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Item 7. Management’s Discussion and Analysis

2021-02-25 compared with 2020-02-27 · 434 added, 352 removed, 356 unchanged (69% 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 8 of this Annual Report on Form 10-K.

(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.

We also operate businesses that provide audio and media services through our Audio and Media Services segment, including our full-service media representation business, Katz Media Group (“Katz Media”) and our provider of scheduling and broadcast software and services, Radio Computing Services ("RCS").

Following the Separation, we ceased to operate the outdoor business, which prior to the Separation was presented as our Americas outdoor segment and our International outdoor segment.

Following the Separation, we ceased to operate our former outdoor business, which prior to the Separation was presented as our Americas outdoor segment and our International outdoor segment.

The historical results of the outdoor business have been reclassified as results from discontinued operations.

On May 1, 2019, we consummated the Separation and Reorganization, resulting in a substantial reduction in our long-term indebtedness and corresponding cash interest expenses, and significantly extending the maturities of our outstanding indebtedness, as more fully described under “Liquidity and Capital Resources” below.

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 podcasting, networks and events.

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

We believe that our ability to generate free cash flow from these business initiatives coupled with the significant reduction in our indebtedness and our continued efforts to lower interest rates by refinancing our indebtedness will enable us to generate sufficient cash flows to operate our businesses and de-lever our balance sheet over time.

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

Certain prior period amounts have been reclassified to conform to the 2020 presentation.

Our Audio strategy centers on delivering entertaining and informative content across multiple platforms, including broadcast, digital and live events.

Our Audio strategy centers on delivering entertaining and informative content where our listeners want to find us across multiple platforms, including broadcast, digital and live mobile, as well as events.

Our primary source of revenue is derived from selling local and national advertising time on our radio stations, with contracts typically less than one year in duration.

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We work closely with our advertising and marketing partners to develop tools and leverage data to enable advertisers to effectively reach their desired audiences.

We continue to expand the choices for listeners and we deliver our content and sell advertising across multiple distribution channels, including digitally via our iHeartRadio mobile application and other digital platforms which reach national, regional and local audiences.

We also generate revenues from network syndication, our nationally recognized live events, our station websites and other miscellaneous transactions.

We continue to expand the choices for listeners and we deliver our radio, podcasting and other content and sell advertising across multiple distribution channels, including digitally via our iHeartRadio mobile application and other digital platforms which reach national, regional and local audiences.

We also generate revenue from network syndication, our nationally recognized events, our station websites and other miscellaneous transactions.

Management monitors average advertising rates and cost per mille, the cost of every 1,000 advertisement impressions (“CPM”), which are principally based on the length of the spot and how many people in a targeted audience listen to our stations, as measured by an independent ratings service.

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Our advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP.

In January 2020, the Company announced its 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 expect our investment in these modernization initiatives to result in an increase in incremental capital expenditures related to real estate optimization of approximately $40 to $50 million during 2020.

While we expect some additional capital expenditures impact from our modernization in 2021, the majority of this investment in capital expenditures is expected to impact 2020 and will be weighted to the second-half of the year.

A recession or downturn in the U.S.

economy typically has 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 year ended December 31, 2020 has declined significantly 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.

In the third and fourth quarters of 2020, we experienced sequential increases in revenue compared to the second quarter of 2020, although 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 $61.8 million in revenue in the year ended December 31, 2020 compared to 2019.

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

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

In the first quarter of 2020, we announced our modernization initiatives, which take advantage of the significant investments we have made in new technologies to build an operating infrastructure that provides new, high quality products while also unlocking cost efficiencies.

These initiatives delivered the expected 2020 in-year savings of approximately $50 million and remain on track to deliver annualized run-rate cost savings of approximately $100 million by mid-year 2021.

In addition, and as previously discussed, in response to the COVID-19 pandemic, we took steps to significantly reduce our capital and operating expenditures in 2020.

These initiatives generated approximately $200 million of operating cost savings in 2020 and we have identified, and executed on, plans to make substantially all of those savings permanent in 2021 and beyond.

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

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 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 December 31, 2020 and borrowing capacity of $172 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.

Impairment Charges

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

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

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.

In addition, no further impairment was considered necessary in the fourth quarter of 2020.

For more information, see Note 5, Property, Plant and Equipment, Intangible Assets and Goodwill to the consolidated financial statements located in Item 8 of this Annual Report on Form 10-K for a further description of the impairment charges and annual impairment tests.

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.

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.

Combined Results

Our financial results for the periods from January 1, 2019 through May 1, 2019, the year ended December 31, 2018 and the year ended December 31, 2017 are referred to as those of the “Predecessor” period.

Our financial results for the period from May 2, 2019 through December 31, 2019 are referred to as those of the “Successor” period.

Our financial results for the periods from January 1, 2019 through May 1, 2019 and the year ended December 31, 2018 are referred to as those of the “Predecessor” period.

Our financial results for the period from May 2, 2019 through December 31, 2019 and the year ended December 31, 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 our results for the period from January 1, 2019 through May 1, 2019 and the period from May 2, 2019 through December 31, 2019 separately, management views the Company’s operating results for the year ended December 31, 2019 by combining the results of the applicable Predecessor and Successor periods because such presentation provides the most meaningful comparison of our results to prior periods.

The Company cannot adequately benchmark the operating results of the period from May 2, 2019 through December 31, 2019 against any of the previous 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 provide more meaningful comparisons to other periods and are useful in identifying current business trends.

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 December 31, 2019 separately, management views the Company’s operating results for the year ended December 31, 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 year ended December 31, 2020.

The Company cannot adequately benchmark the operating results of the period from May 2, 2019 through December 31, 2019 against any of the current or prior 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 in fiscal 2019 when combined with the Predecessor period in fiscal 2019 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 year ended December 31, 2019.

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Executive Summary

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

Revenue from our Broadcast and Audio and Media Services revenue streams were positively impacted by political revenue as a result of 2020 being a presidential election year.

Although revenue improved significantly from the low point through the remainder 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 year ended December 31, 2020 compared to the year ended December 31, 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.

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

For additional information on these actions, see the Liquidity and Capital Resources - Anticipated Cash Requirements section below.

The key developments in our business for the year ended December 31, 2020 are summarized below:

Our Plan of Reorganization became effective May 1, 2019 resulting in the Separation of the Outdoor business and emerging from the Chapter 11 Cases with a significantly de-leveraged capital structure.

As a result of our emergence from the Chapter 11 Cases, we reduced our long-term debt from approximately $16 billion to approximately $5.8 billion.

Revenue of $3,683.5 million increased $72.2 million during 2019 compared to 2018 .

Operating income of $506.7 million was down from $690.1 million in 2018, primarily as a result of higher depreciation and amortization due to the application of fresh start accounting and higher non-cash impairment charges.

Net income of $11.3 billion in 2019 including the $9.5 billion net gain from the Reorganization and the $1.7 billion gain on the Separation of CCOH.

Adjusted EBITDA (1) of $1,000.7 million , was up 2.5% year-over-year.

Cash flows provided by operating activities from continuing operations of $461.4 million decreased $279.8 million or 37.8% compared to 2018 driven by higher cash interest payments as a result of the timing of our Chapter 11 bankruptcy petition and emergence.

Free cash flow (2) of $349.2 million decreased $306.8 million or 46.8% compared to 2018 driven by higher cash interest payments as a result of the timing of our Chapter 11 bankruptcy petition and emergence.

iHeartCommunications issued $750.0 million of new 5.25% Senior Secured Notes due 2027.

Proceeds from the new notes, together with cash on hand, were used to prepay at par $740.0 million of borrowings outstanding under our $3.5 billion aggregate principal amount of senior term loans (the "Term Loan Facility").

iHeartCommunications issued $500.0 million of new 4.75% Senior Secured Notes due 2028.

Proceeds from the new notes, together with cash on hand, were used to prepay at par $500.0 million of borrowings outstanding under the Term Loan Facility.

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

• We achieved approximately $250 million of cost savings in 2020.

• Revenue of $2,948.2 million decreased 20.0% during 2020 compared to 2019.

• Revenue decreased 1.9%, 46.6%, 21.5% and 8.8% in the first, second, third and fourth quarters of 2020, respectively, compared to the respective quarters in 2019.

• Operating loss of $1,737.6 million was down from Operating income of $506.7 million in 2019.

• Net loss of $1.9 billion in 2020, driven primarily by an impairment of $1.7 billion in the first quarter of 2020, as compared to Net income of $11.3 billion in 2019.

• Adjusted EBITDA (1) of $538.7 million, was down from Adjusted EBITDA (1) of $1,000.7 million in 2019.

• Cash flows provided by operating activities from continuing operations of $215.9 million decreased $245.5 million or 53.2% compared to 2019.

• Free cash flow (2) of $130.7 million decreased $218.5 million or 62.6% compared to 2019.

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

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

Operating income

Net income (loss)

Cash provided by (used in) operating activities from continuing operations

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, %

2020 2019 2019 2019 Change

Revenue $ 2,948,218 $ 2,610,056 $ 1,073,471 $ 3,683,527 (20.0) %

Operating income (loss) $ (1,737,624) $ 439,636 $ 67,040 $ 506,676 NM

Net income (loss) $ (1,915,222) $ 113,299 $ 11,165,113 $ 11,278,412 NM

Cash provided by (used for) operating activities from continuing operations $ 215,945 $ 468,905 $ (7,505) $ 461,400 (53.2) %

Adjusted EBITDA (1)

$ 538,673 $ 775,549 $ 225,149 $ 1,000,698 (46.2) %

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

(1) Adjusted EBITDA is a non-GAAP financial measure.

For a definition of Adjusted EBITDA, a statement of the reasons why management believes Adjusted EBITDA provides useful information to investors, a reconciliation to Operating income 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) Free cash flow from (used in) continuing operations is a non-GAAP financial measure.

For a definition of Free cash flow from (used in) continuing operations, a statement of the reasons why management believes Free cash flow from (used in) continuing operations provides useful information to investors 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 (used in) operating activities from continuing operations to Free cash flow from (used in) continuing operations” in this MD&A.

$ 130,740 $ 392,912 $ (43,702) $ 349,210 (62.6) %

(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 (used for) operating activities from continuing operations to Free cash flow from (used for) continuing operations” in this MD&A.

Results of Operations

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

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31,

2020 2019 2019 2019

Revenue $ 2,948,218 $ 2,610,056 $ 1,073,471 $ 3,683,527

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

1,163,148 878,956 381,184 1,260,140

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

1,225,097 897,670 427,230 1,324,900

Corporate expenses (excludes depreciation and amortization)

144,572 136,171 53,647 189,818

Depreciation and amortization 402,929 249,623 52,834 302,457

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Other operating expense, net 11,344 8,000 154 8,154

Operating income

Operating income (loss) (1,737,624) 439,636 67,040 506,676

Interest expense (income), net 343,745 266,773 (499) 266,274

Loss on investments, net (9,346) (20,928) (10,237) (31,165)

Equity in earnings (loss) of nonconsolidated affiliates

Equity in loss of nonconsolidated affiliates (379) (279) (66) (345)

Other income (expense), net (7,751) (18,266) 23 (18,243)

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Income (loss) from continuing operations before income taxes (2,098,845) 133,390 9,519,085 9,652,475

Income tax expense

Income tax benefit (expense) 183,623 (20,091) (39,095) (59,186)

Income (loss) from continuing operations (1,915,222) 113,299 9,479,990 9,593,289

Income (loss) from discontinued operations, net of tax

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

Net income (loss) (1,915,222) 113,299 11,165,113 11,278,412

Less amount attributable to noncontrolling interest

(523) 751 (19,028) (18,277)

Net income (loss) attributable to the Company

$ (1,914,699) $ 112,548 $ 11,184,141 $ 11,296,689

The table below presents the comparison of our revenue streams for the periods presented:

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, %

2020 2019 2019 2019 Change

Broadcast Radio $ 1,604,880 $ 1,575,382 $ 657,864 $ 2,233,246 (28.1) %

Digital 474,371 273,389 102,789 376,178 26.1 %

Networks 484,950 425,631 189,088 614,719 (21.1) %

Sponsorship and Events 107,654 159,187 50,330 209,517 (48.6) %

Audio and Media Services 274,749 167,292 69,362 236,654 16.1 %

Other 9,370 14,211 6,606 20,817 (55.0) %

Eliminations (7,756) (5,036) (2,568) (7,604)

Revenue, total

Combined results for the year ended December 31, 2019 compared to the consolidated results for the year ended December 31, 2018 were as follows:

Revenue increased $72.2 million during the year ended December 31, 2019 compared to 2018 .

The increase in revenue is primarily due to higher digital revenue of $91.6 million driven by growth in podcasting, including the impact of our acquisition of Stuff Media in October 2018, as well as other digital revenue, including live radio and other on-demand services, and revenue from our Network businesses, which increased $32.4 million .

Broadcast revenue decreased $30.8 million , due to a $38.2 million decrease in political revenue as a result of 2018 being a mid-term congressional election year, partially offset by growth generated by our programmatic offerings.

Audio and Media Services revenue decreased $27.4 million due to a $34.5 million decrease in political revenue.

Political revenue for the years ended December 31, 2019 and 2018 was $28.8 million and $103.0 million , respectively.

$ 2,948,218 $ 2,610,056 $ 1,073,471 $ 3,683,527 (20.0) %

Consolidated results for the year ended December 31, 2020 compared to the combined results for the year ended December 31, 2019 were as follows:

Revenue decreased $735.3 million during the year ended December 31, 2020 compared to 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 2020, resulting in a significant economic downturn due to the shut-down of 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 end of 2020, with the exception of October, which saw consolidated revenue growth as a result of strong political advertising spend, resulting in significant revenue declines impacting most of our revenue streams, primarily as a result of a decrease in broadcast radio advertising spend as a result of the COVID-19 pandemic.

Broadcast revenue decreased $628.4 million, driven by a $432.7 million decrease in Local spot revenue and a $195.7 million decrease in National spot revenue.

The decrease in Broadcast revenue was partially offset by a $70.5 million increase in political revenue as a result of 2020 being a presidential election year.

Revenue from our Networks businesses, including both Premiere and Total Traffic & Weather, was also impacted by the downturn, resulting in a decrease of $129.8 million.

Revenue from Sponsorship and Events decreased by $101.9 million, primarily as a result of the cancellations of events in response to the COVID-19 pandemic.

Digital revenue increased $98.2 million, driven by continued growth in podcasting, including for both new and existing podcasts, which continued to experience increased advertiser demand.

Audio and Media Services revenue increased $38.1 million primarily due to a $61.8 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.

Direct Operating Expenses

Direct operating expenses increased $104.7 million during the year ended December 31, 2019 compared to 2018 .

Higher direct operating expenses were driven primarily by higher compensation-related expenses, including from the acquisitions of Stuff Media and Jelli in the fourth quarter of 2018, as well as higher music license fees, digital royalties and content costs from higher podcasting, subscription and other digital revenue.

Included in this increase is the impact of updated estimates to music license fee expenses primarily related to prior years for which payments were made under interim agreements with performance rights organizations and that are subject to ongoing negotiations.

The increase in direct operating expenses also includes a $6.3 million increase in lease expense due to the impact of the adoption of the new leasing standard in the first quarter of 2019 and the adoption of fresh start accounting.

Direct operating expenses decreased $97.0 million during the year ended December 31, 2020 compared to 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 year.

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

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

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

SG&A expenses decreased $99.8 million during the year ended December 31, 2020 compared to 2019.

The decrease in our SG&A expenses was due primarily to lower commissions as a result of our revenue mix, lower bad debt expense, resulting from improved collections, and lower trade and barter expenses, primarily resulting from timing.

The decrease in SG&A expenses was partially offset by higher third-party digital fees, driven by the increase in digital revenue, along with higher employee costs, primarily resulting from the acquisitions of Stuff Media and Jelli in the fourth quarter of 2018.

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.

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 increased $7.1 million during the year ended December 31, 2019 compared to 2018 , as a result of higher share-based compensation expense, which increased $24.8 million as a result of our new equity compensation plan entered

into in connection with our Plan of Reorganization.

This increase was partially offset by lower employee benefit costs and lower amortization of retention bonuses related to the bankruptcy for which amortization ceased on the Effective Date.

Corporate expenses decreased $45.2 million during the year ended December 31, 2020 compared to 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.

Depreciation and Amortization

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Impairment Charges

We perform our annual impairment test on our goodwill, Federal Communication Commission ("FCC") licenses and other intangible assets as of July 1 of each year.

No impairment charges were recorded in the third quarter of 2019 in connection with our annual impairment test.

We perform our annual impairment test on our goodwill and FCC licenses as of July 1 of each year.

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

We recognized non-cash impairment charges of $91.4 million in the first quarter of 2019 on our indefinite-lived FCC licenses as a result of an increase in the weighted average cost of capital.

During 2018 we recorded impairment charges of $33.2 million related primarily to several of our Audio markets.

See Note 7, Property, Plant and Equipment, Intangible Assets and Goodwill to the consolidated financial statements located in Item 8 of this Annual Report on Form 10-K for a further description of the impairment charges.

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

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

We recognized non-cash impairment charges of $91.4 million in the first quarter of 2019 on our indefinite-lived FCC licenses as a result of an increase in our weighted average cost of capital.

See Note 7, Property, Plant and Equipment, Intangible Assets and Goodwill, to the consolidated financial statements located in Item 8 of Part II of this Annual Report on Form 10-K for a further description of the impairment charges.

Other Operating Expense, Net

Other operating expense , net of $8.2 million in 2019 was primarily related to net losses recognized on the disposal of assets.

Other operating expense, net of $9.3 million in 2018 was primarily related to net losses recognized on the disposal of assets.

Other operating expense, net of $11.3 million and $8.2 million in 2020 and 2019, respectively, primarily related to net losses recognized on the disposal of assets.

Interest Expense, Net

Interest expense, net decreased $68.5 million during 2019 compared to 2018 as a result of the interest recognized in the period from January 1, 2018 to the March 14, 2018 petition date on our pre-petition debt exceeding the interest recognized in the period from May 2, 2019 to December 31, 2019 on our new debt issued in connection with our emergence from the Chapter 11 Cases.

Interest expense, net increased $77.5 million during 2020 compared to 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.

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 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.

Loss on Investments, net

During the year ended December 31, 2019 , we recognized a loss of $31.2 million , primarily in connection with other-than-temporary declines in the values of certain of our investments.

Equity in Loss of Nonconsolidated Affiliates

During the year ended December 31, 2019 we recognized a net loss of $0.3 million related to equity-method investments.

During the year ended December 31, 2018 , we recognized net earnings of $0.1 million related to equity-method investments.

During the years ended December 31, 2020 and 2019, we recognized loss on investments, net of $9.3 million and $31.2 million, respectively, primarily in connection with other-than-temporary declines in the values of certain of our investments.

Other Expense, Net

Other expense, net was $7.8 million for the year ended December 31, 2020, which 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 $18.2 million for the year ended December 31, 2019, which related primarily to 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 $23.0 million for the year ended December 31, 2018 , which related primarily to professional fees incurred directly in connection with the Chapter 11 Cases before the March 14, 2018 Petition Date.

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

Reorganization Items, Net

1 unchanged sentence

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.

See Note 3 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

See Note 3, Fresh Start Accounting to our consolidated financial statements included in Item 8 of Part II of this Annual Report on Form 10-K.

Income Tax Expense (Benefit)

The Successor Company’s effective tax rate for the period from May 2, 2019 through December 31, 2019 is 15.1% .

The effective tax rate for the year ended December 31, 2020 was 8.7%.

The effective tax rate for the year ended December 31, 2020 was primarily impacted by the impairment charges discussed above.

In addition, the Successor Company recorded deferred tax adjustments to state net operating losses and federal and state disallowed interest carryforwards as a result of the filing of 2019 tax returns and certain legal entity restructuring completed during the period.

These deferred tax adjustments were partially offset by valuation allowances adjustments recorded during the year against certain federal and state deferred tax assets such as net operating loss carryforwards and disallowed interest carryforwards due to the uncertainty of the ability to utilize those assets in future periods.

The Successor Company’s effective tax rate for the period from May 2, 2019 through December 31, 2019 was 15.1%.

The effective tax rate for the Successor period was primarily impacted by deferred tax benefits recorded for changes in estimates related to the carryforward tax attributes that are expected to survive the emergence from bankruptcy and deferred tax adjustments associated with the filing of the Company’s 2018 tax returns during the fourth quarter of 2019.

1 unchanged sentence

This resulted in less tax depreciation deductions for tax purposes for the 2018 year and higher adjusted tax basis for our fixed assets as of the Effective Date.

The Predecessor Company’s effective tax rate for the period from January 1, 2019 through May 1, 2019 is 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 Predecessor Company’s effective tax rate for the period from January 1, 2019 through May 1, 2019 was 0.4%.

The income tax expense for the period from January 1, 2019 through May 1, 2019 (Predecessor) primarily consisted 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:

4 unchanged sentences

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

The effective tax rate for the year ended December 31, 2018 was (57.3)% .

The effective tax rate for 2018 was primarily impacted by $11.3 million of deferred tax expense attributed to the valuation allowance recorded against federal and state deferred tax assets generated in the period due to the uncertainty of the ability to realize those assets in future periods.

Net Income (Loss) Attributable to the Company

Net income attributable to the Company increased $11.5 billion to $11.3 billion during the year ended December 31, 2019 compared to a net loss of $201.9 million during the year ended December 31, 2018, primarily due to the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities.

The comparison of our historical results of operations for the year ended December 31, 2018 to the year ended December 31, 2017 is as follows:

(In thousands)

Predecessor Company

Years Ended December 31,

Net income (loss) attributable to the Company decreased $13.2 billion to a Net loss of $1.9 billion during the year ended December 31, 2020 compared to net income of $11.3 billion during the year ended December 31, 2019.

The Net loss attributable to the Company for the year ended December 31, 2020 primarily related to the non-cash impairment charges to our indefinite-lived intangible assets and goodwill of $1.7 billion recognized in the first quarter of 2020.

In 2019, the Net income attributable to the Company primarily related to the recognition of net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities.

The comparison of our combined results for the year ended December 31, 2019 to the consolidated results of year ended December 31, 2018 is as follows:

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

Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2019 2019 2019 2018

Revenue $ 2,610,056 $ 1,073,471 $ 3,683,527 $ 3,611,323

Operating expenses:

Direct operating expenses (excludes depreciation and amortization)

878,956 381,184 1,260,140 1,132,439

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

897,670 427,230 1,324,900 1,350,157

Corporate expenses (excludes depreciation and amortization)

136,171 53,647 189,818 184,216

Depreciation and amortization 249,623 52,834 302,457 211,951

Impairment charges — 91,382 91,382 33,150

Other operating income (expense), net

Other operating expense, net 8,000 154 8,154 9,266

Operating income 439,636 67,040 506,676 690,144

Interest expense, net

Interest expense (income), net 266,773 (499) 266,274 334,798

Loss on investments, net (20,928) (10,237) (31,165) (472)

Equity in gain (loss) of nonconsolidated affiliates

Other expense, net

Equity in earnings (loss) of nonconsolidated affiliates

(279) (66) (345) 116

Other income (expense), net (18,266) 23 (18,243) (23,007)

Reorganization items, net — 9,461,826 9,461,826 (356,119)

Loss from continuing operations before income taxes

Income tax benefit (expense)

Loss from continuing operations

Income (loss) from continuing operations before income taxes 133,390 9,519,085 9,652,475 (24,136)

Income tax expense (20,091) (39,095) (59,186) (13,836)

Income (loss) from continuing operations 113,299 9,479,990 9,593,289 (37,972)

Income (loss) from discontinued operations, net of tax — 1,685,123 1,685,123 (164,667)

Net income (loss) 113,299 11,165,113 11,278,412 (202,639)

Less amount attributable to noncontrolling interest

Net loss attributable to the Company

The table below presents the comparison of our revenue streams for the year ended December 31, 2018 to the year ended December 31, 2017 is as follows:

(In thousands)

Predecessor Company

Year Ended December 31,

751 (19,028) (18,277) (729)

Net income (loss) attributable to the Company

$ 112,548 $ 11,184,141 $ 11,296,689 $ (201,910)

The table below presents the comparison of our revenue streams for the periods presented:

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

Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31, %

2019 2019 2019 2018 Change

Broadcast Radio $ 1,575,382 $ 657,864 $ 2,233,246 $ 2,264,058 (1.4) %

Digital 273,389 102,789 376,178 284,565 32.2 %

Networks 425,631 189,088 614,719 582,302 5.6 %

Sponsorship and Events 159,187 50,330 209,517 200,605 4.4 %

Audio and Media Services 167,292 69,362 236,654 264,061 (10.4) %

Other 14,211 6,606 20,817 22,240 (6.4) %

Eliminations (5,036) (2,568) (7,604) (6,508)

Revenue, total

Revenue increased $24.7 million, primarily driven by political revenue, which increased $75.4 million in connection with the 2018 mid-term election cycle.

Of the increase in political revenue, $39.6 million was generated by our Audio business and $35.8 million was generated by our Audio and Media Services business.

Digital revenue, including subscription revenue from our iHeartRadio on-demand service, increased $35.8 million.

These increases were partially offset by lower broadcast revenue, which decreased $28.1 million, driven primarily by lower local agency revenue partially offset by growth generated by our programmatic offerings.

We believe disruption to our business resulting from the Chapter 11 Cases negatively impacted our revenue in the first half of the year.

$ 2,610,056 $ 1,073,471 $ 3,683,527 $ 3,611,323 2.0 %

Revenue increased $72.2 million during the year ended December 31, 2019 compared to 2018.

Broadcast revenue decreased $30.8 million, due to a $38.2 million decrease in political revenue as a result of 2018 being a mid-term congressional election year, partially offset by growth generated by our programmatic offerings.

Audio and Media Services revenue decreased $27.4 million due to a $34.5 million decrease in political revenue.

Political revenue for the years ended December 31, 2019 and 2018 was $28.8 million and $103.0 million, respectively.

Direct Operating Expenses

Direct operating expenses increased $3.3 million during 2018 compared to 2017.

Higher digital royalties and content costs, driven primarily by revenue growth of our iHeartRadio on-demand service and podcasting, and higher employee-related expenses were partially offset by lower music license fees.

Direct operating expenses increased $127.7 million during the year ended December 31, 2019 compared to 2018.

SG&A Expenses

SG&A expenses increased $30.9 million during 2018 compared to 2017.

Higher third-party sales activation fees, trade and barter expenses and variable compensation expense, were partially offset by lower bad debt expense.

SG&A expenses decreased $25.3 million during the year ended December 31, 2019 compared to 2018.

Corporate Expenses

Corporate expenses increased $18.9 million during 2018 compared to 2017.

The increase was primarily as a result of higher employee-related expenses, including variable incentive compensation resulting from higher profitability as well as employee benefits expense.

These increases were partially offset by lower management fees and lower spending on efficiency initiatives.

Corporate expenses increased $5.6 million during the year ended December 31, 2019 compared to 2018 as a result of higher share-based compensation expense, which increased $24.8 million as a result of our equity compensation plan entered into in connection with our Plan of Reorganization.

This increase was partially offset by lower employee benefit costs and lower amortization of retention bonuses related to the bankruptcy for which amortization ceased on the Effective Date.

Depreciation and Amortization

Depreciation and amortization decreased $63.4 million during 2018 compared to 2017 primarily due to assets becoming fully depreciated or fully amortized, including intangible assets that were recorded as part of the merger of iHeartCommunications with iHeartMedia, Inc.

Depreciation and amortization increased $90.5 million during the year ended December 31, 2019 compared to 2018 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

During 2018 we recorded impairment charges of $33.2 million related primarily to several of our Audio markets and during 2017 we recorded an impairment charge of $6.0 million related to FCC licenses in one of our markets in connection with our annual impairment testing.

Other Operating Income (Expense), Net

Other operating expense, net of $9.3 million in 2018 was primarily related to net losses recognized on the disposal of assets.

Other operating income, net of $9.3 million in 2017 was primarily related to the gain on the exchange of four radio stations in Chattanooga, TN and six radio stations in Richmond, VA for four radio stations in Boston, MA and three radio stations in Seattle, WA.

We recognized non-cash impairment charges of $91.4 million in the first quarter of 2019 on our indefinite-lived FCC licenses as a result of an increase in the weighted average cost of capital.

During 2018 we recorded impairment charges of $33.2 million related primarily to several of our Audio markets.

Other Operating Expense, Net

Other operating expense, net of $8.2 million and $9.3 million in 2019 and 2018, respectively, was primarily related to net losses recognized on the disposal of assets.

Interest Expense, Net

Interest expense decreased $1,149.6 million during 2018 compared to 2017 as a result of the Company ceasing to accrue interest expense on long-term debt reclassified as Liabilities subject to compromise as of the Petition Date.

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.

Loss on Investments, net

During the year ended December 31, 2019, we recognized a loss of $31.2 million, primarily in connection with other-than-temporary declines in the values of certain of our investments.

Equity in Loss of Nonconsolidated Affiliates

During the year ended December 31, 2019 we recognized a net loss of $0.3 million related to equity-method investments.

During the year ended December 31, 2018, we recognized net earnings of $0.1 million related to equity-method investments.

Other Expense, Net

Other expense, net was $23.0 million for the year ended December 31, 2018 related primarily to expenses incurred in connection with negotiations with lenders and other activities related to our capital structure which were incurred prior to the filing of the Chapter 11 Cases.

Other expense, net was $43.9 million for the year 2017 related primarily to expenses incurred in connection with negotiations with lenders and other activities related to our capital structure, including $41.8 million related to the notes exchange offers and term loan offers that were launched in early 2017.

Other expense, net was $18.2 million for the year ended December 31, 2019, which related primarily to 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 $23.0 million for the year ended December 31, 2018, which related primarily to professional fees incurred directly in connection with the Chapter 11 Cases before the March 14, 2018 Petition Date.

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

Reorganization Items, Net

During 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.

See Note 3 to our Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

Income Tax Benefit (Expense)

The effective tax rate for the year ended December 31, 2018 was (57.3)% The effective tax rate for 2018 was primarily impacted by $11.3 million of deferred tax expense attributed to the valuation allowance recorded against federal and state deferred tax assets generated in the period due to the uncertainty of the ability to realize those assets in future periods.

The Successor Company’s effective tax rate for the period from May 2, 2019 through December 31, 2019 was 15.1%.

The primary change to the 2018 tax return filings, when compared to the provision estimates, was the Company's decision to elect out of the first-year bonus depreciation rules for the 2018 year for all qualified capital expenditures.

This resulted in less tax depreciation deductions for tax purposes for the 2018 year and higher adjusted tax basis for our fixed assets as of the Effective Date.

The Predecessor Company’s effective tax rate for the period from January 1, 2019 through May 1, 2019 was 0.4%.

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

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

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

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

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

The effective tax rate for the year ended December 31, 2018 was (57.3)%.

The effective tax benefit rate for 2017 was impacted by the effects of U.S.

corporate tax reform which resulted in a tax benefit of $282.1 million recorded in connection with the reduction in the U.S.

federal corporate tax rate.

In partial offset to this tax benefit, the Company recorded tax expense of $202.0 million in connection with the valuation allowance recorded against federal and state deferred tax assets generated in the period due to the uncertainty of the ability to realize those assets in future periods.

Net Loss Attributable to the Company

Net loss attributable to the Company decreased $196.2 million to $201.9 million during the year ended December 31, 2018 compared to a net loss of $398.1 million during the year ended December 31, 2017, primarily due to the factors discussed above.

Net Income (Loss) Attributable to the Company

Net income attributable to the Company increased $11.5 billion to $11.3 billion during the year ended December 31,

2019 compared to a net loss of $201.9 million during the year ended December 31, 2018, primarily due to the net gain from the consummation of the Plan of Reorganization and the related settlement of liabilities.

Non-GAAP Financial Measures

Reconciliations of Operating Income to Adjusted EBITDA

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined 2

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

Operating income

Reconciliations of Operating Income (Loss) to Adjusted EBITDA

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31,

2020 2019 2019 2019

Operating income (loss) $ (1,737,624) $ 439,636 $ 67,040 $ 506,676

Depreciation and amortization (1)

402,929 249,623 52,834 302,457

Impairment charges 1,738,752 — 91,382 91,382

2 unchanged sentences

Restructuring and reorganization expenses 100,410 51,879 13,241 65,120

Music license fees adjustment (3)

Adjusted EBITDA (2)

(In thousands)

$ 538,673 $ 775,549 $ 225,149 $ 1,000,698

(In thousands) Successor Company Predecessor Company Non-GAAP Combined 2

Predecessor Company

Year Ended December 31,

Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2019 2019 2019 2018

Operating income $ 439,636 $ 67,040 $ 506,676 $ 690,144

Depreciation and amortization (1)

249,623 52,834 302,457 211,951

Impairment charges — 91,382 91,382 33,150

Other operating (income) expense, net

Other operating expense, net 8,000 154 8,154 9,266

Share-based compensation expense (3)

26,411 498 26,909 2,066

Restructuring and reorganization expenses 51,879 13,241 65,120 30,078

Adjusted EBITDA (2)

$ 775,549 $ 225,149 $ 1,000,698 $ 976,655

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

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31,

2020 2019 2019 2019

Net income (loss) $ (1,915,222) $ 113,299 $ 11,165,113 $ 11,278,412

(Income) loss from discontinued operations, net of tax

Income tax expense

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

Income tax (benefit) expense (183,623) 20,091 39,095 59,186

Interest expense (income), net 343,745 266,773 (499) 266,274

Depreciation and amortization 402,929 249,623 52,834 302,457

EBITDA $ (1,352,171) $ 649,786 $ 9,571,420 $ 10,221,206

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

1 unchanged sentence

Other (income) expense, net 7,751 18,266 (23) 18,243

Equity in (earnings) loss of nonconsolidated affiliates

Equity in loss of nonconsolidated affiliates 379 279 66 345

Impairment charges 1,738,752 — 91,382 91,382

2 unchanged sentences

Restructuring and reorganization expenses 100,410 51,879 13,241 65,120

Music license fees adjustment (3)

Adjusted EBITDA (2)

(In thousands)

Predecessor Company

Year Ended December 31,

$ 538,673 $ 775,549 $ 225,149 $ 1,000,698

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

Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2019 2019 2019 2018

Net income (loss) $ 113,299 $ 11,165,113 $ 11,278,412 $ (202,639)

(Income) loss from discontinued operations, net of tax — (1,685,123) (1,685,123) 164,667

Income tax (benefit) expense

Interest expense, net

Income tax expense 20,091 39,095 59,186 13,836

Interest expense (income), net 266,773 (499) 266,274 334,798

Depreciation and amortization (1)

249,623 52,834 302,457 211,951

EBITDA $ 649,786 $ 9,571,420 $ 10,221,206 $ 522,613

Reorganization items, net — (9,461,826) (9,461,826) 356,119

Loss on investments, net 20,928 10,237 31,165 472

Other expense, net

Other income (expense), net 18,266 (23) 18,243 23,007

Equity in (earnings) loss of nonconsolidated affiliates 279 66 345 (116)

Impairment charges — 91,382 91,382 33,150

Other operating (income) expense, net

Other operating expense, net 8,000 154 8,154 9,266

Share-based compensation expense 26,411 498 26,909 2,066

1 unchanged sentence

Adjusted EBITDA (2)

$ 775,549 $ 225,149 $ 1,000,698 $ 976,655

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

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

Music license fees adjustment represents the impact of updated estimates to music license fee expenses primarily related to the Predecessor periods, which was recorded in the fourth quarter of 2019 and is not representative of the Company's operations during a normal business cycle.

We define Adjusted EBITDA as consolidated Operating income adjusted to exclude restructuring and reorganization expenses included within Direct operating expenses, Selling, General and Administrative expenses, (“SG&A”) 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 income (expense), net.

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

(2) 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.

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 expense (income), net, Share-based compensation expense, and restructuring and reorganization expenses.

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

11 unchanged sentences

Reconciliations of Cash provided by (used for) operating activities from continuing operations to Free cash flow from (used for) continuing operations

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31,

2020 2019 2019 2019

Cash provided by (used for) operating activities from continuing operations $ 215,945 $ 468,905 $ (7,505) $ 461,400

Purchases of property, plant and equipment by continuing operations

(85,205) (75,993) (36,197) (112,190)

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

(In thousands)

Predecessor Company

Year Ended December 31,

$ 130,740 $ 392,912 $ (43,702) $ 349,210

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

Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2019 2019 2019 2018

Cash provided by (used for) operating activities from continuing operations (1)

$ 468,905 $ (7,505) $ 461,400 $ 741,219

Purchases of property, plant and equipment by continuing operations

(75,993) (36,197) (112,190) (85,245)

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

$ 392,912 $ (43,702) $ 349,210 $ 655,974

(1) Cash provided by operating activities from continuing operations for the year ended December 31, 2019 was impacted primarily by an increase of $165.1 million in cash paid for interest.

13 unchanged sentences

Share-based compensation expenses are recorded in corporate expenses and were $22.9 million, $26.4 million and $2.1 million for the years ended December 31, 2020, 2019 and 2018, respectively.

As of December 31, 2019 , there was $57.6 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions.

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 year ended December 31, 2020, we recognized $3.4 million in relation to these performance-based RSUs.

As of December 31, 2020, there was $54.0 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 2.8 years.

In addition, as of December 31, 2020, there was $1.6 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on performance conditions.

LIQUIDITY AND CAPITAL RESOURCES

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

(In thousands)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2020 2019 2019 2019 2018

Cash provided by (used for):

3 unchanged sentences

Free Cash Flow (1)

See definition of Free Cash Flow under Non-GAAP Financial Measures.

$ 130,740 $ 392,912 $ (43,702) $ 349,210 $ 655,974

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

Operating Activities

Cash provided by operating activities was $215.9 million in 2020 compared to $428.7 million of cash provided by operating activities in 2019.

Cash provided by operating activities from continuing operations decreased from $461.4 million in 2019 to $215.9 million in 2020 primarily as a result of a decrease in Revenue driven by the decline in advertising spend resulting from the economic slow-down caused by the COVID-19 pandemic.

In addition, cash interest payments made by continuing operations increased $169.6 million in 2020 compared to 2019 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 partially offset by changes in working capital balances, particularly accounts receivable, which was impacted by improved collections, and accrued expenses, which was impacted by the timing of payments.

In addition, payments made in relation to Reorganization items, net were $201.2 million lower in the year ended December 31, 2020 compared to the year ended December 31, 2019.

Cash provided by operating activities was $428.7 million in 2019 compared to $966.7 million of cash provided by operating activities in 2018.

The primary driver for the change in cash provided by operating activities was a $258.1 million decrease in operating cash flows provided by discontinued operations, which decreased from a cash inflow of $225.5 million in the year ended December 31, 2018 to a cash outflow of $32.7 million in the year ended December 31, 2019.

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

In addition, cash decreased as a result of cash payments for Reorganization items, including payments for pre-petition liabilities and for bankruptcy-related professional fees, upon our emergence from bankruptcy on May 1, 2019.

In addition, cash decreased as a result of cash payments for Reorganization items, including payments for prepetition liabilities and for bankruptcy-related professional fees, upon our emergence from bankruptcy on May 1, 2019.

Such payments for Reorganization items were $97.9 million higher in the year ended December 31, 2019 compared to the year ended December 31, 2018.

Cash provided by operating activities was $966.7 million in 2018 compared to $491.2 million of cash used for operating activities in 2017.

Cash provided by operating activities from continuing operations was $741.2 million in 2018 compared to $619.2 million of cash used for operating activities from continuing operations in 2017.

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Cash paid for Reorganization items, net was $103.7 million during 2018.

As part of our liquidity measures taken in anticipation of our March 14, 2018 bankruptcy filing, we did not make scheduled interest payments on our 9.0% Priority Guarantee Notes due 2021, 11.25% Priority Guarantee Notes due 2021 and 14.0% Senior Notes due 2021 and we extended certain accounts payable to conserve cash.

As part of our liquidity measures taken in anticipation of our March 14, 2018 bankruptcy filing, we did not make scheduled interest payments on our long-term debt and we extended certain accounts payable to conserve cash.

Subsequent to the bankruptcy filing, interest payments on our debt classified as "Liabilities subject to compromise" were stayed and only limited pre-petition payments on accounts payable were made.

Cash used for operating activities was $491.2 million in 2017 compared to $15.8 million of cash used for operating activities in 2016.

The increase in cash used for operating activities is primarily attributed to lower operating income as well as changes in working capital balances, particularly accounts receivable, which was impacted by slower collections, and prepaid assets, partially offset by accrued interest and accounts payable due to the timing of payments.

Investing Activities

Cash used for investing activities of $147.8 million in 2020 was driven primarily by capital expenditures of $85.2 million primarily related to IT software and infrastructure, reflecting a $27.0 million decrease in capital expenditures compared to the prior year as a result of actions taken in response to the COVID-19 pandemic.

In addition, we used $62.1 million of cash to acquire certain strategic businesses including Voxnest which was acquired in the fourth quarter of 2020.

Cash used for investing activities of $334.4 million in 2019 primarily reflects $222.4 million in cash used for investing activities from discontinued operations.

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In addition, we used $85.2 million for capital expenditures, primarily related to IT software and infrastructure.

Cash used for investing activities of $214.7 million in 2017 primarily reflects $154.5 million in cash used for investing activities from discontinued operations.

In addition, we used $67.7 million for capital expenditures, partially offset by net cash proceeds from the sale of assets of $10.9 million .

Capital expenditures consisted primarily of leasehold improvements and IT infrastructure costs.

Financing Activities

Cash provided by financing activities of $241.2 million in 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 our term loan credit facilities.

Cash used for financing activities of $113.6 million in 2019 primarily resulted from the net 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 balance, partially offset by $60.0 million in proceeds received from the issuance of the iHeart Operations Preferred Stock.

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An additional $125.0 million principal amount was repaid under the DIP Facility during the third quarter of 2018.

Cash provided by financing activities of $151.3 million in 2017 primarily reflects $101.2 million in cash provided by financing activities from discontinued operations.

Cash provided by financing activities from continuing operations of $50.2 million was primarily driven by net proceeds from borrowings on our receivables-based credit facility.

Anticipated Cash Requirements

Our primary sources of liquidity are cash on hand, which consisted of $400.3 million as of December 31, 2019 , cash flow from operations and borrowing capacity under our $450.0 million senior secured asset-based revolving credit facility (the "ABL Facility").

As of December 31, 2019 , we had a facility size of $450.0 million under iHeartCommunications' ABL Facility, had no borrowings outstanding and $48.1 million of outstanding letters of credit, resulting in $401.9 million of availability.

We expect that our primary anticipated uses of liquidity will be to fund our working capital, make interest payments and voluntary prepayments of principal on our long-term debt and to fund capital expenditures and other obligations.

These other obligations include dividend payments to be due to the investor of preferred stock of iHeart Operations, the terms of which are further described in Note 9 to our financial statements included herein.

We anticipate that we will have approximately $356 million of cash interest payments in 2020.

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.

Our primary sources of liquidity are cash on hand, which consisted of $720.7 million as of December 31, 2020, cash flow from operations and borrowing capacity under our $450.0 million ABL Facility.

As of December 31, 2020, iHeartCommunications had no principal amounts outstanding under the ABL Facility, a facility size of $450.0 million and $32.9 million in outstanding letters of credit, resulting in $417.1 million of excess availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of December 31, 2020, approximately $172 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.

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 $720.7 million as of December 31, 2020.

Together with our borrowing capacity under the ABL Facility, our total available liquidity 1 was approximately $893 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 had a significant impact on our revenue for the year ended December 31, 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 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, pursue certain strategic opportunities and maintain operations in light of the COVID-19 pandemic and other obligations.

We expect to have approximately $335 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, our 2020 taxes were significantly reduced compared to what they would have been absent these provisions.

Our cash income tax payments were $5.8 million primarily as a result of the provisions allowing for increased interest deductions, which resulted in additional tax deductible interest expense of $179.4 million during the year.

In addition, the Company was able to defer the payment of $29.3 million in certain employment taxes during 2020, of which half will be due on December 31, 2021 and the other half will be due on December 31, 2022.

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.

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 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.

Our investments in modernization delivered approximately $50 million of savings in 2020 and are expected to deliver annualized run-rate cost savings of approximately $100 million by mid-year 2021.

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

We believe that our ability to generate cash flow from operations from these business initiatives and borrowing capacity under our ABL Facility, taken together, 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 and thereafter for the foreseeable future.

The Separation and Reorganization resulted in a new capital structure with significantly lower levels of long-term debt and a corresponding decrease in debt service requirements after emergence compared to historical debt levels.

As a result of the Separation and Reorganization, our consolidated long-term debt decreased from approximately $16 billion to $5.8 billion.

In connection with the Separation and Reorganization, we paid CCOH $115.8 million in settlement of intercompany payable balances, including settlement of the Due from iHeartCommunications Note and post-petition intercompany balances, $15.8 million to cure contracts, $17.5 million for a general unsecured claims reserve, and $201.6 million for professional fees (of which $126.3 million was paid on the Effective Date).

On August 7, 2019, iHeartCommunications completed the sale of $750.0 million in aggregate principal amount of 5.25% Senior Secured Notes due 2027 (the "5.25% Senior Secured Notes") in a private placement.

We used the net proceeds from the 5.25% Senior Secured Notes, together with cash on hand, to prepay at par $740.0 million of borrowings outstanding under our Term Loan Facility.

On November 22, 2019, iHeartCommunications completed the sale of $500.0 million in aggregate principal amount of 4.75% Senior Secured Notes due 2028 (the "4.75% Senior Secured Notes") in a private placement.

We used the net proceeds from the 4.75% Senior Secured Notes, together with cash on hand, to prepay at par $500.0 million of borrowings outstanding under our Term Loan Facility.

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 took the following measures, which generated approximately $200 million in operating cost savings in 2020:

• 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.

• 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.

• 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.

The Company has identified, and executed on, strategic initiatives to ensure that the majority of all of the $200 million in COVID-19 savings persist in 2021.

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

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

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

We believe that our ability to generate cash flow from operations from our business initiatives, 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.

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

As a precautionary measure to preserve financial flexibility in light of the uncertainty surrounding the COVID-19 pandemic, we borrowed $350.0 million principal amount under our ABL Facility.

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

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

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

The incremental term loans issued pursuant to Amendment No.

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

Amendment No.

2 also modifies certain other provisions of the Credit Agreement.

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

Transition Services Agreement

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 (subject to certain rights of Clear Channel Outdoor Holdings, Inc.

(“New CCOH”) to extend up to one additional year, as described below), iHM Management Services has agreed to provide, or cause us, iHeartCommunications, iHeart Operations or any member of the iHeart Group to provide, CCH with certain administrative and support services and other assistance which CCH will utilize in the conduct of its business as such business was conducted prior to the Separation.

The transition services may include, among other things, (a) treasury, payroll and other financial related services, (b) certain executive officer services, (c) human resources and employee benefits, (d) legal and related services, (e) information systems, network and related services, (f) investment services and (g) procurement and sourcing support.

The charges for the transition services will generally be intended to be consistent with the Corporate Services Agreement.

The allocation of cost is based on various measures depending on the service provided, which measures include relative revenue, employee headcount or number of users of a service.

New CCOH may request an extension of the term for all services or individual services for one‑month periods for up to an additional 12 months, and the price for transition services provided during such extended term will be increased for any service other than those identified in the schedules to the Transition Services Agreement as an “IT Service” or any other service the use and enjoyment of which requires the use of another IT Service.

New 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.

(“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 4, Discontinued Operations to the consolidated financial statements located in Item 8 of this Annual Report on Form 10-K for a further description.

New Tax Matters Agreement

In connection with the Separation, we entered into the New Tax Matters Agreement by and among iHeartMedia, iHeartCommunications, iHeart Operations, Inc., CCH, CCOH and Clear Channel Outdoor, Inc., to allocate the responsibility of iHeartMedia and its subsidiaries, on the one hand, and CCOH and its subsidiaries, on the other, for the payment of taxes arising prior and subsequent to, and in connection with, the Separation.

The New Tax Matters Agreement requires that iHeartMedia and iHeartCommunications indemnify CCOH and its subsidiaries, and their respective directors, officers and employees, and hold them harmless, on an after‑tax basis, from and against (i) any taxes other than transfer taxes or indirect gains taxes imposed on iHeartMedia or any of its subsidiaries (other than CCOH and its subsidiaries) in connection with the Separation, (ii) any transfer taxes and indirect gains taxes arising in connection with the Separation, and (iii) fifty percent of the amount by which the amount of taxes (other than transfer taxes or indirect gains taxes) imposed on CCOH or any of its Subsidiaries in connection with the Separation that are paid to the applicable taxing authority on or before the third anniversary of the separation of CCOH exceeds $5 million, provided that, the obligations of iHeartMedia and iHeartCommunications to indemnify CCOH and its subsidiaries with respect taxes (other than transfer taxes or indirect gains taxes) imposed on CCOH or any of its subsidiaries in connection with the Separation will not exceed $15 million.

In addition, if iHeartMedia or its subsidiaries use certain tax attributes of CCOH and its subsidiaries (including net operating losses, foreign tax credits and other credits) and such use results in a decrease in the tax liability of iHeartMedia or its subsidiaries, then we are required to reimburse CCOH for the use of such attributes based on the amount of tax benefit realized.

The New Tax Matters Agreement provides that any reduction of the tax attributes of CCOH and its subsidiaries as a result of cancellation of indebtedness income realized in connection with the Chapter 11 Cases is not treated as a use of such attributes (and therefore does not require us to reimburse CCOH for such reduction).

The New Tax Matters Agreement also requires that (i) CCOH indemnify iHeartMedia for any income taxes paid by iHeartMedia on behalf of CCOH and its subsidiaries or, with respect to any income tax return for which CCOH or any of its subsidiaries joins with iHeartMedia or any of subsidiaries in filing a consolidated, combined or unitary return, the amount of taxes that would have been incurred by CCOH and its subsidiaries if they had filed a separate return, and (ii) except as described in the preceding paragraph, CCOH will indemnify iHeartMedia and its subsidiaries, and their respective directors, officers and employees, and hold them harmless, on an after‑tax basis, from and against any taxes other than transfer taxes or indirect gains taxes imposed on CCOH or any of its subsidiaries in connection with the Separation Transactions.

Any tax liability of CCH attributable to any taxable period ending on or before the date of the completion of the separation of CCOH, other than any such tax liability resulting from CCH being a successor of CCOH in connection with the merger of CCOH with and into CCH or arising from the operation of the business of CCOH and its subsidiaries after the merger of CCOH with and into CCH, will not be treated as a liability of CCOH and its subsidiaries for purposes of the New Tax Matters Agreement.

CCOH’s obligations and rights under the New Tax Matters Agreement were assumed by CCH in the merger of CCOH with and into CCH (subject to the note above regarding tax liability of CCH for taxable periods ending on or before the date of the completion of the separation of CCOH).

In addition, the New Tax Matters Agreement requires that CCOH indemnify iHeartMedia for certain income taxes paid by iHeartMedia on behalf of CCOH and its subsidiaries.

For additional information, see Note 4, Discontinued Operations to the consolidated financial statements located in Item 8 of Part II of this Annual Report on Form 10-K for a further description.

Sources of Capital

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

(In millions)

Successor Company

Predecessor Company

December 31, 2019

December 31, 2018

(In millions) Successor Company

December 31, 2020 December 31, 2019

Term Loan Facility due 2026 (1)

Debtors-in-Possession Facility (4)

$ 2,080.3 $ 2,251.3

Incremental Term Loan Facility due 2026 (2)

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

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Other Subsidiary Debt 6.7 12.5

Original issue discount (18.8) —

Long-term debt fees (21.8) (19.4)

Liabilities subject to compromise (5)

Total Debt 6,016.9 5,765.4

Cash and cash equivalents 720.7 400.3

On August 7, 2019, iHeartCommunications issued the 5.25% Senior Secured Notes, the proceeds of which were used, together with cash on hand, to prepay at par $740.0 million of borrowings outstanding under the Term Loan Facility, plus approximately $0.8 million of accrued and unpaid interest to, but not including, the date of prepayment.

On November 22, 2019, iHeartCommunications issued the 4.75% Senior Secured Notes, the proceeds of which were used, together with cash on hand, to prepay at par $500.0 million of borrowings outstanding under the Term Loan Facility, plus approximately $1.7 million of accrued and unpaid interest to, but not including, the date of prepayment.

Net Debt $ 5,296.2 $ 5,365.1

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

The Debtors-in-Possession Facility (the "DIP" Facility), which terminated with our emergence from the Chapter 11 Cases, provided for borrowings of up to $450.0 million .

On the Effective Date, the DIP Facility was repaid and canceled and iHeartCommunications entered into the ABL Facility.

As of December 31, 2019 , we had a facility size of $450.0 million under the ABL Facility, had no outstanding borrowings and had $48.1 million of outstanding letters of credit, resulting in $401.9 million of availability.

In connection with our Chapter 11 Cases, the Company's Predecessor long-term debt was reclassified to Liabilities subject to compromise in our Consolidated Balance Sheet as of December 31, 2018 .

As of the Petition Date, we ceased accruing interest expense in relation to long-term debt reclassified as Liabilities subject to compromise.

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

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

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

(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 December 31, 2020, the ABL Facility had a facility size of $450.0 million, no principal amounts outstanding and $32.9 million of outstanding letters of credit, resulting in $417.1 million of excess availability.

As a result of certain restrictions in the Company's debt and preferred stock agreements, as of December 31, 2020, approximately $172.0 million was available to be drawn upon under the ABL Facility.

For additional information regarding our debt, including the terms of the governing documents, refer to Note 9, Long-Term Debt to our consolidated financial statements located in Item 8 of Part II of this Annual Report on Form 10-K.

Exchange of Special Warrants

On July 25, 2019, the Company filed a 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 the Declaratory Ruling granting the relief requested by the PDR, subject to certain conditions set forth in the Declaratory Ruling.

On January 8, 2021, the Company exchanged a portion of the outstanding Special Warrants into 45,133,811 shares of iHeartMedia Class A common stock, the Company’s publicly traded equity, and 22,337,312 Class B common stock in compliance with the Declaratory Ruling, the Communications Act and FCC rules.

Following the Exchange, the Company's remaining Special Warrants continue to be exercisable for shares of Class A common stock or Class B common stock.

were 110,923,534 shares of Class A common stock, 29,088,181 shares of Class B common stock and 6,201,453 Special Warrants outstanding on February 22, 2021.

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

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iHeart Operations and its subsidiaries comprised 84.8% of the Company's consolidated assets as of December 31, 2020.

For the period from May 2, 2019 through December 31, 2019 , iHeart Operations and its subsidiaries comprised 84.5% of the Company's consolidated revenues.

Refinancing and Financing Transactions

2019 Financing Transactions

On the Effective Date, the conditions to the effectiveness of the Plan of Reorganization were satisfied and the Company emerged from Chapter 11 through the Reorganization transactions through which iHeartCommunications’ debt was reduced from approximately $16 billion to approximately $5.8 billion .

The Reorganization included the restructuring of iHeartCommunications’ indebtedness by replacing its DIP facility with a $450.0 million the ABL Facility and the issuance of $3.5 billion aggregate principal amount under the Term Loan Facility, approximately $1.45 billion aggregate principal amount of new 8.375% Senior Notes due 2027 (the “Senior Unsecured Notes”) and approximately $800 million aggregate principal amount of new 6.375% Senior Secured Notes due 2026 (the “ 6.375% Senior Secured Notes”).

On August 7, 2019, iHeartCommunications completed the sale of $750.0 million in aggregate principal amount of 5.25% Senior Secured Notes in a private placement.

We used the net proceeds from the 5.25% Senior Secured Notes, together with cash on hand, to prepay at par $740.0 million of borrowings outstanding under our Term Loan Facility.

On November 22, 2019, iHeartCommunications completed the sale of $500.0 million in aggregate principal amount of 4.75% Senior Secured Notes in a private placement.

We used the net proceeds from the 4.75% Senior Secured Notes, together with cash on hand, to prepay at par $500.0 million of borrowings outstanding under our Term Loan Facility.

For the year ended December 31, 2020, iHeart Operations and its subsidiaries comprised 85.3% of the Company's consolidated revenues.

Uses of Capital

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Capital expenditures for the years ended December 31, 2020, 2019 and 2018 were as follows:

(In millions)

Successor Company

Predecessor Company

Non-GAAP Combined

Predecessor Company

Period from May 2, 2019 through December 31,

Period from January 1, 2019 through May 1,

Year Ended December 31,

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

Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, Year Ended December 31, Year Ended December 31,

2020 2019 2019 2019 2018

Audio $ 73.9 $ 62.0 $ 31.2 $ 93.2 $ 72.4

Audio and Media Services 5.1 4.0 1.3 5.3 5.9

Corporate 6.2 10.0 3.7 13.7 6.9

Total capital expenditures $ 85.2 $ 76.0 $ 36.2 $ 112.2 $ 85.2

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See Note 12 to our consolidated financial statements located in Item 8 of Part II of this Annual Report on Form 10-K.

During the first quarter of 2021, we entered into a Share Purchase Agreement to acquire Triton Digital, a global leader in digital audio and podcast technology and measurement services, from The E.W.

Scripps Company for $230 million in cash, subject to certain adjustments.

The consummation of the proposed acquisition is subject to the satisfaction or waiver of customary closing conditions, including regulatory approval.

During the fourth quarter of 2020, we acquired Voxnest, Inc.

for aggregate consideration of $50 million.

The assets acquired primarily consisted of intangible assets valued at $53.2 million, including $36.6 million in goodwill.

During the fourth quarter of 2018, we acquired Stuff Media LLC and Jelli, Inc.

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The assets acquired as part of these transactions consisted of $27.0 million in fixed assets and $35.2 million in intangible assets, primarily consisting of technology and content, along with $77.3 million in goodwill.

During the fourth quarter of 2017, we exchanged four radio stations in Chattanooga, Tennessee and six radio stations in Richmond, Virginia for four radio stations in Boston, Massachusetts and three radio stations in Seattle, Washington, owned by Entercom Communications Corp.

The assets acquired as part of the transaction consisted of $8.1 million in fixed assets and $63.2 million in intangible assets (including $2.4 million in goodwill).

The Company recognized a net gain of $15.4 million related to the sale, which is included within Other operating income (expense), net.

Subsequent to the exchange, the Company placed two of the stations in Seattle and one station in Boston into a newly-formed trust, the Ocean Trust.

The Ocean Trust is required to divest these stations in order to comply with FCC media ownership rules.

These stations are being marketed for sale.

Certain Relationships with Related Parties

Prior to the Effective Date, we were party to a management agreement with certain affiliates of our former sponsors and certain other parties pursuant to which such affiliates of the former sponsors provided management and financial advisory services until December 31, 2018.

These arrangements required management fees to be paid to such affiliates of the former sponsors for such services at a rate not greater than $15.0 million per year, plus reimbursable expenses.

The Company did not recognize management fees following the Petition Date.

During the years ended December 31, 2018 and 2017 , we recognized management fees and reimbursable expenses of $2.9 million and $15.2 million , respectively.

As of the Effective Date, the 2018 management fees were waived.

Commitments, Contingencies and Guarantees

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Some of our lease agreements contain renewal options and annual rental escalation clauses (generally tied to the consumer price index), as well as provisions for our payment of utilities and maintenance.

We have non-cancelable contracts in our radio broadcasting operations related to program rights and music license fees.

We have non-cancellable contracts in our radio broadcasting operations related to program rights and music license fees.

In the normal course of business, our broadcasting operations have minimum future payments associated with employee and talent contracts.

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The scheduled maturities of iHeartCommunications' secured debt, unsecured debt, mandatorily redeemable preferred stock, and our future minimum rental commitments under non-cancelable lease agreements, minimum payments under other non-cancelable contracts, payments under employment/talent contracts and other long-term obligations as of December 31, 2020 were as set forth in the table below.

(In thousands)

Payments due by Period

Contractual Obligations

(In thousands) Payments due by Period

Contractual Obligations Total 2021 2022-2023 2024-2025 Thereafter

Long-term debt:

Secured debt $ 4,600,762 $ 28,268 $ 56,372 $ 55,469 $ 4,460,653

Unsecured debt 1,456,782 6,507 275 — 1,450,000

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Interest payments on long-term debt and preferred stock (1)

2,054,956 335,267 665,929 657,395 396,365

Non-cancelable operating leases 1,293,645 126,732 253,211 207,230 706,472

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Unrecognized tax benefits (2)

18,183 — — — 18,183

Other long-term obligations 53,034 — 24,401 5,267 23,366

Interest payments on long-term debt and preferred stock reflect the Company's obligations as of December 31, 2019 , with the exception of the amended terms of the Term Loan Facility effective as of February 3, 2020.

Total $ 9,997,816 $ 724,890 $ 1,185,301 $ 970,869 $ 7,116,756

(1) Interest payments on long-term debt and preferred stock reflect the Company's obligations as of December 31, 2020.

Interest payments calculated based on floating rates assume rates are held constant over the remaining term.

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For additional information, see Note 11 included in Item 8 of Part II of this Annual Report on Form 10-K.

OFF-BALANCE SHEET ARRANGEMENTS

As of December 31, 2020, we did not have any off-balance sheet arrangements.

Typically, the Audio segment experiences its lowest financial performance in the first quarter of the calendar year.

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As of December 31, 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 period from May 2, 2019 through December 31, 2019 would have changed by $17.3 million .

Assuming the current level of borrowings and assuming a 50% change in LIBOR, it is estimated that our interest expense for the year ended December 31, 2020 would have changed by $8.2 million.

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

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Inflation has affected our performance in terms of higher costs for wages, salaries and equipment.

We believe the effects of inflation, if any, on our historical results of operations and financial condition have been immaterial.

Although the exact impact of inflation is indeterminable, we believe we have offset these higher costs by increasing the effective advertising rates of most of our broadcasting stations in our Audio operations.

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

Reorganization Value

As set forth in the Plan of Reorganization and the Disclosure Statement, the enterprise value of the Successor Company was estimated to be between $8.0 billion and $9.5 billion.

Based on the estimates and assumptions discussed below, we estimated the enterprise value to be $8.75 billion, which was the mid-point of the range of enterprise value as of the Effective Date.

Management and its valuation advisors estimated the enterprise value of the Successor Company, which was approved by the Bankruptcy Court.

The selected publicly traded companies analysis approach, the discounted cash flow analysis (“DCF”) approach and the selected transactions analysis approach were all utilized in estimating enterprise value.

The use of each approach provides corroboration for the other approaches.

To estimate enterprise value utilizing the selected publicly traded companies analysis method, valuation multiples derived from the operating data of publicly-traded benchmark companies to the same operating data of the Company were applied.

The selected publicly traded companies analysis identified a group of comparable companies giving consideration to lines of business and markets served, size and geography.

The valuation multiples were derived based on historical and projected financial measures of revenue and earnings before interest, taxes, depreciation and amortization and applied to projected operating data of the Company.

To estimate enterprise value utilizing the discounted cash flow method, an estimate of future cash flows for the period 2019 to 2022 with a terminal value was determined and discounted the estimated future cash flows to present value.

The expected cash flows for the period 2019 to 2022 with a terminal value were based upon certain financial projections and assumptions provided to the Bankruptcy Court.

The expected cash flows for the period 2019 to 2022 were derived from earnings forecasts and assumptions regarding growth and margin projections, as applicable.

A terminal value was included, calculated using the terminal multiple method, which estimates a range of values at which the Successor Company will be valued at the end of the Projection Period based on applying a terminal multiple to final year Adjusted EBITDA, which is defined as consolidated operating income adjusted to exclude non-cash compensation expenses included within corporate expenses, as well as Depreciation and amortization, Impairment charges and Other operating income (expense), net.

To estimate enterprise value utilizing the selected transactions analysis, valuation multiples were derived from an analysis of consideration paid and net debt assumed from publicly disclosed merger or acquisition transactions, and such multiples were applied to the broadcast cash flows of the Successor Company.

The selected transactions analysis identified companies and assets involved in publicly disclosed merger and acquisition transactions for which the targets had operating and financial characteristics comparable in certain respects to the Successor Company.

For information regarding the Reorganization, refer to Note 2, Emergence from Voluntary Reorganization under Chapter 11 Proceedings to our consolidated financial statements included in Part II of this Annual Report on Form 10-K.

Fresh Start Accounting

In connection with our emergence from bankruptcy and in accordance with ASC 852, we qualified for and adopted fresh start accounting on the Effective Date.

We were required to adopt fresh start accounting because (i) the holders of existing voting shares of the Predecessor Company received less than 50% of the voting shares of the Successor Company and (ii) the reorganization value of our assets immediately prior to confirmation of the Plan of Reorganization was less than the post-petition liabilities and allowed claims.

In accordance with ASC 852, with the application of fresh start accounting, we allocated our reorganization value to our individual assets based on our estimated fair values in conformity with ASC 805, Business Combinations .

The reorganization value represents the fair value of the Successor Company's assets before considering liabilities.

The excess reorganization value over the fair value of identified tangible and intangible assets is reported as goodwill.

For information regarding fresh start accounting, refer to Note 3, Fresh Start Accounting to our consolidated financial statements included in Part II of this Annual Report on Form 10-K.

Allowance for Doubtful Accounts

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The most significant estimates used by management in accounting for leases and the impact of these estimates are as follows:

Expected lease term Our expected lease term includes both contractual lease periods and cancelable option periods where failure to exercise such options would result in an economic penalty.

The expected lease term is used in determining whether the lease is accounted for as an operating lease or a capital lease.

A lease is considered a capital lease if the lease term exceeds 75% of the leased asset's useful life.

Expected lease term Our expected lease term includes both contractual lease periods and cancellable option periods where failure to exercise such options would result in an economic penalty.

The expected lease term is used in determining whether the lease is accounted for as an operating lease or a finance lease.

A lease is considered a finance lease if the lease term exceeds 75% of the leased asset's useful life.

The expected lease term is also used in determining the depreciable life of the asset.

An increase in the expected lease term will increase the probability that a lease may be considered a capital lease and will generally result in higher interest and depreciation expense for a leased property recorded on our balance sheet.

Incremental borrowing rate The incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operating lease or a capital lease.

A lease is considered a capital lease if the net present value of the minimum lease payments is greater than 90% of the fair market value of the property.

An increase in the incremental borrowing rate decreases the net present value of the minimum lease payments and reduces the probability that a lease will be considered a capital lease.

An increase in the expected lease term will increase the probability that a lease may be considered a finance lease and will generally result in higher interest and depreciation expense for a leased property recorded on our balance sheet.

Incremental borrowing rate The incremental borrowing rate is primarily used in determining whether the lease is accounted for as an operating lease or a finance lease.

A lease is considered a finance lease if the net present value of the minimum lease payments is greater than 90% of the fair market value of the property.

An increase in the incremental borrowing rate decreases the net present value of the minimum lease payments and reduces the probability that a lease will be considered a finance lease.

Fair market value of leased asset The fair market value of leased property is generally estimated based on comparable market data as provided by third-party sources.

Fair market value is used in determining whether the lease is accounted for as an operating lease or a capital lease.

A lease is considered a capital lease if the net present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased property.

A higher fair market value reduces the likelihood that a lease will be considered a capital lease.

Fair market value is used in determining whether the lease is accounted for as an operating lease or a finance lease.

A lease is considered a finance lease if the net present value of the minimum lease payments equals or exceeds 90% of the fair market value of the leased property.

A higher fair market value reduces the likelihood that a lease will be considered a finance lease.

Long-lived Assets

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If actual results are not consistent with our assumptions and judgments used in estimating future cash flows and asset fair values, we may be exposed to future impairment losses that could be material to our results of operations.

Annual Goodwill and Indefinite-lived Intangible Asset Impairment Test

We perform our annual impairment test on goodwill and indefinite-lived intangible assets as of July 1 of each year.

We also test goodwill or indefinite-lived intangible assets at interim dates if events or changes in circumstances indicate that goodwill or indefinite-lived intangible assets might be impaired.

Generally, our annual impairment test includes a full quantitative assessment, which involves the preparation of a fair value estimate for each of our reporting units based on our most recent projected financial results, market and industry factors, including comparison to peer companies and the application of our current estimated weighted average cost of capital ("WACC").

However, in connection with our emergence from bankruptcy, we qualified for and adopted fresh start accounting on the Effective Date.

As of May 1, 2019, we allocated our estimated enterprise fair value to our individual assets and liabilities based on their estimated fair values in conformity with ASC 805, " Business Combinations.

" As a result of the recent fair value exercise applied in connection with fresh start accounting, we opted to use a qualitative assessment for our annual goodwill and indefinite-lived

intangible asset impairment test as of July 1, 2019 in lieu of performing the full quantitative assessment, as permitted by ASC 350, " Intangibles - Goodwill and Other ".

Indefinite-lived Intangible Assets

In connection with our Plan of Reorganization, we applied fresh start accounting as of May 1, 2019 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.

As of July 1, 2019, the qualitative impairment assessment performed for indefinite-lived intangible assets considered the general macroeconomic environment, industry and market specific conditions, financial performance, including changes in costs and actual versus forecasted results, as well other issues or events specific to the Audio reporting unit.

Based on this assessment and the totality of facts and circumstances, including the business environment in the third quarter of 2019, the Company determined that it was not more likely than not that the fair value of the Company and its reporting units is less than their respective carrying amounts.

As such, the Company concluded no impairment of indefinite-lived intangible assets was required as of July 1, 2019.

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.

See Note 3 to the consolidated financial statements located in Part II, Item 8 of this Annual Report on Form 10-K for further information.

As of July 1, 2019, the qualitative impairment assessment performed for goodwill considered the general macroeconomic environment, industry and market specific conditions for each reporting unit, financial performance, including changes in costs and actual versus forecasted results, as well other issues or events specific to each reporting unit.

In addition, we evaluated the impact of changes in our stock price and the trading values of our publicly-traded debt from May 1, 2019 to July 1, 2019 to determine whether or not any changes would indicate a potential impairment of goodwill allocated to our reporting units.

As such, the Company concluded no impairment of goodwill was required as of July 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, the excess of fair value of the Audio and RCS reporting units compared to its carrying value is approximately 10% or less;

however, 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

Tax Provisions

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If actual results are not consistent with our assumptions and judgments, we may be exposed to gains or losses that could be material.

A 10% change in our self-insurance liabilities at December 31, 2019 would have affected our net income by approximately $2.1 million for the year ended December 31, 2019 .

A 10% change in our self-insurance liabilities at December 31, 2020 would have affected our net loss by approximately $2.0 million for the year ended December 31, 2020.

Share-Based Compensation

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Required information is located within Item 7 of Part II of this Annual Report on Form 10-K.

Required information is located within Item 7 of Part II of this Annual Report on Form 10-K, under the heading “Market Risk”.

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-K

Item 7. Management’s Discussion and Analysis