What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-06 compared with 2020-05-07 · 362 added, 186 removed, 234 unchanged (70% of the section changed)

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Over the past ten years, we have transitioned our Audio business from a single platform radio broadcast operator to a company with multiple platforms including podcasting, networks and live events.

We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience We believe that our ability to generate cash flow from operations from our business initiatives and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next 12 months.

We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience.

We believe that our ability to generate cash flow from operations from our business initiatives and our current cash on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next 12 months.

Description of our Business

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A recession or downturn in the U.S.

economy may have a significant impact on the Company’s ability to generate revenues.

In light of the novel coronavirus pandemic (“COVID-19”), we expect that our revenues in 2020 will decline, largely as a result of a decline in consumer and business spending and the related impact to the demand for advertising and pricing pressure resulting from greater competition for available advertising dollars.

In the three months ended March 31, 2020, we saw a sharp decline and expect further declines in our Sponsorships business, driven by the postponement or cancellation of a number of our live events as a result of the COVID-19 pandemic;

however, this portion of our business is the smallest contributor to our revenue and earnings and has the lowest margin of any of our segments.

economy may have a significant impact on the Company’s ability to generate revenue.

In light of the novel coronavirus pandemic (“COVID-19”) and the resulting recession impacting the U.S.

economy, our revenue for the six months ended June 30, 2020 has declined significantly compared to the comparable period in 2019 and we expect our full year 2020 revenue to decline compared to 2019, largely as a result of a decline in consumer and business spending and the related impact to the demand for advertising and pricing pressure resulting from greater competition for available advertising dollars.

Beginning in March 2020 and continuing in the three months ended June 30, 2020, we saw a sharp decline in each of our Broadcast radio, Networks, and Sponsorships revenue streams.

We also saw a sharp decline in revenues from our Audio and Media Services, particularly in Katz Media, as a result of lower advertising spending.

This decrease was partially offset by a $1.7 million increase in political revenue.

When the business environment recovers, we expect that the traditional promotional use of radio to be a strong benefit to us.

As businesses reopen both nationally and locally, we believe that we are advantaged by our unparalleled reach and the live and local trusted voices that advertisers need to get their messages out quickly.

Our broadcast national and local revenue, as well as our Katz Media revenue, are generally impacted by political cycles, and as a result are not as significantly affected by declines in GDP.

In February 2020, we announced our modernization initiatives, which will take advantage of the significant investments we have made in new technologies to build an operating infrastructure that provides better quality and newer products and delivers new cost efficiencies.

In the first quarter of 2020, we announced our modernization initiatives, which will take advantage of the significant investments we have made in new technologies to build an operating infrastructure that provides better quality and newer products and delivers new cost efficiencies.

We anticipate to incur approximately $50 million of restructuring costs related to achieving our cost savings in 2020.

Our investments in modernization are expected to deliver annualized run-rate cost savings of approximately $100 million by mid-year 2021, and we expect to achieve approximately 50% of our anticipated run-rate savings in 2020.

In addition, in response to the COVID-19 pandemic, we have taken significant steps to significantly reduce our capital and operating expenditures for the remainder of 2020.

These initiatives are expected to generate approximately $200 million in operating cost savings in 2020.

For more information, please see the Liquidity and Capital Resources - Anticipated Cash Requirements section below.

On March 26, 2020, we issued a press release announcing the withdrawal of previously announced financial guidance for the fiscal year ending December 31, 2020 due to heightened uncertainty related to COVID-19, its impact on the operating and economic environment and related, near-term advertiser spending decisions.

As a precautionary measure to preserve financial flexibility in light of the current uncertainty in the global economy resulting from COVID-19, we borrowed $350.0 million principal amount under our senior secured asset-based revolving credit facility (the "ABL Facility").

For more information please refer to “Liquidity and Capital Resources” in this MD&A.

On March 26, 2020, we announced the withdrawal of our previously issued financial guidance for the fiscal year ending December 31, 2020 due to heightened uncertainty related to COVID-19.

As a precautionary measure to preserve financial flexibility in light of this uncertainty, we borrowed $350.0 million principal amount under our senior secured asset-

based revolving credit facility (the “ABL Facility”).

During the three months ended June 30, 2020, we repaid $115.0 million principal amount drawn under our ABL Facility, resulting in a balance outstanding of $235.0 million as of June 30, 2020.

In July 2020, iHeartCommunications issued $450.0 million of incremental term loans pursuant to an amendment (the “Amendment No.

2”) to the credit agreement (as amended, the “Credit Agreement”) with Capital I, as guarantor, certain subsidiaries of iHeartCommunications, as guarantors, and Bank of America, N.A., as administrative agent, governing the Company’s $2.5 billion aggregate principal amount of senior secured term loans (the “Term Loan Facility”), resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

A portion of the proceeds was used to repay the remaining balance outstanding on our ABL Facility of $235.0 million, with the remaining $190.6 million of the proceeds available for general corporate purposes.

For more information please refer to the “ Liquidity and Capital Resources section” in this MD&A.

Impairment Charges

As discussed below, we emerged from bankruptcy on May 1, 2019 and applied fresh start accounting, which included stating our assets and liabilities at estimated fair values, including intangible assets and goodwill, based on our discounted future cash flows in the market environment that existed at the time of emergence.

The United States economy is undergoing a period of economic disruption and uncertainty as a result of the COVID-19 pandemic, which has caused, among other things, lower consumer and business spending.

In addition, the economic disruption caused by the COVID-19 pandemic had an adverse impact on our first quarter 2020 results, and we expect the pandemic to negatively affect our future financial results.

In addition, the economic uncertainty as a result of the COVID-19 pandemic has had a significant impact on the trading values of our publicly-traded debt and equity.

As a result, we performed an impairment test as of March 31, 2020 on our long-lived assets, intangible assets, indefinite-lived Federal Communication Commission (“FCC”) licenses and goodwill.

The uncertainty surrounding the demand for advertising significantly and negatively impacted the key assumptions used in the discounted cash flow models, which are utilized to value our FCC licenses and goodwill.

As a result of the recent valuation performed upon emergence, which was based on market conditions at that time, and the significant deterioration in economic conditions currently as a result of the COVID-19 pandemic, the fair values of certain of our FCC licenses and goodwill have decreased significantly.

Our FCC licenses are valued using the direct valuation approach, with the key assumptions being market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values.

This data is populated using industry normalized information representing an average asset within a market.

We obtained the most recent broadcast radio industry revenue projections, which consider the impact of COVID-19 on future broadcast radio advertising revenue.

Such projections reflect a significant and negative impact from COVID-19.

In addition to using these broadcast radio industry revenue projections, we used various sources to analyze media and broadcast industry market forecasts and other data in developing the assumptions used for purposes of performing impairment testing on our FCC licenses as of March 31, 2020.

Considerations in developing these assumptions included the extent of the economic downturn, ranges of expected timing of recovery, discount rates and other factors.

Based on our interim testing, the estimated fair value of FCC licenses was below their carrying values.

As a result, we recognized a non-cash impairment charge of $502.7 million on our FCC licenses.

The goodwill impairment test requires us to measure the fair value of our reporting units and compare the estimated fair value to the carrying value, including goodwill.

Each of our 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 us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

There are inherent uncertainties related to these factors and in management’s judgment in applying these factors.

As with the impairment testing we performed on our FCC licenses described above, the significant deterioration in market conditions and uncertainty in the markets impacted the assumptions used to estimate the discounted future cash flows of our reporting units for purposes of performing the interim goodwill impairment test.

As discussed above, the carrying values our reporting units were based on estimated fair values determined upon our emergence from bankruptcy on May 1, 2019, and the rapid deterioration in economic conditions resulting from the COVID-19 pandemic resulted in lower estimated fair values determined in connection with our interim goodwill impairment testing as of March 31, 2020.

The estimated fair value of one of our reporting units was below its carrying value, including goodwill, which required us to recognize a non-cash impairment charge of $1.2 billion to reduce our goodwill.

As a result of uncertainty related to COVID-19 and its negative impact on our business and the public trading values of our debt and equity, we were required to perform interim impairment tests on our long-lived assets, intangible assets and indefinite-lived intangible assets as of March 31, 2020.

The interim impairment tests resulted in a non-cash impairment of our Federal Communication Commission (“FCC”) licenses of $502.7 million and a non-cash impairment charge of $1.2 billion to reduce goodwill during the three months ended March 31, 2020.

Based on management’s forecasted future cash flows and assessment of market values of our debt and equity securities, market interest rates affecting our weighted average cost of capital (WACC) and other economic factors, additional interim impairment testing of our intangible assets and indefinite-lived intangible was not required as of June 30, 2020.

For more information, see Note 5, Property, Plant and Equipment, Intangible Assets and Goodwill to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description of the impairment charges.

While we believe we have made reasonable estimates and utilized reasonable assumptions to calculate the fair values of our long-lived assets, indefinite-lived FCC licenses and reporting units, it is possible a material change could occur to the estimated fair value of these assets as a result of the uncertainty regarding the magnitude of the economic downturn caused by the COVID-19 pandemic, as well as the timing of any recovery.

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(the “Company,” "iHeartMedia," "we" or "us"), iHeartCommunications, Inc.

(“iHeartCommunications”) and certain of the Company's direct and indirect domestic subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Chapter 11 Cases”) under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”), in the United States Bankruptcy Court for the Southern District of Texas, Houston Division

(the “Bankruptcy Court”).

On April 28, 2018, the Debtors filed a plan of reorganization and a related disclosure statement (as amended, the “Disclosure Statement”) with the Bankruptcy Court, which was subsequently amended by filing the second, third, fourth and fifth amended Plan of Reorganization and amended versions of the Disclosure Statement.

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(“CCH”) and its subsidiaries (collectively with CCOH and CCH, the “Outdoor Group”) were separated from, and ceased to be controlled by, the Company and its subsidiaries (the “iHeart Group”), and (b) a series of transactions (the “Reorganization”) through which iHeartCommunications’ debt was reduced from approximately $16 billion to approximately $5.8 billion and a global compromise and settlement among holders of claims (“Claimholders”) in connection with the Chapter 11 Cases was effected.

The compromise and settlement involved, among others, (i) the restructuring of iHeartCommunications’ indebtedness by (A) replacing its “debtor-in-possession” credit facility with a $450 million senior secured asset-based revolving credit facility (the “ABL Facility”) and (B) issuing to certain Claimholders, on account of their claims, approximately $3.5 billion aggregate principal amount of new senior secured term loans (the “Term Loan Facility”), approximately $1.45 billion aggregate principal amount of new 8.375% Senior Notes due 2027 (the “Senior Unsecured Notes”) and approximately $800 million aggregate principal amount of new 6.375% Senior Secured Notes due 2026 (the “6.375% Senior Secured Notes”), (ii) the Company’s issuance of new Class A common stock, new Class B common stock and special warrants to purchase shares of new Class A common stock and Class B common stock (“Special Warrants”) to Claimholders, subject to ownership restrictions imposed by the Federal Communications’ Commission (“FCC”), (iii) the settlement of certain intercompany transactions, and (iv) the sale of the preferred stock (the “iHeart Operations Preferred Stock”) of the Company’s wholly-owned subsidiary iHeart Operations, Inc.

The compromise and settlement involved, among others, (i) the restructuring of iHeartCommunications’ indebtedness by (A) replacing its “debtor-in-possession” credit facility with a $450 million ABL Facility and (B) issuing to certain Claimholders, on account of their claims, the approximately $3.5 billion aggregate principal amount Term Loan Facility, approximately $1.45 billion aggregate principal amount of new 8.375% Senior Notes due 2027 (the “Senior Unsecured Notes”) and approximately $800 million aggregate principal amount of new 6.375% Senior Secured Notes due 2026 (the “6.375% Senior Secured Notes”), (ii) the Company’s issuance of new Class A common stock, new Class B common stock and special warrants to purchase shares of new Class A common stock and Class B common stock (“Special Warrants”) to Claimholders, subject to ownership restrictions imposed by the Federal Communications’ Commission (“FCC”), (iii) the settlement of certain intercompany transactions, and (iv) the sale of the preferred stock (the “iHeart Operations Preferred Stock”) of the Company’s wholly-owned subsidiary iHeart Operations, Inc.

(“iHeart Operations”) in connection with the Separation.

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As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after May 1, 2019 are not comparable with the consolidated financial statements on or prior to that date.

Combined Results

Our financial results for the periods from April 1, 2019 through May 1, 2019 and from January 1, 2019 through May 1, 2019 are referred to as those of the “Predecessor” period.

Our financial results for the period from May 2, 2019 through June 30, 2019, the three months ended June 30, 2020 and the six months ended June 30, 2020 are referred to as those of the “Successor” period.

Our results of operations as reported in our Consolidated Financial Statements for these periods are prepared in accordance with GAAP.

Although GAAP requires that we report on our results for the period from April 1, 2019 through May 1, 2019, from January 1, 2019 through May 1, 2019 and the period from May 2, 2019 through June 30, 2019 separately, management views the Company’s operating results for the three and six months ended June 30, 2019 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison to our results in the three and six months ended June 30, 2020.

The Company cannot adequately benchmark the operating results of the period from May 2, 2019 through June 30, 2019 against any of the current periods reported in its Consolidated Financial Statements without combining it with the period from April 1, 2019 through May 1, 2019 and the period from January 1, 2019 through May 1, 2019 and does not believe that reviewing the results of this period in isolation would be useful in identifying trends in or reaching conclusions regarding the Company’s overall operating performance.

Management believes that the key performance metrics such as revenue, operating income and Adjusted EBITDA for the Successor period when combined with the Predecessor period provides more meaningful comparisons to other periods and are useful in identifying current business trends.

Accordingly, in addition to presenting our results of operations as reported in our Consolidated Financial Statements in accordance with GAAP, the tables and discussion below also present the combined results for the three and six months ended June 30, 2019.

The combined results for the three months ended June 30, 2019, which we refer to herein as the results for the "three months ended June 30, 2019" represent the sum of the reported amounts for the Predecessor period from April 1, 2019 through May 1, 2019 and the Successor period from May 2, 2019 through June 30, 2019.

The combined results for the six months ended June 30, 2019, which we refer to herein as the results for the “six months ended June 30, 2019” represent the sum of the reported amounts for the Predecessor period from January 1, 2019 through May 1, 2019 and the Successor period from May 2, 2019 through June 30, 2019.

These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results per applicable regulations.

The combined operating results do not reflect the actual results we would have achieved absent our emergence from bankruptcy and may not be indicative of future results.

Executive Summary

As the first quarter of 2020 began, we saw strong growth across our revenue streams, particularly from digital and from political advertising.

However, while digital and political revenue continued to grow, the economic downturn as a result of the COVID-19 pandemic had a significant and negative impact on our other revenue streams in March 2020, including broadcast radio which is our largest revenue stream.

A decline in advertising spend and the postponement or cancellation of certain tent-pole events resulted in a decrease in March revenues which drove an overall decrease in revenue for the first quarter of 2020 compared to the first quarter of 2019.

As 2020 began, we saw strong growth across our revenue streams in January and February, particularly from digital and from political advertising.

However, while digital and political revenue continued to grow, the economic downturn as a result of the COVID-19 pandemic had a significant and negative impact on our other revenue streams beginning in March 2020 and continuing through the second quarter of 2020, including broadcast radio which is our largest revenue stream.

A significant decline in advertising spend and the postponement or cancellation of certain tent-pole events drove an overall decrease in revenue for the three and six months ended June 30, 2020 compared to the three and six months ended June 30, 2019.

The extent of the economic downturn and the timing of recovery, as well as the future impact on our operations, are subject to significant uncertainty.

We expect the trends discussed above to continue during the duration of the economic slow-down that has resulted from the COVID-19 pandemic.

In an effort to further strengthen the Company's financial flexibility and efficiently manage through the COVID-19 pandemic, we implemented measures to cut costs and preserve cash.

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The key developments that impacted our business during the quarter are summarized below:

Strong Revenue growth in January and February was followed by a sharp decline in revenue in March resulting from the effects of the COVID-19 pandemic.

Revenue of $780.6 million decreased $15.2 million or 1.9% during quarter ended March 31, 2020 compared to the same period of 2019 .

Recorded non-cash impairment charges aggregating $1.7 billion to our goodwill and intangible assets balances as a result of the decrease in forecasted future cash flows driven by the expected significant economic slow-down resulting from the COVID-19 pandemic.

• Effects of the COVID-19 pandemic significantly adversely impacted revenue for all revenue streams, with the exception of digital and political revenue, which increased during the quarter.

• Revenue of $487.6 million decreased 46.6% during the quarter ended June 30, 2020 compared to Revenue of $913.3 million in the same period in 2019.

• Operating loss of $159.1 million was down from Operating income of $181.6 million in the prior year’s quarter.

Net loss of $1,688.7 million increased from a Net loss of $135.6 million in the prior year's quarter.

Adjusted EBITDA (1) of $140.3 million , was down 10.6% year-over-year.

Cash flows provided by operating activities from continuing operations of $91.5 million decreased $45.1 million or 33.0% .

Free cash flow (2) from continuing operations of $69.9 million decreased $43.8 million or 38.6% .

Principal payment of $150.0 million using cash on hand to prepay a portion of the senior secured term loan facility (the “Term Loan Facility”) and amended the Term Loan Facility to reduce the Term Loan Facility interest rate by 100 bps.

Borrowing of $350.0 million principal amount under our ABL Facility, resulting in cash on hand at March 31, 2020 of $646.8 million .

The table below presents a summary of our historical results of operations for the three months ended March 31, 2020 (Successor) and 2019 (Predecessor):

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

Operating income (loss)

Cash provided by operating activities from continuing operations

• Net loss of $197.3 million decreased from Net income of $11,339.5 million in the prior year's quarter.

• Adjusted EBITDA (1) of $(29.3) million, was down from $262.9 million year-over-year.

• Cash flows provided by operating activities from continuing operations of $11.4 million increased from Cash flows used for operating activities of $61.0 million in the same period in 2019.

• Free cash flow (2) (used for) continuing operations of $(6.5) million decreased from $(91.6) million in the same period in 2019.

• Repaid $115.0 million of principal amount drawn under our ABL Facility, resulting in a balance outstanding of $235.0 million as of June 30, 2020.

• On July 16, 2020, we issued $450.0 million of incremental Term Loan commitments, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

A portion of the proceeds from the issuance was used to repay the remaining balance outstanding under the ABL Facility of $235.0 million, with the remaining $190.6 million of the proceeds available for general corporate purposes.

The table below presents a summary of our historical results of operations for the periods presented:

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30, %

2020 2019 2019 2019 Change

Revenue $ 487,648 $ 635,646 $ 277,674 $ 913,320 (46.6) %

Operating income (loss) $ (159,087) $ 133,688 $ 47,891 $ 181,579 NM

Net income (loss) $ (197,317) $ 38,793 $ 11,300,714 $ 11,339,507 NM

Cash provided by (used for) operating activities from continuing operations $ 11,369 $ 83,201 $ (144,171) $ (60,970) NM

Adjusted EBITDA (1)

Free cash flow from continuing operations (2)

$ (29,283) $ 194,753 $ 68,097 $ 262,850 NM

Free cash flow from (used for) continuing operations (2)

$ (6,513) $ 65,766 $ (157,415) $ (91,649) NM

(1) For a definition of Adjusted EBITDA and a reconciliation to Operating income (loss), the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Income to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in this MD&A.

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Results of Operations

The tables below present the comparison of our historical results of operations for the three months ended March 31, 2020 (Successor) and 2019 (Predecessor):

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

The tables below present the comparison of our historical results of operations for the periods presented:

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30,

2020 2019 2019 2019

Revenue $ 487,648 $ 635,646 $ 277,674 $ 913,320

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

249,866 198,772 98,310 297,082

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

261,219 220,231 102,296 322,527

Corporate expenses (excludes depreciation and amortization)

26,419 26,818 14,506 41,324

Depreciation and amortization 103,347 59,383 14,544 73,927

Impairment charges 5,378 — — —

Other operating expense, net

Other operating income (expense), net (506) 3,246 (127) 3,119

Operating income (loss) (159,087) 133,688 47,891 181,579

Interest expense (income), net 81,963 69,711 (400) 69,311

Gain on investments, net 1,280 — — —

Equity in loss of nonconsolidated affiliates (31) (24) (59) (83)

Other income (expense), net (1,258) (9,157) 150 (9,007)

Reorganization items, net — — 9,497,944 9,497,944

Income (loss) from continuing operations before income taxes (241,059) 54,796 9,546,326 9,601,122

Income tax benefit (expense) 43,742 (16,003) (100,289) (116,292)

Income (loss) from continuing operations (197,317) 38,793 9,446,037 9,484,830

Income from discontinued operations, net of tax — — 1,854,677 1,854,677

Net income (loss) (197,317) 38,793 11,300,714 11,339,507

Less amount attributable to noncontrolling interest

— — 2,190 2,190

Net income (loss) attributable to the Company

$ (197,317) $ 38,793 $ 11,298,524 $ 11,337,317

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30,

2020 2019 2019 2019

Revenue $ 1,268,282 $ 635,646 $ 1,073,471 $ 1,709,117

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

551,498 198,772 381,184 579,956

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

605,360 220,231 427,230 647,461

Corporate expenses (excludes depreciation and amortization)

66,368 26,818 53,647 80,465

Depreciation and amortization 200,115 59,383 52,834 112,217

Impairment charges 1,733,235 — 91,382 91,382

Other operating income (expense), net (1,572) 3,246 (154) 3,092

Operating income (loss) (1,889,866) 133,688 67,040 200,728

Interest expense (income), net 172,052 69,711 (499) 69,212

Loss on investments, net (8,675) — (10,237) (10,237)

Equity in loss of nonconsolidated affiliates (595) (24) (66) (90)

Other expense, net

Other income (expense), net (9,118) (9,157) 23 (9,134)

Reorganization items, net — — 9,461,826 9,461,826

Loss from continuing operations before income taxes

Income tax benefit

Income (loss) from continuing operations before income taxes (2,080,306) 54,796 9,519,085 9,573,881

Income tax benefit (expense) 194,253 (16,003) (39,095) (55,098)

Income (loss) from continuing operations (1,886,053) 38,793 9,479,990 9,518,783

Loss from discontinued operations, net of tax

Income from discontinued operations, net of tax — — 1,685,123 1,685,123

Net income (loss) (1,886,053) 38,793 11,165,113 11,203,906

Less amount attributable to noncontrolling interest

Net loss attributable to the Company

The tables below present the comparison of our revenue streams for the three months ended March 31, 2020 (Successor) and 2019 (Predecessor):

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

— — (19,028) (19,028)

Net income (loss) attributable to the Company

$ (1,886,053) $ 38,793 $ 11,184,141 $ 11,222,934

The tables below present the comparison of our revenue streams for the periods presented:

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30, %

2020 2019 2019 2019 Change

Broadcast Radio $ 244,035 $ 390,540 $ 170,632 $ 561,172 (56.5) %

Digital 93,227 64,238 26,840 91,078 2.4 %

Networks 96,330 105,426 50,889 156,315 (38.4) %

Sponsorship and Events 14,809 31,790 10,617 42,407 (65.1) %

Audio and Media Services 39,251 40,537 17,970 58,507 (32.9) %

Other 1,943 4,236 1,483 5,719 (66.0) %

Eliminations (1,947) (1,121) (757) (1,878)

Revenue, total

Consolidated results for the three months ended March 31, 2020 compared to the consolidated results for the three months ended March 31, 2019 were as follows:

Revenue decreased $15.2 million during the three months ended March 31, 2020 compared to the same period of 2019 .

The decrease in Revenue is primarily attributable to the effects of COVID-19, which began to unfold into a global pandemic in early March, resulting in a significant economic downturn as a result of the shut-down of non-essential businesses and shelter-in-place orders.

Although revenue growth was strong in the first two months of 2020 compared to the same period of 2019, March revenue declined sharply primarily as a result of a decrease in broadcast radio advertising spend.

Broadcast spot revenue decreased $25.6 million , driven by a $26.0 million decrease in Local spot revenue excluding political, and an $18.1 million decrease in National spot revenue excluding political.

The decrease in Broadcast spot revenue was offset by a $14.9 million increase in political revenue as a result of 2020 being a presidential election year.

Revenue from Sponsorship and Events also decreased by $10.4 million , primarily as a result of the postponement or cancellations of events in response to the COVID-19 pandemic.

Digital revenue increased $16.8 million , driven by continued growth in podcasting, as well as other digital revenue, including on-demand services.

Audio and Media Services revenue also increased $8.8 million primarily as a result of a $7.1 million increase in political revenue.

$ 487,648 $ 635,646 $ 277,674 $ 913,320 (46.6) %

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30, %

2020 2019 2019 2019 Change

Broadcast Radio $ 705,695 $ 390,540 $ 657,864 $ 1,048,404 (32.7) %

Digital 186,003 64,238 102,789 167,027 11.4 %

Networks 230,907 105,426 189,088 294,514 (21.6) %

Sponsorship and Events 44,157 31,790 50,330 82,120 (46.2) %

Audio and Media Services 99,478 40,537 69,362 109,899 (9.5) %

Other 5,967 4,236 6,606 10,842 (45.0) %

Eliminations (3,925) (1,121) (2,568) (3,689)

Revenue, total

$ 1,268,282 $ 635,646 $ 1,073,471 $ 1,709,117 (25.8) %

Consolidated results for the three months ended June 30, 2020 compared to the combined results for the three months ended June 30, 2019 and consolidated results for the six months ended June 30, 2020 compared to the combined results for the six months ended June 30, 2019 were as follows:

Revenue decreased $425.7 million during the three months ended June 30, 2020 compared to the same period of 2019.

The decrease in Revenue is primarily attributable to the effects of COVID-19, which began to unfold into a global pandemic in early March of 2020, resulting in a significant economic downturn due to the shut-down of non-essential businesses and shelter-in-place orders.

The impact continued through the second quarter of 2020, resulting in significant revenue declines impacting most of our revenue streams primarily as a result of a decrease in broadcast radio advertising spend.

Broadcast revenue decreased $317.1 million, driven by a $188.7 million decrease in Local spot revenue and a $103.7 million decrease in National spot revenue.

Revenue from our Network businesses, including both Premiere and Total Traffic & Weather, was also impacted by the downturn, resulting in a decrease of $60.0 million.

Revenue from Sponsorship and Events decreased by $27.6 million, primarily as a result of the postponement or cancellations of events in response to the COVID-19 pandemic.

Digital revenue increased $2.1 million, driven by continued growth in podcasting.

Audio and Media Services revenue decreased $19.3 million primarily due to the effects of COVID-19 on advertising spend.

This decrease was partially offset by a $1.7 million increase in political revenue as a result of 2020 being a presidential election year.

Revenue decreased $440.8 million during the six months ended June 30, 2020 compared to the same period of 2019.

Strong Revenue growth in January and February was followed by a sharp decline in revenue in March, which continued through the second quarter of 2020, resulting in significant revenue declines impacting most of our revenue streams, primarily as a result of a decrease in broadcast radio advertising spend.

Broadcast revenue decreased $342.7 million, driven by a $214.7 million decrease in Local spot revenue and a $121.9 million decrease in National spot revenue.

The decrease in Broadcast revenue was offset by a $15.5 million increase in political revenue as a result of 2020 being a presidential election year.

Revenue from our Network businesses, including both Premiere and Total Traffic & Weather, was also impacted by the downturn, resulting in a decrease of $63.6 million.

Revenue from Sponsorship and Events decreased by $38.0 million, primarily as a result of the postponement or cancellations of events in response to the COVID-19 pandemic.

Digital revenue increased $19.0 million, driven by continued growth in podcasting.

Audio and Media Services revenue decreased $10.4 million primarily due to the effects of COVID-19 on advertising spend.

This decrease was offset by an $8.9 million increase in political revenue.

Direct Operating Expenses

Direct operating expenses increased $18.8 million during the three months ended March 31, 2020 compared to the same period of 2019 .

Higher Direct operating expenses were driven by severance payments and other costs specific to our modernization initiatives, which were incurred mainly in January and February, as well as higher content costs from higher podcasting and digital subscription revenue and higher music license fees and digital royalties.

The increase in direct operating expenses was partially offset by lower event production costs as a result of event postponements made in response to the COVID-19 pandemic.

Direct operating expenses decreased $47.2 million during the three months ended June 30, 2020 compared to the same period of 2019.

The decrease in Direct operating expenses was driven primarily by lower employee compensation expenses resulting from cost reduction initiatives taken in response to the COVID-19 pandemic.

In addition, variable operating expenses, including music license and performance royalty fees, decreased in relation to lower revenue recognized during the period.

Variable expenses related to events also decreased as a result of the postponement or cancellation of events in response to the COVID-19 pandemic.

Direct operating expenses decreased $28.5 million during the six months ended June 30, 2020 compared to the same period of 2019.

The decrease in Direct operating expenses was driven primarily by lower employee compensation expenses resulting from cost reduction initiatives taken in response to the COVID-19 pandemic.

In addition, variable operating expenses, including music license and performance royalty fees, decreased in relation to lower revenue recognized during the period.

Variable expenses related to events also decreased as a result of the postponement or cancellation of events in response to the COVID-19 pandemic.

The decrease in Direct operating expenses was partially offset by severance payments and other costs specific to our modernization initiatives, which were incurred mainly in January and February, as well as higher content costs from higher podcasting and digital subscription revenue.

Selling, General and Administrative (“SG&A”) Expenses

SG&A expenses increased $19.2 million during the three months ended March 31, 2020 compared to the same period of 2019 .

The increase in SG&A was driven by costs incurred in relation to our modernization initiatives announced in February 2020, trade and barter expenses related to the iHeartRadio Podcast Awards, which aired in January of 2020, and higher bad debt expense.

SG&A expenses decreased $61.3 million during the three months ended June 30, 2020 compared to the same period of 2019.

The decrease in SG&A expenses was driven primarily by lower employee compensation expenses resulting from cost reduction initiatives taken in response to the COVID-19 pandemic, along with lower sales commissions, which were impacted by the decrease in revenue.

Trade and barter expenses also decreased primarily driven by lower Local trade expenses, which declined in line with lower Trade revenue.

The decrease in SG&A expenses was partially offset by higher bad debt expense.

SG&A expenses decreased $42.1 million during the six months ended June 30, 2020 compared to the same period of 2019.

Trade and barter expenses also decreased primarily driven by lower Local trade expenses, which declined in line with lower Trade revenue.

The decrease in SG&A expenses was partially offset by costs incurred in relation to our modernization initiatives announced in the first quarter of 2020 and higher bad debt expense.

Corporate Expenses

Corporate expenses increased $0.8 million during the three months ended March 31, 2020 compared to the same period of 2019 , as a result of costs incurred to support our modernization initiatives, as well as higher share-based compensation expense, which increased $4.2 million as a result of our new post-emergence equity compensation plan.

This increase was partially offset by lower employee expenses, including variable incentive compensation expenses, primarily driven by the impact of COVID-19.

Corporate expenses decreased $14.9 million during the three months ended June 30, 2020 compared to the same period of 2019, as a result of lower employee compensation, including variable incentive expenses and employee benefits, resulting from cost reduction initiatives taken in response to the COVID-19 pandemic.

Corporate expenses decreased $14.1 million during the six months ended June 30, 2020 compared to the same period of 2019, as a result of lower employee compensation, including variable incentive expenses and employee benefits, resulting from cost reduction initiatives taken in response to the COVID-19 pandemic.

The decrease in Corporate expenses was partially offset by costs incurred to support our modernization initiatives in January and February, as well as higher share-based compensation expense, which increased $5.3 million as a result of our new post-emergence equity compensation plan.

Depreciation and Amortization

Depreciation and amortization increased $58.5 million during the three months ended March 31, 2020 , compared to the same period of 2019 , primarily as a result of the application of fresh start accounting, which resulted in significantly higher values of our tangible and intangible long-lived assets.

Depreciation and amortization increased $29.4 million and $87.9 million during the three and six months ended June 30, 2020, compared to the same periods of 2019, respectively, primarily as a result of the application of fresh start accounting, which resulted in significantly higher values of our tangible and intangible long-lived assets.

Impairment Charges

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In addition, we test for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired.

As discussed above, as a result of the assumed potential adverse effects caused by the COVID-19 pandemic on estimated future cash flows, we recognized non-cash impairment charges to our indefinite-lived intangible assets and goodwill of $1.7 billion in the three months ended March 31, 2020 .

We recognized non-cash impairment charges of $91.4 million in the three months ended March 31, 2019 on our indefinite-lived FCC licenses as a result of an increase in our weighted average cost of capital.

We recognized non-cash impairment charges of $91.4 million in the six months ended June 30, 2019 on our indefinite-lived FCC licenses as a result of an increase in our weighted average cost of capital.

See Note 5, Property, Plant and Equipment, Intangible Assets and Goodwill, to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description of the impairment charges.

Other Operating Expense, Net

Other operating expense , net of $1.1 million and $0.0 million for the three months ended March 31, 2020 and 2019 , respectively, relates to net gains and losses recognized on asset disposals.

Other Operating Income (Expense), Net

Other operating expense, net of $0.5 million and Other operating income, net of $3.1 million for the three months ended June 30, 2020 and 2019, respectively, and Other operating expense, net of $1.6 million and Other operating income, net of $3.1 million for the six months ended June 30, 2020 and 2019, respectively, relate to net gains and losses recognized on asset disposals.

Interest Expense

Interest expense increased $90.2 million during the three months ended March 31, 2020 , compared to the same period of 2019 as a result of the interest recognized on the new debt issued in connection with our emergence from the Chapter 11 Cases.

Interest expense increased $12.7 million and $102.8 million during the three and six months ended June 30, 2020, respectively, compared to the same periods of 2019 as a result of the interest recognized on the new debt issued in connection with our emergence from the Chapter 11 Cases.

During the period from March 14, 2018 to May 1, 2019, while the Company was a debtor-in-possession, no interest expense was recognized on pre-petition debt.

In the Predecessor period, we ceased to accrue interest expense on long-term debt, which was reclassified as Liabilities subject to compromise as of the Petition Date, resulting in $397.5 million in contractual interest not being accrued in the three months ended March 31, 2019 .

Loss on investments, net

During the three months ended March 31, 2020 , we recognized a loss on investments, net of $10.0 million primarily in connection with estimated credit losses and other-than-temporary declines in the value of our investments.

Loss on investments, net was $10.2 million for the three months ended March 31, 2019 .

Other Expense, Net

Other expense , net was $7.9 million for the three months ended March 31, 2020 which related to costs incurred to refinance our Term Loan Facility and professional fees incurred in connection with the Chapter 11 Cases in the Successor period.

In the Predecessor periods, we ceased to accrue interest expense on long-term debt, which was reclassified as Liabilities subject to compromise as of March 14, 2018 (the “Petition Date”), resulting in $135.9 million and $533.4 million in contractual interest not being accrued in the three and six months ended June 30, 2019, respectively.

Gain (Loss) on Investments, net

During the three and six months ended June 30, 2020, we recognized a gain on investments, net of $1.3 million and a loss on investments of $8.7 million, respectively.

The gain on investments, net recognized during the quarter primarily related to a gain on one of our marketable equity securities.

The loss on investments, net recognized during the six months ended June 30, 2020 was primarily in connection with estimated credit losses and declines in the value of our investments.

During the six months ended June 30, 2019, we recognized a loss of $10.2 million, primarily in connection with declines in the value of our investments.

We did not recognize any gain or loss on investments during the three months ended June 30, 2019.

Other Income (Expense), Net

Other expense, net was $1.3 million and $9.1 million for the three and six months ended June 30, 2020, respectively, which related to costs incurred to refinance our Term Loan Facility and professional fees incurred in connection with the Chapter 11 Cases in the Successor period.

Such expenses were included within Reorganization items, net in the Predecessor period while the Company was a debtor-in-possession.

Other expense , net was $0.1 million for the three months ended March 31, 2019 .

Other expense, net was $9.0 million and $9.1 million for the three and six months ended June 30, 2019, respectively.

Amounts in the six months ended June 30, 2019 related primarily to professional fees incurred directly in connection with the Chapter 11 Cases before the Petition Date.

Such expenses were included within Reorganization items, net in the post-petition period while the Company was a debtor-in-possession.

Reorganization Items, Net

During the three months ended March 31, 2019 , we recognized Reorganization items, net of $36.1 million related to the Chapter 11 Cases, consisting of professional fees and other bankruptcy related costs.

Income Tax Benefit

The effective tax rate for the Successor Company for the three months ended March 31, 2020 was 8.2% .

The effective tax rate for the period was primarily impacted by the impairment charges discussed above.

During the three and six months ended June 30, 2019, we recognized Reorganization items, net of $9,497.9 million and $9,461.8 million related to the Chapter 11 Cases, which consisted primarily of the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities.

In addition, Reorganization items, net included professional fees recognized between the Petition Date and the Effective Date in connection with the Chapter 11 Cases.

Income Tax Benefit (Expense)

The effective tax rate for the Successor Company for the three and six months ended June 30, 2020 was 18.1% and 9.3%, respectively.

The effective tax rate for the six months ended June 30, 2020 was primarily impacted by the impairment charges discussed above.

The deferred tax benefit primarily consists of $125.5 million related to the FCC license impairment charges recorded during the period.

The effective tax rate for continuing operations for the three months ended March 31, 2019 was 224.6% .

The 2019 effective tax rate was primarily impacted by forecasted changes in the valuation allowance recorded against deferred tax assets resulting from net operating loss carryforwards and interest expense limitation carryforwards in U.S.

federal and certain state jurisdictions.

Net Loss Attributable to the Company

Net loss attributable to the Company increased $1,574.4 million to $1,688.7 million during the three months ended March 31, 2020 compared to a Net loss attributable to the Company of $114.4 million during the three months ended March 31, 2019 , primarily due to the factors discussed above.

The effective tax rate for the Successor Company for the Period from May 2, 2019 through June 30, 2019 was 29.2%.

The effective tax rate for continuing operations of the Predecessor Company for Period from April 1, 2019 through May 1, 2019 (Predecessor) and the Period from January 1, 2019 through May 1, 2019 (Predecessor) was 1.1% and 0.4%, respectively.

The income tax expense for the Period from April 1, 2019 through May 1, 2019 (Predecessor) and the Period from January 1, 2019 through May 1, 2019 (Predecessor) primarily consists of the income tax impacts from reorganization and fresh start adjustments, including adjustments to our valuation allowance.

The Company recorded income tax benefits of $102.9 million for reorganization adjustments in the Predecessor period, primarily consisting of:

(1) tax expense for the reduction in federal and state net operating loss carryforwards from the cancellation of debt income realized upon emergence;

(2) tax benefit for the reduction in deferred tax liabilities attributed primarily to long-term debt that was discharged upon emergence;

(3) tax benefit for the effective settlement of liabilities for unrecognized tax benefits that were discharged upon emergence;

and (4) tax benefit for the reduction in valuation allowance resulting from the adjustments described above.

The Company recorded income tax expense of $185.4 million for fresh start adjustments in the Predecessor period, consisting of $529.1 million tax expense for the increase in deferred tax liabilities resulting from fresh start accounting adjustments, which was partially offset by $343.7 million tax benefit for the reduction in the valuation allowance on our deferred tax assets.

Income from Discontinued Operations, Net

During the three and six months ended June 30, 2019, we recognized Income from discontinued operations, net of tax of $1,854.7 million and $1,685.1 million, respectively, related to the separation of our domestic and international outdoor advertising businesses, which were previously reported as the Americas outdoor and International outdoor segments prior to the Separation.

Net Income (Loss) Attributable to the Company

Net loss attributable to the Company decreased $11,534.6 million to $197.3 million during the three months ended June 30, 2020 compared to Net income attributable to the Company of $11,337.3 million during the three months ended June 30, 2019, primarily as a result of the $9.5 billion gain from Reorganization items net related to the Chapter 11 Cases in the 2019 period, the $1.9 billion gain on disposal of our Outdoor business in the 2019 period and due to the other factors discussed above.

Net loss attributable to the Company decreased $13,109.0 million to $1,886.1 million during the six months ended June 30, 2020 compared to Net income attributable to the Company of $11,222.9 million during the six months ended June 30, 2019, primarily as a result of the $9.5 billion gain from Reorganization items net related to the Chapter 11 Cases in the 2019 period, the $1.7 billion gain on disposal of our Outdoor business in the 2019 period and due to the other factors discussed above.

Reconciliation of Operating Income (Loss) to Adjusted EBITDA

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30,

2020 2019 2019 2019

Operating income (loss) $ (159,087) $ 133,688 $ 47,891 $ 181,579

Depreciation and amortization (1)

103,347 59,383 14,544 73,927

Impairment charges 5,378 — — —

Other operating expense, net

Other operating (income) expense, net 506 (3,246) 127 (3,119)

Share-based compensation expense (2)

4,218 3,039 105 3,144

Restructuring and reorganization expenses

16,355 1,889 5,430 7,319

Adjusted EBITDA (3)

Reconciliation of Net Loss to EBITDA and Adjusted EBITDA

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

Loss from discontinued operations, net of tax

Income tax benefit

$ (29,283) $ 194,753 $ 68,097 $ 262,850

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30,

2020 2019 2019 2019

Operating income (loss) $ (1,889,866) $ 133,688 $ 67,040 $ 200,728

Depreciation and amortization (1)

200,115 59,383 52,834 112,217

Impairment charges 1,733,235 — 91,382 91,382

Other operating (income) expense, net 1,572 (3,246) 154 (3,092)

Share-based compensation expense (2)

8,843 3,039 498 3,537

Restructuring and reorganization expenses

57,157 1,889 13,241 15,130

Adjusted EBITDA (3)

$ 111,056 $ 194,753 $ 225,149 $ 419,902

Reconciliation of Net (Income) Loss to EBITDA and Adjusted EBITDA

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30,

2020 2019 2019 2019

Net income (loss) $ (197,317) $ 38,793 $ 11,300,714 $ 11,339,507

Income from discontinued operations, net of tax

— — (1,854,677) (1,854,677)

Income tax (benefit) expense

(43,742) 16,003 100,289 116,292

Interest expense (income), net

81,963 69,711 (400) 69,311

Depreciation and amortization (1)

103,347 59,383 14,544 73,927

EBITDA $ (55,749) $ 183,890 $ 9,560,470 $ 9,744,360

Reorganization items, net

— — (9,497,944) (9,497,944)

Gain on investments, net

(1,280) — — —

Other expense (income), net

1,258 9,157 (150) 9,007

Equity in loss of nonconsolidated affiliates

Impairment charges

Other operating (income) expense, net

506 (3,246) 127 (3,119)

Share-based compensation expense (2)

4,218 3,039 105 3,144

Restructuring and reorganization expenses

16,355 1,889 5,430 7,319

Adjusted EBITDA (3)

$ (29,283) $ 194,753 $ 68,097 $ 262,850

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30,

2020 2019 2019 2019

Net income (loss) $ (1,886,053) $ 38,793 $ 11,165,113 $ 11,203,906

Income from discontinued operations, net of tax

— — (1,685,123) (1,685,123)

Income tax (benefit) expense

(194,253) 16,003 39,095 55,098

Interest expense (income), net

172,052 69,711 (499) 69,212

Depreciation and amortization (1)

200,115 59,383 52,834 112,217

EBITDA $ (1,708,139) $ 183,890 $ 9,571,420 $ 9,755,310

Reorganization items, net

— — (9,461,826) (9,461,826)

Loss on investments, net

Other expense, net

8,675 — 10,237 10,237

Other (income) expense, net

9,118 9,157 (23) 9,134

Equity in loss of nonconsolidated affiliates

Impairment charges

Other operating expense, net

1,733,235 — 91,382 91,382

Other operating (income) expense, net

1,572 (3,246) 154 (3,092)

Share-based compensation expense (2)

8,843 3,039 498 3,537

Restructuring and reorganization expenses

57,157 1,889 13,241 15,130

Adjusted EBITDA (3)

Increase in Depreciation and amortization is driven by the application of fresh start accounting, resulting in significantly higher values of our tangible and intangible assets.

$ 111,056 $ 194,753 $ 225,149 $ 419,902

(1) Increase in Depreciation and amortization is driven by the application of fresh start accounting, resulting in significantly higher value of our tangible and intangible assets.

(2) Increase in Share-based compensation expense is due to our new equity compensation plan entered into in connection with our Plan of Reorganization.

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Depreciation and amortization, Impairment charges and Other operating income (expense), net.

Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude (Income) loss from discontinued operations, net of tax, Income tax (benefit) expense, Interest expense, Depreciation and amortization, Reorganization items, net, Loss on investments, net, Other (income) expense, net, Equity in earnings (loss) of nonconsolidated affiliates, net, Impairment charges, Other operating (income) expense, net, Share-based compensation, restructuring and reorganization expenses.

Alternatively, Adjusted EBITDA is calculated as Net income (loss), adjusted to exclude (Income) loss from discontinued operations, net of tax, Income tax (benefit) expense, Interest expense (income), net, Depreciation and amortization, Reorganization items, net, (Gain) Loss on investments, net, Other (income) expense, net, Equity in loss of nonconsolidated affiliates, net, Impairment charges, Other operating (income) expense, net, Share-based compensation expense, and restructuring and reorganization expenses.

Restructuring expenses primarily include severance expenses incurred in connection with cost saving initiatives, as well as certain expenses, which, in the view of management, are outside the ordinary course of business or otherwise not representative of the Company's operations during a normal business cycle.

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Reconciliation of Cash provided by operating activities from continuing operations to Free cash flow from continuing operations

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

Cash provided by operating activities from continuing operations

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Three Months Ended June 30, Period from May 2, 2019 through June 30, Period from April 1, 2019 through May 1, Three Months Ended June 30,

2020 2019 2019 2019

Cash provided by (used for) operating activities from continuing operations $ 11,369 $ 83,201 $ (144,171) $ (60,970)

Purchases of property, plant and equipment by continuing operations

Free cash flow from continuing operations (1)

(17,882) (17,435) (13,244) (30,679)

Free cash flow from (used for) continuing operations (1)

$ (6,513) $ 65,766 $ (157,415) $ (91,649)

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30,

2020 2019 2019 2019

Cash provided by (used for) operating activities from continuing operations $ 102,909 $ 83,201 $ (7,505) $ 75,696

Purchases of property, plant and equipment by continuing operations

(39,546) (17,435) (36,197) (53,632)

Free cash flow from (used for) continuing operations (1)

$ 63,363 $ 65,766 $ (43,702) $ 22,064

(1) We define Free cash flow from (used for) continuing operations ("Free Cash Flow") as Cash provided by (used for) operating activities from continuing operations less capital expenditures, which is disclosed as Purchases of property, plant and equipment by continuing operations in the Company's Consolidated Statements of Cash Flows.

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Pursuant to the new equity incentive plan (the "Post-Emergence Equity Plan") we adopted in connection with the effectiveness of our Plan of Reorganization, we have granted restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals.

Share-based compensation expenses are recorded in corporate expenses and were $4.6 million and $0.4 million for the three months ended March 31, 2020 and 2019 , respectively.

As of March 31, 2020 , there was $52.7 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions.

Share-based compensation expenses are recorded in corporate expenses and were $4.2 million and $3.1 million for the three months ended June 30, 2020 and 2019, respectively, and $8.8 million and $3.5 million for the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, there was $48.1 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions.

This cost is expected to be recognized over a weighted average period of approximately 3 years.

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The following discussion highlights cash flow activities during the periods presented:

(In thousands)

Successor Company

Predecessor Company

Three Months Ended March 31,

(In thousands) Successor Company Successor Company Predecessor Company Non-GAAP Combined

Six Months Ended June 30, Period from May 2, 2019 through June 30, Period from January 1, 2019 through May 1, Six Months Ended June 30,

2020 2019 2019 2019

Cash provided by (used for):

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Free Cash Flow (1)

$ 63,363 $ 65,766 $ (43,702) $ 22,064

(1) For a definition of Free cash flow from continuing operations and a reconciliation to Cash provided by operating activities from continuing operations, the most closely comparable GAAP measure, please see “Reconciliation of Cash provided by operating activities from continuing operations to Free cash flow from continuing operations” in this MD&A.

Operating Activities

Cash provided by operating activities for the three months ended March 31, 2020 was $91.5 million compared to $89.0 million of cash provided by operating activities in the three months ended March 31, 2019 .

Cash provided by operating activities from continuing operations decreased from $136.7 million in the three months ended March 31, 2019 to $91.5 million in the three months ended March 31, 2020 primarily as a result of cash interest payments made by continuing operations increasing $100.0 million as a result of interest payments on our debt issued upon our emergence compared to pre-petition interest payments made in the prior year.

Cash provided by operating activities for the six months ended June 30, 2020 was $102.9 million compared to $43.0 million of cash provided by operating activities in the six months ended June 30, 2019.

Cash provided by operating activities from continuing operations increased from $75.7 million in the six months ended June 30, 2019 to $102.9 million in the six months ended June 30, 2020 primarily as a result of changes in working capital balances, particularly accounts receivable, as well as accounts payable and accrued expenses, which were affected by the timing of payments.

In addition, we paid $196.3 million during the six months ended June 30, 2019 in relation to Reorganization items, net.

The increase in cash provided by operating activities was offset by a decrease in Revenue driven by the decline in advertising spend resulting from the economic slow-down impacted by the COVID-19 pandemic.

In addition, cash interest payments made by continuing operations increased $181.2 million as a result of interest payments on our debt issued upon our emergence compared to pre-petition interest payments made in the prior year.

The Company ceased paying interest on long-term debt classified as Liabilities subject to compromise after the March 14, 2018 petition date.

This decrease was offset by an increase in cash provided by operating activities attributable to changes in working capital balances, particularly accounts payable, which were affected by the timing of payments.

Investing Activities

Cash used for investing activities of $31.8 million during the three months ended March 31, 2020 primarily reflects $21.7 million in cash used for capital expenditures.

Cash used for investing activities of $50.7 million during the six months ended June 30, 2020 primarily reflects $39.5 million in cash used for capital expenditures.

We spent $32.8 million for capital expenditures in our Audio segment primarily related to IT infrastructure, $1.6 million in our Audio & Media Services segment, primarily related to acquired software and $5.1 million in Corporate primarily related to equipment and software purchases.

Cash used for investing activities of $52.4 million during the three months ended March 31, 2019 primarily reflects $27.6 million in cash used for investing activities from discontinued operations.

Cash used for investing activities of $278.9 million during the six months ended June 30, 2019 primarily reflects $222.4 million in cash used for investing activities from discontinued operations.

In addition, we used $53.6 million for capital expenditures.

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Financing Activities

Cash provided by financing activities of $187.3 million during the three months ended March 31, 2020 primarily resulted from the $350.0 million draw on our ABL Facility, partially offset by the $150.0 million prepayment on our Term Loan Facility.

Cash provided by financing activities was $2.0 million during the three months ended March 31, 2019 .

Cash used for financing activities from continuing operations of $6.3 million during the three months ended March 31, 2019 primarily resulted from payments on our former debtor-in-possession facility.

Cash provided by financing activities of $65.5 million during the six months ended June 30, 2020 primarily resulted from the $350.0 million draw on our ABL Facility, partially offset by the $150.0 million prepayment on our Term Loan Facility and repayments of $115.0 million of amounts drawn under the ABL Facility.

Cash used for financing activities was $56.2 million during the six months ended June 30, 2019 primarily resulted from the payment by iHeartCommunications to CCOH as CCOH's recovery of its claims under the Due from iHeartCommunications Note, partially offset by $60.0 million in proceeds received from the issuance of the iHeart Operations Preferred Stock.

Anticipated Cash Requirements

Our primary sources of liquidity are cash on hand, which consisted of $646.8 million as of March 31, 2020 , and cash flow from operations.

Our primary sources of liquidity are cash on hand, which consisted of $517.7 million as of June 30, 2020, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

On March 13, 2020, iHeartCommunications, Inc.

(“iHeartCommunications”), our indirect wholly-owned subsidiary, borrowed $350.0 million principal amount under our $450.0 million ABL Facility as a precautionary measure to preserve iHeartCommunications’ financial flexibility in light of the current uncertainty in the global economy resulting from the COVID-19 pandemic.

The proceeds will be available if needed to fund iHeartCommunications’ future working capital requirements or other general corporate purposes.

As of March 31, 2020 , iHeartCommunications had a facility size of $450.0 million and utilization of $350.0 million outstanding borrowings and $47.3 million outstanding letters of credit, resulting in $52.7 million of availability, such availability being subject to further restrictions contained within the credit agreement governing the ABL Facility.

To the extent decreases in our accounts receivable result in the borrowing base decreasing to an amount below the amount drawn, we may be required to make a partial repayment of amounts outstanding under our ABL Facility.

While we cannot determine the full extent of COVID-19’s impact on our business at this time, we are monitoring this rapidly evolving situation closely.

The challenges that COVID-19 has created for advertisers and consumers has impacted our revenue and has created a business outlook that is less clear in the near term.

(“iHeartCommunications”), our indirect wholly-owned subsidiary, borrowed $350.0 million principal amount under our $450.0 million ABL Facility as a precautionary measure to preserve iHeartCommunications’ financial flexibility in light of the uncertainty in the global economy resulting from the COVID-19 pandemic.

During the three months ended June 30, 2020, we repaid $115.0 million principal amount drawn under our ABL Facility.

As of June 30, 2020, iHeartCommunications had a borrowing base of $289.4 million and utilization of $235.0 million in outstanding borrowings and $41.2 million in outstanding letters of credit, resulting in $13.2 million of availability, such availability being subject to further restrictions contained within the credit agreement governing the ABL Facility.

In July 2020, the Company issued $450.0 million of incremental term loans, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

Following the repayment of all outstanding borrowings under the ABL Facility, due to restrictions contained primarily in our mandatorily redeemable preferred stock agreements, we had the ability to borrow approximately $160 million under the ABL Facility.

Our cash balance was $517.7 million as of June 30, 2020.

Together with our adjusted cash balance 1 as of June 30, 2020 of approximately $708 million and our borrowing capacity under the ABL Facility, our total available liquidity 2 was approximately $868 million.

We will have the option to redeem the preferred stock beginning on May 1, 2022, or at an earlier date under certain circumstances in accordance with the documents governing the preferred stock instrument.

We cannot determine the full extent of COVID-19’s impact on our business at this time and we are monitoring this rapidly evolving situation closely.

While the challenges that COVID-19 has created for advertisers and consumers have had a significant impact on our revenue for the three and six months ended June 30, 2020 and has created a business outlook that is less clear in the near term, we believe that we have sufficient liquidity to fund our operations for at least the next twelve months.

We expect that our primary anticipated uses of liquidity will be to fund our working capital, make interest payments, fund capital expenditures and maintain operations in light of the COVID-19 pandemic and other obligations.

These other obligations include dividend payments to be due to the investor of preferred stock of iHeart Operations, the terms of which are further described in Note 6, Long-term Debt to our financial statements included herein.

We anticipate that we will have approximately $86 million of cash interest payments in the second quarter of 2020 and approximately $258 million of cash interest payments in the remainder of 2020.

As a result of certain favorable tax provisions in the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, we expect our 2020 cash income tax payments to be insignificant and we expect to be able to defer certain employment taxes into future periods.

These other obligations include dividend payments to be due to the holder of iHeart Operations Preferred Stock, the terms of which are further described in Note 6, Long-term Debt to our financial statements included herein.

We anticipate that we will have approximately $84 million of cash interest payments in the third quarter of 2020 and approximately $170 million of cash interest payments in the remainder of 2020.

As a result of certain favorable tax provisions in the Coronavirus Aid, Relief and Economic Security (“CARES”) Act, we expect our 2020 cash income tax payments to be insignificant.

As a result of the provisions regarding interest deductions and the deferral of certain employment taxes into future periods, cash tax payments in 2020 are expected to be approximately $100 million lower than they would been absent these favorable provisions.

Over the past ten years, we have transitioned our Audio business from a single platform radio broadcast operator to a company with multiple platforms, including podcasting, networks and live events.

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We have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience.

In response to the COVID-19 pandemic, in an effort to further strengthen the Company's financial flexibility and efficiently manage through the period of economic slowdown and uncertainty, the Company is proactively taking the following measures:

1 Adjusted for the impact of the amendment entered into in July 2020 to issue $450.0 million of incremental term loan commitments, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

2 Total available liquidity defined as cash and cash equivalents plus available borrowings under the ABL Facility.

We use total available liquidity to evaluate our capacity to access cash to meet obligations and fund operations.

• Substantial reduction in certain operating expenses, such as suspension of new employee hiring, travel and entertainment expenses, 401(k) matching expenses, consulting fees and other discretionary expenses.

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• Implementation of a furlough for certain employees that are non-essential at this time.

In addition, as a result of the expected decrease in forecasted revenues as a result of the COVID-19 pandemic, we expect variable expenses including event production costs and sales commissions, as well as other variable compensation, to decrease.

We believe that our cash balance, which includes the additional funds from drawing on our ABL Facility, provides us with sufficient liquidity to fund our core operations, maintain key personnel and meet our other material obligations.

In addition, as a result of the decrease in revenue as a result of the COVID-19 pandemic, certain variable expenses including event production costs and sales commissions, as well as other variable compensation, showed a corresponding decrease.

We believe that our cash balance, our cash flow from operations and availability under our ABL Facility provide us with sufficient liquidity to fund our core operations, maintain key personnel and meet our other material obligations.

In addition, none of our long-term debt includes maintenance covenants that could trigger early repayment.

We fully appreciate the unprecedented challenges posed by the COVID-19 pandemic, however, we remain confident in our business, our employees and our strategy.

We believe that our ability to generate cash flow from operations from our business initiatives and our current cash

on hand will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next 12 months.

We believe that our ability to generate cash flow from operations from our business initiatives, our current cash on hand and availability under the ABL Facility will provide sufficient resources to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt for at least the next 12 months.

If these sources of liquidity need to be augmented, additional cash requirements would likely be financed through the issuance of debt or equity securities;

however, there can be no assurances that we will be able to obtain additional debt or equity financing on acceptable terms or at all in the future.

On February 3, 2020, iHeartCommunications made a $150.0 million prepayment using cash on hand and entered into an agreement to amend the Term Loan Facility to reduce the interest rate to LIBOR plus a margin of 3.00%, or the Base Rate (as defined in the credit agreement governing the Term Loan Facility (the “Credit Agreement”)) plus a margin of 2.00% and to modify certain covenants contained in the Credit Agreement.

On February 3, 2020, iHeartCommunications made a $150.0 million prepayment using cash on hand and entered into an agreement to amend the Term Loan Facility to reduce the interest rate to LIBOR plus a margin of 3.00%, or the Base Rate (as defined in the Credit Agreement plus a margin of 2.00% and to modify certain covenants contained in the Credit Agreement.

On July 16, 2020, iHeartCommunications entered into an additional amendment to the Credit Facility (“Amendment No.

2”) to provide for $450.0 million, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

The incremental term loans issued pursuant to Amendment No.

2 have an interest rate of 4.00% for Eurocurrency Rate Loans and 3.00% for Base Rate Loans (subject to a LIBOR floor of 0.75% and Base Rate floor of 1.75%).

Amendment No.

2 also modifies certain other provisions of the Credit Agreement.

In connection with the Separation and Reorganization, we entered into the following transactions which may require ongoing capital commitments:

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(“iHM Management Services”), iHeartCommunications and CCOH, for one year from the Effective Date, we have agreed to provide, CCOH with certain administrative and support services and other assistance which CCOH will utilize in the conduct of its business as such business was conducted prior to the Separation.

As of March 31, 2020 , most of these services have been successfully transitioned to CCOH.

As of June 30, 2020, most of these services have been successfully transitioned to CCOH.

The Company continues to provide certain information systems and other limited support services.

CCOH has requested extensions of the term for certain individual services, primarily related to information systems, for one-month periods through June 30, 2020 and may request further one-month extensions of such services up to May 1, 2021.

CCOH has requested extensions of the term for certain individual services, primarily related to information systems, for one-month periods through August 31, 2020 and may request further one-month extensions of such services up to May 1, 2021.

CCOH may terminate the Transition Services Agreement with respect to all or any individual service, in whole or in part, upon 30 days’ prior written notice, provided that any co-dependent services must be terminated concurrently.

For additional information, see Note 2, Discontinued Operations to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description.

additional information, see Note 2, Discontinued Operations to the consolidated financial statements located in Item 1 of this Quarterly Report on Form 10-Q for a further description.

New Tax Matters Agreement

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Sources of Capital

As of March 31, 2020 and December 31, 2019 , we had the following debt outstanding, net of cash and cash equivalents:

(In millions)

Successor Company

March 31, 2020

December 31, 2019

As of June 30, 2020 and December 31, 2019, we had the following debt outstanding, net of cash and cash equivalents:

(In millions) Successor Company

June 30, 2020 December 31, 2019

Term Loan Facility due 2026 (1)(3)

$ 2,090.8 $ 2,251.3

Asset-based Revolving Credit Facility due 2023 (2)(3)

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Long-term debt fees (18.6) (19.4)

Total Debt 5,837.1 5,765.4

Cash and cash equivalents 517.7 400.3

$ 5,319.4 $ 5,365.1

(1) On February 3, 2020, iHeartCommunications made a $150.0 million prepayment using cash on hand and entered into an agreement to amend the Term Loan Facility to reduce the interest rate to LIBOR plus a margin of 3.00%, or the Base Rate (as defined in the Credit Agreement) plus a margin of 2.00% and to modify certain covenants contained in the Credit Agreement.

(2) On March 13, 2020, iHeartCommunications borrowed $350.0 million under the ABL Facility, the proceeds of which were invested as cash on the Balance Sheet.

As of March 31, 2020 , the ABL Facility had a facility size of $450.0 million and $350.0 million of outstanding borrowings and $47.3 million of outstanding letters of credit, resulting in $52.7 million of availability.

During the three months ended June 30, 2020, iHeartCommunications voluntarily repaid $115.0 million principal amount drawn under the ABL Facility.

As of June 30, 2020, the ABL Facility had a borrowing base of $289.4 million and $235.0 million of outstanding borrowings and $41.2 million of outstanding letters of credit, resulting in $13.2 million of availability.

Amounts available under the ABL Facility are calculated using a borrowing base calculated by reference to our outstanding accounts receivable.

(3) On July 16, 2020, iHeartCommunications issued $450.0 million of incremental term loans under the Amendment No.

2, resulting in net proceeds of $425.8 million, after original issue discount and debt issuance costs.

A portion of the proceeds from the issuance was used to repay the remaining balance outstanding on the Company's ABL Facility of $235.0 million, with the remaining $190.6 million of the proceeds available for general corporate purposes.

For additional information regarding our debt refer to Note 6, Long-Term Debt.

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Pursuant to iHeartCommunications' material debt agreements, Capital I, the parent guarantor and a subsidiary of iHeartMedia, is permitted to satisfy its reporting obligations under such agreements by furnishing iHeartMedia’s consolidated financial information and an explanation of the material differences between iHeartMedia’s consolidated financial information, on the one hand, and the financial information of Capital I and its consolidated restricted subsidiaries, on the other hand.

Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three months ended March 31, 2020 , and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same periods.

Because neither iHeartMedia nor iHeartMedia Capital II, LLC, a wholly-owned direct subsidiary of iHeartMedia and the parent of Capital I, have any operations or material assets or liabilities, there are no material differences between iHeartMedia’s consolidated financial information for the three and six months ended June 30, 2020, and Capital I’s and its consolidated restricted subsidiaries’ financial information for the same periods.

According to the certificate of designation governing the iHeart Operations Preferred Stock, iHeart Operations is required to provide certain supplemental financial information of iHeart Operations in comparison to the Company and its consolidated subsidiaries.

iHeart Operations and its subsidiaries comprised 90.5% of the Company's consolidated assets as of March 31, 2020 .

For the three months ended March 31, 2020 , iHeart Operations and its subsidiaries comprised 86.0% of the Company's consolidated revenues, respectively.

iHeart Operations and its subsidiaries comprised 86.3% of the Company's consolidated assets as of June 30, 2020.

For the three and six months ended June 30, 2020, iHeart Operations and its subsidiaries comprised 83.6% and 85.0% of the Company's consolidated revenue, respectively.

Commitments, Contingencies and Guarantees

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Accordingly, our earnings will be affected by changes in interest rates.

As of March 31, 2020 , approximately 42% of our aggregate principal amount of long-term debt bore interest at floating rates.

Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the three months ended March 31, 2020 would have changed by $5.3 million .

As of June 30, 2020, approximately 41% of our aggregate principal amount of long-term debt bore interest at floating rates.

Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the six months ended June 30, 2020 would have changed by $6.6 million.

In the event of an adverse change in interest rates, management may take actions to mitigate our exposure.

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The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements made by us or on our behalf.

COVID-19 pandemic on our business, financial position and results of operations, our Rights Plan, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, our business plans, strategies and initiatives, our expectations about certain markets, our expectations regarding our FCC petition for declaratory ruling and our anticipated financial performance and liquidity.

This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, the anticipated impacts of the COVID-19 pandemic on our business, financial position and results of operations, our Rights Plan, our expected costs, savings and timing of our modernization initiatives and other capital and operating expense reduction initiatives, our business plans, strategies and initiatives, our expectations about certain markets, our expectations regarding our FCC petition for declaratory ruling and our anticipated financial performance and liquidity.

Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis