What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-09 compared with 2020-08-06 · 254 added, 222 removed, 374 unchanged (56% of the section changed)

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Format of Presentation

Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 1 of this Quarterly Report on Form 10-Q.

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) should be read in conjunction with the consolidated financial statements and related footnotes contained in Item 1 of this Quarterly Report on Form 10-Q of iHeartMedia, Inc.

(the "Company," "iHeartMedia," "we," or "us").

Our primary business provides media and entertainment services via broadcast and digital delivery, including our networks businesses, through our Audio segment.

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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 revenue.

economy could 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.

economy, our revenue for the three and nine months ended September 30, 2020 has declined significantly compared to the comparable periods 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 following months, we saw a sharp decline in each of our Broadcast radio, Networks and Sponsorships revenue streams.

Although revenue increased substantially from the second quarter of 2020 to the third quarter of 2020, we continued to see year-over-year declines in our Broadcast radio, Networks and Sponsorships revenue streams.

Revenue from our Audio and Media Services increased, primarily as a result of higher political revenue, which resulted in an increase of $16.2 million and $25.1 million in the three and nine months ended September 30, 2020, respectively.

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

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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.

In addition, in response to the COVID-19 pandemic, we have taken 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.

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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.

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 second and third quarters of 2020, we repaid the amounts outstanding under our ABL Facility using cash on hand and the proceeds from the issuance of our Incremental Term Loan Facility (as defined below), resulting in no balance outstanding under the facility as of September 30, 2020 and borrowing capacity of $165 million, as a result of restrictions in iHeartMedia’s debt and preferred stock agreements.

In July 2020, iHeartCommunications issued $450.0 million of incremental term loans pursuant to an amendment (the “Incremental Term Loan Facility”) to the credit agreement (as amended, the “Credit Agreement”) with iHeartMedia Capital I, LLC ("Capital I"), as guarantor, certain subsidiaries of iHeartCommunications, Inc.

("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 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.

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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.

The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets, including FCC licenses, as of July 1 of each year.

No impairment was required as part of the 2020 annual impairment testing.

While we believe we 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.

If our actual results are not consistent with our estimates, we could be exposed to future impairment losses that could be material to our results of operations.

Emergence from Bankruptcy

On March 14, 2018, iHeartMedia, Inc.

(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 March 14, 2018, iHeartMedia, 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 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.

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 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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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 financial results for the periods 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 September 30, 2019, the three months ended September 30, 2020 and the nine months ended September 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.

Although GAAP requires that we report on our results for the period from January 1, 2019 through May 1, 2019 and the period from May 2, 2019 through September 30, 2019 separately, management views the Company’s operating results for the three and nine months ended September 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 nine months ended September 30, 2020.

The Company cannot adequately benchmark the operating results of the period from May 2, 2019 through September 30, 2019 against any of the current periods reported in its Consolidated Financial Statements without combining it with 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.

The combined results for the nine months ended September 30, 2019, which we refer to herein as the results for the “nine months ended September 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 September 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.

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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.

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 third quarter of 2020, including broadcast radio which is our largest revenue stream.

Although revenue improved significantly from the second quarter of 2020, we continued to experience a decline in advertising spend and the postponement or cancellation of certain tent-pole events drove an overall decrease in revenue for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 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.

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

• 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 $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.

• Effects of the COVID-19 pandemic adversely impacted revenue for all revenue streams, with the exception of political revenue.

• Revenue of $744.4 million decreased 21.5% during the quarter ended September 30, 2020 compared to Revenue of $948.3 million in the prior year's quarter and increased 52.7% compared to the quarter ended June 30, 2020.

• Operating income of $39.4 million was down from $140.8 million in the prior year’s quarter.

• Net loss of $32.1 million as compared to Net income of $12.4 million in the prior year's quarter.

• Adjusted EBITDA (1) of $162.1 million, was down from $274.7 million compared to prior year's quarter and was up significantly compared to the quarter ended June 30, 2020.

• Cash flows provided by operating activities from continuing operations of $33.3 million increased from Cash flows used for operating activities of $180.3 million in the prior year's quarter.

• Free cash flow (2) (used for) continuing operations of $14.3 million decreased from $151.5 million in the prior year's quarter.

• 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 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, %

(In thousands) Successor Company

Three Months Ended September 30, %

2020 2019 Change

Revenue $ 744,406 $ 948,338 (21.5) %

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

Operating income $ 39,395 $ 140,822 (72.0) %

Net income (loss) $ (32,112) $ 12,374 NM

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

Cash provided by (used for) operating activities from continuing operations $ 33,252 $ 180,341 (81.6) %

Adjusted EBITDA (1)

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

$ 162,124 $ 274,656 (41.0) %

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.

$ 14,275 $ 151,471 (90.6) %

(1) For a definition of Adjusted EBITDA and a reconciliation to Operating income, 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.

(2) 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.

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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

(In thousands) Successor Company

Three Months Ended September 30,

Revenue $ 744,406 $ 948,338

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Depreciation and amortization 99,379 95,268

Impairment charges 5,378 — — —

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

Other operating expense, net 1,675 9,880

Operating income 39,395 140,822

Interest expense, net 85,562 100,967

Gain on investments, net 62 1,735

Equity in loss of nonconsolidated affiliates (58) (1)

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

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

Other expense, net (1,177) (12,457)

Income (loss) from continuing operations before income taxes (47,340) 29,132

Income tax benefit (expense) 15,228 (16,758)

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) (32,112) 12,374

Less amount attributable to noncontrolling interest

— — 2,190 2,190

Net income (loss) attributable to the Company

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(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,

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30,

2020 2019 2019 2019

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

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

Other operating expense, net 3,247 6,634 154 6,788

Operating income (loss) (1,850,471) 274,510 67,040 341,550

Interest expense (income), net 257,614 170,678 (499) 170,179

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

Gain (loss) on investments, net (8,613) 1,735 (10,237) (8,502)

Equity in loss of nonconsolidated affiliates (653) (25) (66) (91)

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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, %

(In thousands) Successor Company

Three Months Ended September 30, %

2020 2019 Change

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(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, %

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30, %

2020 2019 2019 2019 Change

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$ 2,012,688 $ 1,583,984 $ 1,073,471 $ 2,657,455 (24.3) %

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.

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

Revenue decreased $203.9 million during the three months ended September 30, 2020 compared to the same period of 2019.

The decrease in Revenue is attributable to the macroeconomic 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 third 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 $168.6 million, driven by a $107.7 million decrease in Local spot revenue and a $56.1 million decrease in National spot revenue.

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Revenue from Sponsorship and Events decreased by $26.6 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.

Digital revenue increased $15.9 million, driven primarily by continued growth in podcasting.

Audio and Media Services revenue increased $15.2 million primarily due to a $16.2 million increase in political revenue as a result of 2020 being a presidential election year, partially offset by the effects of COVID-19 on advertising spend.

Revenue decreased $644.8 million during the nine months ended September 30, 2020 compared to the same period of 2019.

The decrease in Revenue is primarily attributable to the macroeconomic 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.

Strong Revenue growth in January and February was followed by a sharp decline in revenue in March, which continued through the second and third quarters 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 $511.3 million, driven by a $322.4 million decrease in Local spot revenue and a $177.9 million decrease in National spot revenue.

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Revenue from our Network businesses, including both Premiere and Total Traffic & Weather, was also impacted by the downturn, resulting in a decrease of $104.8 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.

Revenue from Sponsorship and Events decreased by $64.6 million, primarily as a result of the postponement or cancellation of events in response to the COVID-19 pandemic.

Digital revenue increased $34.9 million, driven primarily by continued growth in podcasting.

Audio and Media Services revenue increased $4.7 million due to a $25.1 million increase in political revenue as a result of 2020 being a presidential election year, offset by the effects of COVID-19 on advertising spend.

Direct Operating Expenses

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.

Direct operating expenses decreased $40.0 million during the three months ended September 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 our modernization initiatives and 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.

Direct operating expenses decreased $68.5 million during the nine months ended September 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.

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

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

SG&A expenses decreased $34.5 million during the three months ended September 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.

Travel and entertainment expenses also decreased primarily as a result of operating-expense-saving initiatives put into place in response to the COVID-19 pandemic.

SG&A expenses decreased $76.6 million during the nine months ended September 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.

Travel and entertainment expenses also decreased primarily as a result of operating-expense-saving initiatives put into place in response to the COVID-19 pandemic, as well as trade and barter expenses 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 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.

Corporate expenses decreased $23.9 million during the three months ended September 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.

In addition, share-based compensation expense decreased $11.2 million as a result of incremental share-based compensation expenses recognized in the three months ended September 30, 2019 in relation to a portion of the equity awards that vested upon our listing on Nasdaq in July 2019.

Corporate expenses decreased $38.0 million during the nine months ended September 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.

Depreciation and Amortization

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.

Depreciation and amortization increased $4.1 million during the three months ended September 30, 2020 compared to the same period of 2019, primarily as a result of higher depreciation resulting from our investments in IT infrastructure.

Depreciation and amortization increased $92.0 million during the nine months ended September 30, 2020, compared to the same period 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 six months ended June 30, 2020.

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.

No impairment charges were recorded in the third quarter of 2020 in connection with our annual impairment test.

We recognized non-cash impairment charges of $91.4 million in the nine months ended September 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 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.

Other Operating Expense, Net

Other operating expense, net of $1.7 million and $9.9 million for the three months ended September 30, 2020 and 2019, respectively, and Other operating expense, net of $3.2 million and $6.8 million for the nine months ended September 30, 2020 and 2019, respectively, relate to net losses recognized on asset disposals.

Interest Expense

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.

Interest expense decreased $15.4 million during the three months ended September 30, 2020 compared to the same period of 2019, primarily as a result of the impact of lower LIBOR rates, as well as the impact of the amendment to the Term Loan Facility in the first quarter of 2020, resulting in a 1.00% reduction in the Term Loan Facility interest rate.

Interest expense increased $87.4 million during the nine months ended September 30, 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.

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 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.

The increase was offset by a decrease in interest expense driven by the impact of lower LIBOR rates, as well as the impact of the amendment to the Term Loan Facility in the first quarter of 2020, resulting in a 1.00% reduction in the Term Loan Facility interest rate.

In the Predecessor period, 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 $533.4 million in contractual interest not being accrued on pre-petition indebtedness for the period from January 1, 2019 to May 1, 2019.

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.

During the three and nine months ended September 30, 2020, we recognized a gain on investments, net of $0.1 million and a loss on investments of $8.6 million, respectively.

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

During the three and nine months ended September 30, 2019, we recognized a gain of $1.7 million and a loss of $8.5 million, respectively.

The loss on investments, net recognized during the nine months ended September 30, 2019 was primarily in connection with declines in the value of our investments.

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 $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.

Other expense, net was $1.2 million and $10.3 million for the three and nine months ended September 30, 2020, respectively.

Other expense, net for the nine months ended September 30, 2020 related primarily to costs incurred to amend our Term Loan Facility and professional fees incurred in connection with the Chapter 11 Cases in the Successor period.

Other expense, net was $12.5 million and $21.6 million for the three and nine months ended September 30, 2019, respectively.

Other expense, net for the three and nine months ended September 30, 2019 related primarily to professional fees incurred directly in connection with the Chapter 11 Cases in the Successor period.

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 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.

During the nine months ended September 30, 2019, we recognized Reorganization items, net of $9,461.8 million related to our emergence from 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 March 14, 2018 Petition Date and the May 1, 2019 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 effective tax rate for the Successor Company for the three and nine months ended September 30, 2020 was 32.2% and 9.8%, respectively.

The effective tax rate for the nine months ended September 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 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 effective tax rate for the Successor Company for the period from May 2, 2019 through September 30, 2019 was 39.0%.

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

The income tax expense for 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:

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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.

During the nine months ended September 30, 2019, we recognized Income from discontinued operations, net of tax of $1,685.1 million 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.

Net loss attributable to the Company decreased $44.5 million to $32.1 million during the three months ended September 30, 2020 compared to Net income attributable to the Company of $12.4 million during the three months ended September 30, 2019, primarily as a result of the decrease in Revenue, partially offset by lower operating expenses, in addition to the other factors discussed above.

Net loss attributable to the Company decreased $13,153.5 million to $1,918.2 million during the nine months ended September 30, 2020 compared to Net income attributable to the Company of $11,235.3 million during the nine months ended September 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 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

(In thousands) Successor Company

Three Months Ended September 30,

Operating income $ 39,395 $ 140,822

Depreciation and amortization 99,379 95,268

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

Impairment charges 5,378 — — —

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

Other operating expense, net 1,675 9,880

Share-based compensation expense 5,885 17,112

4,218 3,039 105 3,144

Restructuring and reorganization expenses

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(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,

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30,

2020 2019 2019 2019

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Depreciation and amortization 299,494 154,651 52,834 207,485

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)

Other operating expense, net 3,247 6,634 154 6,788

Share-based compensation expense 14,728 20,151 498 20,649

8,843 3,039 498 3,537

Restructuring and reorganization expenses

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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

(In thousands) Successor Company

Three Months Ended September 30,

Net income (loss) $ (32,112) $ 12,374

Income from discontinued operations, net of tax

— — (1,854,677) (1,854,677)

Income tax (benefit) expense (15,228) 16,758

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

Interest expense (income), net

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

Interest expense, net 85,562 100,967

Depreciation and amortization 99,379 95,268

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

EBITDA $ 137,601 $ 225,367

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

Other expense, net 1,177 12,457

Equity in loss of nonconsolidated affiliates

Impairment charges

Other operating (income) expense, net

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

Other operating expense, net 1,675 9,880

Share-based compensation expense 5,885 17,112

4,218 3,039 105 3,144

Restructuring and reorganization expenses

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(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,

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30,

2020 2019 2019 2019

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Income tax (benefit) expense (209,481) 32,761 39,095 71,856

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

Interest expense (income), net

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Depreciation and amortization 299,494 154,651 52,834 207,485

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

EBITDA $ (1,570,538) $ 409,257 $ 9,571,420 $ 9,980,677

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— — (9,461,826) (9,461,826)

Loss on investments, net

8,675 — 10,237 10,237

(Gain) Loss on investments, net 8,613 (1,735) 10,237 8,502

Other (income) expense, net

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1,733,235 — 91,382 91,382

Other operating (income) expense, net

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

Other operating expense, net 3,247 6,634 154 6,788

Share-based compensation expense 14,728 20,151 498 20,649

8,843 3,039 498 3,537

Restructuring and reorganization expenses

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$ 273,180 $ 469,409 $ 225,149 $ 694,558

(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.

(3) We define Adjusted EBITDA as consolidated Operating income (loss) adjusted to exclude restructuring and reorganization expenses included within Direct operating expenses, SG&A expenses, Corporate expenses and share-based compensation expenses included within Corporate expenses, as well as the following line items presented in our Statements of Operations:

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 (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.

(1) We define Adjusted EBITDA as consolidated Operating income (loss) adjusted to exclude restructuring and reorganization expenses included within Direct operating expenses, SG&A expenses and Corporate expenses, and share-based compensation expenses included within Corporate expenses, as well as the following line items presented in our Statements of Operations:

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

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 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)

(In thousands) Successor Company

Three Months Ended September 30,

Cash provided by operating activities from continuing operations $ 33,252 $ 180,341

Purchases of property, plant and equipment by continuing operations

(18,977) (28,870)

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

Free cash flow from continuing operations (1)

$ 14,275 $ 151,471

(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,

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30,

2020 2019 2019 2019

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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 $4.2 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.

Share-based compensation expenses are recorded in corporate expenses and were $5.9 million and $17.1 million for the three months ended September 30, 2020 and 2019, respectively, and $14.7 million and $20.6 million for the nine months ended September 30, 2020 and 2019, respectively.

In August 2020, we issued performance-based restricted stock units ("Performance RSUs") to certain key employees.

Such Performance RSUs vest upon the achievement of critical operational (cost savings) improvements and specific environmental, social and governance initiatives, which are being measured over an approximately 18-month period from the date of issuance.

In the three months ended September 30, 2020, we recognized $1.1 million in relation to these performance-based RSUs.

As of September 30, 2020, there was $58.5 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.

In addition, as of September 30, 2020, there was $3.9 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on performance conditions.

LIQUIDITY AND CAPITAL RESOURCES

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(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,

Nine Months Ended September 30, Period from May 2, 2019 through September 30, Period from January 1, 2019 through May 1, Nine Months Ended September 30,

2020 2019 2019 2019

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Operating Activities

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.

Cash provided by operating activities for the nine months ended September 30, 2020 was $136.2 million compared to $223.4 million of cash provided by operating activities in the nine months ended September 30, 2019.

Cash provided by operating activities from continuing operations decreased from $256.0 million in the nine months ended September 30, 2019 to $136.2 million in the nine months ended September 30, 2020 primarily as a result of 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 $187.9 million as a result of interest payments on our debt issued upon our emergence.

The Company ceased paying interest on long-term debt after the March 14, 2018 petition date until the Company emerged from bankruptcy on May 1, 2019.

The decrease was offset by changes in working capital balances, particularly accounts receivable, which was impacted by improved collections.

In addition, we paid $201.6 million during the nine months ended September 30, 2019 in relation to Reorganization items, net.

Investing Activities

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.

Cash used for investing activities of $71.2 million during the nine months ended September 30, 2020 primarily reflects $58.5 million in cash used for capital expenditures and $12.7 million used for acquisitions.

We spent $50.4 million for capital expenditures in our Audio segment primarily related to IT infrastructure, $2.4 million in our Audio & Media Services segment, primarily related to acquired software and $5.7 million in Corporate primarily related to equipment and software purchases.

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.

Cash used for investing activities of $305.0 million during the nine months ended September 30, 2019 primarily reflects $222.4 million in cash used for investing activities from discontinued operations.

In addition, we used $82.5 million for capital expenditures.

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Financing Activities

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.

Cash provided by financing activities of $248.6 million during the nine months ended September 30, 2020 primarily resulted from the net proceeds of $425.8 million from the issuance of incremental term loan commitments, offset by the $150.0 million prepayment on our Term Loan Facility in the first quarter 2020, along with required quarterly principal payments made on the Term Loan Facility.

Cash used for financing activities was $60.7 million during the nine months ended September 30, 2019 primarily resulted from the payment by iHeartCommunications to CCOH as CCOH's recovery of its claims under the Due from iHeartCommunications Note and settlement of the post-petition intercompany 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 $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 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.

Our primary sources of liquidity are cash on hand, which consisted of $713.7 million as of September 30, 2020, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of September 30, 2020, iHeartCommunications had no amounts outstanding under the ABL Facility, a borrowing base of $365.6 million and $41.2 million in outstanding letters of credit, resulting in $324.4 million of borrowing base availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of September 30, 2020, approximately $165 million was available to be drawn upon under 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 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.

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

Our cash balance was $713.7 million as of September 30, 2020.

Together with our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $879 million.

We continue to evaluate the full extent of COVID-19’s impact on our business.

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

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

We anticipate that we will have approximately $86 million of cash interest payments in the fourth quarter of 2020.

We expect to have approximately $338 million of cash interest payments in 2021.

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.

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 digital, podcasting, networks and live events.

Early in the first quarter of 2020, we implemented our modernization initiatives to 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 have also invested in numerous technologies and businesses to increase the competitiveness of our inventory with our advertisers and our audience.

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.

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 continuing to take the following measures, which are expected to generate approximately $200 million in operating cost savings in 2020:

• 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.

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

• Reduction in planned capital expenditures to a level that we believe will still enable the Company to make key investments to continue our strategic initiatives related to Smart Audio and Digital, including podcasting.

1 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.

• Reduction in compensation for senior management and other employees of the Company, including a 100% reduction of the Company's Chief Executive Officer's annual base salary and bonus.

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

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.

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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, 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.

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 continue to fund and operate our business, fund capital expenditures and other obligations and make interest payments on our long-term debt.

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.

We frequently evaluate strategic opportunities, and we expect from time to time to pursue acquisitions or dispose of certain businesses, which may or may not be material.

For example, on October 22, 2020, we used a portion of our cash on hand to complete the strategic acquisition of Voxnest, Inc., a provider of podcast analytics and programmatic ad serving tools, which we believe will be a transaction accretive to shareholder value.

Specifically, as we continue to focus on operational efficiencies that drive greater margin and cash flow, we will continue to review and consider opportunities to unlock shareholder value and increase free cash flow.

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.

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Pursuant to the Transition Services Agreement between us, iHeartMedia Management Services, Inc.

(“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 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 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.

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.

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

The Transition Services Agreement was terminated on August 31, 2020.

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.

New Tax Matters Agreement

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Sources of Capital

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

As of September 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

September 30, 2020 December 31, 2019

Term Loan Facility due 2026 (1)

$ 2,085.5 $ 2,251.3

Incremental Term Loan Facility due 2026 (2)

Asset-based Revolving Credit Facility due 2023 (3)

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Other Subsidiary Debt 6.5 12.5

Purchase accounting adjustments and original issue discount (19.6) —

Long-term debt fees (22.5) (19.4)

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(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.

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.

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.

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

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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.

(3) 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.

During the three months ended June 30, 2020 and the three months ended September 30, 2020, iHeartCommunications voluntarily repaid the principal amount drawn under the ABL Facility.

As of September 30, 2020, the ABL Facility had a borrowing base of $365.6 million, no outstanding borrowings and $41.2 million of outstanding letters of credit, resulting in $324.4 million of borrowing base availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of September 30, 2020, approximately $165 million was available to be drawn upon under the ABL Facility.

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

Exchange of Special Warrants

On July 25, 2019, the Company filed a Petition for Declaratory Ruling (“PDR”) with the FCC to permit up to 100% of the Company’s voting stock to be owned by non-U.S.

individuals and entities.

On November 5, 2020, the FCC issued a Declaratory Ruling granting the relief requested by the PDR, subject to certain conditions set forth in the Declaratory Ruling.

On November 9, 2020, the Company notified the holders of warrants to purchase the Company’s Class A common stock or Class B common stock (the “Special Warrants”) of the commencement of an exchange process (the “Exchange”).

In the Exchange, the Company will exchange all or a portion of the outstanding Special Warrants into Class A common stock or Class B common stock, subject to compliance with the Declaratory Ruling, the Communications Act, and FCC rules.

has agreed to waive the exercise price for exchanging the Special Warrants in the exchange following the Declaratory Ruling and consequently will not receive any proceeds from that exchange.

As of November 5, 2020, Special Warrants to purchase 75,753,316 shares of the Company’s Class A common stock or Class B common stock remained outstanding.

Supplemental Financial Information under Debt Agreements and Certificate of Designation Governing the iHeart Operations Preferred Stock

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 and six months ended June 30, 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 nine months ended September 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 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.

iHeart Operations and its subsidiaries comprised 84.6% of the Company's consolidated assets as of September 30, 2020.

For the three and nine months ended September 30, 2020, iHeart Operations and its subsidiaries comprised 84.7% and 84.9% of the Company's consolidated revenue, respectively.

Commitments, Contingencies and Guarantees

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Due to this seasonality and certain other factors, the results for the interim periods may not be indicative of results for the full year.

In addition, our Audio segment and our Audio and media representation business are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years.

In addition, our Audio segment and our Audio and media services segment are impacted by political cycles and generally experience higher revenues in congressional election years, and particularly in presidential election years.

This cyclicality may affect comparability of results between years.

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

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.

As of September 30, 2020, approximately 43% 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 nine months ended September 30, 2020 would have changed by $7.7 million.

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

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There have been no significant changes to our critical accounting policies and estimates disclosed in “Critical Accounting Estimates” of Item 7, Management’s Discussion and Analysis of our Annual Report on Form 10-K for the year ended December 31, 2019 except as disclosed in Note 1, Basis of Presentation to our consolidated financial statements.

CRITICAL ACCOUNTING ESTIMATES

The preparation of our financial statements in conformity with U.S.

GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period.

On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of expenses that are not readily apparent from other sources.

Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material.

Our significant accounting policies are discussed in the notes to our consolidated financial statements included in Note 1 of this Quarterly Report on Form 10-Q.

Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain.

The following narrative describes these critical accounting estimates, the judgments and assumptions and the effect if actual results differ from these assumptions.

The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets as of July 1 of each year.

Indefinite-lived Intangible Assets

In connection with our Plan of Reorganization, we applied fresh start accounting as required by ASC 852 and recorded all of our assets and liabilities at estimated fair values, including our FCC licenses, which are included within our Audio reporting unit.

Indefinite-lived intangible assets, such as our FCC licenses, are reviewed annually for possible impairment using the direct valuation method as prescribed in ASC 805-20-S99.

Under the direct valuation method, the estimated fair value of the indefinite-lived intangible assets was calculated at the market level as prescribed by ASC 350-30-35.

Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically obtains indefinite-lived intangible assets and builds a new operation with similar attributes from scratch.

Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value.

Initial capital costs are deducted from the discounted cash flows model, which results in value that is directly attributable to the indefinite-lived intangible assets.

Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs, the risk-adjusted discount rate and terminal values.

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

On July 1, 2020, we performed our annual impairment test in accordance with ASC 350-30-35 and we concluded no impairment of the indefinite-lived intangible assets was required.

In determining the fair value of our FCC licenses, the following key assumptions were used:

• Revenue forecasts published by BIA Financial Network, Inc.

(“BIA”), varying by market, were used for the initial four-year period;

• 2.0% revenue growth was assumed beyond the initial four-year period;

• Revenue was grown proportionally over a build-up period, reaching market revenue forecast by year 3;

• Operating margins of 8.0% in the first year gradually climb to the industry average margin in year 3 of up to 21.0%, depending on market size;

• Assumed discount rates of 8.5% for the 15 largest markets and 9.0% for all other markets.

While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets, it is possible a material change could occur.

If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.

The following table shows the change in the fair value of our indefinite-lived intangible assets that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:

(In thousands)

Description Revenue

Growth Rate Profit

Margin Discount

FCC license $ 343,517 $ 184,986 $ 542,741

The estimated fair value of our FCC licenses at July 1, 2020 was $2.0 billion, while the carrying value was $1.8 billion.

Upon application of fresh start accounting in accordance with ASC 852 in connection with our emergence from bankruptcy, we recorded goodwill of $3.3 billion, which represented the excess of estimated enterprise fair value over the estimated fair value of our assets and liabilities.

Goodwill was further allocated to our reporting units based on the relative fair values of our reporting units as of May 1, 2019.

We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired.

The fair value of our reporting units is used to apply value to the net assets of each reporting unit.

To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge may be required to be recorded.

The discounted cash flow approach we use for valuing goodwill involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate.

Terminal values are also estimated and discounted to their present value.

On July 1, 2020, we performed our annual impairment test in accordance with ASC 350-30-35, resulting in no impairment of goodwill.

In determining the fair value of our reporting units, we used the following assumptions:

• Expected cash flows underlying our business plans for the periods 2020 through 2024.

Our cash flow assumptions are based on detailed, multi-year forecasts performed by each of our operating reporting units, and reflect the current advertising outlook across our businesses.

• Cash flows beyond 2024 are projected to grow at a perpetual growth rate, which we estimated at 2.0% for our Audio and digital reporting units and 2.0% for our Katz Media reporting unit (beyond 2028).

• In order to risk adjust the cash flow projections in determining fair value, we utilized a discount rate of approximately 14.0% for each of our reporting units.

Based on our annual assessment using the assumptions described above, a hypothetical 5% reduction in the estimated fair value in each of our reporting units would not result in a material impairment condition.

While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the estimated fair value of our reporting units, it is possible a material change could occur.

If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future.

The following table shows the decline in the fair value of each of our reporting units that would result from a 100 basis point decline in our discrete and terminal period revenue growth rate and profit margin assumptions and a 100 basis point increase in our discount rate assumption:

(In thousands)

Description Revenue

Growth Rate Profit

Margin Discount

Audio $ 590,000 $ 233,000 $ 671,000

Katz Media $ 28,000 $ 13,000 $ 31,000

Other $ 16,000 $ 6,000 $ 16,000

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

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

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.

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, expected cash interest payments 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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• regulations and consumer concerns regarding privacy and data protection, and breaches of information security measures;

• risks associated with our recent emergence from the Chapter 11 Cases;

• risks associated with our emergence from the Chapter 11 Cases;

• risks related to our Class A common stock, including our significant number of outstanding warrants;

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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