acquisition Corp III since November 2021 and as director of Radius Global Infrastructure, Inc. since November 2020. He holds a BA in Economics from Bowdoin College and an MBA in finance from University of Pennsylvania—The Wharton School. Qualifications: Mr. King was selected to serve as a director because of his experience in investment banking and knowledge of the financial markets. |
| Notice and Proxy Statement 2022 21 |
Title: Director Age: 50 Board Committees: • None | Jinhy Yoon Professional Experience: Ms. Yoon is an Executive Vice President and Credit Analyst at PIMCO, an investment manager, covering technology, media and telecom companies. Prior to joining PIMCO in 2010, she was an equity research analyst at J.P. Morgan Securities in San Francisco, focusing on the semiconductor capital equipment sector. Previously, Ms. Yoon covered integrated oil companies and independent refiners as an equity analyst at Bear Stearns and was a corporate attorney with Simpson Thacher & Bartlett in New York. She holds a J.D. from Columbia University School of Law and a Bachelor of Business Administration degree from the University of Notre Dame. She is also a retired Certified Public Accountant (CPA) with two years of public accounting experience. Qualifications: Ms. Yoon was selected to serve as a director because of her extensive investment experience, as well as her accounting and legal background. | |
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2019 (CLASS I)2023 (CLASSES I AND II)
Blair E. Hendrix, age 53, is
Title: Director Age: 58 Board Committees: • Audit • Nominating and | John Dionne Professional Experience: Mr. Dionne has served a Senior Advisor to the Blackstone Group L.P., an investment firm, since July 2013 and a Senior Lecturer in the Finance Unit at the Harvard Business School since January 2014. He is also a director of Cengage Learning Holdings II, Inc. and Pelmorex Corp. Until he retired from his position as a Senior Managing Director of Blackstone in 2013, Mr. Dionne was most recently Global Head of its Private Equity Business Development and Investor Relations Groups and served as a member of Blackstone’s Private Equity and Valuation Committees. Mr. Dionne originally joined Blackstone in 2004 as the Founder and Chief Investment Officer of the Blackstone Distressed Securities Fund. Mr. Dionne began his career with Price Waterhouse and holds an M.B.A. from the Harvard Business School and a BS degree in Accounting, Economics, and Finance from The University of Scranton. Qualifications: Mr. Dionne was selected to serve as a director because of his significant financial experience. |
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Title: Executive Age: 66 Board Committees: • None | C. William Eccleshare Professional Experience: Mr. Eccleshare has served as our Executive Vice Chairman since December 31, 2021. Previously, Mr. Eccleshare served as our Chief Executive Officer and President until Mr. Wells’ appointment on January 1, 2022. Prior thereto, Mr. Eccleshare served as the Chief Executive Officer—International division at each of iHeartMedia, iHeartMedia Capital I, LLC, iHeartCommunications and CCOH and was appointed to this position on March 2, 2015. Prior to such time, he served as Chief Executive Officer—Outdoor of iHeartMedia, iHeartCommunications and CCOH since January 24, 2012 and as Chief Executive Officer—Outdoor of iHeartMedia Capital I, LLC since 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 the CCOH 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. Since 2016, Mr. Eccleshare has served as a director of Centaur Media PLC, an information, events and marketing company publicly traded in the U.K. Since 2017, he has served as a director of Britvic PLC, a soft drinks producer in the U.K. Mr. Eccleshare has an MA in History from Trinity College, University of Cambridge. Qualifications: Mr. Eccleshare was selected to serve as a director because of his extensive experience in the outdoor advertising business gained through the course of his career, as well as his insight into the Company. | |
Title: Director Age: 59 Board Committees: • Compensation • Nominating and | Lisa Hammitt Professional Experience: Ms. Hammitt has served as the Executive Vice President, Artificial Intelligence and Chief Technology Officer at Davidson Technologies since 2020. Prior to joining Davidson Technologies, Ms. Hammitt served as the Global Vice President, Data and Artificial Intelligence at VISA Inc., a credit card processing and data services company from 2017 to 2020. Ms. Hammitt served as the Chief Executive Officer and Founder of Beseeq, Inc., an artificial intelligence-driven advertising start-up, from September 2016 through December 2017. Ms. Hammitt served as Vice President of Cloud Marketplace and SaaS at IBM, a computer hardware, software and service company, from June 2015 through August 2016. Prior to IBM, Ms. Hammitt was a Vice President of Business Operations for Salesforce Community Cloud, a SaaS services Company, from August 2012 through May 2015. Before Salesforce, she headed mergers and acquisitions in Information Management and Cloud Computing at IBM and HP. Ms. Hammitt serves as a board member of Davidson Technologies and Glassbox. She also holds an advisor seat at Brighton Park Capital. Ms. Hammitt received BAs from UC Berkeley in French and Economics, completed graduate course work in Artificial Intelligence at Stanford University and received executive education at Harvard Business School. Qualifications: Ms. Hammitt was selected to serve as a director because of her background in artificial intelligence and advertising. |
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Title: Director Age: 60 Board Committees: • Audit | Andrew Hobson Professional Experience: Mr. Hobson has served as Partner and Chief Financial Officer at Innovatus Capital Partners, LLC, a private investment firm, since January 2016. From 1994 to 2015, Mr. Hobson served in various roles at Univision Communications Inc., a media company, including Senior Executive Vice President and Chief Financial Officer from October 2007 through February 2015, during which time he was responsible for all financial aspects of the company. Prior to his employment at Univision, Mr. Hobson served as a Principal at Chartwell Partners LLC from 1990 to 1994. Mr. Hobson has served as chairman of the board of directors of Cumulus Media, Inc. since June 2018. Mr. Hobson holds a B.S.E. in both Finance and Accounting, magna cum laude, from University of Pennsylvania – The Wharton School. Qualifications: Mr. Hobson was selected to serve as a director because of his extensive experience in the media industry and background in finance and accounting. | |
Title: Director Age: 40 Board Committees: • Compensation • Nominating and | Joe Marchese Professional Experience: Mr. Marchese has served as the chief executive officer of Attention Capital, a media and technology holding company, since August 2019, and is the co-founder and chairman of Human Ventures Co. as well as the partner/co-Founder of Casa Komos Beverage Group. From 2015 to 2019, he served as President of Advertising Revenue for Fox Networks Group, a television broadcasting company, a role in which he oversees advertising sales, research and innovation for FOX Broadcast, FOX Sports, FS1, FX, FXX and National Geographic. Mr. Marchese was previously co-founder and CEO of true[X], an ad engagement technology company, from May 2013 until it was acquired by 21st Century Fox in February 2015. Prior to co-founding true[X], Mr. Marchese has spent time as a media executive, management consultant and multiple time entrepreneur. In 2016, Mr. Marchese was inducted into the American Advertising Federation’s Advertising Hall of Achievement. Since February 2020, Joe has served as a director of Cox Media Group. He graduated from Bentley University in Waltham, Massachusetts with a bachelor’s degree in Economics and Finance. Qualifications: Mr. Marchese was selected to serve as a director because of his extensive experience in the advertising industry. |
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Title: Director Age: 66 Board Committees: • Audit • Nominating and | Mary Teresa Rainey Professional Experience: Ms. Rainey OBE was founder of Rainey, Kelly Campbell Roalfe/Y&R, a major UK advertising agency, which is now part of the WPP group, and served as CEO of Rainey, Kelly Campbell Roalfe/Y&R from 1993 to 2003 and Chair from 2003 to 2005. She was also an early investor in and Executive Chair of Th_nk Ltd, a digital strategy agency, from 2006 until 2016. Prior to that, she spent 8 years in the U.S. with Chiat/Day Advertising as SVP Director of Planning. Ms. Rainey currently serves as a Non-Executive Board Director and member of the Audit, Compensation and Governance committees of Hays plc, an international recruitment company publicly traded in the U.K. She is also an investor in Charlotte Street Partners, a UK based public affairs consulting company. Between 2015-2017, Ms. Rainey served as a board director and member of the compensation committee of Pinewood Studios, a UK publicly traded international film studio, and from 2012-2018 she was Vice Chair of Channel 4 Television, a major U.K. broadcaster, where she also served on both the Audit and Ethics committees. Ms. Rainey is a MA Hons graduate of Glasgow University. Qualifications: Ms. Rainey was selected to serve as a director for her various executive and entrepreneurial experiences, her reputation as an internationally respected advertising leader, her extensive experience in the advertising industry and her board level experience in various listed companies. | |
Title: Chief Executive Age: 53 Board Committees: • None | Scott R. Wells Professional Experience: Mr. Wells has served as our Chief Executive Officer and Director since January 1, 2022. Mr. Wells is also Chief Executive Officer of Clear Channel Outdoor Americas. Mr. Wells became Executive Vice President, Chief Executive Officer Clear Channel Outdoor Americas since 2015. Previously, Mr. Wells worked at Bain Capital, where he led operational improvement and transformation efforts across a variety of investments, including Apple Leisure Group and CRC Health Group. These experiences highlight the innovation and embracement of technology throughout his career. Prior to that, Mr. Wells held several executive positions at AT&T and Dell. Mr. Wells holds a BS/BA from Virginia Tech and an MBA from the Wharton School of Business. He is Chairman of Achievement Network (ANet), an education-related non-profit, as well as Vice Chair of Communications and a board member of the Outdoor Advertising Association of America (OAAA) and serves on the board of the American Advertising Federation (AAF). Qualifications: Mr. Wells was selected to serve as a director because of his extensive knowledge of the Company, strategic vision and extensive experience in technology advertising. |
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A Message from our Compensation Committee
The Compensation Committee of the Board of Directors oversees Clear Channel Outdoor Holdings, Inc.’s executive compensation philosophy and reviews and approves compensation for our named executive officers (NEOs). While Clear Channel Outdoor management and our independent compensation consultant provide input, it is the sole responsibility of the Compensation Committee to approve our executive compensation philosophy, plans, policies and programs. Guided by our executive leadership team, 2021 was a year of resilience and rebound for Clear Channel Outdoor. Though the COVID-19 pandemic continues to present challenges for our business, with significant impact on our revenue as a result of a decline in advertiser spending, we saw strong momentum in 2021 as growth in some markets exceeded even 2019 revenue levels. We recognize that the uncertainty of the pandemic remains and may continue for some time, but our strong financial results reflect our ongoing recovery from its macroeconomic effects. The compensation determinations for our NEOs reflect the strong overall performance of Clear Channel Outdoor and the contributions of our leaders to driving the year’s successes. As a result of strong business and individual performance in 2021, all NEOs earned annual incentive payouts between 170% and 173% of their individual target opportunities. This is in contrast to 2020, when as a result of the negative impact of COVID-19 on our financial results, we did not meet our 2020 financial targets and annual incentive payouts were below 50% of each NEO’s individual target opportunities. In connection with annual equity grants, in July 2021, the Company made a one-time incremental adjustment to the grant value for the NEOs, other than with respect to Mr. Eccleshare. These one-time incremental amounts were awarded in alignment with the retention awards made to the broader employee base earlier in the year, and were intended to help foster retention and the continuity of our team through the ongoing COVID-19 pandemic and our senior leadership transitions in early 2022. Effective January 1, 2022, the Company appointed Mr. Scott R. Wells to serve as President and Chief Executive Officer of Clear Channel Outdoor as Mr. C. William Eccleshare stepped into the role of Executive Vice Chairman of the Board. Mr. Wells has served as the Chief Executive Officer of Clear Channel Outdoors America since 2015, and now brings his experience and expertise to leading the Company as a whole. • The Company entered into an amended and restated employment agreement with Mr. Wells in connection with his new appointment. Mr. Wells will receive an increased annual base salary and is eligible to earn an annual performance bonus based on his achievement of financial and performance criteria established by Clear Channel Outdoor. In addition, Mr. Wells is eligible for a long-term incentive opportunity with an approximate value of not less than $2,000,000. Mr. Wells also received a one-time grant of restricted stock units with a value equal to $1,000,000 in recognition of his promotion to CEO. • Effective January 1, 2022, Mr. Eccleshare assumed the role of Executive Vice Chairman and remains a member of the Board until December 31, 2022. Under his amended and restated employment agreement, Mr. Eccleshare will receive a decreased base salary and will be eligible for an annual performance bonus with a 110% target of such reduced base salary. He is not eligible for equity award grants in 2022, but previously granted equity awards will continue to vest and he will qualify for additional vesting upon his planned retirement on December 31, 2022. We also continued to evaluate our compensation and governance practices to support the objectives of the business, align with our compensation philosophy and prevailing market practices, and provide incentive to deliver key financial metrics that are explicitly linked with stockholder value creation. We are committed to ensuring that our executive compensation programs evolve as necessary to support our business strategy and organizational structure. |
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More details are provided on the following pages, and we look forward to getting stockholder feedback in the near future. Thank you for your continued engagement.
Thomas C. King Compensation Committee Thomas C. King (Chair) Lisa Hammitt Joe Marchese |
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Compensation Discussion and Analysis
Clear Channel Outdoor Holdings, Inc. (“Clear Channel Outdoor,” the head of the firm’s operationally focused Portfolio Group for North America. Mr. Hendrix joined Bain Capital in 2000. Prior to joining Bain Capital, Mr. Hendrix was Executive Vice President and Chief Operating Officer of DigiTrace Care Services, Inc. (now SleepMed)“Company,” “we” or “us”), a national healthcare services company heco-founded. Earlier in his career, Mr. Hendrix was employed by Corporate Decisions, Inc. (now Mercer Management Consulting), a management consulting firm. Mr. Hendrix has been a member of our Board since August 2008. Mr. Hendrix also currently serves as a director of BMC Software, TWCC Holdings Corp. (The Weather Channel), iHeartCommunications and iHeartMedia and as a member of the board of managers of iHeartMedia Capital I, LLC. He previously served as a director of Keystone Automotive Operations, Inc., Innophos Holdings, Inc. and SMTC Corporation. Mr. Hendrix received a B.A. from Brown University, awarded with honors. Mr. Hendrix was selected to serve as a member of our Board because of his operational knowledge gained through his experience with Bain Capital and in management consulting.
Harvey L. Tepner,age 61,Delaware corporation, is an independent corporate director and private investor. He was a senior executive of WL Ross & Co. LLC, a private equity and alternative investment fund manager (and a subsidiary of Invesco Ltd., a public mutual fund and asset management company) from 2008 to 2015. From 2002 to 2008, Mr. Tepner was a Partner at Compass Advisers, LLP in charge of its investment banking restructuring practice. Prior to that time, Mr. Tepner was a Managing Director of Loeb Partners Corporation from 1995 to 2002, and before Loeb, served as an officer in the corporate finance departments of Dillon, Read & Co. Inc. and Rothschild Inc. Mr. Tepner began his career with Price Waterhouse in Canada and is a Chartered Accountant and Chartered Professional Accountant (Canada). Mr. Tepner has been a member of our Board since February 2018. Mr. Tepner
serves as a director of Core-Mark Holding Company, Inc., Alpha Natural Resources Holdings, Inc., Nine West Holdings, Inc., and Village Roadshow Entertainment Group (BVI) Limited. In February 2016, Mr. Tepner was appointed a director of Zochem Inc., the Canadian subsidiary of Horsehead Holding Corp., a publicly traded company operating in Chapter 11, and served until the consummation of reorganization proceedings in September 2016. Mr. Tepner previously served on the boards of several public and private companies including portfolio companies controlled by WL Ross & Co. Mr. Tepner holds a B.A. from Carleton University and an M.B.A. from Cornell University. Mr. Tepner was selected to serve as a member of our Board for his extensive experience with public companies, his investment banking and private equity background, and his knowledge of regulatory and accounting issues.
Daniel G. Jones, age 43, is a Managing Director at THL and is part of the firm’s Strategic Resources Group, which works in collaboration with senior management and THL investment professionals to drive value at portfolio companies. Prior to joining THL in 2007, Mr. Jones was a management consultant at Monitor Group from 2004 to 2007. He also served as account leader at Monitor Clipper Fund. Before Monitor Group, Mr. Jones worked in a variety of corporate finance roles, lastly as Financial Project Manager and Deputy to the Chief Financial Officer at LAN Airlines, one of the leading Latin American passengerworld’s largest outdoor advertising companies, providing clients with advertising opportunities through billboards, street furniture displays, transit displays and cargo airlines. Mr. Jones has been a memberother out-of-home advertising displays. Through our extensive display inventory and technology-based enhancements, we have the ability to deliver innovative, effective marketing campaigns for advertising partners globally.
We are focused on building the leadership position of our Board since August 2008. He holdsdiverse 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.
OUR NEOS
For 2021, our NEOs were:
| Named Executive Officer1 | Title | |
C. William Eccleshare | President and Chief Executive Officer of Clear Channel Outdoor | |
Brian D. Coleman | Executive Vice President and Chief Financial Officer of Clear Channel Outdoor | |
Scott R. Wells | Executive Vice President and Chief Executive Officer of the Americas division (CCOA) | |
Lynn A. Feldman | Executive Vice President, General Counsel and Corporate Secretary of Clear Channel Outdoor | |
Jason A. Dilger | Senior Vice President and Chief Accounting Officer of Clear Channel Outdoor |
| 1 | As described in further detail below under “Transition of Chief Executive Officer”, effective as December 31, 2021, Mr. Eccleshare stepped down from the position of President and Chief Executive Officer and assumed the role of Executive Vice Chairman of the Board of Directors, and effective as of January 1, 2022, Mr. Wells assumed the role of President and Chief Executive Officer of the Company. |
IMPACT OF COVID-19
COVID-19 has had a B.A. from Dartmouth Collegesignificant adverse impact on our results of operations. Revenue in 2020 was meaningfully reduced relative to historic norms as lockdowns and reduced economic activity affected out-of-home advertising budgets. We continued to see revenues remain significantly below historic norms during the first quarter of 2021; however, we saw positive trends in revenue for each of our segments during the remainder of 2021 as the relaxation of COVID-19 restrictions and increased vaccination levels led to an M.B.A. fromincrease in mobility and increased time spent out-of-home. Currently, the MIT Sloan Schoolgap to normalized quarterly booking activity is narrowing as most business segment activity is approaching or exceeding historical seasonal levels; however, in certain instances we continue to experience customer advertising buying decisions later in the buying cycle, particularly in Europe.
Though the duration and severity of Management. Mr. JonesCOVID-19 continue to evolve and remain uncertain, 2021 was selectedthe beginning of a return to servenormal for our executive compensation program, driven by our financial and operational recovery. Although we adjusted our annual incentive payout curve for 2021 so that achieving a maximum payout for our executives would be more challenging than under our traditional payout curve, strong business and individual performance resulted in annual incentive payouts between 170% and 173% of individual target opportunities. This is in contrast to 2020, when as a memberresult of the negative impact of COVID-19 on our financial results, we did not meet our 2020 financial targets and annual incentive payouts were below 50% of each NEO’s individual target opportunities.
OUR EXECUTIVE COMPENSATION PHILOSOPHY
To ensure our leaders are driven to deliver sustained business results and achieve our financial, operational and strategic objectives, our executive compensation program is designed to link business priorities with performance. We also believe it is important to strongly align our executives’ interests with those of our Board for his experience in acquisitions and financings gained through his work in private equity at THL and his experience in evaluating strategies, operations and risks gained through his work asstockholders by emphasizing variable pay, with a consultant.specific focus on achieving Company results that drive shareholder returns.
DIRECTORS WHOSE TERMS WILL EXPIRE IN 2020 (CLASS II)
Our executive compensation programs are based on a pay-for-performance philosophy and are designed to: • Attract, motivate and retain talented executives who have the skills to drive our continued profitability, growth and success; • Align the interests of our executives with those of our stockholders; • Reward executives for sustained business results that drive stockholder value (pay-for-performance); and • Balance “best practices” in executive compensation design, local market practice and Company strategy. |
Olivia Sabine, age 39, Ms. Sabine is an Executive Vice President at Bain Capital. Prior to joining Bain Capital in 2006, Ms. Sabine was an Engagement Manager at McKinsey & Co., where she consulted in the healthcare, media and entertainment and consumer products industries. Ms. Sabine has been a member of our Board since March 2015. Ms. Sabine received a B.A.,magna cum laude, from Columbia College. In addition to the Clear Channel Outdoor Board, Ms. Sabine also sits on the Board of Trustees at Williamstown Theatre Festival as well as Concord Academy. Ms. Sabine was selected to serve as a member of our Board for her experience in operations gained through her work as a consultant and for her experience in acquisitions and financings gained through her work in private equity at Bain Capital.
Paul Keglevic, age 64, Mr. Keglevic served as the Chief Executive Officer of Energy Future Holdings Corp. (“EFH”), since October 2016 and as Chief Restructuring Officer of EFH since December 2013. Previously Mr. Keglevic served as Executive Vice President and Chief Financial Officer for EFH from June 2008 to October 2016. EFH filed for Chapter 11 bankruptcy protection in April 2014 while Mr. Keglevic served as its Chief Financial Officer and Chief Restructuring Officer. Mr. Keglevic was a partner at PricewaterhouseCoopers (“PWC”), an accounting firm, where he worked from July 2002 to July 2008. At PWC he was the U.S. utility sector leader for six years and the clients and sector assurance leader for one year. Prior to PWC, Mr. Keglevic led the utilities practice for Arthur Andersen, where he was a partner for 15 years. Mr. Keglevic has been a member of our Board since May 2017. Mr. Keglevic serves on the board of directors of Stellus Capital Investment Corp. and Bonzanza Creek Energy, Inc. and has served as a member of the board of directors of several subsidiaries of EFH and the Dallas and State of California Chambers of Commerce and several other charitable and advisory boards. Mr. Keglevic received his B.S. in accounting from Northern Illinois University and is a certified public accountant. Mr. Keglevic was selected to serve as a member of our Board for his extensive experience with public companies and knowledge of accounting and regulatory issues.
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COMPENSATION COMMITTEE REPORTSUMMARY OF OUR 2021 DECISIONS
The Compensation Committee of the Board has reviewedmakes decisions regarding our NEOs’ total compensation (base salary, annual bonus objectives, opportunities and discussed the Compensation Discussionpayments and Analysis includedannual equity grants) in this proxy statementconnection with management.our annual performance review process. The information below summarizes these decisions for 2021. Based on such reviewmarket data provided by our independent compensation consultant, after making certain adjustments and discussion,compensation related decisions as described below, in aggregate, for 2021, our NEOs’ total compensation was positioned approximately at the Compensation Committee recommended to the Board that the Compensation Discussionmarket median.
Factors that Guided Total Compensation Decisions | • Our executive compensation philosophy • Degree of achievement of key strategic financial and operational goals for 2021 (for annual incentive award payments made in early 2022 and equity grant decisions) • Recommendations of our CEO (other than with respect to his own compensation) • Advice of an independent compensation consultant • Market pay practices and levels • Historical Clear Channel Outdoor compensation • The impact of the COVID-19 pandemic on our employees, business and industry • Senior leadership transitions in early 2022 | |
Key 2021 Compensation Decisions See page 36 for more information | Base Salary Decisions On July 28, 2021, in connection with his transition from Executive Vice President, Chief Executive Officer Clear Channel Outdoor Americas to Chief Executive Officer (as more fully described below), we entered into an amended and restated employment agreement with Mr. Wells, pursuant to which his base salary was increased from $900,000 to $1,100,000 per annum, effective January 1, 2022. On July 29, 2021, in connection with his transition from Chief Executive Officer to Executive Vice Chairman (as more fully described below), we entered into an amended and restated employment agreement with Mr. Eccleshare, pursuant to which his annual base salary was reduced from $1,250,000 to $625,000 per annum, effective January 1, 2022. Effective January 1, 2022, in connection with entering into his amended and restated employment agreement, Mr. Dilger received a base salary increase of 8.1%, pursuant to which his annual base salary was increased from $370,000 to $400,000, which was applied retroactively to October 1, 2021. | |
2015 Executive Incentive Plan (Annual Incentive Plan) Decisions Although we adjusted our annual incentive payout curve for 2021 so that achieving a maximum payout for our executives would be more challenging than under our traditional payout curve, strong business performance across all of our business units, along with the achievement of individual performance objectives resulted in our NEOs earning annual incentive payouts between 170% and 173% of their individual target opportunities, paid in March 2022. Equity Grant Decisions On July 27, 2021, Messrs. Eccleshare, Wells, Coleman and Dilger and Ms. Feldman received equity grants with a fair market value ranging from $374,907 to $1,947,577 (the “Annual Grants”), which included an additional one-time incremental grant value that was intended to help foster retention and the continuity of our team through the ongoing COVID-19 pandemic and our senior leadership transitions in early 2022. The value received factored each NEO’s performance during their tenure at Clear Channel Outdoor, | ||
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including during the prior year, their long-term potential, retention considerations, the value of certain equity grants made in prior years and market practices for comparable positions. Each Annual Grant, in aggregate consisted of approximately 50% restricted stock units and approximately 50% performance stock units. The restricted stock units granted pursuant to Mr. Eccleshare’s Annual Grant vest in two equal installments on April 1, 2022 and 2023. The restricted stock units granted pursuant to the Annual Grants to the other NEOs vest in three equal installments on April 1 of 2022, 2023 and 2024, subject to each NEO’s continued employment through each vesting date. The performance stock units are earned based on Relative Total Shareholder Return (TSR) relative to the Company’s peer group for the period from July 1, 2021 through March 31, 2024. |
SUPPORTING OUR PAY-FOR-PERFORMANCE PHILOSOPHY
In support of our pay-for-performance philosophy and achievement of strong Company results, the majority of the total compensation opportunity that our President and CEO and other NEOs received in 2021 is “at-risk” and dependent upon future performance. Consistent with Clear Channel Outdoor’s overall executive compensation philosophy, NEOs are rewarded for their strong leadership and individual performance, while providing them with equity incentives to ensure alignment of their interests with those of our stockholders. For Mr. Eccleshare, approximately 81% of his annualized total direct compensation opportunity (base salary, target annual incentive award and the annualized value of recent equity grants) is at-risk, as shown below. This is aligned with our media industry peers. On average, the annualized total direct compensation “at risk” for our NEOs, other than Mr. Eccleshare, is approximately 74%. | The majority of annualized total direct compensation for our NEOs — approximately 81% for our President and CEO and on average approximately 74% for our other NEOs — is “at-risk” based on the achievement of specific performance goals and stock price performance. |
| CEO | Other NEOs (average) | |
 |  | |
| 1 | Long-term incentives are presented on an “annualized” basis, which better reflects our intended targeted 2021 compensation mix. These annualized values reflect the sum of the full grant date fair value of the Annual Grants, and the May 22, 2019 and June 3, 2019 grants, which were one-time grants, spread over four and three years, respectively. |
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ALIGNING PAY WITH PERFORMANCE
We emphasize variable pay rather than fixed pay, with target opportunities based on market practices and Analysis be included in this proxy statement.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Dale W. Tremblay, Chairman
Paul Keglevic
COMPENSATION DISCUSSION AND ANALYSIS
payments based on performance. The following Compensation Discussion and Analysis contains statements regarding Company and individual performance measures and other goals. These goals are disclosed in the limited contextstructure of our executive compensation program and should not be understood to be statementsensures that as an executive’s scope of management’s expectationsresponsibility increases, a greater portion of his or estimatesher compensation comes from performance-based pay. For 2021, the at-risk components of results or other guidance. Further, the Company performance measures used for purposes ofour ongoing executive compensation program were designed as described more fully below, differ from segment results reported in our financial statements. Segment resultsfollows:
Element | Objective | Time Horizon | Metrics | Cash or Equity | ||||
Annual Incentive Plan (Short-term) | Reward achievement of annual Company, business unit and/or individual performance goals | 1 year | 70% based on achievement of Plan Adjusted EBITDA2 30% based on other qualitative individual performance objectives | Cash | ||||
Restricted Stock Units (RSUs) (Long-term) | Promote executive retention Reinforce ownership in the Company | 3 years1 | Stock price appreciation and continued employment | Equity | ||||
Performance Stock Units (PSUs) (Long-term) | Reward long-term shareholder value creation Emphasizes long-term view | 3 years1 | Relative Total Shareholder Return (TSR) performance | Equity |
| 1 | The time horizon for the vesting of the July 27, 2021 annual equity awards is 2.75 years for our NEOs, other than with respect to Mr. Eccleshare’s equity awards. Mr. Eccleshare’s July 27, 2021 annual equity award vests over 1.75 years. |
| 2 | Plan Adjusted EBITDA is defined as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs; excluding bonus expenses. |
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COMPENSATION FACTORS AND GOVERNANCE
The Compensation Committee applies a number of governance features related to executive compensation, which are used to measure the overall financial performance of the Company’s segments, while the performance measures used for compensation purposes are used in connection with assessing the performance of executives. We specifically caution investors not to apply the following discussion to other contexts.
OVERVIEW AND OBJECTIVES OF OUR COMPENSATION PROGRAM
summarized below. We believe that these mechanisms help to assure the alignment of executive and stockholder interests.
What We Do | What We Don’t Do | |
ü Deliver a significant portion of executive compensation through performance-based at-risk pay ü Maintain a peer group for benchmarking pay ü Set challenging short- and long-term incentive objectives ü Provide strong oversight to monitor our equity share usage and avoid excessive levels of dilution ü Require stock ownership by executives, with minimum ownership levels defined by role ü Have double-trigger change-in-control arrangements ü Conduct an annual risk assessment to mitigate any compensation program-related risk having a material adverse effect on the Company ü Offer market-competitive benefits for executives that are generally consistent with the benefits provided to the rest of our employees ü Consult with an independent consultant on compensation levels and practices ü Require reimbursement or forfeiture of any excess incentive compensation in the case of an accounting restatement resulting from fraud or misconduct | × No across-the-board base salary increases × No guaranteed bonus payments × No hedging or pledging of equity × No re-pricing of stock options × No tax gross ups upon a change of control × No excessive perquisites × No supplemental executive retirement plans | |
STOCKHOLDER INPUT ON EXECUTIVE COMPENSATION
We value the opinions of our stockholders, and we welcome input on our executive compensation program. In evaluating the design of our executive compensation and the compensation decisions for each of our NEOs, the Compensation Committee considers stockholder input, including investor questions relating to alignment between executive compensation and stockholder returns. Because half of the annual equity grants awarded to our NEOs is tied to relative TSR, we believe that there is alignment between executive compensation and stockholder returns.
We also consider the advisory “say-on-pay” vote in evaluating the design of our executive compensation and the compensation decisions for each of the NEOs. In May 2021, Clear Channel Outdoor held a stockholder advisory vote on the compensation of Clear Channel Outdoor’s NEOs. Approximately 95% of the votes cast approved the compensation of Clear Channel Outdoor’s NEOs. At our annual meeting of stockholders held on May 26, 2017, our stockholders recommended, and the Board determined, that the stockholder vote on the compensation of our namedNEOs would occur every three years. Our Board has determined, however, 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 officers should be directly and materially linked to operating performance. The fundamental objective of our compensation program ison a more regular basis. Accordingly, a say-on-pay advisory vote was held at the annual meeting in 2021 and will also be held at this annual meeting and at our annual meeting in 2023. At our annual meeting in 2023, we also expect to attract, retain and motivate top quality executives through compensation and incentives which are competitive withinhold our next vote on the various labor markets and industries in which we compete for talent and which align the interestsfrequency of our executives with the interests of our stockholders.
Overall, we have designed our compensation program to:
We seek to achieve these objectives through a variety of compensation elements, as summarized below:say-on-pay votes.
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ROLE OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors administers the executive compensation program for all NEOs, as well as other executives within the Company. While Clear Channel Outdoor management provides input, it is the responsibility of the Compensation Committee to evaluate and approve our executive compensation philosophy, plans, policies and programs.
The following table outlines the process the Compensation Committee follows to ensure the total compensation for our NEOs is competitive, appropriately tied to performance and does not promote undue risk taking.
| STEP 1: Input on Compensation | STEP 2: | STEP 3: Compensation Committee Oversight | ||||||
Each year, management, including the Chief Executive Officer, provides recommendations to the Compensation Committee on the compensation of the NEOs. The Chief Executive Officer does not make recommendations on his own pay. These recommendations take into consideration the competitive market pay data provided by the Board’s independent consultant, as well as an evaluation of the NEO’s role, contributions and performance in achieving Company performance and long-term potential. (See more below on the Board’s independent compensation consultant.) | » | The Compensation Committee considers these recommendations together with the input of our independent compensation consultant. Subsequently, the Compensation Committee determines the NEOs’ compensation, ensuring that it is aligned with our compensation philosophy. All aspects of the Chief Executive Officer’s compensation are determined solely by the Compensation Committee, with input from the independent compensation consultant. | » | For the coming year, the Compensation Committee will review and approve: • Objectives for each NEO • Variable pay target opportunities for annual incentive awards • Performance metrics for the annual incentive award Subsequently, each year in the spring, the Compensation Committee will review and approve long-term equity incentive grants and related performance metrics. The Compensation Committee ensures that performance metrics are consistent with the financial, operational and strategic goals set by the Board, the performance goals are sufficiently ambitious and that amounts paid (when target performance levels are achieved) are consistent with our executive compensation philosophy. | ||||
ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT
Though the Compensation Committee has ultimate responsibility for compensation-related decisions, we retain WTW as an independent consultant on executive compensation matters. WTW provides market analyses and recommendations that inform the Compensation Committee’s decisions, shares updates on market trends and the regulatory environment as it relates to executive compensation, reviews various executive compensation proposals presented by management to the Compensation Committee and works with the Compensation Committee to validate and strengthen the pay-for-performance relationship and alignment with stockholders.
Pursuant to the rules of the SEC, the Compensation Committee has reviewed the SEC’s independence factors for compensation advisers and concluded that no conflict of interest exists that would prevent WTW from independently representing the Compensation Committee.
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ROLE OF THE EXECUTIVE COMPENSATION PEER GROUP
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Clear Channel Outdoor’s revenues are positioned near the 30th percentile of our peer group. We generally target total compensation packages for NEOs to reflect the 50th percentile of our peer group of companies when financial and operational goals
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Similar in size (primarily revenue - generally 0.5x - 2.5x that of Clear Channel, as well as market capitalization) and complexity to Clear Channel Outdoor
In the media or similar industry, including broadcasting, outdoor advertising, marketing/advertising and publishing
In competition with Clear Channel Outdoor for executive talent
Our peer group will be regularly reviewed by the Compensation Committee with consideration given to our strategy and the advice of our independent compensation consultant. The Compensation Committee approved the following peer group for 2021:
2021 Executive Compensation Peer Group | ||||
AMC Networks, Inc. Audacy, Inc. Gannett Co., Inc. Gray Television, Inc. Lamar Advertising Company |
Meredith Corporation Nexstar Media Group, Inc. Nielsen Holdings plc Outfront Media, Inc. | Quad/Graphics, Inc. Sinclair Broadcast Group, Inc. Sirius XM Holdings, Inc. TEGNA, Inc. The New York Times Company | ||
RELATIONSHIP OF COMPENSATION POLICIES AND PROGRAMS TO RISK MANAGEMENT
In consultation with the Compensation Committee, management conducted an assessment of whether our compensation policies and practices encourage excessive or inappropriate risk taking by employees, including employees other than our 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 our compensation policies with the long-term interests of Clear Channel Outdoor and avoiding rewards or incentive structures that could create unnecessary risks. |
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 our business.
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ELEMENTS OF THE EXECUTIVE COMPENSATION PROGRAM
CCOH’s executive compensation consists of fixed pay and variable pay, including cash and non-cash components. The chart below summarizes the various elements of CCOH’s executive compensation and their purpose:
Element | Objective | Type of Compensation | Key Features | |||
Base Salary | Provide competitive fixed pay that is tied to the market and allows us to attract, retain and motivate executives within the media industry and broader market | Cash | • Reflects individual skills, experience, responsibilities and performance over time • Provides a stable and reliable source of income | |||
Short-Term Incentive — Annual Incentive Plan | Encourage focus on performance that achieves specific short-term goals | Cash | • Performance-based reward tied to achievement of short-term (annual) corporate, business unit and individual performance goals • Pays only if threshold performance levels or above are met | |||
Long-Term Incentive — Restricted Stock Units (RSUs) | Promote executive retention over the long-term | |||||
| Equity |
• Promotes retention and • Links value to stock price | |||||
Long-Term Incentive — Performance Stock Units (PSUs) | Reward long-term stockholder value creation and emphasize a long-term view | Equity | • Performance-based rewards tied to achievement of long-term Total Shareholder Return (TSR) goals • Vests only if threshold performance levels or above are met • Aligns executive and stockholder interests • Links value to stock price and emphasizes relative outperformance of shareholder returns | |||
Other Benefits | Provide | Benefit | • 401(k) retirement plan available to all employees • Broad-based benefits available to all employees • Private medical insurance and • Limited perquisites | |||
Severance Agreements | • Facilitates an orderly transition in the event of management changes • Helps ensure NEOs remain focused on creating sustainable performance in case of personal uncertainties or risk of job loss • Provides confidentiality, non-compete and non-solicit protections |
In May 2017, we held a stockholder advisory vote on the
| Notice and Proxy Statement 2022 35 |
ANALYSIS OF 2021 COMPENSATION DECISIONS
All compensation of our named executive officers. More than 99% of the votes cast on the matter approved the compensation of our named executive officers as disclosed in our 2017 proxy statement. Accordingly, wedecisions for 2021 for Clear Channel Outdoor’s NEOs were made no significant changes to the objectives or structure of our executive compensation program. We currently hold oursay-on-pay vote once every three years. Accordingly, we expect that our nextsay-on-pay advisory vote will occur at our annual meeting of stockholders in 2020. We also expect our next vote on the frequency ofsay-on-pay votes to occur at our annual meeting of stockholders in 2023.
COMPENSATION OF OFFICERS EMPLOYED BY IHEARTMEDIA
The following of our named executive officers were employed by and received compensation from iHeartMedia in 2017:
Accordingly, the 2017 compensation for Messrs. Pittman, Bressler and Macri was set by the Compensation Committee ofCommittee.
Base Salary
We establish base salaries for NEOs that reflect each executive’s experience, expertise and the Board of Directors of iHeartMedia. Clear Channel Outdoor’s Compensation Committee had no involvement in recommending or approving their compensation.
As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement,” a portion of the 2017 compensation for Messrs. Bressler and Macri was allocated to us in recognitioncomplexity of their services provided to us pursuant to a Corporate Services Agreement between us and a subsidiary of iHeartMedia. Those allocated amounts are reflected in the Summary Compensation Table below, along with any compensation that we or our subsidiaries provided to them directly. See footnote (g) to the Summary Compensation Table below for a description of the allocations. Additionally, upon termination or a change in control, a portion of certain payments that would be due to Messrs. Bressler and Macri would be allocated to us, as reflected in the Potential Payments Upon Termination or Change in Control table set forth below. These allocations were or would be made, as applicable, based on Clear Channel Outdoor’s OIBDAN (as defined below) as a percentage of iHeartMedia’s OIBDAN for the prior year, each as reported in
connection withyear-end financial results. For purposes of these allocations, OIBDAN is defined as: consolidated net income (loss) adjusted to excludenon-cash compensation expenses and amortization of deferred system implementation costsrole, as well as the following line items presented in the Statement of Operations: income tax benefit (expense); other income (expense), net; equity in earnings (loss) of nonconsolidated affiliates; interest expense; interest income on the Due from iHeartCommunications Note; other operating income, net; depreciation and amortization; and impairment charges. Mr. Pittman’scurrent competitive compensation is paid by iHeartMedia and is not allocated to us.
All references in this Compensation Discussion and Analysis to compensation policies and practices for our executive officers should be read to exclude the compensation policies and practices applicable to Messrs. Pittman, Bressler and Macri and any other executive officers whose compensation was determined by iHeartMedia, other than with respect to Clear Channel Outdoor equity awards provided to those individuals. Accordingly, except as otherwise indicated below, references in this Compensation Discussion and Analysis to our named executive officers are intended to include:
data. The Compensation Committee typically determines total compensation, as well as the individual components of such compensation,reviews base salaries of our named executive officers (other than Messrs. Pittman, BresslerNEOs annually and Macri) on an annual basis. All compensation decisions are made within the scope of each named executive officer’s employment agreement, if any.
In making decisions with respect to each element of executive compensation, the Compensation Committee considers the total compensation that may be awarded to the executive, including salary, annual incentive bonus and long-term incentive compensation. Multiple factors are considered in determining the amount of total compensation awarded to the named executive officers, including:
The goal is to award compensation that is reasonable when all elements of potential compensation are considered.
As described above, we believe that a combination of various elements of compensation best serves the interests of Clear Channel Outdoor and its stockholders. Having a variety of compensation elements enables us to meet the requirements of the highly competitive environment in which we operate while ensuring that our named executive officers are compensated in a way that advances the interests of all stockholders. Under this approach, executive compensation generally involves a significant portion of pay that is “at risk,” namely, the annual incentive bonus. The annual incentive bonus is based entirely on financial performance, individual performance or a combination of both. In conjunction with the annual incentive bonus awards, the Compensation Committee also may provide annual discretionary bonuses or additional bonus opportunities to our named executive officers, which also would be based on financial performance, individual performance or a combination of both. Equity awards constitute a significant portion of long-term remuneration that is tied directly to stock price appreciation, which benefits all stockholders.
Our practices with respect to each of the elements of executive compensation are set forth below, followed by a discussion of the specific factors relevant to the named executive officers.
Base Salary
Administration. Base salaries for executive officers typically are reviewed on an annual basis and at the time of promotion or other change in responsibilities. In general, anyapproves increases in salary will be based on the subjective evaluation ofconsidering factors such as the level of responsibility, individual performance level of pay both of the executive in question and other similarly situated executives and competitive pay practices. All decisions regarding increasing or decreasing an executive officer’s base salary are made within the scope of the executive’s respective employment agreement, if any. In the casemarket competitiveness.
2021 Base Salary Decisions
None of our named executive officers who have employment agreements with us, each of their employment agreements contains a minimum level of baseNEOs received based salary increases in 2021, other than Mr. Dilger, as described below under “Executive Compensation—Employment Agreements with the Named Executive Officers.”below.
In reviewing base salaries, the Compensation Committee considers the importance of linking a significant proportion of the named executive officer’s compensation to performance in the form of the annual incentive bonus (plus any annual discretionary bonuses or additional bonus opportunities), which is tied to financial performance measures, individual performance, or a combination of both, as well as long-term incentive compensation.
12/31/2020 Salary |
Salary | Percent Change | ||||||||||
C. William Eccleshare(1) | $ | 1,250,000 | $ | 1,250,000 | 0.0 | % | ||||||
Brian D. Coleman | $ | 650,000 | $ | 650,000 | 0.0 | % | ||||||
Scott R. Wells(2) | $ | 900,000 | $ | 900,000 | 0.0 | % | ||||||
Lynn A. Feldman | $ | 600,000 | $ | 600,000 | 0.0 | % | ||||||
Jason A. Dilger(3) | $ | 370,000 | $ | 400,000 | 8.1 | % | ||||||
Analysis. Mr. Eccleshare’s base salary increased to $1,000,000 in connection with his promotion to serve as our Chief Executive Officer on January 24, 2012. Mr. Eccleshare’s base salary remained at that level for 2017.
| (1) | On July 29, 2021, in connection with his transition from Chief Executive Officer to Executive Vice Chairman (as more fully described below), we entered into an amended and restated employment agreement with Mr. Eccleshare, pursuant to which his annual base salary was reduced from $1,250,000 to $625,000 per annum, effective January 1, 2022. |
In March 2015, we hired Mr. Wells as Chief Executive Officer of our Americas division. Under his employment agreement, Mr. Wells was provided an initial base salary of $750,000. His base salary remained at that level for 2017.
| (2) | On July 28, 2021, in connection with his transition from Executive Vice President, Chief Executive Officer Clear Channel Outdoor Americas to Chief Executive Officer (as more fully described below), we entered into an amended and restated employment agreement with Mr. Wells, pursuant to which his base salary was increased from $900,000 to $1,100,000 per annum, effective January 1, 2022. |
For a more detailed description of the employment agreements of the named executive officers, please refer to “Executive Compensation—Employment Agreements with the Named Executive Officers.”
| (3) | Effective January 1, 2022, in connection with entering into his amended and restated employment agreement, Mr. Dilger received a base salary increase of 8.1%, pursuant to which his annual base salary was increased from $370,000 to $400,000, which was applied retroactively to October 1, 2021. |
Annual Incentive Plan
Administration. Each of our named executive officers participates in ourThe 2015 Executive Incentive Plan (the “Annual Incentive Plan”), other than Messrs. Pittman, Bressler and Macri, who participate in iHeartMedia’s 2015 Executive Incentive Plan. The Annual Incentive Plan is administered by the Compensation Committee and is intended to provide an“annual incentive to the named executive officers and other selected key executives to contribute to the growth, profitability and increased stockholder value and to retain such executives. Under the Annual Incentive Plan, participants are eligible for performance-based awards, which represent the conditional right to receive cash or other property based upon the achievement ofpre-established performance goals within a specified performance period. No single participant may receive more than $15,000,000 in awards in any calendar year. The Annual Incentive Plan was designed to allow awards to qualify for the performance-based compensation exception under Section 162(m) of the Code.
The performance goals for our named executive officers are set pursuant to an extensive annual operating plan developed by the Chief Executive Officer in consultationplan”) provides NEOs with the Board, the Chief Financial Officer and other senior executive officers of Clear Channel Outdoor, within any parameters specified within each executive’s employment agreement. The Chief Executive Officer makes recommendations asopportunity to the compensation levels and performance goals of our named executive officers (other than his own) to the Compensation Committee for its review, consideration and approval. The Compensation Committee has complete discretion to accept, reject or modify the recommendations of the Chief Executive Officer.
The 2017 annual incentive bonuses were based on the following performance goals (as further described below): (1) Mr. Eccleshare’s performance goals were based upon achievement of a targeted OIBDAN level for
CCI and certain qualitative performance objectives which contributed to CCI’s performance, and (2) Mr. Wells’ performance goals wereearn rewards based on the achievement of annual corporate and individual performance goals set by the Compensation Committee. Each NEO has a targeted OIBDAN level for CCOA, excluding Latin America,target award opportunity, with no minimum (that is, the actual payment could be 0%) and Latin America and certain qualitative performance objectives, which contributeda maximum of 200% of their target opportunity.
Actual target awards are based on:
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Prior to CCOA’s performance.
The2021, our annual incentive bonusplan had a threshold payout at an achievement of 90% of the applicable target Adjusted EBITDA and a maximum payout at an achievement of 115% of the applicable target Adjusted EBITDA. For 2021, due to uncertainties around COVID-19, we adjusted our annual incentive payout curve so that the threshold payout would be achieved earlier but also so that achieving a maximum payout for our executives would be more challenging than under our traditional payout curve.
After the end of the fiscal year, the Compensation Committee determines the earned amounts are determined according toby measuring the level of achievement of the objective OIBDAN-basedAdjusted EBITDA-based performance goals and the individual qualitative performance goals. No award is earned under the objectiveAdjusted EBITDA performance goal belowif a minimum threshold of performance (90%(80% of the applicable target OIBDANAdjusted EBITDA for each individual) is not achieved, and athe maximum amount is earned underonly if the objective performance goal for performanceis at or above a maximum level (115%(125% of the applicable target OIBDANAdjusted EBITDA for each individual). The Compensation Committee may, inat its discretion, reducemodify the awards earned pursuant to eitherfor the Adjusted EBITDA objective and/or individual qualitative performance goals, as applicable.
The Compensation Committee follows the process set forth below to determine
Annual Incentive Plan Financial Measure We present Adjusted EBITDA as an externally reported measure of performance because we believe Adjusted EBITDA helps investors understand our operating performance as compared to other outdoor advertisers, it is widely used in practice and it is one of the primary measures used for planning and forecasting of future periods. |   |
We define Adjusted EBITDA as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. For purposes of the annual incentive bonusesplan, Adjusted EBITDA excludes bonus expenses.
Annual Incentive Plan Objectives and Results
For 2021, annual incentive plan objectives were established by the Compensation Committee at the beginning of the fiscal year for both CCOA and CCOH.
The financial objectives for our NEOs reflect their roles as follows:
The financial objectives for Messrs. Eccleshare and Wells:
Mr. Wells’ financial objective was based on CCOA Adjusted EBITDA
The financial objectives for Ms. Feldman and Mr. Dilger were based on achievement of Clear Channel Outdoor (CCOH) and CCOA Adjusted EBITDA (with the weighting split 35% on each).
Mr. Eccleshare
2021 Individual Performance Objectives:
Lead the business toward a post-COVID-19 future;
Lead and collaborate to advance CCOA strategy, including through growth of CCOA EBITDA ahead of revenue, support of key investments within the division and advancement of key cultural and talent initiatives across the Company;
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Continue to implement the investor relations strategy in alignment with corporate transactions with a view of reinforcing the positive messages to investors and markets on the impact of corporate transactions on the remaining organization and share price;
Accelerate the development of our programmatic offer and RADAR across all divisions and deliver further efficiencies in technology spend in Europe; and
Continue to set the tone from the top on compliance and support all related initiatives throughout the organization.
Key Achievements: Mr. Eccleshare led the Clear Channel organization and our senior leadership team throughout 2021 in managing the Company in the face of the pandemic, including encouraging return to office initiatives while being respectful of national government mandates and employee surveys, continued communications across our global leadership team, and an increased focus on our succession planning and diversity and inclusion initiatives. In addition, Mr. Eccleshare developed and implemented strategic operating plans across various international locations, achieved RADAR going live in the UK, Spain and Sweden and continued to integrate a compliance culture across the business.
Mr. Coleman
2021 Individual Performance Objectives:
Assume oversight of international corporate finance in conjunction with corporate restructuring plan;
Lead/support various processes to optimize desired outcome of strategic initiatives;
Manage capital structure and ensure adequate corporate liquidity;
Build CCOH finance “identity”;
Improve communications with the Board and emphasize all areas of finance, including audit and control; and
Maintain operational excellence by ensuring that the Company’s financial units are strategically aligned and performing effectively.
Key Achievements: Mr. Coleman played a key role in the support and management of multiple critical strategic initiatives during the course of 2021, including leading our liquidity initiatives and providing ongoing support for our M&A-related activities. Mr. Coleman continued to lead CCOH’s highly functional corporate finance structure and executed on various initiatives relating to negotiating a second amendment to the Company’s revolver, which provides additional financial flexibility to bridge the financial/liquidity impact of the pandemic, and the operating divisions, as well as any individualpreparation and presentation of materials for the Board. Mr. Coleman successfully managed functional challenges including work from home/partial return to office dynamics to ensure effective performance goals.of corporate teams and delivery of financial support/services. Additionally, he assisted with successfully managing our CEO transition in early 2022.
Mr. Wells
2021 Individual Performance Objectives:
Drive cultural change to embrace a growth-centric approach, including through growth of CCOA EBITDA ahead of revenue;
Analysis. In determining whether
Continue momentum of largest clients through the 2017 financial performance goals were met,execution of growth plans;
Enhance digital tool set, communicate capabilities and use innovation to grow customer base;
Drive local sales growth;
Shepherd major investment opportunities to successful outcomes; and
Promote winning culture and continue to drive high talent standards.
Key Achievements:Mr. Wells led the Compensation Committee considered the financial results of Clear Channel OutdoorAmerica’s business unit in 2021, notably including the achievement of growing EBITDA faster than revenue by 37%. Mr. Wells was responsible for several sales and its operating divisions from January 1, 2017
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operational accomplishments, including leading the evolution of our inventory and sales systems and our digital tools and capabilities. Additionally, Mr. Wells led the return to December 31, 2017. For 2017,office and safety initiatives in the performance-based goals applicableAmericas, increased the focus on diversity and inclusion initiatives within the business and maintained recognition and increased cross-market competition despite COVID-19 restrictions.
Ms. Feldman
2021 Individual Performance Objectives:
Deliver on corporate transactions;
Provide effective board management and enhance corporate secretarial functional improvements;
Further development of executive compensation function;
Implementation of legal reorganization;
Continued development of compliance program; and
Continued development of legal support for growth initiatives.
Key Achievements: Ms. Feldman led the Clear Channel legal and compliance functions throughout 2021, and played a key role in supporting and negotiating various corporate transactions. In addition, Ms. Feldman led several operational achievements within the legal function, including improvements relating to the management of Board and shareholder meetings, enhancements to proxy and 10-K disclosures and further development of compliance and internal training programs. Ms. Feldman developed a cross-divisional committee to align on compensation strategy and continued to support the roll out of diversity and inclusion initiatives within the organization. Additionally, she assisted with successfully managing our CEO transition in early 2022.
Mr. Dilger
2021 Individual Performance Objectives:
Drive operational excellence within the global accounting function;
Support capital markets transactions and other strategic initiatives;
Enhance and broaden business services functions;
Assume direct leadership responsibilities for corporate Europe and Latin America accounting teams; and
Continue to lead return to office initiative in alignment with evolving COVID-19 restrictions.
Key Achievements: Mr. Dilger led the Clear Channel accounting and business services functions throughout 2021 and played a key role in supporting several strategic initiatives throughout the year including capital market transactions and restructuring programs. He created enhancements to our named executive officers are set forth under “—Summaryfinancial reporting and earnings releases; improved on business services operating metrics and automations; and provided support relating to Treasury and other initiatives. Mr. Dilger successfully took on direct responsibility for the Europe and Latin America corporate accounting functions which supported cost savings initiatives and strengthened in country CFO communications. In addition, he enabled staff to provide uninterrupted accounting and business services support through a nimble combination of 2017 Cashat office and at home work arrangements and active employee engagement discussions and other related activities.
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2021 Annual Incentive Payments for each Named Executive Officer” below.Award (paid in March 2022)
For 2017, Clear Channel Outdoor’s OIBDAN performance was negatively impacted by the macroeconomic environment. As a result Clear Channel Outdoorof strong business performance across all our business units, along with the achievement of their individual performance objectives, the Committee deemed that each of the NEOs achieved above “target” levels of their performance objectives and its operating divisions did not meet their OIBDAN targetsthat it was appropriate to approve payouts between 170% and 173% of each NEO’s individual target opportunities. The following table provides a summary of the earned annual incentive bonus awards werepayouts for each NEO in 2021, to be paid below the target bonus levels.in March 2022.
Supplemental Incentive Plan
Total Base Salary | Total Opportunity | Financial Portion Weight | Financial Portion Actual % of Target | MBO Portion Weight | MBO Portion Actual % of Target | Total Actual as a % of Target | Total Actual Amount Awarded | |||||||||||||||||||||||||
C. William Eccleshare | 110 | % | $ | 1,375,000 | 70 | % | 200 | % | 30 | % | 110 | % | 173 | % | $ | 2,378,750 | ||||||||||||||||
Brian D. Coleman | 100 | % | $ | 650,000 | 70 | % | 200 | % | 30 | % | 100 | % | 170 | % | $ | 1,105,000 | ||||||||||||||||
Scott R. Wells | 100 | % | $ | 900,000 | 70 | % | 200 | % | 30 | % | 110 | % | 173 | % | $ | 1,557,000 | ||||||||||||||||
Lynn A. Feldman | 100 | % | $ | 600,000 | 70 | % | 200 | % | 30 | % | 110 | % | 173 | % | $ | 1,038,000 | ||||||||||||||||
Jason A. Dilger | 60 | % | $ | 226,537 | 70 | % | 200 | % | 30 | % | 110 | % | 173 | % | $ | 391,909 | ||||||||||||||||
Administration. Mr. Eccleshare participates in the Clear Channel Outdoor Holdings Inc. 2015 Supplemental Incentive Plan (the “SIP”). Our stockholders approved the SIP in May 2015.
The SIP isClear Channel Outdoor Holdings (CCOH) supplemental incentive plan (SIP) was intended to provide additional bonus opportunities as an incentive to the executive officersNEOs to contribute to the growth, profitability and increased stockholder value of Clear Channel OutdoorCCOH and for the retention of such executives. UnderIn 2018, Mr. Eccleshare participated in the SIP participants are eligible for performance-based awards, which represent the conditional right to receive cash or other property based upon the achievement ofpre-established performance goals within a specified performance period. No single participant may receive more than $15,000,000 in awards in any calendar year. The performance period for awards under the SIP is twelve months. The achievement ofwith an earned award is determined as soon as practicable after the end of the applicable performance period. Unless otherwise communicated to a participant in a written agreement, payment of the awards shall not occur until the90-day period following the third anniversary of the beginning of the applicable performance period, subject to the participant’s continued employment through such payment date. Pursuant to the terms of his employment agreement, Mr. Eccleshare’s earned SIP bonuses are paid by Clear Channel Outdoor in equal cash installments on or about the first, second and third anniversary of the beginning of the applicable performance period, in each case contingent upon his continued employment through the applicable payment date.
In 2017, Mr. Eccleshare received a SIP bonusincentive opportunity based on certain qualitative performance objectives, which contributed to CCI’s performance.
Analysis. For 2017, the individual performance-based goals for Mr. Eccleshare are set forth under “—Summary of 2017 Cash Incentive Payments for each Named Executive Officer” below. Following the end of 2017, the Compensation Committee determined that Mr. Eccleshare met his performance objectives, and Mr. Eccleshare’s 2017 SIP bonus was earned at 100% of target. The Compensation Committee believed that the payment of SIP awards in increments over a three-year period, subject to continued employment, would enhance the retention value of these awards.
Summary of 2017 Cash Incentive Payments for each Named Executive Officer
C. William Eccleshare
Pursuant to his employment agreement, Mr. Eccleshare’s target bonus for 2017 under the Annual Incentive Plan was set at $1,000,000, with 70% based on the achievement of OIBDAN at CCI of $246.5 million and 30% based on the achievement of the other qualitative performance objectives described below. His maximum bonus for 2017 was set at $2,000,000. For purposes of calculating Mr. Eccleshare’s bonus, OIBDAN was calculated in the same manner as CCI’s reportable OIBDAN, with further adjustments to calculate on a constant currency basis, to exclude restructuring expenses and to allocate the applicable corporate expenses to CCI. CCI’s reportable OIBDAN is defined as CCI’s operating income adjusted to excludenon-cash compensation expenses, included within corporate expenses, as well as Depreciation and amortization; Impairment charges; and Other operating income (expense), net. Mr. Eccleshare’s individual qualitative performance objectives for 2017 consisted of:(1) re-shaping CCI’s operating model; (2) talent and succession planning; (3) continuing to outperform theout-of-home market; (4) increasing digital revenue; and (5) remaining focused on compliance and regulation. CCI’s 2017 OIBDAN was approximately $208.5 million, which was below the OIBDAN minimum. Based on Mr. Eccleshare’s level of achievement of his qualitative performance objectives described above, Mr. Eccleshare received an annual incentive bonus of $300,000. In addition, based on the subjective review of Mr. Eccleshare’s performance by our Compensation Committee, Mr. Eccleshare received an additional $250,000 bonus in respect of 2017 performance, for an aggregate 2017 bonus of $550,000. The annual incentive bonus of $300,000, is reflected in theNon-Equity Incentive Plan Compensation column and the additional $250,000 bonus is reflected in the Bonus column of the Summary Compensation Table for 2017.
Pursuant to a SIP bonus opportunity approved for Mr. Eccleshare by our Compensation Committee with respect to 2017 performance, Mr. Eccleshare also earned an additional $300,000 SIP bonus based on achieving the followingcertain additional performance objectives established by ourClear Channel Outdoor’s pre-Separation Compensation Committee for Mr. Eccleshare with respect to our business: (1) positioning CCI at the forefront of programmatic delivery in theout-of-home environment; and (2) partnering with iHeartMedia on restructuring transactions and managing any impact on CCI. Clear Channel Outdoor’s business.
Of the $300,000 SIP bonus earned with respect to 20172018 performance, $100,000 was paid at the end of February 2018, and the remaining $200,000 will be2019, $100,000 was paid in equal installments of $100,000 each at the same time as the annual incentive bonus payments in 2019 and 2020 if Mr. Eccleshare remains employed on the applicable payment dates. In addition, at the end of February 2018, Mr. Eccleshare2020, and the remaining $100,000 was paid the third of three $80,000 installments pursuant to his earned 2015 SIP bonus. He was also paid the second of three $90,000 installments pursuant to his earned 2016 SIP bonus. The final $90,000 installment of the 2016 SIP bonus will be paid at the same time asend of February 2021.
Equity Grants
Equity grants help to align executive interests with those of our stockholders. We have designed our annual equity program to support the objectives of our business, align with market practice, and provide incentive to deliver key financial metrics that are explicitly linked with stockholder value creation.
The annual incentive bonus payments are paid generallyequity grant was awarded to our NEOs on July 27, 2021. In future years, we intend to follow a standard practice of making annual equity grants in 2019 if Mr. Eccleshare remains employed on the payment date. The $80,000 paymentfirst half of the 2015 SIP bonus,year. Our long-term incentive program is made up of 50% restricted stock units (RSUs) and 50% performance stock units (PSUs). The following criteria are evaluated for each of our NEOs when determining the $90,000 paymentvalue of their annual equity award:
Performance over the long term;
Performance during the prior year;
Long-term potential;
Economics of certain equity grants made in prior years;
Retention considerations; and
Market practices for comparable positions.
40 Notice and Proxy Statement 2022 | |
| Restricted Stock Units (RSUs) | Performance Stock Units (PSUs) | |||
Definition | Clear Channel Outdoor shares that vest upon meeting time-based vesting conditions | Clear Channel Outdoor shares that are earned by the executive upon achieving Relative Total Shareholder Return (TSR) performance goals and time-based vesting conditions | ||
Value | Clear Channel Outdoor stock price at vesting | Clear Channel Outdoor stock price at vesting | ||
% of Equity Grant | 50% | 50% | ||
Performance Metric | Time | Relative Total Shareholder Return (TSR) relative to the Company’s peer group | ||
Vesting | One-third annually (on the anniversary of the grant) over three years1 | 0% to 150% after three-year performance period based on achievement of performance goal2 |
| 1 | July 2021 grant will vest over 1.75 years for Mr. Eccleshare and 2.75 years for the other NEOs, in each case with the first tranche vesting in April 2022. |
| 2 | July 2021 grant performance is based on Relative TSR from July 1, 2021 through March 31, 2024, with payout within 60 days of the performance period conclusion. |
Adoption of the 2016 SIP bonus and the $100,000 payment of the 2017 SIP bonus are reflected in theNon-Equity Incentive Plan Compensation column of the Summary Compensation Table for 2017.
In March 2017, in accordance with his amended employment agreement, Mr. Eccleshare received a cash payment of $1.1 million as a bonus in lieu of the severance payment Mr. Eccleshare would have been entitled to pursuant to a prior employment agreement, which payment was conditioned on his continued employment through March 2017. This payment is reflected in the Bonus column of the Summary Compensation Table for 2017.
Pursuant to the amendment to his employment agreement, Mr. Eccleshare was paid a retention award of $875,000 on January 1, 2018, which will be reflected as compensation in the Summary Compensation Table for 2018. This retention award is subject to his continued employment through June 30, 2019. He will also receive an additional retention payment of $875,000 on January 1, 2020 subject to his continued employment through June 30, 2020.
Scott R. Wells
Pursuant to his employment agreement, Mr. Wells’ target bonus for 2017 under the Annual Incentive Plan was set at $750,000, with 65% based on the achievement of OIBDAN at CCOA, excluding Latin America, of $443.9 million, 5% based on the achievement of Latin America OIBDAN of $24.1 million and 30% based on the achievement of the other qualitative performance objectives described below. His maximum bonus for 2017 was set at $1,500,000. For purposes of calculating Mr. Wells’ bonus, OIBDAN was calculated in the same manner as CCOA’s reportable OIBDAN, with further adjustments to calculate on a constant currency basis, to exclude restructuring expenses and to allocate the applicable corporate expenses to CCOA. CCOA’s reportable OIBDAN is defined as CCOA’s operating income adjusted to excludenon-cash compensation expenses, included within corporate expenses, as well as Depreciation and amortization; Impairment charges; and Other operating income (expense), net. Mr. Wells’ individual qualitative performance objectives for 2017 consisted of: (1) proactively managing liquidity levers while still strategically driving footprint growth; (2) driving national sales group growth; (3) driving customer valued innovation to increase use of Outdoor by national advertisers; (4) embedding solution-selling techniques and digital fluency in our local markets and reducing customer churn; (5) continuing to drive winning culture and high talent standards; (6) resolving our Los Angeles digital billboard litigation; and (7) continuing to raise the bar for a winning culture at CCOA. The 2017 CCOA OIBDAN, excluding Latin America, was approximately $409.9 million which was below the OIBDAN target but above the OIBDAN minimum. The Latin America OIBDAN was approximately $22.6 million which was below the OIBDAN target, but above the OIBDAN minimum. Based on the achieved OIBDAN levels, together with Mr. Wells’ level of achievement of his qualitative performance objectives described above, Mr. Wells received an annual incentive bonus of $551,396. The annual incentive bonus of $551,396 is reflected in theNon-Equity Incentive Plan Compensation column of the Summary Compensation Table for 2017.
Long-Term Incentive Compensation
Administration. Our named executive officers participate in our 2012 Second Amended and Restated Stock Incentive Plan or our previous 2005 Stock
On May 5, 2021, the Company’s stockholders approved the adoption of the 2012 Second Amended and Restated Equity Incentive Plan (the “2005 Stock Incentive“2021 Plan”), which allow for the issuance of incentiveamends andnon-statutory stock options, restricted stock and other equity awards. The 2012 Amended and Restated Stock Incentive Plan is administered by our Compensation Committee. See “Executive Compensation—Grants of Plan-Based Awards” for a more detailed description of restates the 2012 Amended and Restated Stock Incentive Plan. AsThe 2021 Plan is a broad-based incentive plan that provides for granting stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based cash and stock awards to any of the Company’s or its subsidiaries’ present or future directors, officers, employees, consultants, or advisers. The Company had 34,132,684 shares available for issuance under the 2021 Plan as of December 31, 2017, there were 247 employees holding2021, assuming a 100% payout of the Company’s outstanding performance stock incentive awards underunits.
2021 Equity Compensation Decisions
On July 27, 2021, Messrs. Eccleshare, Wells, Coleman and Dilger and Ms. Feldman received the 2012 AmendedAnnual Grants. The grant date fair value of each award was based on each NEO’s performance over the long term and Restated Stock Incentive Planduring the prior year, their long-term potential and retention considerations, and market practices for comparable positions. The equity grants consisted of 50% RSUs and 50% PSUs. The RSUs vest in three equal installments on April 1 of 2022, 2023 and 2024 for each NEO other than Mr. Eccleshare. The RSUs for Mr. Eccleshare vest in two equal installments on April 1 of 2022 and 2023. The PSUs are earned based on the Company’s Relative Total Shareholder Return (TSR) achievement against the S&P 600 Index, and the 2005 Stock Incentive Plan. In general,entire earned amount will be paid out within 60 days following the levelend of long-term incentive compensationthe performance period on March 31, 2024. The value of these awards, other than with respect to Mr. Eccleshare, included a
| Notice and Proxy Statement 2022 41 |
one-time incremental addition to their regular annual grant value, which was intended to help foster retention and the continuity of our team through the ongoing COVID-19 pandemic and our senior leadership transitions in early 2022.
| Regular Annual RSUs | Regular Annual PSUs | Incremental RSUs | Incremental PSUs | Total 2021 Grant Value | ||||||||||||||||
C. William Eccleshare | $ | 947,579 | $ | 999,998 | N/A | N/A | $ | 1,947,577 | ||||||||||||
Brian D. Coleman | $ | 473,791 | $ | 499,999 | $ | 230,972 | $ | 243,749 | $ | 1,448,511 | ||||||||||
Scott R. Wells | $ | 568,550 | $ | 600,000 | $ | 319,806 | $ | 337,500 | $ | 1,825,856 | ||||||||||
Lynn A. Feldman | $ | 331,652 | $ | 350,000 | $ | 213,204 | $ | 225,000 | $ | 1,119,856 | ||||||||||
Jason A. Dilger | $ | 94,757 | $ | 100,000 | $ | 87,650 | $ | 92,500 | $ | 374,907 | ||||||||||
Using Relative Total Shareholder Return (“TSR”) as the PSU Performance Metric Relative TSR compared to the S&P 600 Index was selected as the performance metric for PSU awards because it rewards long-term stockholder value creation, aligning the interests of our executives and stockholders. The TSR of Clear Channel Outdoor will be measured at the end of the performance period relative to the Company’s peer group. The TSR calculation for Clear Channel Outdoor and each of the companies in the Company’s peer group will be based on the average stock price of each company over the 20 trading days following the beginning of the performance period, and the average stock price of each company over the 20 trading days prior to the end of the performance period (defined at grant). Based on the payout scale of the plan, the percentile rank translates into a payout percentage. The target number of shares is then multiplied times the payout percent to determine the earned number of shares that will be distributed to the participant once the award is vested. PSUs Granted in 2021 Pursuant to the PSUs granted on July 27, 2021, each NEO is eligible to receive shares of Clear Channel Outdoor common stock ranging from 0% to 150% of target based on Clear Channel Outdoor’s achievement of a Relative TSR goal over the performance period from July 1, 2021 to March 31, 2024: |
Total Shareholder Return Relative to S&P 600
| Performance Goal | Performance Vesting Percentage | |||
Below Threshold Level | <30th Percentile relative to S&P 600 | 0% | ||
Threshold Level | 30th Percentile relative to S&P 600 | 50% | ||
Target Level | 60th Percentile relative to S&P 600 | 100% | ||
Maximum Level | 90th Percentile relative to S&P 600 | 150% |
Note: Straight line interpolation is determined basedused to determine the performance vesting percentage between threshold and maximum.
PSUs Granted in 2020 and 2019
We granted PSUs on an evaluationOctober 20, 2020 (the “2020 PSUs”). The performance period for the 2020 PSUs is in progress, and the payout of competitive factors in conjunction with total compensation providedthe 2020 PSUs will not be determinable until after the performance period is completed on March 31, 2023. Pursuant to the executive officers and the overall goals of the compensation program described above. Long-term incentive compensation typically has been paid in stock options and/or restricted stock or restricted stock units with time-vesting conditions and/or vesting conditions tied2020 PSUs, each NEO is eligible to predetermined performance goals. The Board believes equity ownership is important for purposes of executive retention and alignment of interests with stockholders.
Stock Options, Restricted Stock and Restricted Stock Units. Long-term incentive compensation may be granted to our named executive officers in the form of stock options, with exercise prices of not less than fair market value of our Class A common stock on the date of grant and with a10-year term. We typically define fair market value as the closing price on the date of grant. Long-term incentive compensation also may be granted to our named executive officers in the form of restricted stock or restricted stock unit awards. Vesting schedules are set by the Compensation Committee in its discretion and vary on a case by case basis. All vesting is contingent
on continued employment, with rare exceptions made by the Compensation Committee. See “Executive Compensation—Potential Post-Employment Payments” for a description of the treatment of the named executive officers’ equity awards upon termination or change in control. All decisions to award the named executive officers stock options, restricted stock or restricted stock units are in the sole discretion of the Compensation Committee.
Analysis. Effective as of February 24, 2017, in lieu of dividends that were paid to stockholders, the Compensation Committee granted Mr. Eccleshare (i) an award of 20,719 restricted stock units which vest based on time according to the original vesting schedules of the outstanding restricted stock unit awards; and (ii) 2,702receive shares of Clear Channel Outdoor Class A common stock. Also, on June 30, 2017, the Compensation Committee granted Mr. Eccleshare an awardstock ranging from 0% to 150% of 70,588 restricted stock units, which shall vesttarget based on time.
On June 28, 2017,Clear Channel Outdoor’s achievement of a Relative TSR goal over the Compensation Committee granted Mr. Wells an award of 88,235 restricted shares, which shall vest2.5-year performance period from October 1, 2020 to March 31, 2023, based on time. Also,the same performance goals as described for our 2021 PSUs.
We granted PSUs on September 7, 2017,October 15, 2019 (the “2019 PSUs”). The performance period for the Compensation Committee granted Mr. Wells an award2019 PSUs is in progress, and the payout of 208,333 restrictedthe 2019 PSUs will not be determinable until after the performance period is completed on March 31, 2022. Pursuant to the 2019 PSUs, each NEO is eligible to receive shares which shall vestof Clear Channel Outdoor common stock ranging from 0% to 150% of target based on time.
As mentioned above,Clear Channel Outdoor’s achievement of a Relative TSR goal over the Compensation Committee typically considers internal pay equity when determining2.5-year performance period from October 1, 2020 to March 31, 2022, based on the amount of long-term incentive compensation to grant to our named executive officers. However, the Committee does so broadly and does not have a specific policy, or seek to follow established guidelines or formulas, to maintain a particular ratio of long-term incentive compensation among the named executive officers or other executives. For further information about the 2017 long-term incentive awards, please refer to the “Grants of Plan-Based Awards” and the “Employment Agreements with the Named Executive Officers” sections appearing later under the “Executive Compensation” heading in this proxy statement.
Equity Award Grant Timing Practices
Regular Annual Equity Award Grant Dates. The grant date for regular annual stock options and other equity awards,same performance goals as applicable, for employees, including the named executive officers anddescribed for our independent directors, typically is in the first half of the year. During 2017, our compensation committee granted equity awards to our named executive officers in September, and our Board granted equity awards to our independent directors in July 2017. See “Director Compensation” set forth below in this proxy statement for additional information regarding the compensation program for our independent directors.2021 PSUs.
Employee New Hires/Promotions Grant Dates. Grants of stock options and other equity awards, if any, to newly-hired or newly promoted employees generally are made at the time of hire or promotion or at the regularly scheduled meeting of the Compensation Committee immediately following the hire or promotion. However, timing may vary as provided in a particular employee’s agreement or to accommodate the Compensation Committee.
Initial Equity Award Grant Dates for Newly-Elected Independent Directors. Grants of stock options and other equity awards, as applicable, to newly-elected independent directors generally are made at the regularly scheduled meeting of the Board following their election. If an independent director is appointed between regularly scheduled Board meetings, then grants of stock options and other equity awards, as applicable, generally are made at the first meeting in attendance after such appointment.
Timing of Equity Awards. We do not have a formal policy on the timing of equity awards in connection with the release of materialnon-public information to affect the value of compensation. In the event that materialnon-public information becomes known to the Compensation Committee prior to granting equity awards, the Compensation Committee will take the existence of such information under advisement and make an assessment in its business judgment regarding whether to delay the grant of the equity award in order to avoid any potential impropriety.
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Executive Benefits and PerquisitesEXECUTIVE BENEFITS AND PERQUISITES
We provide certain personalIn 2021, we provided retirement benefits to our named executive officers. The primary personal benefits providedNEOs, except Mr. Eccleshare, through Company matching contributions to one or morethe 401(k) retirement savings plan as well as access to health, disability and life insurance programs, which are the same plans available to all U.S. employees.
Mr. Eccleshare, who is a citizen of the named executive officers include: (1) certain pension benefits (or payments in lieu thereof) in the United Kingdom; (2) company matching 401(k) contributions in the U.S.; (3) tax services andgross-up; (4) private medical insurance for officers who are not U.S. citizens; (5) supplemental life insurance; (6) legal fees; (7) personal use of Company aircraft; and (8) transportation, automobile allowances and the use of a car service.
Mr. EccleshareKingdom, participates in a private pension schemeplan (not sponsored by Clear Channel Outdoor) and, pursuant to his employment agreement, is entitled to have the Company contribute a portion of his salary to the private pension scheme.plan. The pension schemeplan provides pension income at retirement based upon contributions made during the employee’s years of participation. Mr. Eccleshare is required to make contributions to this scheme in order for the Company to make contributions (or provide cash benefits to him as salary in lieu of such contributions). HePursuant to his employment agreement, he also receives a car allowance in the United Kingdom, private medical insurance and we have agreed to maketax services and gross-up. In addition, because he is a car service available for his business use incitizen of the United States. In addition, we provideKingdom, Clear Channel Outdoor provides private medical insurance benefits and supplemental life insurance to Mr. Eccleshare. During 2021, the Company also paid certain legal fees associated with the negotiation of Mr. Eccleshare’s new employment agreement.
The Company has a furnished apartment in New York City that Mr. Wells uses when he is working in our corporate office in New York. We also pay for Mr. Wells’ travel expenses between his home in Massachusetts and New York City, and certain other expenses, including transportation and non-working meals, while he is working in New York City. These amounts are included under “Other Compensation” in the Summary Compensation Table based on SEC guidance. During 2021, the Company also paid certain legal fees associated with the negotiation of Mr. Wells’ new employment agreement.
OTHER KEY FEATURES OF OUR EXECUTIVE COMPENSATION PROGRAM
Stock Ownership Guidelines
Our stock ownership guidelines, effective January 1, 2020, require all NEOs and other members of the Executive Team with a base salary of at least $500,000 to hold a minimum number of shares of Clear Channel Outdoor stock while serving in their leadership position. The guidelines are intended to further align the interests of executives with those of our stockholders by requiring executives to be subject to the same long-term stock price volatility our stockholders experience.
Shares counted toward meeting the requirement include direct owned shares (including after-tax vested RSUs) and unvested RSUs. Unvested stock options and unearned PSUs do not count toward meeting the requirement. The ownership value for each participant will be measured annually based on the closing stock price as of December 31.
Current executives had five years from January 1, 2020 to meet the ownership guideline requirements for their position. New hires and newly promoted executives will have five years from their hire/promotion date to meet their requirement. Executives who have not yet met their requirement will be evaluated on a case-by-case basis. As of December 31, 2021, all of our NEOs exceeded their applicable requirement set forth in the table below.
Named Executive Officer | Stock Ownership Guideline | |
C. William Eccleshare | 5 times base salary | |
Brian D. Coleman | 3 times base salary | |
Scott R. Wells* | 3 times base salary | |
Lynn A. Feldman | 3 times base salary | |
Jason A. Dilger | 1 times base salary |
| * | As of January 1, 2022, upon becoming our Chief Executive Officer, Mr. Wells became subject to a stock ownership requirement equal to 5 times his base salary, which he exceeded as of December 31, 2021. |
Anti-Hedging and Anti-Pledging Policies
Our Insider Trading Policy prohibits hedging and pledging of our securities by any employee, including our NEOs without the prior approval of our General Counsel’s office.
Clawback Policy
The Compensation Committee believeshas adopted a Clawback Policy that is applicable to our current and former NEOs and such other senior executives and employees as the above benefits provide aCompensation Committee may designate from time to time. The policy provides that if the Compensation Committee determines one or more tangible incentive than an equivalent amount of cash compensation. In determiningsuch individuals committed fraud or willful
| Notice and Proxy Statement 2022 43 |
misconduct that caused or contributed to Clear Channel Outdoor restating its financial statements due to material noncompliance with financial reporting requirements under the named executive officers’ total compensation,securities laws, then the Compensation Committee will consider these benefits. However,require reimbursement or forfeiture of any excess cash or equity incentive compensation, as these benefits and perquisites represent a relatively small portion ofdefined in the named executive officers’ total compensation, itpolicy, received by such individuals during the three completed fiscal years immediately preceding the date on which the Company is unlikely that they will materially influence the Compensation Committee’s decision in setting such named executive officers’ total compensation. For further discussion of these benefits and perquisites, including the methodology for computing their costs, please referrequired to the Summary Compensation Table included in this proxy statement, as well as the All Other Compensation table included in footnote (d) to the Summary Compensation Table. For further information about other benefits provided to the named executive officers, please refer to “Executive Compensation—Employment Agreements with the Named Executive Officers.”prepare an accounting restatement.
Severance ArrangementsSEVERANCE AGREEMENTS
Pursuant to their respective employment agreements, each of our named executive officersEach NEO is entitled to certain payments and benefits in certain termination situations or upon a change in control. We believeSeverance agreements are provided based on competitive market practice and the Company’s desire to ensure some level of income continuity should an executive’s employment be terminated without cause. Clear Channel Outdoor believes that ourits severance arrangements facilitate an orderly transition in the event of changes in management. For further discussion ofinformation on severance payments and benefits, see “Executive Compensation—Potential Post-Employment Payments” set forth below in this proxy statement..
Roles and Responsibilities
Role of the Committee. The Compensation Committee is primarily responsible for conducting reviews of our executive compensation policies and strategies, overseeing and evaluating our overall compensation structure and programs, setting executive compensation, setting performance goals and evaluating the performance of executive officers against those goals and approving equity awards. The responsibilities of the Compensation Committee are described above under “The Board of Directors—Committees of the Board.”
Role of Executive Officers. The Chief Executive Officer provides reviews and recommendations regarding executive compensation programs, policies and governance for the Compensation Committee’s consideration. His responsibilities include, but are not limited to:
The Compensation Committee has the responsibility for administrating performance awards under the Annual Incentive Plan. These duties included, among other things, setting the performance period, setting the performance goals and certifying the achievement of the predetermined performance goals by each named executive officer.
Use of Compensation Consultants. As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement,” our parent entity provides us with certain services, including human resources support. During 2017, iHeartMedia’s management retained Willis Towers Watson (“Willis”) to provide (1) executive compensation benchmarking data, and (2) incentive and retention compensation design advice.
iHeartMedia requested and received responses from Willis addressing its independence, including the following factors: (1) other services provided to iHeartMedia and its subsidiaries by Willis; (2) fees paid iHeartMedia and its subsidiaries as a percentage of Willis’ total revenue; (3) policies or procedures maintained by Willis that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagements and a member of the Compensation Committee; (5) any iHeartMedia or Clear Channel Outdoor stock owned by the individual consultants involved in the engagements; and (6) any business or personal relationships between our executive officers and Willis or the individual consultants involved in the engagements. The iHeartMedia Compensation Committee discussed these considerations and concluded that Willis’ work does not raise any conflict of interest.
Deductibility of Executive Compensation
Section 162(m) of the Code placesplaced a limit of $1,000,000 on the amount of compensation Clear Channel Outdoor maycould deduct for Federal income tax purposes in any one year with respect to certain senior executives of Clear Channel Outdoor, which we referred to herein as the “Covered Employees.” The exemption from Section 162(m)’s deduction limit for performance-based compensation has been repealed, effective for taxable years beginning after December 31, 2017,2018, such that compensation paid to ourClear Channel Outdoor’s covered executive officers in excess of $1 million will not be deductible unless it qualifies for transition relief applicable to certain arrangements in place as of November 2, 2017.
In reviewing the effectiveness of the executive compensation program, the Compensation Committee considers the anticipated tax treatment to Clear Channel Outdoor and to the Covered Employees of various payments and benefits. To maintain flexibility in compensating the named executive officersNEOs in a manner designed to promote varying corporate goals, the Compensation Committee will not necessarily limit executive compensation to that which is deductible under Section 162(m) of the Code and has not adopted a policy requiring all compensation to be deductible. The Compensation Committee will consider various alternatives to preserving the deductibility of compensation payments and may award compensation that is not deductible to the extent consistent with its other compensation objectives.
Accounting for Stock-Based Compensation
Clear Channel Outdoor accounts for stock-based payments, including awards under the 2012 Amended and Restated Stock Incentive2021 Plan, in accordance with the requirements of FASB ASC Topic 718 (formerly Statement of Financial Accounting Standards No. 123(R)).718.
44 Notice and Proxy Statement 2022 | |
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed with management the Compensation Discussion and Analysis prepared by management. Based on this review and discussion, we have recommended to the Board of Directors that the Compensation Discussion and Analysis prepared by management be included in this Proxy Statement and incorporated into our 2021 Annual Report on Form 10-K.
Respectfully submitted,
The Compensation Committee of the Board of Directors
Thomas C. King (Chair)
Lisa Hammitt
Joe Marchese
| Notice and Proxy Statement 2022 45 |
The Summary Compensation Table below provides compensation information for the years ended December 31, 2017, 20162021, 2020 and 20152019 for our NEOs, which consist of the principal executive officer, (“PEO”), the principal financial officer (“PFO”) and the next three most highly compensated executive officers serving during 2017 (collectively, the “named executive officers”).2021. As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Certain Relationships and Related Party Transactions Prior to the Separation—Corporate Services Agreement,” a portion of the compensation for 2017, 2016 and 20152019 for Richard J. Bressler and Steven J. MacriBrian D. Coleman paid by iHeartMedia was allocated to us in recognition of theirthe services provided to us. Those allocated amounts are reflected in the Summary Compensation Table below, along with any compensation that we or our subsidiaries provided to themhim directly. Mr. Pittman’s compensation is paid by iHeartMedia and is not allocated to us.
Summary Compensation Table
Name and Principal Position | Year | Salary ($) | Bonus(a) ($) | Stock Awards(b) ($) | Option Awards(b) ($) | Non-Equity Incentive Plan Compensation(c) ($) | All Other Compensation(d) ($) | Total ($) | ||||||||||||||||||||||||
Robert W. Pittman Chief Executive Officer (PEO)(e) | 2017 | — | — | — | — | — | 534,469 | 534,469 | ||||||||||||||||||||||||
| 2016 | — | — | — | — | — | 409,860 | 409,860 | |||||||||||||||||||||||||
| 2015 | — | — | 857,082 | — | — | — | 857,082 | |||||||||||||||||||||||||
Richard J. Bressler Chief Financial Officer (PFO)(f) | 2017 | 427,920 | (g) | 1,073,366 | (g) | — | — | 1,440,664 | (g) | 571,919 | (g) | 3,513,869 | ||||||||||||||||||||
| 2016 | 452,520 | (g) | 62,529 | (g) | — | — | 767,091 | (g) | 450,695 | (g) | 1,732,835 | |||||||||||||||||||||
| 2015 | 464,640 | (g) | 67,734 | (g) | 321,397 | — | 590,506 | (g) | 17,282 | (g) | 1,461,559 | |||||||||||||||||||||
C. William Eccleshare Chief Executive Officer – International division(h) | 2017 | 964,948 | (i) | 1,350,000 | 451,259 | — | 570,000 | 251,240 | 3,587,447 | |||||||||||||||||||||||
| 2016 | 927,601 | (i) | 1,200,000 | 554,296 | — | 955,190 | 255,721 | 3,892,808 | ||||||||||||||||||||||||
| 2015 | 1,043,630 | (i) | — | — | — | 961,686 | 372,670 | 2,377,986 | ||||||||||||||||||||||||
Scott R. Wells Chief Executive Officer – Americas division(j) | 2017 | 750,000 | — | 1,262,865 | — | 551,396 | 5,000 | 2,569,261 | ||||||||||||||||||||||||
| 2016 | 750,000 | 50,000 | 532,067 | 72,857 | 784,385 | 5,000 | 2,194,309 | |||||||||||||||||||||||||
| 2015 | 621,875 | — | 485,340 | 1,664,649 | 483,067 | 5,000 | 3,259,931 | |||||||||||||||||||||||||
Steven J. Macri Senior Vice President – | 2017 | 124,810 | (g) | 222,875 | (g) | — | — | 90,933 | (g) | 892 | (g) | 439,510 | ||||||||||||||||||||
| 2016 | 130,100 | (g) | 27,647 | (g) | — | — | 175,956 | (g) | 943 | (g) | 334,646 | |||||||||||||||||||||
| 2015 | 123,904 | (g) | 51,837 | (g) | — | — | 104,979 | (g) | 968 | (g) | 281,688 | |||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus(a) ($) | Stock Awards(b) ($) | Option Awards(b) ($) | Non-Equity Incentive Plan Compensation(c) ($) | All Other Compensation(d) ($) | Total ($) | ||||||||||||||||||||||||
C. William Eccleshare Chief Executive Officer(e) | 2021 | 1,334,926 | — | 1,947,577 | — | 2,540,365 | 411,903 | 6,234,771 | ||||||||||||||||||||||||
| 2020 | 1,174,054 | (f) | 871,521 | 1,449,029 | — | 715,892 | 327,463 | 4,537,958 | ||||||||||||||||||||||||
| 2019 | 1,295,950 | (f) | — | 2,929,549 | 4,500,000 | 1,512,071 | 339,608 | 10,577,178 | ||||||||||||||||||||||||
Brian D. Coleman Executive Vice President, Chief Financial Officer | 2021 | 650,000 | — | 1,448,511 | — | 1,105,000 | 5,000 | 3,208,511 | ||||||||||||||||||||||||
| 2020 | 617,500 | — | 966,019 | — | 292,500 | 5,000 | 1,881,019 | |||||||||||||||||||||||||
| 2019 | 519,393 | (g) | 12,500 | (g) | 1,356,022 | — | 595,294 | (g) | 2,152 | (g) | 2,485,362 | |||||||||||||||||||||
Scott R. Wells Chief Executive Officer – Americas division | 2021 | 900,000 | — | 1,825,856 | — | 1,557,000 | 108,978 | 4,391,834 | ||||||||||||||||||||||||
| 2020 | 832,500 | — | 1,159,223 | — | 405,000 | 137,683 | 2,534,406 | |||||||||||||||||||||||||
| 2019 | 850,000 | — | 1,199,998 | — | 1,114,721 | 221,614 | 3,386,333 | |||||||||||||||||||||||||
Lynn A. Feldman | 2021 | 600,000 | — | 1,119,856 | — | 1,038,000 | 9,579 | 2,767,436 | ||||||||||||||||||||||||
Executive Vice President, General Counsel and Secretary | 2020 | 570,000 | 93,375 | 676,213 | — | 270,000 | 26,293 | 1,653,881 | ||||||||||||||||||||||||
| 2019 | 476,667 | 110,875 | 848,408 | — | 502,392 | 29,471 | 1,967,813 | |||||||||||||||||||||||||
Jason A. Dilger | 2021 | 378,769 | (h) | — | 374,907 | — | 391,909 | 7,002 | 1,152,586 | |||||||||||||||||||||||
Chief Accounting Officer | 2020 | 351,500 | — | 193,204 | — | 99,900 | 11,933 | 656,537 | ||||||||||||||||||||||||
| 2019 | 351,167 | 75,000 | 134,999 | — | 240,232 | 17,027 | 818,425 | |||||||||||||||||||||||||
| (a) | The amounts reflect: |
For Mr. Wells,Coleman for 2019, a cash payment for 2016 as an additional bonus award in respect of 2016 performance frompursuant to his new employment contract with Clear Channel Outdoor.
See “Compensation Discussion
For Ms. Feldman, (1) for 2020, a cash payment of $93,375 as a retention award; (2) for 2019, a cash payment of $17,500 pursuant to the first amendment to her employment contract and Analysis—Elements(3) for 2019, a cash payment of Compensation—Annual Incentive Bonus.”$93,375 as a retention award.
For Mr. Dilger, a cash payment in 2019 of $75,000 as a retention award.
| (b) | The amounts shown in the Stock Awards column include the full grant date fair value of |
| 718, but excluding any impact of estimated forfeiture rates as required by SEC regulations. For time-vesting restricted stock awards and RSUs, the grant date fair value is based on the closing price of our Class A common stock (prior to the Separation) or common stock (from and after the Separation), as applicable, on the date of grant. For PSUs, the grant date fair value is based on a Monte Carlo simulation model as of the grant date. The probable outcome for the PSUs awarded in 2021 was estimated at the target payout level, or 100%. The grant date fair value of PSUs awarded in 2021 assuming the target and maximum levels of performance are achieved are as follows: |
| Name | Grant Date Fair Value Assuming Target Performance ($) | Grant Date Fair Value Assuming Maximum Performance ($) | ||||||||
Mr. Eccleshare | $ | 999,998 | $ | 1,499,997 | ||||||
Mr. Coleman | 743,748 | 1,115,622 | ||||||||
Mr. Wells | 937,500 | 1,406,250 | ||||||||
Ms. Feldman | 575,000 | 862,500 | ||||||||
Mr. Dilger | 192,500 | 288,750 | ||||||||
46 Notice and Proxy Statement 2022 | |
The amount shown in the Option Awards column includes the full grant date fair value of stock options awarded to Mr. Eccleshare pursuant to his employment agreement, signed in 2019. The value was 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 strike price of these options is $5.11 and therefore, as of December 31, 2021, the value of the options is $0. |
See “Grants of |
The amounts shown in the Option Awards column reflect the full grant date fair value of time-vesting stock options awarded to Mr. Wells by Clear Channel Outdoor in 2016 and 2015, computed in accordance with the requirements of FASB ASC Topic 718, but excluding any impact of estimated forfeiture rates as required by SEC regulations. See “Grants of Plan Based Awards” for additional details.
For further discussion of the assumptions made in valuation, see also Note 14-Stockholders’ Deficit beginning on page 90 of our 2021 Annual Report on Form 10-K. The amounts reflect: For Mr. For further discussion of the assumptions made in valuation, see also Note8-Stockholders’ Equity (Deficit) beginning on pageA-72 of Appendix A.(c) For Messrs. Bressler and Macri, the portion allocated to Clear Channel Outdoor of (1) cash payments from iHeartMedia as annual incentive plan awards for 2017, 2016 and 2015 under its 2015 Executive Incentive Plan, each pursuant topre-established performance goals; (2) for 2016, cash payments in 2017 of $400,000 and $320,000, respectively, earned pursuant to an iHeartMedia SIP bonus based onpre-established performance goals with respect to 2014; and (3) for 2017, cash payments in 2018 of $500,000 and $300,000, respectively, earned pursuant to an iHeartMedia SIP bonus based onpre-established performance goals with respect to 2015.For Mr. Bressler, for 2017, the portion allocated to Clear Channel Outdoor of cash payments pursuant topre-established goals under the iHeartMedia 2017 Key Employee Incentive Plan.For Mr. Eccleshare, (1) cash payments of $2,540,365 for 2021, $616,290 for 2020 and $1,313,908 for 2019 from Clear Channel Outdoor as annual incentive plan awards for 2017, 2016 and 2015 under the 2015 Executive Incentive Plan pursuant topre-established performance goals; (2) for 2017,2020, a cash payment in 2018 of (a) the finalone-third ($80,000)2021 of the $240,000 earned pursuant to the 2015 SIP bonus, (b) the secondfinal one-third ($90,000) of the $270,000 earned pursuant to the 2016 SIP bonus and(c) one-third ($100,000) of the $300,000 earned pursuant to the 20172018 SIP bonus; and (3) for 2016,2019, a cash payment in 20172020 of (a) the finalone-third ($100,000) ($85,000) of the $255,000$300,000 earned pursuant to the 20142017 SIP bonus and (b) a the secondone-third ($100,000) ($80,000) of the $240,000$300,000 earned pursuant to the 20152018 SIP bonus, and(c) one-third ($90,000) of the $270,000 earned pursuant to the 2016 SIP bonus; and (4) for 2015, a cash payment in 2015 of (a) the finalone-third ($84,000) of the $252,000 earned pursuant to the 2013 SIP bonus, (b) asecond one-third ($85,000) of the $255,000 earned pursuant to the 2014 SIP bonus, and(c) one-third ($80,000) of the $240,000 earned pursuant to the 2015 SIP bonus. The remaining $90,000 of the 2016 SIP bonus will be paid in 2019 and the remaining $200,000 of the 2017 SIP bonus will be paid in equal installments in 2019 and 2020, in each case if Mr. Eccleshare remains employed at the payment dates.Wells,Coleman, cash payments of $1,105,000 for 2021, $292,500 for 2020 and for 2019, (1) $486,227 for the period from May 2019 through December 2019 from Clear Channel Outdoor as annual incentive plan awards for 2017, 2016 and 2015 under the 2015 Executive Incentive Plan pursuant topre-established performance goals.With respect to 2017, (1) Mr. Bressler also earned an additional $500,000 from iHeartMedia (agoals, and (2) the portion of which was allocated to Clear Channel Outdoor of a cash payment of $253,468 from iHeartMedia as annual incentive plan award for the period from January through April 2019 under the Corporate Services Agreement)iHeartMedia, Inc. 2019 Key Employee Incentive Plan (the “iHeartMedia 2019 KEIP”).
For Mr. Wells, cash payments of $1,557,000 for 2021, $405,000 for 2020 and (2) Mr. Macri also earned an additional $400,000$1,114,721 for 2019 from iHeartMedia (a portion of which was allocated to Clear Channel Outdoor as annual incentive plan awards under the Corporate Services Agreement)2015 Executive Incentive Plan pursuant to pre-established performance goals.
For Ms. Feldman, cash payments of $1,038,000 for 2021, $270,000 for 2020 and $502,392 for 2019 from Clear Channel Outdoor as annual incentive plan awards under the iHeartMedia SIP, in each case based on2015 Executive Incentive Plan pursuant to pre-established performance goals.
For Mr. Dilger, (1) a cash payment of $391,909 for 2021 and $99,900 for 2020 from Clear Channel Outdoor as an annual incentive plan award under the 2015 Executive Incentive Plan pursuant to pre-established performance goals, with respect to 2017. These amounts are not reflected inand (2) an aggregate of $240,232 for 2019 from Clear Channel Outdoor as an annual incentive plan award under theNon-Equity 2015 Executive Incentive Plan Compensation column with respectand the Management Incentive Plan pursuant to 2017 because they were paid in February 2018 and have a clawback provision, which requires them to repay theafter-taxpre-established value of the bonus if certain termination events occur prior to January 1, 2020.performance goals.
| (d) | As described below, for |
amounts we contributed under our 401(k) plan as a matching contribution for the benefit of Mr.Messrs. Coleman, Wells and Dilger and Ms. Feldman in the United States or payments in lieu of pension contributions for the benefit of Mr. Eccleshare in the United Kingdom;
taxgross-ups on tax services for Mr. Eccleshare;
legal expenses for Mr. Eccleshare;Messrs. Eccleshare and Wells related to the negotiation of their new employment agreements;
the cost of private medical insurance for the benefit of Mr. Eccleshare;
the cost of premiums for a supplemental life insurance benefit for Mr. Eccleshare;
automobile allowances and transportation expenses for the benefit of Mr. Eccleshare in the United KingdomKingdom;
the cost of housing and related expenses in New York City for car service expenses incurred bythe benefit of Mr. Bressler;Wells;
the cost of transportation related to commuting for the benefit of Mr. Wells; and
accrued dividends paid on Clear Channel Outdoor restricted shares that vested during 20172021 for Messrs. PittmanWells and Bressler.
For 2017, the All Other Compensation column also reflects (1) the allocation to us pursuant to the Corporate Services Agreement of amounts iHeartMedia contributed under the 401(k) plan as a matching contribution for the benefit of Messrs. BresslerDilger and Macri; (2) the allocation to us of an amount iHeartMedia contributed for the personal use of the Company aircraft by Mr. Bressler and (3) accrued dividends on CCOH restricted shares that vested during 2017 for Messrs. Pittman and Bressler.Ms. Feldman.
Mr. Eccleshare is a citizen of the United Kingdom. The amounts reported for Mr. Eccleshare for 2017 that were originally denominated in British pounds have been converted to U.S. dollars using the average exchange rate of £1=$1.2878 for the year ended December 31, 2017.
| Pittman | Bressler | Eccleshare | Wells | Macri | ||||||||||||||||
Plan contributions (or payments in lieu thereof) | $ — | $ | 1,783 | $ | 130,772 | $ | 5,000 | $ | 892 | |||||||||||
Aircraft usage | — | 3,961 | — | — | — | |||||||||||||||
Tax services | — | — | 33,310 | — | — | |||||||||||||||
Tax services taxgross-up | — | — | 20,438 | — | — | |||||||||||||||
Legal fees | — | $ | 1,662 | 4,926 | — | — | ||||||||||||||
Private medical insurance | — | — | 27,891 | — | — | |||||||||||||||
Supplemental life insurance benefit | — | — | 10,722 | — | — | |||||||||||||||
Automobile allowance/transportation | — | — | 23,181 | — | — | |||||||||||||||
Car service expense | — | 9,760 | — | — | — | |||||||||||||||
Accrued Dividends | 534,469 | 554,753 | — | — | — | |||||||||||||||
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Total | $ | 534,469 | $ | 571,919 | $ | 251,240 | $ | 5,000 | $ | 892 | ||||||||||
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For 2019, the All Other Compensation column also reflects the allocation to us pursuant to the Corporate Services Agreement of amounts iHeartMedia contributed under the 401(k) plan as a matching contribution for the benefit of Mr. Coleman. |
Mr. Eccleshare is reimbursed for car service use for commuting and other personal purposes. Pursuant to his employment agreement, Mr. Eccleshare receives certain tax and other benefits.
| Eccleshare | Coleman | Wells | Feldman | Dilger | ||||||||||||||||
Plan contributions (or payments in lieu thereof) | $ | 200,239 | $ | 5,000 | $ | 5,000 | $ | 5,000 | $ | 5,000 | ||||||||||
Tax services | $ | 58,538 | — | — | — | — | ||||||||||||||
Tax services tax gross-up | $ | 51,912 | — | — | — | — | ||||||||||||||
Legal fees | $ | 22,258 | — | $ | 6,983 | — | — | |||||||||||||
Private medical insurance | $ | 33,280 | — | — | — | — | ||||||||||||||
Supplemental life insurance benefit | $ | 20,921 | — | — | — | — | ||||||||||||||
Automobile allowance/transportation | $ | 24,756 | — | — | — | — | ||||||||||||||
Car service expense | — | — | — | — | — | |||||||||||||||
Housing & related expenses | — | — | $ | 51,482 | — | — | ||||||||||||||
Commuting expenses | — | — | $ | 22,617 | — | — | ||||||||||||||
Accrued Dividends | — | — | $ | 22,896 | $ | 4,579 | $ | 2,002 | ||||||||||||
Total | $ | 411,903 | $ | 5,000 | $ | 108,978 | $ | 9,579 | $ | 7,002 | ||||||||||
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. |
| Notice and Proxy Statement 2022 47 |
Except as described below with respect to aircraft usage, 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.
The value of the apartment made available to Mr. Wells is based on annual rent and related expenses paid by Clear Channel Outdoor, and the value of his travel and other expenses for 2021, 2020 and 2019 is based on actual costs to Clear Channel Outdoor. |
| (e) |
|
The Summary Compensation Table above reflects these allocated amounts, as described below:
The tables below reflect 100% of the applicable Salary, Bonus,Non-Equity Incentive Plan Compensation amounts and All Other Compensation amounts paid by iHeartMedia to Messrs. Pittman, Bressler and Macri, the allocated percentage of which is included in the Summary Compensation Table above for Messrs. Bressler and Macri. For Messrs. Pittman and Bressler, who also are named executive officers of iHeartMedia, these amounts will be disclosed by iHeartMedia in iHeartMedia’s Summary Compensation Table.
| iHeartMedia Salary | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Robert W. Pittman | $ | 1,200,000 | $ | 1,200,000 | $ | 1,200,000 | ||||||
Richard J. Bressler | 1,200,000 | 1,200,000 | 1,200,000 | |||||||||
Steven J. Macri | 700,000 | 690,000 | 640,000 | |||||||||
| iHeartMedia Bonus and Non-Equity Incentive Plan Compensation | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Robert W. Pittman | $ | 11,050,000 | $ | 1,800,000 | $ | 1,700,000 | ||||||
Richard J. Bressler | 7,050,000 | 2,200,000 | 1,700,000 | |||||||||
Steven J. Macri | 1,760,000 | 1,079,836 | 810,000 | |||||||||
| iHeartMedia All Other Compensation | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Robert W. Pittman | $ | 1,152,112 | $ | 1,654,672 | $ | 698,919 | ||||||
Richard J. Bressler | 602,889 | 453,809 | 44,633 | |||||||||
Steven J. Macri | 5,000 | 5,000 | 5,000 | |||||||||
|
| periods, as well as his service as a director of Clear Media Limited, as described in footnote |
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 in 2019 and 2020 for his service as a director of |
| 2017 | 2016 | 2015 | ||||||||||
C. William Eccleshare | $ | 25,660 | $ | 21,896 | $ | 18,060 | ||||||
| 2020 | 2019 | |||
C. William Eccleshare | $22,402 | $57,434 |
As described below under “Certain Relationships and Related Party Transactions—Certain Relationship and Related Party Transactions Prior to the |
The Summary Compensation Table above reflects these allocated amounts, as |
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. Coleman for the period from January 2019 through April 2019.
The tables below reflect 100% of the applicable Salary, Bonus, Non-Equity Incentive Plan Compensation amounts and All Other Compensation amounts paid by iHeartMedia |
| iHeartMedia Salary | |||||
| January 1, 2019— April 30, 2019 | |||||
Brian D. Coleman | $200,000 | ||||
| iHeartMedia Bonus and Non-Equity Incentive Plan Compensation | |||||
| January 1, 2019— April 30, 2019 | |||||
Brian D. Coleman | $253,468 | ||||
| iHeartMedia All Other Compensation | |||||
| January 1, 2019— April 30, 2019 | |||||
Brian D. Coleman | $5,000 | ||||
| (h) | The amount in the salary column for 2021 for Mr. Dilger includes a true-up payment of $8,769 which reflects the difference between (i) any previously paid base salary for the period beginning on October 1, 2021 and ending on December 31, 2021 and (ii) the base salary amount which would have been paid to Mr. Dilger for such period if Mr. Dilger’s 8.1% base salary increase pursuant to his amended and restated employment agreement had been effective during such period. |
EMPLOYMENT AGREEMENTS WITH THE NAMED EXECUTIVE OFFICERS
Messrs. Eccleshare, Coleman, Wells and WellsDilger and Ms. Feldman have employment agreements with us and Messrs. Pittman, Bressler and Macri have employment agreements with iHeartMedia.us. Certain elements of their compensation are determined based on their respective employment agreements. The descriptions of the employment agreements 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, which descriptions are incorporated herein by reference.
As described below under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services
48 Notice and Proxy Statement 2022 | |
C. William Eccleshare
Employment 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 compensation is allocated to us in recognition of their services provided to us. Accordingly, a portion of the compensation for 2017, 2016 and 2015 for Richard J. Bressler and 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 and Macri 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 through 2021
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 Chairman and Chief Executive Officer of CCOH. The October 2, 2011 employment agreement superseded the consulting agreement that Mr. Pittman
previously entered into with iHeartMedia and Pilot Group Manager LLC, dated November 15, 2010, and had an initial term ending on December 31, 2016, with automatic12-month extensions thereafter unless either party provided prior notice electing not to extend the employment agreement. On January 13, 2014, iHeartMedia entered into an amended and restated employment agreement with Mr. Pittman. The amended and restated employment agreement has an initial five-year term ending on January 13, 2019, with automatic12-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 minimum base salary is $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 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 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 2017, Mr. Pittman received an annual incentive bonus of $1,800,000, which included an additional bonus in respect of 2017 performance of $1,260,000. 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.
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 FiscalYear-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 vested 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 Clear Channel Outdoor’s Class A common stock. Mr. Pittman’s CCOH restricted stock award vested 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 stockholder 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 stockholders, 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 agross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on thegross-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 automatic12-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 under the iHeartMedia SIP 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 SIP 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 2017, Mr. Bressler received from iHeartMedia an annual incentive bonus of $1,800,000, which included an additional bonus in respect of 2017 performance of $1,260,000. Mr. Bressler also earned an additional bonus of $500,000 under the iHeartMedia SIP with respect to 2017. 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 stockholder 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 stockholders, 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 agross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on suchgross-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 “—Outstanding Equity Awards at FiscalYear-End” below for a description of the terms of the award. In addition, on July 29, 2013, iHeartMedia granted Mr. Bressler 910,000 restricted shares of iHeartMedia’s Class A common stock.
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.agreement (the “2019 Eccleshare Employment Agreement”). The 2019 Eccleshare Employment Agreement became effective upon the effective date of the Separation (the “Effective Date”), at which time the 2019 Eccleshare Employment Agreement superseded and replaced Mr. Eccleshare’s existing employment agreement has an initialagreement. On the Effective Date, Mr. Eccleshare began to serve as the Company’s Chief Executive Officer.
The term beginningof the 2019 Eccleshare Employment Agreement ended on January 24, 2012 and continuing until December 31, 2014, with automatic12-month extensions thereafter, beginning on January 1, 2015, unless either Clear Channel Outdoor or Mr.2021. Pursuant to the 2019 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 this position,Agreement, Mr. Eccleshare received an annual base salary of $1,000,000; provided, however, that until$1,250,000 U.S. dollars (“Base Salary”). Clear Channel Outdoor (i) made a lump sum payment of $83,333, less applicable payroll taxes and other deductions, in respect of the period between January 1, 2019 and May 1, 2019 (such lump sum payment, the “Catch-Up Payment”), and (ii) in respect of the period between January 1, 2019 and May 1, 2019, contributed to Mr. Eccleshare’s pension plan (or pay as otherwise directed by Mr. Eccleshare, relocatedso long as such direction is consistent with past practice) an additional amount equal to the United States, his base salary was to be paid in British pounds (using an exchange rateproduct of £1=$1.49). His salary will be reviewed at least annually for possible increase0.15 multiplied by our Board. the amount of the Catch-Up Payment.
During the term of the employment agreement,2019 Eccleshare Employment Agreement, Mr. Eccleshare iswas eligible to receive an annual performance bonus with a target of not less than $1,000,000110% of Base Salary and the opportunity to earn up to 200%160% of the target amountBase Salary 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. Clear Channel Outdoor.
In addition to the annual bonus,2019, Mr. Eccleshare is eligible to receivereceived a SIP bonusone-time equity grant with an aggregate value of up to $300,000$6,000,000 U.S. dollars (the “2019 Equity Award Grant”). Seventy-five percent (75%) of the 2019 Equity Award Grant consists of stock options with a grant date fair value of $4,500,000 U.S. dollars and an exercise price based on the achievementVolume Weighted Average Price of one or more annual performance goalsClear Channel Outdoor stock for the fifteen trading days preceding the fifteen trading days following the Effective Date (the “Effective Date VWAP”). The remaining 25% of the 2019 Equity Award Grant consists of restricted stock units, with the number of shares of Clear Channel Outdoor stock subject to the restricted stock unit grant determined by our Board or a subcommittee thereof. Any bonus earned underdividing $1,500,000 U.S. dollars by the SIP bonus opportunity will be paid by usEffective Date VWAP and rounding down to the nearest whole number. One-third of the 2019 Equity Award Grant vested on December 31, 2019 and the remaining two-thirds vested in equal cashannual installments on or about the first, secondeach of December 31, 2020 and third anniversaryDecember 31, 2021. The strike price of the beginningstock options is $5.11 and therefore, as of December 31, 2021, the value of the applicable performance period and will be contingent in each case upon hisoptions is $0.
Pursuant to the 2019 Eccleshare Employment Agreement, Clear Channel Outdoor continued employment through the applicable payment date. For 2017, Mr. Eccleshare received an annual bonus of $550,000, including an additional bonus in respect of 2017 performance of $250,000. Mr. Eccleshare also (1) received an additional bonus payment of $80,000 provided pursuant to his 2015 SIP bonus; (2) received an additional bonus payment of $90,000 provided pursuant to his 2016 SIP bonus and (3) earned an additional bonus of $100,000 with respect to his 2017 SIP bonus, $100,000 of which was paid in February 2018 and $100,000 of which will be paid in equal installments in 2019 and 2020 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. Weemployment agreement. The Company also agreed to reimburse Mr. Eccleshare for the reasonable costs and expenses (not to exceed $25,000 annually, fullygrossed-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 iswas 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, weThe Company also agreed to makeprovide a £1,500 monthly car service available toallowance, reimburse 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,policy, and reimburse Mr. Eccleshare was awarded 506,329 restricted stock units with respectfor up to our Class A common stockfour long-haul flights per calendar year for his wife when she accompanies him on July 26, 2012 in connection with his promotion. See “—Outstanding Equity Awards at FiscalYear-End” below.Company business.
During Mr. Eccleshare’s employment with usClear Channel Outdoor and for 1812 months thereafter, Mr. Eccleshare is subject tonon-competition,non-interference andnon-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 performas a trustee of Donmar Warehouse and as a non-executive services withdirector of Centaur plc. Upon his service with Centaur plc ceasing,Media Plc and Britvic Plc.
Employment Agreement Effective as of January 1, 2022
On July 29, 2021, the Company announced that Mr. Eccleshare will be permittedstep down from the position of President and Chief Executive Office effective as of December 31, 2021, and assume the role of Executive Vice Chairman and remain a member of the Board until December 31, 2022.
In connection with Mr. Eccleshare’s transition, the Company and Mr. Eccleshare agreed not to perform anothernon-executive roleextend the term of the 2019 Eccleshare Employment Agreement, which expired on December 31, 2021, but agreed to enter into an amended and restated employment agreement, dated as of July 29, 2021 (the “2022 Eccleshare Employment
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Agreement”), which, effective January 1, 2022, supersedes the 2019 Eccleshare Employment Agreement. Pursuant to the 2022 Eccleshare Employment Agreement, Mr. Eccleshare will remain employed as Executive Vice Chairman through December 31, 2022, unless Mr. Eccleshare resigns earlier or the Company terminates Mr. Eccleshare’s employment as of an earlier date by providing not less than 30 days’ notice or at any time upon a termination for “cause” (as defined therein).
During the term of the 2022 Eccleshare Employment Agreement, Mr. Eccleshare will receive an annual base salary of $625,000 U.S. dollars and will be eligible to receive an annual performance bonus with a business that does not compete with us or our affiliates, subjecttarget of 110% of his base salary based on performance goals to our prior written consent thatbe set by the Company. Mr. Eccleshare will not be unreasonably withheld.
March 2, 2015 Amendmenteligible for any equity award grants in calendar year 2022. Previously granted equity awards will continue to January 24, 2012 Employment Agreement. Effective March 2, 2015, Mr. Ecclesharevest while he remains employed 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 towill qualify for additional vesting under 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 Reasonapplicable award agreements as a result of his retirement on December 31, 2022, or on any earlier termination by 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) Company without cause.
Clear Channel Outdoor agreedwill continue to continuecontribute 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 the 2019 Eccleshare Employment Agreement. The Company also agreed to reimburse Mr. Eccleshare for the reasonable costs and expenses (not to exceed $25,000 annually, fullygrossed-up for applicable taxes) associated with filing his U.S. and U.K. personal income tax returns, as applicable, both during the remainder ofapplicable. Mr. Eccleshare is eligible to receive health 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. The Company also agreed to provide a £1,500 monthly car allowance, reimburse Mr. Eccleshare for travel and entertainment related expenses, consistent with past practices pursuant to Company policy, and reimburse Mr. Eccleshare for up to four long-haul flights per calendar year for his wife when she accompanies him on Company business.
During Mr. Eccleshare’s employment with Clear Channel Outdoor and for a period of twelve (12)12 months thereafter, Mr. Eccleshare is subject to non-competition, non-interferenceand (4)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 as a trustee of Donmar Warehouse and as a non-executive director of Centaur Media Plc and Britvic Plc.
Brian D. Coleman
Upon the Effective Date, Clear Channel Outdoor agreedand Brian D. Coleman entered into an employment agreement which superseded and replaced Mr. Coleman’s existing employment agreement.
The initial term of the employment agreement will end on April 30, 2023, and thereafter will extend for additional three year periods unless Clear Channel Outdoor or Mr. Coleman provides written notice of non-renewal of the employment agreement between October 1 and November 1 (the “Notice of Non-Renewal Period”) prior to reimbursethe end of the then applicable employment period. Under the employment agreement, Mr. Eccleshare for certain relocation costs associated withColeman receives an annual base salary of $650,000, which is subject to increase at Clear Channel Outdoor’s discretion, and received a one-time signing bonus of $12,500 in 2019.
During the relocationterm of the employment agreement, Mr. Eccleshare and his family from New York CityColeman is eligible to London in connectionreceive (i) an annual performance bonus with a termination duetarget of not less than 100% of his base salary based on applicable performance goals to death, “disability,”be set by Clear Channel Outdoor, without “cause”(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.
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 bybe 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. Eccleshare for Good Reason (asColeman’s employment under the employment agreement, after which such terms are defined in the Prior Employment Agreement), whether such costs are incurred during hisemployment period shall end.
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During Mr. Coleman’s employment with Clear Channel Outdoor or during theand for 12 months thereafter, Mr. Coleman is subject to 12-monthnon-competition, non-interference period thereafter (previously,and non-solicitation covenants substantially consistent with our other senior executives. Mr. Eccleshare would only be entitledColeman also is subject to such reimbursement if the relevant costs were incurred during the12-month period following termination of his employment with Clear Channel Outdoor).customary confidentiality, work product and trade secret provisions.
December 17, 2015 Amendment to January 24, 2012 Scott R. Wells
Employment Agreement. through 2021
Effective December 17,March 3, 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 automaticone-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) the definition of Good Reason was amended to provide that Mr. Eccleshare may not trigger Good Reason if, after a restructuring or reorganization of the Company or a sale or spinoff of all or a portion of the Company’s operations, he continues as Chief Executive Officer of CCI (or any of its successors), (4) 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 (5) 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 ofone-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.
May 10, 2017 Amendment to January 24, 2012 Employment Agreement. On May 10, 2017, Mr. Eccleshare and Clear Channel Outdoor entered into an amendment (the “Third Amendment”) to the Prior Employment Agreement. Pursuant to the terms of the Third Amendment, beginning January 1, 2017, the calculation of all cash payments related to Mr. Eccleshare’s base salary, annual bonus, additional bonus or any other compensation or cash payments or reimbursements owed to Mr. Eccleshare or contributed on behalf of Mr. Eccleshare, shall be paid based upon the prior calendar year’s average exchange rate.
December 5, 2017 Amendment to January 24, 2012 Employment Agreement. On December 5, 2017, Mr. Eccleshare and Clear Channel Outdoor entered into an amendment (the “Fourth Amendment”) to the Prior Employment Agreement. Pursuant to the terms of the Fourth Amendment, (1) Mr. Eccleshare’s term of employment was extended until December 31, 2020 and thereafter provided for automaticone-year extensions, unless either Clear Channel Outdoor or Mr. Eccleshare gives prior notice electing not to extend the Prior Employment Agreement, (2) beginning on January 1, 2018, the calculation of all cash payments related to base salary, annual bonus, additional bonus or any other compensation or cash payments or reimbursements owed to Mr. Eccleshare or contributed on behalf of Mr. Eccleshare shall be paid based on the average exchange rate for 2017 and (3) Mr. Eccleshare will receive a first retention bonus payment (the “First Retention Bonus Payment”) of $875,000 if he remains employed by the Company on January 1, 2018 (payable on Clear Channel Outdoor’s first scheduled payroll following such date) and Mr. Eccleshare will receive a second retention bonus payment of $875,000 (the “Second Retention Bonus Payment”) if he remains employed by Clear Channel Outdoor on January 1, 2020 (payable on Clear Channel Outdoor’s first scheduled payroll following such date).
In the event Mr. Eccleshare’s employment is terminated by Clear Channel Outdoor for Cause pursuant to the terms and conditions of the Prior Employment Agreement or Mr. Eccleshare resigns without Good Reason and the date of such termination is on or before June 30, 2019, Mr. Eccleshare shall repay to Clear Channel Outdoor the“After-Tax Value” of the First Retention Bonus Payment within 10 days of his termination. In the event Mr. Eccleshare is terminated by Clear Channel Outdoor for Cause pursuant to the terms and conditions of the Employment Agreement or Mr. Eccleshare resigns without Good Reason and the date of such termination is on or between July 1, 2019 and June 30, 2020, Mr. Eccleshare shall repay to Clear Channel Outdoor the“After-Tax Value” of the Second Retention Bonus Payment (if so received) within 10 days of his termination. For the purposes of the Fourth Amendment,“After-Tax Value” means the applicable portion of the retention bonus payment net of any and all taxes and social security contributions, determined taking into account any tax benefit available in respect of such repayment.
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 hasemployment agreement had an initial term (the “Initial Term”) that endsended on March 2, 2019, and thereafter provides for automatic four-year extensions, unless either CCOHClear Channel Outdoor or Mr. Wells gives prior notice electing not to extend the agreement. Subject to the termination provisions described below,
On March 26, 2019, Clear Channel Outdoor and Mr. Wells will receiveentered into a First Amendment to Employment Agreement (the “First Amendment”). The First Amendment became effective upon the Separation of Clear Channel Outdoor from iHeartMedia. As amended, the employment agreement provides that (i) Mr. Wells’ base salary from CCOH atincreased to $900,000 and (ii) upon a rate no less than $750,000 per year, which shall be increased at CCOH’s discretion.termination of Mr. Wells’ employment by Clear Channel Outdoor without Cause, non-renewal of the employment agreement by Clear Channel Outdoor or termination of employment by Mr. Wells for Good Reason, all of Mr. Wells’ unvested time vesting equity awards that are scheduled to vest within twelve months following the date of termination will also havevest in full on the date of termination (previously, only time-vesting options were eligible for such accelerated vesting), and any unvested performance vesting options will remain eligible to vest for three months following the date of termination.
Mr. Wells has 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% of Mr. Wells’ base salary amount (the “Target Bonus”). For 2017, Mr. Wells received an annual bonus of $551,396. 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, 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 the board of directors or the compensation committee of CCOH,Clear Channel Outdoor, as applicable. The Wells Employment Agreementemployment agreement also entitles Mr. Wells to participate in all employee welfare benefit plans in which other similarly situated employees of CCOHClear Channel Outdoor may participate. CCOHClear Channel Outdoor will reimburse Mr. Wells for the attorneys’ fees incurred by Mr. Wells in connection with the negotiation of the Wells Employment Agreementemployment agreement and ancillary documents, up to a maximum reimbursement of $25,000 in the aggregate. The Wells Employment Agreementemployment agreement also contains a customary confidentiality provision that survives Mr. Wells’ termination of employment, as well as customarynon-competition andnon-solicitation provisions that apply during employment and for the12-month period thereafter.
If Mr. Wells’ employment with CCOH is terminated 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 ofnon-renewal, CCOH shall pay to Mr. Wells: (i) Mr. Wells’ accrued 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, if Mr. Wells has signed 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 the12-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.
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.
As provided in the Wells Employment Agreement,employment agreement, the compensation committee of the board of directors of CCOHClear Channel Outdoor Board approved an award by CCOH,Clear Channel Outdoor, 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”) and fifty percent of the award vests over time (the “Time Vesting Options”). The Time Vesting Options will vestvested in equal amounts on the first, second, third and fourth anniversaries of the Effective Date, so long as Mr. Wells remains employedDate. Fifty percent of the Performance Vesting Options vested on February 3, 2020 based on the vesting date (except as previously set forth inachievement of $472 million of OIBDAN for Clear Channel Outdoor Americas (“CCOA”) for 2019, which exceeded the eventperformance hurdle of a termination by CCOH without Cause (as defined in$471 million. The remaining fifty percent of 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 ofnon-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 below in the event of a termination by CCOHClear Channel Outdoor 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’sClear Channel Outdoor’s notice ofnon-renewal).
Steven J. MacriEmployment Agreement Effective as of January 1, 2022
Effective October 7, 2013, Steven J. MacriOn July 29, 2021, the Company announced that Mr. Wells will assume the role of President and Chief Executive Officer of the Company as of January 1, 2022, and will be appointed as a member of the Board.
In connection with the appointment of Mr. Wells as Chief Executive Officer, the Company and Mr. Wells entered into an amended and restated employment agreement, dated as of July 28, 2021 (the “Wells Amended and Restated Employment Agreement”), which, as of January 1, 2022, supersedes the employment agreement between the Company and Mr. Wells, dated March 3, 2015 and amended March 26, 2019 (together, the “Prior Wells Employment Agreement”).
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Under the Wells Amended and Restated Employment Agreement, Mr. Wells receives an annual base salary equal to $1,100,000 and is eligible to earn an annual performance bonus based on the achievement of financial and performance criteria established by Clear Channel Outdoor and approved in the annual budget. The target performance bonus that may be earned will be not less than 110% of Mr. Wells’ base salary 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 Clear Channel Outdoor with iHeartMedia.an approximate value of not less than $2,000,000. Mr. Wells also received a one-time grant of restricted stock units with a value equal to $1,000,000.
Lynn A. Feldman
On February 4, 2020, Lynn A. Feldman and the Company entered into a Second Amendment to Employment Agreement (the “Second Amendment”) to Ms. Feldman’s employment agreement dated June 27, 2016. Pursuant to histhe Second Amendment, the employment agreement Mr. Macri will serve as Executive Vice President and Chief Financial Officerwas amended to, among other things: (i) extend the term of iHeartMedia + Entertainment, Inc. (formerly known as Clear Channel Broadcasting, Inc.) (“iHM”), a wholly owned subsidiary of iHeartMedia, until October 6, 2017,Ms. Feldman’s employment agreement to December 31, 2022, after which time such employment period will be automatically extended fromfor additional two year to yearperiods unless either party gives prior written notice ofnon-renewalnon-renewal; (ii) increase Ms. Feldman’s annual base salary to $600,000; (iii) increase Ms. Feldman’s target bonus to 100% of her base salary; and (iv) increase the value of Ms. Feldman’s annual long term incentive grants to $300,000 for each award. The Second Amendment became effective as permitted inof January 1, 2020. Ms. Feldman is eligible for salary increases at the agreement. On September 9, 2014, Mr. Macri became Senior Vice President—Corporate Financediscretion of iHeartMediaClear Channel Outdoor based on Company performance and/or individual performance.
Pursuant to the employment agreement, Ms. Feldman is eligible to receive annual long term incentive grants with a value of no less than $300,000 for each award consistent with other comparable positions pursuant to the terms of the award agreement(s), taking into consideration demonstrated performance and potential, and the allocation of each award between stock options and restricted stock, subject to approval by the board of directors or the compensation committee of Clear Channel Outdoor, as well.
On July 3, 2017, iHeartMedia and Mr. Macri entered into a first amendment to Mr. Macri’s employment agreement. Pursuant to the first amendment, the term of Mr. Macri’s employment agreement was extended through June 30, 2018.
On February 27, 2018, iHeartMedia and Mr. Macri entered into a second amendment to Mr. Macri’s employment agreement. Pursuant to the second amendment, the term of Mr. Macri’s employment agreement, which was previously scheduled to expire on June 30, 2018, was extended through March 31, 2019. The second amendment to Mr. Macri’s employment agreement does not contemplate automatic renewals of the employment period and states that if Mr. Macri’s employment continues for any period of time following March 31, 2019, such employment will be“at-will” and may be terminated at any time by either party. In such case, pursuant to the second amendment to Mr. Macri’s employment agreement, Mr. Macri will be entitled to receive his accrued and unpaid base salary through the termination date and any payments required under applicable employee benefit plans.
Under his agreement, Mr. Macri receives compensation consisting of a base salary, incentive awards and other benefits and perquisites. Mr. Macri’s current annual base salary is $700,000. During 2013, Mr. Macri received a $60,000 signing bonus. No later than March 15 of each calendar year, Mr. Macri is 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 amountMBO-based. For purposes of his agreement,MBO-based means the subjective performance criteria agreed to on an annual basis between the President and Chief Financial Officer 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 no less than his base salary for the year to which the bonus relates and the criteria will be set by management in consultation with Mr. Macri. For 2017, Mr. Macri received an annual bonus of $710,000, including an additional bonus in respect of 2017 performance of $500,000. Mr. Macri also earned an additional bonus of $400,000 pursuant to an iHeartMedia SIP bonus opportunity with respect to 2017. Heapplicable. Ms. Feldman is entitled to participate in all employee benefit plans and perquisites in which other similarly situated employees may participate.
Additionally, pursuantIn August 2018, Ms. Feldman was awarded a retention bonus of $186,750. The retention bonus vests and is payable as follows: (i) 50% of the retention bonus was paid in 2019 and (ii) 50% was paid in August 2020, upon the termination of the Transition Services Agreement, in each case subject to hisMs. Feldman’s continued employment agreement, on October 7, 2013, Mr. Macri received aone-time long term incentive grant of 100,000 shares of restricted stock.such date.
Under the employment agreement, Mr. MacriMs. Feldman is required to protect the secrecy of confidential information of iHeartMedia and its affiliatesClear Channel Outdoor and to assign certain intellectual property rights. HeShe also is prohibited by the agreement from engaging in certain activities that compete with iHeartMedia and its affiliatesClear Channel Outdoor Americas during employment and for 12 months after hisher employment terminates, and heshe is prohibited from soliciting employees of Clear Channel Outdoor Americas for employment during employment and for 12 months after termination of employment. iHeartMedia agreed
Jason A. Dilger
Employment Agreement through 2021
On May 1, 2019, Clear Channel Outdoor and Jason A. Dilger entered into an employment agreement (the “Prior Dilger Employment Agreement”).
The initial term of the Prior Dilger Employment Agreement will end on April 30, 2022, and thereafter will automatically extend for additional three year periods unless Clear Channel Outdoor or Mr. Dilger provides written notice of non-renewal of the employment agreement between October 1 and November 1 (the “Notice of Non-Renewal Period”) prior to defend and indemnifythe end of the then applicable employment period. Under the Prior Dilger Employment Agreement, Mr. MacriDilger receives an annual base salary of $370,000. Mr. Dilger is eligible for acts committed insalary increases at the course and scopediscretion of Clear Channel Outdoor based on Company performance and/or individual performance.
During the term of the Prior Dilger Employment Agreement, Mr. Dilger is eligible to receive (i) an annual performance bonus with a target of not less than 60% of his employment.base salary based on applicable performance goals to be set by Clear Channel Outdoor and (ii) long term incentive opportunities with an approximate value of $125,000 per award, to be allocated between stock options and restricted stock at the discretion of the Compensation Committee. Mr. Dilger 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.
52 Notice and Proxy Statement 2022 | |
Clear Channel Outdoor may elect at any time prior to the Notice of Non-Renewal Period to place Mr. Dilger 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. Dilger 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 Prior Dilger Employment Agreement will be coextensive with and may extend the term of Mr. Dilger’s employment under the Prior Dilger Employment Agreement.
During the term of Mr. Dilger’s employment and for 12 months thereafter, Mr. Dilger is subject to non-competition, non-interference and non-solicitation covenants substantially consistent with Clear Channel Outdoor’s other senior executives. Mr. Dilger also is subject to customary confidentiality, work product and trade secret provisions.
Employment Agreement Effective as of January 1, 2022
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 Dilger Amended and Restated Employment Agreement supersedes the Prior Dilger Employment Agreement.
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. 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 at 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 and (iii) be eligible for an annual equity incentive grant with an approximate value of not less than $325,000 per award.
Stock Incentive Plans
Clear Channel Outdoor grants equity incentive awards to named executive officersNEOs and other eligible participants under its 2012 Amended and Restated Stock Incentivethe 2021 Plan. The 2012 Amended and Restated 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 2012 Amended and Restated Stock Incentive2021 Plan allows for the issuance of restricted stock, incentive andnon-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 2012 Amended and Restated Stock Incentive2021 Plan is administered by the Compensation Committee, except that the entire Board has sole authority for granting and administering awards tonon-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 2012 Amended and Restated Stock Incentive2021 Plan. The Compensation Committee also makes other determinations and interpretations necessary to carry out the purposes of the 2012 Amended and Restated 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—2021 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, 2017. 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 (35.66% and 17.83%) of the annual incentive awards provided by our parent entities to Messrs. Bressler and Macri, respectively, with respect to 2017 was allocated to us in recognition of their services provided to us. Those allocated amounts are reflected in the 2021.
| Notice and Proxy Statement 2022 53 |
Grants of Plan-Based Awards During 2017 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 20172021
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 Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(a) ($) | Grant Date | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of shares of Stock | All Other Option Awards: Number of Securities Underlying | Exercise of Base Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | All Other Stock Awards: Number of shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | Exercise Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards(a) ($) | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | or Units (#) | Options (#) | Awards ($/Sh) | Awards(a) ($) | ||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Richard J. Bressler | N/A(b) | — | 641,880 | 1,283,760 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| N/A(b) | — | 178,300 | 178,300 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| N/A(c) | — | 1,069,800 | 1,069,800 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
C. William Eccleshare | N/A(b) | — | 1,000,000 | 2,000,000 | — | — | — | — | N/A(b) | — | 1,375,000 | 2,750,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| N/A(b) | — | 300,000 | 300,000 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 2/24/17(d) | — | — | — | 23,421 | — | — | 108,908 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 6/30/17(e) | — | — | — | 70,588 | — | — | 342,352 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(c) | — | — | — | — | — | 403,225 | — | — | 947,579 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(c) | — | — | — | 196,078 | 392,156 | 588,234 | — | — | — | 999,998 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Brian D. Coleman | N/A(b) | — | 650,000 | 1,300,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(d) | — | — | — | — | — | — | 299,899 | — | — | 704,763 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(d) | — | — | — | 145,833 | 291,666 | 437,499 | — | — | — | 743,748 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Scott R. Wells | N/A(b) | — | 750,000 | 1,500,000 | — | — | — | — | N/A(b) | — | 900,000 | 1,800,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| 6/28/2017(f) | — | — | — | 88,235 | — | — | 419,116 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 9/7/2107(g) | — | — | — | 208,333 | — | — | 843,749 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(e) | — | — | — | — | — | — | 378,024 | — | — | 888,356 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Steven J. Macri | N/A(b) | — | 124,810 | 249,620 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| N/A(b) | — | 71,320 | 71,320 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(e) | — | — | — | 183,824 | 367,647 | 551,471 | — | — | — | 937,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn Feldman | N/A(b) | — | 600,000 | 1,200,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(f) | — | — | — | — | — | — | 231,854 | — | — | 544,857 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(f) | — | — | — | 112,745 | 225,490 | 338,235 | — | — | — | 575,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Jason Dilger | N/A(b) | — | 226,537 | 453,074 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(g) | — | — | — | — | — | — | 77,620 | — | — | 182,407 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| 7/27/21(g) | — | — | — | 37,745 | 75,490 | 113,235 | — | — | — | 192,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (a) | The amounts in the table reflect the full grant date fair value of |
| (b) | Messrs. |
| (c) | On July 27, 2021, Mr. Eccleshare received a |
| (d) | On |
| (e) | On |
| (f) | On |
| (g) | On |
For further discussion of the equity awards, see “Compensation Discussion and Analysis—Elements of Compensation—Long-Term Incentive Compensation.
For further discussion of the equity awards, see “Compensation Discussion and Analysis—Analysis of 2021 Executive Compensation Decisions—Equity Grants.” |
54 Notice and Proxy Statement 2022 | |
OUTSTANDING EQUITY AWARDS AT FISCALYEAR-END
The following table sets forth certain information concerning outstanding equity awards of the named executive officersNEOs at December 31, 2017.2021.
In connection with the payment of a special cash dividend of $0.7797 per share on February 23, 2017 to Clear Channel Outdoor’s stockholders of record as of February 20 2017, Clear Channel Outdoor adjusted the exercise price of options outstanding under the 2012 Amended and Restated Stock Incentive Plan and the 2005 Stock Incentive Plan as of February 24, 2017 downward by $0.7797. All other terms and conditions governing each such option remained unchanged. The table below reflects the terms of each option outstanding at December 31, 2017 and, accordingly, reflects such adjustments. In addition, Clear Channel Outdoor issued additional restricted stock units to holders of restricted stock units in lieu of the special dividends that were paid
to stockholders. The additional restricted stock units vest based on time according to the original vesting schedules of the underlying restricted stock unit awards. Mr. Eccleshare’s additional restricted stock units are included in the table below.
Outstanding Equity Awards at December 31, 20172021
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of | Option Exercise Price ($) | 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) ($) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested(a) ($) | Number of Securities Underlying Unexercised Options | Option | Option | Number of Shares or Units of Stock That | Market Value of Shares or Units 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 | (#) Exercisable | (#) Unexercisable | Exercise Price ($) | Expiration Date | Have Not Vested (#) | Have Not Vested(a) ($) | Not Vested (#) | Have Not Vested(a) ($) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Robert W. Pittman | — | — | — | — | 28,967 | (b) | 133,248 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Richard J. Bressler | — | — | — | — | 10,863 | (c) | 49,970 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
C. William Eccleshare | 164,907 | (d) | — | 1.17 | 09/10/19 | — | — | — | — | 90,000 | — | $ | 5.02 | 3/26/2022 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| 22,500 | (e) | — | 1.16 | 02/24/20 | — | — | — | — | 2,189,781 | — | $ | 5.11 | 6/3/2029 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| 63,583 | (f) | — | 1.43 | 09/10/20 | — | — | — | — | — | — | — | — | 110,865 | (b) | $ | 366,963 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 104,167 | (c) | $ | 344,793 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 315,126 | (d) | $ | 1,043,067 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 485,437 | (e) | $ | 1,606,796 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 1,125,000 | (f) | $ | 3,723,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 403,225 | (g) | $ | 1,334,675 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 588,234 | (h) | $ | 1,947,055 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Brian D. Coleman | — | — | — | — | 104,602 | (i) | $ | 346,233 | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
| 15,360 | (g) | — | 4.78 | 12/13/20 | — | — | — | — | — | — | — | — | 56,250 | (j) | $ | 186,188 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| 90,000 | (h) | — | 6.09 | 02/21/21 | — | — | — | — | — | — | — | — | — | — | 170,168 | (d) | $ | 563,256 | ||||||||||||||||||||||||||||||||||||||||||
| 90,000 | (i) | — | 5.02 | 03/26/22 | — | — | — | — | — | — | — | — | 323,624 | (k) | $ | 1,071,195 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 25,000 | (j) | 115,000 | — | — | — | — | — | — | — | — | 750,000 | (f) | $ | 2,482,500 | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 4,191 | (k) | 19,279 | — | — | — | — | — | — | 299,899 | (l) | $ | 992,666 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 70,588 | (l) | 324,705 | — | — | — | — | — | — | — | — | 437,499 | (m) | $ | 1,448,122 | ||||||||||||||||||||||||||||||||||||||||||
Scott R. Wells | 84,650 | (m) | 253,950 | (m) | 6.85 | 3/3/2025 | — | — | — | — | 253,950 | (n) | 84,650 | (n) | $ | 6.85 | 3/3/2025 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||
| 18,882 | (n) | 18,882 | (n) | 7.71 | 6/15/2025 | — | — | — | — | 37,764 | — | $ | 7.71 | 6/15/2025 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| 6,413 | 19,241 | (o) | 5.69 | 6/3/2026 | — | — | — | — | 25,654 | — | $ | 5.69 | 6/3/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 45,830 | (p) | 210,818 | — | — | — | — | — | — | 110,865 | (o) | $ | 366,963 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 82,236 | (q) | 378,286 | — | — | — | — | — | — | 83,334 | (p) | $ | 275,836 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 88,235 | (r) | 405,881 | — | — | — | — | — | — | — | — | 252,100 | (d) | $ | 834,451 | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 208,333 | (s) | 958,332 | — | — | — | — | — | — | 388,350 | (q) | $ | 1,285,439 | — | — | ||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 900,000 | (f) | $ | 2,979,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Steven J. Macri | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 378,024 | (r) | $ | 1,251,259 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 551,470 | (m) | $ | 1,825,366 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Lynn A. Feldman | 11,043 | — | $ | 5.54 | 7/7/2026 | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 22,173 | (s) | $ | 73,393 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 41,841 | (t) | $ | 138,494 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 43,750 | (u) | $ | 144,813 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 132,352 | (d) | $ | 438,085 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 226,537 | (v) | $ | 749,837 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 525,000 | (f) | $ | 1,737,750 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 231,854 | (w) | $ | 767,437 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 338,235 | (m) | $ | 1,119,558 | |||||||||||||||||||||||||||||||||||||||||||||||||||
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 | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 9,250 | (x) | $ | 30,618 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 9,375 | (y) | $ | 31,031 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 28,361 | (d) | $ | 93,875 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 64,725 | (z) | $ | 214,240 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 150,000 | (f) | $ | 496,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | 77,620 | (aa) | $ | 256,922 | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
| — | — | — | — | — | — | 113,235 | (m) | $ | 374,808 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Notice and Proxy Statement 2022 55 |
| (a) | Market value is based upon the closing sale price of |
| (b) | Mr. |
| (c) | Mr. |
| (d) | The PSUs granted on October 15, 2019 will vest, if at all, based on the Company’s total shareholder return relative to the Company’s peer group (the “Relative TSR”) over a performance period commencing on October 1, 2019 and ending on March 31, 2022. As of |
| (e) | Mr. Eccleshare’s |
| (f) | The 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 |
| (g) | Mr. Eccleshare’s |
| (h) | The PSUs granted to Mr. Eccleshare on July 27, 2021 will vest on April 1, 2023 and will be earned, 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 December 31, 2021, the Company’s achievement level of Relative TSR was between the target and maximum levels of performance. Accordingly, the number of shares reported in the table reflect amounts based on maximum performance. The actual number of shares that will vest pursuant to the PSUs is not yet determinable. |
| (i) | Mr. Coleman’s unvested restricted stock award representing 104,602 shares of common stock will vest 50% on each of May 22, 2022 and May 22, 2023. |
| (j) | Mr. Coleman’s unvested RSU award representing 56,250 shares of common stock will vest on April 1, 2022. |
| (k) | Mr. Coleman’s unvested RSU award representing 323,624 shares of common stock will vest 50% on each of April 1, 2022 and April 1, 2023. |
| (l) | Mr. Coleman’s unvested RSU award representing 299,899 shares of common stock will vest in three equal annual installments beginning on |
The PSUs granted to Messrs. Coleman, Wells and Dilger and Ms. Feldman on July 27, 2021 will vest on April 1, 2024 and will be earned, 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 December 31, 2021, the Company’s achievement level of Relative TSR was between the target and maximum levels of performance. Accordingly, the number of shares reported in the table reflect amounts based on maximum performance. The actual number of shares that will vest pursuant to the PSUs is not yet determinable. |
| (n) | Mr. |
| 2, 2016. Mr. Wells’ grant of performance-based options to purchase |
EBITDA targets.
| (o) |
| Mr. Wells’ unvested restricted stock award representing |
| (p) | Mr. Wells’ unvested RSU award representing 83,334 shares of common stock will vest on |
| (q) | Mr. Wells’ unvested |
| (r) | Mr. Wells’ unvested |
| (s) | Ms. Feldman’s unvested restricted stock award representing |
| (t) | Ms. Feldman’s unvested restricted stock award representing 41,841 shares of common stock will vest 50% on |
| (u) | Ms. Feldman’s unvested RSU award representing 43,750 shares of common stock will vest on April 1, 2022. |
| (v) | Ms. Feldman’s unvested RSU award representing 226,537 shares of common stock will vest 50% on each of April 1, 2022 and April 1, 2023. |
| (w) | Ms. Feldman’s unvested RSU award representing 231,854 shares of common stock will vest in three equal annual installments beginning on April 1, 2022. |
| (x) | Mr. Dilger’s unvested restricted stock award representing 9,250 shares of common stock will vest on September |
| (y) | Mr. Dilger’s unvested RSU award representing 9,375 shares of common stock will vest on April 1, 2022. |
| (z) | Mr. Dilger’s unvested RSU award representing 64,725 shares of common stock will vest 50% on each of April 1, 2022 and April 1, 2023. |
| (aa) | Mr. Dilger’s unvested RSU award representing 77,620 shares of common stock will vest in three equal annual installments beginning on April 1, 2022. |
56 Notice and Proxy Statement 2022 | |
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, 2017.2021.
Option Exercises and Stock Vested During 20172021
| Option Awards | Stock Awards | Option Awards | Stock Awards | |||||||||||||||||||||||||||||
Name | Number of Shares Acquired on Exercise(a) (#) | Value Realized on Exercise(b) ($) | Number of Shares Acquired on Vesting(c) (#) | Value Realized on Vesting(d) ($) | 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 | — | — | 163,985 | 762,766 | ||||||||||||||||||||||||||||
Richard J. Bressler | — | — | 146,413 | 764,978 | ||||||||||||||||||||||||||||
C. William Eccleshare | — | — | 117,807 | 582,334 | — | — | 555,596 | 1,240,982 | ||||||||||||||||||||||||
Brian D. Coleman | — | — | 218,062 | 409,957 | ||||||||||||||||||||||||||||
Scott R. Wells | — | — | — | — | — | — | 492,538 | 1,051,262 | ||||||||||||||||||||||||
Steven J. Macri | — | — | — | — | ||||||||||||||||||||||||||||
Lynn A. Feldman | — | — | 200,025 | 401,106 | ||||||||||||||||||||||||||||
Jason A. Dilger | 23,006 | 22,454 | 60,094 | 123,705 | ||||||||||||||||||||||||||||
| (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 |
| (c) | Represents the gross number of shares acquired on vesting of restricted shares or |
| (d) | Represents the value of the vested restricted shares or |
Clear Channel Outdoor does not sponsor any pension plans in which the named executive officersNEOs participate.
NONQUALIFIED DEFERRED COMPENSATION PLANS
Clear Channel outdoorOutdoor does not sponsor anynon-qualified deferred compensation plans in which the named executive officersNEOs participate.
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. Eccleshare, Coleman, Wells and Dilger and Ms. Feldman, using an assumed December 31, 20172021 trigger event for each scenario.
C. William Eccleshare
The following description describes payments payable under certain termination scenarios under the 2019 Eccleshare Employment Agreement, which was in effect through December 31, 2021. 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.
Robert W. Pittman
Termination by iHeartMedia for Cause, by Mr. Pittman without Good Cause or UponNon-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 thenon-renewal of the agreement by Mr. Pittman.
Under the agreement, “Cause” is defined as: (1) conduct by Mr. Pittman constituting a material act of willful misconductabove, on July 29, 2021, in connection with his transition to Executive Vice Chairman, the performance of his duties; (2) continued, willful and deliberatenon-performance by Mr. Pittman of his duties under the agreement (other than by reason of physical or mental illness, incapacity or disability) where suchnon-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 CauseCompany and Mr. Pittman failsEccleshare entered into the 2022 Eccleshare Employment Agreement, effective as of January 1, 2022.
Termination due to cure within 15 business days after receipt of the notice.
The term “Good Cause” includes, subjectDeath. If Mr. Eccleshare’s employment is terminated by his death, Clear Channel Outdoor will pay/provide 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, responsibilitieshis designee 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, iHeartMedia will pay Mr. Pittman a lump sum cash payment equalif no person is designated, to Mr. Pittman’s accrued andEccleshare’s estate: (i) his unpaid base salary, if any, that was earned through the termination date but not otherwise previously paid (“Accrued Base Salary”), (ii) the annual bonus and bonus under the SIP, if any (the “Additional Bonus”), that Mr. Eccleshare earned with respect to the calendar year prior to the calendar year that includes the termination date (to the extent not paid as of the date of termination), which shall be paid at the time such annual bonus or Additional Bonus is payable in accordance with the employment agreement (the “Unpaid Prior Year Bonus”), (iii) a pro-rata portion, if any, of the annual bonus for the calendar year that includes the termination date (calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year and payable only if an annual bonus would have otherwise been earned for such calendar year had Mr. Eccleshare remained employed until the end of such calendar
| Notice and Proxy Statement 2022 57 |
year), to be paid at the time such annual bonus would otherwise be required to be paid in accordance with the employment agreement (the ”Pro-Rata Bonus”), and (iv) any unreimbursed business expenses and any payments or benefits required to which he may be entitledpaid or provided under applicable employee benefit plans (“Accrued Amounts”or equity plans, which shall be paid or provided in accordance with the terms of such plans and/or policies (the “Accrued Obligations”). 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, UponNon-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 ofnon-renewal, Mr. Pittman will receive alump-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 the18-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. PittmanEccleshare is unable to perform the essential functions of his duties under the agreement on a full-time basisposition for more than 180 consecutive days in any12-month period, iHeartMediaClear Channel Outdoor may terminate his employment. If Mr. Pittman’sEccleshare’s employment is terminated due to death or disability, iHeartMediaClear Channel Outdoor will pay to Mr. PittmanEccleshare, or, in the event of Mr. Eccleshare’s legal incapacity, to the individual who holds a power of attorney on behalf of Mr. Eccleshare, any Accrued Base Salary and Accrued Obligations. In addition, if Mr. Eccleshare or his designeeattorney in fact signs a settlement and release agreement (a “Release”), which will include terms reasonably acceptable to Clear Channel Outdoor and Mr. Eccleshare (provided that, for the avoidance of doubt, such Release will include a release by Mr. Eccleshare of claims against Clear Channel Outdoor), then Clear Channel Outdoor will pay/provide to Mr. Eccleshare or estate: (1) a lump sum cash payment equal to his Accrued Amounts; (2)the attorney in fact any
Earned Unpaid Prior Year Annual Bonus;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. Pittmanany Pro-Rata Bonus, such payments or his estate for all COBRA premium payments paid by Mr. Pittman or his estate for continuation of healthcare coverage during the18-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 continuebenefits to be exercisable for the shorter of one year or the remaining10-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 remaining10-year term of the options. If both of the following conditions occur during thesix-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 the10-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 vestmade 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 thesix-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 the18-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 the90-day period prior to or the12-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 stockholders, 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 agross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on thegross-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 andnon-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 the12-month period following Mr. Pittman’s termination by reason ofnon-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 UponNon-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 thenon-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 deliberatenon-performance by Mr. Bressler of his duties under the agreement (other than by reason of physical or mental illness, incapacity or disability) where suchnon-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 days to cure.
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, UponNon-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 ofnon-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 the18-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 iHeartMedia SIP 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 the18-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 stockholders, 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 agross-up payment equal to (1) the excise tax and (2) any U.S. Federal, state and local income or payroll tax imposed on thegross-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 the90-day period prior to or the12-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 EccleshareRelease.
Termination by Clear Channel Outdoor for Cause or. If Clear Channel Outdoor terminates Mr. Eccleshare’s employment for Cause, Clear Channel Outdoor will pay to Mr. Eccleshare any Accrued Base Salary and any Accrued Obligations.
Termination by Clear Channel Outdoor without Cause / Termination by Mr. Eccleshare withoutfor Good ReasonCause / Failure of Clear Channel Outdoor to offer to extend the Employment Period.Mr. Eccleshare’s employment agreement provides for the following payments and benefits upon terminationmay be terminated at any time by Clear Channel Outdoor without Cause by giving Mr. Eccleshare not less than six months prior written notice. If Clear Channel Outdoor terminates Mr. Eccleshare’s employment without Cause, if Mr. Eccleshare terminates employment for “Cause”Good Cause or if Clear Channel Outdoor fails to offer to extend the employment period, Clear Channel Outdoor will pay/provide to Mr. Eccleshare: (i) any Accrued Base Salary, (ii) any Accrued Obligations and (iii) any amount due during any notice period, garden leave or suspension period. In addition, if Mr. Eccleshare signs the Release, and subject to Mr. Eccleshare’s compliance with his non-competition and non-solicitation agreements, Clear Channel Outdoor will also pay/provide to Mr. Eccleshare: (A) any Unpaid Prior Year Bonus, (B) any Pro-Rata Bonus, and (C) payment of an aggregate amount equal to Mr. Eccleshare’s Base Salary, multiplied by 2.3, and reduced by the total amount of remuneration previously paid to Mr. Eccleshare during any notice period, garden leave or suspension period, which aggregate amount shall be paid in equal installments in accordance with Clear Channel Outdoor’s normal payroll practices for a period of 12 months following the date of such termination (the amounts in (C), the “Continued Salary Payments”), such payments to be made in accordance with the terms of such Release.
Termination by Mr. Eccleshare without “Good Reason.”Good Cause / Failure of Mr. Eccleshare to Accept Extension of the Employment Period. Mr. Eccleshare’s employment may be terminated at any time by Mr. Eccleshare without Good Cause by giving the Board not less than 90 days prior written notice. In the event that Mr. Eccleshare terminates employment without Good Cause or Mr. Eccleshare fails to affirmatively accept in writing Clear Channel Outdoor’s extension of the employment period within 30 days after when such extension is offered by Clear Channel Outdoor to him, Clear Channel Outdoor shall pay Mr. Eccleshare any Accrued Base Salary, any Accrued Obligations and, only if Clear Channel Outdoor provides notice of a garden leave or payment in lieu of notice after Mr. Eccleshare has provided notice of termination without Good Cause, any amount due during any garden leave or notice period.
If Mr. Eccleshare is in breach of his post-employment obligations or covenants, then Mr. Eccleshare will forfeit any right to the pro-rata portion of his continued salary payments described above.
Under the agreement,2019 Eccleshare Employment Agreement, “Cause” is defined as: (1)means one or more of the following reasons, as determined by the Board reasonably and in good faith: (i) conduct by Mr. Eccleshare constituting a material act of willful misconduct in connection with the performance of his duties; (2)(ii) continued, willful and deliberatenon-performance by Mr. Eccleshare of his duties hereunder (other than by reason of Mr. Eccleshare’s physical or mental illness, incapacity or disability) where suchnon-performance has has continued for more than 15 business days following written notice of suchnon-performance; (3) (iii) Mr. Eccleshare’s refusal or failure to follow lawful and reasonable directives consistent with hisMr. Eccleshare’s job responsibilities where such refusal or failure has continued for more than 15 business days following written notice of such refusal or failure; (4)(iv) 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)(v) a material breach by Mr. Eccleshare of
any of the provisions of his employment agreement;the agreement or (6)(vi) 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.harassment.
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Under the 2019 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 termEmployment Agreement, “Good Reason” includes: (1)Cause” means (i) a change in Mr. Eccleshare’s reporting line; (2)(ii) a material change in hisMr. Eccleshare’s 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)authorities; (iii) a reduction in Mr. Eccleshare’s base salaryBase Salary or target annual bonus, other than anacross-the-board reduction reduction applicable to all senior executive officers of Clear Channel Outdoor; (4)(iv) a required relocation within the domestic United States of more than 50 miles of hisMr. Eccleshare’s primary place of employment;employment as of the effective date of the agreement; it being understood, however, that Mr. Eccleshare may be required to travel on business to other locations as may be required or (5)desirable in connection with the performance of his duties specified in the agreement; or (v) a material breach by Clear Channel Outdoor of the terms of the agreement.
Brian D. Coleman
Termination due to Death. If Mr. Coleman’s employment agreement. To terminate for Good Reason, Mr. Eccleshare must provideis 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 is unable to perform the essential functions of his full-time position for more than 180 days in any 12-month period, Clear Channel Outdoor has 30 days to cure, and Mr. Eccleshare mustmay terminate employment within ten (10) days following the expiration of the Company’s cure period, if he still intends to terminate.
his employment. If Mr. Eccleshare’sColeman’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 for Cause or by. If Clear Channel Outdoor terminates Mr. Eccleshare without Good Reason,Coleman’s employment for Cause, Clear Channel Outdoor will pay to Mr. EccleshareColeman his accrued and unpaid base salary through the termination date of termination and any unreimbursed business expenses and any payments or benefits (including 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 the90-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 original10-year terms, and any unvested Clear Channel Outdoor restricted stock units will continue to vest as if he were employed.plans.
Termination by Clear Channel Outdoor without Cause / Non-renewal by Clear Channel Outdoor / Termination by Mr. EccleshareColeman for Good Reason, UponNon-Renewal of the Agreement by Clear Channel Outdoor or Upon Change in ControlCause. If Clear Channel Outdoor terminates Mr. Eccleshare’sColeman’s 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. EccleshareColeman terminates his employment for Good Reason,Cause, Clear Channel Outdoor will pay to Mr. Ecclesharehis accrued and unpaid base salary through the termination date, unpaid prior year bonus, if any, Accrued Amounts.and any payments required under applicable employee benefit plans. In addition, if Mr. EccleshareColeman signs a severance agreement and returns ageneral release of claims in the time period required,a form satisfactory to Clear Channel Outdoor, will: (1)Clear Channel Outdoor will pay to Mr. Eccleshare a severance paymentColeman, 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 policy (the “Relocation Fee”); (3) pay toordinary payroll practices and deductions, Mr. EccleshareColeman’s current base salary for twelve (12) months. Further, Mr. Coleman will be eligible for a pro-rata portion of the Earned Prior Year Annual and Additional Bonus; (4) pay to Mr. Eccleshare a pro rata portion of his annual bonus, for the year of termination, 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 beColeman is eligible only if a bonus would have been earned by the end of the calendar year (the “Prorated Annual Bonus”);year. Calculation and (5) provide for himpayment 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 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 severance agreement and 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. Coleman an amount equal to his dependents continued participationpro-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 group health plansole discretion, in any location during any severance pay period, the severance payments described above shall cease.
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 covers Mr. Eccleshare athas or would result in material injury to Clear Channel Outdoor; (5) a material breach of his employment agreement; or (6) a significant violation of Clear Channel Outdoor’s expensewritten employment and management policies made known to Mr. Coleman.
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
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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 period of three months as long as he timely elects continued coveragesubstantial and continuesunusual reduction in responsibilities or authority; or (6) a reduction in Mr. Coleman’s base salary or annual bonus target.
Scott R. Wells
The following description describes payments payable under certain termination scenarios under the Prior Wells Employment Agreement, which was in effect through December 31, 2021. As described above, on July 28, 2021, in connection with his transition to pay copayment premiums atPresident and Chief Executive Officer, the same levelCompany and cost as Mr. Eccleshare paid immediately priorWells entered into the Wells Amended and Restated Employment Agreement, effective January 1, 2022.
Termination due to the termination (the “COBRA Coverage Benefit”)Death. If Mr. Eccleshare violates thenon-competition,non-interference ornon-solicitation covenants contained in the employment agreement (after being provided a10-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 the18-monthnon-compete period after termination. In addition, no Relocation Fee or COBRA Coverage Benefit will be paid in the event of a violation of thenon-competition,non-interference ornon-solicitation covenants contained in the employment agreement (after being provided a10-day cure opportunity to the extent such violation is curable) and Mr. Eccleshare will reimburse Clear Channel Outdoor for any forfeitedpro-rata portion of the Severance Payment, Relocation Fee and/or COBRA Coverage Benefit already paid.
Furthermore, in the event that Mr. Eccleshare’sWells’ employment is terminated by his death, Clear Channel Outdoor without Causewill 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, any business expenses incurred 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 doesWells but 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,yet reimbursed and any unvested restricted stock units shall automatically vest on his last day of employment.other payments required under applicable employee benefit plans (collectively, the “Accrued Obligations”).
Termination due to Disability. If Mr. EccleshareWells is unable to perform the essential functions of his full-time position for more than 180 consecutive days in any 12 month12-month period, Clear Channel Outdoor may terminate his employment. If Mr. Eccleshare’sWells’ employment is terminated, Clear Channel Outdoor will pay all Accrued Obligations to Mr. Eccleshare or his designee any Accrued Amounts and the Relocation Fee for Mr. Eccleshare and his family. In addition, if Mr. Eccleshare signs and returns a release of claims in the time period required, Clear Channel Outdoor will pay to Mr. Eccleshare or his designee any Earned Prior Year Annual and Additional Bonus, Prorated Annual Bonus and the COBRA Coverage Benefit. If his employment is terminated due to disability, his unvested Clear Channel Outdoor stock options will continue to vest for the shorter of five years or the remainder of their original10-year terms, and any unvested Clear Channel Outdoor restricted stock units will continue to vest as if he were employed.
Termination due to Death. If Mr. Eccleshare’s employment is terminated by his death, Clear Channel Outdoor will pay to his designee or estate: (1) the Accrued Amounts; (2) any Earned Prior Year Annual and Additional Bonus; (3) the Prorated Annual Bonus; (4) the Relocation Fee; and (5) the COBRA Coverage Benefit. If Mr. Eccleshare is terminated due to his death, his unvested Clear Channel Outdoor stock options will vest and continue to be exercisable for the shorter of one year or the remainder of the original10-year term and his unvested Clear Channel Outdoor restricted stock units will vest.
Scott R. Wellshim.
Termination by Clear Channel Outdoor for Cause. If Mr. Wells’ employment is terminated by Clear Channel Outdoor for Cause, Clear Channel Outdoor will pay all Accrued Obligations to him.
Termination by Clear Channel Outdoor without Cause, Non-renewal by Clear Channel Outdoor or Termination by Mr. Wells withoutfor Good Reason. If Clear Channel Outdoor terminates Mr. Wells’ employment without Cause or does not renew the agreement, providesor if Mr. Wells terminates employment for the following payments and benefits upon termination byGood Reason, then Clear Channel Outdoor will pay all Accrued Obligations to Mr. Wells. In addition, if Mr. Wells signs a severance agreement and general release of claims in a form satisfactory to Clear Channel Outdoor: (i) Clear Channel Outdoor will pay Mr. Wells, in periodic payments in accordance with ordinary payroll practices and deductions, his current base salary for “Cause”18 months (the “Severance Payments” or “Severance Pay Period”); (ii) Mr. Wells will be eligible for a pro-rata bonus (“Pro-Rata Bonus”), calculated based upon performance as of the termination date as related to overall performance at the end of the calendar year. Mr. Wells will receive such Pro-Rata Bonus only if Mr. Wells would have earned the bonus had Mr. Wells remained employed through the end of the applicable calendar year. Calculation and payment of the bonus, if any, shall be pursuant to the plan in effect during the termination year; (iii) Clear Channel Outdoor will pay 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 his employment terminates, payable in a lump sum; (iv) Clear Channel Outdoor will pay Mr. Wells in a lump sum an amount equal to the product of (A) 12 and (B) the COBRA premiums Mr. Wells would be required to pay 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 time 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 shall remain eligible to vest for the three-month period following the date of termination.
Non-Renewal by Mr. Wells without “Good Reason.”. If Mr. Wells gives notice of non-renewal of the agreement, Clear Channel Outdoor will pay all Accrued Obligations to Mr. Wells. If the termination date is before the end of the then current employment period, then Clear Channel Outdoor will, in periodic payments in accordance with ordinary payroll practices and deductions, pay Mr. Wells an amount equal to Mr. 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.
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
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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.
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; or (5) a material breach by Clear Channel Outdoor of the terms of the employment agreement. To terminate for Good Reason, Mr. Wells must provide
Lynn A. Feldman
Termination due to Death. If Ms. Feldman’s employment is terminated by her death, Clear Channel Outdoor with 30 days’ written notice, after whichwill 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, and any payments required under applicable employee benefit plans.
Termination due to Disability. If Ms. Feldman is unable to perform the essential functions of her full-time position for more than 180 days in any 12-month period, Clear Channel Outdoor has 30 days to cure.
may terminate her employment. If Mr. WellsMs. Feldman’s employment is terminated with Cause, hedue to disability, she will receive alump-sum cash payment equal to his Accrued Amountsall accrued and 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.
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 her accrued and unpaid base salary through the termination date and any payments required under applicable employee benefit plans.
Termination by Clear Channel Outdoor without Cause by Mr. Wells for Good Reason or Upon/ Non-RenewalNon-renewal of the Agreement by Clear Channel Outdoor / Termination by Ms. Feldman for Good Cause. If Mr. Wells is terminated by Clear Channel Outdoor terminates Ms. Feldman’s employment without Cause, Mr. Wells resignsor if Ms. Feldman terminates for Good Reason orCause, Clear Channel Outdoor will pay her accrued and unpaid base salary through the termination date, unpaid prior year bonus, if any, and any payments required under applicable employee benefit plans. If Clear Channel Outdoor does not renew the agreement, is not renewed by Clear Channel Outdoor: (1) heOutdoor will receive alump-sum cash payment equal to his Accrued Amountspay her accrued and unpaid base salary through the end of the employment period, 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 Ms. Feldman 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 Ms. Feldman, in periodic payments in accordance with ordinary payroll practices and deductions, hisMs. Feldman’s current base salary on the date of termination for 18 months (the “Wells Severance Payments”); (b) twelve (12) months. Further, Ms. Feldman will be eligible for a Prorated Annual Bonus; (c) a separation bonus in an amount equal to 100% of his then-applicable target annual bonus in respect of the year of termination (the “Separation Bonus”), with such Separation Bonus to be paid in a lump sum; (d) a lump sum equal to the product of (i) 12 and (ii) the COBRA premiums Mr. Wells would be required to pay if he elected to continue the health benefits coverage he had prior to the termination date (less the amount Mr. Wells would have to pay for such coverage as an active employee); and (e) any unvested time vesting options scheduled to vest within the twelve month period following the date of termination, which options shall be considered fully vested on the date of termination and any unvested performance vesting options shall remain eligible to vest for the three month period following the date of termination. If Mr. Wells violates the terms of the severance agreement and general release of claims, the Wells Severance Payments shall cease.
Termination due to Disability. If Mr. Wells is unable to perform the essential functions of his full-time position for more than 180 days in any 12 month period, Clear Channel Outdoor may terminate his employment. If Mr. Wells’ employment is terminated, he will receive: (1) alump-sum cash payment equal to his Accrued Amounts and (2) any Earned Prior Year Annual Bonus.
Termination due to Death. If Mr. Wells’ 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) his Accrued Amounts and (2) any Earned Prior Year Annual Bonus.
Steven J. Macri
Termination by iHeartMedia for Cause or by Mr. Macri without Good Cause. Mr. Macri’s employment agreement provides for the following payments and benefits upon termination by iHeartMedia for “Cause” or by Mr. Macri without “Good Cause.”
Under the agreement, “Cause” is defined as Mr. Macri’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 iHeartMedia’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 outside a 50 mile radius of New York, New York. To terminate for Good Cause, Mr. Macri must provide iHeartMedia with 30 days written notice, after which iHeartMedia has 30 days to cure, unless the Good Cause is not curable by its nature.
If Mr. Macri is terminated with Cause, he will receive alump-sum cash payment equal to his Accrued Amounts.
Termination by iHeartMedia without Cause, by Mr. Macri for Good Cause or UponNon-Renewalpro-rata portion 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 his accrued and unpaid base salary through the termination date and payments required under applicable employee benefit plans; and (2) provided he signs and returns a severance agreement and general release of claims in the time period required, he will receive (a) $1,400,000.0 which represents the sum of Mr. Macri’s base salary and target Annual Bonus, to be paid out over a period of twelve 12 months and (b) a pro rata portion of his 2019 Annual Bonus,annual 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.
PursuantNon-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 accrued and unpaid base salary through the end of the then current employment period, unpaid prior year bonus, if any, and any payments required under applicable employee benefit plans.
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.
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 agreement; or (6) a significant violation of Clear Channel Outdoor’s written employment and management policies.
| Notice and Proxy Statement 2022 61 |
The term “Good Cause” includes: (1) a material 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 a location more than 30 miles from Ms. Feldman’s current location in New York, NY; or (3) a significant reduction in Ms. Feldman’s base salary or annual bonus target.
Jason A. Dilger
The following description describes payments payable under certain termination scenarios under the second amendment to Mr. Macri’s employment agreement, the term of Mr. Macri’s employment agreement,Prior Dilger Employment Agreement, which was previously scheduledin effect through December 31, 2021. As described above, on January 20, 2022, the Company and Mr. Dilger entered into the Dilger Amended and Restated Employment Agreement, effective January 1, 2022.
Termination due to expire on June 30, 2018, was extended through March 31, 2019. The second amendmentDeath. If Mr. Dilger’s employment is terminated by his death, Clear Channel Outdoor will pay to Mr. Macri’s employment agreement does not contemplate automatic renewals of the employment period andhis designee or, if Mr. Macri’s employment continues for any period of time following March 31, 2019, such employment will be“at-will” and may be terminated at any time by either party. In such case, pursuantno designee, to the second amendment to Mr. Macri’s employment agreement, Mr. Macri will be entitled to receivehis estate his accrued and unpaid base salary and any unpaid prior year bonus, if any, through the date of termination, date and any payments required under applicable employee benefit plans.
Termination due to Disability.Disability. If Mr. MacriDilger is unable to perform the essential functions of his full-time position for more than 180 days in any 12 month12-month period, iHeartMediaClear Channel Outdoor may terminate his employment. If Mr. Macri’sDilger’s employment is terminated due to disability, he will receive aall 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 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.
Termination by Clear Channel Outdoor without Cause / lump-sumNon-renewal cashby 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 twelve (12) months. Further, Mr. Dilger 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. Dilger 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.
Non-Renewal by Mr. Dilger. If Mr. Dilger 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 and 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 Accrued Amounts.pro-rata base salary through the end of the then current employment period.
TerminationIf 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.
Under the agreement, “Cause” is defined as Mr. Dilger’s: (1) willful misconduct; (2) non-performance of duties (other than due to Death. Ifdisability); (3) failure to follow lawful directives; (4) felony conviction, a plea of nolo contendere to a felony by Mr. Macri’sDilger, or other conduct that has or would result in material injury to Clear Channel Outdoor’s reputation; (5) a material breach of his employment is terminated by his death, iHeartMedia will pay inagreement; or (6) a lump sum to his designee or, if no designee, to his estate, his Accrued Amounts.significant violation of Clear Channel Outdoor’s written employment and management policies.
62 Notice and Proxy Statement 2022 | |
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) | — | — | — | — | — | — | $ | 220,584 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| TOTAL | — | — | — | — | — | — | $ | 220,584 | ||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Richard J. Bressler(c) | Cash payment TOTAL | — | $ | 2,736,905 | (e) | $ | 1,132,205 | (f) | $ | 1,132,205 | (f) | — | — | $ | 2,736,905 | (e) | ||||||||||||
| Cash value of benefits(g) | — | 9,688 | 9,688 | 9,688 | — | — | 9,688 | |||||||||||||||||||||
| Vesting of equity awards(d) | — | — | — | — | — | — | 82,722 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| TOTAL | — | $ | 2,746,593 | $ | 1,141,893 | $ | 1,141,893 | — | — | $ | 2,829,315 | |||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
C. William Eccleshare | Cash payment | — | $ | 3,010,000 | (h) | $ | 810,000 | (i) | $ | 810,000 | (i) | $ | 506,575 | (j) | — | — | ||||||||||||
| Vesting of equity awards(d) | — | — | — | 458,983 | — | $ | 458,983 | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| TOTAL | — | $ | 3,010,000 | $ | 810,000 | $ | 1,268,983 | $ | 506,575 | $ | 458,983 | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Scott R. Wells | Cash payment | — | $ | 2,426,396 | (k) | — | — | — | — | — | ||||||||||||||||||
| Cash value of benefits(g) | — | 6,915 | — | — | — | — | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| TOTAL | — | $ | 2,433,311 | — | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
Steven J. Macri(c) | Cash payment | — | $ | 376,213 | (l) | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| TOTAL | — | $ | 376,213 | — | — | — | — | — | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
| 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 | ||||||||||||||||||||||
C. William | Cash payment | $ | — | $ | 5,253,750 | (c) | $ | 2,378,750 | (d) | $ | 2,378,750 | (d) | $ | 308,219 | (e) | $ | — | $ | 5,253,750 | (c) | ||||||||||
| Vesting of equity awards(f) | — | $ | 1,815,528 | $ | 8,109,867 | $ | 8,476,831 | $ | 1,815,528 | $ | — | $ | 8,476,831 | |||||||||||||||||
| TOTAL | $ | — | $ | 7,069,278 | $ | 10,488,617 | $ | 10,855,581 | $ | 2,123,748 | $ | — | $ | 13,730,581 | ||||||||||||||||
Brian D. | Cash payment | $ | — | $ | 1,755,000 | (g) | $ | — | $ | — | $ | — | $ | — | $ | 1,755,000 | (g) | |||||||||||||
| Vesting of equity awards(f) | — | $ | 5,779,952 | $ | 5,433,719 | $ | 5,433,719 | $ | — | $ | — | $ | 5,779,952 | |||||||||||||||||
| TOTAL | $ | — | $ | 7,534,952 | $ | 5,433,719 | $ | 5,433,719 | $ | — | $ | — | $ | 7,534,952 | ||||||||||||||||
Scott R. Wells | Cash payment | $ | — | $ | 3,807,000 | (h) | $ | — | $ | — | $ | — | $ | — | $ | 3,807,000 | (h) | |||||||||||||
| Cash value of benefits(i) | — | $ | 10, 905 | $ | — | $ | — | $ | — | $ | — | $ | 10,905 | |||||||||||||||||
| Vesting of equity awards(f) | — | $ | 1,702,604 | $ | 6,849,896 | $ | 6,849,896 | $ | — | $ | — | $ | 7,216,859 | |||||||||||||||||
| TOTAL | $ | — | $ | 5,520,509 | $ | 6,849,896 | $ | 6,849,896 | $ | — | $ | — | $ | 11,034,764 | ||||||||||||||||
Lynn A. Feldman | Cash payment | $ | — | $ | 1,638,000 | (g) | $ | — | $ | — | $ | — | $ | — | $ | 1,638,000 | (g) | |||||||||||||
| Vesting of equity awards(f) | — | $ | — | $ | 4,005,044 | $ | 4,005,044 | $ | — | $ | — | $ | 4,216,930 | |||||||||||||||||
| TOTAL | $ | — | $ | 1,638,000 | $ | 4,005,044 | $ | 4,005,044 | $ | — | $ | — | $ | 5,854,930 | ||||||||||||||||
Jason A. Dilger | Cash payment | $ | — | $ | 791,909 | (g) | $ | — | $ | — | $ | — | $ | — | $ | 791,909 | (g) | |||||||||||||
| Vesting of equity awards(f) | — | $ | — | $ | 1,176,940 | $ | 1,176,940 | $ | — | $ | — | $ | 1,207,558 | |||||||||||||||||
| TOTAL | $ | — | $ | 791,909 | $ | 1,176,940 | $ | 1,176,940 | $ | — | $ | — | $ | 1,999,467 | ||||||||||||||||
| (a) | Amounts reflected in the table were calculated assuming the triggering event occurred on December 31, |
| (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 |
| (c) | Represents the |
| (d) | Represents Mr. Eccleshare’s annual bonus based on actual performance for the year ended December 31, 2021 pursuant to Mr. Eccleshare’s employment agreement. |
| (e) | Represents base salary during the 90-day notice period that is required under Mr. Eccleshare’s employment agreement if Clear Channel Outdoor exercises its right to immediately terminate Mr. Eccleshare following his resignation without Good Cause. |
| (f) | Amounts reflect the value of unvested Clear Channel Outdoor equity awards held by the respective |
| Notice and Proxy Statement 2022 63 |
| (g) | Represents |
| (h) | Represents the sum of (1) 1.5 times Mr. Wells’ base salary at termination, (2) |
| The values associated with the continued provision of health benefits are based on |
64 Notice and |
|
As required by Item 402(u) of RegulationS-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. Robert W. Pittman,C. William Eccleshare, our 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. We have had no changes to our employee population or compensation arrangements that would significantly impact our pay ratio disclosure. The employee who was used in the pay ratio calculation for 2019 and 2020 terminated employment with the Company during 2021. As such, we selected a new median employee for 2021 from a group of employees as of December 31, 2019 whose compensation was approximately equal to the median employee. For 2017,2021, our last completed fiscal year:
the median of the annual total compensation of all employees of our company (other than our CEO), was $42,611;$50,547; and
the annual total compensation of our CEO, as reported in the Summary Compensation Table presented elsewhere in this Proxy Statement, was $534,469.$6,234,771.
Based on this information, for 20172021 the ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees was 13123 to 1.
Explanation of our Pay Ratio Disclosure
Mr. Pittman, our Chief Executive Officer, simultaneously holds the same positions at iHeartCommunications and iHeartMedia, our indirect parent entities. Our Chief Financial Officer, General Counsel, Chief Accounting Officer and Senior Vice President—Corporate Finance also hold the same positions at iHeartCommunications and iHeartMedia. The compensation of all of these officers is set by the board of directors and the Compensation Committee of the board of directors of iHeartMedia and allocated to us pursuant to the Corporate Services Agreement, dated November 16, 2005, by and between iHeartMedia Management Services, Inc., an indirect subsidiary of iHeartMedia, and Clear Channel Outdoor. These officers’ compensation is paid by iHeartMedia, and Clear Channel Outdoor is allocated a portion of the cost of the services of these officers, other than Mr. Pittman. The compensation paid by iHeartMedia to Mr. Pittman is not allocated to Clear Channel Outdoor, and is not reflected in our Summary Compensation Table. The only compensation reflected in our Summary Compensation Table for Mr. Pittman is $534,469 of accrued dividends paid on restricted shares issued by Clear Channel Outdoor that vested during 2017. Consequently, the pay ratio information calculated in accordance with Item 402(u) of RegulationS-K, which uses Mr. Pittman’s annual total compensation as reported in the Summary Compensation Table presented in this Proxy Statement, is not reflective of the ratio of our of CEO’s earnings to the annual total compensation of our median employee.
All of Mr. Pittman’s compensation for 2017 is reflected in iHeartMedia’s Summary Compensation Table for 2017. Consequently, in addition to the foregoing disclosure, we believe that the following information is helpful in evaluating the earnings of our CEO. This information should be viewed as a supplement to, and not as a replacement of, the required pay ratio disclosure set forth above. As described in footnote (g) to the Summary Compensation Table, Mr. Pittman received $1,200,000 in Salary, $11,050,000 in Bonus andNon-Equity Incentive Plan Compensation and $1,152,112 in All Other Compensation from iHeartMedia, in each case, calculated in accordance with the requirements of the Summary Compensation Table. Using all or a portion of Mr. Pittman’s annual total compensation for 2017 as set forth in iHeartMedia’s Summary Compensation Table in our pay ratio calculation would have resulted in a significantly higher pay ratio than the pay ratio calculated in accordance with Item 402(u) of RegulationS-K.
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 RegulationS-K.
1. We selected October 1, 2017, which is within the last three months of 2017, as the date upon which we would identify the median employee, to allow sufficient time to identify the median employee given the global scope of our operations.
| 1. | There has been no change in our employee population or employee compensation arrangements since that median employee was identified that we believe would significantly impact our pay ratio disclosure. We identified the median employee as of December 31, 2019. The employee who was used in the pay ratio calculation for 2019 and 2020 terminated employment with the company during 2021. As such, we selected a new median employee for 2021 from a group of employees as of December 31, 2019 whose compensation was approximately equal to the median employee. |
| 2. | We determined that, as of December 31, 2019, our employee population consisted of approximately 5,929 individuals working at Clear Channel Outdoor and its consolidated subsidiaries. |
2. We determined that, as of October 1, 2017, our employee population consisted of approximately 5,823 individuals working at Clear Channel Outdoor and its consolidated subsidiaries. This number does not include 326 employees of iHeartMedia who provide corporate services to us under the Corporate Services Agreement. These iHeartMedia employees are compensated by iHeartMedia, and the costs of these corporate services are allocated to us as described under “Certain Relationships and Related Party Transactions—iHeartMedia, Inc.—Corporate Services Agreement.” These iHeartMedia employees do not receive any compensation from Clear Channel Outdoor.
3. Of our employee population as of October 1, 2017, 1,584
| 3. | Of our employee population as of December 31, 2019, 1,708 were U.S. employees and 4,221 were |
| Country | Number of Employees | |
Estonia, Lithuania and Latvia | 24 | |
Ireland | 51 | |
Total Excluded Employees | 75 |
In total, the excluded employees represented 1.3% of our combined U.S. and non-U.S. workforce as of December 31, 2019.
| 4. | For purposes of measuring the compensation 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 twelve-month period ended December 31, 2019. |
| 5. | We gathered our total cash compensation information for the twelve-month period ended December 31, 2019 from payroll records of each of our business units and applied this compensation measure |
| ||||
| Notice and Proxy Statement 2022 65 |
| consistently to all our employees included in the calculation. We annualized the total cash compensation of permanent employees hired during the 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 twelve months ended December 31, 2019. |
| 6. | |||
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|
In total, the excluded employees represented 2.9% of our combined U.S. andnon-U.S. workforce.
4. For purposes of measuring the compensation 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 nine-month period ended September 30, 2017. While some of our highly compensated employees are eligible to receive cash bonuses in the first quarter of the year under our annual cash bonus plan, the majority of our employees are not eligible to receive annual cash bonuses and instead earn quarterly cash bonuses or commissions, or are not eligible for any bonus. Consequently, we believe that total cash compensation for the nine-month period ended September 30, 2017 reasonably reflects the annual total compensation of our employee population for purposes of identifying our median employee.
5. We gathered our total cash compensation information for the nine-month period ended September 30, 2017 from payroll records of each of our business units and applied this compensation measure consistently to all of our employees included in the calculation. We annualized the total cash compensation of permanent employees hired during the year. We did not make any other annualizing adjustments, and we did not make anycost-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 twelve months ended December 31, 2017.
6. Once we identified the median employee, we identified and calculated the elements of such employee’s compensation for 2017 in accordance with the requirements of Item 402(c)(2)(x) of RegulationS-K, resulting in annual total compensation of $42,611. With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2017 Summary Compensation Table included in this Proxy Statement.
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.
The individuals who served as members of our Board during 20172021 are set forth in the table below. 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 (who retired fromdirector compensation program for independent directors providing for an annual retainer of $75,000 in cash and $150,000 in equity. The equity is in the form of RSUs and is granted annually (beginning in 2019), 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 meeting attendance. The Chair of our Board effective February 15, 2018), Keglevic, Temple (who didboard of directors (as long as the Chair is not stand for reelection atan 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 October 21, 2021, our 2017 Annual Meetingboard of Stockholders)directors approved an increase to the annual fee payable to the Chair of the Nominating and Tremblay were compensated for their service as directorsCorporate Governance Committee, resulting in a total annual fee of Clear Channel Outdoor during 2017. The following table contains information about our independent directors’ 2017 compensation.$15,000. Members of the Audit Committee (other than the Chair) receive an annual fee of $15,000, members of the Compensation 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 $7,500.
66 Notice and Proxy Statement 2022 | |
Director Compensation Table
Name | Fees Earned or Paid in Cash ($) | Stock Awards(a) ($) | Option Awards(a) ($) | Total ($) | ||||||||||||
Blair E. Hendrix | — | — | — | — | ||||||||||||
Douglas L. Jacobs(b) | 422,500 | 148,522 | — | 571,022 | ||||||||||||
Daniel G. Jones | — | — | — | — | ||||||||||||
Paul Keglevic | 189,326 | 139,996 | — | 329,322 | ||||||||||||
Vicente Piedrahita | — | — | — | — | ||||||||||||
Robert W. Pittman(c) | — | — | — | — | ||||||||||||
Olivia Sabine | — | — | — | — | ||||||||||||
Christopher M. Temple(d) | 181,620 | — | — | 181,620 | ||||||||||||
Dale W. Tremblay | 424,000 | 159,381 | — | 583,381 | ||||||||||||
| Name | Fees Earned or Paid in Cash ($) | Stock Awards(a) ($) | Option Awards(a) ($) | Total ($) | ||||||||||||
John Dionne | $ | 97,500 | $ | 150,000 | — | $ | 247,500 | |||||||||
Lisa Hammitt | $ | 92,500 | $ | 150,000 | — | $ | 242,500 | |||||||||
Andrew Hobson | $ | 100,000 | $ | 150,000 | — | $ | 250,000 | |||||||||
Thomas King | — | $ | 244,999 | — | $ | 244,999 | ||||||||||
Joe Marchese | — | $ | 242,499 | — | $ | 242,499 | ||||||||||
W. Benjamin Moreland | — | $ | 274,998 | — | $ | 274,998 | ||||||||||
Mary Teresa Rainey(b) | $ | 100,799 | $ | 150,000 | — | $ | 250,799 | |||||||||
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 |
In addition, Messrs. King, Marchese and Moreland elected to receive their annual retainer and committee fees in |
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. |
For further discussion of the |
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.
For further discussion of the assumptions made in valuation, see also Note8-Stockholders’ Equity (Deficit) beginning on pageA-72 of Appendix A.
As of December 31, 2017, there were outstanding stock options awarded to our independent directors in 2012 and prior thereto with respect to an aggregate of 100,522 shares of our Class A common stock outstanding under our 2005 Stock Incentive Plan. As of December 31, 2017, there were outstanding stock options awarded to our independent directors in 2016 and prior thereto with respect to 132,411 shares of our Class A common stock outstanding under our 2012 Amended and Restated Stock Incentive Plan and there were 21,870 unvested shares of restricted stock awarded to our independent directors in 2017 and prior thereto outstanding under our 2012 Amended and Restated Stock Incentive Plan.
| (b) |
The cash fees paid to Ms. Rainey were converted to GBP based on the |
Messrs. Jacobs, Keglevic and Tremblay all served as our independent directors during 2017. 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 2017. Directors also are reimbursed for their expenses associated with their service as directors of Clear Channel Outdoor. We also pay retainer and meeting fees to directors serving on ad hoc special committees from time to time. During 2017, for service on an ad hoc special committee, Mr. Jacobs received retainer fees of $240,000 and meeting fees of $34,500; Mr. Tremblay received retainer fees of $240,000 and meeting fees of $31,500; Mr. Temple received retainer fees of $96,774 and meeting fees of $31,500; and Mr. Keglevic received retainer fees of $112,903 and meeting fees of $3,000.
During 2016, 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 effective July 1, 2016 and granted restricted stock to our independent directors as described in footnote (a) above. Effective as of July 1, 2016, the compensation program for our independent directors is as set forth below.
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In 2016, our Board adopted a stock ownership guideline for our independent directors that requires our independent directors to own a minimum of 35,000 shares of Class A common stock by July 1, 2019 or, in the case of any independent directors appointed after the adoption of the guideline, within three years of the date of the independent director’s appointment.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information as of December 31, 20172021 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.
Plan Category | 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)) | |||||||||||||||||||||
| 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) | (A) | (B) | (C) | ||||||||||||||||||
| 8,010,876 | (3) | $ | 6.10 | 26,849,707 | 30,054,879 | (3) | $ | 5.45 | 30,479,232 | |||||||||||||||
Equity Compensation Plans not approved by security holders | — | — | — | — | — | — | ||||||||||||||||||
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Total | 8,010,876 | $ | 6.10 | 26,849,707 | $ | 30,054,879 | $ | 5.45 | 30,479,232 | |||||||||||||||
| (1) | The weighted-average exercise price is calculated based solely on the exercise prices of the outstanding options and does not reflect the shares that will be issued upon the vesting of outstanding awards of |
| (2) | Represents the 2005 Stock Incentive Plan and the 2012 Second Amended and Restated Stock Incentive Plan. The 2005 Stock Incentive Plan automatically terminated (other than with respect to outstanding awards) upon stockholder approval of the 2012 Stock Incentive Plan at our Annual |
| (3) | This number includes shares subject to outstanding awards granted, of which |
DELINQUENT SECTION 16(A) BENEFICIAL OWNERSHIPREPORTS
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% stockholders 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 usfiled electronically with the SEC and written representations that no other reports were required, during the fiscal year ended December 31, 2017,2021, our officers, directors and greater than 10% beneficial owners timely filed all required Section 16(a) reports, except that Mr. Jacobs wasother than one late in filing a Form 4 disclosing one transactionfiled by Mr. Jason Dilger reporting the exercise of a stock option and Mr. Tremblaysame-day sales of the resulting shares that was filed late in filing a Form 4 disclosing one transaction.due to administrative error.
COMPENSATION COMMITTEE INTERLOCKS
INTERLOCKS AND INSIDER PARTICIPATION
During 2017,2021, 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 20172021 and as of the date of this proxy statement. During 2017,2021, no
member of our Compensation Committee simultaneously served as an executive officer of Clear Channel Outdoor. NoExcept as otherwise described herein, no member of our Compensation Committee had a relationship with us that requires disclosure under Item 404 of RegulationS-K.
68 Notice and Proxy Statement 2022 | |
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
We are an indirect subsidiary of iHeartMedia. As of May 9, 2018, 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 89.5% 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 and its subsidiaries.
Master Agreement
We have entered into a master agreement (the “Master Agreement”) with iHeartCommunications. Among other things, the Master Agreement sets forth agreements governing our relationship with iHeartCommunications.
Auditors and Audits; Annual Financial Statements and Accounting. We have agreed that, for so long as iHeartCommunications 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 fiscalyear-end and accounting periods the same as iHeartCommunications, conform our financial presentation with that of iHeartMedia, we will not change our independent auditors without iHeartCommunications’ 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 iHeartCommunications all information required for iHeartCommunications to meet its schedule for the filing and distribution of its financial statements and to make available to iHeartCommunications and its independent auditors all documents necessary
for the annual audit of our Company as well as access to the responsible personnel so that iHeartCommunications and its independent auditors may conduct their audits relating to our financial statements. We provide iHeartCommunications 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 iHeartCommunications accounting policies and to notify and consult with iHeartCommunications 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 iHeartCommunications 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 iHeartCommunications, each of its affiliates (excluding us and our subsidiaries) and each of their respective directors, officers and employees, on anafter-tax basis, from and against all liabilities relating to, arising out of or resulting from:
iHeartCommunications 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 anafter-tax basis, from and against all liabilities relating to, arising out of or resulting from:
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 iHeartCommunications 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 iHeartCommunications and us have similar dispute resolution provisions.
Other Provisions. The Master Agreement also contains covenants between iHeartCommunications and us with respect to other matters, including the following:
Approval Rights of iHeartCommunications on Certain of our Activities. Until the first date on which iHeartCommunications owns less than 50% of the total voting power of our common stock, the prior affirmative vote or written consent of iHeartCommunications is required for the following actions (subject in each case to certain agreed exceptions):
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 iHeartCommunications continues to own greater than 50% of the total voting power of our common stock then an affiliate of iHeartCommunications (referred to as iHeartCommunications 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:
The charges for the corporate services generally are intended to allow iHeartCommunications to fully recover the allocated direct costs of providing the services, plus allout-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 iHeartCommunications 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 iHeartCommunications will make available to us, and we will be obligated to utilize, certain executive officers of iHeartCommunications to serve as our executive officers. The Corporate Services Agreement may be terminated by mutual agreement or, after the date iHeartCommunications 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 iHeartCommunications. iHeartCommunications 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 iHeartCommunications. 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, 2017, charges for the corporate and executive services provided to us by iHeartCommunications under the Corporate Services Agreement totaled $68.7 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 iHeartCommunications 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 iHeartCommunications or one or more of its subsidiaries for certain state and local income tax purposes. We and iHeartCommunications have entered into a tax matters agreement (the “Tax Matters Agreement”) to allocate the responsibility of iHeartCommunications 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 iHeartCommunications or any of its subsidiaries for Federal, state or local tax purposes, we make payments to iHeartCommunications 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 iHeartCommunications 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 iHeartCommunications. 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 iHeartCommunications 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 iHeartCommunications as such tax items are used.
Under the Tax Matters Agreement, iHeartCommunications 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, iHeartCommunications determines the amount of our liability to (or entitlement to payment from) iHeartCommunications under the Tax Matters Agreement. This arrangement may result in conflicts of interest between iHeartCommunications and us. For example, under the Tax Matters Agreement, iHeartCommunications 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 iHeartCommunications 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 iHeartCommunications and us during the period in which we or any of our subsidiaries are included in the consolidated group of iHeartCommunications 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 iHeartCommunications. The Tax Matters Agreement provides, however, that iHeartCommunications 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 iHeartCommunications 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 iHeartCommunications 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 iHeartCommunications spins off our Class B common stock to its stockholders in a distribution that is intended to betax-free under Section 355 of the Code, we have agreed in the Tax Matters Agreement to indemnify iHeartCommunications and its affiliates against any and alltax-related liabilities if such aspin-off fails to qualify as atax-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 iHeartCommunications is responsible under the Tax Matters Agreement for any suchspin-off not beingtax-free under Section 355 of the Code, we and iHeartMedia have agreed that we will each be responsible for 50% of thetax-related liabilities arising from the failure of such aspin-off to so qualify.
At December 31, 2017, the amount payable to iHeartCommunications under the Tax Matters Agreement was $0.1 million.
Employee Matters Agreement
We have entered into an employee matters agreement (the “Employee Matters Agreement”) with iHeartCommunications covering certain compensation and employee benefit issues. In general, with certain exceptions, our employees participate in the iHeartCommunications employee plans and arrangements along with the employees of other iHeartCommunications subsidiaries. Our payroll is also administered by iHeartCommunications.
We and iHeartCommunications reserve the right to withdraw from or terminate our participation, as the case may be, in any of the iHeartCommunications 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 iHeartCommunications employee plans and arrangements will end if and at such time as we are no longer a subsidiary of iHeartCommunications which, for this purpose, means iHeartCommunications 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 “Clear Channel” trademark and the Clear Channel “outdoor” trademark logo with respect today-to-day operations of our business worldwide and on the Internet, and (2) certain other Clear Channel marks in connection with our business. Our use of the marks is subject to iHeartCommunications’ approval. iHeartCommunications 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 iHeartCommunications and (2) at any time after iHeartCommunications ceases to own at least 50% of the total voting power of our common stock.
On February 9, 2017, we entered into a binding option and letter of intent with iHeartMedia granting us a binding option to purchase the registered trademarks and domain names owned by iHeartMedia and its subsidiaries that incorporate one or more of the words “Clear” and/or “Channel,” and any translations or
derivations of any of the foregoing, together with any goodwill associated therewith. This option is exercisable in our sole and absolute discretion at any time between February 23, 2018 and February 23, 2019. For the year ended December 31, 2017, iHeartCommunications charged us $36.7 million in trademark license fees.
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 2017, we incurred approximately $394,130 to install and remove this advertising.
Cash Management Notes
We maintain accounts that represent net amounts due to or from iHeartCommunications, which is 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 revolving promissory note issued by iHeartCommunications 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. On November 29, 2017, we amended the Due from iHeartCommunications Note to extend the maturity date to May 15, 2019 and to increase the interest rate from 6.5% to 9.3%. The accounts accrue interest pursuant to the terms of the promissory notes and are generally payable on demand or when they mature on May 15, 2019. Included in the accounts are the net activities resulting fromday-to-day cash management services provided by iHeartCommunications. Suchday-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 ournon-U.S. subsidiaries. At December 31, 2017, the asset recorded in “Due from iHeartCommunications” on our consolidated balance sheet was $212.0 million. At December 31, 2017, the principal amount outstanding under the Due from iHeartCommunications Note was $1,067.6 million. As a result of the iHeart Chapter 11 Cases (as defined below), we recognized a loss of $855.6 million on the Due from iHeartCommunications Note during the fourth quarter of 2017 to reflect the estimated recoverable amount of the note as of December 31, 2017, based on management’s best estimate of the cash settlement amount. As of December 31, 2017, we had no borrowings under the revolving promissory note to iHeartMedia.
At December 31, 2017, the fixed interest rate on the “Due from iHeartCommunications” account was 9.3%, 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 is variable, but in no event is less than 9.3% nor greater than 20%. The net interest income for the year ended December 31, 2017 was $68.9 million.
Pursuant to an order entered by the Bankruptcy Court (as defined below) in the iHeart Chapter 11 Cases, as of March 14, 2018, the balance of the Due from iHeartCommunications Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Due from iHeartCommunications Note are instead reflected in an intercompany balance that accrues interest at a rate equal to the interest under the Due from iHeart Communications Note. Our board of directors has established a special committee consisting of our independent directors to consider, review and negotiate certain transactions between iHeartCommunications and Clear Channel Outdoor Holdings in connection with the iHeart Chapter 11 Cases, and discussions regarding the outcome of the Due from iHeartCommunications Note are ongoing. On March 16, 2018, iHeartMedia and certain of its subsidiaries (collectively, the “Debtors”) and certain creditors and equity holders entered into a Restructuring Support Agreement (the “iHeart RSA”). The iHeart RSA contemplates that
our business will be separated from iHeartCommunications at the conclusion of the iHeart Chapter 11 Cases and that the Due from iHeartCommunications Note will receive treatment in a form and substance acceptable to the Debtors, to the Company and to certain consenting senior creditors of iHeartCommunications, which treatment will be set forth in a plan of reorganization and approved by the Bankruptcy Court. It is still early in the iHeart Chapter 11 Cases, and we cannot predict at this time the outcome of iHeartCommunications’ efforts to restructure its indebtedness.
On October 5, 2017 we made a demand for the repayment $25.0 million outstanding under the Due From iHeartCommunications Note and paid a special cash dividend to our stockholders of record at the close of business on October 2, 2017 in an aggregate amount equal to $25.0 million, or $0.0687 per share.
On October 11, 2017 we made a demand for the repayment of $25.0 million outstanding under the Due From iHeartCommunications Note and paid a special cash dividend to our stockholders of record at the close of business on October 26, 2017 in an aggregate amount equal to $25.0 million, or $0.0687 per share.
On January 24, 2018, we made a demand for the repayment of $30.0 million outstanding under the Due From iHeartCommunications Note and paid a special cash dividend to our stockholders of record at the close of business on January 19, 2018, in an aggregate amount equal to $30.0 million, or $0.0824 per share.
iHeartMedia Chapter 11 Proceedings
On March 14, 2018, iHeartMedia and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (the “iHeart Chapter 11 Cases”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). Clear Channel Outdoor and its direct and indirect subsidiaries did not file voluntary petitions for reorganization under the Bankruptcy Code and are not Debtors in the iHeart Chapter 11 cases. Pursuant to first day motions filed with the Bankruptcy Court, the Bankruptcy Court authorized iHeartMedia to continue to provide services to Clear Channel Outdoor in the ordinary course of business, including, among other things, with respect to the Corporate Services Agreement.
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 otherout-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% stockholders 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 2017, 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 four 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 $0.9 million by these entities and we paid approximately $0.8 million to these entities with respect to these 2017 transactions, including to entities in which THL directly or indirectly owns a greater than 10% equity interest that
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 $135,000.
POLICY ON REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS
We have adopted formal written policies and procedures for the review, 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 bepre-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 suchpre-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 until 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 consideration with respect to the approval of related party transactions is the overall fairness of the terms of the transaction to us. The related personparty transactions described abovebelow in this proxy statement were ratified or approved by the Audit Committee or Boarda special committee of the disinterested directors pursuant to these policies and procedures,procedures.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In Connection with the Separation
Following the separation of Clear Channel Outdoor from iHeartMedia, Inc. (“iHeartMedia”) on May 1, 2019 (the “Separation”), Clear Channel Outdoor and iHeartMedia operate separately, each as an independent public company. Prior to the extent required,Separation, Clear Channel Outdoor and iHeartMedia entered into several agreements to effect the Separation and provide a framework for Clear Channel Outdoor’s relationship with iHeartMedia after the Separation. These agreements, other than the New Tax Matters Agreement have terminated. The New Tax Matters Agreement allocates the responsibility of the iHeart Group, on the one hand, and the Outdoor Group, on the other hand, for the payment of taxes arising prior and subsequent to, and in connection with, the exceptionSeparation. The New Tax Matters Agreement continues and remains in full force and effect.
Other Transactions
Mr. Marchese, one 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 transactionsour directors, serves as a partner/co-founder of a similar nature to occurcompany that paid us approximately $321,021 during 2018.2021 for ordinary course outdoor advertising services.
| Notice and Proxy Statement 2022 69 |
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 of 1934, as amended, 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 performnon-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 Auditing Standard No. 1301, “Communications with Audit Committees” issued bythe applicable requirements of the Public Company Accounting Oversight Board.Board 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 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.
70 Notice and Proxy Statement 2022 | |
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 Form10-K for the year ended December 31, 2017,2021 for filing with the Securities and Exchange Commission.
Respectfully submitted, | ||
THE AUDIT COMMITTEE | ||
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The following fees for services provided by Ernst & Young LLP were incurred by Clear Channel Outdoor with respect to the years ended December 31, 20172021 and 2016:2020:
| Years Ended December 31, | Years Ended December 31, | |||||||||||||||
(In thousands) | 2017 | 2016 | 2021 | 2020 | ||||||||||||
Audit Fees(a) | $ | 6,336 | $ | 6,276 | $ | 5,826 | $ | 5,371 | ||||||||
Audit-Related Fees(b) | 74 | 73 | 202 | 77 | ||||||||||||
Tax Fees(c) | 1,836 | 1,260 | 2,154 | 2,501 | ||||||||||||
All Other Fees(d) | 3 | — | 8 | 17 | ||||||||||||
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Total Fees for Services | $8,249 | $ | 7,649 | $ | 8,190 | $ | 7,966 | |||||||||
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| (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. |
| (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 ofnon-audit services to Clear Channel Outdoor is compatible with maintaining Ernst & Young LLP’s independence.
The Audit Committeepre-approves all audit and permittednon-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 ofpre-approving permissiblenon-audit services, provided that the decision topre-approve any service is disclosed to the Audit Committee no later than its next scheduled meeting.
72 Notice and Proxy Statement 2022 | |
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 Securities 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 2022 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.
| Notice and Proxy Statement 2022 73 |
PROPOSAL 3: 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, 2018.2022.
Stockholder 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 stockholders 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 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 withoutre-submitting the matter to 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 stockholder 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 stockholders, 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, 2018.2022. Properly submitted proxies will be so voted unless stockholders specify otherwise.
74 Notice and Proxy Statement 2022 | |
STOCKHOLDER PROPOSALS FOR 20192023 ANNUAL MEETING
AND ADVANCE NOTICE PROCEDURES
Stockholders interested in submitting a proposal for inclusion in our proxy materials for the annual meeting of stockholders in 20192023 may do so by following the procedures prescribed in SEC Rule14a-8. To be eligible for inclusion, stockholder proposals must be received by the Secretary of Clear Channel Outdoor no later than January 17, 2019,November 23, 2022 and must otherwise comply with the SEC’s rules. Proposals should be sent to: Secretary, Clear Channel Outdoor Holdings, Inc., 20880 Stone Oak Parkway,4830 North Loop 1604W, Suite 111, San Antonio, Texas 78258.78249.
If you intend to present a proposal at the annual meeting of stockholders in 2019,2023, or if you want to nominate one or more directors at the annual meeting of stockholders in 2019,2023, you must comply with the advance notice provisions of Clear Channel Outdoor’s bylaws.By-laws. If 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 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 stockholders. This means that, for our 20192023 annual meeting, our Secretary must receive the notice no earlier than February 22, 2019January 4, 2023 and no later than March 24, 2019.February 3, 2023. You may contact our Secretary at the address set forth above for a copy of the relevant bylawBy-law provisions regarding the requirements for making stockholder proposals and nominating director candidates.
In addition, to comply with the universal proxy rules (once effective), stockholders who intend to solicit proxies in support of director nominees, other than the Company’s nominees, must give timely notice thereof in writing to the Secretary at the address set forth above, that sets forth the information required by Rule 14a-19 under the Exchange Act, no later than 60 days before the anniversary date of the immediately preceding annual meeting of stockholders. This means, that for our 2023 annual meeting, our Secretary must receive notice no later than March 5, 2023.
Neither Clear Channel Outdoor’s management nor the Board knows of any other business to be brought before the annual meeting other than the matters described above. If any other matters properly come before the 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.
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 $20,000, 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 stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as “householding,”“householding”, potentially provides extra convenience for stockholders and cost savings for companies. Clear Channel Outdoor and some brokers household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Once you have received notice from your broker or us that they or we will be householding materials to your address, 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, 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
| Notice and Proxy Statement 2022 75 |
us by sending a written request to Clear Channel Outdoor Holdings, Inc., Investor Relations, 20880 Stone Oak Parkway,4830 North Loop 1604W, Suite 111, San Antonio, Texas 7825878249 or by calling(210) 832-3700. Upon written or oral request, we will promptly deliver a separate copy of this proxy statement to a beneficial owner at a shared address to which a single copy of the proxy statement was delivered.
An electronic copy of Clear Channel Outdoor’s Annual Report on Form10-K filed with the SEC on May 3, 2018 and Amendment No. 1 on Form10-K/A filed with the SEC on May 11, 2018 areFebruary 24, 2022 is available free of charge at Clear Channel Outdoor’s website atwww.clearchanneloutdoor.comwww.investor.clearchannel.com. A paper copy of the Form10-K and Form10-K/Ais also are available without charge to stockholders upon written request to: Investor Relations, Clear Channel Outdoor Holdings, Inc., 20880 Stone Oak Parkway,4830 North Loop 1604W, Suite 111, San Antonio, Texas 78258.78249.
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, 2012 through December 31, 2017.
Indexed Yearly Stock Price Close
(Price Adjusted for Stock Splits and Dividends)
Source: FactSet Research Systems, Inc.; Bloomberg
| 12/31/2012 | 12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | |||||||||||||||||||
Clear Channel Outdoor Holdings | $ | 1,000 | $ | 1,444 | $ | 1,509 | $ | 796 | $ | 719 | $ | 655 | ||||||||||||
Outdoor Index* | $ | 1,000 | $ | 1,348 | $ | 1,047 | $ | 1,117 | $ | 1,219 | $ | 1,313 | ||||||||||||
S&P500 Index | $ | 1,000 | $ | 1,296 | $ | 1,444 | $ | 1,433 | $ | 1,570 | $ | 1,875 | ||||||||||||
Our Outdoor Index, which provides a peer comparison for our Outdoor business, 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”). Also includes Outfront Media, Inc., which began trading on March 28, 2014 pursuant to its IPO and spin off from CBS Corp. Outfront Media, Inc. began operating as a REIT in July 2014.
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 2017 revenue, respectively. As of December 31, 2017, our Americas segment consisted of operations primarily in the United States and Latin America and our International segment consisted of operations primarily in Europe and Asia. Beginning January 1, 2018, our Latin American operations will be included in our International segment.
We are a leading global outdoor advertising company providing clients with advertising opportunities through billboards, street furniture displays, transit displays and otherout-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 11 to our Consolidated Financial Statements located in Item 8 of Part II of the Annual Report onForm 10-K.
Americas Outdoor Advertising Sources of Revenue
Americas generated 48%, 48% and 48% of our revenue in 2017, 2016 and 2015, respectively. Americas revenue is derived from the sale of advertising copy placed on our printed and digital displays. Our display inventory consists primarily of billboards, transit displays and street furniture. 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 approximatelytwo-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, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Billboards: | ||||||||||||
Bulletins | 59 | % | 59 | % | 58 | % | ||||||
Posters | 10 | % | 10 | % | 12 | % | ||||||
Transit displays | 16 | % | 16 | % | 15 | % | ||||||
Street furniture displays | 7 | % | 7 | % | 6 | % | ||||||
Spectaculars/wallscapes | 4 | % | 4 | % | 5 | % | ||||||
Other | 4 | % | 4 | % | 4 | % | ||||||
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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 Outdoor Advertising Sources of Revenue
Our International segment generated 52%, 52% and 52% of our revenue in 2017, 2016 and 2015, respectively. Our International display inventory consists primarily of street furniture displays, billboards, transit displays and otherout-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, | ||||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Street furniture displays | 51 | % | 52 | % | 52 | % | ||||||
Billboards | 17 | % | 17 | % | 19 | % | ||||||
Transit displays | 11 | % | 10 | % | 9 | % | ||||||
Other(1) | 21 | % | 21 | % | 20 | % | ||||||
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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 147 stockholders of record as of April 24, 2018. 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 | |||||||||||||||
2017 | 2016 | |||||||||||||||||
First Quarter | $ | 6.20 | $ | 4.60 | First Quarter | $ | 4.71 | $ | 3.32 | |||||||||
Second Quarter | 6.00 | 3.55 | Second Quarter | 6.65 | 4.10 | |||||||||||||
Third Quarter | 5.20 | 3.85 | Third Quarter | 7.25 | 5.84 | |||||||||||||
Fourth Quarter | 4.80 | 3.80 | Fourth Quarter | 6.25 | 4.90 | |||||||||||||
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 April 24, 2018. iHeartCommunications indirectly holds all of the shares of Class B common stock outstanding and 10,726,917 shares of Class A common stock, representing 89.5% 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 aone-for-one basis, subject to certain limited exceptions.
Dividend Policy
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. 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. On February 23, 2017 we paid a special dividend in an amount equal to $0.7797 per share to the holders of our Class A and Class B common stock at the close of business on February 20, 2017. On October 5, 2017 we paid a special dividend in an amount equal to $0.0687 per share to the holders of our Class A and Class B common stock at the close of business on October 2, 2017. On October 31, 2017 we paid a special dividend in an amount equal to $0.0687 per share to the holders of our Class A and Class B common stock at the close of business on October 26, 2017. On January 24, 2018 we paid a special dividend in an amount equal to $0.0824 per share to the holders of our Class A and Class B common stock at the close of business on January 19, 2018.
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 thenon-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. Any payment pursuant to such demand would be subject to the approval of the Bankruptcy Court.
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 6 to the Consolidated Financial Statements in Item 8 of the Annual Report on Form10-K.
Sales of Unregistered Securities
We did not sell any equity securities during 2017 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, 2017 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) | Average Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||
October 1 through October 31 | 1,458 | $ | 4.30 | — | $ | — | ||||||||||
November 1 through November 30 | — | — | — | — | ||||||||||||
December 1 through December 31 | 9,145 | 3.98 | — | — | ||||||||||||
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Total | 10,603 | $ | 4.03 | — | $ | — | ||||||||||
The following tables set forth our selected historical consolidated financial and other data as of the dates and for the periods indicated. The selected historical financial data are derived from our audited consolidated financial statements. Certain prior period amounts have been reclassified to conform to the 2017 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 selected 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 onForm 10-K.
| (In thousands, except per share data) | For the Years Ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2015 | 2014 | 2013 | ||||||||||||||||
Results of Operations Data: | ||||||||||||||||||||
Revenue | $ | 2,591,265 | $ | 2,688,884 | $ | 2,806,204 | $ | 2,961,259 | $ | 2,946,190 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 1,402,765 | 1,422,058 | 1,494,902 | 1,596,888 | 1,594,728 | |||||||||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 508,637 | 515,202 | 531,504 | 548,519 | 543,572 | |||||||||||||||
Corporate expenses (excludes depreciation and amortization) | 143,678 | 117,436 | 116,523 | 131,008 | 124,483 | |||||||||||||||
Depreciation and amortization | 325,991 | 344,124 | 375,962 | 406,243 | 403,170 | |||||||||||||||
Impairment charges(1) | 4,159 | 7,274 | 21,631 | 3,530 | 13,150 | |||||||||||||||
Other operating income (expense), net | 26,391 | 354,688 | (4,824 | ) | 7,259 | 22,979 | ||||||||||||||
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Operating income | 232,426 | 637,478 | 260,858 | 282,330 | 290,066 | |||||||||||||||
Interest expense, net | 381,149 | 374,892 | 355,669 | 353,265 | 352,783 | |||||||||||||||
Interest income on Due from iHeartCommunications | 68,871 | 50,309 | 61,439 | 60,179 | 54,210 | |||||||||||||||
Loss on Due from iHeartCommunications | (855,648 | ) | — | — | — | — | ||||||||||||||
Gain (loss) on investments, net | (1,045 | ) | 531 | — | — | (18 | ) | |||||||||||||
Equity in earnings (loss) of nonconsolidated affiliates | (990 | ) | (1,689 | ) | (289 | ) | 3,789 | (2,092 | ) | |||||||||||
Other income (expense), net | 29,800 | (70,682 | ) | 12,387 | 15,185 | 1,016 | ||||||||||||||
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Income (loss) before income taxes | (907,735 | ) | 241,055 | (21,274 | ) | 8,218 | (9,601 | ) | ||||||||||||
Income tax benefit (expense) | 280,218 | (76,656 | ) | (49,943 | ) | 8,967 | (14,543 | ) | ||||||||||||
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Consolidated net income (loss) | (627,517 | ) | 164,399 | (71,217 | ) | 17,185 | (24,144 | ) | ||||||||||||
Less amount attributable to noncontrolling interest | 12,199 | 23,002 | 24,764 | 26,709 | 24,134 | |||||||||||||||
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Net income (loss) attributable to the Company | $ | (639,716 | ) | $ | 141,397 | $ | (95,981 | ) | $ | (9,524 | ) | $ | (48,278 | ) | ||||||
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Net income (loss) attributable to the Company per common share: | ||||||||||||||||||||
Basic | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | $ | (0.03 | ) | $ | (0.13 | ) | ||||||
Weighted average common shares | 361,141 | 360,294 | 359,508 | 358,565 | 357,662 | |||||||||||||||
Diluted | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | $ | (0.03 | ) | $ | (0.13 | ) | ||||||
Weighted average common shares | 361,141 | 361,612 | 359,508 | 358,565 | 357,662 | |||||||||||||||
| As of December 31, | ||||||||||||||||||||
| (In thousands) | 2017 | 2016 | 2015 | 2014 | 2013 | |||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||
Current assets | $ | 974,172 | $ | 1,341,435 | $ | 1,567,697 | $ | 1,056,030 | $ | 1,214,143 | ||||||||||
Property, plant and equipment, net | 1,395,029 | 1,412,833 | 1,627,986 | 1,905,651 | 2,081,098 | |||||||||||||||
Total assets | 4,670,782 | 5,718,828 | 6,306,788 | 6,296,630 | 6,685,069 | |||||||||||||||
Current liabilities | 657,512 | 641,718 | 920,613 | 717,829 | 773,590 | |||||||||||||||
Long-term debt, net of current maturities | 5,266,153 | 5,110,020 | 5,106,513 | 4,880,526 | 4,861,357 | |||||||||||||||
Stockholders’ equity (deficit) | (1,841,405 | ) | (930,926 | ) | (567,824 | ) | (139,332 | ) | 161,537 | |||||||||||
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 Form10-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, Equity in earnings (loss) of nonconsolidated affiliates, 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.
During the first quarter of 2018, we reevaluated our segment reporting and determined that our Latin America operations should be managed by our International outdoor leadership team. As such, beginning January 1, 2018, our Latin American operations will be included in our International outdoor segment. Certain prior period amounts have been reclassified to conform to the 2017 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 costs, electricity costs and the costs for cleaning and maintaining our displays. Vinyl 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 and Asia, 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 up 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.
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 2017 was 2.3%. 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 (collectively, the “Intercompany Agreements”). iHeartCommunications has the right to terminate these agreements in various circumstances. As of the date of the filing of the Annual Report onForm 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.
On March 14, 2018, iHeartMedia, the indirect parent of the Company which owns approximately 89.5% of the Company’s outstanding common stock, and certain of its subsidiaries (collectively, the “Debtors”), filed
voluntary petitions for reorganization (the “iHeart Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Company and its direct and indirect subsidiaries did not file voluntary petitions for reorganization under the Bankruptcy Code and are not Debtors in the iHeart Chapter 11 Cases.
Our board of directors has established a Special Committee to consider and review certain transactions between iHeartCommunications and us in connection with the iHeart Chapter 11 Cases. We have consented to, and the Bankruptcy Court has entered a final order approving, iHeartCommunications’ continuing to provide services pursuant to the Corporate Services Agreement during the iHeart Chapter 11 Cases. We expect iHeartCommunications to continue to provide services to us pursuant to the Corporate Services Agreement in the ordinary course of business, until it emerges from Chapter 11 or such arrangements are otherwise addressed through the iHeart Chapter 11 Cases.
On March 16, 2018, iHeartMedia and the other Debtors entered into a Restructuring Support Agreement (the “iHeart RSA”) with certain creditors and equityholders. The iHeart RSA contemplates that our business will be separated from iHeartCommunications at the conclusion of the iHeartMedia Chapter 11 Cases. The terms and conditions of the separation will be set forth in a plan of reorganization and approved by the Bankruptcy Court. While we cannot predict at this time the outcome of iHeartCommunications’ efforts to restructure its indebtedness, we currently expect that the plan of reorganization will provide for the termination, modification or replacement of the Intercompany Agreements.
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, 2017, 2016 and 2015, we recorded approximately $68.7 million, $36.0 million and $30.1 million, respectively, as a component of corporate expenses for these services.
The Trademark and License Agreement entitles us to use (1) on a nonexclusive basis, the “Clear Channel” trademark and the Clear Channel “outdoor” trademark logo with respect today-to-day operations of our business worldwide and on the Internet, and (2) certain other Clear Channel marks in connection with our business. On February 9, 2017, we entered into a binding option and letter of intent with iHeartMedia granting us a binding option to purchase at fair value the registered trademarks and domain names owned by iHeartMedia and its subsidiaries that incorporate one or more of the words “Clear” and/or “Channel,” and any translations or derivations of any of the foregoing, together with any goodwill associated therewith. This option is exercisable in our sole and absolute discretion at any time between February 23, 2018 and February 23, 2019. For the year ended December 31, 2017, management service expenses included $36.8 million pursuant to the Trademark License Agreement.
As of December 31, 2017, iHeartCommunications’ and its subsidiaries held 10,726,917 shares of the Company’s Class A common stock and all of the Company’s class B common stock, which represented 89.5% of the outstanding shares of the Company’s common stock on a fully-diluted basis.
Executive Summary
The key developments in our business for the year ended December 31, 2017 are summarized below:
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, 2017 to the year ended December 31, 2016 is as follows:
| Years Ended December 31, | % Change | |||||||||||
| (In thousands) | 2017 | 2016 | ||||||||||
Revenue | $ | 2,591,265 | $ | 2,688,884 | (3.6 | )% | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 1,402,765 | 1,422,058 | (1.4 | )% | ||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 508,637 | 515,202 | (1.3 | )% | ||||||||
Corporate expenses (excludes depreciation and amortization) | 143,678 | 117,436 | 22.3 | % | ||||||||
Depreciation and amortization | 325,991 | 344,124 | (5.3 | )% | ||||||||
Impairment charges | 4,159 | 7,274 | (42.8 | )% | ||||||||
Other operating income, net | 26,391 | 354,688 | (92.6 | )% | ||||||||
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Operating income | 232,426 | 637,478 | (63.5 | )% | ||||||||
Interest expense | 381,149 | 374,892 | ||||||||||
Interest income on Due from iHeartCommunications | 68,871 | 50,309 | ||||||||||
Loss on Due from iHeartCommunications | (855,648 | ) | — | |||||||||
Gain (loss) on investments, net | (1,045 | ) | 531 | |||||||||
Equity in loss of nonconsolidated affiliates | (990 | ) | (1,689 | ) | ||||||||
Other income (expense), net | 29,800 | (70,682 | ) | |||||||||
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Income (loss) before income taxes | (907,735 | ) | 241,055 | |||||||||
Income tax benefit (expense) | 280,218 | (76,656 | ) | |||||||||
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Consolidated net income (loss) | (627,517 | ) | 164,399 | |||||||||
Less amount attributable to noncontrolling interest | 12,199 | 23,002 | ||||||||||
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Net income (loss) attributable to the Company | $ | (639,716 | ) | $ | 141,397 | |||||||
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Consolidated Revenue
Consolidated revenue decreased $97.6 million during 2017 compared to 2016. Excluding an $8.6 million impact from movements in foreign exchange rates, consolidated revenue decreased $106.2 million during 2017 compared to 2016. The decrease in consolidated revenue is primarily due to the sales of our businesses in Australia and Turkey in 2016 and Canada in 2017, which generated revenue of $13.7 million and $149.4 million in the years ended December 31, 2017 and 2016, respectively. This decrease was partially offset by revenue growth in our International business as a result of new contracts and digital expansion.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses decreased $19.3 million during 2017 compared to 2016. Excluding the $4.0 million impact from movements in foreign exchange rates, consolidated direct operating expenses decreased $23.3 million during 2017 compared to 2016 due to the sales of our businesses in Australia and Turkey in 2016 and Canada in 2017. This decrease was partially offset by higher site lease expense related to new contracts.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses decreased $6.6 million during 2017 compared to 2016. Excluding the $2.8 million impact from movements in foreign exchange rates, consolidated SG&A expenses decreased
$9.4 million during 2017 compared to 2016. SG&A expenses were lower primarily due to the sales of our businesses in Australia and Turkey in 2016 and Canada in 2017.
Corporate Expenses
Corporate expenses increased $26.2 million during 2017 compared to 2016. Excluding the $1.4 million impact from movements in foreign exchange rates, corporate expenses increased $27.6 million during 2017 compared to 2016 primarily due to the $36.7 million trademark license fee paid to iHeartMedia, Inc. (see Note 6 to our Consolidated Financial Statements located in Part II of the Annual Report on Form10-K). The increase in Corporate expenses is partially offset by a decrease in executive and share-based compensation expense.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of $11.2 million and $13.0 million incurred in 2017 and 2016, respectively, 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 2017, $1.8 million are reported within direct operating expenses, $8.5 million are reported within SG&A and $0.9 million are reported within corporate expense. In 2016, such costs totaled $2.7 million, $7.7 million, and $2.6 million, respectively.
Depreciation and Amortization
Depreciation and amortization decreased $18.1 million during 2017 compared to 2016 primarily due to the sale of the Australia and Turkey businesses and assets becoming fully depreciated or fully amortized.
Impairment Charges
We perform our annual impairment test on our goodwill, billboard permits, and other intangible assets as of 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 2017, we recorded an impairment charge of $1.6 million during 2017 related to goodwill in one International business. In addition, the Company recognized an impairment of $2.6 million during 2017 in relation to advertising assets that were no longer usable in one country in our International segment. During 2016, we recognized a $7.3 million impairment related to goodwill in one International business. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of the Annual Report onForm 10-K for a further description of the impairment charges.
Other Operating Income, Net
Other operating income, net of $26.4 million in 2017 primarily related to the sale in the first quarter of 2017 of the Americas’ Indianapolis market in exchange for cash and certain assets in Atlanta, Georgia, resulting in a net gain of $28.9 million, and the $6.8 million gain recognized on the sale of our ownership interest in a joint venture in Belgium during the second quarter of 2017. These gains were partially offset by the $12.1 million loss on the sale in the third quarter 2017 of our Canada business.
Other operating income, net of $354.7 million in 2016 primarily related to the net gain of $278.3 million on sale of ninenon-strategic U.S. markets in the first quarter of 2016 and the net gain of $127.6 million on sale of our business in Australia in the fourth quarter of 2016, partially offset by the $56.6 million loss, which includes $32.2 million in cumulative translation adjustments, on the sale of our business in Turkey in the second quarter of 2016.
Interest Expense
Interest expense increased $6.3 million in 2017 compared to 2016, due primarily to new debt issuances.
Interest Income on Due From iHeartCommunications
The terms of the Due from iHeartCommunications Note provide that any balance above $1.0 billion continues to accrue interest at a rate of 20.0%, while the balance up to $1.0 billion accrues interest at a rate of 9.3% (prior to the amendment to the terms of the Due from iHeartCommunications note on November 29, 2017, the Note accrued interest at 6.5%). Interest income increased $18.6 million during 2017 compared to 2016, primarily due to a higher average outstanding balance on the Due from iHeartCommunications Note, including the impact of the amounts over $1.0 billion accruing interest at 20.0%.
Loss on Due from iHeartCommunications
Loss on Due from iHeartCommunications included the $855.6 million impairment of the Due from iHeartCommunications Note, which was recorded as a result of the Chapter 11 bankruptcy protection filed by iHeartCommunications.
Gain (loss) on Investments, net
Loss on investments, net was $1.0 million for 2017. Gain on investments, net was $0.5 million for 2016.
Equity in Loss of Nonconsolidated Affiliates
Equity in loss of nonconsolidated affiliates of $1.0 million and $1.7 million for 2017 and 2016, respectively, included the loss from our equity investments in our Americas and International segments.
Other Income (Expense), Net
Other income was $29.8 million for 2017. Other expense was $70.7 million for 2016. These amounts relate primarily to net foreign exchange gains and losses recognized in connection with intercompany notes denominated in foreign currencies.
Income Tax 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.
On December 22, 2017, the U.S. government enacted comprehensive income tax legislation, referred to as The Tax Cuts and Jobs Act (the Tax Act). The Tax Act reduces the U.S. federal corporate tax rate from 35% percent to 21% effective January 1, 2018, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new U.S. taxes on certain foreign earnings. To account for the reduction in the U.S. federal corporate income tax rate, we remeasured our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, generally 21% percent. To determine the impact from theone-time transition tax on accumulated foreign earnings, we analyzed our cumulative foreign earnings and profits in accordance with the rules provided in the Tax Act. Based upon our preliminary analysis which is not yet complete, we have not recorded income tax expense in the current period for theone-time transition tax due to the net accumulated deficit in our foreign earnings and profits.
The effective tax rate for 2017 was 30.9% and was primarily impacted by the $228.0 million provisional deferred tax benefit recorded in connection with the reduction of the U.S. federal corporate income tax rate to 21% upon enactment of the Tax Act mentioned above.
The effective tax rate for 2016 was 31.8% and was primarily impacted by the deferred tax benefits recorded in the current period for the release of valuation allowances in the U.S. and France. The release of the valuation allowance of $32.9 million in the U.S. was primarily due to the taxable income generated from the sale of ninenon-strategic U.S. outdoor markets during the first quarter of 2016 and the release of valuation allowance in France of $43.3 million was due to positive evidence that existed related to the Company’s ability to utilize certain net operating loss carryforwards in the future. The deferred tax benefits described above were partially offset by $54.7 million in tax expense attributable to the sale of our business in Australia during the period.
Americas Results of Operations
Our Americas operating results were as follows:
| (In thousands) | Years Ended December 31, | % Change | ||||||||||
| 2017 | 2016 | |||||||||||
Revenue | $ | 1,256,326 | $ | 1,278,413 | (1.7 | )% | ||||||
Direct operating expenses | 574,113 | 570,310 | 0.7 | % | ||||||||
SG&A expenses | 219,467 | 225,415 | (2.6 | )% | ||||||||
Depreciation and amortization | 189,707 | 185,654 | 2.2 | % | ||||||||
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Operating income | $ | 273,039 | $ | 297,034 | (8.1 | )% | ||||||
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Americas revenue decreased $22.1 million during 2017 compared to 2016. Excluding the $3.8 million impact from movements in foreign exchange rates, Americas revenue decreased $25.9 million during 2017 compared to 2016. The decrease in revenue was primarily due to the $17.9 million impact resulting from the sales ofnon-strategic outdoor markets during the first quarter of 2016 and our Canadian business in the third quarter of 2017. The impact of exchanging our Indianapolis market for cash and assets in Atlanta in the first quarter of 2017 also contributed to the decrease in revenue. These decreases were partially offset by higher revenue from new and existing airport contracts.
Americas direct operating expenses increased $3.8 million during 2017 compared to 2016. Excluding the $1.9 million impact from movements in foreign exchange rates, Americas direct operating expenses increased $1.9 million during 2017 compared to 2016. The increase in direct operating expenses was driven primarily by higher site lease expenses related to new and existing airport contracts and print displays, partially offset by the $13.2 million decrease in expense due to the impact of the sales ofnon-strategic outdoor markets during the first quarter of 2016 and our Canadian business in the third quarter of 2017. Americas SG&A expenses decreased $5.9 million during 2017 compared to 2016. Excluding the $1.0 million impact from movements in foreign exchange rates, Americas SG&A expenses decreased $6.9 million during 2017 compared to 2016. The decrease in SG&A expenses was primarily due to lower bad debt expense and the $2.5 million impact resulting from the sales ofnon-strategic outdoor markets in the first quarter of 2016 and the sale of our Canadian business in the third quarter of 2017, and the exchange of outdoor markets in the first quarter of 2017.
International Results of Operations
Our International operating results were as follows:
| (In thousands) | Years Ended December 31, | % Change | ||||||||||
| 2017 | 2016 | |||||||||||
Revenue | $ | 1,334,939 | $ | 1,410,471 | (5.4 | )% | ||||||
Direct operating expenses | 828,652 | 851,748 | (2.7 | )% | ||||||||
SG&A expenses | 289,170 | 289,787 | (0.2 | )% | ||||||||
Depreciation and amortization | 131,224 | 152,758 | (14.1 | )% | ||||||||
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Operating income | $ | 85,893 | $ | 116,178 | (26.1 | )% | ||||||
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International revenue decreased $75.5 million during 2017 compared to 2016. Excluding the $4.9 million impact from movements in foreign exchange rates, International revenue decreased $80.4 million during 2017 compared to 2016. The decrease in revenue is due to a $117.8 million decrease in revenue resulting from the sale of our businesses in Australia and Turkey in 2016. This was partially offset by growth across other markets including Spain, the United Kingdom, Switzerland and China, primarily from new contracts and digital expansion.
International direct operating expenses decreased $23.1 million during 2017 compared to 2016. Excluding the $2.0 million impact from movements in foreign exchange rates, International direct operating expenses decreased $25.1 million during 2017 compared to 2016. The decrease was driven by a $70.3 million decrease in direct operating expenses resulting from the 2016 sales of our businesses in Australia and Turkey, partially offset by higher site lease and production expenses primarily in countries experiencing revenue growth. International SG&A expenses decreased $0.6 million during 2017 compared to 2016. Excluding the $1.7 million impact from movements in foreign exchange rates, International SG&A expenses decreased $2.3 million during 2017 compared to 2016. The decrease in SG&A expenses was primarily due to a $22.6 million decrease resulting from the sale of our businesses in Australia and Turkey, partially offset by higher spending related to growth in certain countries. Included within SG&A expenses is $9.6 million recorded in the fourth quarter of 2017 to correct for accounting errors related to the misappropriation of cash identified at our China subsidiary. Such corrections are not considered to be material to the current year or prior year financial results.
Depreciation and amortization decreased $21.5 million primarily due to the sale of our businesses in Australia and Turkey in 2016 and assets becoming fully depreciated or fully amortized.
Consolidated Results of Operations
The comparison of our historical results of operations for the year ended December 31, 2016 to the year ended December 31, 2015 is as follows:
| Years Ended December 31, | % Change | |||||||||||
| (In thousands) | 2016 | 2015 | ||||||||||
Revenue | $ | 2,688,884 | $ | 2,806,204 | (4.2 | )% | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 1,422,058 | 1,494,902 | (4.9 | )% | ||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 515,202 | 531,504 | (3.1 | )% | ||||||||
Corporate expenses (excludes depreciation and amortization) | 117,436 | 116,523 | 0.8 | % | ||||||||
Depreciation and amortization | 344,124 | 375,962 | (8.5 | )% | ||||||||
Impairment charges | 7,274 | 21,631 | (66.4 | )% | ||||||||
Other operating (expense) income, net | 354,688 | (4,824 | ) | (7,452.6 | )% | |||||||
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Operating income | 637,478 | 260,858 | 144.4 | % | ||||||||
Interest expense | 374,892 | 355,669 | ||||||||||
Interest income on Due from iHeartCommunications | 50,309 | 61,439 | ||||||||||
Loss on investments, net | 531 | — | ||||||||||
Equity in earnings (loss) of nonconsolidated affiliates | (1,689 | ) | (289 | ) | ||||||||
Other income, net | (70,682 | ) | 12,387 | |||||||||
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Income (loss) before income taxes | 241,055 | (21,274 | ) | |||||||||
Income tax benefit (expense) | (76,656 | ) | (49,943 | ) | ||||||||
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Consolidated loss | 164,399 | (71,217 | ) | |||||||||
Less amount attributable to noncontrolling interest | 23,002 | 24,764 | ||||||||||
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Net loss attributable to the Company | $ | 141,397 | $ | (95,981 | ) | |||||||
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Consolidated Revenue
Consolidated revenue decreased $117.3 million during 2016 compared to 2015. Excluding a $47.6 million impact from movements in foreign exchange rates, consolidated revenue decreased $69.7 million during 2016 compared to 2015. The decrease in consolidated revenue is primarily due to the sale of certain U.S. markets and International businesses which generated $248.9 million in revenue in 2015 and $123.5 million in 2016. This decrease was partially offset by revenues from new digital assets and new contracts.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses decreased $72.8 million during 2016 compared to 2015. Excluding the $29.0 million impact from movements in foreign exchange rates, consolidated direct operating expenses decreased $43.8 million during 2016 compared to 2015. Lower direct operating expenses was primarily due to the sale of certain U.S. markets and International businesses.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses decreased $16.3 million during 2016 compared to 2015. Excluding the $9.9 million impact from movements in foreign exchange rates, consolidated SG&A expenses decreased $6.4 million during 2016 compared to 2015. SG&A expenses were lower primarily due to the sale of ninenon-strategic U.S. markets in the first quarter of 2016, and were partially offset by higher variable compensation expenses.
Corporate Expenses
Corporate expenses increased $0.9 million during 2016 compared to 2015. Excluding the $4.1 million impact from movements in foreign exchange rates, corporate expenses increased $5.0 million during 2016 compared to 2015 primarily resulting from higher litigation costs and higher expenses related tonon-cash compensation plans.
Revenue and Efficiency Initiatives
Included in the amounts for direct operating expenses, SG&A and corporate expenses discussed above are expenses of $13.0 million and $20.3 million incurred in 2016 and 2015, respectively, 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 2016, $2.7 million are reported within direct operating expenses, $7.8 million are reported within SG&A and $2.5 million are reported within corporate expense. In 2015, such costs totaled $9.2 million, $4.3 million, and $6.8 million, respectively.
Depreciation and Amortization
Depreciation and amortization decreased $31.8 million during 2016 compared to 2015 primarily due to assets becoming fully depreciated or fully amortized, the sale of certain U.S. markets and International businesses, as well as the impact of movements in foreign exchange rates.
Impairment Charges
We perform our annual impairment test on our goodwill, billboard permits, and other intangible assets as of 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 2016, we recorded an impairment charge of $7.3 million during 2016 related to goodwill in one International business. During 2015, we recognized a $21.6 million impairment charge related to billboard permits in one Americas market. Please see Note 2 to the consolidated financial statements included in Item 8 of Part II of the Annual Report onForm 10-K for a further description of the impairment charges.
Other Operating Income (Expense), Net
Other operating income, net of $354.7 million in 2016 primarily related to the net gain of $278.3 million on sale of ninenon-strategic markets in the first quarter of 2016 and the net gain of $127.6 million on sale on our business in Australia in the fourth quarter of 2016, partially offset by the $56.6 million loss, which includes $32.2 million in cumulative translation adjustments, on the sale of our business in Turkey in the second quarter of 2016. In the first quarter of 2016, Americas sold ninenon-strategic markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for net proceeds of $592.3 million in cash and certain advertising assets in Florida.
Other operating expense, net of $4.8 million in 2015 primarily related to acquisition/disposition transaction costs.
Interest Expense
Interest expense increased $19.2 million in 2016 compared to 2015, primarily due to the issuance by Clear Channel International B.V. of its 8.75% Senior Notes due 2020 during the fourth quarter of 2015.
Interest Income on Due From iHeartCommunications
Interest income decreased $11.1 million during 2016 compared to 2015 due to the decrease in the average outstanding balance on the Due from iHeartCommunications note.
Equity in Loss of Nonconsolidated Affiliates
Equity in loss of nonconsolidated affiliates of $1.7 million and $0.3 million for 2016 and 2015, respectively, included the loss from our equity investments in our Americas and International segments.
Other Income (Expense), Net
Other expense was $70.2 million for 2016. Other income was $12.4 million for 2015. These amounts relate primarily to net foreign exchange gains and losses recognized in connection with intercompany notes denominated in foreign currencies. The decline in value during 2016 of the British pound against the Euro impacted Euro-denominated notes payable by one of our UK subsidiaries, which was the primary driver of the foreign exchange loss in 2016.
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 2016 was 31.8% and was primarily impacted by the deferred tax benefits recorded in the current period for the release of valuation allowances in the U.S. and France. The release of the valuation allowance of $32.9 million in the U.S. was primarily due to the taxable income generated from the sale of nine
non-strategic U.S. outdoor markets during the first quarter of 2016 and the release of valuation allowance in France of $43.3 million was due to positive evidence that existed related to the Company’s ability to utilize certain net operating loss carryforwards in the future. The deferred tax benefits described above were partially offset by $54.7 million in tax expense attributable to the sale of our business in Australia during the period.
The effective tax rate for 2015 was (234.7)% 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.
Americas Results of Operations
Our Americas operating results were as follows:
| Years Ended December 31, | % Change | |||||||||||
| (In thousands) | 2016 | 2015 | ||||||||||
Revenue | $ | 1,278,413 | $ | 1,349,021 | (5.2 | )% | ||||||
Direct operating expenses | 570,310 | 597,382 | (4.5 | )% | ||||||||
SG&A expenses | 225,415 | 233,254 | (3.4 | )% | ||||||||
Depreciation and amortization | 185,654 | 204,514 | (9.2 | )% | ||||||||
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Operating income | $ | 297,034 | $ | 313,871 | (5.4 | )% | ||||||
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Americas revenue decreased $70.6 million during 2016 compared to 2015. Excluding the $7.7 million impact from movements in foreign exchange rates, Americas revenue decreased $62.9 million during 2016 compared to 2015. The decrease in revenue is due to the $102.7 million impact of the sale of ninenon-strategic U.S. markets in the first quarter of 2016. The decrease in revenue resulting from these sales was partially offset by increased revenues from digital billboards from new deployments and higher occupancy on existing digital billboards, as well as new airport contracts, and higher revenues in Latin America.
Americas direct operating expenses decreased $27.1 million during 2016 compared to 2015. Excluding the $3.6 million impact from movements in foreign exchange rates, Americas direct operating expenses decreased $23.5 million during 2016 compared to 2015. The decrease in direct operating expenses was driven by a $35.4 million decrease in direct operating expenses resulting from the sale of the ninenon-strategic markets in the first quarter of 2016, partially offset by higher site lease expenses related to new airport contracts. Americas SG&A expenses decreased $7.8 million during 2016 compared to 2015. Excluding the $2.1 million impact from movements in foreign exchange rates, Americas SG&A expenses decreased $5.7 million during 2016 compared to 2015. This decrease was due to a $20.4 million decrease in SG&A expenses resulting from the sale of the ninenon-strategic U.S. markets in the first quarter of 2016, partially offset by higher variable compensation expense related to higher revenues.
Depreciation and amortization decreased $18.9 million. Excluding the $0.8 million impact from movements in foreign exchange rates, depreciation and amortization decreased $18.1 million primarily due to the sale of the ninenon-strategic U.S. markets in the first quarter of 2016 and assets becoming fully depreciated or fully amortized.
International Results of Operations
Our International operating results were as follows:
| Years Ended December 31, | % Change | |||||||||||
| (In thousands) | 2016 | 2015 | ||||||||||
Revenue | $ | 1,410,471 | $ | 1,457,183 | (3.2 | )% | ||||||
Direct operating expenses | 851,748 | 897,520 | (5.1 | )% | ||||||||
SG&A expenses | 289,787 | 298,250 | (2.8 | )% | ||||||||
Depreciation and amortization | 152,758 | 166,060 | (8.0 | )% | ||||||||
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Operating income | $ | 116,178 | $ | 95,353 | 21.8 | % | ||||||
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International revenue decreased $46.7 million during 2016 compared to 2015. Excluding the $39.9 million impact from movements in foreign exchange rates, International revenue decreased $6.8 million during 2016 compared to 2015. The decrease in revenue is due to a $22.7 million decrease in revenue resulting from the sale of our businesses in Turkey and Australia in the second and fourth quarters of 2016, respectively, as well as lower revenue in the United Kingdom as a result of the London bus shelter contract not being renewed. These decreases were partially offset by growth across most of our markets including China, Spain, Sweden, France and Belgium, primarily from new digital assets and new contracts.
International direct operating expenses decreased $45.8 million during 2016 compared to 2015. Excluding the $25.4 million impact from movements in foreign exchange rates, International direct operating expenses decreased $20.4 million during 2016 compared to 2015. The decrease was driven by a $14.6 million decrease in direct operating expenses resulting from the sale of our businesses in Turkey and Australia and lower rent expense due to lower revenue in the United Kingdom as a result of the London bus shelter contract not being renewed. These decreases were partially offset by higher site lease and production expenses in countries experiencing revenue growth. International SG&A expenses decreased $8.5 million during 2016 compared to 2015. Excluding the $7.8 million impact from movements in foreign exchange rates, International SG&A expenses decreased $0.7 million during 2016 compared to 2015. The decrease in SG&A expenses was primarily due to a $3.0 million decrease resulting from the sale of our businesses in Turkey and Australia, partially offset by higher variable compensation expenses.
Included in 2015 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 of our Netherlands subsidiary reported in prior years. Such corrections are not considered to be material to the prior year financial results.
Depreciation and amortization decreased $13.3 million. Excluding the $5.5 million impact from movements in foreign exchange rates, depreciation and amortization decreased $7.8 million primarily due to assets becoming fully depreciated or fully amortized.
Reconciliation of Segment Operating Income to Consolidated Operating Income
| (In thousands) | Years Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Americas | $ | 273,039 | 297,034 | 313,871 | ||||||||
International | 85,893 | 116,178 | 95,353 | |||||||||
Impairment charges | (4,159 | ) | (7,274 | ) | (21,631 | ) | ||||||
Corporate and other(1) | (148,738 | ) | (123,148 | ) | (121,911 | ) | ||||||
Other operating income (expense), net | 26,391 | 354,688 | (4,824 | ) | ||||||||
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Consolidated operating income | $ | 232,426 | $ | 637,478 | $ | 260,858 | ||||||
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Share-Based Compensation Expense
As of December 31, 2017, there was $13.0 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.
Share-based compensation expenses are recorded in corporate expenses and were $9.6 million, $10.3 million and $8.5 million for the years ended December 31, 2017, 2016 and 2015, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the years ended December 31, 2017, 2016 and 2015.
| (In thousands) | Years Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Cash provided by (used for): | ||||||||||||
Operating activities | $ | 147,588 | $ | 310,293 | $ | 298,933 | ||||||
Investing activities | $ | (175,901 | ) | $ | 551,499 | $ | (257,725 | ) | ||||
Financing activities | $ | (379,513 | ) | $ | (726,499 | ) | $ | 199,054 | ||||
Operating Activities
2017
Cash provided by operating activities was $147.6 million in 2017 compared to $310.3 million of cash provided in 2016. Our consolidated net loss included $840.0 million ofnon-cash items in 2017. Our consolidated net income in 2016 included $121.4 million ofnon-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, loss on Due from iHeartCommunications, (gain) loss on investments, equity in loss of nonconsolidated affiliates 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 lower operating income as well as changes in working capital balances, particularly accounts receivable at our International business, which was impacted by slower collections.
2016
Cash provided by operating activities was $310.3 million in 2016 compared to $298.9 million of cash provided in 2015. Our consolidated net income included $121.4 million ofnon-cash items in 2016. Our consolidated net loss in 2015 included $412.9 million ofnon-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, equity in (earnings) loss of nonconsolidated affiliates and other reconciling items, net as presented on the face of the consolidated statement of cash flows. The increase in cash provided by operating activities is primarily attributed to changes in working capital balances, particularly accounts receivable, which was driven primarily by lower revenues and improved collections, partially offset by an increase in cash paid for interest.
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 $412.9 million of netnon-cash items in 2015. Our
consolidated net loss in 2014 included $373.6 million of netnon-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 accounts receivable.
Investing Activities
2017
Cash used for investing activities of $175.9 million during 2017 reflected our capital expenditures of $224.2 million. We spent $74.6 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $146.4 million in our International segment primarily related to street furniture advertising and digital billboard structures, and $3.2 million by Corporate primarily related to equipment and software. This cash usage was partially offset by $72.0 million of net cash proceeds from the disposals of assets.
2016
Cash provided by investing activities of $551.5 million during 2016 primarily reflected $592.3 million of net cash proceeds from the sale of ninenon-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, and the sale of our business in Australia for $195.7 million, net of cash retained by the purchaser and closing costs. Those sale proceeds were partially offset by $229.8 million used for capital expenditures. We spent $81.4 million in our Americas segment primarily related to the construction of new advertising structures such as digital displays, $143.8 million in our International segment primarily related to street furniture advertising structures, and $4.6 million by Corporate primarily related to equipment and software.
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.
Financing Activities
2017
Cash used for financing activities of $379.5 million during 2017 primarily reflected cash dividends paid in the aggregate amount of $332.8 million and net transfers of $181.9 million in cash to iHeartCommunications, which represents the activity in the “Due from iHeartCommunications” account, partially offset by proceeds from the issuance by CCIBV of $150.0 million of additional 8.75% Senior Notes due 2020, which were issued at a premium, resulting in $156.0 million in proceeds.
2016
Cash used for financing activities of $726.5 million during 2016 primarily reflected two cash dividends paid in the aggregate amount of $755.5 million, partially offset by net transfers of $45.1 million in cash from iHeartCommunications, which represents the activity in the “Due from iHeartCommunications” account.
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 was reflected as cash used for financing activities in the first quarter of 2016.
Anticipated Cash Requirements
Our primary sources of liquidity are cash on hand, cash flow from operations, cash from the intercompany arrangement with iHeartComunications described below and our senior revolving credit facility. As of December 31, 2017, we had $144.1 million of cash on our balance sheet, including $119.0 million of cash held outside the U.S. by our subsidiaries, a portion of which is held bynon-wholly owned subsidiaries or is otherwise subject to certain restrictions and not readily accessible to us. Excess cash from our foreign operations may be transferred to our operations in the United States if needed to fund operations in the United States, subject to the foreseeable cash needs of our foreign operations and the mutual agreement of iHeartCommunications and us. 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 as 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 asnon-taxable returns of capital. Additionally, as a result of U.S. tax reform, future dividend distributions from our international subsidiaries are exempt from U.S. federal income tax beginning January 1, 2018.
Our primary uses of liquidity are for our working capital, capital expenditure, debt service, dividends 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, cash from the intercompany arrangement with iHeartCommunications described below and borrowing capacity under our senior revolving credit facility will enable us to meet our working capital, capital expenditure, debt service, dividends 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, special dividend 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.
During the fourth quarter of 2016, we sold our business in Australia for cash proceeds of $195.7 million, net of cash retained by the purchaser and closing costs. In January 2017, we sold our Indianapolis, Indiana outdoor market in exchange for certain assets in Atlanta, Georgia, plus approximately $43.1 million in cash, net of closing costs. On February 23, 2017, we paid a special cash dividend to our stockholders of $282.5 million using proceeds from the sales of certainnon-strategic U.S. markets and of our business in Australia. iHeartCommunications received 89.9% or approximately $254.0 million, of the dividend, with the remaining 10.1%, or approximately $28.5 million, paid to our public stockholders. On August 14, 2017, CCIBV, our indirect subsidiary, issued $150.0 million in aggregate principal amount of 8.75% Senior Notes due 2020, as additional notes under the indenture governing CCIBV’s existing 8.75% Senior Notes due 2020. Partially as a result of these transactions, our cash flows from operations have decreased due to lower revenues and higher
interest expense. On October 5, 2017, we made a demand for repayment of $25.0 million outstanding under the Due from iHeartCommunications Note and simultaneously paid a special cash dividend of $25.0 million. iHeartCommunications received approximately 89.5%, or approximately $22.4 million, of the proceeds of the dividend through its wholly-owned subsidiaries, with the remaining approximately 10.5%, or approximately $2.6 million, of the proceeds of the dividend paid to our public stockholders. On October 31, 2017, we made a demand for repayment of $25.0 million outstanding under the Due from iHeartCommunications Note and simultaneously paid a special cash dividend of $25.0 million. iHeartCommunications received approximately 89.5%, or approximately $22.4 million, of the proceeds of the dividend through its wholly-owned subsidiaries, with the remaining approximately 10.5%, or approximately $2.6 million, of the proceeds of the dividend paid to our public stockholders. On January 24, 2018, we made a demand for repayment of $30.0 million outstanding under the Due from iHeartCommunications Note and simultaneously paid a special cash dividend of $30.0 million. iHeartCommunications received approximately 89.5%, or approximately $26.8 million, of the proceeds of the dividend through its wholly-owned subsidiaries, with the remaining approximately 10.5%, or approximately $3.2 million, of the proceeds of the dividend paid to our public stockholders. The payment of these special dividends reduces the amount of cash available to us for future working capital, capital expenditure, debt service and other funding requirements. Future special cash dividends will be dependent upon, among other things, our having sufficient available cash.
Historically, repayments of amounts outstanding under the Due from iHeartCommunications Note has been a source of liquidity for us. On March 14, 2018, iHeartMedia, iHeartCommunications and certain of iHeartMedia’s direct and indirect domestic subsidiaries, not including the Company or any of its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. It is still early in the iHeart Chapter 11 Cases, and we cannot predict at this time the outcome of iHeartCommunications’ efforts to restructure its indebtedness. As an unsecured creditor of iHeartCommunications, we do not expect that we will be able to recover all of the amounts owed to us under the Due from iHeartCommunications Note upon the implementation of any plan of reorganization that is ultimately accepted by the requisite creditors and approved by the Bankruptcy Court. Consequently, the amounts owed under the Due from iHeartCommunications Note may not continue to be a source of liquidity for us in the future.
The settlement of the Due from iHeartCommunications Note is expected to be addressed in the plan of reorganization in the iHeart Chapter 11 Cases. See “—Promissory Notes with iHeartCommunications.”
iHeartCommunications provides theday-to-day cash management services for our cash activities and balances in the U.S. We do not have any material committed external sources of capital other than iHeartCommunications, and iHeartCommunications is not required to provide us with funds to finance our working capital or other cash requirements. We have no access to the cash transferred from us to iHeartCommunications under the cash management arrangement. As of December 31, 2017, iHeartCommunications had $267.1 million recorded as “Cash and cash equivalents” on its consolidated balance sheets, of which $144.1 million was held by us and our subsidiaries. Pursuant to a final order entered by the Bankruptcy Court, as of March 14, 2018, the actual pre-iHeart bankruptcy balance of the Due from iHeartCommunications Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Due from iHeartCommunications Note are instead reflected in a new intercompany balance that accrues interest at a rate equal to the interest under the Due from iHeart Communications Note. As a result, iHeartCommunications is continuing to provide theday-to-day cash management services for us during the iHeart Chapter 11 Cases and we expect it to continue to do so until such arrangements are addressed through the iHeart Chapter 11 Cases. We are an unsecured creditor of iHeartCommunications with respect to amounts owed under the Due from iHeartCommunications Note. It is still early in the iHeart Chapter 11 Cases, and we cannot predict at this time the outcome of iHeartCommunications’ efforts to restructure its indebtedness. We do not expect to recover all of the amounts owed to us under the Due from iHeartCommunications Note upon the implementation of any plan of reorganization that is ultimately accepted by the requisite majority of creditors and approved by the Bankruptcy Court. If we do not recognize the
expected recovery under the Due from iHeartCommunications Note, or if we cannot generate sufficient liquidity from our operations or other sources on a timely basis, we could experience a liquidity shortfall. In addition, any repayments that we received on the Due from iHeartCommunications Note during theone-year preference period prior to the filing of the iHeart Chapter 11 Cases may potentially be avoidable as a preference and subject to recovery by the iHeartCommunications bankruptcy estate, which could further exacerbate any liquidity shortfall.
We were in compliance with the covenants contained in our material financing agreements as of December 31, 2017. 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.
On August 14, 2017, CCIBV, our indirect subsidiary, issued an additional $150.0 million in aggregate principal amount of its 8.75% Senior Notes due 2020 (the “New CCIBV Notes”). The New CCIBV Notes were issued as additional notes under the indenture governing CCIBV’s existing 8.75% Senior Notes due 2020 and were issued at a premium, resulting in $156.0 million in proceeds. The New CCIBV 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.
We frequently evaluate strategic opportunities both within and outside our existing lines of business. We expect from time to time to dispose of certain businesses and may pursue acquisitions. These dispositions or acquisitions could be material.
Sources of Capital
As of December 31, 2017 and 2016, we had the following debt outstanding, cash and cash equivalents and amounts due from iHeartCommunications:
| December 31, | ||||||||
| (In millions) | 2017 | 2016 | ||||||
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 (1) | — | — | ||||||
Clear Channel International B.V. Senior Notes due 2020 | 375.0 | 225.0 | ||||||
Other debt | 2.4 | 14.8 | ||||||
Original issue discount | (0.2 | ) | (6.7 | ) | ||||
Long-term debt fees | (35.5 | ) | (41.1 | ) | ||||
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Total debt | 5,266.7 | 5,117.0 | ||||||
Less: Cash and cash equivalents | 144.1 | 542.0 | ||||||
Less: Due from iHeartCommunications | 212.0 | 885.7 | ||||||
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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 iHeartCommunications” on our consolidated balance sheets. On November 29, 2017, we amended
the Due from iHeartCommunications Note to extend the maturity date to May 15, 2019 and to increase the interest rate from 6.5% to 9.3%. The accounts represent our revolving promissory note issued by us to iHeartCommunications and the revolving promissory note issued by iHeartCommunications to us, 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 May 15, 2019. Included in the accounts are the net activities resulting fromday-to-day cash management services provided by iHeartCommunications. Suchday-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 ournon-U.S. subsidiaries. As of December 31, 2017 and December 31, 2016, the asset recorded in “Due from iHeartCommunications” on our consolidated balance sheet was $212.0 million and $885.7 million, respectively. At December 31, 2017, the principal amount outstanding under the Due from iHeartCommunications Note was $1,067.6 million. As a result of the iHeart Chapter 11 Cases, CCOH recognized a loss of $855.6 million on the Due from iHeartCommunications Note during the fourth quarter of 2017 to reflect the estimated recoverable amount of the note as of December 31, 2017, based on management’s best estimate of the cash settlement amount. As of December 31, 2017, we had no borrowings under the revolving promissory 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, 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 thenon-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. As of May 3, 2018, the committee has the right pursuant to the terms of the settlement of the derivative litigation filed by our stockholders regarding the Due from iHeartCommunications Note but not the obligation, to make a demand on the Due from iHeartCommunications Note; however, as described below, the balance of the Due from iHeartCommunications Note is currently frozen and any payment pursuant to such demand would be subject to the approval of the bankruptcy court.
Pursuant to an order entered by the Bankruptcy Court, as of March 14, 2018, the balance of the Due from iHeartCommunications Note is frozen, and following March 14, 2018, intercompany allocations that would have been reflected in adjustments to the balance of the Due from iHeartCommunications Note are instead reflected in an intercompany balance that accrues interest at a rate equal to the interest under the Due from iHeart Communications Note. Our board of directors has established a special committee consisting of our independent directors (the “Special Committee”) to consider, review and negotiate certain transactions between iHeartCommunications and CCOH in connection with the iHeart Chapter 11 Cases, and discussions regarding the outcome of the Due from iHeartCommunications Note are ongoing. On March 16, 2018, iHeartMedia and the other Debtors and certain creditors and equity holders entered into the iHeart RSA. The iHeart RSA contemplates that our business will be separated from iHeartCommunications at the conclusion of the iHeart Chapter 11 Cases and that the Due from iHeartCommunications Note will receive treatment in a form and substance acceptable to the Debtors, to the Company and to certain consenting senior creditors of iHeartCommunications, which treatment will be set forth in a plan of reorganization and approved by the Bankruptcy Court. It is still early in the iHeart Chapter 11 Cases, and we cannot predict at this time the outcome of iHeartCommunications’ efforts to restructure its indebtedness. As an unsecured creditor of iHeartCommunications, we do not expect that we will be able to recover all of the amounts owed to us under the Due from iHeartCommunications Note upon the implementation of any plan of reorganization that is ultimately accepted by the requisite majority of creditors and approved by the Bankruptcy Court. As a result, we recognized a loss of $855.6 million on the Due from iHeartCommunications Note during the fourth quarter of 2017 to reflect the estimated recoverable amount of the note as of December 31, 2017, based on management’s best estimate of the cash settlement amount.
Consequently, we may not have the “Due from iHeartCommunications” asset available to us in the future 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, 2017, 2016 and 2015 was $68.9 million, $50.3 million and $61.4 million, respectively. As noted above, on November 29, 2017, the “Due from iHeartCommunications” account was amended to extend its maturity from December 15, 2017 to May 15, 2019. The note’s interest rate was also amended and increased from 6.5% to 9.3%. Any balance above $1.0 billion continues to accrue interest capped at a rate of 20.0%, while the balance up to $1.0 billion will accrue interest at a rate of 9.3%.
If we are unable to obtain financing from iHeartCommunications under the intercompany arrangement or pursuant to any recoveries of the Due from iHeartCommunications Note in the Chapter 11 Cases, 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. We may be unable to successfully obtain additional debt or equity financing on satisfactory terms or at all.
As long as the Master Agreement continues to govern the relationship 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, 2017, CCWH senior notes represented $2.7 billion aggregate principal amount of indebtedness outstanding, which consisted of $735.8 million aggregate principal amount of Series A Senior Notes due 2022 (the “Series A CCWH Senior Notes”) and $1,989.2 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.
CCWH may redeem the CCWH Senior Notes, in whole or in part at the redemption prices set forth in the applicable indenture governing the CCWH Senior Notes plus accrued and unpaid interest to the redemption date. 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:
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:
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 excess proceeds from asset sales after making an asset sale offer 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. Because our consolidated leverage ratio exceeded the limit in the incurrence tests described above, we are not currently permitted to incur additional indebtedness using the incurrence test in the Series A CCWH Senior Notes indenture and the Series B CCWH Senior Notes indenture, and we are not currently permitted to pay dividends from the proceeds of indebtedness or the excess proceeds from asset sales under the Series B CCWH Senior Notes indenture. There are other exceptions in these indentures that allow us to incur additional indebtedness and pay dividends. The exceptions in the Series B CCWH Senior Notes indenture that allow us to pay dividends include (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. We have used substantially all of the $525.0 million general restricted payments basket capacity in the Series B CCWH Senior Notes indenture. The Series A CCWH Senior Notes indenture does not limit our ability to pay dividends.
Our consolidated leverage ratio, defined as total debt divided by EBITDA (as defined by the CCWH Senior Notes indentures) for the preceding four quarters was 8.9:1 at December 31, 2017, 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 4.6:1 at December 31, 2017. As required by the definition of EBITDA in the CCWH Senior Notes indentures, our EBITDA for the preceding four quarters of $599.8 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. Because our consolidated leverage ratio exceeded the limit in the incurrence tests described above, we are not currently permitted to incur additional indebtedness using the incurrence test in the Series A CCWH Senior Notes indenture and the Series B CCWH Senior Notes indenture, and we are not currently permitted to pay dividends from the proceeds of indebtedness or the excess proceeds from asset sales under the Series B CCWH Senior Notes indenture.
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, 2017:
| (In millions) | Four Quarters Ended December 31, 2017 | |||
EBITDA (as defined by the CCWH Senior Notes indentures) | $ | 599.8 | ||
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 | (12.2 | ) | ||
Extraordinary,non-recurring or unusual gains or losses or expenses (as referenced in the definition of EBITDA in the CCWH Senior Notes indentures) | (19.6 | ) | ||
Non-cash charges | (20.1 | ) | ||
Other items | (2.6 | ) | ||
Less: Depreciation and amortization, Impairment charges, Other operating income, net and Share-based compensation expense | (312.9 | ) | ||
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Operating income | 232.4 | |||
Plus: Depreciation and amortization, Impairment charges, Gain (loss) on disposal of operating and fixed assets and Share-based compensation expense | 310.4 | |||
Less: Interest expense | (381.2 | ) | ||
Plus: Interest income on Due from iHeartCommunications | 68.9 | |||
Less: Current income tax expense | (30.9 | ) | ||
Plus: Other income, net | 29.8 | |||
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) | (17.0 | ) | ||
Change in assets and liabilities, net of assets acquired and liabilities assumed | (64.8 | ) | ||
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Net cash provided by operating activities | $ | 147.6 | ||
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CCWH Senior Subordinated Notes
As of December 31, 2017, 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.
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.
CCWH may redeem the CCWH Subordinated Notes, in whole or in part, at the redemption prices set forth in the applicable indenture governing the CCWH Subordinated Notes plus accrued and unpaid interest to the redemption date. 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:
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:
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 excess proceeds from asset sales after making an asset sale offer 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. Because our consolidated leverage ratio exceeded the limit in the incurrence tests described above, we are not currently permitted to incur additional indebtedness using the incurrence test in the Series A CCWH Subordinated Notes indenture and the Series B CCWH Subordinated Notes indenture, and we are not currently permitted to pay dividends from the proceeds of indebtedness or the excess proceeds from asset sales under the Series B CCWH Subordinated Notes indenture. There are other exceptions in these indentures that allow us to incur additional indebtedness and pay dividends. The exceptions in the Series B CCWH Subordinated Notes indenture that allow us to pay dividends include (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. We have used substantially all of the $525.0 million general restricted payments basket capacity in the Series B CCWH Senior Subordinated Notes indenture. The Series A CCWH Senior Subordinated Notes indenture does not limit our ability to pay dividends.
CCIBV Senior Notes
During the third quarter of 2017, Clear Channel International B.V., an international subsidiary of ours, issued $150.0 million in additional aggregate principal amount of 8.75% Senior Notes due 2020 (“CCIBV Senior Notes”), bringing the total amount outstanding under the CCIBV Senior Notes as of December 31, 2017 to $375.0 million.
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. 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, in whole or in part at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date.
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, 2017, there were no amounts outstanding under the revolving credit facility, and $71.2 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, 2017.
Other Debt
Other debt includes various borrowings and capital leases utilized for general operating purposes. As of December 31, 2017, approximately $2.4 million was outstanding as other debt.
iHeartCommunications’ Debt Covenants
On March 14, 2018, iHeartMedia, iHeartCommunications and certain of iHeartMedia’s direct and indirect domestic subsidiaries, not including the Company or any of its subsidiaries, filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The filing of the voluntary petitions triggered an event of default under the iHeartCommunications’ senior credit facility and other debt agreements. The ability of iHeartCommunications’ creditors to seek remedies to enforce their rights under such debt agreements is automatically stayed as a result of the filing of the iHeart Chapter 11 Cases, and the creditors’ rights of enforcement are subject to the applicable provisions of the Bankruptcy Code.
Dispositions and Other
In January 2017, we sold our Indianapolis, Indiana market in exchange for certain assets in Atlanta, Georgia, plus approximately $43.1 million in cash, net of closing costs. A net gain of $28.9 million was recognized related to the sale.
During the third quarter of 2017, the Company sold its ownership interest in a joint venture in Canada. As a result, the Company recognized a net loss on sale of $12.1 million, which is included within Other operating income (expense), net.
In the first quarter of 2016, Americas outdoor sold ninenon-strategic outdoor markets including Cleveland and Columbus, Ohio, Des Moines, Iowa, Ft. Smith, Arkansas, Memphis, Tennessee, Portland, Oregon, Reno, Nevada, Seattle, Washington and Wichita, Kansas for net proceeds of $592.3 million in cash and certain advertising assets in Florida. We recognized a net gain of $278.3 million related to the sale, which is included within Other operating income (expense), net.
In the second quarter of 2016, International outdoor sold its business in Turkey. As a result, we recognized a net loss of $56.6 million, which includes $32.2 million in cumulative translation adjustments that were recognized upon sale of the subsidiaries in Turkey.
In the fourth quarter 2016, International outdoor sold its business in Australia for cash proceeds of $195.7 million. As a result, we recognized a net gain of $127.6 million, which is net of $14.6 million in cumulative translation adjustments that were recognized upon the sale of our business in Australia.
Uses of Capital
Capital Expenditures
Our capital expenditures for the years ended December 31, 2017, 2016 and 2015 were as follows:
| (In millions) | Years Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Americas advertising | $ | 74.6 | $ | 81.4 | $ | 82.2 | ||||||
International advertising | 146.4 | 143.8 | 132.6 | |||||||||
Corporate | 3.2 | 4.6 | 3.5 | |||||||||
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Total capital expenditures | $ | 224.2 | $ | 229.8 | $ | 218.3 | ||||||
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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 and Contingencies” and Note 5 to our Consolidated Financial Statements located in Item 8 of Part II of the Annual Report on Form10-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 onForm 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 2018, we are committed to $143.1 million and $359.2 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 withnon-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 undernon-cancelable lease agreements, minimum payments under othernon-cancelable contracts, capital expenditure commitments and other long-term obligations as of December 31, 2017, are as follows:
| (In thousands) | Payments due by Period | |||||||||||||||||||
Contractual Obligations | Total | 2018 | 2019-2020 | 2021-2022 | 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 | 375,000 | — | 375,000 | — | — | |||||||||||||||
Other Long-term Debt | 2,393 | 533 | 311 | 363 | 1,186 | |||||||||||||||
Interest payments on long-term debt(1) | 1,322 | 378 | 672 | 266 | 6 | |||||||||||||||
Non-cancelable operating leases | 2,602,429 | 359,175 | 608,294 | 465,089 | 1,169,871 | |||||||||||||||
Non-cancelable contracts | 1,839,611 | 393,980 | 634,614 | 417,418 | 393,599 | |||||||||||||||
Employment contracts | — | — | — | — | — | |||||||||||||||
Capital expenditures | 68,110 | 38,444 | 10,699 | 9,090 | 9,877 | |||||||||||||||
Unrecognized tax benefits(2) | 22,419 | — | — | — | 22,419 | |||||||||||||||
Other long-term obligations(3) | 247,997 | 8,699 | 12,996 | 34,059 | 192,243 | |||||||||||||||
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Total | $ | 10,084,281 | $ | 801,209 | $ | 3,842,586 | $ | 3,651,285 | $ | 1,789,201 | ||||||||||
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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, foreign currency exchange rates and inflation.
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 $6.7 million for year ended December 31, 2017. 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, 2017 by $0.7 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, 2017 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 third quarter of 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This update provides aone-year deferral of the effective date for ASUNo. 2014-09,Revenue from Contracts with Customers. ASUNo. 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 two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company expects to utilize the full retrospective method. The Company has substantially completed its evaluation of the potential changes from adopting the new standard on its future financial reporting and disclosures, which included reviews of contractual terms for all of the Company’s significant revenue streams and the development of an implementation plan. The Company continues to execute on its implementation plan, including detailed policy drafting and training of segment personnel. Based on its evaluation, the Company does not expect material changes to its consolidated revenues, operating income or balance sheets as a result of the implementation of this standard.
During the first quarter of 2016, the FASB issued ASUNo. 2016-02,Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the first quarter of 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350). This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Entities will record an impairment charge based on the excess of a reporting unit’s
carrying amount over its fair value. The standard is effective for annual and any interim impairment tests performed for periods beginning after December 15, 2019. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the second quarter of 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718). This update mandates that entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. Entities will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn’t changed. Additionally, the new guidance also clarifies that a modification to an award could be significant and therefore require disclosure, even if the modification accounting is not required. The guidance will be applied prospectively to awards modified on or after the adoption date and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company does not expect that the adoption of this guidance will have 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 onForm 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, 2017 would have changed by approximately $2.2 million.
Leases
The most significant estimates used by management in accounting for leases and the impact of these estimates are as follows:
Expected lease termOur expected lease term includes both contractual lease periods and cancelable option periods where failure to exercise such options would result in an economic penalty. The expected lease term is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the lease term exceeds 75% of the leased asset’s useful life. The expected lease term
is also used in determining the depreciable life of the asset. An increase in the expected lease term will increase the probability that a lease may be considered a capital lease and will generally result in higher interest and depreciation expense for a leased property recorded on our balance sheet.
Incremental borrowing rateThe incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the minimum lease payments is greater than 90% of the fair market value of the property. An increase in the incremental borrowing rate decreases the net present value of the minimum lease payments and reduces the probability that a lease will be considered a capital lease.
Fair market value of leased assetThe fair market value of leased property is generally estimated based on comparable market data as provided by third-party sources. Fair market value is used in determining whether the lease is accounted for as an operating lease or a capital lease. A lease is considered a capital lease if the net present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased property. A higher fair market value reduces the likelihood that a lease will be considered a capital lease.
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 and amortization. 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.
Annual Impairment Test
The Company performs its annual impairment test on indefinite-lived intangible assets and goodwill as of July 1 of each year.
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 inASC 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 byASC 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 incursstart-up costs during thebuild-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 thebuild-up period, estimatedstart-up capital costs and losses incurred during thebuild-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.
On July 1, 2017, we performed our annual impairment test in accordance withASC 350-30-35, resulting in no impairment charge
In determining the fair value of our billboard permits, the following key assumptions were used:
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 rate | |||||||||
Billboard permits | $ | 1,107,600 | $ | 161,800 | $ | 1,118,300 | ||||||
The estimated fair value of our billboard permits at July 1, 2017 was $3.7 billion while the carrying value was $1.0 billion. The estimated fair value of our billboard permits at July 1, 2016 was $4.0 billion while the carrying value was $1.0 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 thetwo-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.
On July 1, 2017, we performed our annual impairment test in accordance withASC 350-30-35, resulting in a goodwill impairment charge of $1.6 million related to one of our International outdoor markets. In determining the fair value of our reporting units, we used the following assumptions:
Based on our annual assessment using the assumptions described above, a hypothetical 10% 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 | $ | 820,000 | $ | 170,000 | $ | 780,000 | ||||||
International | $ | 260,000 | $ | 210,000 | $ | 220,000 | ||||||
Tax Provisions
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 than 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.
On December 22, 2017, the U.S. government enacted comprehensive income tax legislation, referred to as The Tax Cuts and Jobs Act (the Tax Act). The Tax Act reduces the U.S. federal corporate tax rate from 35%
percent to 21% effective January 1, 2018, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and creates new U.S. taxes on certain foreign earnings. To account for the reduction in the U.S. federal corporate income tax rate, we remeasured our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, generally 21% percent. To determine the impact from theone-time transition tax on accumulated foreign earnings, we analyzed our cumulative foreign earnings and profits in accordance with the rules provided in the Tax Act. Based upon our preliminary analysis which is not yet complete, we have not recorded income tax expense in the current period for theone-time transition tax due to the net accumulated deficit in our foreign earnings and profits.
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 55 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, 2017 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 ofASC 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.
Required information is located within Item 7 of Part II of the Annual Report on Form10-K.
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Clear Channel Outdoor Holdings, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Clear Channel Outdoor Holdings, Inc. and subsidiaries (the Company) as of December 31, 2017 and 2016, the related consolidated statements of comprehensive income (loss), changes in stockholders’ deficit and cash flows for each of the three years in the period ended December 31, 2017, and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2017, based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated May 3, 2018 expressed an adverse opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2005.
San Antonio, Texas
May 3, 2018
CONSOLIDATED BALANCE SHEETS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| (In thousands) | December 31, 2017 | December 31, 2016 | ||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | $ | 144,119 | $ | 541,995 | ||||
Accounts receivable, net of allowance of $22,487 in 2017 and $22,398 in 2016 | 659,463 | 593,070 | ||||||
Prepaid expenses | 111,876 | 111,569 | ||||||
Assets held for sale | — | 55,602 | ||||||
Other current assets | 58,714 | 39,199 | ||||||
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Total Current Assets | 974,172 | 1,341,435 | ||||||
PROPERTY, PLANT AND EQUIPMENT | ||||||||
Structures, net | 1,180,882 | 1,196,676 | ||||||
Other property, plant and equipment, net | 214,147 | 216,157 | ||||||
INTANGIBLE ASSETS AND GOODWILL | ||||||||
Indefinite-lived intangibles | 977,152 | 960,966 | ||||||
Other intangibles, net | 273,862 | 299,617 | ||||||
Goodwill | 714,043 | 696,263 | ||||||
OTHER ASSETS | ||||||||
Due from iHeartCommunications, net of allowance of $855,648 in 2017 and $0 in 2016 | 211,990 | 885,701 | ||||||
Other assets | 124,534 | 122,013 | ||||||
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Total Assets | $ | 4,670,782 | $ | 5,718,828 | ||||
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CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 87,960 | $ | 86,870 | ||||
Accrued expenses | 509,801 | 480,872 | ||||||
Deferred income | 59,178 | 67,005 | ||||||
Current portion of long-term debt | 573 | 6,971 | ||||||
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Total Current Liabilities | 657,512 | 641,718 | ||||||
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Long-term debt | 5,266,153 | 5,110,020 | ||||||
Deferred tax liability | 318,107 | 638,705 | ||||||
Other long-term liabilities | 270,415 | 259,311 | ||||||
Commitments and contingent liabilities (Note 5) | ||||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Noncontrolling interest | 157,040 | 149,886 | ||||||
Preferred stock, $.01 par value, 150,000,000 shares authorized, no shares issued and outstanding | — | — | ||||||
Class A common stock, par value $.01 per share, authorized 750,000,000 shares, issued 49,955,300 and 47,947,123 shares in 2017 and 2016, respectively | 500 | 479 | ||||||
Class B common stock, $.01 par value, 600,000,000 shares authorized, 315,000,000 shares issued and outstanding | 3,150 | 3,150 | ||||||
Additionalpaid-in capital | 3,108,148 | 3,432,121 | ||||||
Accumulated deficit | (4,765,514 | ) | (4,125,798 | ) | ||||
Accumulated other comprehensive loss | (338,936 | ) | (386,658 | ) | ||||
Cost of shares (946,415 in 2017 and 633,851 in 2016) held in treasury | (5,793 | ) | (4,106 | ) | ||||
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Total Stockholders’ Deficit | (1,841,405 | ) | (930,926 | ) | ||||
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Total Liabilities and Stockholders’ Deficit | $ | 4,670,782 | $ | 5,718,828 | ||||
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See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
| Years Ended December 31, | ||||||||||||
| (In thousands, except per share data) | 2017 | 2016 | 2015 | |||||||||
Revenue | $ | 2,591,265 | $ | 2,688,884 | $ | 2,806,204 | ||||||
Operating expenses: | ||||||||||||
Direct operating expenses (excludes depreciation and amortization) | 1,402,765 | 1,422,058 | 1,494,902 | |||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) | 508,637 | 515,202 | 531,504 | |||||||||
Corporate expenses (excludes depreciation and amortization) | 143,678 | 117,436 | 116,523 | |||||||||
Depreciation and amortization | 325,991 | 344,124 | 375,962 | |||||||||
Impairment charges | 4,159 | 7,274 | 21,631 | |||||||||
Other operating income (expense), net | 26,391 | 354,688 | (4,824 | ) | ||||||||
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Operating income | 232,426 | 637,478 | 260,858 | |||||||||
Interest expense | 381,149 | 374,892 | 355,669 | |||||||||
Interest income on Due from iHeartCommunications | 68,871 | 50,309 | 61,439 | |||||||||
Loss on Due from iHeartCommunications | (855,648 | ) | — | — | ||||||||
Gain (loss) on investments, net | (1,045 | ) | 531 | — | ||||||||
Equity in loss of nonconsolidated affiliates | (990 | ) | (1,689 | ) | (289 | ) | ||||||
Other income (expense), net | 29,800 | (70,682 | ) | 12,387 | ||||||||
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Income (loss) before income taxes | (907,735 | ) | 241,055 | (21,274 | ) | |||||||
Income tax benefit (expense) | 280,218 | (76,656 | ) | (49,943 | ) | |||||||
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Consolidated net income (loss) | (627,517 | ) | 164,399 | (71,217 | ) | |||||||
Less amount attributable to noncontrolling interest | 12,199 | 23,002 | 24,764 | |||||||||
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Net income (loss) attributable to the Company | $ | (639,716 | ) | $ | 141,397 | $ | (95,981 | ) | ||||
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Other comprehensive income (loss), net of tax: | ||||||||||||
Foreign currency translation adjustments | 45,151 | 22,408 | (112,729 | ) | ||||||||
Unrealized holding gain (loss) on marketable securities | (414 | ) | (576 | ) | 553 | |||||||
Other adjustments to comprehensive income (loss) | 6,720 | (11,814 | ) | (10,266 | ) | |||||||
Reclassification adjustments | 5,441 | 46,730 | 808 | |||||||||
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Other comprehensive income (loss) | 56,898 | 56,748 | (121,634 | ) | ||||||||
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Comprehensive income (loss) | (582,818 | ) | 198,145 | (217,615 | ) | |||||||
Less amount attributable to noncontrolling interest | 9,176 | (8,427 | ) | (11,154 | ) | |||||||
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Comprehensive income (loss) attributable to the Company | $ | (591,994 | ) | $ | 206,572 | $ | (206,461 | ) | ||||
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Net income (loss) attributable to the Company per common share: | ||||||||||||
Basic | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | ||||
Weighted average common shares outstanding—Basic | 361,141 | 360,294 | 359,508 | |||||||||
Diluted | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | ||||
Weighted average common shares outstanding—Diluted | 361,141 | 361,612 | 359,508 | |||||||||
See Notes to Consolidated Financial Statements
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ 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, 2014 | 45,231,282 | 315,000,000 | $ | 203,334 | $ | 3,602 | $ | 4,167,491 | $ | (4,171,214 | ) | $ | (341,353 | ) | $ | (1,192 | ) | $ | (139,332 | ) | ||||||||||||||||
Net income (loss) | — | — | 24,764 | — | — | (95,981 | ) | — | — | (71,217 | ) | |||||||||||||||||||||||||
Exercise of stock options and other | 1,429,832 | — | — | 15 | 3,783 | — | — | (912 | ) | 2,886 | ||||||||||||||||||||||||||
Share-based payments | — | — | — | — | 8,502 | — | — | — | 8,502 | |||||||||||||||||||||||||||
Dividends and other payments to noncontrolling interests | — | — | (30,870 | ) | — | — | — | — | — | (30,870 | ) | |||||||||||||||||||||||||
Dividends declared and paid ($0.6026/share) | — | — | — | — | (217,796 | ) | — | — | — | (217,796 | ) | |||||||||||||||||||||||||
Other | — | — | 1,701 | — | (64 | ) | — | — | — | 1,637 | ||||||||||||||||||||||||||
Other comprehensive loss | — | — | (11,154 | ) | — | — | — | (110,480 | ) | — | (121,634 | ) | ||||||||||||||||||||||||
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Balances at December 31, 2015 | 46,661,114 | 315,000,000 | $ | 187,775 | $ | 3,617 | $ | 3,961,916 | $ | (4,267,195 | ) | $ | (451,833 | ) | $ | (2,104 | ) | $ | (567,824 | ) | ||||||||||||||||
Net income | — | — | 23,002 | — | — | 141,397 | — | — | 164,399 | |||||||||||||||||||||||||||
Exercise of stock options and other | 1,286,009 | — | — | 12 | 624 | — | — | (2,002 | ) | (1,366 | ) | |||||||||||||||||||||||||
Share-based payments | — | — | — | — | 10,291 | — | — | — | 10,291 | |||||||||||||||||||||||||||
Disposal of noncontrolling interest | (36,846 | ) | (36,846 | ) | ||||||||||||||||||||||||||||||||
Dividends and other payments to noncontrolling interests | — | — | (16,917 | ) | — | — | — | — | — | (16,917 | ) | |||||||||||||||||||||||||
Dividends declared and paid ($1.4937/share) | — | — | — | — | (540,034 | ) | — | — | — | (540,034 | ) | |||||||||||||||||||||||||
Other | — | — | 1,299 | — | (676 | ) | — | — | — | 623 | ||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | (8,427 | ) | — | — | — | 65,175 | — | 56,748 | ||||||||||||||||||||||||||
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Balances at December 31, 2016 | 47,947,123 | 315,000,000 | $ | 149,886 | $ | 3,629 | $ | 3,432,121 | $ | (4,125,798 | ) | $ | (386,658 | ) | $ | (4,106 | ) | $ | (930,926 | ) | ||||||||||||||||
Net income | — | — | 12,199 | — | — | (639,716 | ) | — | — | (627,517 | ) | |||||||||||||||||||||||||
Exercise of stock options and other | 2,008,177 | — | — | 21 | 198 | — | — | (1,687 | ) | (1,468 | ) | |||||||||||||||||||||||||
Share-based payments | — | — | 931 | — | 8,659 | — | — | — | 9,590 | |||||||||||||||||||||||||||
Disposal of noncontrolling interest | — | — | (2,439 | ) | — | — | — | — | — | (2,439 | ) | |||||||||||||||||||||||||
Dividends and other payments to noncontrolling interests | — | — | (12,010 | ) | — | — | — | — | — | (12,010 | ) | |||||||||||||||||||||||||
Dividends declared and paid ($0.9171/share) | — | — | — | — | (332,498 | ) | — | — | — | (332,498 | ) | |||||||||||||||||||||||||
Other | — | — | (703 | ) | — | (332 | ) | — | — | — | (1,035 | ) | ||||||||||||||||||||||||
Other comprehensive income | — | — | 9,176 | — | — | — | 47,722 | — | 56,898 | |||||||||||||||||||||||||||
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Balances at December 31, 2017 | 49,955,300 | 315,000,000 | $ | 157,040 | $ | 3,650 | $ | 3,108,148 | $ | (4,765,514 | ) | $ | (338,936 | ) | $ | (5,793 | ) | $ | (1,841,405 | ) | ||||||||||||||||
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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) | 2017 | 2016 | 2015 | |||||||||
Cash flows from operating activities: | ||||||||||||
Consolidated net income (loss) | $ | (627,517 | ) | $ | 164,399 | $ | (71,217 | ) | ||||
Reconciling items: | ||||||||||||
Impairment charges | 4,159 | 7,274 | 21,631 | |||||||||
Depreciation and amortization | 325,991 | 344,124 | 375,962 | |||||||||
Deferred taxes | (311,112 | ) | 31,314 | 3,305 | ||||||||
Provision for doubtful accounts | 6,740 | 10,659 | 13,384 | |||||||||
Amortization of deferred financing charges and note discounts, net | 10,527 | 10,572 | 8,770 | |||||||||
Share-based compensation | 9,590 | 10,291 | 8,502 | |||||||||
Gain on disposal of operating and other assets | (29,347 | ) | (363,485 | ) | (5,468 | ) | ||||||
Loss on Due from iHeartCommunications | 855,648 | — | — | |||||||||
(Gain) loss on investments | 1,045 | (531 | ) | — | ||||||||
Equity in loss of nonconsolidated affiliates | 990 | 1,689 | 289 | |||||||||
Foreign exchange transaction (gain) loss | (29,563 | ) | 69,599 | (14,790 | ) | |||||||
Other reconciling items, net | (4,710 | ) | (135 | ) | 1,350 | |||||||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||||
(Increase) decrease in accounts receivable | (39,790 | ) | 30,308 | (56,580 | ) | |||||||
(Increase) decrease in prepaid expenses and other current assets | 9,552 | (15,578 | ) | (1,728 | ) | |||||||
Increase (decrease) in accrued expenses | (7,316 | ) | 25,518 | 4,565 | ||||||||
Increase (decrease) in accounts payable | (4,126 | ) | (3,797 | ) | 30,642 | |||||||
Increase (decrease) in accrued interest | 431 | 194 | (4,072 | ) | ||||||||
Increase (decrease) in deferred income | (13,273 | ) | (18,119 | ) | 2,549 | |||||||
Changes in other operating assets and liabilities | (10,331 | ) | 5,997 | (18,161 | ) | |||||||
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Net cash provided by operating activities | 147,588 | 310,293 | 298,933 | |||||||||
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Cash flows from investing activities: | ||||||||||||
Purchases of property, plant and equipment | (224,238 | ) | (229,772 | ) | (218,332 | ) | ||||||
Proceeds from disposal of assets | 72,049 | 808,194 | 11,264 | |||||||||
Purchases of other operating assets | (837 | ) | (2,244 | ) | (23,640 | ) | ||||||
Change in other, net | (22,875 | ) | (24,679 | ) | (27,017 | ) | ||||||
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Net cash provided by (used for) investing activities | (175,901 | ) | 551,499 | (257,725 | ) | |||||||
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Cash flows from financing activities: | ||||||||||||
Payments on credit facilities | (909 | ) | (2,100 | ) | (3,849 | ) | ||||||
Proceeds from long-term debt | 156,000 | 6,856 | 222,777 | |||||||||
Payments on long-term debt | (748 | ) | (2,334 | ) | (56 | ) | ||||||
Net transfers from (to) iHeartCommunications | (181,939 | ) | 45,099 | 17,007 | ||||||||
Dividends and other payments to noncontrolling interests | (12,010 | ) | (16,917 | ) | (30,870 | ) | ||||||
Dividends paid | (332,824 | ) | (755,538 | ) | — | |||||||
Change in other, net | (7,083 | ) | (1,565 | ) | (5,955 | ) | ||||||
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Net cash provided by (used for) financing activities | (379,513 | ) | (726,499 | ) | 199,054 | |||||||
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Effect of exchange rate changes on cash | 9,950 | (6,041 | ) | (13,723 | ) | |||||||
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Net increase (decrease) in cash and cash equivalents | (397,876 | ) | 129,252 | 226,539 | ||||||||
Cash and cash equivalents at beginning of year | 541,995 | 412,743 | 186,204 | |||||||||
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Cash and cash equivalents at end of year | $ | 144,119 | $ | 541,995 | $ | 412,743 | ||||||
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SUPPLEMENTAL DISCLOSURES: | ||||||||||||
Cash paid during the year for interest | $ | 374,309 | $ | 368,051 | $ | 356,021 | ||||||
Cash paid during the year for income taxes | 33,747 | 40,185 | 43,781 | |||||||||
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, 2017, 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 89.5% 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 aone-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 and Latin America; the International segment primarily includes operations in Europe and Asia.
During the first quarter of 2018, the Company reevaluated its segment reporting and determined that its Latin America operations should be managed by its International outdoor leadership team. As such, beginning January 1, 2018, our Latin American operations will be included in our International outdoor segment.
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.
On March 14, 2018, iHeartMedia, iHeartCommunications and certain of iHeartMedia’s direct and indirect domestic subsidiaries, not including the Company or any of its subsidiaries (collectively, the “Debtors”), filed voluntary petitions for relief (the “iHeart Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). The Company and its direct and indirect subsidiaries did not file Chapter 11 cases.
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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 2017 presentation.
Included in Selling, general and administrative expenses and Interest expense is $9.6 million and $1.4 million, respectively, recorded in the fourth quarter of 2017 to correct for accounting errors related to the misappropriation of cash identified at our China subsidiary. 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 ofASC 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
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 up to 12 months. Most international street furniture display faces are operated through contracts with municipalities for up to 15 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 inASC 805-20-S99. The Company engages 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
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
The Company performs its annual impairment test on July 1 of each year. The Company uses 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 withASC 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 and its International outdoor segment each country constitutes a separate reporting unit. The Company had impairment of goodwill of $1.6 million and $7.3 million for 2017 and 2016, respectively. The Company had no impairment of goodwill for 2015.
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 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 asavailable-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 theavailable-for-sale securities, net of tax, are reported in accumulated other comprehensive loss as a component of stockholders’ deficit.
The Company periodically assesses the value ofavailable-for-sale andnon-marketable securities and records impairment charges in the statement of comprehensive income (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, the Company recognized an impairment of $1.0 million during the year ended December 31, 2017, which was recorded in “Other income (expense), net,” and no impairments during the years ended December 31, 2016 and 2015.
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, 2017 and 2016.
Asset Retirement Obligation
ASC 410-20 requires the Company to estimate its obligation upon the termination ornon-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
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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. The Company has not provided U.S. federal income taxes for temporary differences with respect to investments in foreign subsidiaries, which at December 31, 2017, 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 U.S., we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes as 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 asnon-taxable returns of capital. Additionally, as a result of U.S. tax reform, future dividend distributions from our international subsidiaries are exempt from U.S. federal income tax beginning January 1, 2018. 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 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 $15.5 million, $19.3 million and $21.1 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Share-Based Compensation
Under the fair value recognition provisions ofASC 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 stockholders’ equity (deficit), “Accumulated other comprehensive loss”. Foreign currency transaction gains and losses are included in operations.
New Accounting Pronouncements
During the third quarter of 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. This update provides aone-year deferral of the effective date for ASUNo. 2014-09,Revenue from Contracts with Customers. ASUNo. 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 two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company is using the full retrospective method. The Company has completed its evaluation of the changes from adopting the new standard on its future financial reporting and disclosures, which included reviews of contractual terms for all of the Company’s significant revenue streams and the development of an implementation plan. The Company has executed on its implementation plan, including drafting a detailed policy and training segment personnel. Based on its evaluation, the Company does not expect material changes to its consolidated revenues, operating income or balance sheets as a result of the implementation of this standard.
During the first quarter of 2016, the FASB issued ASUNo. 2016-02,Leases (Topic 842). The new leasing standard presents significant changes to the balance sheets of lessees. Lessor accounting is updated to align with certain changes in the lessee model and the new revenue recognition standard which was issued in the third quarter of 2015. The standard is effective for annual periods, and for interim periods within those annual periods, beginning after December 15, 2018. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements. The Company expects the primary impact to our consolidated financial statements will be the recognition, on a discounted basis, of our minimum commitments undernon-cancelable operating leases on our consolidated balance sheets resulting in the recording of right of use assets and lease obligations. Our current minimum commitments undernon-cancelable operating leases are disclosed in Note 5.
During the first quarter of 2017, the FASB issued ASU2017-04,Intangibles—Goodwill and Other (Topic 350). This update eliminates the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. The standard is effective for annual and any interim impairment tests performed for periods beginning after December 15, 2019. The Company is currently evaluating the impact of the provisions of this new standard on its consolidated financial statements.
During the second quarter of 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718). This update mandates that entities will apply the modification accounting guidance if the value, vesting conditions or classification of the award changes. Entities will have to make all of the disclosures about modifications that are required today, in addition to disclosing that compensation expense hasn’t changed. Additionally, the new guidance also clarifies that a modification to an award could be significant and therefore
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
require disclosure, even if the modification accounting is not required. The guidance will be applied prospectively to awards modified on or after the adoption date and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company does not expect that the adoption of this guidance will have material effect on the Company’s consolidated financial statements.
NOTE 2—PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Dispositions
In January 2017, Americas sold its Indianapolis, Indiana market in exchange for certain assets in Atlanta, Georgia with a fair value of $39.4 million, plus $43.1 million in cash, net of closing costs. The assets acquired as part of the transaction consisted of $9.9 million in fixed assets and $29.5 million in intangible assets (including $2.3 million in goodwill). The Company recognized a net gain of $28.9 million related to the sale, which is included within Other operating income (expense), net.
During the third quarter of 2017, Americas sold its ownership interest in a joint venture in Canada. As a result, the Company recognized a net loss on sale of $12.1 million, including a $6.3 million cumulative translation adjustment, which is included within Other operating income (expense), net.
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of December 31, 2017 and 2016, respectively.
| (In thousands) | December 31, 2017 | December 31, 2016 | ||||||
Land, buildings and improvements | $ | 145,763 | $ | 152,775 | ||||
Structures | 2,864,442 | 2,684,673 | ||||||
Furniture and other equipment | 179,215 | 148,516 | ||||||
Construction in progress | 55,753 | 58,585 | ||||||
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Less: accumulated depreciation | 1,850,144 | 1,631,716 | ||||||
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Property, plant and equipment, net | $ | 1,395,029 | $ | 1,412,833 | ||||
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The Company recognized an impairment of $2.6 million during the year ended December 31, 2017 in relation to advertising assets that were no longer usable in one country in the Company’s International segment.
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. Accordingly, there are no indefinite-lived intangible assets in the International segment.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Annual Impairment Test to Billboard Permits
The Company performs its annual impairment test on July 1 of each year. 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 inASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed byASC 350-30-35. The Company engaged 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 thebuild-up process. The Company forecasts revenue, expenses and cash flows over aten-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 incursstart-up costs during thebuild-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 thebuild-up period, estimatedstart-up capital costs and losses incurred during thebuild-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 2017 and 2016, the Company recognized no impairment charges related to billboard permits.
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, 2017 and 2016, respectively:
| December 31, 2017 | December 31, 2016 | |||||||||||||||
| (In thousands) | Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||
Transit, street furniture and other outdoor contractual rights | $ | 548,918 | $ | (440,284 | ) | $ | 563,863 | $ | (426,752 | ) | ||||||
Permanent easements | 162,920 | — | 159,782 | — | ||||||||||||
Other | 4,626 | (2,318 | ) | 4,536 | (1,812 | ) | ||||||||||
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Total | $ | 716,464 | $ | (442,602 | ) | $ | 728,181 | $ | (428,564 | ) | ||||||
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Total amortization expense related to definite-lived intangible assets for the years ended December 31, 2017, 2016 and 2015 was $27.9 million, $37.8 million, and $49.2 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) | ||||
2018 | $ | 21,787 | ||
2019 | 14,165 | |||
2020 | 11,974 | |||
2021 | 11,864 | |||
2022 | 10,325 | |||
Annual Impairment Test to Goodwill
The Company performs 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 inASC 350-20-55. The Company also determined that within its Americas segment, each country in its International segment constitutes a separate reporting unit.
The goodwill impairment test is atwo-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.
Based on declining future cash flows expected, the Company recognized goodwill impairment of $1.6 million for the year ended December 31, 2017 for one country in the International segment and $7.3 million for the year ended December 31, 2016 for one country in the International segment.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 2015 | $ | 534,683 | $ | 223,892 | $ | 758,575 | ||||||
Impairment | — | (7,274 | ) | (7,274 | ) | |||||||
Dispositions | (6,934 | ) | (30,718 | ) | (37,652 | ) | ||||||
Foreign currency | (1,998 | ) | (5,051 | ) | (7,049 | ) | ||||||
Assets held for sale | (10,337 | ) | — | (10,337 | ) | |||||||
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Balance as of December 31, 2016 | $ | 515,414 | $ | 180,849 | $ | 696,263 | ||||||
Impairment | — | (1,591 | ) | (1,591 | ) | |||||||
Acquisitions | 2,252 | — | 2,252 | |||||||||
Dispositions | — | (1,817 | ) | (1,817 | ) | |||||||
Foreign currency | 777 | 18,070 | 18,847 | |||||||||
Assets held for sale | 89 | — | 89 | |||||||||
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Balance as of December 31, 2017 | $ | 518,532 | $ | 195,511 | $ | 714,043 | ||||||
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The balance at December 31, 2015 is net of cumulative impairments of $2.6 billion and $326.6 million in the Company’s Americas and International segments, respectively.
NOTE 3—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 ornon-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 period over the next 55 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) | 2017 | 2016 | ||||||
Beginning balance | $ | 39,451 | $ | 45,125 | ||||
Adjustment due to changes in estimates | 2,166 | (5,431 | ) | |||||
Accretion of liability | 3,373 | 4,863 | ||||||
Liabilities settled | (2,712 | ) | (4,104 | ) | ||||
Foreign Currency | 2,501 | (1,002 | ) | |||||
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Ending balance | $ | 44,779 | $ | 39,451 | ||||
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CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4—LONG-TERM DEBT
Long-term debt at December 31, 2017 and 2016 consisted of the following:
| (In thousands) | December 31, 2017 | December 31, 2016 | ||||||
Clear Channel Worldwide Holdings Notes | $ | 4,925,000 | $ | 4,925,000 | ||||
Clear Channel International B.V. Senior Notes | 375,000 | 225,000 | ||||||
Senior revolving credit facility due 2018 | — | — | ||||||
Other debt | 2,393 | 14,798 | ||||||
Original issue discount | (241 | ) | (6,738 | ) | ||||
Long-term debt fees | (35,426 | ) | (41,069 | ) | ||||
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Total debt | $ | 5,266,726 | $ | 5,116,991 | ||||
Less: current portion | 573 | 6,971 | ||||||
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Total long-term debt | $ | 5,266,153 | $ | 5,110,020 | ||||
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The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.3 billion and $5.2 billion at December 31, 2017 and December 31, 2016, respectively. Under the fair value hierarchy established byASC 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, 2017 and 2016, the Company had Senior Notes consisting of:
| (In thousands) | Maturity Date | Interest Rate | Interest Payment Terms | 12/31/2017 | 12/31/2016 | |||||||||||
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 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 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 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 noteholders on March 15 and September 15 of each year | 1,925,000 | 1,925,000 | |||||||||||
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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 | 375,000 | 225,000 | |||||||||||
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Total Senior Notes | $ | 5,300,000 | $ | 5,150,000 | ||||||||||||
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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
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Senior Subordinated Notes.
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:
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.
On August 14, 2017, CCIBV issued $150.0 million in aggregate principal amount of 8.75% Senior Notes due 2020 (the “New CCIBV Notes”). The New CCIBV Notes were issued as additional notes under the indenture governing CCIBV’s existing 8.75% Senior Notes due 2020 and were issued at a premium, resulting in $156.0 million in proceeds. The New CCIBV 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.
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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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:
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, 2017, there were no amounts outstanding under the revolving credit facility, and $71.2 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, 2017.
Other Debt
Other debt includes various borrowings and capital leases utilized for general operating purposes. Included in the $2.4 million balance at December 31, 2017 is $0.6 million that matures in less than one year.
Future Maturities of Long-term Debt
Future maturities of long-term debt as of December 31, 2017 are as follows:
| (in thousands) | ||||
2018 | $ | 533 | ||
2019 | 168 | |||
2020 | 2,575,143 | |||
2021 | 169 | |||
2022 | 2,725,194 | |||
Thereafter | 1,186 | |||
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Total(1) | $ | 5,302,393 | ||
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CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Guarantees
As of December 31, 2017, the Company had $95.9 million in letters of credit outstanding, a portion of which were supported by $25.4 million of cash collateral. Additionally, as of December 31, 2017, iHeartCommunications had outstanding commercial standby letters of credit and surety bonds of $1.2 million and $55.4 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, 2017, the Company had outstanding bank guarantees of $37.3 million related to international subsidiaries, a portion of which were supported by $17.6 million of cash collateral.
NOTE 5—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 itsnon-cancelable contracts that enable it to display advertising on buses, bus shelters, trains, etc. to be leases in accordance with the guidance inASC 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 inASC 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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2017, the Company’s future minimum rental commitments undernon-cancelable operating lease agreements with terms in excess of one year, minimum payments undernon-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 | |||||||||
2018 | $ | 359,175 | $ | 393,980 | $ | 38,444 | ||||||
2019 | 318,213 | 343,578 | 7,928 | |||||||||
2020 | 290,081 | 291,036 | 2,771 | |||||||||
2021 | 253,979 | 255,356 | 4,499 | |||||||||
2022 | 211,110 | 162,062 | 4,591 | |||||||||
Thereafter | 1,169,871 | 393,599 | 9,877 | |||||||||
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Total | $ | 2,602,429 | $ | 1,839,611 | $ | 68,110 | ||||||
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Rent expense charged to operations for the years ended December 31, 2017, 2016 and 2015 was $954.3 million, $947.4 million and $978.6 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.
Stockholder Litigation
On May 9, 2016, a stockholder of the Company filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned GAMCO Asset Management Inc. v. iHeartMedia Inc. et al., C.A. No.12312-VCS. The complaint names as defendants iHeartCommunications, Inc. (“iHeartCommunications”), the Company’s indirect parent company, iHeartMedia, Inc. (“iHeartMedia”), the parent company of iHeartCommunications, Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsor Defendants”), iHeartMedia’s private equity sponsors and majority owners, and the members of the Company’s board of directors. The Company also is named as a nominal defendant. The complaint alleges that the Company has been harmed by the intercompany agreements with iHeartCommunications, the Company’s lack of autonomy over its own cash and the actions of the defendants in serving the interests of iHeartMedia, iHeartCommunications and the Sponsor Defendants to the
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
detriment of the Company and its minority stockholders. Specifically, the complaint alleges that the defendants have breached their fiduciary duties by causing the Company to: (i) continue to loan cash to iHeartCommunications under the intercompany note at below-market rates; (ii) abandon its growth and acquisition strategies in favor of transactions that would provide cash to iHeartMedia and iHeartCommunications; (iii) issue new debt in the CCIBV note offering (the “CCIBV Note Offering”) to provide cash to iHeartMedia and iHeartCommunications through a dividend; and (iv) effect the sales of certain outdoor markets in the U.S. (the “Outdoor Asset Sales”) allegedly to provide cash to iHeartMedia and iHeartCommunications through a dividend. The complaint also alleges that iHeartMedia, iHeartCommunications and the Sponsor Defendants aided and abetted the directors’ breaches of their fiduciary duties. The complaint further alleges that iHeartMedia, iHeartCommunications and the Sponsor Defendants were unjustly enriched as a result of these transactions and that these transactions constituted a waste of corporate assets for which the defendants are liable to the Company. The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to the Company and that iHeartMedia, iHeartCommunications and the Sponsor Defendants aided and abetted the board of directors’ breaches of fiduciary duty, rescission of payments to iHeartCommunications and its affiliates pursuant to dividends declared in connection with the CCIBV Note Offering and Outdoor Asset Sales, and an order requiring iHeartMedia, iHeartCommunications and the Sponsor Defendants to disgorge all profits they have received as a result of the alleged fiduciary misconduct.
On July 20, 2016, the defendants filed a motion to dismiss plaintiff’s verified stockholder derivative complaint for failure to state a claim upon which relief can be granted. On November 23, 2016, the Court granted defendants’ motion to dismiss all claims brought by the plaintiff. On December 19, 2016, the plaintiff filed a notice of appeal of the ruling. The oral hearing on the appeal was held on October 11, 2017. On October 12, 2017, the Supreme Court of Delaware affirmed the lower court’s ruling, dismissing the case.
On December 29, 2017, another stockholder of the Company filed a derivative lawsuit in the Court of Chancery of the State of Delaware, captioned Norfolk County Retirement System, v. iHeartMedia, Inc., et al., C.A. No.2017-0930-JRS. The complaint names as defendants iHeartMedia, iHeartCommunications, the Sponsor Defendants, and the members of the Company’s board of directors. The Company is named as a nominal defendant. The complaint alleges that the Company has been harmed by the Company Board’s November 2017 decision to extend the maturity date of the intercompany revolving note (the “Third Amendment”) at what the complaint describes asfar-below-market interest rates. Specifically, the complaint alleges that (i) iHeartMedia and Sponsor defendants breached their fiduciary duties by exploiting their position of control to require the Company to enter the Third Amendment on terms unfair to the Company; (ii) the Company Board breached their duty of loyalty by approving the Third Amendment and elevating the interests of iHeartMedia, iHeartCommunications and the Sponsor Defendants over the interests of the Company and its minority unaffiliated stockholders; and (iii) the terms of the Third Amendment could not have been agreed to in good faith and represent a waste of corporate assets by the Company Board. The complaint further alleges that iHeartMedia, iHeartCommunications and the Sponsor defendants were unjustly enriched as a result of the unfairly favorable terms of the Third Amendment. The plaintiff is seeking, among other things, a ruling that the defendants breached their fiduciary duties to the Company, a modification of the Third Amendment to bear a commercially reasonable rate of interest, and an order requiring disgorgement of all profits, benefits and other compensation obtained by defendants as a result of the alleged breaches of fiduciary duties.
On March 7, 2018, the defendants filed a motion to dismiss plaintiff’s verified derivative complaint for failure to state a claim upon which relief can be granted. On March 16, 2018, iHM filed a Notice of Suggestion of Pendency of Bankruptcy and Automatic Stay of Proceedings.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
China Investigation
Several employees of Clear Media Limited, an indirect,non-wholly-owned subsidiary of the Company whose ordinary shares are listed on, but are currently suspended from trading on, the Hong Kong Stock Exchange, are subject to an ongoing police investigation in China for misappropriation of funds. Clear Media Limited has conducted additional procedures and processes, including a special investigation by forensic accountants and an external law firm appointed by Clear Media Limited’s board of directors and approved by the Company’s Audit Committee, into the misappropriation of funds. During the course of the special investigation, it was discovered that three bank accounts were opened in the name of Clear Media Limited entities, which were not authorized, and certain transactions were recorded therein. The opening of the unauthorized bank accounts has also been referred to the police in China for investigation. The misappropriation of funds resulted in discrepancies between actual cash balances and cash amounts included in the Company’s accounting records as of December 31, 2016 and 2015. Included in Selling, general and administrative expenses and Interest expense is $9.6 million and $1.4 million, respectively, recorded in the fourth quarter of 2017 to correct for the accounting errors resulting from the discrepancies. Such accounting errors are not considered to be material to the current year or prior year financial statements.
The Company advised both the United States Securities and Exchange Commission and the United States Department of Justice of the investigation at Clear Media Limited, and the Company intends to cooperate with both agencies in connection with any investigation that may be conducted in this matter.
The police investigation ison-going, and the Company is not aware of any litigation, claim or assessment pending against the Company related to the matters described above. Based on information known to date, the Company believes any contingent liabilities arising from potential misconduct that has been or may be identified by the investigations are not material to the Company’s consolidated financial statements. In 2017, Clear Media Limited accounted for 9.8% of the Company’s net revenue and 9.9% of its consolidated total assets.
The investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. It is possible that monetary penalties and other sanctions could be assessed on the Company in connection with this matter. The nature and amount of any monetary penalty or other sanctions cannot reasonably be estimated at this time.
NOTE 6—RELATED PARTY TRANSACTIONS
The Company records net amounts due from or to iHeartCommunications as “Due from/to iHeartCommunications” on the consolidated balance sheets, net of allowance for credit losses. 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 May 15, 2019.
Included in the accounts are the net activities resulting fromday-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 Company’s controlled disbursement accounts and the funding requirements of the Trustee Accounts under the CCWH Senior Notes and the CCWH Subordinated Notes). 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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As of December 31, 2017 and December 31, 2016, the asset recorded in “Due from iHeartCommunications” on the consolidated balance sheet was $212.0 million and $885.7 million, respectively. On March 14, 2018, iHeartMedia, iHeartCommunications and certain of iHeartMedia’s direct and indirect domestic subsidiaries, not including the Company or any of its subsidiaries (collectively, the “Debtors”), filed voluntary petitions for relief (the “iHeart Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the “Bankruptcy Court”). As an unsecured creditor of iHeartCommunications, the Company does not expect that the Company will be able to recover all of the amounts owed under the Due from iHeartCommunications Note upon the implementation of any plan of reorganization that is ultimately accepted by the requisite creditors and approved by the Bankruptcy Court. As a result, the Company recognized a loss of $855.6 million on the Due from iHeartCommunications Note during the fourth quarter of 2017 to reflect the estimated recoverable amount of the note as of December 31, 2017, based on management’s best estimate of the cash settlement amount. The loss recognized reduced the amount outstanding of $1,067.6 million to $212.0 million.
If the Company does not recognize the expected recovery under the Due from iHeartCommunications Note, or cannot obtain that amount on a timely basis, the Company could experience a liquidity shortfall. In addition, any repayments that the Company received on the Due from iHeartCommunications Note during theone-year preference period prior to the filing of the iHeart Chapter 11 Cases may potentially be avoidable as a preference and subject to recovery by the iHeartCommunications bankruptcy estate, which could further exacerbate any liquidity shortfall.
On November 29, 2017, the “Due from iHeartCommunications” note was amended to extend its maturity from December 15, 2017 to May 15, 2019. The note’s interest rate was also amended and increased from 6.5% to 9.3%. Any balance above $1.0 billion continues to accrue interest capped at a rate of 20.0%, while the balance up to $1.0 billion will accrue interest at a rate of 9.3%. The net interest income recognized in the years ended December 31, 2017, 2016 and 2015 was $68.9 million, $50.3 million, and $61.4 million, respectively.
The Company provides advertising space on its billboards for radio stations owned by iHeartCommunications. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $6.9 million, $3.5 million, and $2.7 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, 2017, 2016 and 2015, the Company recorded $68.7 million, $36.0 million, and $30.1 million, respectively, as a component of corporate expenses for these services.
In February 2017, the Company and its indirect parent company, iHeartMedia, Inc., entered into an agreement related to the potential purchase at fair value of the Clear Channel registered trademarks and domain names. The agreements provide that CCOH will pay a license fee to iHeartMedia, Inc. in 2017 based on revenues of entities using the Clear Channel name, pursuant to the Amended and Restated License Agreement, dated November 10, 2005, by and between iHM Identity, Inc. and Outdoor Management Services, Inc. Included within the management services expense recognized in the year ended December 31, 2017 is an expense related to this license of $36.8 million.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 ofASC 740-10, as if the Company was a separate taxpayer. Deferred tax assets and liabilities are determined based on differences between financial reporting basis and tax basis of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not some portion or all of the asset will not be realized.
Pursuant to the Employee Matters Agreement, the Company’s employees participate in iHeartCommunications’ employee benefit plans, including employee medical insurance and a 401(k) retirement benefit plan. For the years ended December 31, 2017, 2016 and 2015, the Company recorded $9.5 million, $9.4 million and $10.7 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 approximately 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.
Dividends
On February 23, 2017, the Company paid a special cash dividend to our stockholders of $282.5 million, using proceeds from the sales of certainnon-strategic U.S. markets and of our business in Australia. iHeartCommunications received 89.9%, or approximately $254.0 million, with the remaining 10.1%, or approximately $28.5 million, paid to our public stockholders. The payment of these special dividends reduces the amount of cash available to us for future working capital, capital expenditure, debt service and other funding requirements.
On October 5, 2017, the Company paid a special cash dividend to Class A and Class B stockholders of record at the closing of business on October 2, 2017, in an aggregate amount equal to $25.0 million. On October 31, 2017, the board of directors of the Company paid a special cash dividend to Class A and Class B stockholders of record at the closing of business on October 26, 2017, in an aggregate amount equal to $25.0 million.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
On January 24, 2018, the Company paid a special cash dividend to Class A and Class B stockholders of record at the closing of business on January 19, 2018, in an aggregate amount equal to $30.0 million.
NOTE 7—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.
On December 22, 2017, the U.S. government enacted comprehensive income tax legislation, referred to as The Tax Cuts and Jobs Act (the Tax Act). The Tax Act reduces the U.S. federal corporate tax rate from 35% percent to 21% effective January 1, 2018, percent, requires companies to pay aone-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new U.S taxes on certain foreign earnings. To account for the reduction in the U.S. federal corporate income tax rate, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, generally 21%, which resulted in recording of a provisional deferred tax benefit of $228.0 million during 2017. To determine the impact from theone-time transition tax on accumulated foreign earnings, we analyzed our cumulative foreign earnings and profits in accordance with the rules provided in the Tax Act. Based upon our preliminary analysis which is not yet complete, we have not recorded income tax expense in the current period for theone-time transition tax due to the net accumulated deficit in our foreign earnings and profits.
The provisions in the Tax Act are broad and complex. The Company has not yet completed its analysis of the income tax effects of the Tax Act as of December 31, 2017, but has made reasonable estimates of those effects on existing deferred income tax balances and theone-time transition tax. The final financial statement impact of the Tax Act may differ from the above estimates, possibly materially, due to, among other things, changes in interpretations of the Tax Act, any legislative action to address questions that arise because of the Tax Act, and changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates to estimates the Company has utilized to calculate the provisional impacts. The Securities and Exchange Commission (SEC) has issued rules that allow for a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related income tax impacts.
Significant components of the provision for income tax benefit (expense) are as follows:
| (In thousands) | Years Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
Current—federal | $ | (87 | ) | $ | — | $ | (270 | ) | ||||
Current—foreign | (29,430 | ) | (43,611 | ) | (45,322 | ) | ||||||
Current—state | (1,377 | ) | (1,731 | ) | (1,046 | ) | ||||||
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Total current expense | (30,894 | ) | (45,342 | ) | (46,638 | ) | ||||||
Deferred—federal | 306,078 | (89,049 | ) | (8,025 | ) | |||||||
Deferred—foreign | (2,521 | ) | 56,759 | 5,282 | ||||||||
Deferred—state | 7,555 | 976 | (562 | ) | ||||||||
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Total deferred benefit (expense) | 311,112 | (31,314 | ) | (3,305 | ) | |||||||
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Income tax benefit (expense) | $ | 280,218 | $ | (76,656 | ) | $ | (49,943 | ) | ||||
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For the year ended December 31, 2017 the Company recorded current tax expense of $30.9 million as compared to $45.3 million for the 2016 year. The current tax expense for 2017 was primarily related to foreign income taxes on operating profits generated in certain jurisdictions during the period.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
For the year ended December 31, 2016 the Company recorded current tax expense of $45.3 million as compared to $46.6 million for the 2015 year. The current tax expense for 2016 was primarily related to foreign income taxes on operating profits generated in certain jurisdictions during the period.
Deferred tax benefit of $311.1 million was recorded for 2017 compared with a deferred tax expense of $31.3 million for 2016. The change in deferred taxes is primarily due to the provisional deferred tax benefit of $228.0 million recorded in 2017 related to the reduction of the U.S. federal corporate tax rate to 21% in connection with the enactment of the Tax Act mentioned above. The change in foreign deferred taxes was the result of foreign deferred tax benefit recorded in 2016 for the release of valuation allowance against certain net operating loss carryforwards in France.
Deferred tax expense of $31.3 million was recorded for 2016 compared with a deferred tax expense of $3.3 million for 2015. The change in deferred tax expense is primarily due to the utilization of net operating loss carryforwards in the U.S. which offset taxable income from the gains on the sales of ninenon-strategic U.S. outdoor markets during the first quarter of 2016 and the sale of the Company’s Australia business during the fourth quarter of 2016. The 2016 federal deferred tax expense was partially offset by foreign deferred tax benefit attributable to the release of $43.3 million of valuation allowance against certain net operating losses in France.
Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2017 and 2016 are as follows:
| (In thousands) | December 31, 2017 | December 31, 2016 | ||||||
Deferred tax liabilities: | ||||||||
Intangibles and fixed assets | $ | 504,290 | $ | 801,442 | ||||
Equity in earnings | 2,106 | 2,816 | ||||||
Other | 14,058 | 16,971 | ||||||
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Total deferred tax liabilities | 520,454 | 821,229 | ||||||
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Deferred tax assets: | ||||||||
Accrued expenses | 16,927 | 19,458 | ||||||
Net operating loss carryforwards | 229,398 | 257,613 | ||||||
Bad debt reserves | 3,656 | 3,364 | ||||||
Due from iHeartCommunications | 202,461 | — | ||||||
Other | 24,124 | 38,128 | ||||||
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Total deferred tax assets | 476,566 | 318,563 | ||||||
Less: Valuation allowance | 274,219 | 136,039 | ||||||
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Net deferred tax assets | 202,347 | 182,524 | ||||||
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Net deferred tax liabilities | $ | 318,107 | $ | 638,705 | ||||
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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 withASC 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 deferred tax liability will increase over time. The Company’s net foreign deferred tax assets for the period ending December 31, 2017 and 2016 were $57.0 million and $50.0 million, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 2017, the Company had recorded deferred tax assets for net operating loss carryforwards (tax effected) for federal and state income tax purposes of $84.5 million, which expire in various amounts through 2037. In addition, the Company recorded a deferred tax asset of $202.5 million related to the impairment loss on the Due from iHeartCommunications Note. The Company expects to realize the benefits of a portion of its deferred tax assets 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, 2017, the Company had recorded a valuation allowance of $149.2 million against a portion of these deferred tax assets which it does not expect to realize. The Company recorded a net decrease of $11.0 million in valuation allowances against its foreign deferred tax assets during the year ended December 31, 2017. At December 31, 2017, the Company had recorded $144.9 million(tax-effected) of deferred tax assets for foreign net operating losses, which are offset in part by an associated valuation allowance of $94.2 million. The remaining deferred tax valuation allowance of $30.8 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, 2017 and 2016, net deferred tax assets include a deferred tax asset of $9.6 million and $14.9 million, respectively, relating to stock-based compensation expense underASC 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 8 for additional discussion ofASC 718-10.
Income (loss) before income taxes:
| (In thousands) | Years Ended December 31, | |||||||||||
| 2017 | 2016 | 2015 | ||||||||||
US | $ | (942,297 | ) | $ | 182,258 | $ | (69,819 | ) | ||||
Foreign | 34,562 | 58,797 | 48,545 | |||||||||
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Total income (loss) before income taxes | $ | (907,735 | ) | $ | 241,055 | $ | (21,274 | ) | ||||
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CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The reconciliation of income tax computed at the U.S. federal statutory rates to income tax benefit is:
| (In thousands) | Years Ended December 31, | |||||||||||||||||||||||
| 2017 | 2016 | 2015 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||
Income tax benefit (expense) at statutory rates | $ | 317,707 | 35.0 | % | $ | (84,369 | ) | 35.0 | % | $ | 7,446 | 35.0 | % | |||||||||||
State income taxes, net of federal tax effect | 23,378 | 2.6 | % | (4,602 | ) | 1.9 | % | 2,238 | 10.5 | % | ||||||||||||||
Foreign income taxes | (19,866 | ) | (2.2 | )% | (20,725 | ) | 8.6 | % | (23,062 | ) | (108.4 | )% | ||||||||||||
Nondeductible items | (646 | ) | (0.1 | )% | (687 | ) | 0.3 | % | (754 | ) | (3.5 | )% | ||||||||||||
Changes in valuation allowance and other estimates | (148,389 | ) | (16.2 | )% | 34,597 | (14.4 | )% | (33,684 | ) | (158.3 | )% | |||||||||||||
U.S. tax reform | 228,010 | 25.1 | % | — | — | % | — | — | % | |||||||||||||||
U.S. rate differential on impairment of related party note | (115,755 | ) | (12.8 | )% | — | — | % | — | — | % | ||||||||||||||
Other, net | $ | (4,221 | ) | (0.5 | )% | $ | (870 | ) | 0.4 | % | $ | (2,127 | ) | (10.0 | )% | |||||||||
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Income tax benefit (expense) | $ | 280,218 | 30.9 | % | $ | (76,656 | ) | 31.8 | % | $ | (49,943 | ) | (234.7 | )% | ||||||||||
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During 2017, the Company recorded tax benefit of approximately $280.2 million. The 2017 income tax benefit and 30.9% effective tax rate were impacted primarily by the $228.0 million provisional deferred tax benefits recorded in connection with the reduction in the U.S. federal corporate tax rate to 21% upon enactment of the Tax Act described above. Additionally, subsequent to the enactment of the Tax Act and as further described in Note 6 above, the Company recorded an impairment loss of $855.6 million on the Due from iHeartCommunications Note. In connection with this impairment loss, the Company recorded a deferred tax asset at the newly enacted U.S. federal corporate tax rate. As this deferred tax asset was recorded subsequent to the enactment of the Tax Act, the associated impact to the Company’s 2017 effective tax rate is separately described in the table above “U.S. rate differential on impairment of related party note”. The Company also recorded tax expense of $149.2 million in connection with the valuation allowance recorded against federal and state deferred tax assets generated in the current period due to the uncertainty of the ability to utilize those assets in future periods.
During 2016, the Company recorded tax expense of approximately $76.7 million. The 2016 income tax expense and 31.8% effective tax rate were impacted primarily by the $32.9 million and $43.3 million deferred tax benefits recorded in connection with the release of valuation allowances in the U.S. and France, respectively. These deferred tax benefits were partially offset by $54.7 million in tax expense attributable to the sale of our Australia outdoor business.
During 2015, the Company recorded tax expense of approximately $49.9 million. The 2015 income tax expense and (234.7)% effective tax rate were impacted primarily by a $32.9 million valuation allowance recorded against the Company’s 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.
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 and that would become taxable upon remittance within our foreign structure. At December 31, 2017, all undistributed earnings of our international subsidiaries have been included in our provisional computation of theone-time transition tax associated with the enactment of the Tax Act. Based upon our preliminary analysis of the effects of the Tax Act which is not yet complete, the Company has not provided U.S. federal income taxes for temporary differences with respect to investments in our foreign subsidiaries, which at December 31, 2017 currently result in tax basis amounts greater than the financial reporting basis. If any excess cash held by our foreign subsidiaries were needed to fund operations in the U.S.,
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes as 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 asnon-taxable returns of capital. Additionally, as a result of U.S. tax reform described above, future dividend distributions from our international subsidiaries are exempt from U.S. federal income tax beginning January 1, 2018. 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, 2017 and 2016, was $3.2 million and $3.4 million, respectively. The total amount of unrecognized tax benefits including accrued interest and penalties at December 31, 2017 and 2016, was $36.7 million and $39.7 million, respectively, of which $22.4 million and $23.8 million is included in “Other long-term liabilities.” In addition, $14.3 million and $15.9 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, 2017 and 2016, respectively. The total amount of unrecognized tax benefits at December 31, 2017 and 2016 that, if recognized, would impact the effective income tax rate is $18.5 million and $18.6 million, respectively.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (In thousands) | Years Ended December 31, | |||||||
Unrecognized Tax Benefits | 2017 | 2016 | ||||||
Balance at beginning of period | $ | 36,332 | $ | 39,908 | ||||
Increases for tax position taken in the current year | 4,327 | 6,996 | ||||||
Increases for tax positions taken in previous years | 2,046 | 2,199 | ||||||
Decreases for tax position taken in previous years | (499 | ) | (6,148 | ) | ||||
Decreases due to settlements with tax authorities | (225 | ) | (717 | ) | ||||
Decreases due to lapse of statute of limitations | (8,511 | ) | (5,906 | ) | ||||
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Balance at end of period | $ | 33,470 | $ | 36,332 | ||||
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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 2017 and 2016, the Company reversed $9.2 million and $6.2 million in unrecognized tax benefits, respectively, inclusive of interest, as a result of the expiration of statutes of limitations to assess taxes in certain state and foreign jurisdictions. During 2016, the Company settled certain tax examinations that resulted in the reduction of uncertain tax positions of $6.8 million, inclusive of interest. All federal income tax matters through 2013 are closed. Substantially all material state, local, and foreign income tax matters have been concluded for years through 2008.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8—STOCKHOLDERS’ 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 stockholders’ 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, 2017 | $ | (1,080,812 | ) | $ | 149,886 | $ | (930,926 | ) | ||||
Net income | (639,716 | ) | 12,199 | (627,517 | ) | |||||||
Dividends declared | (332,498 | ) | — | (332,498 | ) | |||||||
Dividends and other payments to noncontrolling interests | — | (12,010 | ) | (12,010 | ) | |||||||
Disposal of noncontrolling interests | — | (2,439 | ) | (2,439 | ) | |||||||
Share-based compensation | 8,659 | 931 | 9,590 | |||||||||
Foreign currency translation adjustments | 35,975 | 9,176 | 45,151 | |||||||||
Unrealized holding loss on marketable securities | (414 | ) | — | (414 | ) | |||||||
Other adjustments to comprehensive loss | 6,720 | — | 6,720 | |||||||||
Reclassifications | 5,441 | — | 5,441 | |||||||||
Other, net | (1,800 | ) | (703 | ) | (2,503 | ) | ||||||
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Balances as of December 31, 2017 | $ | (1,998,445 | ) | $ | 157,040 | $ | (1,841,405 | ) | ||||
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Balance as of January 1, 2016 | $ | (755,599 | ) | $ | 187,775 | $ | (567,824 | ) | ||||
Net income | 141,397 | 23,002 | 164,399 | |||||||||
Dividends declared | (540,034 | ) | — | (540,034 | ) | |||||||
Dividends and other payments to noncontrolling interests | — | (16,917 | ) | (16,917 | ) | |||||||
Disposal of noncontrolling interests | — | (36,846 | ) | (36,846 | ) | |||||||
Share-based compensation | 10,291 | — | 10,291 | |||||||||
Foreign currency translation adjustments | 30,835 | (8,427 | ) | 22,408 | ||||||||
Unrealized holding loss on marketable securities | (576 | ) | — | (576 | ) | |||||||
Other adjustments to comprehensive loss | (11,814 | ) | — | (11,814 | ) | |||||||
Reclassifications | 46,730 | — | 46,730 | |||||||||
Other, net | (2,042 | ) | 1,299 | (743 | ) | |||||||
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Balances as of December 31, 2016 | $ | (1,080,812 | ) | $ | 149,886 | $ | (930,926 | ) | ||||
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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 ASC718-10. 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. ASC718-10 requires the cash flows from the tax benefits resulting from tax
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
deductions in excess of the compensation cost recognized for those options (excess tax benefits) to be classified as financing cash flows. The excess tax benefit that is required to be classified as a financing cash inflow after application of ASC718-10 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, | ||||||
| 2017 | 2016 | 2015 | ||||
Expected volatility | 42% | 42% – 44% | 37% – 56% | |||
Expected life in years | 6.3 | 6.3 | 6.3 | |||
Risk-free interest rate | 2.12% | 1.12% – 1.41% | 1.70% – 2.07% | |||
Dividend yield | —% | —% | —% | |||
The following table presents a summary of the Company’s stock options outstanding at and stock option activity during the year ended December 31, 2017:
| (In thousands, except per share data) | Options | Price (3) | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||
Outstanding, January 1, 2017 | 5,033 | $ | 7.04 | 4.9 years | $ | 2,539 | ||||||||||
Granted(1) | 4 | 4.25 | ||||||||||||||
Exercised(2) | (71 | ) | 3.10 | |||||||||||||
Forfeited | (96 | ) | 6.85 | |||||||||||||
Expired | (760 | ) | 12.49 | |||||||||||||
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Outstanding, December 31, 2017 | 4,110 | 6.10 | 4.1 years | $ | 2,378 | |||||||||||
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Exercisable | 3,392 | 6.01 | 3.4 years | $ | 2,359 | |||||||||||
Expected to vest | 718 | 6.52 | 7.5 years | $ | 19 | |||||||||||
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, 2017 is presented below:
| (In thousands, except per share data) | Options | Weighted Average Grant Date Fair Value | ||||||
Unvested, January 1, 2017 | 1,164 | $ | 4.25 | |||||
Granted | 4 | 2.04 | ||||||
Vested(1) | (354 | ) | 4.37 | |||||
Forfeited | (96 | ) | 4.15 | |||||
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| |||||||
Unvested, December 31, 2017 | 718 | $ | 4.19 | |||||
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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, 2017 (“Price” reflects the weighted average share price at the date of grant):
| (In thousands, except per share data) | Awards | Price | ||||||
Outstanding, January 1, 2017 | 2,743 | $ | 7.63 | |||||
Granted | 2,539 | 4.30 | ||||||
Vested (restriction lapsed) | (1,040 | ) | 7.16 | |||||
Forfeited | (342 | ) | 7.39 | |||||
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Outstanding, December 31, 2017 | 3,900 | 5.61 | ||||||
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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 $9.6 million, $10.3 million and $8.5 million, during the years ended December 31, 2017, 2016 and 2015, respectively.
The tax benefit related to the share-based compensation expense for the years ended December 31, 2017, 2016 and 2015 was $3.3 million, $3.9 million and $3.2 million, respectively.
As of December 31, 2017, there was $13.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be recognized over a weighted average period of approximately three years.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net Income (Loss) per Share
The following table presents the computation of earnings (loss) per share for the years ended December 31, 2017, 2016 and 2015:
| Years Ended December 31, | ||||||||||||
| (In thousands, except per share data) | 2017 | 2016 | 2015 | |||||||||
NUMERATOR: | ||||||||||||
Net income (loss) attributable to the Company—common shares | $ | (639,716 | ) | $ | 141,397 | $ | (95,981 | ) | ||||
DENOMINATOR: | ||||||||||||
Weighted average common shares outstanding—basic | 361,141 | 360,294 | 359,508 | |||||||||
Stock options and restricted stock (1): | — | 1,318 | ||||||||||
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Weighted average common shares outstanding—diluted | 361,141 | 361,612 | 359,508 | |||||||||
Net income (loss) attributable to the Company per common share: | ||||||||||||
Basic | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | ||||
Diluted | $ | (1.77 | ) | $ | 0.39 | $ | (0.27 | ) | ||||
NOTE 9—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 makepre-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 $2.2 million, $2.3 million and $2.4 million for the years ended December 31, 2017, 2016 and 2015, 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 $13.1 million, $15.1 million and $13.6 million for the years ended December 31, 2017, 2016 and 2015, respectively, were recorded as a component of operating expenses.
Certain highly compensated executives of the Company are eligible to participate in anon-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 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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10—OTHER INFORMATION
The following table discloses the components of “Other income (expense)” for the years ended December 31, 2017, 2016 and 2015, respectively:
| Years Ended December 31, | ||||||||||||
| (In thousands) | 2017 | 2016 | 2015 | |||||||||
Foreign exchange loss | $ | 29,563 | $ | (69,599 | ) | $ | 14,790 | |||||
Other | 237 | (1,083 | ) | (2,403 | ) | |||||||
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Total other income (expense)—net | $ | 29,800 | $ | (70,682 | ) | $ | 12,387 | |||||
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For the years ended December 31, 2017, 2016 and 2015 the total increase (decrease) in other comprehensive income (loss) related to the impact of pensions on deferred income tax liabilities were $(0.3) million, ($1.0) million and $1.6 million, respectively.
The following table discloses the components of “Other current assets” as of December 31, 2017 and 2016, respectively:
| As of December 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
Inventory | $ | 21,940 | $ | 21,190 | ||||
Deposits | 1,720 | 1,445 | ||||||
Other receivables | 4,906 | 9,302 | ||||||
Restricted cash | 26,096 | 680 | ||||||
Other | 4,052 | 6,582 | ||||||
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Total other current assets | $ | 58,714 | $ | 39,199 | ||||
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During 2017, CCOH established a separatebi-lateral letter of credit facility to issue additional letters of credit to be supported by cash collateral posted by the Company. As of December 31, 2017, the amount of letters of credit issued under this facility totaled $24.7 million and was backed by cash collateral of $25.4 million, which is classified as Restricted cash.
The following table discloses the components of “Other assets” as of December 31, 2017 and 2016, respectively:
| As of December 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
Investments | $ | 10,042 | $ | 10,183 | ||||
Deposits | 23,096 | 19,318 | ||||||
Prepaid expenses | 60,294 | 61,814 | ||||||
Restricted cash | 18,095 | 20,474 | ||||||
Other | 13,007 | 10,224 | ||||||
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Total other assets | $ | 124,534 | $ | 122,013 | ||||
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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, 2017 and 2016, respectively:
| As of December 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
Unrecognized tax benefits | $ | 22,419 | $ | 23,772 | ||||
Asset retirement obligation | 44,779 | 39,451 | ||||||
Deferred rent | 105,324 | 101,673 | ||||||
Employee related liabilities | 52,212 | 55,460 | ||||||
Other | 45,681 | 38,955 | ||||||
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Total other long-term liabilities | $ | 270,415 | $ | 259,311 | ||||
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The following table discloses the components of “Accumulated other comprehensive loss,” net of tax, as of December 31, 2017 and 2016, respectively:
| As of December 31, | ||||||||
| (In thousands) | 2017 | 2016 | ||||||
Cumulative currency translation adjustments and other | $ | (340,109 | ) | $ | (388,246 | ) | ||
Cumulative unrealized gain on securities | 1,173 | 1,588 | ||||||
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Total accumulated other comprehensive loss | $ | (338,936 | ) | $ | (386,658 | ) | ||
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NOTE 11—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 and Latin America, and the International segment primarily includes operations in Europe and Asia. The Americas and International display inventory consists primarily of billboards, street furniture displays and transit displays. Corporate includes infrastructure and support including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments are recorded in corporate expenses.
During the first quarter of 2018, the Company revised its segment reporting, as discussed in Note 1.
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, 2017, 2016 and 2015:
| (In thousands) | Americas Outdoor Advertising | International Outdoor Advertising | Corporate and other reconciling items | Consolidated | ||||||||||||
Year Ended December 31, 2017 | ||||||||||||||||
Revenue | $ | 1,256,326 | $ | 1,334,939 | $ | — | $ | 2,591,265 | ||||||||
Direct operating expenses | 574,113 | 828,652 | — | 1,402,765 | ||||||||||||
Selling, general and administrative expenses | 219,467 | 289,170 | — | 508,637 | ||||||||||||
Corporate expenses | — | — | 143,678 | 143,678 | ||||||||||||
Depreciation and amortization | 189,707 | 131,224 | 5,060 | 325,991 | ||||||||||||
Impairment charges | — | — | 4,159 | 4,159 | ||||||||||||
Other operating income, net | — | — | 26,391 | 26,391 | ||||||||||||
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Operating income (loss) | $ | 273,039 | $ | 85,893 | $ | (126,506 | ) | $ | 232,426 | |||||||
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Segment assets | $ | 2,969,326 | $ | 1,449,365 | $ | 252,091 | $ | 4,670,782 | ||||||||
Capital expenditures | $ | 74,580 | $ | 146,392 | $ | 3,266 | $ | 224,238 | ||||||||
Share-based compensation expense | $ | — | $ | — | $ | 9,590 | $ | 9,590 | ||||||||
Year Ended December 31, 2016 | ||||||||||||||||
Revenue | $ | 1,278,413 | $ | 1,410,471 | $ | — | $ | 2,688,884 | ||||||||
Direct operating expenses | 570,310 | 851,748 | — | 1,422,058 | ||||||||||||
Selling, general and administrative expenses | 225,415 | 289,787 | — | 515,202 | ||||||||||||
Corporate expenses | — | — | 117,436 | 117,436 | ||||||||||||
Depreciation and amortization | 185,654 | 152,758 | 5,712 | 344,124 | ||||||||||||
Impairment charges | — | — | 7,274 | 7,274 | ||||||||||||
Other operating income, net | — | — | 354,688 | 354,688 | ||||||||||||
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Operating income | $ | 297,034 | $ | 116,178 | $ | 224,266 | $ | 637,478 | ||||||||
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Segment assets | $ | 3,175,355 | $ | 1,342,356 | $ | 1,201,117 | $ | 5,718,828 | ||||||||
Capital expenditures | $ | 81,401 | $ | 143,788 | $ | 4,583 | $ | 229,772 | ||||||||
Share-based compensation expense | $ | — | $ | — | $ | 10,291 | $ | 10,291 | ||||||||
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 | — | — | 116,523 | 116,523 | ||||||||||||
Depreciation and amortization | 204,514 | 166,060 | 5,388 | 375,962 | ||||||||||||
Impairment charges | — | — | 21,631 | 21,631 | ||||||||||||
Other operating expense, net | — | — | (4,824 | ) | (4,824 | ) | ||||||||||
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Operating income (loss) | $ | 313,871 | $ | 95,353 | $ | (148,366 | ) | $ | 260,858 | |||||||
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Segment assets | $ | 3,567,764 | $ | 1,573,161 | $ | 1,165,863 | $ | 6,306,788 | ||||||||
Capital expenditures | $ | 82,165 | $ | 132,554 | $ | 3,613 | $ | 218,332 | ||||||||
Share-based compensation expense | — | — | $ | 8,502 | $ | 8,502 | ||||||||||
Revenue of $1.5 billion, $1.5 billion and $1.6 billion derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2017, 2016 and 2015, respectively. Revenue of
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$0.3 billion, $0.3 billion and $0.3 billion derived from France are included in the data above for the years ended December 31, 2017, 2016 and 2015, respectively. Revenue of $1.1 billion, $1.1 billion and $1.2 billion derived from the Company’s U.S. operations are included in the data above for the years ended December 31, 2017, 2016 and 2015.
Identifiable long-lived assets of $0.6 billion, $0.5 billion and $0.7 billion derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2017, 2016 and 2015, respectively. Identifiable long-lived assets of $0.3 billion, $0.2 billion and $0.2 billion derived from China are included in the data above for the years ended December 31, 2017, 2016 and 2015, respectively. Identifiable long-lived assets of $0.8 billion, $0.9 billion and $1.0 billion derived from the Company’s U.S. operations are included in the data above for the years ended December 31, 2017, 2016 and 2015, respectively.
NOTE 12—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, | ||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||||||
Revenue | $ | 544,726 | $ | 589,014 | $ | 672,319 | $ | 708,086 | $ | 645,089 | $ | 669,221 | $ | 729,131 | $ | 722,563 | ||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||
Direct operating expenses | 327,931 | 341,987 | 350,173 | 362,001 | 356,100 | 362,250 | 368,561 | 355,820 | ||||||||||||||||||||||||
Selling, general and administrative expenses | 115,774 | 126,801 | 125,898 | 135,567 | 128,397 | 126,164 | 138,568 | 126,670 | ||||||||||||||||||||||||
Corporate expenses | 34,540 | 28,224 | 35,340 | 29,673 | 35,333 | 28,103 | 38,465 | 31,436 | ||||||||||||||||||||||||
Depreciation and amortization | 77,494 | 85,395 | 78,290 | 86,974 | 81,096 | 85,780 | 89,111 | 85,975 | ||||||||||||||||||||||||
Impairment charges | — | — | — | — | 1,591 | 7,274 | 2,568 | — | ||||||||||||||||||||||||
Other operating income (expense), net | 32,611 | 284,774 | 7,829 | (59,384 | ) | (11,783 | ) | 1,095 | (2,266 | ) | 128,203 | |||||||||||||||||||||
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Operating income | 21,598 | 291,381 | 90,447 | 34,487 | 30,789 | 60,745 | 89,592 | 250,865 | ||||||||||||||||||||||||
Interest expense | 92,633 | 93,873 | 94,630 | 94,650 | 95,467 | 93,313 | 98,419 | 93,056 | ||||||||||||||||||||||||
Interest income on Due from iHeartCommunications | 14,807 | 12,713 | 15,383 | 11,291 | 17,087 | 12,429 | 21,594 | 13,876 | ||||||||||||||||||||||||
Loss on Due from iHeartCommunications | — | — | — | — | — | — | (855,648 | ) | — | |||||||||||||||||||||||
Gain (loss) on investments, net | (125 | ) | — | (135 | ) | — | (532 | ) | 781 | (253 | ) | (250 | ) | |||||||||||||||||||
Equity in earnings (loss) of nonconsolidated affiliates | (472 | ) | (415 | ) | 271 | (232 | ) | (628 | ) | (727 | ) | (161 | ) | (315 | ) | |||||||||||||||||
Other income (expense), net | 3,992 | (5,803 | ) | 8,908 | (33,871 | ) | 9,696 | (7,305 | ) | 7,204 | (23,703 | ) | ||||||||||||||||||||
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Income (loss) before income taxes | (52,833 | ) | 204,003 | 20,244 | (82,975 | ) | (39,055 | ) | (27,390 | ) | (836,091 | ) | 147,417 | |||||||||||||||||||
Income tax benefit (expense) | 21,837 | (62,917 | ) | (18,390 | ) | 21,719 | (16,347 | ) | 3,619 | 293,118 | (39,077 | ) | ||||||||||||||||||||
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Consolidated net income (loss) | (30,996 | ) | 141,086 | 1,854 | (61,256 | ) | (55,402 | ) | (23,771 | ) | (542,973 | ) | 108,340 | |||||||||||||||||||
Less amount attributable to noncontrolling interest | (1,995 | ) | 976 | 6,631 | 7,857 | 6,237 | 7,329 | 1,326 | 6,840 | |||||||||||||||||||||||
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Net income (loss) attributable to the Company | $ | (29,001 | ) | $ | 140,110 | $ | (4,777 | ) | $ | (69,113 | ) | $ | (61,639 | ) | $ | (31,100 | ) | $ | (544,299 | ) | $ | 101,500 | ||||||||||
Net income (loss) per common share: |
| |||||||||||||||||||||||||||||||
Basic | $ | (0.08 | ) | $ | 0.39 | $ | (0.01 | ) | $ | (0.19 | ) | $ | (0.17 | ) | $ | (0.09 | ) | $ | (1.51 | ) | $ | 0.28 | ||||||||||
Diluted | $ | (0.08 | ) | $ | 0.39 | $ | (0.01 | ) | $ | (0.19 | ) | $ | (0.17 | ) | $ | (0.09 | ) | $ | (1.51 | ) | $ | 0.28 | ||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13—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 RegulationS-X Rule3-10(d):
| (In thousands) | December 31, 2017 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents | 2,212 | — | 22,841 | 119,066 | — | $ | 144,119 | |||||||||||||||||
Accounts receivable, net of allowance | — | — | 192,493 | 466,970 | — | 659,463 | ||||||||||||||||||
Intercompany receivables | — | 785,075 | 2,924,888 | 88,053 | (3,798,016 | ) | — | |||||||||||||||||
Prepaid expenses | 291 | 3,433 | 50,028 | 58,124 | — | 111,876 | ||||||||||||||||||
Other current assets | 25,441 | — | 2,552 | 30,721 | — | 58,714 | ||||||||||||||||||
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Total Current Assets | 27,944 | 788,508 | 3,192,802 | 762,934 | (3,798,016 | ) | 974,172 | |||||||||||||||||
Structures, net | — | — | 675,443 | 505,439 | — | 1,180,882 | ||||||||||||||||||
Other property, plant and equipment, net | — | — | 119,856 | 94,291 | — | 214,147 | ||||||||||||||||||
Indefinite-lived intangibles | — | — | 977,152 | — | — | 977,152 | ||||||||||||||||||
Other intangibles, net | — | — | 248,674 | 25,188 | — | 273,862 | ||||||||||||||||||
Goodwill | — | — | 507,820 | 206,223 | — | 714,043 | ||||||||||||||||||
Due from iHeartCommunications | 211,990 | — | — | — | — | 211,990 | ||||||||||||||||||
Intercompany notes receivable | 182,026 | 5,087,742 | 12,437 | 16,273 | (5,298,478 | ) | — | |||||||||||||||||
Other assets | 447,152 | 111,432 | 1,335,346 | 70,897 | (1,840,293 | ) | 124,534 | |||||||||||||||||
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Total Assets | $ | 869,112 | $ | 5,987,682 | $ | 7,069,530 | $ | 1,681,245 | $ | (10,936,787 | ) | $ | 4,670,782 | |||||||||||
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Accounts payable | $ | — | $ | — | $ | 7,592 | $ | 80,368 | $ | — | $ | 87,960 | ||||||||||||
Intercompany payable | 2,924,888 | — | 873,128 | — | (3,798,016 | ) | — | |||||||||||||||||
Accrued expenses | 1,167 | (1,315 | ) | 91,325 | 418,624 | — | 509,801 | |||||||||||||||||
Deferred income | — | — | 25,278 | 33,900 | — | 59,178 | ||||||||||||||||||
Current portion of long-term debt | — | — | 115 | 458 | — | 573 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Current Liabilities | 2,926,055 | (1,315 | ) | 997,438 | 533,350 | (3,798,016 | ) | 657,512 | ||||||||||||||||
Long-term debt | — | 4,895,104 | 1,820 | 369,229 | — | 5,266,153 | ||||||||||||||||||
Intercompany notes payable | — | 16,273 | 5,046,119 | 236,086 | (5,298,478 | ) | — | |||||||||||||||||
Deferred tax liability | (93,111 | ) | 853 | 466,827 | (56,462 | ) | — | 318,107 | ||||||||||||||||
Other long-term liabilities | 1,157 | — | 140,272 | 128,986 | — | 270,415 | ||||||||||||||||||
Total stockholders’ equity (deficit) | (1,964,989 | ) | 1,076,767 | 417,054 | 470,056 | (1,840,293 | ) | (1,841,405 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 869,112 | $ | 5,987,682 | $ | 7,069,530 | $ | 1,681,245 | $ | (10,936,787 | ) | $ | 4,670,782 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| (In thousands) | December 31, 2016 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash and cash equivalents | $ | 300,285 | $ | — | $ | 61,542 | $ | 180,168 | $ | — | $ | 541,995 | ||||||||||||
Accounts receivable, net of allowance | — | — | 193,474 | 399,596 | — | 593,070 | ||||||||||||||||||
Intercompany receivables | — | 687,043 | 2,694,094 | 99,431 | (3,480,568 | ) | — | |||||||||||||||||
Prepaid expenses | 1,363 | 3,433 | 51,751 | 55,022 | — | 111,569 | ||||||||||||||||||
Assets held for sale | — | — | 55,602 | — | — | 55,602 | ||||||||||||||||||
Other current assets | — | — | 6,873 | 32,326 | — | 39,199 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Current Assets | 301,648 | 690,476 | 3,063,336 | 766,543 | (3,480,568 | ) | 1,341,435 | |||||||||||||||||
Structures, net | — | — | 746,877 | 449,799 | — | 1,196,676 | ||||||||||||||||||
Other property, plant and equipment, net | — | — | 124,138 | 92,019 | — | 216,157 | ||||||||||||||||||
Indefinite-lived intangibles | — | — | 951,439 | 9,527 | — | 960,966 | ||||||||||||||||||
Other intangibles, net | — | — | 259,915 | 39,702 | — | 299,617 | ||||||||||||||||||
Goodwill | — | — | 505,478 | 190,785 | — | 696,263 | ||||||||||||||||||
Due from iHeartCommunications | 885,701 | — | — | — | — | 885,701 | ||||||||||||||||||
Intercompany notes receivable | 182,026 | 4,887,354 | — | — | (5,069,380 | ) | — | |||||||||||||||||
Other assets | 280,435 | 418,658 | 1,320,838 | 65,589 | (1,963,507 | ) | 122,013 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Assets | $ | 1,649,810 | $ | 5,996,488 | $ | 6,972,021 | $ | 1,613,964 | $ | (10,513,455 | ) | $ | 5,718,828 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Accounts payable | $ | — | $ | — | $ | 14,897 | $ | 71,973 | $ | — | $ | 86,870 | ||||||||||||
Intercompany payable | 2,694,094 | — | 786,474 | — | (3,480,568 | ) | — | |||||||||||||||||
Accrued expenses | 2,223 | 58,652 | 35,509 | 384,488 | — | 480,872 | ||||||||||||||||||
Deferred income | — | — | 33,471 | 33,534 | — | 67,005 | ||||||||||||||||||
Current portion of long-term debt | — | — | 89 | 6,882 | — | 6,971 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Current Liabilities | 2,696,317 | 58,652 | 870,440 | 496,877 | (3,480,568 | ) | 641,718 | |||||||||||||||||
Long-term debt | — | 4,886,318 | 1,711 | 221,991 | — | 5,110,020 | ||||||||||||||||||
Intercompany notes payable | — | 5,000 | 5,027,681 | 36,699 | (5,069,380 | ) | — | |||||||||||||||||
Deferred tax liability | 772 | 1,367 | 685,780 | (49,214 | ) | — | 638,705 | |||||||||||||||||
Other long-term liabilities | 1,055 | — | 135,094 | 123,162 | — | 259,311 | ||||||||||||||||||
Total stockholders’ equity (deficit) | (1,048,334 | ) | 1,045,151 | 251,315 | 784,449 | (1,963,507 | ) | (930,926 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 1,649,810 | $ | 5,996,488 | $ | 6,972,021 | $ | 1,613,964 | $ | (10,513,455 | ) | $ | 5,718,828 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| (In thousands) | Year Ended December 31, 2017 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Revenue | $ | — | $ | — | $ | 1,137,003 | $ | 1,454,262 | $ | — | $ | 2,591,265 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Direct operating expenses | — | — | 510,271 | 892,494 | — | 1,402,765 | ||||||||||||||||||
Selling, general and administrative expenses | — | — | 192,452 | 316,185 | — | 508,637 | ||||||||||||||||||
Corporate expenses | 14,660 | — | 93,232 | 35,786 | — | 143,678 | ||||||||||||||||||
Depreciation and amortization | — | — | 181,906 | 144,085 | — | 325,991 | ||||||||||||||||||
Impairment charges | — | — | — | 4,159 | — | 4,159 | ||||||||||||||||||
Other operating income (expense), net | (406 | ) | — | 34,943 | (8,146 | ) | — | 26,391 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating income (loss) | (15,066 | ) | — | 194,085 | 53,407 | — | 232,426 | |||||||||||||||||
Interest (income) expense, net | (414 | ) | 353,082 | (205 | ) | 28,686 | — | 381,149 | ||||||||||||||||
Interest income on Due from iHeartCommunications | 68,871 | — | — | — | — | 68,871 | ||||||||||||||||||
Intercompany interest income | 16,349 | 339,925 | 69,424 | 184 | (425,882 | ) | — | |||||||||||||||||
Intercompany interest expense | 68,871 | 406 | 356,458 | 147 | (425,882 | ) | — | |||||||||||||||||
Loss on Due from iHeartCommunications | (855,648 | ) | — | — | — | — | (855,648 | ) | ||||||||||||||||
Loss on investments, net | — | — | — | (1,045 | ) | — | (1,045 | ) | ||||||||||||||||
Equity in earnings (loss) of nonconsolidated affiliates | 118,995 | 4,749 | (18,122 | ) | (1,981 | ) | (104,631 | ) | (990 | ) | ||||||||||||||
Other income, net | 3,167 | — | 11,232 | 15,401 | — | 29,800 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) before income taxes | (731,789 | ) | (8,814 | ) | (99,634 | ) | 37,133 | (104,631 | ) | (907,735 | ) | |||||||||||||
Income tax benefit (expense) | 92,073 | 2,405 | 218,629 | (32,889 | ) | — | 280,218 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated net income (loss) | (639,716 | ) | (6,409 | ) | 118,995 | 4,244 | (104,631 | ) | (627,517 | ) | ||||||||||||||
Less amount attributable to noncontrolling interest | — | — | — | 12,199 | — | 12,199 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to the Company | $ | (639,716 | ) | $ | (6,409 | ) | $ | 118,995 | $ | (7,955 | ) | $ | (104,631 | ) | $ | (639,716 | ) | |||||||
Other comprehensive income (loss), net of tax: | ||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | 235 | 44,916 | — | 45,151 | ||||||||||||||||||
Unrealized holding loss on marketable securities | — | — | — | (414 | ) | — | (414 | ) | ||||||||||||||||
Other adjustments to comprehensive income (loss) | — | — | — | 6,720 | — | 6,720 | ||||||||||||||||||
Reclassification adjustments | — | — | — | 5,441 | — | 5,441 | ||||||||||||||||||
Equity in subsidiary comprehensive income | 47,722 | 38,025 | 47,487 | — | (133,234 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income (loss) | (591,994 | ) | 31,616 | 166,717 | 48,708 | (237,865 | ) | (582,818 | ) | |||||||||||||||
Less amount attributable to noncontrolling interest | — | — | — | 9,176 | — | 9,176 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income (loss) attributable to the Company | $ | (591,994 | ) | $ | 31,616 | $ | 166,717 | $ | 39,532 | $ | (237,865 | ) | $ | (591,994 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| (In thousands) | Year Ended December 31, 2016 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Revenue | $ | — | $ | — | $ | 1,144,445 | $ | 1,544,439 | $ | — | $ | 2,688,884 | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Direct operating expenses | — | — | 497,634 | 924,424 | — | 1,422,058 | ||||||||||||||||||
Selling, general and administrative expenses | — | — | 196,006 | 319,196 | — | 515,202 | ||||||||||||||||||
Corporate expenses | 13,157 | — | 61,926 | 42,353 | — | 117,436 | ||||||||||||||||||
Depreciation and amortization | — | — | 177,918 | 166,206 | — | 344,124 | ||||||||||||||||||
Impairment charges | — | — | — | 7,274 | — | 7,274 | ||||||||||||||||||
Other operating income (expense), net | (427 | ) | — | 291,717 | 63,398 | — | 354,688 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Operating income (loss) | (13,584 | ) | — | 502,678 | 148,384 | — | 637,478 | |||||||||||||||||
Interest (income) expense, net | (1,195 | ) | 353,447 | 721 | 21,919 | — | 374,892 | |||||||||||||||||
Interest income on Due from iHeartCommunications | 50,309 | — | — | — | — | 50,309 | ||||||||||||||||||
Intercompany interest income | 16,142 | 341,472 | 52,103 | — | (409,717 | ) | — | |||||||||||||||||
Intercompany interest expense | 50,309 | 15 | 357,614 | 1,779 | (409,717 | ) | — | |||||||||||||||||
Gain (loss) on investments, net | — | — | (250 | ) | 781 | — | 531 | |||||||||||||||||
Equity in earnings (loss) of nonconsolidated affiliates | 136,885 | 44,767 | (19,575 | ) | (2,837 | ) | (160,929 | ) | (1,689 | ) | ||||||||||||||
Other income (expense), net | 3,429 | — | (6,376 | ) | (67,735 | ) | — | (70,682 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income before income taxes | 144,067 | 32,777 | 170,245 | 54,895 | (160,929 | ) | 241,055 | |||||||||||||||||
Income tax benefit (expense) | (2,670 | ) | (55,574 | ) | (33,360 | ) | 14,948 | — | (76,656 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated net income (loss) | 141,397 | (22,797 | ) | 136,885 | 69,843 | (160,929 | ) | 164,399 | ||||||||||||||||
Less amount attributable to noncontrolling interest | — | — | — | 23,002 | — | 23,002 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to the Company | $ | 141,397 | $ | (22,797 | ) | $ | 136,885 | $ | 46,841 | $ | (160,929 | ) | $ | 141,397 | ||||||||||
Other comprehensive loss, net of tax: | ||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | (8,000 | ) | 30,408 | — | 22,408 | |||||||||||||||||
Unrealized holding loss on marketable securities | — | — | — | (576 | ) | — | (576 | ) | ||||||||||||||||
Other adjustments to comprehensive loss | — | — | — | (11,814 | ) | — | (11,814 | ) | ||||||||||||||||
Reclassification adjustments | — | — | — | 46,730 | — | 46,730 | ||||||||||||||||||
Equity in subsidiary comprehensive income | 65,175 | 66,758 | 73,175 | — | (205,108 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income | 206,572 | 43,961 | 202,060 | 111,589 | (366,037 | ) | 198,145 | |||||||||||||||||
Less amount attributable to noncontrolling interest | — | — | — | (8,427 | ) | — | (8,427 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive income attributable to the Company | $ | 206,572 | $ | 43,961 | $ | 202,060 | $ | 120,016 | $ | (366,037 | ) | $ | 206,572 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
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 | — | 58,719 | 44,755 | — | 116,523 | ||||||||||||||||||
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 | ) | — | 202,849 | 71,516 | — | 260,858 | |||||||||||||||||
Interest expense, net | 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 | (75,927 | ) | 10,383 | 5,609 | (1,935 | ) | 61,581 | (289 | ) | |||||||||||||||
Other income, net | 2,915 | 3,440 | 20,318 | 10,289 | (24,575 | ) | 12,387 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income (loss) before income taxes | (70,453 | ) | 1,951 | (67,377 | ) | 77,599 | 37,006 | (21,274 | ) | |||||||||||||||
Income tax expense | (953 | ) | (575 | ) | (8,550 | ) | (39,865 | ) | — | (49,943 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Consolidated net income (loss) | (71,406 | ) | 1,376 | (75,927 | ) | 37,734 | 37,006 | (71,217 | ) | |||||||||||||||
Less amount attributable to noncontrolling interest | 24,764 | 24,764 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) attributable to the Company | $ | (71,406 | ) | $ | 1,376 | $ | (75,927 | ) | $ | 12,970 | $ | 37,006 | $ | (95,981 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
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 loss | (110,480 | ) | (61,867 | ) | (93,875 | ) | — | 266,222 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive loss | (181,886 | ) | (63,931 | ) | (186,407 | ) | (88,619 | ) | 303,228 | (217,615 | ) | |||||||||||||
Less amount attributable to noncontrolling interest | — | — | — | (11,154 | ) | — | (11,154 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Comprehensive loss attributable to the Company | $ | (181,886 | ) | $ | (63,931 | ) | $ | (186,407 | ) | $ | (77,465 | ) | $ | 303,228 | $ | (206,461 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| (In thousands) | Year Ended December 31, 2017 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Consolidated net income (loss) | $ | (639,716 | ) | $ | (6,409 | ) | $ | 118,995 | $ | 4,244 | $ | (104,631 | ) | $ | (627,517 | ) | ||||||||
Reconciling items: | ||||||||||||||||||||||||
Impairment charges | — | — | — | 4,159 | — | 4,159 | ||||||||||||||||||
Depreciation and amortization | — | — | 181,906 | 144,085 | — | 325,991 | ||||||||||||||||||
Deferred taxes | (93,882 | ) | (514 | ) | (218,955 | ) | 2,239 | — | (311,112 | ) | ||||||||||||||
Provision for doubtful accounts | — | — | 10,083 | (3,343 | ) | — | 6,740 | |||||||||||||||||
Amortization of deferred financing charges and note discounts, net | — | 8,786 | — | 1,741 | — | 10,527 | ||||||||||||||||||
Share-based compensation | — | — | 6,432 | 3,158 | — | 9,590 | ||||||||||||||||||
(Gain) loss on disposal of operating assets, net | — | — | (35,020 | ) | 5,673 | — | (29,347 | ) | ||||||||||||||||
Loss on Due from iHeartCommunications | 855,648 | — | — | — | — | 855,648 | ||||||||||||||||||
Loss on investments, net | — | — | — | 1,045 | — | 1,045 | ||||||||||||||||||
Equity in (earnings) loss of nonconsolidated affiliates | (118,995 | ) | (4,749 | ) | 18,122 | 1,981 | 104,631 | 990 | ||||||||||||||||
Foreign exchange transaction gain | — | — | (27 | ) | (29,536 | ) | — | (29,563 | ) | |||||||||||||||
Other reconciling items, net | — | — | (3,423 | ) | (1,287 | ) | — | (4,710 | ) | |||||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||||||||||||||||
Increase in accounts receivable | — | — | (9,104 | ) | (30,686 | ) | — | (39,790 | ) | |||||||||||||||
Decrease in prepaids and other current assets | 1,072 | — | 2,410 | 6,070 | — | 9,552 | ||||||||||||||||||
Increase (decrease) in accrued expenses | (436 | ) | (59,968 | ) | 56,926 | (3,838 | ) | — | (7,316 | ) | ||||||||||||||
Increase (decrease) in accounts payable | — | — | (7,305 | ) | 3,179 | — | (4,126 | ) | ||||||||||||||||
Increase (decrease) in accrued interest | — | — | (77 | ) | 508 | — | 431 | |||||||||||||||||
Decrease in deferred income | — | — | (8,401 | ) | (4,872 | ) | — | (13,273 | ) | |||||||||||||||
Changes in other operating assets and liabilities | — | — | (3,067 | ) | (7,264 | ) | — | (10,331 | ) | |||||||||||||||
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|
|
|
|
| |||||||||||||
Net cash provided by (used for) operating activities | $ | 3,691 | $ | (62,854 | ) | $ | 109,495 | $ | 97,256 | $ | — | $ | 147,588 | |||||||||||
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| |||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchases of property, plant and equipment | — | — | (73,641 | ) | (150,597 | ) | — | (224,238 | ) | |||||||||||||||
Proceeds from disposal of assets | — | — | 55,747 | 16,302 | — | 72,049 | ||||||||||||||||||
Purchases of other operating assets | — | — | (757 | ) | (80 | ) | — | (837 | ) | |||||||||||||||
(Increase) decrease in intercompany notes receivable, net | — | 149,612 | 11 | (11,284 | ) | (138,339 | ) | — | ||||||||||||||||
Dividends from subsidiaries | — | — | 10,710 | — | (10,710 | ) | — | |||||||||||||||||
Change in other, net | (25,441 | ) | — | (5 | ) | 2,571 | — | (22,875 | ) | |||||||||||||||
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|
|
|
|
|
| |||||||||||||
Net cash provided by (used for) investing activities | $ | (25,441 | ) | $ | 149,612 | $ | (7,935 | ) | $ | (143,088 | ) | $ | (149,049 | ) | $ | (175,901 | ) | |||||||
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|
|
| |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Payments on credit facilities | — | — | — | (909 | ) | — | (909 | ) | ||||||||||||||||
Proceeds from long-term debt | — | — | — | 156,000 | — | 156,000 | ||||||||||||||||||
Payments on long-term debt | — | — | (100 | ) | (648 | ) | — | (748 | ) | |||||||||||||||
Net transfers to iHeartCommunications | (181,939 | ) | — | — | — | — | (181,939 | ) | ||||||||||||||||
Dividends and other payments to noncontrolling interests | — | — | — | (12,010 | ) | — | (12,010 | ) | ||||||||||||||||
Dividends paid | (332,824 | ) | — | — | (10,710 | ) | 10,710 | (332,824 | ) | |||||||||||||||
Increase (decrease) in intercompany notes payable, net | — | 11,273 | — | (149,612 | ) | 138,339 | — | |||||||||||||||||
Intercompany funding | 239,908 | (98,031 | ) | (140,160 | ) | (1,717 | ) | — | — | |||||||||||||||
Change in other, net | (1,468 | ) | — | (1 | ) | (5,614 | ) | — | (7,083 | ) | ||||||||||||||
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|
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|
|
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|
|
| |||||||||||||
Net cash used for financing activities | (276,323 | ) | (86,758 | ) | (140,261 | ) | (25,220 | ) | 149,049 | (379,513 | ) | |||||||||||||
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| |||||||||||||
Effect of exchange rate changes on cash | — | — | — | 9,950 | — | 9,950 | ||||||||||||||||||
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|
|
|
|
| |||||||||||||
Net decrease in cash and cash equivalents | (298,073 | ) | — | (38,701 | ) | (61,102 | ) | — | (397,876 | ) | ||||||||||||||
Cash and cash equivalents at beginning of year | 300,285 | — | 61,542 | 180,168 | — | 541,995 | ||||||||||||||||||
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|
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|
|
|
| |||||||||||||
Cash and cash equivalents at end of year | $ | 2,212 | $ | — | $ | 22,841 | $ | 119,066 | $ | — | $ | 144,119 | ||||||||||||
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| |||||||||||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
| (In thousands) | Year Ended December 31, 2016 | |||||||||||||||||||||||
| Parent Company | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Consolidated net income (loss) | $ | 141,397 | $ | (22,797 | ) | $ | 136,885 | $ | 69,843 | $ | (160,929 | ) | $ | 164,399 | ||||||||||
Reconciling items: | ||||||||||||||||||||||||
Impairment charges | — | — | — | 7,274 | — | 7,274 | ||||||||||||||||||
Depreciation and amortization | — | — | 177,918 | 166,206 | — | 344,124 | ||||||||||||||||||
Deferred taxes | — | — | 88,083 | (56,769 | ) | — | 31,314 | |||||||||||||||||
Provision for doubtful accounts | — | — | 5,565 | 5,094 | — | 10,659 | ||||||||||||||||||
Amortization of deferred financing charges and note discounts, net | — | 8,741 | — | 1,831 | — | 10,572 | ||||||||||||||||||
Share-based compensation | — | — | 5,658 | 4,633 | — | 10,291 | ||||||||||||||||||
Gain on sale of operating and fixed assets | — | — | (293,802 | ) | (69,683 | ) | — | (363,485 | ) | |||||||||||||||
(Gain) loss on investments, net | — | — | 250 | (781 | ) | — | (531 | ) | ||||||||||||||||
Equity in (earnings) loss of nonconsolidated affiliates | (136,885 | ) | (44,767 | ) | 19,575 | 2,837 | 160,929 | 1,689 | ||||||||||||||||
Foreign exchange transaction loss | — | — | 22,874 | 46,725 | — | 69,599 | ||||||||||||||||||
Other reconciling items, net | — | — | 1,256 | (1,391 | ) | — | (135 | ) | ||||||||||||||||
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | ||||||||||||||||||||||||
Decrease in accounts receivable | — | — | 13,660 | 16,648 | — | 30,308 | ||||||||||||||||||
(Increase) decrease in prepaids and other current assets | 60 | — | 5,662 | (21,300 | ) | (15,578 | ) | |||||||||||||||||
Increase (decrease) in accrued expenses | (227 | ) | 59,359 | (70,834 | ) | 37,220 | — | 25,518 | ||||||||||||||||
Increase (decrease) in accounts payable | — | — | 2,764 | (6,561 | ) | — | (3,797 | ) | ||||||||||||||||
Increase (decrease) in accrued interest | — | — | (571 | ) | 765 | — | 194 | |||||||||||||||||
Decrease in deferred income | — | — | (5,265 | ) | (12,854 | ) | — | (18,119 | ) | |||||||||||||||
Changes in other operating assets and liabilities | — | — | 9,846 | (3,849 | ) | — | 5,997 | |||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by operating activities | $ | 4,345 | $ | 536 | $ | 119,524 | $ | 185,888 | $ | — | $ | 310,293 | ||||||||||||
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|
|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Purchases of property, plant and equipment | — | — | (77,034 | ) | (152,738 | ) | — | (229,772 | ) | |||||||||||||||
Proceeds from disposal of assets | — | — | 358,906 | 449,288 | — | 808,194 | ||||||||||||||||||
Purchases of other operating assets | — | — | (1,689 | ) | (555 | ) | — | (2,244 | ) | |||||||||||||||
Decrease in intercompany notes receivable, net | — | 220,038 | — | — | (220,038 | ) | — | |||||||||||||||||
Dividends from subsidiaries | — | — | 235,467 | — | (235,467 | ) | — | |||||||||||||||||
Change in other, net | — | (79 | ) | — | (24,679 | ) | 79 | (24,679 | ) | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by investing activities | $ | — | $ | 219,959 | $ | 515,650 | $ | 271,316 | $ | (455,426 | ) | $ | 551,499 | |||||||||||
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|
|
|
|
|
|
|
|
| |||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Payments on credit facilities | — | — | — | (2,100 | ) | — | (2,100 | ) | ||||||||||||||||
Proceeds from long-term debt | — | — | 801 | 6,055 | — | 6,856 | ||||||||||||||||||
Payments on long-term debt | — | — | (79 | ) | (2,255 | ) | — | (2,334 | ) | |||||||||||||||
Net transfers to iHeartCommunications | 45,099 | — | — | — | — | 45,099 | ||||||||||||||||||
Dividends and other payments to noncontrolling interests | — | — | — | (16,917 | ) | — | (16,917 | ) | ||||||||||||||||
Dividends paid | (755,538 | ) | — | (913 | ) | (234,554 | ) | 235,467 | (755,538 | ) | ||||||||||||||
Increase (decrease) in intercompany notes payable, net | — | 5,000 | (3,604 | ) | (221,434 | ) | 220,038 | — | ||||||||||||||||
Intercompany funding | 789,044 | (225,495 | ) | (588,292 | ) | 24,743 | — | — | ||||||||||||||||
Change in other, net | (1,366 | ) | — | — | (120 | ) | (79 | ) | (1,565 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used for) financing activities | 77,239 | (220,495 | ) | (592,087 | ) | (446,582 | ) | 455,426 | (726,499 | ) | ||||||||||||||
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|
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| |||||||||||||
Effect of exchange rate changes on cash | — | — | — | (6,041 | ) | — | (6,041 | ) | ||||||||||||||||
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|
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|
|
|
|
|
|
| |||||||||||||
Net increase in cash and cash equivalents | 81,584 | — | 43,087 | 4,581 | — | 129,252 | ||||||||||||||||||
Cash and cash equivalents at beginning of year | 218,701 | — | 18,455 | 175,587 | — | 412,743 | ||||||||||||||||||
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|
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|
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|
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|
|
| |||||||||||||
Cash and cash equivalents at end of year | $ | 300,285 | $ | — | $ | 61,542 | $ | 180,168 | $ | — | $ | 541,995 | ||||||||||||
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| |||||||||||||
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) | $ | (71,406 | ) | $ | 1,376 | $ | (75,927 | ) | $ | 37,734 | $ | 37,006 | $ | (71,217 | ) | |||||||||
Reconciling items: | ||||||||||||||||||||||||
Impairment charges | — | — | 21,631 | — | — | 21,631 | ||||||||||||||||||
Depreciation and amortization | — | — | 194,891 | 181,071 | — | 375,962 | ||||||||||||||||||
Deferred taxes | — | 1,282 | 7,305 | (5,282 | ) | — | 3,305 | |||||||||||||||||
Provision for doubtful accounts | — | — | 5,398 | 7,986 | — | 13,384 | ||||||||||||||||||
Amortization of deferred financing charges and note discounts, net | — | 7,468 | 1,230 | 72 | — | 8,770 | ||||||||||||||||||
Share-based compensation | — | — | 5,855 | 2,647 | — | 8,502 | ||||||||||||||||||
Gain on sale of operating and fixed assets | — | — | (1,235 | ) | (4,233 | ) | — | (5,468 | ) | |||||||||||||||
Equity in (earnings) loss of nonconsolidated affiliates | 75,927 | (10,383 | ) | (5,609 | ) | 1,935 | (61,581 | ) | 289 | |||||||||||||||
Foreign exchange transaction gain | — | (3,440 | ) | (11 | ) | (11,339 | ) | — | (14,790 | ) | ||||||||||||||
Other reconciling items, net | — | — | 1,350 | — | — | 1,350 | ||||||||||||||||||
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 | (983 | ) | 5,476 | (414 | ) | — | 4,565 | ||||||||||||||||
Increase (decrease) in accounts payable | — | — | (15,742 | ) | 26,424 | 19,960 | 30,642 | |||||||||||||||||
Increase (decrease) in accrued interest | — | (3,199 | ) | 15 | (888 | ) | — | (4,072 | ) | |||||||||||||||
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 by) 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 | ) | |||||||||||||||
Decrease in intercompany notes receivable, net | — | 70,125 | — | — | (70,125 | ) | — | |||||||||||||||||
Dividends from subsidiaries | — | 157,570 | — | — | (157,570 | ) | — | |||||||||||||||||
Change in other, net | — | (8,606 | ) | (909 | ) | (27,015 | ) | 9,513 | (27,017 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used by) investing activities | — | 219,089 | (91,699 | ) | (166,933 | ) | (218,182 | ) | (257,725 | ) | ||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
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 transfer to iHeartCommunications | 17,007 | — | — | — | — | 17,007 | ||||||||||||||||||
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 | — | — | |||||||||||||||||
Change in other, net | 2,885 | — | — | 673 | (9,513 | ) | (5,955 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used by) 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 increase (decrease) 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 | ||||||||||||
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| |||||||||||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
Disclosure Controls and Procedures
As required by Rule13a-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 Rule13a-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. As a result of the material weakness described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of December 31, 2017.
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 preparation and 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. 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.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As of December 31, 2017, 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 Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on the assessment, we determined that there was a material weakness in internal control over financial reporting with respect to Clear Media Limited, our outdoor business in China. Clear Media Limited is anindirect, non-wholly-owned subsidiary of the Company whose ordinary shares are listed but currently suspended from trading on the Hong Kong Stock Exchange. Specifically, falsification of bank statements and other supporting documentation used to complete bank reconciliations, collusion and circumvention of controls enabled an employee of Clear Media Limited to misappropriate $10.2 million over several years and resulted in discrepancies between actual cash balances and cash amounts included in the Company’s accounting records. These discrepancies were identified in January 2018 when the employee
surrendered to the police in China and confessed to the misappropriation, and our consolidated financial statements as of and for the year ended December 31, 2017 have been adjusted to accurately reflect the Company’s cash balances.
Upon discovery of the misappropriation, we undertook certain procedures including a forensic investigation and performance of incremental substantive testing of the amounts recorded in the accounting records of our China business. Such procedures identified other matters, including three unauthorized bank accounts opened in the names of certain subsidiaries of our China business of which management was not aware. The unauthorized bank accounts have been reported to the police in China. Our investigation, as well as the investigation by the police, areon-going.
The errors arising from the deficiencies identified at our China business are not material to the consolidated financial statements reported in any interim or annual period, and therefore did not result in a revision to previously filed financial statements. However, the control deficiencies could have resulted in misstatements of the aforementioned accounts and disclosures that could have resulted in a material misstatement or omission to the annual or interim consolidated financial statements that would not have been prevented or detected in a timely manner. Specifically, it was determined that our China business had control deficiencies related to: circumvention of controls and the related control environment through collusion and override of control processes; inadequate segregation of duties; and inadequate controls regarding the safeguarding of authorization mechanisms for bank accounts. We have determined that these control deficiencies constitute a material weakness.
Because of this material weakness, management concluded that we did not maintain effective internal control over financial reporting as of December 31, 2017, based on criteria described in the 2013 Framework.
The effectiveness of the Company’s internal control over financial reporting as of December 31, 2017 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears in this Item under the heading “Report of Independent Registered Public Accounting Firm.”
Remediation of the Material Weakness
We are evaluating the material weakness and developing a plan of remediation to strengthen the internal controls over the cash management process and financial reporting of our China business. The remediation plan at Clear Media Limited will include actions to:
We are committed to maintaining a strong internal control environment and believe that these remediation efforts will address the weakness in controls described above. We have started to implement these steps, however, some of these steps will take time to be fully integrated and confirmed to be effective and sustainable. Additional controls may also be required over time. Until the remediation steps set forth above are fully implemented and tested, the material weakness described above will continue to exist.
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
To the Stockholders and the Board of Directors of Clear Channel Outdoor Holdings, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Clear Channel Outdoor Holdings, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2017, 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). In our opinion, because of the effect of the material weakness described below on the achievement of the objectives of the control criteria, Clear Channel Outdoor Holdings, Inc. and subsidiaries (the Company) has not maintained effective internal control over financial reporting as of December 31, 2017, based on the COSO criteria.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weakness has been identified and included in management’s assessment. Management has identified a material weakness in controls related to an inadequate control environment at its China based subsidiary, Clear Media Limited, specifically it was determined that there was inadequate segregation of duties and inadequate controls regarding the safeguarding of authorization mechanisms for transactions.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the 2017 consolidated financial statements of the Company and financial statement schedule listed in the Index at Item 15 (a)2. This material weakness was considered in determining the nature, timing and extent of audit tests applied in our audit of the 2017 consolidated financial statements, and this report does not affect our report dated May 3, 2018, which expressed an unqualified opinion thereon.
Basis for Opinion
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 Annual 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 an 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.
Definition and Limitations on Internal Control Over Financial Reporting
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 the transactions are recorded as necessary to permit preparation of the 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 and procedures may deteriorate.
/s/ Ernst & Young LLP
San Antonio, Texas
May 3, 2018
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 May 3, 2018:
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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. Pittman is the Chairman and Chief Executive Officer of iHeartMedia, iHeartCommunications and iHeartMedia Capital I, LLC and the Chairman and Chief Executive Officer of the Company. Mr. Pittman was appointed as the Executive Chairman 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 the 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 asCo-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 Lupus Research Alliance, 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 our Chief Executive Officer, as well as his extensive media experience gained through the course of his career.
Richard J. Bressler is the President, Chief Operating Officer, Chief Financial Officer and Director of iHeartMedia, iHeartMedia Capital I, LLC and iHeartCommunications and the Chief Financial Officer of the Company. Mr. Bressler was appointed as the Chief Financial Officer and President of iHeartMedia, iHeartMedia Capital I, LLC, iHeartCommunications and the Company on July 29, 2013 and as Chief Operating Officer of iHeartMedia, iHeartMedia Capital I, LLC 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 previously a partner with the accounting firm of Ernst & Young LLP. 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 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. Wells is the Chief Executive Officer of Clear Channel Outdoor Americas at each of the iHeartMedia, iHeartMedia Capital I, LLC, iHeartCommunications and the Company 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 andOn-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 Ad Council, the Achievement Network (ANet) and the Outdoor Advertising Association of America (OAAA). 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, iHeartMedia Capital I, LLC, iHeartCommunications and the Company and was appointed to this position on March 2, 2015. Prior to such time, he served as Chief Executive Officer—Outdoor of iHeartMedia, iHeartCommunications and the Company since January 24, 2012 and as Chief Executive Officer—Outdoor of iHeartMedia Capital I, LLC 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 the Company 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, iHeartMedia Capital I, LLC, iHeartCommunications and the Company and the Chief Financial Officer of iHeartMedia’s iHM segment. Mr. Macri was appointed Senior Vice President—Corporate Finance of iHeartMedia, iHeartMedia Capital I, LLC, iHeartCommunications and the Company on September 9, 2014 and as the Chief Financial Officer of iHeartMedia division on October 7, 2013. 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. He has an MBA from New York University Stern School of Business and a B.S. in Accounting from Syracuse University.
Scott D. Hamilton is the Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia, iHeartMedia Capital I, LLC, iHeartCommunications and the Company. Mr. Hamilton was appointed Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia, iHeartCommunications and the Company on April 26, 2010 and was appointed as Senior Vice President, Chief Accounting Officer and Assistant Secretary of iHeartMedia Capital I, LLC 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, iHeartMedia Capital I, LLC, iHeartCommunications and the Company. Mr. Walls was appointed the Executive Vice President, General Counsel and Secretary of iHeartMedia, iHeartCommunications and the Company on January 1, 2010 and was appointed as Executive Vice President, General Counsel and Secretary of iHeartMedia Capital I, LLC 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 iHeartMedia Capital I, LLC, iHeartCommunications and the Company, in addition to his existing offices. Mr. Walls served in the Office of the Chief Executive Officer for iHeartMedia Capital I, LLC and iHeartCommunications until October 2, 2011, and served in the Office of the Chief Executive
Officer for the Company 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
Lonestar Ballroom
611 NW Loop 410
San Antonio, Texas 78216
June 22, 2018
9:00 a.m.
ADMIT ONE
Clear Channel Outdoor Holdings, Inc.
Annual Meeting of Stockholders
Hilton San Antonio Airport
Lonestar Ballroom
611 NW Loop 410
San Antonio, Texas 78216
June 22, 2018
9:00 a.m.
ADMIT ONE
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| A | Proposals – The Board of Directors recommends a vote FOR all the nominees listed in Proposal 1 and FOR Proposals 2 and 3. |
1. Election of Directors | ||||||||||||||||||||||||||||||||||||||||||||||
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| 01 - Thomas C. King | 02 - W. Benjamin Moreland | 03 - Jinhy Yoon | ||||||||||||||||||||||||||||||||||||||||||||
☐ | 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. | |||||||||||||||||||||||||||||||||||||||||
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| For | Against | Abstain | ||||||||||||||||
2. | Approval of the advisory (non-binding) resolution on executive compensation | ☐ | ☐ | ☐ | ||||||||||||||
| For | Against | Abstain | ||||||||||||||||
| 3. | Ratification of Ernst & Young LLP as the independent accounting firm for the year ending December 31, 2022 | ☐ | ☐ | ☐ | ||||||||||||||
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.
| B | Authorized Signatures |
NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
Date (mm/dd/yyyy) | Signature 1 | Signature 2 | ||||||||||||||
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The 2022 Annual Meeting of Stockholders of Clear Channel Outdoor Holdings, Inc.
will be held on Wednesday May 4, 2022, 9:00 A.M. Eastern Time, virtually via the Internet at meetnow.global/MKGDU6F.
To access the virtual meeting, you must have the information that is printed in the shaded bar located on the reverse side of this form.
Important Notice Regarding the Availability of Proxy Materials
for the StockholderAnnual Meeting of Stockholders to be held on June 22, 2018.May 4, 2022.
The Proxy Statement and the Annual Report Materials are available at:
www.envisionreports.com/cco
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Proxy — Clear Channel Outdoor Holdings, Inc.
20182022 Meeting of Stockholders – June 22, 2018May 4, 2022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert W. Pittman, Richard J. BresslerScott R. Wells, Brian D. Coleman and Robert H. Walls, Jr.,Lynn A. Feldman, and each of them, proxies of the undersigned with full power of substitution for and in the name, place and stead of the undersigned to appear and act for and to vote all shares of Clear Channel Outdoor Holdings, Inc. standing in the name of the undersigned or with respect to which the undersigned is entitled to vote and act at the Annual Meeting of Stockholders of said company to be held in San Antonio, Texas on June 22, 2018virtually at 9:00 a.m. local time,A.M. Eastern Time on May 4, 2022, or at any adjournments or postponements thereof, with all powers the undersigned would possess if then personally present, as indicated on the reverse side.
If shares of Clear Channel Outdoor Holdings, Inc. are issued to or held for the account of the undersigned under the 401(k) Plan, then the undersigned hereby directs the trustee of the plan to vote all such shares in the undersigned’s name and/or account under such plan in accordance with the instructions given herein, at the Annual Meeting and at any adjournments or postponements thereof, on all matters properly coming before the Annual Meeting, including but not limited to the matters set forth on the reverse side.The trustee will vote shares as to which no instructions are received in proportion to voting directions received by the trustee from all plan participants who vote.
THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED “FOR” THE ELECTION OF THE TWOTHREE NOMINEES NAMED ON THE REVERSE SIDE AND “FOR” PROPOSALPROPOSALS 2 (other than 401(k) Plan participants discussed above).AND 3.
(Continued and to be marked, dated and signed, on the other side)
| C | Non-Voting Items |
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