iHeartMedia (IHRT) 8-K Other Events

Exhibit 99.2

CONSOLIDATED BALANCE SHEETS

(In thousands)	December 31, 2014		December 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$	457,024	$	708,151
Accounts receivable, net of allowance of $39,698 in 2014 and $48,401 in 2013		1,395,248		1,440,501
Prepaid expenses		191,572		203,485
Other current assets		136,299		161,157
Total Current Assets		2,180,143		2,513,294
PROPERTY, PLANT AND EQUIPMENT
Structures, net		1,614,199		1,765,510
Other property, plant and equipment, net		1,084,865		1,132,120
INTANGIBLE ASSETS AND GOODWILL
Indefinite-lived intangibles - licenses		2,411,071		2,416,406
Indefinite-lived intangibles - permits		1,066,748		1,067,783
Other intangibles, net		1,206,727		1,466,546
Goodwill		4,187,424		4,202,187
OTHER ASSETS
Other assets		289,065		533,456
Total Assets	$	14,040,242	$	15,097,302
CURRENT LIABILITIES
Accounts payable	$	132,258	$	131,370
Accrued expenses		799,475		807,210
Accrued interest		252,900		194,844
Deferred income		176,048		176,460
Current portion of long-term debt		3,604		453,734
Total Current Liabilities		1,364,285		1,763,618
Long-term debt		20,322,414		20,030,479
Deferred income taxes		1,563,888		1,537,820
Other long-term liabilities		454,863		462,020
Commitments and contingent liabilities (Note 7)
SHAREHOLDERS’ DEFICIT
Noncontrolling interest		224,140		245,531
Class A Common Stock, par value $.001 per share, authorized 400,000,000 shares, issued 29,307,583 and 29,504,379 shares in 2014 and 2013, respectively		29		29
Class B Common Stock, par value $.001 per share, authorized 150,000,000 shares, issued 555,556 shares in 2014 and 2013		1		1
Class C Common Stock, par value $.001 per share, authorized 100,000,000 shares, issued 58,967,502 shares in 2014 and 2013		59		59
Additional paid-in capital		2,102,789		2,148,303
Accumulated deficit		(11,682,390)		(10,888,629)
Accumulated other comprehensive loss		(308,590)		(196,073)
Cost of shares (227,638 in 2014 and 1,402,227 in 2013) held in treasury		(1,246)		(5,856)
Total Shareholders’ Deficit		(9,665,208)		(8,696,635)
Total Liabilities and Shareholders’ Deficit	$	14,040,242	$	15,097,302

See Notes to Consolidated Financial Statements

1

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)	Years Ended December 31,
	2014		2013		2012
Revenue	$	6,318,533	$	6,243,044	$	6,246,884
Operating expenses:
Direct operating expenses (excludes depreciation and amortization)		2,540,950		2,565,020		2,504,529
Selling, general and administrative expenses (excludes depreciation and amortization)		1,680,623		1,638,928		1,660,289
Corporate expenses (excludes depreciation and amortization)		320,331		313,514		293,207
Depreciation and amortization		710,898		730,828		729,285
Impairment charges		24,176		16,970		37,651
Other operating income, net		40,031		22,998		48,127
Operating income		1,081,586		1,000,782		1,070,050
Interest expense		1,741,596		1,649,451		1,549,023
Gain (loss) on marketable securities		-		130,879		(4,580)
Equity in earnings (loss) of nonconsolidated affiliates		(9,416)		(77,696)		18,557
Loss on extinguishment of debt		(43,347)		(87,868)		(254,723)
Other income (expense), net		9,104		(21,980)		250
Loss before income taxes		(703,669)		(705,334)		(719,469)
Income tax benefit (expense)		(58,489)		121,817		308,279
Consolidated net loss		(762,158)		(583,517)		(411,190)
Less amount attributable to noncontrolling interest		31,603		23,366		13,289
Net loss attributable to the Company	$	(793,761)	$	(606,883)	$	(424,479)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(121,878)		(33,001)		40,242
Unrealized gain (loss) on securities and derivatives:
Unrealized holding gain on marketable securities		327		16,576		23,103
Unrealized holding gain on cash flow derivatives		-		48,180		52,112
Other adjustments to comprehensive income (loss)		(11,438)		6,732		1,135
Reclassification adjustment for realized (gain) loss on securities included in net loss		3,317		(83,752)		2,045
Other comprehensive income (loss)		(129,672)		(45,265)		118,637
Comprehensive loss		(923,433)		(652,148)		(305,842)
Less amount attributable to noncontrolling interest		(21,080)		(2,476)		5,878
Comprehensive loss attributable to the Company	$	(902,353)	$	(649,672)	$	(311,720)
Net loss attributable to the Company per common share:
Basic		(9.46)		(7.31)		(5.23)
Weighted average common shares outstanding — Basic	$	83,941	$	83,364	$	82,745
Diluted		(9.46)		(7.31)		(5.23)
Weighted average common shares outstanding — Diluted	$	83,941	$	83,364	$	82,745

See Notes to Consolidated Financial Statements

2

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

	Common Shares						Non- controlling Interest		Controlling Interest
(In thousands, except share data)									Common Stock		Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)		Treasury Stock
	Class C Shares		Class B Shares		Class A Shares														Total
Balances at December 31, 2011		58,967,502		555,556		24,106,139	$	521,794	$	83	$	2,132,368	$	(9,857,267)	$	(266,043)	$	(2,876)	$	(7,471,941)
Net income (loss)		-		-		-		13,289		-		-		(424,479)		-		-		(411,190)
Issuance (forfeiture) of restricted stock		-		-		3,543,238		6,381		4		(4)		-		-		(3,290)		3,091
Amortization of share-based compensation		-		-		-		10,589		-		17,951		-		-		-		28,540
Purchases of additional noncontrolling interest		-		-		-		28		-		-		-		-		-		28
Dividend declared and paid to noncontrolling interests		-		-		-		(244,734)		-		-		-		-		-		(244,734)
Other		-		-		-		(9,228)		-		(8,394)		-		-		-		(17,622)
Other comprehensive income		-		-		-		5,878		-		-		-		112,759		-		118,637
Balances at December 31, 2012		58,967,502		555,556		27,649,377		303,997		87		2,141,921		(10,281,746)		(153,284)		(6,166)	$	(7,995,191)
Net income (loss)		-		-				23,366		-		-		(606,883)		-		-		(583,517)
Issuance (forfeiture) of restricted stock		-		-		1,855,002		4,192		2		(2)		-		-		(423)		3,769
Amortization of share-based compensation		-		-		-		7,725		-		8,990		-		-		-		16,715
Dividend declared and paid to noncontrolling interests		-		-		-		(91,887)		-				-		-		-		(91,887)
Other		-		-		-		614		-		(2,606)		-		-		733		(1,259)
Other comprehensive income		-		-		-		(2,476)		-		-		-		(42,789)		-		(45,265)
Balances at December 31, 2013		58,967,502		555,556		29,504,379	$	245,531	$	89	$	2,148,303	$	(10,888,629)	$	(196,073)	$	(5,856)	$	(8,696,635)
Net income (loss)		-		-		-		31,603		-		-		(793,761)		-		-		(762,158)
Issuance (forfeiture) of restricted stock		-		-		(196,796)		2,237		-		-		-		-		(993)		1,244
Amortization of share-based compensation		-		-		-		7,743		-		2,970		-		-		-		10,713
Dividend declared and paid to noncontrolling interests		-		-		-		(40,027)		-		-		-		-		-		(40,027)
Purchases of additional noncontrolling interest		-		-		-		(1,944)		-		(42,881)		-		(3,925)		-		(48,750)
Other		-		-		-		77		-		(5,603)		-		-		5,603		77
Other comprehensive loss		-		-		-		(21,080)		-		-		-		(108,592)		-		(129,672)
Balances at December 31, 2014		58,967,502		555,556		29,307,583	$	224,140	$	89	$	2,102,789	$	(11,682,390)	$	(308,590)	$	(1,246)	$	(9,665,208)

See Notes to Consolidated Financial Statements

3

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)	Years Ended December 31,
	2014		2013		2012
Cash flows from operating activities:
Consolidated net loss	$	(762,158)	$	(583,517)	$	(411,190)
Reconciling items:
Impairment charges		24,176		16,970		37,651
Depreciation and amortization		710,898		730,828		729,285
Deferred taxes		33,923		(158,170)		(304,611)
Provision for doubtful accounts		14,167		20,243		11,715
Amortization of deferred financing charges and note discounts, net		89,701		124,342		164,097
Share-based compensation		10,713		16,715		28,540
Gain on disposal of operating and fixed assets		(44,512)		(22,998)		(48,127)
(Gain) loss on marketable securities		—		(130,879)		4,580
Equity in (earnings) loss of nonconsolidated affiliates		9,416		77,696		(18,557)
Loss on extinguishment of debt		43,347		87,868		254,723
Other reconciling items, net		(14,325)		19,904		14,234
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Increase in accounts receivable		(13,898)		(29,605)		(34,238)
Increase in accrued expenses		31,049		26,105		34,874
Increase (decrease) in accounts payable		6,404		(2,620)		13,863
Increase in accrued interest		88,560		16,014		20,223
Increase in deferred income		11,288		7,508		33,482
Changes in other operating assets and liabilities		6,367		(3,532)		(45,412)
Net cash provided by operating activities		245,116		212,872		485,132
Cash flows from investing activities:
Proceeds from sale of other investments		236,618		135,571		—
Purchases of businesses		841		(97)		(50,116)
Purchases of property, plant and equipment		(318,164)		(324,526)		(390,280)
Proceeds from disposal of assets		10,273		81,598		59,665
Purchases of other operating assets		(4,541)		(21,532)		(14,826)
Change in other, net		(13,709)		(4,379)		(1,464)
Net cash used for investing activities		(88,682)		(133,365)		(397,021)
Cash flows from financing activities:
Draws on credit facilities		68,010		272,252		604,563
Payments on credit facilities		(315,682)		(27,315)		(1,931,419)
Proceeds from long-term debt		2,062,475		575,000		4,917,643
Payments on long-term debt		(2,099,101)		(1,248,860)		(3,346,906)
Payments to repurchase noncontrolling interests		(48,750)		(61,143)		(7,040)
Dividends and other payments to noncontrolling interests		(40,027)		(91,887)		(251,665)
Deferred financing charges		(26,169)		(18,390)		(83,617)
Change in other, net		1,243		4,461		3,092
Net cash used for financing activities		(398,001)		(595,882)		(95,349)
Effect of exchange rate changes on cash		(9,560)		(484)		3,566
Net decrease in cash and cash equivalents		(251,127)		(516,859)		(3,672)
Cash and cash equivalents at beginning of period		708,151		1,225,010		1,228,682
Cash and cash equivalents at end of period	$	457,024	$	708,151	$	1,225,010
SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for interest	$	1,540,860	$	1,543,455	$	1,381,396
Cash paid during the year for taxes		53,074		50,934		52,517

See Notes to Consolidated Financial Statements

4

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

iHeartMedia, Inc. (“the Company”) was formed in May 2007 by private equity funds sponsored by Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsors”) for the purpose of acquiring the business of iHeartCommunications, Inc., a Texas company (iHeartCommunications”). The acquisition was completed on July 30, 2008 pursuant to the Agreement and Plan of Merger, dated November 16, 2006, as amended on April 18, 2007, May 17, 2007 and May 13, 2008 (the “Merger Agreement”).

The Company’s reportable operating segments are iHeartMedia (“iHM”), Americas outdoor advertising (“Americas outdoor”), and International outdoor advertising (“International outdoor”). The iHM segment provides media and entertainment services via broadcast and digital delivery. The Americas outdoor and International outdoor segments provide outdoor advertising services in their respective geographic regions using various digital and traditional display types. Included in the “Other” category are the Company’s media representation business, Katz Media Group, as well as other general support services and initiatives, which are ancillary to its other businesses.

Recent Developments

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

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. Investments in companies in which the Company owns 20 percent to 50 percent of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for using the equity method of accounting. All significant intercompany accounts have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform to the 2014 presentation.

The Company is the beneficiary of two trusts created to comply with Federal Communications Commission (“FCC”) ownership rules. The radio stations owned by the trusts are managed by independent trustees. The trustees are marketing these stations for sale, and the stations will have to be sold unless any stations may be owned by the Company under then-current FCC rules, in which case the trusts will be terminated with respect to such stations. The trust agreements stipulate that the Company must fund any operating shortfalls of the trust activities, and any excess cash flow generated by the trusts is distributed to the Company. The Company is also the beneficiary of proceeds from the sale of stations held in the trusts. The Company consolidates the trusts in accordance with ASC 810-10, which requires an enterprise involved with variable interest entities to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in the variable interest entity, as the trusts were determined to be a variable interest entity and the Company is the primary beneficiary under the trusts.

5

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Cash and Cash Equivalents

Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, net of reserves for sales returns and allowances, and allowances for doubtful accounts. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In circumstances where it is aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of revenue for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number and the geographic diversification of its customers.

Business Combinations

The Company accounts for its business combinations under the acquisition method of accounting. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Various acquisition agreements may include contingent purchase consideration based on performance requirements of the investee. The Company accounts for these payments in conformity with the provisions of ASC 805-20-30, which establish the requirements related to recognition of certain assets and liabilities arising from contingencies.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows:

Buildings and improvements – 10 to 39 years

Structures – 5 to 15 years

Towers, transmitters and studio equipment – 7 to 20 years

Furniture and other equipment – 3 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.

Land Leases

Most of the Company’s outdoor advertising structures are located on leased land. Americas outdoor land leases are typically paid in advance for periods ranging from one to 12 months. International outdoor land leases are paid both in advance and in arrears, for periods ranging from one to 12 months. Most international street furniture display faces are operated through contracts with municipalities for up to 20 years. The leased land and street furniture contracts often include a percent of revenue to be paid along with a base rent payment. Prepaid land leases are recorded as an asset and expensed ratably over the related rental term and rent payments in arrears are recorded as an accrued liability.

6

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Intangible Assets

The Company’s indefinite-lived intangible assets include FCC broadcast licenses in its iHM segment and billboard permits in its Americas outdoor advertising 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 FCC licenses and permits using a direct valuation technique as prescribed in ASC 805-20-S99. The Company engages Mesirow Financial Consulting LLC (“Mesirow Financial”), 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 FCC licenses and 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, talent and representation contracts, customer and advertiser relationships, and site-leases, all of which are amortized over the respective lives of the agreements, or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at cost. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company.

The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value.

Goodwill

At least annually, the Company performs its impairment test for each reporting unit’s goodwill. 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 with ASC 350-20-55. The U.S. radio markets are aggregated into a single reporting unit and 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 outdoor segment, Canada constitutes a separate reporting unit and each country in its International outdoor segment constitutes a separate reporting unit. The Company had no impairment of goodwill in 2014. The Company recognized a non-cash impairment charge to goodwill of $10.7 million based on declining future cash flows expected in one country in the International outdoor segment for 2013. The Company had no impairment of goodwill for 2012.

Nonconsolidated Affiliates

In general, investments in which the Company owns 20 percent to 50 percent of the common stock or otherwise exercises significant influence over the investee are accounted for under the equity method. The Company does not recognize gains or losses upon the issuance of securities by any of its equity method investees. The Company reviews the value of equity method investments and records impairment charges in the statement of operations as a component of “Equity in earnings (loss) of nonconsolidated affiliates” for any decline in value that is determined to be other-than-temporary.

Other Investments

Other investments are composed primarily of equity securities. These securities are classified as available-for-sale or trading and are carried at fair value based on quoted market prices. Securities are carried at historical value when quoted market prices are unavailable. The net unrealized gains or losses on the available-for-sale securities, net of tax, are reported in accumulated other comprehensive loss as a component of shareholders’ deficit. In addition, the Company holds investments that do not have quoted market prices. The Company periodically assesses the value of available-for-sale and non-marketable securities and records impairment charges in the statement of comprehensive loss for any decline in value that is determined to be other-than-temporary. The average cost method is used to compute the realized gains and losses on sales of equity securities.

7

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The Company periodically assesses the value of its available-for-sale securities. Based on these assessments, there were no impairments during the years ended December 31, 2014 and 2013. The Company concluded that other-than-temporary impairments existed at December 31, 2012 and recorded a noncash impairment charge of $4.6 million during the year ended December 31, 2012. Such charge is recorded on the statement of comprehensive loss in “Gain (Loss) on marketable securities”.

Derivative Instruments and Hedging Activities

Prior to the expiration of the Company’s interest rate swap agreement on September 30, 2013, the provisions of ASC 815-10 required the Company to recognize it as either an asset or liability in the consolidated balance sheet at fair value. The accounting for changes in the fair value of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship, and further, on the type of hedging relationship. The interest rate swap was designated and qualified as a hedging instrument, and was characterized as a cash flow hedge. The Company formally documented all relationships between hedging instruments and hedged items, as well as its risk management objectives and strategies for undertaking various hedge transactions. The Company formally assessed, both at inception and at least quarterly thereafter prior to expiration, whether the derivatives that were used in hedging transactions were highly effective in offsetting changes in either the fair value or cash flows of the hedged item.

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, 2014 and 2013.

Income Taxes

The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not that some portion or the entire asset will not be realized. Generally all earnings from the Company’s foreign operations are permanently reinvested and not distributed. The Company has not provided U.S. federal income taxes for temporary differences with respect to investments in foreign subsidiaries, which at December 31, 2014 currently result in tax basis amounts greater than the financial reporting basis. It is not apparent that these unrecognized deferred tax assets will reverse in the foreseeable future. If any excess cash held by our foreign subsidiaries were needed to fund operations in the United States, we could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. This is a result of significant current and historic deficits in our foreign earnings and profits, which gives us flexibility to make future cash distributions as non-taxable returns of capital. We regularly review our tax liabilities on amounts that may be distributed in future periods and provide for foreign withholding and other current and deferred taxes on any such amounts. The determination of the amount of federal income taxes, if any, that might become due in the event that our foreign earnings are distributed is not practicable.

Revenue Recognition

iHM revenue is recognized as advertisements or programs are broadcast and is generally billed monthly. Outdoor advertising contracts typically cover periods of a few weeks up to one year and are generally billed monthly. Revenue for outdoor 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 media and entertainment and outdoor operations. Payments received in advance of being earned are recorded as deferred income. Revenue arrangements may 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.

8

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Barter transactions represent the exchange of advertising spots or display space for merchandise, services or other assets. These transactions are recorded at the estimated fair market value of the advertising spots or display space or the fair value of the merchandise or services received, whichever is most readily determinable. Revenue is recognized on barter and trade transactions when the advertisements are broadcasted or displayed. Expenses are recorded ratably over a period that estimates when the merchandise, service or other assets received is utilized, or when the event occurs. Barter and trade revenues and expenses from continuing operations are included in consolidated revenue and selling, general and administrative expenses, respectively. Barter and trade revenues and expenses from continuing operations were as follows:

(In millions)	Years Ended December 31,
	2014		2013		2012
Barter and trade revenues	$	69.4	$	66.0	$	56.5
Barter and trade expenses		68.1		58.5		58.8

Advertising Expense

The Company records advertising expense as it is incurred. Advertising expenses were $103.0 million, $133.7 million and $113.4 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Share-Based Compensation

Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is measured at the grant date based on the fair value of the award. For awards that vest based on service conditions, this cost is recognized as expense on a straight-line basis over the vesting period. For awards that will vest based on market or performance conditions, this cost will be recognized when it becomes probable that the performance conditions will be satisfied. Determining the fair value of share-based awards at the grant date requires assumptions and judgments about expected volatility and forfeiture rates, among other factors.

Foreign Currency

Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using the average exchange rates during the year. The assets and liabilities of those subsidiaries and investees are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of shareholders’ deficit, “Accumulated other comprehensive loss”. Foreign currency transaction gains and losses are included in operations.

New Accounting Pronouncements

During the first quarter of 2014, the Company adopted the Financial Accounting Standards Board’s (“FASB”) ASU No. 2013-04,Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date. This update provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date. The amendments were effective for fiscal years (and interim periods within) beginning after December 15, 2013 and were to be applied retrospectively to all prior periods presented for such obligations that existed at the beginning of an entity’s fiscal year of adoption. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the first quarter of 2014, the Company adopted the FASB’s ASU No. 2013-05,Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity of an Investment in a Foreign Entity. The amendments were effective prospectively for the fiscal years (and interim periods within) beginning after December 15, 2013 and provide clarification guidance for the release of the cumulative translation adjustment under current U.S. GAAP. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements

During the first quarter of 2014, the Company adopted the FASB’s ASU No. 2013-11,Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This update requires unrecognized tax benefits to be offset against a deferred tax asset for a net operating loss carryforward, similar tax loss or tax credit carryforward in certain situations. The amendments were effective prospectively for the fiscal years (and interim periods within) beginning after December 15, 2013. The adoption of this guidance did not have a material effect on the Company’s consolidated financial statements.

During the second quarter of 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers. This new standard 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, 2016. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.

During the third quarter of 2014, the FASB issued ASU No. 2014-12,Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This new standard clarifies that a performance target in a share-based compensation award that could be achieved after an employee completes the requisite service period should be treated as a performance condition that affects the vesting of the award. The standard is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015. The Company is currently evaluating the impact of the provisions of this new standard on its financial position and results of operations.

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

Acquisitions

The Company is the beneficiary of Aloha Station Trust, LLC (the “Aloha Trust”), which owns and operates radio stations which the Aloha Trust is required to divest in order to comply with Federal Communication Commission (“FCC”) media ownership rules, and which are being marketed for sale. During 2014, the Aloha Trust completed a transaction in which it exchanged two radio stations for a portfolio of 29 radio stations. In this transaction the Company received 28 radio stations. One radio station was placed into the Brunswick Station Trust, LLC in order to comply with FCC media ownership rules where it is being marketed for sale, and the Company is the beneficiary of this trust. The exchange was accounted for at fair value in accordance with ASC 805, Business Combinations. The disposal of these radio stations resulted in a gain on sale of $43.5 million, which is included in other operating income, net. This acquisition resulted in an aggregate increase in net assets of $49.2 million, which includes $13.8 million in indefinite-lived intangible assets, $10.2 million in definite-lived intangibles, $8.1 million in property, plant and equipment and $0.8 million of assumed liabilities. In addition, the Company recognized $17.9 million of goodwill.

During 2012, a wholly owned subsidiary of the Company completed the acquisition of WOR-AM in New York City for $30.0 million and WFNX-FM in Boston for $14.5 million. These acquisitions resulted in an aggregate increase of $5.3 million to property plant and equipment, $15.2 million to intangible assets and $24.7 million to goodwill, in addition to $0.7 million of assumed liabilities. Purchase accounting adjustments were finalized during 2013.

Dispositions

During 2013, the Company’s Americas outdoor segment divested certain outdoor advertising assets in Times Square for approximately $18.7 million resulting in a gain of $12.2 million. In addition, iHM exercised a put option to sell five radio stations in the Green Bay market for approximately $17.6 million, resulting in a gain of $0.5 million. These net gains are included in “Other operating income, net.”

During 2012, the Company’s International outdoor segment sold its international neon business and its outdoor advertising business in Romania, resulting in an aggregate gain of $39.7 million included in “Other operating income, net.”

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Property, Plant and Equipment

The Company’s property, plant and equipment consisted of the following classes of assets at December 31, 2014 and 2013, respectively.

(In thousands)	December 31, 2014		December 31, 2013
Land, buildings and improvements	$	731,925	$	723,268
Structures		2,999,582		3,021,152
Towers, transmitters and studio equipment		453,044		440,612
Furniture and other equipment		536,255		473,995
Construction in progress		95,671		123,814
		4,816,477		4,782,841
Less: accumulated depreciation		2,117,413		1,885,211
Property, plant and equipment, net	$	2,699,064	$	2,897,630

The Company recorded an impairment charge related to property of $4.5 million during 2014. The Company recorded an impairment charge related to radio broadcast equipment in one market of $1.3 million based on a sales agreement entered into during the fourth quarter of 2013. The Company recognized an impairment charge for outdoor advertising structures in its Americas outdoor segment of $1.7 million during 2012.

Indefinite-lived Intangible Assets

The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses and billboard permits. FCC broadcast licenses are granted to radio stations for up to eight years under the Telecommunications Act of 1996 (the “Act”). The Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity, there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee, and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future.

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

The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35. The Company engaged Mesirow Financial, a third-party valuation firm, to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets.

The application of the direct valuation method attempts to isolate the income that is properly attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses, and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the licenses in each market.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets.

The key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average FCC license or billboard permit within a market.

Annual Impairment Test to FCC Licenses and Billboard Permits

The Company performs its annual impairment test on October 1 of each year.

During 2014, the Company recognized a $15.7 million impairment charge related to FCC licenses in eleven markets due to changes in the revenue growth forecasts and margins for those markets. During 2013, the Company recognized a $2.0 million impairment charge related to FCC licenses in two markets due to changes in the discount rates and weight-average cost of capital for those markets. In addition, the Company recognized a $2.5 million impairment charge related to billboard permits in a certain market due to increased start-up costs for that market exceeding market value. During 2012, the Company recognized a $35.9 million impairment charge related to billboard permits in certain markets due to a change in the Company’s forecast of revenue growth within the markets. There was no impairment of FCC licenses during 2012.

Other Intangible Assets

Other intangible assets include definite-lived intangible assets and permanent easements. The Company’s definite-lived intangible assets include primarily transit and street furniture contracts, talent and representation contracts, customer and advertiser relationships, and site-leases, all of which are amortized over the respective lives of the agreements, or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. Permanent easements are indefinite-lived intangible assets which include certain rights to use real property not owned by the Company. During 2014, the Company recognized a $3.4 million impairment charge to easements in three markets primarily due to declining revenue forecasts. There were no impairments of other intangible assets for the years ended December 31, 2013 and 2012.

The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets at December 31, 2014 and 2013, respectively:

(In thousands)	December 31, 2014				December 31, 2013
	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Transit, street furniture and other outdoor contractual rights	$	716,723		$(476,523)	$	777,521		$(464,548)
Customer / advertiser relationships		1,222,518		(765,596)		1,212,745		(645,988)
Talent contracts		319,384		(223,936)		319,617		(195,403)
Representation contracts		238,313		(206,338)		252,961		(200,058)
Permanent easements		171,271		-		173,753		-
Other		388,160		(177,249)		387,405		(151,459)
Total	$	3,056,369		$(1,849,642)	$	3,124,002		$(1,657,456)

Total amortization expense related to definite-lived intangible assets was $263.4 million, $289.0 million and $300.0 million for the years ended December 31, 2014, 2013 and 2012, respectively.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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)
2015	$	236,019
2016		219,485
2017		197,061
2018		127,730
2019		42,274

Annual Impairment Test to Goodwill

The Company performs its annual impairment test on October 1 of each year. Each of the Company’s U.S. radio markets and outdoor advertising markets are components. The U.S. radio markets are aggregated into a single reporting unit and the U.S. outdoor advertising markets are aggregated into a single reporting unit for purposes of the goodwill impairment test using the guidance in ASC 350-20-55. The Company also determined that within its Americas outdoor and International outdoor segments, each country constitutes a separate reporting unit.

The goodwill impairment test is a two-step process. The first step, used to screen for potential impairment, compares the fair value of the reporting unit with its carrying amount, including goodwill. If applicable, the second step, used to measure the amount of the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill.

Each of the Company’s reporting units is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values were also estimated and discounted to their present value. Assessing the recoverability of goodwill requires the Company to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on its budgets, business plans, economic projections, anticipated future cash flows and marketplace data. There are inherent uncertainties related to these factors and management’s judgment in applying these factors.

In 2014, the Company concluded no goodwill impairment was required. In 2013, the Company concluded no goodwill impairment was required for iHM and Americas outdoor. Based on declining future cash flows expected in one country in the International outdoor segment, the Company recognized a non-cash impairment charge to goodwill of $10.7 million. The Company recognized no goodwill impairment for the year ended December 31, 2012.

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

(In thousands)	iHM		Americas Outdoor Advertising		International      Outdoor Advertising		Other		Consolidated
Balance as of December 31, 2012	$	3,236,688	$	585,307	$	276,941	$	117,149	$	4,216,085
Impairment		-		-		(10,684)		-		(10,684)
Acquisitions		-		-		-		97		97
Dispositions		-		-		(456)		-		(456)
Foreign currency		-		(80)		(894)		-		(974)
Other		(1,881)		-		-		-		(1,881)
Balance as of December 31, 2013	$	3,234,807	$	585,227	$	264,907	$	117,246	$	4,202,187
Acquisitions		17,900		-		-		299		18,199
Foreign currency		-		(653)		(32,369)		-		(33,022)
Other		60		-		-		-		60
Balance as of December 31, 2014	$	3,252,767	$	584,574	$	232,538	$	117,545	$	4,187,424

The balance at December 31, 2012 is net of cumulative impairments of $3.5 billion, $2.7 billion, $250.5 million and $212.0 million in the Company’s iHM, Americas outdoor, International outdoor and Other segments, respectively.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 3 – INVESTMENTS

The Company’s most significant investments in nonconsolidated affiliates are listed below:

Australian Radio Network

The Company owned a fifty-percent (50%) interest in Australian Radio Network (“ARN”), an Australian company that owns and operates radio stations in Australia and New Zealand. An impairment charge of $95.4 million was recorded during the fourth quarter of 2013 to write down the investment to its estimated fair value. On February 18, 2014, a subsidiary of the Company sold its 50% interest in ARN, recognizing a loss on the sale of $2.4 million and $11.5 million of foreign exchange losses that were reclassified from accumulated other comprehensive income at the date of the sale.

Buspak

The Company owned a 50% interest in Buspak, a bus advertising company in Hong Kong. On July 18, 2014, a subsidiary of the Company sold its 50% interest in Buspak, recognizing a gain on the sale of $4.5 million.

Summarized Financial Information

The following table summarizes the Company’s investments in nonconsolidated affiliates:

(In thousands)	ARN		All         Others		Total
Balance at December 31, 2012	$	353,062	$	17,850	$	370,912
Cash advances (repayments)		-		3,051		3,051
Acquisitions of investments, net		-		1,354		1,354
Equity in loss		(75,318)		(2,378)		(77,696)
Foreign currency translation adjustment		(37,068)		4		(37,064)
Distributions received		(19,926)		(1,750)		(21,676)
Other		-		(76)		(76)
Balance at December 31, 2013	$	220,750	$	18,055	$	238,805
Cash advances (repayments)		-		3,452		3,452
Acquisitions of investments, net		-		1,811		1,811
Equity in earnings (loss)		(12,678)		3,262		(9,416)
Foreign currency transaction adjustment		1,449		77		1,526
Distributions received		(228)		(1,000)		(1,228)
Proceeds on sale		(220,783)		(15,820)		(236,603)
Other		11,490		(344)		11,146
Balance at December 31, 2014	$	-	$	9,493	$	9,493

The investments in the table above are not consolidated, but are accounted for under the equity method of accounting, whereby the Company records its investments in these entities in the balance sheet as “Other assets.” The Company’s interests in their operations are recorded in the statement of comprehensive loss as “Equity in earnings (loss) of nonconsolidated affiliates.”

NOTE 4 – ASSET RETIREMENT OBLIGATION

The Company’s asset retirement obligation is reported in “Other long-term liabilities” with the current portion recorded in “Accrued liabilities” and relates to its obligation to dismantle and remove outdoor advertising displays and radio broadcasting towers from leased land and to reclaim the site to its original condition upon the termination or non-renewal of a lease or contract. When the liability is recorded, the cost is capitalized as part of the related long-lived assets’ carrying value. Due to the high rate of lease renewals over a long period of time, the calculation assumes that all related assets will be removed at some period over the next 50 years. An estimate of third-party cost information is used with respect to the dismantling of the structures and the reclamation of the site. The interest rate used to calculate the present value of such costs over the retirement period is based on an estimated risk adjusted credit rate for the same period.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table presents the activity related to the Company’s asset retirement obligation:

(In thousands)	Years Ended December 31,
	2014		2013
Beginning balance	$	59,380	$	56,849
Adjustment due to changes in estimates		(5,391)		806
Accretion of liability		7,858		5,106
Liabilities settled		(5,802)		(3,323)
Foreign Currency		(1,834)		(58)
Ending balance	$	54,211	$	59,380

NOTE 5 – LONG-TERM DEBT

Long-term debt at December 31, 2014 and 2013 consisted of the following:

(In thousands)	December 31,      2014		December 31,      2013
Senior Secured Credit Facilities		7,231,222		8,225,754
Receivables Based Facility Due 2017		-		247,000
Priority Guarantee Notes		5,324,815		4,324,815
Subsidiary Revolving Credit Facility Due 2018		-		-
Other Secured Subsidiary Debt		19,257		21,124
Total Consolidated Secured Debt		12,575,294		12,818,693
10.75% Senior Cash Pay Notes Due 2016		-		94,304
11.00%/11.75% Senior Toggle Notes Due 2016		-		127,941
14.0% Senior Notes Due 2021		1,661,697		1,404,202
iHeartCommunications Legacy Notes		667,900		1,436,455
10.0% Senior Notes Due 2018		730,000		-
Subsidiary Senior Notes		4,925,000		4,925,000
Other Subsidiary Debt		1,024		10
Purchase accounting adjustments and original issue discount		(234,897)		(322,392)
		20,326,018		20,484,213
Less: current portion		3,604		453,734
Total long-term debt	$	20,322,414	$	20,030,479

The Company’s weighted average interest rates at December 31, 2014 and 2013 were 8.1% and 7.6%, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $19.7 billion and $20.5 billion at December 31, 2014 and 2013, respectively. Under the fair value hierarchy established by ASC 820-10-35, the fair market value of the Company’s debt is classified as either Level 1 or Level 2.

Senior Secured Credit Facilities

As of December 31, 2014, iHeartCommunications had senior secured credit facilities consisting of:

(In thousands)	Maturity     Date	December 31,     2014		December 31,     2013
Term Loan B	1/29/2016	$	916,061		1,890,978
Term Loan C	1/29/2016		15,161		34,776
Term Loan D	1/30/2019		5,000,000		5,000,000
Term Loan E	7/30/2019		1,300,000		1,300,000
Total Senior Secured Credit Facilities		$	7,231,222	$	8,225,754

iHeartCommunications is the primary borrower under the senior secured credit facilities, except that certain of its domestic restricted subsidiaries are co-borrowers under a portion of the term loan facilities.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Interest Rate and Fees

Borrowings under iHeartCommunications’ senior secured credit facilities bear interest at a rate equal to an applicable margin plus, at iHeartCommunications’ option, either (i) a base rate determined by reference to the higher of (A) the prime lending rate publicly announced by the administrative agent or (B) the Federal funds effective rate from time to time plus 0.50%, or (ii) a Eurocurrency rate determined by reference to the costs of funds for deposits for the interest period relevant to such borrowing adjusted for certain additional costs.

The margin percentages applicable to the term loan facilities are the following percentages per annum:

• with respect to loans under the Term Loan B and Term Loan C – asset sale facility, (i) 2.65%, in the case of base rate loans and (ii) 3.65%, in the case of Eurocurrency rate loans; and

• with respect to loans under the Term Loan D, (i) 5.75% in the case of base rate loans and (ii) 6.75% in the case of Eurocurrency rate loans; and

• with respect to loans under the Term Loan E, (i) 6.50% in the case of base rate loans and (ii) 7.50% in the case of Eurocurrency rate loans.

The margin percentages are subject to adjustment based upon iHeartCommunications’ leverage ratio.

Collateral and Guarantees

The senior secured credit facilities are guaranteed by iHeartCommunications and each of iHeartCommunications’ existing and future material wholly-owned domestic restricted subsidiaries, subject to certain exceptions.

All obligations under the senior secured credit facilities, and the guarantees of those obligations, are secured, subject to permitted liens, including prior liens permitted by the indenture governing the iHeartCommunications senior notes, and other exceptions, by:

• a lien on the capital stock of iHeartCommunications;

• 100% of the capital stock of any future material wholly-owned domestic license subsidiary that is not a “Restricted Subsidiary” under the indenture governing the iHeartCommunications senior notes;

• certain assets that do not constitute “principal property” (as defined in the indenture governing the iHeartCommunications senior notes);

• certain specified assets of iHeartCommunications and the guarantors that constitute “principal property” (as defined in the indenture governing the iHeartCommunications senior notes) securing obligations under the senior secured credit facilities up to the maximum amount permitted to be secured by such assets without requiring equal and ratable security under the indenture governing the iHeartCommunications senior notes; and

• a lien on the accounts receivable and related assets securing iHeartCommunications’ receivables based credit facility that is junior to the lien securing iHeartCommunications’ obligations under such credit facility.

Certain Covenants and Events of Default

The senior secured credit facilities include negative covenants that, subject to significant exceptions, limit iHeartCommunications’ ability and the ability of its restricted subsidiaries to, among other things:

• incur additional indebtedness;

• create liens on assets;

• engage in mergers, consolidations, liquidations and dissolutions;

• sell assets;

• pay dividends and distributions or repurchase iHeartCommunications’ capital stock;

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

• make investments, loans, or advances;

• prepay certain junior indebtedness;

• engage in certain transactions with affiliates;

• amend material agreements governing certain junior indebtedness; and

• change lines of business.

Receivables Based Credit Facility

As of December 31, 2014, there were no borrowings outstanding under iHeartCommunications’ receivables based credit facility.

The receivables based credit facility provides revolving credit commitments of $535.0 million, subject to a borrowing base. The borrowing base at any time equals 90% of the eligible accounts receivable of iHeartCommunications and certain of its subsidiaries. The receivables based credit facility includes a letter of credit sub-facility and a swingline loan sub-facility.

iHeartCommunications and certain subsidiary borrowers are the borrowers under the receivables based credit facility. iHeartCommunications has the ability to designate one or more of its restricted subsidiaries as borrowers under the receivables based credit facility. The receivables based credit facility loans are available in U.S. dollars and letters of credit are available in a variety of currencies including U.S. dollars, Euros, Pounds Sterling, and Canadian dollars.

Interest Rate and Fees

Borrowings under the receivables based credit facility bear interest at a rate per annum equal to an applicable margin plus, at iHeartCommunications’ option, either (i) a base rate determined by reference to the highest of (a) the prime rate of Citibank, N.A. and (b) the Federal Funds rate plus 0.50% or (ii) a Eurocurrency rate determined by reference to the rate (adjusted for statutory reserve requirements for Eurocurrency liabilities) for Eurodollar deposits for the interest period relevant to such borrowing. The applicable margin for borrowings under the receivables based credit facility ranges from 1.50% to 2.00% for Eurocurrency borrowings and from 0.50% to 1.00% for base-rate borrowings, depending on average daily excess availability under the receivables based credit facility during the prior fiscal quarter.

In addition to paying interest on outstanding principal under the receivables based credit facility, iHeartCommunications is required to pay a commitment fee to the lenders under the receivables based credit facility in respect of the unutilized commitments thereunder. The commitment fee rate ranges from 0.25% to 0.375% per annum dependent upon average unused commitments during the prior quarter. iHeartCommunications must also pay customary letter of credit fees.

Maturity

Borrowings under the receivables based credit facility will mature, and lending commitments thereunder will terminate, on the fifth anniversary of the effectiveness of the receivables based credit facility (December 24, 2017), provided that, (a) the maturity date will be October 31, 2015 if on October 30, 2015, greater than $500.0 million in aggregate principal amount is owing under certain of iHeartCommunications’ term loan credit facilities, (b) the maturity date will be May 3, 2016 if on May 2, 2016 greater than $500.0 million aggregate principal amount of iHeartCommunications’ 10.75% senior cash pay notes due 2016 and 11.00%/11.75% senior toggle notes due 2016 are outstanding and (c) in the case of any debt under clauses (a) and (b) that is amended or refinanced in any manner that extends the maturity date of such debt to a date that is on or before the date that is five years after the effectiveness of the receivables based credit facility, the maturity date will be one day prior to the maturity date of such debt after giving effect to such amendment or refinancing if greater than $500,000,000 in aggregate principal amount of such debt is outstanding.

Guarantees and Security

The facility is guaranteed by, subject to certain exceptions, the guarantors of iHeartCommunications’ senior secured credit facilities. All obligations under the receivables based credit facility, and the guarantees of those obligations, are secured by a perfected security interest in all of iHeartCommunications’ and all of the guarantors’ accounts receivable and related assets and proceeds thereof that is senior to the security interest of iHeartCommunications’ senior secured credit facilities in such accounts receivable and related assets and proceeds thereof, subject to permitted liens, including prior liens permitted by the indenture governing certain of iHeartCommunications’ Legacy Notes, and certain exceptions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Certain Covenants and Events of Default

The receivables based credit facility includes negative covenants that, subject to significant exceptions, limit iHeartCommunications’ ability and the ability of its restricted subsidiaries to, among other things:

• incur additional indebtedness;

• create liens on assets;

• engage in mergers, consolidations, liquidations and dissolutions;

• sell assets;

• pay dividends and distributions or repurchase capital stock;

• make investments, loans, or advances;

• prepay certain junior indebtedness;

• engage in certain transactions with affiliates;

• amend material agreements governing certain junior indebtedness; and

• change lines of business.

Priority Guarantee Notes

As of December 31, 2014, iHeartCommunications had outstanding Priority Guarantee Notes consisting of:

(In thousands)	Maturity Date	Interest Rate		Interest Payment Terms	December 31, 2014		December 31, 2013
9.0% Priority Guarantee Notes due 2019	12/15/2019		9.0%	Payable semi-annually in arrears on June 15 and December 15 of each year	$	1,999,815		1,999,815
9.0% Priority Guarantee Notes due 2021	3/1/2021		9.0%	Payable semi-annually in arrears on March 1 and September 1 of each year		1,750,000		1,750,000
11.25% Priority Guarantee Notes due 2021	3/1/2021		11.25%	Payable semi-annually on March 1 and September 1 of each year		575,000		575,000
9.0% Priority Guarantee Notes due 2022	9/15/2022		9.0%	Payable semi-annually in arrears on March 15 and September 15 of each year		1,000,000		-
Total Priority Guarantee Notes					$	5,324,815		4,324,815

Guarantees and Security

The Priority Guarantee Notes are iHeartCommunications’ senior obligations and are fully and unconditionally guaranteed, jointly and severally, on a senior basis by the guarantors named in the indentures. The Priority Guarantee Notes and the guarantors’ obligations under the guarantees are secured by (i) a lien on (a) the capital stock of iHeartCommunications and (b) certain property and related assets that do not constitute “principal property,” in each case equal in priority to the liens securing the obligations under iHeartCommunications’ senior secured credit facilities and (ii) a lien on the accounts receivable and related assets securing iHeartCommunications’ receivables based credit facility junior in priority to the lien securing iHeartCommunications’ obligations thereunder, subject to certain exceptions. In addition to the collateral granted to secure the Priority Guarantee Notes due 2019, the collateral agent and the trustee for the Priority Guarantee Notes due 2019 entered into an agreement with the administrative agent for the lenders under the senior secured credit facilities to turn over to the trustee under the Priority Guarantee Notes due 2019, for the benefit of the holders of the Priority Guarantee Notes due 2019, a pro rata share of any recovery received on account of the principal properties, subject to certain terms and conditions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Redemptions

iHeartCommunications may redeem the Priority Guarantee Notes at its option, in whole or part, at redemption prices set forth in the indentures, plus accrued and unpaid interest to the redemption dates plus applicable premiums.

Certain Covenants

The indentures governing the Priority Guarantee Notes contain covenants that limit iHeartCommunications’ 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) modify any of iHeartCommunications’ existing senior notes; (iv) transfer or sell 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 iHeartCommunications’ assets. The indentures contain covenants that limit iHeartMedia Capital I, LLC’s and iHeartCommunications’ ability and the ability of its restricted subsidiaries to, among other things: (i) create liens on assets and (ii) materially impair the value of the security interests taken with respect to the collateral for the benefit of the notes collateral agent and the holders of the Priority Guarantee Notes. The indentures also provide for customary events of default.

Subsidiary Senior Revolving Credit Facility Due 2018

During the third quarter of 2013, CCOH 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. At December 31, 2014, there were no amounts outstanding under the revolving credit facility, and $62.2 million of letters of credit under the revolving credit facility, which reduce availability under the facility.

Senior Cash Pay Notes and Senior Toggle Notes

As of December 31, 2014, iHeartCommunications had no principal amounts outstanding of 10.75% senior cash pay notes due 2016 and 11.00%/11.75% senior toggle notes due 2016. In August 2014, iHeartCommunications fully redeemed the remaining notes with proceeds from the issuance of 14.0% Senior Notes due 2021.

14.0% Senior Notes due 2021

As of December 31, 2014, iHeartCommunications had outstanding approximately $1.66 billion of aggregate principal amount of 14.0% Senior Notes due 2021 (net of $423.4 million principal amount issued to, and held by, a subsidiary of iHeartCommunications).

The Senior Notes due 2021 mature on February 1, 2021. Interest on the Senior Notes due 2021 is payable semi-annually on February 1 and August 1 of each year, which began on August 1, 2013. Interest on the Senior Notes due 2021 will be paid at the rate of (i) 12.0% per annum in cash and (ii) 2.0% per annum through the issuance of payment-in-kind notes (the “PIK Notes”). Any PIK Notes issued in certificated form will be dated as of the applicable interest payment date and will bear interest from and after such date. All PIK Notes issued will mature on February 1, 2021 and have the same rights and benefits as the Senior Notes due 2021. The Senior Notes due 2021 are fully and unconditionally guaranteed on a senior basis by the guarantors named in the indenture governing such notes. The guarantee is structurally subordinated to all existing and future indebtedness and other liabilities of any subsidiary of the applicable subsidiary guarantor that is not also a guarantor of the Senior Notes due 2021. The guarantees are subordinated to the guarantees of iHeartCommunications’ senior secured credit facility and certain other permitted debt, but rank equal to all other senior indebtedness of the guarantors.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

iHeartCommunications may redeem the Senior Notes due 2021, in whole or in part, within certain dates, at the redemption prices set forth in the indenture plus accrued and unpaid interest to the redemption date.

The indenture governing the Senior Notes due 2021 contains covenants that limit iHeartCommunications’ ability and the ability of its restricted subsidiaries to, among other things: (i) incur additional indebtedness or issue certain preferred stock; (ii) pay dividends on, or make distributions in respect of, their capital stock or repurchase their capital stock; (iii) make certain investments or other restricted payments; (iv) sell certain assets; (v) create liens or use assets as security in other transactions; (vi) merge, consolidate or transfer or dispose of substantially all of their assets; (vii) engage in transactions with affiliates; and (viii) designate their subsidiaries as unrestricted subsidiaries.

iHeartCommunications Legacy Notes

As of December 31, 2014, iHeartCommunications had outstanding senior notes (net of $57.1 million aggregate principal amount held by a subsidiary of iHeartCommunications) consisting of:

(In thousands)	December 31,      2014		December 31,      2013
5.5% Senior Notes Due 2014	$	-		461,455
4.9% Senior Notes Due 2015		-		250,000
5.5% Senior Notes Due 2016		192,900		250,000
6.875% Senior Notes Due 2018		175,000		175,000
7.25% Senior Notes Due 2027		300,000		300,000
Total Legacy Notes	$	667,900		1,436,455

These senior notes were the obligations of iHeartCommunications prior to the merger. The senior notes are senior, unsecured obligations that are effectively subordinated to iHeartCommunications’ secured indebtedness to the extent of the value of iHeartCommunications’ assets securing such indebtedness and are not guaranteed by any of iHeartCommunications’ subsidiaries and, as a result, are structurally subordinated to all indebtedness and other liabilities of iHeartCommunications’ subsidiaries. The senior notes rank equally in right of payment with all of iHeartCommunications’ existing and future senior indebtedness and senior in right of payment to all existing and future subordinated indebtedness.

10.0% Senior Notes due 2018

As of December 31, 2014, iHeartCommunications had outstanding $730.0 million aggregate principal amount of senior notes due 2018 (net of $120.0 million aggregate principal amount held by a subsidiary of iHeartCommunications). The senior notes due 2018 mature on January 15, 2018 and bear interest at a rate of 10.0% per annum, payable semi-annually on January 15 and July 15 of each year, which began on July 15, 2014.

The senior notes due 2018 are senior, unsecured obligations that are effectively subordinated to iHeartCommunications’ secured indebtedness to the extent of the value of iHeartCommunications’ assets securing such indebtedness and are not guaranteed by any of iHeartCommunications’ subsidiaries and, as a result, are structurally subordinated to all indebtedness and other liabilities of iHeartCommunications’ subsidiaries. The senior notes due 2018 rank equally in right of payment with all of iHeartCommunications’ existing and future senior indebtedness and senior in right of payment to all existing and future subordinated indebtedness.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Subsidiary Senior Notes

As of December 31, 2014, the Company’s subsidiary, Clear Channel Worldwide Holdings, Inc. (“CCWH”) had outstanding notes consisting of:

(In thousands)	Maturity Date		Interest Rate		Interest Payment Terms	December 31, 2014		December 31, 2013
CCWH Senior Notes:
6.5% Series A Senior Notes Due 2022		11/15/2022		6.5%	Payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year	$	735,750		735,750
6.5% Series B Senior Notes Due 2022		11/15/2022		6.5%	Payable to the trustee weekly in arrears and to the noteholders on May 15 and November 15 of each year		1,989,250		1,989,250
CCWH Senior Subordinated Notes:
7.625% Series A Senior Notes Due 2020		3/15/2020		7.625%	Payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year		275,000		275,000
7.625% Series B Senior Notes Due 2020		3/15/2020		7.625%	Payable to the trustee weekly in arrears and to the noteholders on March 15 and September 15 of each year		1,925,000		1,925,000
Total CCWH Notes						$	4,925,000		4,925,000

Guarantees and Security

The CCWH Senior Notes are guaranteed by CCOH, Clear Channel Outdoor, Inc. (“CCOI”) and certain of CCOH’s direct and indirect subsidiaries. The CCWH Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, on a senior subordinated basis by CCOH, CCOI and certain of CCOH’s other domestic subsidiaries and rank junior to each guarantor’s existing and future senior debt, including the CCWH Senior Notes, equally with each guarantor’s existing and future senior subordinated debt and ahead of each guarantor’s existing and future debt that expressly provides that it is subordinated to the guarantees of the CCWH Senior Subordinated Notes.

The CCWH Senior Notes are senior obligations that rank pari passu in right of payment to all unsubordinated indebtedness of CCWH and the guarantees of the CCWH Senior Notes rank pari passu in right of payment to all unsubordinated indebtedness of the guarantors. The CCWH Senior Subordinated Notes are unsecured senior subordinated obligations that rank junior to all of CCWH’s existing and future senior debt, including the CCWH Senior Notes, equally with any of CCWH’s existing and future senior subordinated debt and ahead of all of CCWH’s existing and future debt that expressly provides that it is subordinated to the CCWH Subordinated Notes.

Redemptions

CCWH may redeem the Subsidiary Senior Notes at its option, in whole or part, at redemption prices set forth in the indentures plus accrued and unpaid interest to the redemption dates and plus an applicable premium.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Certain Covenants

The indentures governing the Subsidiary Senior Notes contain covenants that limit CCOH and its restricted subsidiaries ability to, among other things:

• incur or guarantee additional debt or issue certain preferred stock;

• in case of the Senior Notes, create liens on its restricted subsidiaries’ assets to secure such debt;

• create restrictions on the payment of dividends or other amounts;

• enter into certain transactions with affiliates;

• merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of its assets; and

• sell certain assets, including capital stock of its subsidiaries.

Future Maturities of Long-term Debt

Future maturities of long-term debt at December 31, 2014 are as follows:

(in thousands)
2015	$	3,604
2016		1,126,920
2017		8,208
2018		909,272
2019		8,300,043
Thereafter		10,212,868
Total (1)	$	20,560,915

⁽¹⁾  Excludes purchase accounting adjustments and original issue discount of $234.9 million, which is amortized through interest expense over the life of the underlying debt obligations.

NOTE 6 – FAIR VALUE MEASUREMENTS

ASC 820-10-35 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Marketable Equity Securities

The Company’s marketable equity securities are measured at fair value on each reporting date.

The marketable equity securities are measured at fair value using quoted prices in active markets. Due to the fact that the inputs used to measure the marketable equity securities at fair value are observable, the Company has categorized the fair value measurements of the securities as Level 1.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The cost, unrealized holding gains or losses, and fair value of the Company’s investments at December 31, 2014 and 2013 are as follows:

(In thousands)			Gross		Gross
Investments	Amortized Cost		Unrealized Losses		Unrealized Gains		Fair Value
2014
Available-for-sale	$	369	$	-	$	1,609	$	1,978
Other cost investments		16,269		-		-		16,269
Total	$	16,638	$	-	$	1,609	$	18,247
2013
Available-for-sale	$	659	$	-	$	1,283	$	1,942
Other cost investments		7,783		-		-		7,783
Total	$	8,442	$	-	$	1,283	$	9,725

During 2013, the Company sold shares of Sirius XM Radio, Inc. held by it for $135.5 million. In connection with the sale of shares of Sirius XM Radio, Inc., a realized gain of $130.9 million and income tax expense of $48.6 million were reclassified out of accumulated other comprehensive loss into “Gain on marketable securities” and “Income tax benefit,” respectively. The net difference of $82.3 million is reported as a reduction of “Other comprehensive income (loss).”

Other cost investments include various investments in companies for which there is no readily determinable market value. The Company recognized other-than-temporary impairments of $2.0 million on a cost investment for the year ended December 31, 2012, which was a non-cash impairment charge recorded in “Loss on marketable securities.”

NOTE 7 – COMMITMENTS AND CONTINGENCIES

The Company accounts for its rentals that include renewal options, annual rent escalation clauses, minimum franchise payments and maintenance related to displays under the guidance in ASC 840.

The Company considers its non-cancelable contracts that enable it to display advertising on buses, bus shelters, trains, etc. to be leases in accordance with the guidance in ASC 840-10. These contracts may contain minimum annual franchise payments which generally escalate each year. The Company accounts for these minimum franchise payments on a straight-line basis. If the rental increases are not scheduled in the lease, such as an increase based on subsequent changes in the index or rate, those rents are considered contingent rentals and are recorded as expense when accruable. Other contracts may contain a variable rent component based on revenue. The Company accounts for these variable components as contingent rentals and records these payments as expense when accruable. No single contract or lease is material to the Company’s operations.

The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in ASC 840-20-25. The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized.

The Company leases office space, certain broadcasting facilities, equipment and the majority of the land occupied by its outdoor 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.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In addition, the Company has commitments relating to required purchases of property, plant and equipment under certain street furniture contracts. Certain of the Company’s contracts contain penalties for not fulfilling its commitments related to its obligations to build bus stops, kiosks and other public amenities or advertising structures. Historically, any such penalties have not materially impacted the Company’s financial position or results of operations.

Certain acquisition agreements include deferred consideration payments based on performance requirements by the seller typically involving the completion of a development or obtaining appropriate permits that enable the Company to construct additional advertising displays. At December 31, 2014, the Company believes its maximum aggregate contingency, which is subject to performance requirements by the seller, is approximately $30.0 million. As the contingencies have not been met or resolved as of December 31, 2014, these amounts are not recorded.

As of December 31, 2014, the Company’s future minimum rental commitments under non-cancelable operating lease agreements with terms in excess of one year, minimum payments under non-cancelable contracts in excess of one year, capital expenditure commitments and employment/talent contracts consist of the following:

(In thousands)					Capital
	Non-Cancelable     Operating Leases		Non-Cancelable       Contracts		Expenditure         Commitments		Employment/Talent   Contracts
2015	$	435,118	$	593,123	$	55,968	$	80,442
2016		347,487		437,022		70,385		75,760
2017		302,876		262,368		67,053		31,673
2018		269,697		240,128		922		11,069
2019		243,096		171,562		757		-
Thereafter		1,325,171		336,120		14,402		-
Total	$	2,923,445	$	2,040,323	$	209,487	$	198,944

Rent expense charged to operations for the years ended December 31, 2014, 2013 and 2012 was $1.17 billion, $1.16 billion and $1.14 billion, 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; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Los Angeles Litigation

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

NOTE 8 – GUARANTEES

As of December 31, 2014, iHeartCommunications had outstanding surety bonds and commercial standby letters of credit of $47.7 million and $113.9 million, respectively, of which no letters of credit were cash secured. These letters of credit and surety bonds relate to various operational matters including insurance, bid, concession and performance bonds as well as other items.

As of December 31, 2014, iHeartCommunications had outstanding bank guarantees of $55.1 million. Bank guarantees in the amount of $15.2 million are backed by cash collateral.

NOTE 9 – INCOME TAXES

Significant components of the provision for income tax benefit (expense) are as follows:

(In thousands)	Years Ended December 31,
	2014			2013			2012
Current - Federal	$	(503	)	$	10,586		$	61,655
Current - foreign		(27,256	)		(48,466	)		(48,579	)
Current - state		3,193			1,527			(9,408	)
Total current benefit (expense)		(24,566	)		(36,353	)		3,668
Deferred - Federal		(29,284	)		126,905			261,014
Deferred - foreign		4,308			8,932			27,970
Deferred - state		(8,947	)		22,333			15,627
Total deferred benefit (expense)		(33,923	)		158,170			304,611
Income tax benefit (expense)	$	(58,489	)	$	121,817		$	308,279

Current tax expense of $24.6 million was recorded for 2014 as compared to a current tax expense of $36.4 million for 2013. The change in current tax was primarily due to a reduction in unrecognized tax benefits during 2014, which resulted from the expiration of statutes of limitations to assess taxes in the United Kingdom and several state jurisdictions. This decrease in unrecognized tax benefits resulted in a reduction to current tax expense of $35.4 million during 2014.

Current tax expense of $36.4 million was recorded for 2013 as compared to a current tax benefit of $3.7 million for 2012. The change in current tax was primarily due to the Company’s settlement of U.S. federal and foreign tax examinations during 2012. Pursuant to the settlements, the Company recorded a reduction to current income tax expense of approximately $67.3 million during 2012 to reflect the net current tax benefits of the settlements.

Deferred tax expense of $33.9 million was recorded for 2014 compared with deferred tax benefit of $158.2 million for 2013. The change in deferred tax is primarily due to the valuation allowance of $339.8 million recorded against the Company’s current period federal and state net operating losses during 2014.

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Deferred tax benefit of $158.2 million for 2013 primarily relates to cancellation of debt income recognized during the year as a result of certain debt restructuring transactions, and is lower when compared with the deferred tax benefit of $304.6 million for 2012. The decrease in deferred tax benefit in 2013 is primarily due to the valuation allowance of $143.5 million recorded against a portion of the Company’s federal and state net operating losses.

Significant components of the Company’s deferred tax liabilities and assets as of December 31, 2014 and 2013 are as follows:

(In thousands)	2014		2013
Deferred tax liabilities:
Intangibles and fixed assets	$	2,335,584	$	2,402,168
Long-term debt		119,887		183,615
Investments in nonconsolidated affiliates		1,121		-
Other investments		5,575		6,759
Other		8,857		6,655
Total deferred tax liabilities		2,471,024		2,599,197
Deferred tax assets:
Accrued expenses		111,884		106,651
Investments in nonconsolidated affiliates		-		1,824
Net operating loss carryforwards		1,445,340		1,287,239
Bad debt reserves		9,346		9,726
Other		34,017		35,527
Total gross deferred tax assets		1,600,587		1,440,967
Less: Valuation allowance		655,658		327,623
Total deferred tax assets		944,929		1,113,344
Net deferred tax liabilities	$	1,526,095	$	1,485,853

Included in the Company’s net deferred tax liabilities are $37.8 million and $52.0 million of current net deferred tax assets for 2014 and 2013, respectively. The Company presents these assets in “Other current assets” on its consolidated balance sheets. The remaining $1.6 billion and $1.5 billion of net deferred tax liabilities for 2014 and 2013, respectively, are presented in “Deferred tax liabilities” on the consolidated balance sheets.

The Company’s net foreign deferred tax liabilities were $13.6 million and $19.8 million for the periods ended December 31, 2014 and December 31, 2013, respectively.

The deferred tax liability related to intangibles and fixed assets primarily relates to the difference in book and tax basis of acquired FCC licenses, billboard permits and tax deductible goodwill created from the Company’s various stock acquisitions. In accordance with ASC 350-10,Intangibles—Goodwill and Other, the Company does not amortize FCC licenses and billboard permits. As a result, this deferred tax liability will not reverse over time unless the Company recognizes future impairment charges related to its FCC licenses, permits and tax deductible goodwill or sells its FCC licenses or permits. As the Company continues to amortize its tax basis in its FCC licenses, permits and tax deductible goodwill, the deferred tax liability will increase over time.

At December 31, 2014, the Company had recorded net operating loss carryforwards (tax effected) for federal and state income tax purposes of approximately $1.3 billion, expiring in various amounts through 2034. The Company expects to realize the benefits of a portion of its deferred tax assets attributable to federal and state net operating losses based upon expected future taxable income from deferred tax liabilities that reverse in the relevant federal and state jurisdictions and carryforward periods. As of December 31, 2014, the Company has recorded a partial valuation allowance of $487.1 million against these deferred tax assets attributable to federal and state net operating losses. In addition, the Company had recorded deferred tax assets for foreign net operating loss carryforwards (tax effected) of approximately $153.0 million which are offset in part by an associated valuation allowance of $146.4 million. Additional deferred tax valuation allowance of $22.1 million offsets other foreign deferred tax assets that are not expected to be realized. Realization of these foreign deferred tax assets is dependent upon the Company’s ability to generate future taxable income in appropriate tax jurisdictions and carryforward periods. Due to the Company’s evaluation of negative factors including particular

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IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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 acquired FCC licenses, 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, 2014, net deferred tax liabilities include a deferred tax asset of $28.9 million relating to stock-based compensation expense under ASC 718-10,Compensation—Stock Compensation. Full realization of this deferred tax asset requires stock options to be exercised at a price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the stock price of the Company’s common stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in its balance sheet.

The reconciliation of income tax computed at the U.S. Federal statutory tax rates to income tax benefit is:

	Years Ended December 31,
(In thousands)	2014			2013			2012
	Amount		Percent	Amount		Percent	Amount		Percent
Income tax benefit at statutory rates	$	246,284	35%	$	246,867	35%	$	251,814	35%
State income taxes, net of federal tax effect		26,518	4%		32,768	4%		6,218	1%
Foreign income taxes		11,074	2%		(22,640)	(3%)		8,782	2%
Nondeductible items		(5,533)	(1%)		(4,870)	(1%)		(4,617)	(1%)
Changes in valuation allowance and other estimates		(333,641)	(47%)		(135,161)	(19%)		50,697	7%
Other, net		(3,191)	(1%)		4,853	1%		(4,615)	(1%)
Income tax benefit (expense)	$	(58,489)	(8%)	$	121,817	17%	$	308,279	43%

The Company’s effective tax rate for the year ended December 31, 2014 is (8%). The effective tax rate for 2014 was impacted by the $339.8 million valuation allowance recorded during the period as additional deferred tax expense. The valuation allowance was recorded against the Company’s current period federal and state net operating losses due to the uncertainty of the ability to utilize those losses in future periods. This expense was partially offset by $28.9 million in net tax benefits associated with a decrease in unrecognized tax benefits resulting from the expiration of statute of limitations to assess taxes in the United Kingdom and several state jurisdictions. Foreign income before income taxes was approximately $97.2 million for 2014, and it should be noted that with limited exceptions, tax rates in our foreign jurisdictions are lower than that of the U.S. federal statutory rate.

A tax benefit was recorded for the year ended December 31, 2013 of 17%. The effective tax rate for 2013 was impacted by the $143.5 million valuation allowance recorded during the period as additional deferred tax expense. The valuation allowance was recorded against a portion of the federal and state net operating losses due to the uncertainty of the ability to utilize those losses in future periods. This expense was partially offset by $20.2 million in net tax benefits recorded during the period due to the settlement of certain U.S. federal and state tax examinations during the year. Foreign income before income taxes was approximately $48.3 million for 2013.

A tax benefit was recorded for the year ended December 31, 2012 of 43%. The effective tax rate for 2012 was impacted by the Company’s settlement of U.S. federal and foreign tax examinations during the year. Pursuant to the settlements, the Company recorded a reduction to income tax expense of approximately $60.6 million to reflect the net tax benefits of the settlements. This benefit was partially offset by additional tax recorded during 2012 related to the write-off of deferred tax assets associated with the vesting of certain equity awards. Foreign income before income taxes was approximately $84.0 million for 2012.

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, 2014 and 2013 was $40.8 million and $49.4 million, respectively. The total amount of unrecognized tax benefits and accrued interest and penalties at December 31, 2014 and 2013 was $147.7 million and $178.8 million,

27

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

respectively, of which $110.4 million and $131.0 million is included in “Other long-term liabilities”, and $2.3 million and $11.6 million is included in “Accrued Expenses” on the Company’s consolidated balance sheets, respectively. In addition, $35.0 million and $36.1 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, 2014 and 2013, respectively. The total amount of unrecognized tax benefits at December 31, 2014 and 2013 that, if recognized, would impact the effective income tax rate is $68.8 million and $100.1 million, respectively.

(In thousands)	Years Ended December 31,
Unrecognized Tax Benefits	2014		2013
Balance at beginning of period	$	129,375	$	138,437
Increases for tax position taken in the current year		13,848		12,004
Increases for tax positions taken in previous years		6,003		13,163
Decreases for tax position taken in previous years		(9,764)		(21,928)
Decreases due to settlements with tax authorities		(8,181)		(1,113)
Decreases due to lapse of statute of limitations		(24,367)		(11,188)
Balance at end of period	$	106,914	$	129,375

The Company and its subsidiaries file income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. During 2014, the statute of limitations for certain tax years expired in the United Kingdom and several state jurisdictions resulting in a reduction to unrecognized tax benefits of $24.4 million, excluding interest. Also during 2014, the Company settled certain U.S. federal and state examinations with taxing authorities, resulting in decreases in unrecognized tax benefits relating to cash tax payments of $8.2 million. All federal income tax matters through 2008 are closed and the Company has effectively settled the 2009 and 2010 examinations with the IRS and is awaiting final approval of the settlement from the Joint Committee on Taxation. The IRS is currently auditing the Company’s tax returns for the 2011 and 2012 periods. Substantially all material state, local, and foreign income tax matters have been concluded for years through 2005.

NOTE 10 – SHAREHOLDERS’ 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 member’s deficit attributable to the Company and the noncontrolling interests of subsidiaries in which the Company has a majority, but not total ownership interest:

(In thousands)	The Company		Noncontrolling     Interests		Consolidated
Balances at January 1, 2014	$	(8,942,166)	$	245,531	$	(8,696,635)
Net income (loss)		(793,761)		31,603		(762,158)
Dividends and other payments to noncontrolling interests		-		(40,027)		(40,027)
Purchase of additional noncontrolling interests		(46,806)		(1,944)		(48,750)
Foreign currency translation adjustments		(101,980)		(19,898)		(121,878)
Unrealized holding gain on marketable securities		285		42		327
Other adjustments to comprehensive loss		(10,214)		(1,224)		(11,438)
Reclassifications		3,317		-		3,317
Other, net		1,977		10,057		12,034
Balances at December 31, 2014	$	(9,889,348)	$	224,140	$	(9,665,208)

(In thousands)	The Company		Noncontrolling     Interests		Consolidated
Balances at January 1, 2013	$	(8,299,188)	$	303,997	$	(7,995,191)
Net income (loss)		(606,883)		23,366		(583,517)
Dividends and other payments to noncontrolling interests		-	��	(91,887)		(91,887)
Foreign currency translation adjustments		(29,755)		(3,246)		(33,001)
Unrealized holding gain on marketable securities		16,439		137		16,576
Unrealized holding gain on cash flow derivatives		48,180		-		48,180
Other adjustments to comprehensive loss		5,932		800		6,732
Reclassifications		(83,585)		(167)		(83,752)
Other, net		6,694		12,531		19,225
Balances at December 31, 2013	$	(8,942,166)	$	245,531	$	(8,696,635)

28

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Dividends

The Company has not paid cash dividends since its formation and its ability to pay dividends is subject to restrictions should it seek to do so in the future. iHeart’s debt financing arrangements include restrictions on its ability to pay dividends thereby limiting the Company’s ability to pay dividends.

Share-Based Compensation

Stock Options

The Company does not have any compensation plans under which it grants stock awards to employees. Prior to the merger, iHeartCommunications granted options to purchase its common stock to its employees and directors and its affiliates under its various equity incentive plans typically at no less than the fair value of the underlying stock on the date of grant. These options were granted for a term not exceeding ten years and were forfeited, except in certain circumstances, in the event the employee or director terminated his or her employment or relationship with iHeartCommunications or one of its affiliates. Prior to acceleration, if any, in connection with the merger, these options vested over a period of up to five years. All equity incentive plans contained anti-dilutive provisions that permitted an adjustment of the number of shares of iHeartCommunications’ common stock represented by each option for any change in capitalization.

The Company has granted options to purchase its shares of Class A common stock to certain key executives 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 to exceed ten years and are forfeited, except in certain circumstances, in the event the executive terminates his or her employment or relationship with the Company or one of its affiliates. Approximately three-fourths of the options outstanding at December 31, 2014 vest based solely on continued service over a period of up to five years with the remainder becoming eligible to vest over a period of up to five years if certain predetermined performance targets are met. The equity incentive plan contains antidilutive provisions that permit an adjustment of the number of shares of Parent’s common stock represented by each option for any change in capitalization.

The Company accounts for its share-based payments using the fair value recognition provisions of ASC 718-10. The fair value of the portion of options that vest based on continued service is estimated on the grant date using a Black-Scholes option-pricing model and the fair value of the remaining options which contain vesting provisions subject to service, market and performance conditions is estimated on the grant date using a Monte Carlo model. Expected volatilities were based on historical volatility of peer companies’ stock, including the Company, over the expected life of the options. The expected life of the options granted represents the period of time that the options granted are expected to be outstanding. The Company used historical data to estimate option exercises 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. No options were granted during the years ended December 31, 2014 and 2013. The following assumptions were used to calculate the fair value of the options granted during the year ended December 31, 2012:

	Years Ended December 31,
	2014(1)	2013(1)	2012
Expected volatility	N/A	N/A	71% – 77%
Expected life in years	N/A	N/A	6.3 – 6.5
Risk-free interest rate	N/A	N/A	0.97% – 1.55%
Dividend yield	N/A	N/A	0%

⁽¹⁾ No options were granted in 2013 and 2014

29

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table presents a summary of the Company’s stock options outstanding at and stock option activity during the year ended December 31, 2014 (“Price” reflects the weighted average exercise price per share):

(In thousands, except per share data)	Options		Price		Weighted Average Remaining   Contractual   Term
Outstanding, January 1, 2014		2,509	$	33.11
Granted(1)		-		-
Exercised		-		-
Forfeited		(125)		36.00
Expired		(83)		36.00
Outstanding, December 31, 2014(2)		2,301		32.85	4.3years
Exercisable		1,480		31.95	4.0years
Expected to Vest		797		35.20	4.7years

⁽¹⁾  The weighted average grant date fair value of options granted during the years ended December 31, 2012 was $2.68 per share. No options were granted during the years ended December 31, 2013 and 2014.

⁽²⁾  Non-cash compensation expense has not been recorded with respect to 0.6 million shares as the vesting of these options is subject to performance conditions that have not yet been determined probable to meet.

A summary of the Company’s unvested options and changes during the year ended December 31, 2014 is presented below:

(In thousands, except per share data)	Options		Weighted Average Grant Date Fair Value
Unvested, January 1, 2014		1,086	$	10.74
Granted		-		-
Vested(1)		(140)		2.32
Forfeited		(125)		2.16
Unvested, December 31, 2014		821		13.61

⁽¹⁾  The total fair value of the options vested during the years ended December 31, 2014, 2013 and 2012 was $0.3 million, $6.3 million and $3.9 million, respectively.

Restricted Stock Awards

The Company has granted restricted stock awards to its employees and affiliates under its equity incentive plan. The restricted stock awards are restricted in transferability for a term of up to five years. Restricted stock awards 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. Dividends or distributions paid in respect of unvested restricted stock awards will be held by the Company and paid to the recipients of the restricted stock awards upon vesting of the shares.

The following table presents a summary of the Company’s restricted stock outstanding and restricted stock activity as of and during the year ended December 31, 2014 (“Price” reflects the weighted average share price at the date of grant):

(In thousands, except per share data)	Awards		Price
Outstanding, January 1, 2014		3,919	$	3.35
Granted		1,826		7.86
Vested (restriction lapsed)		(506)		3.14
Forfeited		(710)		8.85
Outstanding, December 31, 2014		4,529		5.02

30

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CCOH Share-Based Awards

CCOH Stock Options

The Company’s subsidiary, CCOH, has granted options to purchase shares of its Class A common stock to employees and directors of CCOH and its affiliates under its equity incentive plan at no less than the fair market 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 CCOH or one of its affiliates. These options vest solely on continued service over a period of up to five years. The equity incentive stock plan contains anti-dilutive provisions that permit an adjustment of the number of shares of CCOH’s common stock represented by each option for any change in capitalization. CCOH determined that the CCOH dividend discussed in Note 5 was considered a change in capitalization and therefore adjusted outstanding options as of March 15, 2012. No incremental compensation cost was recognized in connection with the adjustment.

The fair value of each option awarded on CCOH common stock is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are based on historical volatility of CCOH’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. CCOH uses historical data to estimate option exercises and employee terminations within the valuation model. CCOH 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 CCOH’s options on the date of grant:

	Years Ended December 31,
	2014	2013	2012
Expected volatility	54% – 56%	55% – 56%	54% – 56%
Expected life in years	6.3	6.3	6.3
Risk-free interest rate	1.73% – 2.08%	1.05% – 2.19%	0.92% – 1.48%
Dividend yield	0%	0%	0%

The following table presents a summary of CCOH’s stock options outstanding at and stock option activity during the year ended December 31, 2014 (“Price” reflects the weighted average exercise price per share):

(In thousands, except per share data)	Options		Price		Weighted Average Remaining   Contractual   Term	Aggregate   Intrinsic Value
Outstanding, January 1, 2014		6,909		$9.60
Granted(1)		627		8.64
Exercised(2)		(459)		5.23
Forfeited		(628)		8.11
Expired		(424)		10.58
Outstanding, December 31, 2014		6,025		9.92	5.1years		$13,956
Exercisable		4,471		10.56	4.1years		$10,065
Expected to vest		1,487		8.08	7.8years		$3,729

⁽¹⁾  The weighted average grant date fair value of CCOH options granted during the years ended December 31, 2014, 2013 and 2012 was $4.69, $4.10 and $4.43 per share, respectively.

⁽²⁾  Cash received from option exercises during the years ended December 31, 2014, 2013 and 2012 was $2.4 million, $4.2 million and $6.4 million, respectively. The total intrinsic value of the options exercised during the years ended December 31, 2014, 2013 and 2012 was $1.5 million, $5.0 million and $7.9 million, respectively.

31

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

A summary of CCOH’s unvested options at and changes during the year ended December 31, 2014 is presented below:

(In thousands, except per share data)	Options		Weighted Average Grant Date Fair Value
Unvested, January 1, 2014		2,645	$	5.21
Granted		627		4.69
Vested(1)		(1,091)		5.59
Forfeited		(628)		4.74
Unvested, December 31, 2014		1,553		4.92

⁽¹⁾  The total fair value of CCOH options vested during the years ended December 31, 2014, 2013 and 2012 was $6.1 million, $7.1 million and $11.5 million, respectively.

CCOH Restricted Stock Awards

CCOH 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 hold 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 CCOH prior to the lapse of the restriction.

The following table presents a summary of CCOH’s restricted stock and restricted stock units outstanding at and activity during the year ended December 31, 2014 (“Price” reflects the weighted average share price at the date of grant):

(In thousands, except per share data)	Awards		Price
Outstanding, January 1, 2014		1,892	$	6.83
Granted		1,040		8.88
Vested (restriction lapsed)		(64)		6.86
Forfeited		(410)		7.76
Outstanding, December 31, 2014		2,458		7.54

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 $10.7 million, $16.7 million and $28.5 million, during the years ended December 31, 2014, 2013 and 2012, respectively.

The tax benefit related to the share-based compensation expense for the years ended December 31, 2014, 2013 and 2012 was $4.1 million, $6.3 million and $10.8 million, respectively.

As of December 31, 2014, there was $22.4 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. In addition, as of December 31, 2014, there was $24.7 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on market, performance and service conditions. This cost will be recognized when it becomes probable that the performance condition will be satisfied.

The Company completed a voluntary stock option exchange program on November 19, 2012 and exchanged 2.0 million stock options granted under the Clear Channel 2008 Executive Incentive Plan for 1.8 million replacement restricted share awards with different service and performance conditions. The Company accounted for the exchange program as a modification of the existing awards under ASC 718 and will recognize incremental compensation expense of approximately $1.7 million over the service period of the new awards. In connection with the exchange program, the Company granted an additional 1.5 million restricted stock awards pursuant to a tax assistance program offered to employees participating in the exchange. Of the total 1.5 million restricted stock awards granted, 0.9 million were repurchased by the Company upon expiration of the exchange program while the remaining 0.6 million awards were forfeited. The Company recognized $2.6 million of expense related to the awards granted in connection with the tax assistance program.

(In thousands, except per share data)	Years Ended December 31,
	2014		2013		2012
NUMERATOR:
Net loss attributable to the Company – common shares	$	(793,761)	$	(606,883)	$	(424,479)
Less: Participating securities dividends		-		2,566		8,456
Less: Income (loss) attributable to the Company – unvested shares		-		-		-
Net loss attributable to the Company per common share – basic and diluted	$	(793,761)	$	(609,449)	$	(432,935)
DENOMINATOR:
Weighted average common shares outstanding – basic		83,941		83,364		82,745
Effect of dilutive securities:
Stock options and common stock warrants(1)		-		-		-
Weighted average common shares outstanding – diluted		83,941		83,364		82,745
Net loss attributable to the Company per common share:
Basic	$	(9.46)	$	(7.31)	$	(5.23)
Diluted	$	(9.46)	$	(7.31)	$	(5.23)

⁽¹⁾  6.8 million, 6.4 million and 5.4 million stock options and restricted shares were outstanding at December 31, 2014, 2013 and 2012, respectively, that were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.

32

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11 – EMPLOYEE STOCK AND SAVINGS PLANS

iHeartCommunications has various 401(k) savings and other plans for the purpose of providing retirement benefits for substantially all employees. Under these plans, an employee can make pre-tax contributions and iHeartCommunications will match a portion of such an employee’s contribution. Employees vest in these iHeartCommunications matching contributions based upon their years of service to iHeartCommunications. Contributions of $27.6 million, $26.6 million and $29.5 million to these plans for the years ended December 31, 2014, 2013 and 2012, respectively, were expensed.

iHeartCommunications offers a non-qualified deferred compensation plan for a select group of management or highly compensated employees, under which such employees 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. iHeartCommunications suspended all salary and bonus deferrals and company matching contributions to the deferred compensation plan on January 1, 2010. iHeartCommunications accounts for the plan in accordance with the provisions of ASC 710-10. Matching credits on amounts deferred may be made in iHeartCommunications’ sole discretion and iHeartCommunications retains ownership of all assets until distributed. Participants in the plan have the opportunity to allocate their deferrals and any iHeartCommunications matching credits among different investment options, the performance of which is used to determine the amounts to be paid to participants under the plan. In accordance with the provisions of ASC 710-10, the assets and liabilities of the non-qualified deferred compensation plan are presented in “Other assets” and “Other long-term liabilities” in the accompanying consolidated balance sheets, respectively. The asset and liability under the deferred compensation plan at December 31, 2014 was approximately $11.6 million recorded in “Other assets” and $11.6 million recorded in “Other long-term liabilities”, respectively. The asset and liability under the deferred compensation plan at December 31, 2013 was approximately $11.8 million recorded in “Other assets” and $11.8 million recorded in “Other long-term liabilities”, respectively.

NOTE 12 – OTHER INFORMATION

The following table discloses the components of “Other income (expense)” for the years ended December 31, 2014, 2013 and 2012, respectively:

(In thousands)	Years Ended December 31,
	2014		2013		2012
Foreign exchange gain (loss)	$	15,554	$	1,772	$	(3,018)
Debt modification expenses		-		(23,555)		-
Other		(6,450)		(197)		3,268
Total other income (expense), net	$	9,104	$	(21,980)	$	250

The following table discloses the increase (decrease) in net deferred income tax liabilities related to each component of other comprehensive income (loss) for the years ended December 31, 2014, 2013 and 2012, respectively:

(In thousands)	Years Ended December 31,
	2014		2013		2012
Foreign currency translation adjustments and other	$	2,559	$	(14,421)	$	3,210
Unrealized holding gain on marketable securities		-		(11,010)		15,324
Unrealized holding gain (loss) on cash flow derivatives		-		28,759		30,074
Total increase in deferred tax liabilities	$	2,559	$	3,328	$	48,608

The following table discloses the components of “Other current assets” as of December 31, 2014 and 2013, respectively:

(In thousands)	As of December 31,
	2014		2013
Inventory	$	23,777	$	26,872
Deferred tax asset		37,793		51,967
Deposits		4,466		5,126
Deferred loan costs		32,602		30,165
Other		37,661		47,027
Total other current assets	$	136,299	$	161,157

33

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table discloses the components of “Other assets” as of December 31, 2014 and 2013, respectively:

(In thousands)	As of December 31,
	2014		2013
Investments in, and advances to, nonconsolidated affiliates	$	9,493	$	238,805
Other investments		18,247		9,725
Notes receivable		242		302
Prepaid expenses		16,082		24,231
Deferred loan costs		130,267		143,763
Deposits		27,822		26,200
Prepaid rent		56,430		62,864
Non-qualified plan assets		11,568		11,844
Other		18,914		15,722
Total other assets	$	289,065	$	533,456
The following table discloses the components of “Other long-term liabilities” as of December 31, 2014 and 2013, respectively:
(In thousands)	As of December 31,
	2014		2013
Unrecognized tax benefits	$	110,410	$	131,015
Asset retirement obligation		53,936		59,125
Non-qualified plan liabilities		11,568		11,844
Deferred income		23,734		16,247
Deferred rent		125,530		120,092
Employee related liabilities		39,963		31,617
Other		89,722		92,080
Total other long-term liabilities	$	454,863	$	462,020

The following table discloses the components of “Accumulated other comprehensive loss,” net of tax, as of December 31, 2014 and 2013, respectively:

(In thousands)	As of December 31,
	2014		2013
Cumulative currency translation adjustment	$	(291,520)	$	(188,920)
Cumulative unrealized gain on securities		1,397		1,101
Cumulative other adjustments		(18,467)		(8,254)
Total accumulated other comprehensive loss	$	(308,590)	$	(196,073)

NOTE 13 – SEGMENT DATA

The Company’s reportable segments, which it believes best reflect how the Company is currently managed, are iHM, Americas outdoor advertising and International outdoor advertising. Revenue and expenses earned and charged between segments are recorded at estimated fair value and eliminated in consolidation. The iHM segment provides media and entertainment services via broadcast and digital delivery and also includes the Company’s national syndication business. The Americas outdoor advertising segment consists of operations primarily in the United States, Canada and Latin America. The International outdoor advertising segment primarily includes operations in Europe, Asia and Australia. The Americas outdoor and International outdoor display inventory consists primarily of billboards, street furniture displays and transit displays. The Other category includes the Company’s media representation business as well as other general support services and initiatives which are ancillary to the Company’s other businesses. 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.

34

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

During the first quarter of 2015, the Company revised its segment reporting, as discussed in Note 1. The following table presents the Company’s revised reportable segment results for the years ended December 31, 2014, 2013 and 2012.

(In thousands)	iHM		Americas Outdoor   Advertising		International   Outdoor Advertising		Other			Corporate and other   reconciling   items			Eliminations			Consolidated
Year Ended December 31, 2014
Revenue	$	3,161,503	$	1,350,623	$	1,610,636	$	212,676		$	-		$	(16,905	)	$	6,318,533
Direct operating expenses		927,674		605,771		991,117		24,009			-			(7,621	)		2,540,950
Selling, general and administrative expenses		1,018,930		233,641		314,878		122,448			-			(9,274	)		1,680,623
Depreciation and amortization		240,868		203,928		198,143		33,543			34,416			-			710,898
Impairment charges		-		-		-		-			24,176			-			24,176
Corporate expenses		-		-		-		-			320,341			(10	)		320,331
Other operating income, net		-		-		-		-			40,031			-			40,031
Operating income (loss)	$	974,031	$	307,283	$	106,498	$	32,676		$	(338,902	)	$	-		$	1,081,586
Intersegment revenues	$	10	$	3,436	$	-	$	13,459		$	-		$	-		$	16,905
Segment assets	$	7,720,181	$	3,664,574	$	1,680,598	$	277,388		$	697,501		$			$	14,040,242
Capital expenditures	$	50,403	$	109,727	$	117,480	$	5,744		$	34,810		$			$	318,164
Share-based compensation expense	$	-	$	-	$	-	$	-		$	10,713		$	-		$	10,713
Year Ended December 31, 2013
Revenue	$	3,131,595	$	1,385,757	$	1,560,433	$	181,993		$	-		$	(16,734	)	$	6,243,044
Direct operating expenses		953,577		610,750		983,978		25,271			-			(8,556	)		2,565,020
Selling, general and administrative expenses		984,704		243,456		300,116		118,830			-			(8,178	)		1,638,928
Depreciation and amortization		262,136		206,031		194,493		39,291			28,877			-			730,828
Impairment charges		-		-		-		-			16,970			-			16,970
Corporate expenses		-		-		-		-			313,514			-			313,514
Other operating income, net		-		-		-		-			22,998			-			22,998
Operating income (loss)	$	931,178	$	325,520	$	81,846	$	(1,399	)	$	(336,363	)	$	-		$	1,000,782
Intersegment revenues	$	-	$	2,473	$	-	$	14,261		$	-		$	-		$	16,734
Segment assets	$	7,933,564	$	3,823,347	$	1,899,648	$	534,363		$	906,380		$			$	15,097,302
Capital expenditures	$	75,742	$	96,590	$	100,949	$	9,933		$	41,312		$			$	324,526
Share-based compensation expense	$	-	$	-	$	-	$	-		$	16,715		$	-		$	16,715
Year Ended December 31, 2012
Revenue	$	3,084,780	$	1,367,669	$	1,579,275	$	231,667		$	-		$	(16,507	)	$	6,246,884
Direct operating expenses		888,914		625,852		977,640		25,088			-			(12,965	)		2,504,529
Selling, general and administrative expenses		959,182		262,645		312,017		129,987			-			(3,542	)		1,660,289
Depreciation and amortization		262,409		200,372		196,909		45,568			24,027			-			729,285
Impairment charges		-		-		-		-			37,651			-			37,651
Corporate expenses		-		-		-		-			293,207			-			293,207
Other operating income, net		-		-		-		-			48,127			-			48,127
Operating income (loss)	$	974,275	$	278,800	$	92,709	$	31,024		$	(306,758	)	$	-		$	1,070,050
Intersegment revenues	$	-	$	1,175	$	80	$	15,252		$	-		$	-		$	16,507
Segment assets	$	8,061,701	$	3,991,147	$	2,100,397	$	815,435		$	1,324,033		$	-		$	16,292,713
Capital expenditures	$	65,821	$	130,786	$	136,990	$	17,438		$	39,245		$	-		$	390,280
Share-based compensation expense	$	-	$	-	$	-	$	-		$	28,540		$	-		$	28,540

Revenue of $1.8 billion, $1.7 billion and $1.7 billion derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2014, 2013 and 2012, respectively. Revenue of $4.5 billion, $4.5 billion and $4.5 billion derived from the Company’s U.S. operations are included in the data above for the years ended December 31, 2014, 2013 and 2012, respectively.

Identifiable long-lived assets of $682.7 million, $760.5 million and $805.2 million derived from the Company’s foreign operations are included in the data above for the years ended December 31, 2014, 2013 and 2012, respectively. Identifiable long-lived assets of $2.0 billion, $2.1 billion and $2.2 billion derived from the Company’s U.S. operations are included in the data above for the years ended December 31, 2014, 2013 and 2012, respectively.

35

IHEARTMEDIA, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14 – 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,
	2014		2013		2014		2013		2014		2013		2014		2013
Revenue	$	1,342,548	$	1,343,058	$	1,630,154	$	1,618,097	$	1,630,034	$	1,587,522	$	1,715,797	$	1,694,367
Operating expenses:
Direct operating expenses		597,688		599,310		644,870		635,528		648,409		651,413		649,983		678,769
Selling, general and administrative expenses		414,636		401,833		418,928		408,399		427,259		408,684		419,800		420,012
Corporate expenses		72,705		80,800		82,197		75,328		78,202		89,574		87,227		67,812
Depreciation and amortization		174,871		182,182		174,062		179,734		175,865		177,330		186,100		191,582
Impairment charges		-		-		4,902		-		35		-		19,239		16,970
Other operating income, net		165		2,395		(1,628)		1,113		47,172		6,186		(5,678)		13,304
Operating income		82,813		81,328		303,567		320,221		347,436		266,707		347,770		332,526
Interest expense		431,114		385,525		440,605		407,508		432,616		438,404		437,261		418,014
Gain (loss) on marketable securities		-		-		-		130,898		-		31		-		(50)
Equity in earnings (loss) of nonconsolidated affiliates		(13,326)		3,641		(16)		5,971		3,955		3,983		(29)		(91,291)
Gain (loss) on extinguishment of debt		(3,916)		(3,888)		(47,503)		-		(4,840)		-		12,912		(83,980)
Other income (expense), net		1,541		(1,000)		12,157		(18,098)		2,617		1,709		(7,211)		(4,591)
Income (loss) before income taxes		(364,002)		(305,444)		(172,400)		31,484		(83,448)		(165,974)		(83,819)		(265,400)
Income tax benefit (expense)		(68,388)		96,325		621		(11,477)		(24,376)		73,802		33,654		(36,833)
Consolidated net income (loss)		(432,390)		(209,119)		(171,779)		20,007		(107,824)		(92,172)		(50,165)		(302,233)
Less amount attributable to noncontrolling interest		(8,200)		(6,116)		14,852		12,805		7,028		9,683		17,923		6,994
Net income (loss) attributable to the Company	$	(424,190)	$	(203,003)	$	(186,631)	$	7,202	$	(114,852)	$	(101,855)	$	(68,088)	$	(309,227)
Net income (loss) to the Company per common share:
Basic	$	(5.06)	$	(2.47)	$	(2.22)	$	0.09	$	(1.37)	$	(1.22)	$	(0.81)	$	(3.70)
Diluted	$	(5.06)	$	(2.47)	$	(2.22)	$	0.09	$	(1.37)	$	(1.22)	$	(0.81)	$	(3.70)

The Company’s Class A common shares are quoted for trading on the OTC Bulletin Board under the symbol IHRT.

NOTE 15 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

iHeartCommunications is a party to a management agreement with certain affiliates of Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P. (together, the “Sponsors”) and certain other parties pursuant to which such affiliates of the Sponsors will provide management and financial advisory services until 2018. These agreements require management fees to be paid to such affiliates of the Sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses. For the years ended December 31, 2014, 2013 and 2012, the Company recognized management fees and reimbursable expenses of $15.2 million, $15.8 million and $15.9 million, respectively.

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 $100.0 million of the Company’s Class A common stock and/or the Class A common stock of CCOH. The stock purchase program does not have a fixed expiration date and may be modified, suspended or terminated at any time at iHeartCommunications’ discretion. During 2014, CC Finco purchased 5,000,000 shares of CCOH’s Class A common stock for approximately $48.8 million. During 2012, CC Finco purchased 111,291 shares of the Company’s Class A common stock for $692,887. During 2011, CC Finco purchased 1,553,971 shares of CCOH’s Class A common stock through open market purchases for approximately $16.4 million. As of December 31, 2014, an aggregate $34.2 million was available under the stock purchase program to purchase the Company’s Class A common stock and/or the Class A common stock of CCOH.

On January 7, 2015 CC Finco purchased an additional 2,000,000 shares of CCOH’s Class A common stock for $20.4 million.

36

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Allowance for Doubtful Accounts

(In thousands)

Description	Balance at Beginning of period		Charges to Costs, Expenses and other		Write-off of Accounts Receivable		Other(1)			Balance at End of Period
Year ended December 31, 2012	$	63,098	$	11,715	$	14,082	$	(4,814	)	$	55,917
Year ended December 31, 2013	$	55,917	$	20,242	$	28,492	$	734		$	48,401
Year ended December 31, 2014	$	48,401	$	14,167	$	20,368	$	(2,502	)	$	39,698

⁽¹⁾  Primarily foreign currency adjustments and acquisition and/or divestiture activity.

37

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

Deferred Tax Asset Valuation Allowance

(In thousands)

Description	Balance at Beginning of Period		Charges to Costs, Expenses and other (1)		Reversal (2)			Adjustments (3)			Balance at end of Period
Year ended December 31, 2012	$	193,052	$	14,309	$	(21,727	)	$	(1,948	)	$	183,686
Year ended December 31, 2013	$	183,686	$	149,107	$	(5	)	$	(5,165	)	$	327,623
Year ended December 31, 2014	$	327,623	$	356,583	$	(230	)	$	(28,318	)	$	655,658

⁽¹⁾  During 2012, 2013 and 2014, the Company recorded valuation allowances on deferred tax assets attributable to net operating losses in certain foreign jurisdictions. In addition, during 2013 and 2014 the Company recorded a valuation allowance of $143.5 million and $339.8 million, respectively, on a portion of its deferred tax assets attributable to federal and state net operating loss carryforwards due to the uncertainty of the ability to utilize those losses in future periods.

⁽²⁾  During 2012, 2013 and 2014, the Company realized the tax benefits associated with certain foreign deferred tax assets, primarily related to foreign loss carryforwards, on which a valuation allowance was previously recorded. The associated valuation allowance was reversed in the period in which, based on the weight of available evidence, it is more-likely-than-not that the deferred tax asset will be realized.

⁽³⁾  During 2012, 2013 and 2014, the Company adjusted certain valuation allowances as a result of changes in tax rates in certain jurisdictions and as a result of the expiration of carryforward periods for net operating loss carryforwards.

38

Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders

iHeartMedia, Inc.

We have audited the accompanying consolidated balance sheets of iHeartMedia, Inc. and subsidiaries (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of comprehensive loss, changes in shareholders’ deficit and cash flows for each of the three years in the period ended December 31, 2014. Our audits also included the financial statement schedule listed in the Index at Item 9.01(d), within this Exhibit 99.2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of iHeartMedia, Inc. and subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 19, 2015 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

San Antonio, Texas

February 19, 2015

except for Notes 2 and 13 as to which the date is June 24, 2015