iHeartMedia, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of iHeartMedia, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of iHeartMedia, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020 (Successor), the related consolidated statements of comprehensive income (loss), changes in stockholders' equity (deficit) and cash flows for the years ended December 31, 2021 (Successor), December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor), and the period from January 1, 2019 through May 1, 2019 (Predecessor), and the related notes and the financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020 (Successor), and the results of its operations and its cash flows for the years ended December 31, 2021 (Successor), December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor), and the period from January 1, 2019 through May 1, 2019 (Predecessor) in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 23, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 60 Valuation of Goodwill and Indefinite-Lived Intangibles Description of the Matter As described in Note 4 to the consolidated financial statements, at December 31, 2021 the Company’s goodwill was $2.3 billion and FCC licenses with indefinite lives were $1.8 billion. Management conducts impairment tests for goodwill and indefinite-lived intangibles annually during the third quarter, or more frequently, if events or circumstances indicate the carrying value of goodwill or indefinite-lived intangibles may be impaired. The Company performed their annual impairment test as of July 1, 2021 on goodwill and indefinite-lived intangible assets which resulted in no impairment charges being recorded to goodwill or FCC Licenses. Auditing management’s impairment tests for goodwill and intangible assets with indefinite lives was complex and highly judgmental and required the involvement of a valuation specialist due to the significant estimation required to determine the fair value of the reporting units and FCC licenses. In particular for goodwill, the fair value estimates in the discounted cash flow models of reporting units are sensitive to assumptions such as changes in projected cash flows, including due to the impacts of COVID-19, and discount rate. For FCC Licenses, the fair value estimates in the discounted cash flow models are sensitive to changes to the discount rate assumption. All of these assumptions are sensitive to and affected by expected future market or economic conditions, and industry factors. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill and FCC licenses impairment review process, including controls over management’s review of the significant assumptions described above. This included evaluating controls over the Company’s forecasting process used to develop the estimated future cash flows. We also tested controls over management’s review of the data used in their valuation models and review of the significant assumptions such as estimation of discount rates. To test the estimated fair values of the Company’s reporting units and FCC licenses, our audit procedures included, among others, evaluating the Company's selection of the valuation methodology, evaluating the methods and significant assumptions used by management, and evaluating the completeness and accuracy of the underlying data supporting the significant assumptions and estimates. We compared the projected cash flows to the Company’s historical cash flows and other available industry and market forecast information, including third-party industry projections for the advertising industry. We involved our valuation specialists to assist in reviewing the valuation methodology and testing the terminal growth rates and discount rates. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units and FCC licenses that would result from changes in the assumptions. In addition, for goodwill we also tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company. For FCC licenses, we also assessed whether the assumptions used were consistent with those used in the goodwill impairment review process. /s/ Ernst & Young LLP We have served as the Company’s auditor since at least 1986, but we are unable to determine the specific year. San Antonio, Texas February 23, 2022 61 CONSOLIDATED BALANCE SHEETS OF IHEARTMEDIA, INC. AND SUBSIDIARIES (In thousands, except share and per share data) Successor Company December 31, 2021 December 31, 2020 Cash and cash equivalents $ 352,129 $ 720,662 Accounts receivable, net of allowance of $ 29,270 in 2021 and $ 38,777 in 2020 1,030,380 801,380 Prepaid expenses 65,927 79,508 Other current assets 24,431 17,426 Total Current Assets 1,472,867 1,618,976 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net 782,093 811,702 INTANGIBLE ASSETS AND GOODWILL Indefinite-lived intangibles - licenses 1,778,045 1,770,345 Other intangibles, net 1,666,600 1,924,492 Goodwill 2,313,581 2,145,935 OTHER ASSETS Operating lease right-of-use assets 741,410 825,887 Other assets 126,713 105,624 Total Assets $ 8,881,309 $ 9,202,961 CURRENT LIABILITIES Accounts payable $ 206,007 $ 149,333 Current operating lease liabilities 88,585 76,503 Accrued expenses 353,045 265,651 Accrued interest 67,983 68,054 Deferred revenue 133,123 123,488 Current portion of long-term debt 673 34,775 Total Current Liabilities 849,416 717,804 Long-term debt 5,738,195 5,982,155 Series A Mandatorily Redeemable Preferred Stock, par value $ 0.001 , authorized 95,000 shares, no shares issued in 2021 and 60,000 shares issued in 2020, respectively — 60,000 Noncurrent operating lease liabilities 738,814 764,491 Deferred income taxes 558,222 556,477 Other long-term liabilities 80,897 71,217 Commitments and contingent liabilities (Note 7) STOCKHOLDERS’ EQUITY Noncontrolling interest 8,410 8,350 Preferred stock, par value $ .001 per share, 100,000,000 shares authorized, no shares issued and outstanding — — Class A Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued and outstanding 120,633,937 and 64,726,864 shares in 2021 and 2020, respectively 120 65 Class B Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued and outstanding 21,590,192 and 6,886,925 shares in 2021 and 2020, respectively 22 7 Special Warrants, 5,304,430 and 74,835,899 issued and outstanding in 2021 and 2020, respectively — — Additional paid-in capital 2,876,571 2,849,020 Accumulated deficit ( 1,962,819 ) ( 1,803,620 ) Accumulated other comprehensive income (loss) ( 257 ) 194 Cost of shares ( 389,814 in 2021 and 254,066 in 2020) held in treasury ( 6,282 ) ( 3,199 ) Total Stockholders' Equity 915,765 1,050,817 Total Liabilities and Stockholders' Equity $ 8,881,309 $ 9,202,961 See Notes to Consolidated Financial Statements 62 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) OF IHEARTMEDIA, INC. AND SUBSIDIARIES Successor Company Predecessor Company (In thousands, except per share data) Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 Revenue $ 3,558,340 $ 2,948,218 $ 2,610,056 $ 1,073,471 Operating expenses: Direct operating expenses (excludes depreciation and amortization) 1,324,657 1,137,807 860,313 370,612 Selling, general and administrative expenses (excludes depreciation and amortization) 1,519,355 1,395,010 1,052,484 491,449 Depreciation and amortization 469,417 402,929 249,623 52,834 Impairment charges 57,734 1,738,752 — 91,382 Other operating expense, net 32,320 11,344 8,000 154 Operating income (loss) 154,857 ( 1,737,624 ) 439,636 67,040 Interest expense (income), net 332,384 343,745 266,773 ( 499 ) Gain (loss) on investments, net 43,643 ( 9,346 ) ( 20,928 ) ( 10,237 ) Equity in loss of nonconsolidated affiliates ( 1,138 ) ( 379 ) ( 279 ) ( 66 ) Other income (expense), net ( 14,976 ) ( 7,751 ) ( 18,266 ) 23 Reorganization items, net — — — 9,461,826 Income (loss) from continuing operations before income taxes ( 149,998 ) ( 2,098,845 ) 133,390 9,519,085 Income tax benefit (expense) ( 8,391 ) 183,623 ( 20,091 ) ( 39,095 ) Income (loss) from continuing operations ( 158,389 ) ( 1,915,222 ) 113,299 9,479,990 Income from discontinued operations, net of tax — — — 1,685,123 Net income (loss) ( 158,389 ) ( 1,915,222 ) 113,299 11,165,113 Less amount attributable to noncontrolling interest 810 ( 523 ) 751 ( 19,028 ) Net income (loss) attributable to the Company $ ( 159,199 ) $ ( 1,914,699 ) $ 112,548 $ 11,184,141 Other comprehensive income (loss), net of tax: Foreign currency translation adjustments ( 451 ) 945 ( 750 ) ( 1,175 ) Other comprehensive income (loss) ( 451 ) 945 ( 750 ) ( 1,175 ) Comprehensive income (loss) ( 159,650 ) ( 1,913,754 ) 111,798 11,182,966 Less amount attributable to noncontrolling interest — — — 2,784 Comprehensive income (loss) attributable to the Company $ ( 159,650 ) $ ( 1,913,754 ) $ 111,798 $ 11,180,182 Basic net income (loss) per share: From continuing operations $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 109.92 From discontinued operations — — — 19.76 Basic net income (loss) per share $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 129.68 Weighted average common shares outstanding - Basic 146,726 145,979 145,608 86,241 Diluted net income (loss) per share: From continuing operations $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 109.92 From discontinued operations — — — 19.76 Diluted net income (loss) per share $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 129.68 Weighted average common shares outstanding - Diluted 146,726 145,979 145,795 86,241 See Notes to Consolidated Financial Statements 63 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) OF IHEARTMEDIA, INC. AND SUBSIDIARIES (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2020 (Successor) 64,726,864 6,886,925 74,835,899 $ 8,350 $ 72 $ 2,849,020 $ ( 1,803,620 ) $ 194 $ ( 3,199 ) $ 1,050,817 Net income (loss) 810 — — ( 159,199 ) — — ( 158,389 ) Vesting of restricted stock and other 1,075,889 — — 4,078 — — ( 3,083 ) 995 Share-based compensation — — 23,543 — — — 23,543 Conversion of Special Warrants to Class A and Class B Shares 47,197,139 22,337,312 ( 69,534,451 ) — 70 ( 70 ) — — — — Conversion of Class B Shares to Class A Shares 7,634,045 ( 7,634,045 ) — — — — — — — Other 2,982 ( 750 ) — — — — — ( 750 ) Other comprehensive loss — — — — ( 451 ) — ( 451 ) Balances at December 31, 2021 (Successor) 120,633,937 21,590,192 5,304,430 $ 8,410 $ 142 $ 2,876,571 $ ( 1,962,819 ) $ ( 257 ) $ ( 6,282 ) $ 915,765 (1) The Successor Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2021 or 2020. See Notes to Consolidated Financial Statements 64 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) OF IHEARTMEDIA, INC. AND SUBSIDIARIES (In thousands, except per share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Shares Class B Shares Special Warrants Total Balances at December 31, 2019 (Successor) 57,776,204 6,904,910 81,046,593 $ 9,123 $ 65 $ 2,826,533 $ 112,548 $ ( 750 ) $ ( 2,078 ) $ 2,945,441 Net loss ( 523 ) — — ( 1,914,699 ) — — ( 1,915,222 ) Vesting of restricted stock and other 724,963 — 1 ( 23 ) — — ( 1,121 ) ( 1,143 ) Share-based compensation — — 22,516 — — — 22,516 Conversion of Special Warrants to Class A and B Shares 6,205,617 2,095 ( 6,207,712 ) — 6 ( 6 ) — — — — Conversion of Class B Shares to Class A Shares 20,080 ( 20,080 ) — — — — — — — Other ( 2,982 ) ( 250 ) — — ( 1,469 ) ( 1 ) — ( 1,720 ) Other comprehensive income — — — — 945 — 945 Balances at December 31, 2020 (Successor) 64,726,864 6,886,925 74,835,899 $ 8,350 $ 72 $ 2,849,020 $ ( 1,803,620 ) $ 194 $ ( 3,199 ) $ 1,050,817 (1) The Predecessor Company's former Class D Common Stock and Preferred Stock are not presented in the data above as there were no shares issued and outstanding in 2020 or 2019. 65 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) OF IHEARTMEDIA, INC. AND SUBSIDIARIES (In thousands, except share data) Controlling Interest Common Shares (1) Non- controlling Interest Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Class A Shares Class B Shares Class C Shares Special Warrants Total Balances at December 31, 2018 (Predecessor) 32,292,944 555,556 58,967,502 — $ 30,868 $ 92 $ 2,074,632 $ ( 13,345,346 ) $ ( 318,030 ) $ ( 2,558 ) $ ( 11,560,342 ) Net income (loss) ( 19,028 ) — — 11,184,141 — — 11,165,113 Non-controlling interest - Separation ( 13,199 ) — — — — — ( 13,199 ) Accumulated other comprehensive loss - Separation — — — — 307,813 — 307,813 Adoption of ASC 842, Leases — — — 128,908 — — 128,908 Issuance of restricted stock 196 — — — — ( 4 ) 192 Forfeitures of restricted stock ( 110,333 ) — — — — — — — Share-based compensation — — 2,028 — — — 2,028 Share-based compensation - discontinued operations 2,449 — — — — — 2,449 Payments to non-controlling interests ( 3,684 ) — — — — — ( 3,684 ) Other — — — — 1 — 1 Other comprehensive income (loss) 2,784 — — — ( 3,959 ) — ( 1,175 ) Cancellation of Predecessor equity ( 32,182,611 ) ( 555,556 ) ( 58,967,502 ) ( 386 ) ( 92 ) ( 2,076,660 ) 2,059,998 14,175 2,562 ( 403 ) Issuance of Successor common stock and warrants 56,861,941 6,947,567 — 81,453,648 8,943 64 2,770,108 ( 27,701 ) — — 2,751,414 Balances at May 1, 2019 (Predecessor) 56,861,941 6,947,567 — 81,453,648 $ 8,943 $ 64 $ 2,770,108 $ — $ — $ — $ 2,779,115 Balances at May 2, 2019 (Successor) 56,861,941 6,947,567 — 81,453,648 $ 8,943 $ 64 $ 2,770,108 $ — $ — $ — $ 2,779,115 Net income 751 — — 112,548 — — 113,299 Vesting of restricted stock 644,025 — 1 ( 1 ) — — ( 2,078 ) ( 2,078 ) Share-based compensation — — 26,377 — — — 26,377 Conversion of Special Warrants to Class A and Class B Shares 216,921 10,660 ( 227,581 ) — — — — — — — Conversion of Class B Shares to Class A Shares 53,317 ( 53,317 ) — — — — — — — Cancellation of Special Warrants and other ( 179,474 ) ( 571 ) — 30,049 — — — 29,478 Other comprehensive loss — — — — ( 750 ) — ( 750 ) Balances at December 31, 2019 (Successor) 57,776,204 6,904,910 — 81,046,593 $ 9,123 $ 65 $ 2,826,533 $ 112,548 $ ( 750 ) $ ( 2,078 ) $ 2,945,441 (1) The Company's former Class D Common Stock and Preferred Stock are not presented in the data above as there were no shares issued and outstanding in 2019 and 2018, respectively. 66 CONSOLIDATED STATEMENTS OF CASH FLOWS OF IHEARTMEDIA, INC. AND SUBSIDIARIES Successor Company Predecessor Company (In thousands) Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 Cash flows from operating activities: Net income (loss) $ ( 158,389 ) $ ( 1,915,222 ) $ 113,299 $ 11,165,113 Income from discontinued operations — — — ( 1,685,123 ) Reconciling items: Impairment charges 57,734 1,738,752 — 91,382 Depreciation and amortization 469,417 402,929 249,623 52,834 Deferred taxes ( 10,874 ) ( 184,269 ) 9,120 115,839 Provision for doubtful accounts 4,144 38,273 14,088 3,268 Amortization of deferred financing charges and note discounts, net 5,930 4,758 1,295 512 Non-cash Reorganization items, net — — — ( 9,619,236 ) Share-based compensation 23,543 22,516 26,377 498 (Gain) loss on disposal of operating and other assets 26,841 6,986 4,539 ( 143 ) (Gain) loss on investments ( 43,643 ) 9,346 20,928 10,237 Equity in loss of nonconsolidated affiliates 1,138 379 279 66 Barter and trade income ( 16,276 ) ( 10,502 ) ( 12,961 ) ( 5,947 ) Other reconciling items, net 12,490 656 ( 9,154 ) ( 65 ) Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: (Increase) decrease in accounts receivable ( 205,200 ) 77,335 ( 179,479 ) 117,263 (Increase) decrease in prepaid expenses and other current assets 4,746 2,447 15,288 ( 24,044 ) (Increase) decrease in other long-term assets ( 5,505 ) ( 1,119 ) 7,924 ( 7,098 ) Increase (decrease) in accounts payable and accrued expenses 153,938 52,354 127,150 ( 156,885 ) Increase (decrease) in accrued interest ( 72 ) ( 15,714 ) 84,523 256 Increase (decrease) in deferred income 8,229 ( 21,859 ) ( 8,441 ) 13,377 Increase (decrease) in other long-term liabilities 2,382 7,899 4,507 ( 79,609 ) Cash provided by (used for) operating activities from continuing operations 330,573 215,945 468,905 ( 7,505 ) Cash used for operating activities from discontinued operations — — — ( 32,681 ) Net cash provided by (used for) operating activities 330,573 215,945 468,905 ( 40,186 ) Cash flows from investing activities: Business combinations ( 245,462 ) ( 62,050 ) — ( 1,998 ) Proceeds from sale of investments 50,757 1,000 765 — Proceeds from disposal of assets 37,463 2,041 7,281 99 Purchases of property, plant and equipment ( 183,372 ) ( 85,205 ) ( 75,993 ) ( 36,197 ) Change in other, net ( 6,176 ) ( 3,599 ) ( 5,331 ) ( 682 ) Cash used for investing activities from continuing operations ( 346,790 ) ( 147,813 ) ( 73,278 ) ( 38,778 ) Cash used for investing activities from discontinued operations — — — ( 222,366 ) Net cash used for investing activities ( 346,790 ) ( 147,813 ) ( 73,278 ) ( 261,144 ) Cash flows from financing activities: Proceeds from long-term debt and credit facilities — 779,750 1,250,007 269 Payments on long-term debt, Mandatorily Redeemable Preferred Stock and credit facilities ( 352,383 ) ( 532,392 ) ( 1,285,408 ) ( 8,294 ) Proceeds from Mandatorily Redeemable Preferred Stock — — — 60,000 Settlement of intercompany related to discontinued operations — — — ( 159,196 ) Debt issuance costs 15 ( 4,786 ) ( 19,983 ) — Change in other, net 244 ( 1,392 ) ( 2,649 ) ( 5 ) Cash provided by (used for) financing activities from continuing operations ( 352,124 ) 241,180 ( 58,033 ) ( 107,226 ) Cash provided by financing activities from discontinued operations — — — 51,669 Net cash provided by (used for) financing activities ( 352,124 ) 241,180 ( 58,033 ) ( 55,557 ) Effect of exchange rate changes on cash ( 292 ) 257 15 562 Net increase (decrease) in cash, cash equivalents and restricted cash ( 368,633 ) 309,569 337,609 ( 356,325 ) Cash, cash equivalents and restricted cash at beginning of period 721,187 411,618 74,009 430,334 Cash, cash equivalents and restricted cash at end of period 352,554 721,187 411,618 74,009 Less cash, cash equivalents and restricted cash of discontinued operations at end of period — — — — Cash, cash equivalents and restricted cash of continuing operations at end of period $ 352,554 $ 721,187 $ 411,618 $ 74,009 SUPPLEMENTAL DISCLOSURES: Cash paid during the year for interest $ 328,101 $ 357,168 $ 183,806 $ 137,042 Cash paid during the year for taxes 11,130 5,844 5,759 22,092 Cash paid for Reorganization items, net — 443 18,360 183,291 See Notes to Consolidated Financial Statements 67 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business iHeartMedia, Inc. (the “Company,” "iHeartMedia," "we" or "us") was formed in May 2007 for the purpose of acquiring the business of iHeartCommunications, Inc., a Texas company (“iHeartCommunications”), which occurred on July 30, 2008. Prior to the consummation of the acquisition of iHeartCommunications, iHeartMedia had not conducted any activities, other than activities incident to its formation in connection with the acquisition, and did not have any assets or liabilities, other than those related to the acquisition. On March 14, 2018 (the “Petition Date”), the Company, iHeartCommunications and certain of the Company’s direct and indirect domestic subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the "Chapter 11 Cases") under Chapter 11 of the United States Bankruptcy Code (the "Bankruptcy Code"), in the United States Bankruptcy Court for the Southern District of Texas, Houston Division (the "Bankruptcy Court"). On May 1, 2019 (the “Effective Date”), the conditions to the effectiveness of the Debtors plan of reorganization, as amended, were satisfied and the Company emerged from Chapter 11 through (a) a series of transactions (the “Separation”) through which Clear Channel Outdoor Holdings, Inc. (“CCOH”), its parent Clear Channel Holdings, Inc. (“CCH”) and its subsidiaries (collectively with CCOH and CCH, the “Outdoor Group”) were separated from, and ceased to be controlled by, the Company and its subsidiaries (the “iHeart Group”), and (b) a series of transactions (the “Reorganization”) through which iHeartCommunications’ debt was reduced from approximately $ 16 billion to approximately $ 5.8 billion and a global compromise and settlement among holders of claims (“Claimholders”) in connection with the Chapter 11 Cases was effected (collectively, the “Plan of Reorganization”). Unless otherwise indicated, information in these notes to the consolidated financial statements relates to continuing operations. The operations of the Outdoor Group have been presented as discontinued. The Company presents businesses that represent components as discontinued operations when the components meet the criteria for held for sale, are sold, or spun-off and their disposal represents a strategic shift that has, or will have, a major effect on its operations and financial results. See Note 16, Discontinued Operations . As of January 1, 2021, the Company began reporting based on three reportable segments: • the Multiplatform Group, which includes the Company's Broadcast radio, Networks and Sponsorships and Events businesses; • the Digital Audio Group, which includes all of the Company's Digital businesses, including Podcasting; and • the Audio & Media Services Group, which includes Katz Media Group (“Katz Media”), a full-service media representation business, and RCS Sound Software ("RCS"), a provider of scheduling and broadcast software and services. These reporting segments reflect how senior management operates the Company, align with certain leadership and organizational changes implemented in the first quarter of 2021 and provide improved visibility into the underlying performances, results, and margin profiles of our distinct businesses. Additionally, as of January 1, 2021, Segment Adjusted EBITDA is the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as Revenue less operating expenses, excluding restructuring expenses and share-based compensation 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. The corresponding current and prior period segment disclosures have been recast to reflect the current segment presentation. See Note 12, Segment Data . COVID-19 Our business has been adversely impacted by the novel coronavirus pandemic (“COVID-19”), its impact on the operating and economic environment and related, near-term advertiser spending decisions. The Company's revenue in the latter half of the month ended March 31, 2020, through the remainder of 2020 and into 2021 was significantly and negatively impacted as a 68 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS result of a decline in advertising spend driven by COVID-19, and the Company's management took proactive actions during 2020, which continued into 2021, to expand the Company’s financial flexibility by reducing expenses and preserving cash as a result of such impact. Although our results for 2021 continued to be impacted by the effects of the COVID-19 pandemic, our revenue increased significantly compared to 2020, including revenue from our Multiplatform segment, which includes our broadcast radio, networks and sponsorship and events businesses. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (“CARES Act”) was signed into law. The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property. The provisions of the CARES Act resulted in an increase to allowable interest deductions of $ 179.4 million during 2020. In addition, the Company was able to defer the payment of $ 29.3 million in certain employment taxes during 2020, half of which was due and paid on January 3, 2022 and the other half will be due on January 3, 2023. In addition, the Company claimed $ 12.4 million in refundable payroll tax credits related to the CARES Act provisions, of which $ 0.7 million was received in 2020, $ 3.8 million was received in 2021 and $ 7.9 million was received in January 2022. As of December 31, 2021, the Company had approximately $ 352.1 million in cash and cash equivalents. While the the effects of COVID-19 may continue to negatively impact the results of operations, cash flows and financial position of the Company, the related financial impact cannot be reasonably estimated at this time. Based on current available liquidity, the Company expects to be able to meet its obligations as they become due over the coming year. Voluntary Filing under Chapter 11 On the Petition Date, the Debtors filed the Chapter 11 Cases. Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its direct and indirect subsidiaries (the “Outdoor Group”) did not file voluntary petitions for reorganization under the Bankruptcy Code and were not Debtors in the Chapter 11 Cases. On May 1, 2019, ( the “Effective Date”), the conditions to the effectiveness of the Plan of Reorganization were satisfied and the Company emerged from Chapter 11 through (a) a series of transactions (the “Separation”) through which the Outdoor Group was separated from, and ceased to be controlled by, the Company and its subsidiaries (the “iHeart Group”), and (b) a series of transactions (the “Reorganization”) through which iHeartCommunications’ debt was reduced from approximately $ 16 billion to approximately $ 5.8 billion and a global compromise and settlement among Claimholders in connection with the Chapter 11 Cases was effected. The compromise and settlement involved, among others, (i) the restructuring of iHeartCommunications’ indebtedness by (A) replacing its “debtor-in-possession” credit facility with a $ 450 million ABL Facility and (B) issuing to certain Claimholders, on account of their claims, approximately $ 3.5 billion aggregate principal amount of new senior secured term loans (the “Term Loan Facility”), approximately $ 1.45 billion aggregate principal amount of new 8.375 % Senior Notes due 2027 (the “Senior Unsecured Notes”) and approximately $ 800 million aggregate principal amount of new 6.375 % Senior Secured Notes due 2026 (the “ 6.375 % Senior Secured Notes”), (ii) the Company’s issuance of new Class A common stock, new Class B common stock and special warrants to purchase shares of new Class A common stock and Class B common stock (“Special Warrants”) to Claimholders, subject to ownership restrictions imposed by the Federal Communications Commission (“FCC”), (iii) the settlement of certain intercompany transactions, and (iv) the sale of the preferred stock (the “iHeart Operations Preferred Stock”) of the Company’s wholly-owned subsidiary iHeart Operations, Inc. (“iHeart Operations”) in connection with the Separation. All of the Company's equity existing as of the Effective Date was canceled on such date pursuant to the Plan of Reorganization. Upon the Company's emergence from the Chapter 11 Cases, the Company adopted fresh start accounting, which resulted in a new basis of accounting and the Company becoming a new entity for financial reporting purposes. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after the Effective Date, are not comparable with the consolidated financial statements on or before that date. Refer to Note 15, Fresh Start Accounting , for additional information. References to “Successor” or “Successor Company” relate to the financial position and results of operations of the Company after the Effective Date. References to "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of the Company on or before the Effective Date. 69 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the Predecessor period, the Company applied Accounting Standards Codification (“ASC”) 852, Reorganizations, in preparing the consolidated financial statements. ASC 852 requires the financial statements, for periods subsequent to the commencement of the Chapter 11 Cases, to distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain charges incurred during 2019 related to the Chapter 11 Cases, including the write-off of unamortized long-term debt fees and discounts associated with debt classified as liabilities subject to compromise, and professional fees incurred directly as a result of the Chapter 11 Cases are recorded as Reorganization items, net in the Predecessor period. ASC 852 requires certain additional reporting for financial statements prepared between the bankruptcy filing date and the date of emergence from bankruptcy, including: • Reclassification of Debtor pre-petition liabilities that are unsecured, under-secured or where it cannot be determined that the liabilities are fully secured, to a separate line item in the Consolidated Balance Sheet called, "Liabilities subject to compromise"; and • Segregation of Reorganization items, net as a separate line in the Consolidated Statement of Comprehensive Loss, included within income from continuing operations. Use of Estimates The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes including, but not limited to, legal, tax and insurance accruals. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. Also included in the consolidated financial statements are entities for which the Company has a controlling financial interest or is the primary beneficiary. Investments in companies in which the Company owns 20% to 50% of the voting common stock or otherwise exercises significant influence over operating and financial policies of the Company are accounted for using the equity method of accounting. All significant intercompany accounts have been eliminated in consolidation. The Company is the beneficiary of two trusts created to comply with Federal Communications Commission (“FCC”) ownership rules. The radio stations owned by the trusts are managed by independent trustees. The trustees are marketing these stations for sale, and the stations will have to be sold unless any stations may be owned by the Company under then-current FCC rules, in which case the trusts will be terminated with respect to such stations. The trust agreements stipulate that the Company must fund any operating shortfalls of the trust activities, and any excess cash flow generated by the trusts is distributed to the Company. The Company is also the beneficiary of proceeds from the sale of stations held in the trusts. The Company consolidates the trusts in accordance with ASC 810-10, Consolidation , which requires an enterprise involved with variable interest entities to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in the variable interest entity, as the trusts were determined to be a variable interest entity and the Company is the primary beneficiary under the trusts. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less. Accounts Receivable Accounts receivable are recorded when the Company has an unconditional right to payment, either because it has satisfied a performance obligation prior to receiving payment from the customer or has a non-cancelable contract that has been billed in advance in accordance with the Company’s normal billing terms. Accounts receivable are recorded at the invoiced amount, net of reserves for sales allowances and allowances for doubtful accounts. The Company evaluates the collectability of its accounts receivable based on a combination of factors. In 70 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS circumstances where it is aware of a specific customer’s inability to meet its financial obligations, it records a specific reserve to reduce the amounts recorded to what it believes will be collected. For all other customers, it recognizes reserves for bad debt based on historical experience of bad debts as a percent of accounts receivable for each business unit, adjusted for relative improvements or deteriorations in the agings and changes in current economic conditions. The Company believes its concentration of credit risk is limited due to the large number of its customers. Business Combinations The Company accounts for its business combinations under the acquisition method of accounting. The total cost of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Determining the fair value of assets acquired and liabilities assumed requires management's judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, discount rates, asset lives and market multiples, among other items. Various acquisition agreements may include contingent purchase consideration based on performance requirements of the investee. The Company accounts for these payments in conformity with the provisions of ASC 805-20-30, Business Combinations , which establish the requirements related to recognition of certain assets and liabilities arising from contingencies. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method at rates that, in the opinion of management, are adequate to allocate the cost of such assets over their estimated useful lives, which are as follows: Buildings and improvements – 10 to 39 years Towers, transmitters and studio equipment – 5 to 40 years Computer equipment and software - 3 years Furniture and other equipment – 5 to 7 years Leasehold improvements – shorter of economic life or lease term assuming renewal periods, if appropriate For assets associated with a lease or contract, the assets are depreciated at the shorter of the economic life or the lease or contract term, assuming renewal periods, if appropriate. Expenditures for maintenance and repairs are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized. The Company tests for possible impairment of property, plant, and equipment whenever events and circumstances indicate that depreciable assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value. Assets and businesses are classified as held for sale if their carrying amount will be recovered or settled principally through a sale transaction rather than through continuing use. The asset or business must be available for immediate sale and the sale must be highly probable within one year. Leases The Company enters into operating lease contracts for land, buildings, structures and other equipment. Arrangements are evaluated at inception to determine whether such arrangements contain a lease. Operating leases primarily include land and building lease contracts and leases of radio towers. Arrangements to lease building space consist primarily of the rental of office space, but may also include leases of other equipment, including automobiles and copiers. Operating leases are reflected on the Company's balance sheet within Operating lease right-of-use ("ROU') assets and the related short-term and long-term liabilities are included within Current and Noncurrent operating lease liabilities, respectively. The Company's finance leases are included within Property, plant and equipment with the related liabilities included within Long-term debt or within Liabilities subject to compromise (see Note 15, Fresh Start Accounting ). ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based 71 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS on the present value of lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term. Certain of the Company's operating lease agreements include rental payments that are adjusted periodically for inflationary changes. Payments due to changes in inflationary adjustments are included within variable rent expense, which is accounted for separately from periodic straight-line lease expense. Amounts related to insurance and property taxes in lease arrangements when billed on a pass-through basis are allocated to the lease and non-lease components of the lease based on their relative standalone selling prices. Certain of the Company's leases provide options to extend the terms of the agreements. Generally, renewal periods are excluded from minimum lease payments when calculating the lease liabilities as, for most leases, the Company does not consider exercise of such options to be reasonably certain. As a result, unless a renewal option is considered reasonably assured, the optional terms and related payments are not included within the lease liability. For those leases for which renewal periods are included in calculating minimum lease liabilities, any adjustments resulting from changes in circumstances which result in the renewal options no longer being reasonably certain are accounted for as changes in estimates. The Company's lease agreements do not contain any material residual value guarantees or material restrictive covenants. The implicit rate within the Company's lease agreements is generally not determinable. As such, the Company uses the incremental borrowing rate ("IBR") to determine the present value of lease payments at the commencement of the lease. The IBR, as defined in ASC 842, Leases , is "the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment." In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, Reorganizations , the Company applied the provisions of fresh start accounting to its Consolidated Financial Statements on the Effective Date. As a result, the Company adjusted the IBR used to value the Company's ROU assets and operating lease liabilities at the Effective Date (see Note 15, Fresh Start Accounting ). Upon adoption of ASC 842 in the first quarter of 2019, the Company did not elect the practical expedient to combine non-lease components with the associated lease components. Upon application of fresh start accounting on the Effective Date, the Company elected to use the practical expedient to not separate non-lease components from the associated lease component for all classes of the Company's assets. When the Company decides to abandon a leased property before the expiration of the lease term, management assesses whether such property will be subleased. If it is determined that subleasing the property for the remaining lease term is reasonable, management estimates the fair value of the sublease payments to be received and compares the estimated fair value to the ROU asset. To the extent the estimated fair value is less than the net book value of the ROU asset, the Company records a non-cash impairment charge for the difference, and the remaining ROU asset is recorded ratably over the remaining lease term. If it is determined that subleasing the property for the remaining lease term is not reasonable (e.g. the remaining lease term is too short to reasonably expect the property to be subleased), amortization of the net book value of the ROU asset is accelerated and recognized as expense ratably from the decision date to the date the Company ceases use of the property. Intangible Assets The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses in its Multiplatform Group segment. The Company’s indefinite-lived intangible assets are not subject to amortization, but are tested for impairment at least annually. The Company tests for possible impairment of indefinite-lived intangible assets whenever events or changes in circumstances, such as a significant reduction in operating cash flow or a dramatic change in the manner for which the asset is intended to be used indicate that the carrying amount of the asset may not be recoverable. In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, the Company applied the provisions of fresh start accounting to its Consolidated Financial Statements on the Effective Date. As a result, the Company adjusted its FCC licenses to their respective estimated fair values as of the Effective Date of $ 2,281.7 million (see Note 15, Fresh Start Accounting ). The Company normally performs its annual impairment test for its FCC licenses using a direct valuation technique as prescribed in ASC 805-20-S99, Business Combinations . The Company engages a third-party valuation firm to assist the Company in the development of these assumptions and the Company’s determination of the fair value of its FCC licenses. As discussed above, as a result of uncertainty related to COVID-19 and its negative impact on the Company's business and the public trading values of its debt and equity, the Company performed interim impairment tests on its indefinite-lived intangible assets as of March 31, 2020. The interim impairment tests resulted in a non-cash impairment of the Company's FCC licenses of $ 502.7 million. The Company performed its annual impairment testing of indefinite-lived intangible assets as of July 1, 2021 72 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and 2020 and no additional impairment charges were recorded. See Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . Other intangible assets include definite-lived intangible assets. The Company’s definite-lived intangible assets primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost. In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, the Company applied the provisions of fresh start accounting to its Consolidated Financial Statements on the Effective Date. As a result, the Company adjusted Other intangible assets to their respective fair values at the Effective Date (see Note 15, Fresh Start Accounting ). The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value. Goodwill At least annually, the Company performs its impairment test for each reporting unit’s goodwill. The Company also tests goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The Company identified its reporting units in accordance with ASC 350-20-55, Intangibles-Goodwill and Other . Generally, the Company's annual impairment test includes a full quantitative assessment, which involves the preparation of a fair value estimate for each reporting unit based on the most recent projected financial results, market and industry factors, including comparison to peer companies and the application of the Company's current estimated WACC. However, in connection with emergence from bankruptcy, the Company qualified for and adopted fresh start accounting on the Effective Date. As of May 1, 2019, the Company allocated its estimated enterprise fair value to its individual assets and liabilities based on their estimated fair values in conformity with ASC 805, Business Combinations . Upon application of fresh start accounting in accordance with ASC 852, Reorganizations , in connection with the emergence from bankruptcy, the Company recorded goodwill of $ 3.3 billion, which represented the excess of Reorganization Value over the estimated fair value of the Company's assets and liabilities. Goodwill was further allocated to reporting units based on the relative fair values of the Company's reporting units as of May 1, 2019. As a result of the changes in the Company's management structure and its reportable segments effective at the beginning of 2021, the Company performed an interim impairment test on goodwill as of January 1, 2021. No impairment charges were recorded in the first quarter of 2021 in connection with the interim impairment test. As discussed above, as a result of uncertainty related to COVID-19 and its negative impact on the Company's business and the public trading values of its debt and equity, the Company performed interim impairment tests on its 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 the Company's goodwill of $ 1.2 billion. The Company performed its annual impairment testing of goodwill and indefinite-lived intangible assets as of July 1, 2021 and 2020 and no additional impairment charges were recorded. For more information, see Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . Nonconsolidated Affiliates In general, investments in which the Company owns 20% to 50% of the common stock or otherwise exercises significant influence over the investee are accounted for under the equity method. The Company does not recognize gains or losses upon the issuance of securities by any of its equity method investees. The Company reviews the value of equity method investments and records impairment charges in the statement of comprehensive income (loss) as a component of “Equity in loss of nonconsolidated affiliates” for any decline in value. 73 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other Investments We apply Accounting Standards Update ("ASU") 2016-01 Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which requires us to measure all equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in earnings. For equity securities without readily determinable fair values, we have elected the measurement alternative under which we measure these investments at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Investments in notes receivable are evaluated for credit losses in accordance with ASC 326, Financial Instruments-Credit Losses , on a quarterly basis or when indicators of credit loss exist. The Company recorded noncash impairment charges of $ 8.7 million, $ 0.9 million, $ 21.0 million and $ 8.3 million during the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor), respectively. These charges are recorded on the Statement of Comprehensive Income (Loss) in “Gain (loss) on investments, net”. Any noncash impairment charges related to equity method investments are recorded on the Statement of Comprehensive Income (Loss) in "Equity in loss of nonconsolidated affiliates." Financial Instruments Due to their short maturity, the carrying amounts of accounts and notes receivable, accounts payable, accrued liabilities, and short-term borrowings approximated their fair values at December 31, 2021 and 2020. Income Taxes The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting bases and tax bases of assets and liabilities and are measured using the enacted tax rates expected to apply to taxable income in the periods in which the deferred tax asset or liability is expected to be realized or settled. Deferred tax assets are reduced by valuation allowances if the Company believes it is more likely than not that some portion or the entire asset will not be realized. The Company has not provided U.S. federal income taxes for temporary differences with respect to investments in foreign subsidiaries. It is not apparent that these temporary differences will reverse in the foreseeable future. If any excess cash held by our foreign subsidiaries were needed to fund operations in the U.S., the Company could presently repatriate available funds without a requirement to accrue or pay U.S. taxes. The Company regularly reviews its tax liabilities on amounts that may be distributed in future periods and provides for foreign withholding and other current and deferred taxes on any such amounts, where applicable. Revenue Recognition The Company recognizes revenue when or as it satisfies a performance obligation by transferring a promised good or service to a customer. Where third-parties are involved in the provision of goods and services to a customer, revenue is recognized at the gross amount of consideration the Company expects to receive if the Company controls the promised good or service before it is transferred to the customer; otherwise, revenue is recognized at the net amount the Company retains. The Company receives payments from customers based on billing schedules that are established in its contracts, and deferred revenue is recorded when payment is received from a customer before the Company has satisfied the performance obligation or a non-cancelable contract has been billed in advance in accordance with the Company’s normal billing terms. The primary source of revenue in the Multiplatform Group segment is the sale of advertising on the Company’s broadcast radio stations and national and local live and virtual events. Revenues for advertising spots are recognized at the point in time when the advertisement is broadcast. Revenues for event sponsorships are recognized over the period of the event. Multiplatform Group also generates revenues from programming talent, network syndication, traffic and weather data, and other miscellaneous transactions, which are recognized when the services are transferred to the customer. Multiplatform Group's contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations. 74 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The primary source of revenue in the Digital Audio Group segment is the sale of advertising on the Company’s iHeartRadio mobile application and website, station websites, and podcast network. Revenues for advertising spots are recognized over time based on impressions delivered or time elapsed, depending upon the terms of the contract. Digital Audio Group’s contracts with advertisers are typically a year or less in duration and are generally billed monthly upon satisfaction of the performance obligations. The Company also generates revenue through contractual commissions realized from the sale of national spot and online advertising on behalf of clients of its full-service media representation business, Katz Media, which is part of the Audio and Media Services Group segment. Revenues from these contracts are recognized at the point in time when the advertisements are broadcast. Because the Company is a representative of its media clients and does not control the advertising inventory before it is transferred to the advertiser, the Company recognizes revenue at the net amount of contractual commissions retained for its representation services. The Company’s media representation contracts typically have terms up to ten years in duration and are generally billed monthly upon satisfaction of the performance obligations. The Company recognizes revenue in amounts that reflect the consideration it expects to receive in exchange for transferring goods or services to customers, excluding sales taxes and other similar taxes collected on behalf of governmental authorities (the "transaction price”). When this consideration includes a variable amount, the Company estimates the amount of consideration it expects to receive and only recognizes revenue to the extent that it is probable it will not be reversed in a future reporting period. Because the transfer of promised goods and services to the customer is generally within a year of scheduled payment from the customer, the Company is not typically required to consider the effects of the time value of money when determining the transaction price. Advertising revenue is reported net of agency commissions. In order to appropriately identify the unit of accounting for revenue recognition, the Company determines which promised goods and services in a contract with a customer are distinct and are therefore separate performance obligations. If a promised good or service does not meet the criteria to be considered distinct, it is combined with other promised goods or services until a distinct bundle of goods or services exists. Certain of the Company’s contracts with customers include options for the customer to acquire additional goods or services for free or at a discount, and management judgment is required to determine whether these options are material rights that are separate performance obligations. For revenue arrangements that contain multiple distinct goods or services, the Company allocates the transaction price to these performance obligations in proportion to their relative standalone selling prices or the best estimate of their fair values. The Company has concluded that the contractual prices for the promised goods and services in its standard contracts generally approximate management’s best estimate of standalone selling price as the rates reflect various factors such as the size and characteristics of the target audience, market location and size, and recent market selling prices. However, where the Company provides customers with free or discounted services as part of contract negotiations, management uses judgment to determine how much of the transaction price to allocate to these performance obligations. Contract Costs Incremental costs of obtaining a contract primarily relate to sales commissions, which are included in selling, general and administrative expenses and are generally commensurate with sales. These costs are generally expensed when incurred because the period of benefit is one year or less. Advertising Expense The Company records advertising expense as it is incurred. Advertising expenses were $ 166.1 million, $ 167.2 million, $ 126.0 million and $ 59.6 million for the years ended December 31, 2021 and 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor), respectively, which include $ 130.1 million, $ 133.0 million, $ 105.0 million and $ 46.0 million in barter advertising, respectively. 75 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share-Based Compensation Under the fair value recognition provisions of ASC 718, Compensation-Stock Compensation , share-based compensation cost is measured at the grant date based on the fair value of the award. For awards that vest based on service conditions, this cost is recognized as expense on a straight-line basis over the vesting period. For awards that will vest based on market or performance conditions, this cost is recognized when it becomes probable that the performance conditions will be satisfied. Determining the fair value of share-based awards at the grant date requires assumptions and judgments, such as expected volatility, among other factors. Foreign Currency Results of operations for foreign subsidiaries and foreign equity investees are translated into U.S. dollars using average exchange rates during the year. The assets and liabilities of those subsidiaries and investees are translated into U.S. dollars using the exchange rates at the balance sheet date. The related translation adjustments are recorded in a separate component of stockholders' equity, “Accumulated other comprehensive income (loss)”. Foreign currency transaction gains and losses are included in Other income (expense), net in the Statement of Comprehensive Income (Loss). Reclassifications and New Segment Presentation Certain prior period amounts have been reclassified to conform to the 2021 presentation. In connection with the organization and leadership changes resulting in the realignment of its reportable segments as discussed above, the Company also determined that all selling, general and administrative expenses incurred by its reportable segments and by its corporate functions would be reported together as Selling, general and administrative expenses. Amounts presented in prior years as Corporate expenses have been reclassified as Selling, general and administrative expenses to conform to the current presentation. 76 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS New Accounting Pronouncements Recently Adopted In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of the Interbank Offered Rate Transition on Financial Reporting to provide optional relief from applying generally accepted accounting principles to contracts, hedging relationships and other transactions affected by reference rate reform. In addition, in January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848) – Scope, to clarify that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. The guidance is effective upon issuance and generally can be applied through December 31, 2022. The Company is currently evaluating the future impact of adoption of this standard. New Accounting Pronouncements Not Yet Adopted In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805) - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers which requires an acquirer in a business combination to recognize and measure contract assets and contract liabilities in accordance with Accounting Standards Codification 606. The amendments of ASU 2021-08 are effective for interim and annual periods beginning after December 15, 2022. The Company is currently evaluating the future impact of adoption of this standard. Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash reported in the Consolidated Balance Sheets to the total of the amounts reported in the Consolidated Statements of Cash Flows: (In thousands) Successor Company December 31, 2021 December 31, 2020 Cash and cash equivalents $ 352,129 $ 720,662 Restricted cash included in: Other current assets 425 — Other assets — 525 Total cash, cash equivalents and restricted cash in the Statement of Cash Flows $ 352,554 $ 721,187 NOTE 2 – REVENUE The Company generates revenue from several sources: • The primary source of revenue in the Multiplatform Group segment is the sale of advertising on the Company’s radio stations. This segment also generates revenues from programming talent, network syndication, traffic and weather data, live and virtual events and other miscellaneous transactions. • The primary source of revenue in the Digital Audio Group segment is the sale of advertising on the Company’s iHeartRadio mobile application and website, station websites and on its podcast network. • The Company also generates revenue through contractual commissions realized from the sale of national spot and online advertising on behalf of clients of its full-service media representation business, Katz Media, which is reported in the Company’s Audio and Media Services Group segment. 77 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Disaggregation of Revenue The following table shows revenue streams for the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019: Successor Company (In thousands) Multiplatform Group Digital Audio Group Audio and Media Services Group Eliminations Consolidated Year Ended December 31, 2021 Revenue from contracts with customers: Broadcast Radio (1) $ 1,812,252 $ — $ — $ — $ 1,812,252 Networks (2) 503,052 — — — 503,052 Sponsorship and Events (3) 160,322 — — — 160,322 Digital, excluding Podcast (4) — 581,918 — ( 5,845 ) 576,073 Podcast (5) — 252,564 — — 252,564 Audio & Media Services (6) — — 247,957 ( 6,602 ) 241,355 Other (7) 11,958 — — ( 670 ) 11,288 Total 2,487,584 834,482 247,957 ( 13,117 ) 3,556,906 Revenue from leases (8) 1,434 — — — 1,434 Revenue, total $ 2,489,018 $ 834,482 $ 247,957 $ ( 13,117 ) $ 3,558,340 Year Ended December 31, 2020 Revenue from contracts with customers: Broadcast Radio (1) $ 1,604,880 $ — $ — $ — $ 1,604,880 Networks (2) 484,950 — — — 484,950 Sponsorship and Events (3) 107,654 — — — 107,654 Digital, excluding Podcast (4) — 372,687 — — 372,687 Podcast (5) — 101,684 — — 101,684 Audio & Media Services (6) — — 274,749 ( 7,086 ) 267,663 Other (7) 7,276 — — ( 670 ) 6,606 Total 2,204,760 474,371 274,749 ( 7,756 ) 2,946,124 Revenue from leases (8) 2,094 — — — 2,094 Revenue, total $ 2,206,854 $ 474,371 $ 274,749 $ ( 7,756 ) $ 2,948,218 Period from May 2, 2019 through December 31, 2019 Revenue from contracts with customers: Broadcast Radio (1) $ 1,575,382 $ — $ — $ — $ 1,575,382 Networks (2) 425,631 — — — 425,631 Sponsorship and Events (3) 159,187 — — — 159,187 Digital, excluding Podcast (4) — 231,160 — — 231,160 Podcast (5) — 42,229 — — 42,229 Audio & Media Services (6) — 167,292 ( 4,589 ) 162,703 Other (7) 13,017 — ( 447 ) 12,570 Total 2,173,217 273,389 167,292 ( 5,036 ) 2,608,862 Revenue from leases (8) 1,194 — — — 1,194 Revenue, total $ 2,174,411 $ 273,389 $ 167,292 $ ( 5,036 ) $ 2,610,056 78 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table shows revenue streams from continuing operations for the Predecessor Company. The presentation of amounts in the Predecessor period has been revised to conform to the Successor period presentation. Predecessor Company (In thousands) Multiplatform Group Digital Audio Group Audio and Media Services Group Eliminations Consolidated Period from January 1, 2019 through May 1, 2019 Revenue from contracts with customers: Broadcast Radio (1) $ 657,864 $ — $ — $ — $ 657,864 Networks (2) 189,088 — — — 189,088 Sponsorship and Events (3) 50,330 — — — 50,330 Digital, excluding Podcast (4) — 91,695 — — 91,695 Podcast (5) — 11,094 — — 11,094 Audio and Media Services (6) — — 69,362 ( 2,325 ) 67,037 Other (7) 5,910 — — ( 243 ) 5,667 Total 903,192 102,789 69,362 ( 2,568 ) 1,072,775 Revenue from leases (8) 696 — — — 696 Revenue, total $ 903,888 $ 102,789 $ 69,362 $ ( 2,568 ) $ 1,073,471 (1) Broadcast Radio revenue is generated through the sale of advertising time on the Company’s domestic radio stations. (2) Networks revenue is generated through the sale of advertising on the Company’s Premiere and Total Traffic & Weather network programs and through the syndication of network programming to other media companies. (3) Sponsorship and events revenue is generated through local events and major nationally-recognized tent pole events and include sponsorship and other advertising revenue, ticket sales, and licensing, as well as endorsement and appearance fees generated by on-air talent. (4) Digital, excluding Podcast revenue is generated through the sale of streaming and display advertisements on digital platforms and through subscriptions to iHeartRadio streaming services. (5) Podcast revenue is generated through the sale of advertising on the Company's podcast network. (6) Audio and media services revenue is generated by services provided to broadcast industry participants through the Company’s Katz Media and RCS businesses. As a media representation firm, Katz Media generates revenue via commissions on media sold on behalf of the radio and television stations that it represents, while RCS generates revenue by providing broadcast software and media streaming, along with research services for radio stations, broadcast television stations, cable channels, record labels, ad agencies and Internet stations worldwide. (7) Other revenue represents fees earned for miscellaneous services, including on-site promotions, activations, and local marketing agreements. (8) Revenue from leases is primarily generated by the lease of towers to other media companies, which are all categorized as operating leases. 79 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Trade and Barter Trade and barter transactions represent the exchange of advertising spots for merchandise, services, other advertising or other assets in the ordinary course of business. The transaction price for these contracts is measured at the estimated fair value of the non-cash consideration received unless this is not reasonably estimable, in which case the consideration is measured based on the standalone selling price of the advertising spots promised to the customer. Trade and barter revenues and expenses from continuing operations, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows: Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, (In thousands) 2021 2020 2019 2019 Consolidated: Trade and barter revenues $ 175,519 $ 158,383 $ 151,497 $ 65,934 Trade and barter expenses 149,846 154,715 134,865 58,330 The Successor Company recognized barter revenue of $ 16.3 million, $ 10.5 million and $ 13.0 million for the year ended December 31, 2021, the year ended December 31, 2020, and the period from May 2, 2019 through December 31, 2019, respectively, in connection with investments made in companies in exchange for advertising services. The Predecessor Company recognized barter revenue of $ 5.9 million in the period from January 1, 2019 through May 1, 2019 in connection with investments made in companies in exchange for advertising services. Deferred Revenue The following tables show the Company’s deferred revenue balance from contracts with customers, excluding discontinued operations: Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, (In thousands) 2021 2020 2019 2019 Deferred revenue from contracts with customers: Beginning balance (1) $ 145,493 $ 162,068 $ 151,475 $ 148,720 Impact of fresh start accounting — — 298 — Revenue recognized, included in beginning balance ( 93,195 ) ( 95,531 ) ( 102,237 ) ( 76,473 ) Additions, net of revenue recognized during period, and other 108,816 78,956 112,532 79,228 Ending balance $ 161,114 $ 145,493 $ 162,068 $ 151,475 (1) Deferred revenue from contracts with customers, which excludes other sources of deferred revenue that are not related to contracts with customers, is included within deferred revenue and other long-term liabilities on the Consolidated Balance Sheets, depending upon when revenue is expected to be recognized. As described in Note 15, Fresh Start Accounting , as part of the fresh start accounting adjustments on May 1, 2019, deferred revenue from contracts with customers was adjusted to its estimated fair value. The Company’s contracts with customers generally have a term of one year or less; however, as of December 31, 2021, the Company expects to recognize $ 244.7 million of revenue in future periods for remaining performance obligations from current 80 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS contracts with customers that have an original expected duration of greater than one year, with substantially all of this amount to be recognized over the next five years . Commissions related to the Company’s media representation business have been excluded from this amount as they are contingent upon future sales. Revenue from Leases As of December 31, 2021, the future lease payments to be received by the Successor Company are as follows: (In thousands) 2022 $ 951 2023 780 2024 600 2025 415 2026 323 Thereafter 1,524 Total minimum future rentals $ 4,593 NOTE 3 – LEASES The following tables provide the components of lease expense included within the Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor): Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, (In thousands) 2021 2020 2019 2019 Operating lease expense $ 153,042 $ 151,448 $ 100,835 $ 44,667 Variable lease expense 31,516 31,451 15,940 476 Non-cash impairment of ROU assets (1) 44,311 8,043 — — (1) In addition to non-cash impairment of ROU assets, the Company recorded an additional $ 13.4 million of non-cash impairments related to leasehold improvements in 2021. The amounts related to leasehold improvements was immaterial for 2020 and 2019. The following table provides the weighted average remaining lease term and the weighted average discount rate for the Company's leases as of December 31, 2021 (Successor): December 31, 2021 Operating lease weighted average remaining lease term (in years) 12.7 Operating lease weighted average discount rate 6.5 % 81 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2021 (Successor), the Company’s future maturities of operating lease liabilities were as follows: (In thousands) 2022 $ 136,870 2023 127,340 2024 117,413 2025 107,226 2026 97,275 Thereafter 659,500 Total lease payments $ 1,245,624 Less: Effect of discounting 418,225 Total operating lease liability $ 827,399 The following table provides supplemental cash flow information related to leases for the years ended December 31, 2021 and 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor): Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, (In thousands) 2021 2020 2019 2019 Cash paid for amounts included in measurement of operating lease liabilities $ 136,780 $ 139,507 $ 89,567 $ 44,888 Lease liabilities arising from obtaining right-of-use assets (1) $ 74,745 $ 56,243 $ 29,498 $ 913,598 (1) Lease liabilities from obtaining right-of-use assets include transition liabilities upon adoption of ASC 842, Leases , as well as new leases entered into during the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor). Upon adoption of fresh start accounting upon emergence from the Chapter 11 Cases, the Company increased its operating lease obligation by $ 459.0 million to reflect its operating lease obligation as estimated fair value (see Note 15, Fresh Start Accounting ). The Company reflects changes in the lease liability and changes in the ROU asset on a net basis in the Statements of Cash Flows. The non-cash operating lease expense was $ 114.5 million, $ 103.4 million, $ 61.6 million and $ 14.3 million for the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor), respectively. 82 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 4 – PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL Property, Plant and Equipment Acquisitions On March 31, 2021, the Company acquired Triton Digital, a global leader in digital audio and podcast technology and measurement services, from The E.W. Scripps Company for $ 228.5 million in cash. The assets acquired as part of this transaction consisted of $ 69.4 million in current and fixed assets, consisting primarily of accounts receivable and technology, and $ 191.3 million in intangible assets, consisting primarily of customer relationships, along with $ 168.0 million in goodwill (of which $ 6.9 million is tax-deductible). The Company also assumed liabilities of $ 32.2 million, consisting primarily of accounts payable and deferred tax liabilities. The assessment of fair value of assets acquired and liabilities assumed is preliminary and is based on information that was available to management at the time these consolidated financial statements were prepared. The finalization of the Company’s acquisition accounting assessment could result in changes in the valuation of assets acquired and liabilities assumed, which could be material. Property, Plant and Equipment The Company’s property, plant and equipment consisted of the following classes of assets as of December 31, 2021 (Successor) and 2020 (Successor), respectively: (In thousands) Successor Company December 31, 2021 December 31, 2020 Land, buildings and improvements $ 355,474 $ 386,980 Towers, transmitters and studio equipment 180,571 169,788 Computer equipment and software 521,872 398,084 Furniture and other equipment 35,390 45,711 Construction in progress 64,732 25,073 1,158,039 1,025,636 Less: accumulated depreciation 375,946 213,934 Property, plant and equipment, net $ 782,093 $ 811,702 Indefinite-lived Intangible Assets The Company’s indefinite-lived intangible assets consist of FCC broadcast licenses in its Multiplatform Group segment. FCC broadcast licenses are granted to radio stations for up to eight years under the Telecommunications Act of 1996 (the “Act”). The Act requires the FCC to renew a broadcast license if the FCC finds that the station has served the public interest, convenience and necessity, there have been no serious violations of either the Communications Act of 1934 or the FCC’s rules and regulations by the licensee, and there have been no other serious violations which taken together constitute a pattern of abuse. The licenses may be renewed indefinitely at little or no cost. The Company does not believe that the technology of wireless broadcasting will be replaced in the foreseeable future. In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, Reorganizations , the Company applied the provisions of fresh start accounting to its Consolidated Financial Statements on the Effective Date. As a result, the Company adjusted its FCC licenses to their respective estimated fair values of $ 2,281.7 million as of the Effective Date (see Note 15, Fresh Start Accounting ). Annual Impairment Test on Indefinite-lived Intangible Assets The Company performs its annual impairment test on goodwill and indefinite-lived intangible assets, including FCC licenses, as of July 1 of each year. In addition, the Company tests for impairment of intangible assets whenever events and circumstances indicate that such assets might be impaired. The Company applied fresh start accounting as of May 1, 2019 in connection with its emergence from Chapter 11 bankruptcy, which required stating the Company’s intangible assets at estimated fair value. Such fair values recorded in fresh start 83 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS accounting reflected the economic conditions in place at the time of emergence. The economic downturn starting in March 2020 and the COVID-19 pandemic had an adverse impact on the trading values of the Company’s publicly-traded debt and equity and on the Company's first quarter 2020 results, and the continuing uncertainty surrounding the duration and magnitude of the economic impact of the pandemic had a negative impact on the Company's forecasted future cash flows. As a result, the Company performed an interim impairment test as of March 31, 2020 on its indefinite-lived FCC licenses. For purposes of initial recording in fresh start accounting and for annual impairment testing purposes, our FCC licenses are valued using the direct valuation approach, with the key assumptions being forecasted market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average asset within a market. In estimating the fair value of its FCC licenses, the Company obtained the most recent broadcast radio industry revenue projections which considered the impact of COVID-19 on future broadcast radio advertising revenue. Such projections reflected a significant and negative impact from COVID-19. In addition to using these broadcast radio industry revenue projections at the time, the Company used various sources to analyze media and broadcast industry market forecasts and other data in developing the assumptions used for purposes of performing impairment testing on our FCC licenses as of March 31, 2020. As a result of COVID-19, the United States economy was undergoing a period of economic disruption and uncertainty, which had caused, among other things, lower consumer and business spending. The uncertainty surrounding the projected demand for advertising negatively impacted the key assumptions used in the discounted cash flow models used to value the Company's FCC licenses. Considerations in developing these assumptions included the extent of the economic downturn, ranges of expected timing of recovery, discount rates and other factors. As a result of the Company’s assessment, the estimated fair value of FCC licenses was determined to be below their carrying values as of March 31, 2020. As a result, during the three months ended March 31, 2020, the Successor Company recognized a non-cash impairment charge of $ 502.7 million on its FCC licenses. The impairment tests for indefinite-lived intangible assets consist of a comparison between the fair value of the indefinite-lived intangible asset at the market level with its carrying amount. If the carrying amount of the indefinite-lived intangible asset exceeds its fair value, an impairment loss is recognized equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the indefinite-lived asset is its new accounting basis. The fair value of the indefinite-lived asset is determined using the direct valuation method as prescribed in ASC 805-20-S99, Business Combinations . Under the direct valuation method, the fair value of the indefinite-lived assets is calculated at the market level as prescribed by ASC 350-30-35, Intangibles - Goodwill and Other . The Company engaged a third-party valuation firm to assist it in the development of the assumptions and the Company’s determination of the fair value of its indefinite-lived intangible assets. The application of the direct valuation method attempts to isolate the income that is attributable to the indefinite-lived intangible asset alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. The Company forecasts revenue, expenses, and cash flows over a ten-year period for each of its markets in its application of the direct valuation method. The Company also calculates a “normalized” residual year which represents the perpetual cash flows of each market. The residual year cash flow was capitalized to arrive at the terminal value of the licenses in each market. Under the direct valuation method, it is assumed that rather than acquiring indefinite-lived intangible assets as part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the indefinite-lived intangible assets. The key assumptions used in applying the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry normalized information representing an average FCC license within a market. No further impairment was recognized as a result of the Company's annual impairment test on indefinite-lived intangible assets in 2021 or 2020. 84 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the period from January 1, 2019 through May 1, 2019, the Predecessor Company recognized non-cash impairment charges of $ 91.4 million in relation to indefinite-lived FCC licenses as a result of an increase in the WACC used in performing the annual impairment test. As a result of the fair value exercise applied in connection with fresh start accounting, the Successor Company opted to use a qualitative assessment as permitted by ASC 350, "Intangibles - Goodwill and Other" as of July 1, 2019 and no additional impairment charges were recorded. Other Intangible Assets Other intangible assets consists of definite-lived intangible assets, which primarily include customer and advertiser relationships, talent and representation contracts, trademarks and tradenames and other contractual rights, all of which are amortized over the shorter of either the respective lives of the agreements or over the period of time that the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The Company periodically reviews the appropriateness of the amortization periods related to its definite-lived intangible assets. These assets are recorded at amortized cost. The Company tests for possible impairment of other intangible assets whenever events and circumstances indicate that they might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. When specific assets are determined to be unrecoverable, the cost basis of the asset is reduced to reflect the current fair market value. The Company applied fresh start accounting as of May 1, 2019 in connection with its emergence from Chapter 11 bankruptcy which required stating the Company’s intangible assets at estimated fair value. Such fair values recorded in fresh start accounting reflected the economic conditions in place at the time of emergence. The economic downturn in March 2020 and the COVID-19 pandemic had an adverse impact on the Company's first quarter 2020 results, and the continuing uncertainty surrounding the duration and magnitude of the economic impact of the pandemic has had a negative impact on the Company's forecasted future cash flows. As a result, the Company performed interim impairment tests as of March 31, 2020 on its other intangible assets. Based on the Company’s test of recoverability using estimated undiscounted future cash flows, the carrying values of the Company’s definite-lived intangible assets were determined to be recoverable, and no impairment was recognized. The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of December 31, 2021 (Successor) and December 31, 2020 (Successor), respectively: (In thousands) Successor Company December 31, 2021 December 31, 2020 Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Customer / advertiser relationships 1,636,202 ( 457,627 ) 1,620,509 ( 286,066 ) Talent and other contracts 338,900 ( 117,337 ) 375,900 ( 84,065 ) Trademarks and tradenames 335,862 ( 88,252 ) 326,061 ( 54,358 ) Other 27,994 ( 9,142 ) 31,351 ( 4,840 ) Total $ 2,338,958 $ ( 672,358 ) $ 2,353,821 $ ( 429,329 ) Total amortization expense related to definite-lived intangible assets for the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019 was $ 280.6 million, $ 258.9 million and $ 171.5 million, respectively. Total amortization expense related to definite-lived intangible assets for the Predecessor Company for the period from January 1, 2019 through May 1, 2019 and the year ended December 31, 2019 was $ 12.7 million. 85 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As acquisitions and dispositions occur in the future, amortization expense may vary. The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years for definite-lived intangible assets: (In thousands) 2022 $ 254,713 2023 246,007 2024 244,582 2025 213,389 2026 201,467 Goodwill The following tables present the changes in the carrying amount of goodwill: (In thousands) Audio Audio & Media Services Group Consolidated Balance as of December 31, 2019 $ 3,221,468 $ 104,154 $ 3,325,622 Impairment ( 1,224,374 ) — ( 1,224,374 ) Acquisitions 44,606 — 44,606 Dispositions ( 164 ) — ( 164 ) Foreign currency — 245 245 Balance as of December 31, 2020 $ 2,041,536 $ 104,399 $ 2,145,935 (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Consolidated Balance as of January 1, 2021 $ 1,462,217 $ 579,319 $ 104,399 $ 2,145,935 Acquisitions 1,267 168,031 — 169,298 Dispositions ( 1,446 ) — — ( 1,446 ) Foreign currency — — ( 206 ) ( 206 ) Balance as of December 31, 2021 $ 1,462,038 $ 747,350 $ 104,193 $ 2,313,581 As a result of the leadership and organizational changes implemented in the first quarter 2021, as described in Note 1, Basis of Presentation , the Company re-evaluated its reporting units and allocated goodwill to these new reporting units. Refer to Note 12, Segment Data, for additional information on our segments. Goodwill was allocated to these new reporting units based on the relative fair values of these reporting units. Fair value was calculated using the expected present value of future cash flows, and included estimates, judgments and assumptions consistent with those of a market participant that management believes were appropriate in the circumstances. The estimates and judgments that most significantly affect the fair value calculations are assumptions related to long-term growth rates, expected profit margins and discount rates. The Company did not recast prior-period goodwill balances to the new reporting units as it was impractical to do so. The balance at December 31, 2019 (Successor) is net of cumulative impairments of $ 3.5 billion and $ 212.0 million in the Company’s Audio and Audio and Media Services segments, respectively. 86 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Goodwill Impairment The Company performs its annual impairment test on goodwill as of July 1 of each year. The Company also tests goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. As described in Note 1, Summary of Significant Accounting Policies , the economic disruption as a result of COVID-19 had a significant impact to the trading values of the Company’s publicly-traded debt and equity and on the Company's results in the latter half of the month ended March 31, 2020. In addition, the Company expected that the pandemic would continue to impact the operating and economic environment of our customers and would impact the near-term spending decisions of advertisers. As a result, the Company performed an interim impairment test on its indefinite-lived intangible assets as of March 31, 2020. The goodwill impairment test requires measurement of the fair value of the Company's reporting units, which is compared to the carrying value of the reporting units, including goodwill. Each reporting unit is valued using a discounted cash flow model which requires estimating future cash flows expected to be generated from the reporting unit, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires estimates and assumptions about sales, operating margins, growth rates and discount rates based on budgets, business plans, economic projections, anticipated future cash flows and marketplace data. As with the impairment testing performed on the Company’s FCC licenses described above, the significant deterioration in market conditions and uncertainty in the markets impacted the assumptions used to estimate the discounted future cash flows of the Company’s reporting units for purposes of performing the interim goodwill impairment test. There are inherent uncertainties related to these factors and management’s judgment in applying these factors. As discussed above, the carrying values of the Company’s reporting units were based on estimated fair values determined upon our emergence from bankruptcy on May 1, 2019, and the rapid deterioration in economic conditions resulting from the COVID-19 pandemic resulted in lower estimated fair values determined in connection with our interim goodwill impairment testing as of March 31, 2020. The estimated fair value of one of the Company's reporting units was below its carrying value, including goodwill. The macroeconomic factors discussed above had an adverse effect on the Company's estimated cash flows used in the discounted cash flow model. As a result, the Company recognized a non-cash impairment charge of $ 1.2 billion in the first quarter of 2020 to reduce goodwill. The Company engaged a third-party valuation firm to assist it in the development of the assumptions and the Company’s determination of the fair value of its reporting units as of July 1 2021 and 2020 as part of the annual impairment test. No impairment was recognized as a result of the Company's annual impairment tests on goodwill. As a result of the changes in the Company's management structure and its reportable segments effective at the beginning of 2021, the Company performed an interim impairment test on goodwill as of January 1, 2021. No impairment charges were recorded in the first quarter of 2021 in connection with the interim impairment test. 87 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 5 – INVESTMENTS The following table summarizes the Company's investments in nonconsolidated affiliates and other securities: (In thousands) Available-for-Sale Debt Securities Equity Method Investments Other Investments Marketable Equity Securities Total Investments Balance at December 31, 2019 (Successor) $ 33,128 $ 10,952 $ 16,989 $ 2,700 $ 63,769 Purchases of investments 9,595 1,523 7,629 — 18,747 Equity in loss — ( 379 ) — — ( 379 ) Disposals ( 194 ) ( 1,000 ) ( 1,194 ) Distributions received — ( 31 ) — — ( 31 ) Loss on investments ( 7,116 ) — ( 959 ) ( 1,271 ) ( 9,346 ) Other ( 3,957 ) — 2,965 — ( 992 ) Balance at December 31, 2020 (Successor) $ 31,456 $ 11,065 $ 26,624 $ 1,429 $ 70,574 Purchases of investments 7,263 690 15,368 — 23,321 Equity in loss — ( 1,138 ) — — ( 1,138 ) Disposals ( 426 ) — ( 1,172 ) — ( 1,598 ) Gain (loss) on investments, net ( 62 ) — ( 8,680 ) 2,801 ( 5,941 ) Other ( 4,363 ) — 5,070 — 707 Balance at December 31, 2021 (Successor) $ 33,868 $ 10,617 $ 37,210 $ 4,230 $ 85,925 Equity method investments in the table above are not consolidated, but are accounted for under the equity method of accounting. The Company records its investments in these entities on the balance sheet within “Other assets.” The Company's interests in the operations of equity method investments are recorded in the statement of comprehensive income (loss) as “Equity in loss of nonconsolidated affiliates.” Other investments includes various investments in companies for which there is no readily determinable market value. During 2021, the Successor Company recorded $ 17.5 million for investments made in seven companies in exchange for advertising services and cash. One of these investments is being accounted for under the equity method of accounting, three of these investments are being accounted for at amortized cost and three of these investments are notes receivable that are convertible into cash or equity. During 2020, the Successor Company recorded $ 15.0 million for investments made in seven companies in exchange for advertising services and cash. One of these investments is being accounted for under the equity method of accounting, two of these investments are being accounted for at amortized cost and four of these investments are notes receivable that are convertible into cash or equity. The Successor Company recognized barter revenue of $ 16.3 million and $ 10.5 million in the year ended December 31, 2021 and the year ended December 31, 2020, respectively. The Successor Company recognized non-cash investment impairments totaling $ 8.7 million and $ 5.7 million on our investments for the year ended December 31, 2021 and the year ended December 31, 2020 , respectively, which were recorded in “Gain (loss) on investments, net.” 88 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 6 – LONG-TERM DEBT Long-term debt outstanding as of December 31, 2021 (Successor) and December 31, 2020 (Successor) consisted of the following: (In thousands) Successor Company December 31, 2021 December 31, 2020 Term Loan Facility due 2026 $ 1,864,032 $ 2,080,259 Incremental Term Loan Facility due 2026 401,220 447,750 Asset-based Revolving Credit Facility due 2023 (1) — — 6.375 % Senior Secured Notes due 2026 800,000 800,000 5.25 % Senior Secured Notes due 2027 750,000 750,000 4.75 % Senior Secured Notes due 2028 500,000 500,000 Other secured subsidiary debt (2) 5,350 22,753 Total consolidated secured debt 4,320,602 4,600,762 8.375 % Senior Unsecured Notes due 2027 1,450,000 1,450,000 Other unsecured subsidiary debt 90 6,782 Original issue discount ( 13,454 ) ( 18,817 ) Long-term debt fees ( 18,370 ) ( 21,797 ) Total debt 5,738,868 6,016,930 Less: Current portion 673 34,775 Total long-term debt $ 5,738,195 $ 5,982,155 (1) As of December 31, 2021, the ABL Facility had a facility size of $ 450.0 million, no outstanding borrowings and $ 26.9 million of outstanding letters of credit, resulting in $ 423.1 million of borrowing base availability. (2) Other secured subsidiary debt consists of finance lease obligations maturing at various dates from 2022 through 2045. The Successor Company’s weighted average interest rate was 5.4 % and 5.5 % as of December 31, 2021 and December 31, 2020, respectively. The aggregate market value of the Successor Company’s debt based on market prices for which quotes were available was approximately $ 5.9 billion and $ 6.2 billion as of December 31, 2021 and December 31, 2020, respectively. Under the fair value hierarchy established by ASC 820-10-35, Fair Value Measurement , the fair market value of the Successor Company’s debt is classified as either Level 1 or Level 2. As of December 31, 2021 we were in compliance with all covenants related to the Company's debt agreements. Asset-based Revolving Credit Facility due 2023 On the Effective Date, iHeartCommunications, as borrower, entered into a Credit Agreement (the “ABL Credit Agreement”) with iHeartMedia Capital I, LLC, the direct parent of iHeartCommunications (“Capital I”), as guarantor, certain subsidiaries of iHeartCommunications, as guarantors, Citibank, N.A., as administrative and collateral agent, and the lenders party thereto from time to time, governing the ABL Facility. The ABL Facility includes a letter of credit sub-facility and a swingline loan sub-facility. Size and Availability The ABL Facility provides for a senior secured asset-based revolving credit facility in the aggregate principal amount of up to $ 450.0 million, with amounts available from time to time (including in respect of letters of credit) equal to the lesser of (A) the borrowing base, which equals the sum of (i) 90.0 % of the eligible accounts receivable of iHeartCommunications and the subsidiary guarantors and (ii) 100 % of qualified cash, each subject to customary reserves and eligibility criteria, and (B) the aggregate revolving credit commitments. Subject to certain conditions, iHeartCommunications may at any time request one or more increases in the amount of revolving credit commitments, in an amount up to the sum of (x) $ 150.0 million and (y) the amount by which the borrowing base exceeds the aggregate revolving credit commitments. As of December 31, 2021, 89 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS iHeartCommunications had no principal amounts outstanding under the ABL Facility, a facility size of $ 450.0 million and $ 26.9 million in outstanding letters of credit, resulting in $ 423.1 million of borrowing base availability. Interest Rate and Fees Borrowings under the ABL Facility bear interest at a rate per annum equal to the applicable margin plus, at iHeartCommunications’ option, either (1) a eurocurrency rate or (2) a base rate. The applicable margin for borrowings under the ABL Facility range from 1.25 % to 1.75 % for eurocurrency borrowings and from 0.25 % to 0.75 % for base-rate borrowings, in each case, depending on average excess availability under the ABL Facility based on the most recently ended fiscal quarter. In addition to paying interest on outstanding principal under the ABL Facility, iHeartCommunications is required to pay a commitment fee to the lenders under the ABL Facility in respect of the unutilized commitments thereunder. The commitment fee rate ranges from 0.25 % to 0.375 % per annum dependent upon average unused commitments during the prior quarter. iHeartCommunications may also pay customary letter of credit fees. Maturity Borrowings under the ABL Facility will mature, and lending commitments thereunder will terminate on June 14, 2023. Prepayments If at any time, the sum of the outstanding amounts under the ABL Facility exceeds the lesser of (i) the borrowing base and (ii) the aggregate commitments under the facility (such lesser amount, the “line cap”), iHeartCommunications is required to repay outstanding loans and cash collateralize letters of credit in an aggregate amount equal to such excess. iHeartCommunications may voluntarily repay outstanding loans under the ABL Facility at any time without premium or penalty, other than customary “breakage” costs with respect to eurocurrency rate loans. Any voluntary prepayments made by iHeartCommunications will not reduce iHeartCommunications’ commitments under the ABL Facility. Guarantees and Security The ABL Facility is guaranteed by, subject to certain exceptions, the guarantors of iHeartCommunications’ Term Loan Facility. All obligations under the ABL Facility, and the guarantees of those obligations, are secured by a perfected security interest in the accounts receivable and related assets of iHeartCommunications’ and the guarantors’ accounts receivable, qualified cash and related assets and proceeds thereof that is senior to the security interest of iHeartCommunications’ Term Loan Facility in such accounts receivable, qualified cash and related assets and proceeds thereof, subject to permitted liens and certain exceptions. Certain Covenants and Events of Default If borrowing availability is less than the greater of (a) $ 40.0 million and (b) 10 % of the aggregate commitments under the ABL Facility, in each case, for two consecutive business days (a “Trigger Event”), iHeartCommunications will be required to comply with a minimum fixed charge coverage ratio of at least 1.00 to 1.00, and must continue to comply with this minimum fixed charge coverage ratio for fiscal quarters ending after the occurrence of the Trigger Event until borrowing availability exceeds the greater of (x) $ 40.0 million and (y) 10 % of the aggregate commitments under the ABL Facility, in each case, for 20 consecutive calendar days, at which time the Trigger Event shall no longer be deemed to be occurring. Term Loan Facility due 2026 On the Effective Date, iHeartCommunications, as borrower, entered into a Credit Agreement (the “Term Loan Credit Agreement”) with Capital I, as guarantor, certain subsidiaries of iHeartCommunications, as guarantors, and Bank of America, N.A.., as succesor administrative and collateral agent, governing the Term Loan Facility. On the Effective Date, iHeartCommunications issued an aggregate of approximately $ 3.5 billion principal amount of senior secured term loans under the Term Loan Facility to certain Claimholders pursuant to the Plan of Reorganization. The Term Loan Facility matures on May 1, 2026. 90 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As described below, on August 7, 2019, the proceeds from the issuance of $ 750.0 million in aggregate principal amount of 5.25 % Senior Secured Notes due 2027 were used, together with cash on hand, to prepay at par $ 740.0 million of borrowings outstanding under the Term Loan Facility. On November 22, 2019, the proceeds from the issuance of $ 500.0 million in aggregate principal amount of 4.75 % Senior Secured Notes due 2028 were used, together with cash on hand, to prepay at par $ 500.0 million of borrowings outstanding under the Term Loan Facility. On February 3, 2020, iHeartCommunications entered into an amendment to the Term Loan Credit Agreement which reduced the interest rate to LIBOR plus a margin of 3.00 % (from LIBOR plus a margin of 4.00 %), or the Base Rate (as defined in the Term Loan Credit Agreement) plus a margin of 2.00 % (from Base Rate plus a margin of 3.00 %) and modified certain covenants contained in the Term Loan Credit Agreement. In connection with the Term Loan Facility amendment in February 2020, iHeartCommunications also prepaid at par $ 150.0 million of borrowings outstanding under the Term Loan Facility with cash on hand. On July 16, 2020, iHeartCommunications entered into Amendment No. 2 to issue $ 450.0 million of incremental term loan commitments (the “Incremental Term Loan Facility”), resulting in net proceeds of $ 425.8 million, after original issue discount and debt issuance costs. A portion of the proceeds from the issuance were used to repay the balance outstanding under the ABL Facility of $ 235.0 million, with the remaining $ 190.6 million of the proceeds available for general corporate purposes. On July 16, 2021, iHeartCommunications, Inc. entered into Amendment No. 3 which reduced the interest rate of its Incremental Term Loan Facility due 2026 to a Eurocurrency Rate of LIBOR plus a margin of 3.25 % and floor of 0.50 % (from LIBOR plus a margin of 4.00 % and floor of 0.75 %). The Base Rate interest amount was reduced to Base Rate plus a margin of 2.25 % and floor of 1.50 %. In connection with the amendment, iHeartCommunications voluntarily prepaid $ 250.0 million of borrowings outstanding under the Term Loan credit facilities with cash on hand, resulting in a reduction of $ 44.3 million of the existing Incremental Term Loan Facility due 2026 and $ 205.7 million of the Term Loan Facility due 2026. Under the terms of the Term Loan Credit Agreement, iHeartCommunications made quarterly principal payments of $ 6.4 million during the three months ended September 30, 2020, December 31, 2020, March 31, 2021 and June 30, 2021, and previously made payments of $ 5.25 million during the three months ended March 31, 2020 and June 30, 2020. Following the prepayment of $ 250.0 million of borrowings outstanding under the Term Loan credit facilities on July 16, 2021, iHeartCommunications is no longer required to make such quarterly payments. Interest Rate and Fees Following the amendment made on February 3, 2020, the loans under the Term Loan Facility due 2026 bear interest at a rate per annum equal to LIBOR plus a margin of 3.00 %, or the Base Rate plus a margin of 2.00 %. Following the amendment made on July 16, 2021, the incremental loans under the Incremental Term Loan Facility due 2026 have an interest rate of LIBOR plus a margin of 3.25 % and floor of 0.50 % for Eurocurrency Rate Loans and Base Rate plus a margin of 2.25 % and floor of 1.50 % for Base Rate Loans. Collateral and Guarantees The Term Loan Facility is guaranteed by Capital I and each of iHeartCommunications’ existing and future material wholly-owned restricted subsidiaries, subject to certain exceptions. All obligations under the Term Loan Facility, and the guarantees of those obligations, are secured, subject to permitted liens and other exceptions, by a first priority lien in substantially all of the assets of iHeartCommunications and all of the guarantors’ assets, including a lien on the capital stock of iHeartCommunications and certain of its subsidiaries owned by a guarantor, other than the accounts receivable and related assets of iHeartCommunications and all of the subsidiary guarantors, and by a second priority lien on accounts receivable and related assets securing iHeartCommunications’ ABL Facility. 91 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Prepayments iHeartCommunications is required to prepay outstanding term loans under the Term Loan Facility, subject to certain exceptions, with: • 50 % (which percentage may be reduced to 25 % and to 0 % based upon iHeartCommunications’ first lien leverage ratio) of iHeartCommunications’ annual excess cash flow, subject to customary credits, reductions and exclusions; • 100 % (which percentage may be reduced to 50 % and 0 % based upon iHeartCommunications’ first lien leverage ratio) of the net cash proceeds of sales or other dispositions of the assets of iHeartCommunications or its wholly owned restricted subsidiaries, subject to reinvestment rights and certain other exceptions; and • 100 % of the net cash proceeds of any incurrence of debt, other than debt permitted under the Term Loan Facility. iHeartCommunications may voluntarily repay outstanding loans under the Term Loan Facility at any time, without prepayment premium or penalty, subject to customary “breakage” costs with respect to eurocurrency loans. Certain Covenants and Events of Default The Term Loan Facility does not include any financial covenants. However, the Term Loan Facility includes negative covenants that, subject to significant exceptions, limit Capital I’s ability and the ability of its restricted subsidiaries (including iHeartCommunications) to, among other things: • incur additional indebtedness; • create liens on assets; • engage in mergers, consolidations, liquidations and dissolutions; • sell assets; • pay dividends and distributions or repurchase Capital I’s capital stock; • make investments, loans, or advances; • prepay certain junior indebtedness; • engage in certain transactions with affiliates; • amend material agreements governing certain junior indebtedness; and • change lines of business. The Term Loan Facility includes certain customary representations and warranties, affirmative covenants and events of default, including but not limited to, payment defaults, breach of representations and warranties, covenant defaults, cross defaults to certain indebtedness, certain bankruptcy-related events, certain events under ERISA, material judgments and a change of control. If an event of default occurs, the lenders under the Term Loan Facility are entitled to take various actions, including the acceleration of all amounts due under the Term Loan Facility and all actions permitted to be taken under the loan documents relating thereto or applicable law. 6.375 % Senior Secured Notes due 2026 On the Effective Date, iHeartCommunications entered into an indenture (the “Senior Secured Notes Indenture”) with Capital I, as guarantor, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee and collateral agent, governing the $ 800.0 million aggregate principal amount of 6.375 % Senior Secured Notes due 2026 that were issued to certain Claimholders pursuant to the Plan of Reorganization. The 6.375 % Senior Secured Notes mature on May 1, 2026 and bear interest at a rate of 6.375 % per annum, payable semi-annually in arrears on February 1 and August 1 of each year. The 6.375 % Senior Secured Notes are guaranteed on a senior secured basis by Capital I and the subsidiaries of iHeartCommunications that guarantee the Term Loan Facility or other credit facilities or capital markets debt securities. The 6.375 % Senior Secured Notes and the related guarantees rank equally in right of payment with all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is not expressly subordinated to the 6.375 % Senior Secured Notes 92 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (including the Term Loan Facility, the 5.25 % Senior Secured Notes, the 4.75 % Senior Secured Notes and the Senior Unsecured Notes), effectively equal with iHeartCommunications’ and the guarantors’ existing and future indebtedness secured by a first priority lien on the collateral securing the 6.375 % Senior Secured Notes, effectively subordinated in right of payment to all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is secured by assets that are not part of the collateral securing the 6.375 % Senior Secured Notes, to the extent of the value of such assets, and structurally subordinated in right of payment to all existing and future indebtedness and other liabilities of any subsidiary of iHeartCommunications that is not a guarantor of the 6.375 % Senior Secured Notes. The 6.375 % Senior Secured Notes and the related guarantees are secured, subject to permitted liens and certain other exceptions, by a first priority lien on the capital stock of iHeartCommunications and substantially all of the assets of iHeartCommunications and the guarantors, other than accounts receivable and related assets, and by a second priority lien on accounts receivable and related assets securing the ABL Facility. iHeartCommunications may redeem the 6.375 % Senior Secured Notes at its option, in whole or in part, at any time prior to May 1, 2022, at a price equal to 100 % of the principal amount of the 6.375 % Senior Secured Notes being redeemed, plus an applicable premium and plus accrued and unpaid interest to the redemption date. iHeartCommunications may redeem the 6.375 % Senior Secured Notes at its option, in whole or in part, on or after May 1, 2022, at the redemption prices set forth in the 6.375 % Senior Secured Notes Indenture plus accrued and unpaid interest to the redemption date. At any time prior to May 1, 2022, iHeartCommunications may redeem at its option, up to 40 % of the aggregate principal amount of the 6.375 % Senior Secured Notes at a redemption price equal to 106.375 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the proceeds of one or more equity offerings. The 6.375 % Senior Secured Notes Indenture contains covenants that limit the ability of Capital I and its restricted subsidiaries, including iHeartCommunications, to, among other things: • incur or guarantee additional debt or issue certain preferred stock; • create liens on certain assets; • redeem, purchase or retire subordinated debt; • make certain investments; • create restrictions on the payment of dividends or other amounts from iHeartCommunications’ restricted subsidiaries; • enter into certain transactions with affiliates; • merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of iHeartCommunications’ assets; • sell certain assets, including capital stock of iHeartCommunications’ subsidiaries; • designate iHeartCommunications’ subsidiaries as unrestricted subsidiaries, and • pay dividends, redeem or repurchase capital stock or make other restricted payments. 5.25 % Senior Secured Notes due 2027 On August 7, 2019, iHeartCommunications entered into an indenture (the “ 5.25 % Senior Secured Notes Indenture”) with Capital I, as guarantor, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee and collateral agent, governing the $ 750.0 million aggregate principal amount of 5.25 % Senior Secured Notes due 2027 that were issued in a private placement to qualified institutional buyers under Rule 144A under the Securities Act, and to persons outside the United States pursuant to Regulation S under the Securities Act. The 5.25 % Senior Secured Notes mature on August 15, 2027 and bear interest at a rate of 5.25 % per annum. Interest is payable semi-annually on February 15 and August 15 of each year. The 5.25 % Senior Secured Notes are guaranteed on a senior secured basis by Capital I and the subsidiaries of iHeartCommunications that guarantee the Term Loan Facility. The 5.25 % Senior Secured Notes and the related guarantees rank equally in right of payment with all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is not expressly subordinated to the 5.25 % Senior Secured Notes (including the Term Loan Facility, the 6.375 % Senior Secured Notes, the 4.75 % Senior Secured Notes and the Senior Unsecured Notes), effectively equal with iHeartCommunications’ and the guarantors’ existing and future indebtedness secured by a first priority lien on the collateral securing the 5.25 % Senior Secured Notes, effectively subordinated to all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is secured by assets that are not part of the collateral securing the 5.25 % Senior Secured Notes, to the extent of the value of 93 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS such collateral, and structurally subordinated to all existing and future indebtedness and other liabilities of any subsidiary of iHeartCommunications that is not a guarantor of the 5.25 % Senior Secured Notes. The 5.25 % Senior Secured Notes and the related guarantees are secured, subject to permitted liens and certain other exceptions, by a first priority lien on the capital stock of iHeartCommunications and substantially all of the assets of iHeartCommunications and the guarantors, other than accounts receivable and related assets, and by a second priority lien on accounts receivable and related assets securing the ABL Facility. iHeartCommunications may redeem the 5.25 % Senior Secured Notes at its option, in whole or part, at any time prior to August 15, 2022, at a price equal to 100 % of the principal amount of the 5.25 % Senior Secured Notes redeemed, plus a make-whole premium, plus accrued and unpaid interest to the redemption date. iHeartCommunications may redeem the 5.25 % Senior Secured Notes, in whole or in part, on or after August 15, 2022, at the redemption prices set forth in the 5.25 % Senior Secured Notes Indenture plus accrued and unpaid interest to the redemption date. At any time on or before August 15, 2022, iHeartCommunications may elect to redeem up to 40 % of the aggregate principal amount of the 5.25 % Senior Secured Notes at a redemption price equal to 105.25 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. The 5.25 % Senior Secured Notes Indenture contains covenants that limit the ability of iHeartCommunications and its restricted subsidiaries, to, among other things: • incur or guarantee additional debt or issue certain preferred stock; • create liens on certain assets; • redeem, purchase or retire subordinated debt; • make certain investments; • create restrictions on the payment of dividends or other amounts from iHeartCommunications’ restricted subsidiaries; • enter into certain transactions with affiliates; • merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of iHeartCommunications’ assets; • sell certain assets, including capital stock of iHeartCommunications’ subsidiaries; • designate iHeartCommunications’ subsidiaries as unrestricted subsidiaries, and • pay dividends, redeem or repurchase capital stock or make other restricted payments. 4.75 % Senior Secured Notes due 2028 On November 22, 2019, iHeartCommunications entered into an indenture (the “ 4.75 % Senior Secured Notes Indenture”) with Capital I, as guarantor, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee and collateral agent, governing the $ 500.0 million aggregate principal amount of 4.75 % Senior Secured Notes due 2028 that were issued in a private placement to qualified institutional buyers under Rule 144A under the Securities Act, and to persons outside the United States pursuant to Regulation S under the Securities Act. The 4.75 % Senior Secured Notes mature on January 15, 2028 and bear interest at a rate of 4.75 % per annum. Interest is payable semi-annually on January 15 and July 15 of each year. The 4.75 % Senior Secured Notes are guaranteed on a senior secured basis by Capital I and the subsidiaries of iHeartCommunications that guarantee the Term Loan Facility. The 4.75 % Senior Secured Notes and the related guarantees rank equally in right of payment with all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is not expressly subordinated to the 4.75 % Senior Secured Notes (including the Term Loan Facility, the 6.375 % Senior Secured Notes, the 5.25 % Senior Secured Notes and the Senior Unsecured Notes), effectively equal with iHeartCommunications’ and the guarantors’ existing and future indebtedness secured by a first priority lien on the collateral securing the 4.75 % Senior Secured Notes, effectively subordinated to all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is secured by assets that are not part of the collateral securing the 4.75 % Senior Secured Notes, to the extent of the value of such collateral, and structurally subordinated to all existing and future indebtedness and other liabilities of any subsidiary of iHeartCommunications that is not a guarantor of the 4.75 % Senior Secured Notes. The 4.75 % Senior Secured Notes and the related guarantees are secured, subject to permitted liens and certain other exceptions, by a first priority lien on the capital stock of iHeartCommunications and substantially all of the assets of iHeartCommunications 94 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and the guarantors, other than accounts receivable and related assets, and by a second priority lien on accounts receivable and related assets securing the ABL Facility. iHeartCommunications may redeem the 4.75 % Senior Secured Notes at its option, in whole or part, at any time prior to January 15, 2023, at a price equal to 100 % of the principal amount of the 4.75 % Senior Secured Notes redeemed, plus a make-whole premium, plus accrued and unpaid interest to the redemption date. iHeartCommunications may redeem the 4.75 % Senior Secured Notes, in whole or in part, on or after January 15, 2023, at the redemption prices set forth in the 4.75 % Senior Secured Notes Indenture plus accrued and unpaid interest to the redemption date. At any time on or before November 15, 2022, iHeartCommunications may elect to redeem up to 40 % of the aggregate principal amount of the 4.75 % Senior Secured Notes at a redemption price equal to 104.75 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the net proceeds of one or more equity offerings. The 4.75 % Senior Secured Notes Indenture contains covenants that limit the ability of iHeartCommunications and its restricted subsidiaries, to, among other things: • incur or guarantee additional debt or issue certain preferred stock; • create liens on certain assets; • redeem, purchase or retire subordinated debt; • make certain investments; • create restrictions on the payment of dividends or other amounts from iHeartCommunications’ restricted subsidiaries; • enter into certain transactions with affiliates; • merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of iHeartCommunications’ assets; • sell certain assets, including capital stock of iHeartCommunications’ subsidiaries; • designate iHeartCommunications’ subsidiaries as unrestricted subsidiaries, and • pay dividends, redeem or repurchase capital stock or make other restricted payments. 8.375 % Senior Unsecured Notes due 2027 On the Effective Date, iHeartCommunications entered into an indenture (the “Senior Unsecured Notes Indenture”) with Capital I, as guarantor, the subsidiary guarantors party thereto, and U.S. Bank National Association, as trustee, governing the $ 1,450.0 million aggregate principal amount of 8.375 % Senior Notes due 2027 that were issued to certain Claimholders pursuant to the Plan of Reorganization. The Senior Unsecured Notes mature on May 1, 2027 and bear interest at a rate of 8.375 % per annum, payable semi-annually in arrears on May 1 and November 1 of each year. The Senior Unsecured Notes are guaranteed on a senior unsecured basis by Capital I and the subsidiaries of iHeartCommunications that guarantee the Term Loan Facility or other credit facilities or capital markets debt securities. The Senior Unsecured Notes and the related guarantees rank equally in right of payment with all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is not expressly subordinated to the Senior Unsecured Notes, effectively subordinated to all of iHeartCommunications’ and the guarantors’ existing and future indebtedness that is secured (including the 6.375 % Senior Secured Notes, the 5.25 % Senior Secured Notes, the 4.75 % Senior Secured Notes and borrowings under the ABL Facility and the Term Loan Facility), to the extent of the value of the collateral securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other liabilities of any subsidiary of iHeartCommunications that is not a guarantor of the Senior Unsecured Notes. iHeartCommunications may redeem the Senior Unsecured Notes at its option, in whole or in part, at any time prior to May 1, 2022, at a price equal to 100 % of the principal amount of the Senior Unsecured Notes being redeemed, plus an applicable premium and plus accrued and unpaid interest to the redemption date. iHeartCommunications may redeem the Senior Unsecured Notes at its option, in whole or in part, on or after May 1, 2022, at the redemption prices set forth in the Senior Unsecured Notes Indenture plus accrued and unpaid interest to the redemption date. At any time prior to May 1, 2022, iHeartCommunications redeem at its option, up to 40 % of the aggregate principal amount of the Senior Unsecured Notes at a redemption price equal to 108.375 % of the principal amount thereof, plus accrued and unpaid interest to the redemption date, with the proceeds of one or more equity offerings. 95 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Senior Unsecured Notes Indenture contains covenants that limit the ability of Capital I and its restricted subsidiaries, including iHeartCommunications, to, among other things: • incur or guarantee additional debt or issue certain preferred stock; • create liens on certain assets; • redeem, purchase or retire subordinated debt; • make certain investments; • create restrictions on the payment of dividends or other amounts from iHeartCommunications’ restricted subsidiaries; • enter into certain transactions with affiliates; • merge or consolidate with another person, or sell or otherwise dispose of all or substantially all of iHeartCommunications’ assets; • sell certain assets, including capital stock of iHeartCommunications’ subsidiaries; • designate iHeartCommunications’ subsidiaries as unrestricted subsidiaries, and • pay dividends, redeem or repurchase capital stock or make other restricted payments. Mandatorily Redeemable Preferred Stock On the Effective Date, in accordance with the Plan of Reorganization, iHeart Operations issued 60,000 shares of its Series A Perpetual Preferred Stock, par value $ 0.001 per share (the "iHeart Operations Preferred Stock"), having an aggregate initial liquidation preference of $ 60.0 million for a cash purchase price of $ 60.0 million. The iHeart Operations Preferred Stock was purchased by a third party investor. On October 27, 2021, iHeart Operations repurchased all of the iHeart Operations Preferred Stock with cash on hand for an aggregate price of $ 64.4 million (“Redemption Price”), including accrued dividends, upon obtaining consent from the third party investor. The Redemption Price included a negotiated make-whole premium as the redemption occurred prior to the optional redemption date set forth in the Certificate of Designation governing the iHeart Operations Preferred Stock. Subsequent to the transaction, the preferred shares were retired and cancelled and are no longer outstanding. Holders of the iHeart Operations Preferred Stock were entitled to receive, as declared by the board of directors of iHeart Operations, in respect of each share, cumulative dividends accruing daily and payable quarterly at a per annum rate equal to the sum of (1) the greater of (a) LIBOR and (b) two percent, plus (2) the applicable margin, which was calculated as a function of iHeartMedia’s consolidated total leverage ratio. Dividends were payable on the liquidation preference. Unless all accrued and unpaid dividends on the iHeart Operations Preferred Stock were paid in full, no dividends or distributions could be paid on any equity interests of iHeartMedia or its subsidiaries other than iHeart Operations, and no such equity interests could be repurchased or redeemed (subject to certain exceptions that were specified in the certificate of designation for the iHeart Operations Preferred Stock). Dividends, if declared, were payable on March 31, June 30, September 30 and December 31 of each year (or on the next business day if such date is not a business day). During the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 1, 2019 through December 31, 2019, the Successor Company recognized $ 7.5 million, $ 9.3 million and $ 5.5 million, respectively, of interest expense related to dividends on mandatorily redeemable preferred stock. 96 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Future Maturities of Long-term Debt Future maturities of long-term debt at December 31, 2021 are as follows: (in thousands) 2022 $ 673 2023 639 2024 338 2025 220 2026 3,065,381 Thereafter 2,703,441 Total (1) $ 5,770,692 (1) Excludes original issue discount of $ 13.5 million and long-term debt fees of $ 18.4 million, which are amortized through interest expense over the life of the underlying debt obligations.. Surety Bonds and Letters of Credit As of December 31, 2021, iHeartCommunications had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $ 11.6 million , $ 27.3 million and $ 0.2 million, respectively. These surety bonds, letters of credit and bank guarantees relate to various operational matters including insurance, lease and performance bonds as well as other items. NOTE 7 – COMMITMENTS AND CONTINGENCIES Commitments and Contingencies The Company accounts for its rentals that include renewal options, annual rent escalation clauses, minimum franchise payments and maintenance related to displays under the guidance in ASC 842, Leases . The Company accounts for annual rent escalation clauses included in the lease term on a straight-line basis under the guidance in ASC 842, Leases . The Company considers renewal periods in determining its lease terms if at inception of the lease there is reasonable assurance the lease will be renewed. Expenditures for maintenance are charged to operations as incurred, whereas expenditures for renewal and betterments are capitalized. Non-cancelable contracts that provide the lessor with a right to fulfill the arrangement with property, plant and equipment not specified within the contract are not a lease and have been included within non-cancelable contracts within the table below. The Company leases office space, certain broadcasting facilities and equipment under long-term operating leases. The Company accounts for these leases in accordance with the policies described above. Rent expense charged to operations for the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor) was $ 203.5 million, $ 198.2 million, $ 128.3 million and $ 59.2 million, respectively. 97 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 31, 2021, the Company's future minimum payments under non-cancelable contracts in excess of one year and employment/talent contracts consist of the following: (In thousands) Non-Cancelable Employment/Talent Contracts Contracts 2022 $ 218,441 $ 83,344 2023 162,064 63,777 2024 63,421 63,052 2025 31,713 39,096 2026 5,591 13,000 Thereafter 5,810 — Total $ 487,040 $ 262,269 The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations. Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of its litigation arises in the following contexts: commercial disputes; defamation matters; employment and benefits related claims; governmental fines; intellectual property claims; and tax disputes. Alien Ownership Restrictions and FCC Petition for Declaratory Ruling The Communications Act and FCC regulation prohibit foreign entities and individuals from having direct or indirect ownership or voting rights of more than 25 percent in a corporation controlling the licensee of a radio broadcast station unless the FCC finds greater foreign ownership to be in the public interest. Under the Plan of Reorganization, the Company committed to file a petition for declaratory ruling (the “PDR”) requesting the FCC to permit the Company to be up to 100% foreign-owned. On November 5, 2020, the FCC issued the 2020 Declaratory Ruling, which granted the relief requested by the PDR, subject to certain conditions, as described further in Note 9, Stockholder's Equity . On November 9, 2020, the Company notified the holders of Special Warrants of the commencement of an exchange process (the “Exchange Notice”). On January 8, 2021, the Company exchanged a portion of the outstanding Special Warrants into Class A common stock or Class B common stock, in compliance with the Declaratory Ruling, the Communications Act and FCC rules (the “Exchange”). 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. See “Item 1. Business – Regulation of Our Business, Alien Ownership Restrictions” of our Annual Report on Form 10-K for the year ended December 31, 2020 and "Part II, Item 1A. Risk Factors - Regulatory, Legislative and Litigation Risks, Regulations imposed by the Communications Act and the FCC limit the amount of foreign individuals or entities that may invest in our capital stock without FCC approval" in this Quarterly Report on Form 10-Q for additional information. On March 8, 2021, the Company filed the Remedial PDR with the FCC. The Remedial PDR relates to the acquisition by Global Media & Entertainment Ltd (f/k/a Honeycomb Investments Limited) ("Global Investments") of the Company’s Class A Common Stock. Specifically, on February 5, 2021, Global Investments, The Global Media & Entertainment Investments Trust (the "GMEI Trust"), James Hill (as trustee of the GMEI Trust), Simon Groom (as trustee of the GMEI Trust) and Michael Tabor (as beneficiary of the GMEI Trust) (together with Global Investments and any affiliates or third parties to whom they may assign or transfer any of their rights or interests, the "GMEI Investors") filed a Schedule 13D with the SEC, in which the 98 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS GMEI Investors disclosed beneficial ownership of 9,631,329 shares of the Company’s Class A Common Stock, which at that time represented approximately 8.7 % of the Company’s outstanding Class A Common Stock. This ownership interest was inconsistent with the FCC’s foreign ownership rules and the 2020 Declaratory Ruling issued by the FCC relating to the Company’s foreign ownership on November 5, 2020, both of which limit a foreign investor in the GMEI Investors’ position to holding no more than 5 % of the Company’s voting equity or total equity without prior FCC approval. The Remedial PDR, which was filed pursuant to the rules and regulations of the FCC, sought (a) specific approval for the more than 5 % equity and voting interests in the Company presently held by the GMEI Investors and (b) as amended, advance approval for the GMEI Investors to increase their equity and voting interest in the Company up to any non-controlling amount not to exceed 14.99 %. On March 26, 2021, the FCC conditioned the approval of applications by the Company to acquire certain radio stations, which were pending prior to the GMEI Investors’ Schedule 13D filing, on the Company taking certain actions with respect to the GMEI Investors' rights as stockholders of the Company. On that same date, and in order to implement the conditions required by the FCC, the Company’s Board of Directors (the “Board”) resolved to take certain actions to limit the rights of the GMEI Investors, including, but not limited to, suspending all voting rights of GMEI Investors until and unless the FCC releases a declaratory ruling granting specific approval for each of the GMEI Investors to hold more than 5 percent of the equity and/or voting interests of the Company. On December 22, 2021, the FCC issued the “GMEI Declaratory Ruling" which granted the Remedial PDR. Subject to certain conditions set forth therein, the GMEI Declaratory Ruling (a) grants specific approval for the more than 5 % equity and/or voting interests in the Company presently held by the GMEI Investors, (b) grants advance approval for the GMEI Investors to increase their equity and/or voting interests in the Company up to any non-controlling amount not to exceed 14.99 %, and (c) restates the terms of the 2020 Declaratory Ruling, including that the Company may have up to 100 % of its voting stock and equity owned by non-U.S. individuals and entities. At such time, the actions previously taken by the Board of Directors to implement the conditions required by the FCC during the pendency of the Remedial PDR ceased to apply. NOTE 8 – INCOME TAXES Significant components of the provision for income tax benefit (expense) from continuing operations are as follows: (In thousands) Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 Current – Federal $ ( 2,169 ) $ ( 652 ) $ ( 172 ) $ 2,264 Current – foreign ( 2,177 ) ( 1,674 ) ( 754 ) ( 282 ) Current – state ( 14,919 ) 1,680 ( 10,045 ) 74,762 Total current benefit (expense) ( 19,265 ) ( 646 ) ( 10,971 ) 76,744 Deferred – Federal 932 172,302 ( 14,470 ) ( 109,511 ) Deferred – foreign 976 28 23 ( 8 ) Deferred – state 8,966 11,939 5,327 ( 6,320 ) Total deferred benefit (expense) 10,874 184,269 ( 9,120 ) ( 115,839 ) Income tax benefit (expense) $ ( 8,391 ) $ 183,623 $ ( 20,091 ) $ ( 39,095 ) The current tax expense recorded in the period ended December 31, 2021 was primarily related to federal and state and local tax expenses incurred due to taxable income in excess of available net operating losses during the period. 99 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The current tax expense recorded in the period ended December 31, 2020 was primarily related to local country foreign tax expense in certain jurisdictions partially offset by adjustments to the Company’s reserves for unrecognized tax benefits in certain state jurisdictions. The current tax expense of $ 11.0 million recorded in the Successor period from May 2, 2019 through December 31, 2019 was primarily related to state income taxes on operating profits generated in certain state jurisdictions during the period. The federal current tax expense for the Successor period was not significant due to the net operating loss carryforwards that were available to offset taxable income. The current tax benefit of $ 76.7 million recorded for the Predecessor period from January 1, 2019 through May 1, 2019 relates primarily to the effective settlement of liabilities for unrecognized tax benefits that were discharged upon the Company's emergence from bankruptcy for certain state jurisdictions. The deferred tax benefit of $ 10.9 million recorded in the period ended December 31, 2021 related primarily to the difference of book in excess of tax depreciation and amortization expense during the period and the disallowance of interest expense deductions under Section 163(j) of the Internal Revenue Code. These benefits were partially offset by the utilization of net operating losses during the current period and the recording of valuation allowance adjustments against certain federal and state deferred tax assets for disallowed interest carryforwards due to the uncertainty of the ability to realize those assets in future periods. The deferred tax benefit of $ 184.3 million recorded in the period ended December 31, 2020 related primarily to the current period net operating losses and a reduction in deferred tax liabilities recorded in connection with the impairment of our FCC licenses discussed in Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . The deferred tax expense of $ 9.1 million recorded in the Successor period from May 2, 2019 through December 31, 2019 related primarily to the utilization of federal and state net operating loss carryforwards which offset taxable income during the period. The deferred tax expense of $ 115.8 million recorded in the Predecessor period from January 1, 2019 through May 1, 2019 related primarily to the impact of reorganization and fresh start adjustments described in Note 15, Fresh Start Accounting . On March 27, 2020, the CARES Act, which included numerous tax provisions, was signed into law. The CARES Act included certain temporary relief provisions with respect to the application of the Section 163(j) interest deduction limitation including the ability to elect to use the Company’s 2019 Adjusted Taxable Income (as defined under Section 163(j)) for purposes of calculating the 2020 interest deduction limitation. This provision of the CARES Act resulted in an increase to allowable interest deductions of $ 179.4 million during 2020. The other federal income tax provisions within the CARES Act did not materially impact the Company’s financial statements. On December 27, 2020, the Consolidated Appropriations Act was signed into law in order to provide further stimulus and support to those affected by the COVID-19 pandemic. The tax provisions included within the Consolidated Appropriations Act did not materially impact the Company’s financial statements in the current year. As a result of steps in the Plan of Reorganization described in Note 14, Emergence from Voluntary Reorganization Under Chapter 11 Proceedings , and the fresh start accounting adjustments described in Note 15, Fresh Start Accounting , there were significant tax adjustments recorded in the period from January 1, 2019 through May 1, 2019. The Company recorded income tax benefits of $ 102.9 million for reorganization adjustments in the Predecessor period ended May 1, 2019, primarily consisting of: (1) $ 483.0 million in 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) $ 275.2 million in tax benefit for the reduction in deferred tax liabilities attributed primarily to long-term debt that was discharged upon emergence; (3) $ 62.3 million in tax benefit for the effective settlement of liabilities for unrecognized tax benefits that were discharged upon emergence; and (4) $ 263.8 million in tax benefit for the reduction in valuation allowance resulting from the adjustments described above. The Company recorded income tax expense of $ 185.4 million for fresh start adjustments in the Predecessor period ended May 1, 2019, 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. 100 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Significant components of the Company's deferred tax liabilities and assets as of December 31, 2021 and 2020 are as follows: Successor Company (In thousands) 2021 2020 Deferred tax liabilities: Intangibles and fixed assets $ 931,406 $ 1,005,116 Operating lease right-of-use assets 187,938 204,953 Total deferred tax liabilities 1,119,344 1,210,069 Deferred tax assets: Accrued expenses 22,003 23,052 Net operating loss carryforwards 157,095 218,290 Interest expense carryforwards 337,660 315,304 Operating lease liabilities 210,227 209,010 Capital loss carryforwards 1,651,413 1,662,174 Investments 18,956 15,378 Bad debt reserves 13,078 15,247 Other 4,833 13,228 Total gross deferred tax assets 2,415,265 2,471,683 Less: Valuation allowance 1,854,143 1,818,091 Total deferred tax assets 561,122 653,592 Net deferred tax liabilities $ 558,222 $ 556,477 The deferred tax liability related to intangibles and fixed assets primarily relates to the difference in book and tax basis of FCC licenses and other intangible assets that were adjusted for book purposes to estimated fair values as part of the application of fresh start accounting, and were further adjusted in the first quarter of 2020 upon recognition of an impairment as discussed in Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . In accordance with ASC 350-10, Intangibles—Goodwill and Other , the Company does not amortize FCC licenses. As a result, this deferred tax liability will not reverse over time unless the Company recognizes future impairment charges or sells its FCC licenses. As the Company continues to amortize its tax basis in its FCC licenses, the deferred tax liability will increase over time. The Company’s net foreign deferred tax liabilities for the period ending December 31, 2021 were $ 13.2 million and the Company's net foreign deferred tax assets for the period ending December 31, 2020 were $ 0.3 million. At December 31, 2021, the Company had recorded net operating loss and tax credit carryforwards (tax effected) for federal and state income tax purposes of approximately $ 157.1 million, expiring in various amounts through 2040 or in some cases with no expiration date. Internal Revenue Code Section 163(j), as amended, generally limits the deduction for business interest expense to thirty percent of adjusted taxable income (notwithstanding the temporary provisions described above from the enactment of the CARES Act), and provides that any disallowed interest expense may be carried forward indefinitely. The Company recorded deferred tax assets for federal and state interest limitation carryforwards of $ 337.7 million as of December 31, 2021. In connection with the taxable separation of the Outdoor division as part of the bankruptcy restructuring, the Company realized a $ 7.2 billion capital loss (gross after attribute reduction calculations). For federal tax purposes the capital loss can be carried forward 5 years and only be used to offset capital gains. For state tax purposes, the capital loss has various carryforward periods. As of December 31, 2021 the tax effected balance of the capital loss carryforwards were $ 1.7 billion. The Company has recorded a full valuation allowance against the deferred tax asset associated with the federal and state capital loss carryforward as it is not expected to be realized. The Company expects to realize the benefits of a portion of its remaining deferred tax assets based upon expected future taxable income from deferred tax liabilities that reverse in the relevant federal and state jurisdictions and carryforward periods. As of December 31, 2021, the Company had recorded a valuation allowance of $ 1.9 billion against a portion of these U.S. federal and state deferred tax assets which it does not expect to realize, relating primarily to capital loss carryforwards and certain state net operating loss carryforwards. The Company's U.S. federal and state deferred tax valuation allowance increased by $ 36.1 million during the period ending December 31, 2021 primarily due to an 101 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS increase in valuation allowances against interest limitation carryforwards. Any deferred tax liabilities associated with acquired FCC licenses and tax-deductible goodwill intangible assets are now relied upon as sources of future taxable income for purposes of realizing deferred tax assets attributed to carryforwards that have an indefinite life such as the Section 163(j) interest carryforward. At December 31, 2021, net deferred tax liabilities include a deferred tax asset of $ 4.0 million relating to stock-based compensation expense under ASC 718-10, Compensation—Stock Compensation . Full realization of this deferred tax asset requires stock options to be exercised at a price equal to or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the stock price of the Successor Company’s common stock will rise to levels sufficient to realize the entire deferred tax benefit currently reflected in its balance sheet. The reconciliations of income tax on income (loss) from continuing operations computed at the U.S. federal statutory tax rates to the recorded income tax benefit (expense) for the Successor Company and Predecessor Company are: Successor Company Year Ended December 31, Year Ended December 31, Period from May 2, 2019 through December 31, (In thousands) 2021 2020 2019 Amount Percent Amount Percent Amount Percent Income tax benefit (expense) at statutory rates $ 31,500 21.0 % 440,758 21.0 % $ ( 28,012 ) 21.0 % State income taxes, net of federal tax effect 3,325 2.2 % 13,619 0.7 % ( 4,718 ) 3.5 % Foreign income taxes ( 978 ) ( 0.7 ) % ( 1,187 ) ( 0.1 ) % ( 1,593 ) 1.2 % Nondeductible items ( 10,264 ) ( 6.8 ) % ( 8,928 ) ( 0.4 ) % ( 7,345 ) 5.5 % Changes in valuation allowance and other estimates ( 35,093 ) ( 23.4 ) % ( 30,531 ) ( 1.5 ) % 24,439 ( 18.2 ) % Impairment charges — — % ( 257,119 ) ( 12.3 ) % — — % Tax credits 4,831 3.2 % 3,353 0.2 % — — % Other, net ( 1,712 ) ( 1.1 ) % 23,658 1.1 % ( 2,862 ) 2.1 % Income tax benefit (expense) $ ( 8,391 ) ( 5.6 ) % $ 183,623 8.7 % $ ( 20,091 ) 15.1 % Predecessor Company Period from January 1, 2019 through May 1, (In thousands) 2019 Amount Percent Income tax expense at statutory rates $ ( 1,999,008 ) 21.0 % State income taxes, net of federal tax effect 68,442 ( 0.7 ) % Foreign income taxes ( 270 ) — % Nondeductible items ( 1,793 ) — % Changes in valuation allowance and other estimates 648,384 ( 6.8 ) % Reorganization and fresh start adjustments 1,245,282 ( 13.1 ) % Other, net ( 132 ) — % Income tax expense $ ( 39,095 ) 0.4 % 102 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company’s effective tax rate for the year ended December 31, 2021 is ( 5.6 )%. The effective tax rate for this period was primarily impacted by the valuation allowance adjustments recorded during the year against certain federal and state deferred tax assets for disallowed interest carryforwards due to the uncertainty of the ability to realize those assets in future periods. The Company’s effective tax rate for the year ended December 31, 2020 was 8.7 %. The effective tax rate for this period was primarily impacted by the impairment charges to non-deductible goodwill discussed in Note 4, Property, Plant and Equipment, Intangible Assets and Goodwill . In addition, the 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 adjustments were partially offset by valuation allowance 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 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 effective rate for the Successor period was primarily impacted by deferred tax benefits recorded for changes in estimates related to the carryforward tax attributes that survived 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. 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 income tax expense for the period from January 1, 2019 through May 1, 2019 (Predecessor) primarily consists of the income tax impacts from reorganization and fresh start adjustments, including adjustments to our valuation allowance. The Company recorded income tax benefits of $ 102.9 million for reorganization adjustments in the Predecessor period, primarily consisting of: (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 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. In addition to the above mentioned adjustments, the Reorganization and fresh start adjustments line above includes the reversal of the $ 2.0 billion in tax benefits that are presented in the reconciliation table in the Income tax benefit at statutory rates line. The Company continues to record interest and penalties related to unrecognized tax benefits in current income tax expense. The total amount of interest accrued at December 31, 2021 and 2020 was $ 4.2 million and $ 5.3 million, respectively. The total amount of unrecognized tax benefits including accrued interest and penalties at December 31, 2021 and 2020 was $ 22.2 million and $ 20.0 million, respectively, of which $ 20.7 million and $ 18.2 million is included in “Other long-term liabilities”. In addition, $ 1.5 million and $ 1.8 million of unrecognized tax benefits are recorded net with the Company’s deferred tax assets for its net operating losses as opposed to being recorded in “Other long-term liabilities” at December 31, 2021 and 2020, respectively. The total amount of unrecognized tax benefits at December 31, 2021 and 2020 that, if recognized, would impact the effective income tax rate is $ 15.5 million and $ 13.8 million, respectively. (In thousands) Successor Company Years Ended December 31, Unrecognized Tax Benefits 2021 2020 Balance at beginning of period $ 14,681 $ 13,664 Increases for tax position taken in the current year 1,911 2,325 Increases for tax positions taken in previous years 2,937 453 Decreases for tax position taken in previous years ( 217 ) ( 1,566 ) Decreases due to lapse of statute of limitations ( 1,267 ) ( 195 ) Balance at end of period $ 18,045 $ 14,681 103 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. All federal income tax matters through 2017 are closed. The majority of all material state, local, and foreign income tax matters have been concluded for years through 2017 with the exception of a current examination in Texas that covers the 2007-2016 tax years. NOTE 9 – STOCKHOLDERS’ EQUITY As described in Note 14, Emergence from Voluntary Reorganization under Chapter 11 Proceedings, and Note 15, Fresh Start Accounting , the Company emerged from bankruptcy upon the effectiveness of the Plan of Reorganization on May 1, 2019, at which time all shares of the Predecessor Company’s issued and outstanding common stock immediately prior to the Effective Date were canceled, and reorganized iHeartMedia issued an aggregate of 56,861,941 shares of iHeartMedia Class A common stock, 6,947,567 shares of Class B common stock and special warrants to purchase 81,453,648 shares of Class A common stock or Class B common stock to holders of claims pursuant to the Plan of Reorganization. The value of these shares and warrants issued to claimholders in settlement of Liabilities subject to compromise was based on the difference between the Enterprise Value of the Company and the and new debt and mandatorily redeemable preferred stock issued upon emergence, adjusted as necessary for cash and cash equivalents, noncontrolling interest and changes in deferred taxes. The impact of finalization of deferred tax amounts related to the Reorganization is reflected within the Consolidated Statement of Changes in Stockholders’ Equity (Deficit). Historically, the Company granted restricted shares of the Company's Class A common stock to certain key individuals. In connection with the effectiveness of the Plan of Reorganization, all unvested restricted shares were canceled. Pursuant to our 2019 Incentive Equity Plan ("2019 Plan") we adopted in connection with the effectiveness of our Plan of Reorganization as well as our 2021 Long-Term Incentive Award Plan ("2021 Plan"), we have granted restricted stock units and options to purchase shares of the Company's Class A common stock to our employees and directors. The 2021 Plan was approved in April 2021. In connection with the approval, the 2019 Plan was terminated and no future awards will be granted under the 2019 Plan. The terms and conditions of the 2019 Plan continue to govern any outstanding awards under this plan. The 2019 Plan and 2021 Plan are designed to provide an incentive to certain key members of management and service providers of the Company or any of its subsidiaries and non-employee members of the Board of Directors and to offer an additional inducement in obtaining the services of such individuals. The 2019 Plan provided for the grant of (a) options and (b) restricted stock units, which, in each case, may be subject to contingencies or restrictions as set forth under the plan and applicable award agreement. The 2021 Plan provides for the grant of (a) incentive and non-incentive options, (b) stock appreciation rights, (c) restricted stock, (d) restricted stock units, (e) other stock or cash-based awards and (f) dividend equivalents. The aggregate number of shares of Class A common stock that may be issued or used for reference purposes with respect to which awards may be granted under the 2021 Plan share be equal to the sum of (a) 6,000,000 shares of Class A common stock plus (b) shares of Class A common stock which are subject to outstanding awards under the 2019 Plan, and become available for issuance under the 2021 Plan (which may not exceed 10,743,222 shares of Class A common stock). Such shares of common stock may, in the discretion of the Board of Directors, consist either in whole or in part of authorized but unissued shares of common stock, shares purchased on the open market, or shares of common stock held in the treasury of the Company. The Company shall at all times during the term of the plan reserve and keep available such number of shares of common stock as will be sufficient to satisfy the requirements of the plan. The Company granted 5,542,668 stock options and 3,205,360 restricted stock units on May 30, 2019 in connection with the Company's emergence from bankruptcy (the "Emergence Awards"). Share-Based Compensation Successor Stock Options Options granted under the 2021 Plan may not have a term that exceeds ten years . The term of each option granted pursuant to the 2019 Plan may not exceed (a) six (6) years from the date of grant thereof in the case of the awards granted upon emergence 104 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and (b) ten (10) years from the date of grant thereof in the case of all other options; subject, however, in either case, to earlier termination as hereinafter provided. Options granted under the 2019 Plan and 2021 Plan are exercisable at such time or times and subject to such terms and conditions as shall be determined by the Compensation Committee of the Board (the "Committee") at the time of grant. The options granted as Emergence Awards under the 2019 Plan vest (or vested, as applicable), subject to a participant’s continued full-time employment or service with the Company through each applicable vesting date, (a) 20 % on July 22, 2019, and (b) an additional 20 % vesting on each of the next four anniversaries of the grant date. No options granted under the 2019 Plan or the 2021 Plan will provide for any dividends or dividend equivalents thereon. The Company accounts for its share-based payments using the fair value recognition provisions of ASC 718-10, Compensation—Stock Compensation . The fair value of options that vest based on continued service is estimated on the grant date using a Black-Scholes option-pricing model. Expected volatilities were based on historical volatility of peer companies’ stock, including the Company, over the expected life of the options. The expected life of the options granted represents the period of time that the options granted are expected to be outstanding. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option. The Company does not estimate forfeitures at grant date, but rather has elected to account for forfeitures when they occur. The following assumptions were used to calculate the fair value of the Successor Company's options on the date of grant: Year Ended December 31, Period from May 2, 2019 through December 31, 2021 2020 2019 Expected volatility 56 % 44 % – 57 % 44 % – 45 % Expected life in years 6.2 – 6.3 6.0 – 6.3 4.0 – 4.1 Risk-free interest rate 0.79 % – 1.15 % 0.35 % – 1.41 % 1.40 % – 2.02 % Dividend yield — % — % — % The following table presents a summary of the Successor Company's stock options outstanding at and stock option activity during the year ended December 31, 2021 ("Price" reflects the weighted average exercise price per share): (In thousands, except per share data) Options Price Weighted Average Remaining Contractual Term Outstanding, January 1, 2021 7,695 $ 16.01 5.9 years Granted 296 19.20 Exercised ( 244 ) 16.72 Forfeited ( 112 ) 13.89 Expired ( 20 ) 19.00 Outstanding, December, 31, 2021 7,615 16.14 5.1 years Exercisable 3,565 17.52 4.1 years Expected to Vest 4,050 14.93 6.0 years 105 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A summary of the Successor Company's unvested options and changes during the year ended December 31, 2021 is presented below: (In thousands, except per share data) Options Weighted Average Grant Date Fair Value Unvested, January 1, 2021 5,491 $ 5.06 Granted 296 10.28 Vested (1) ( 1,625 ) 5.10 Forfeited ( 112 ) 5.00 Unvested, December 31, 2021 4,050 5.43 (1) The total fair value of the options vested during the year ended December 31, 2021 (Successor) was $ 8.3 million. Restricted Stock Units ( “ RSUs ” ) RSUs may be issued either alone or in addition to other awards granted under the 2019 Plan and 2021 Plan. The RSUs granted in respect of the Emergence Awards under the 2019 Plan vest or vested (as applicable), subject to a participant’s continued full-time employment or service with the Company through each applicable vesting date, (a) 20 % on July 22, 2019, and (b) an additional 20 % vesting on each of the next four anniversaries of the grant date. Each RSU (representing one share of common stock) awarded to a participant, both under the 2019 Plan and the 2021 Plan will be credited with dividends paid in respect of one share of common stock (“Dividend Equivalents”). Dividend Equivalents will be withheld by the Company for the participant’s account, and interest may be credited on the amount of cash Dividend Equivalents withheld at a rate and subject to such terms as determined by the Committee. Dividend Equivalents credited to a participant’s account and attributable to any particular RSU (and earnings thereon, if applicable) shall be distributed to the participant upon settlement of such RSU and, if such RSU is forfeited, the participant shall have no right to such Dividend Equivalents. The following table presents a summary of the Successor Company's RSUs outstanding and RSU stock activity as of and during the year ended December 31, 2021 (“Price” reflects the weighted average share price at the date of grant): (In thousands, except per share data) Awards Price Outstanding, January 1, 2021 2,578 $ 14.42 Granted 298 21.57 Vested (restriction lapsed) ( 832 ) 14.87 Forfeited ( 78 ) 17.41 Outstanding, December 31, 2021 1,966 15.20 Performance-based Restricted Stock Units (“Performance RSUs”) In August 2020, the Company issued Performance RSUs under the 2019 Plan 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, 2021 and the year ended December 31, 2020, the Company recognized $ 1.6 million and $ 3.4 million , respectively, in relation to these Performance RSUs. 106 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents a summary of the Successor Company's Performance RSUs outstanding and activity as of and during the year ended December 31, 2021 (“Price” reflects the weighted average share price at the date of grant): (In thousands, except per share data) Awards Price Outstanding, January 1, 2021 556 $ 8.98 Granted — — Vested (restriction lapsed) — — Forfeited — — Outstanding, December 31, 2021 556 $ 8.98 Predecessor Prior to the Emergence Date, the Predecessor Company had granted share-based awards that were canceled upon emergence from bankruptcy. In conjunction with the cancellation, the Predecessor Company accelerated the unrecognized share-based compensation expense and recorded $ 1.5 million of compensation expense in the period from January 1, 2019 through May 1, 2019 (Predecessor), principally reflected in Reorganization costs, net. Successor Common Stock and Special Warrants The following table presents the Successor Company's Class A Common Stock, Class B Common Stock and Special Warrants issued and outstanding as of December 31, 2021: (In thousands, except share and per share data) December 31, 2021 Successor Class A Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 120,633,937 Successor Class B Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized 21,590,192 Successor Special Warrants 5,304,430 Total Successor Class A Common Stock, Class B Common Stock and Special Warrants issued and outstanding 147,528,559 Class A Common Stock Holders of shares of the Successor Company's Class A common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of the Successor Company's Class A common stock will have the exclusive right to vote for the election of directors. There will be no cumulative voting rights in the election of directors. Holders of shares of the Successor Company's Class A common stock are entitled to receive dividends, on a per share basis, when and if declared by the Company's Board out of funds legally available therefor and whenever any dividend is made on the shares of the Successor Company's Class B common stock subject to certain exceptions set forth in our certificate. The Successor Company may not subdivide or combine (by stock split, reverse stock split, recapitalization, merger, consolidation or any other transaction) its shares of Class A common stock or Class B common stock without subdividing or combining its shares of Class B common stock or Class A common stock, respectively, in a similar manner. Upon our dissolution or liquidation or the sale of all or substantially all of the Successor Company's assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of the Successor Company's Class A common stock will be entitled to receive pro rata together with holders of the Successor Company's Class B common stock our remaining assets available for distribution. New Class A common stock certificates issued upon transfer or new issuance of Class A common stock shares contain a legend stating that such shares of Class A common stock are subject to the provisions of our amended and restated certificate of incorporation, including but not limited to provisions governing compliance with requirements of the Communications Act and regulations thereunder, including, without limitation, those concerning foreign ownership and media ownership. On July 18, 2019, the Company’s Class A common stock was listed and began trading on the Nasdaq Global Select Market ("Nasdaq") under the ticker symbol “IHRT”. 107 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Class B Common Stock Holders of shares of the Successor Company's Class B common stock are not entitled to vote for the election of directors or, in general, on any other matter submitted to a vote of the Company’s stockholders, but are entitled to one vote per share on the following matters: (a) any amendment or modification of any specific rights or obligations of the holders of Class B common stock that does not similarly affect the rights or obligations of the holders of Class A common stock, in which case the holders of Class B Common Stock will be entitled to a separate class vote, with each share of Class B common stock having one vote; and (b) to the extent submitted to a vote of our stockholders, (i) the retention or dismissal of outside auditors by the Company, (ii) any dividends or distributions to our stockholders, (ii) any material sale of assets, recapitalization, merger, business combination, consolidation, exchange of stock or other similar reorganization of the Company or any of its subsidiaries, (iv) the adoption of any amendment to our certificate of incorporation, (v) other than in connection with any management equity or similar plan adopted by the Company's Board, any authorization or issuance of equity interests, or any security or instrument convertible into or exchangeable for equity interests, in the Company or any of its subsidiaries, and (vi) the liquidation of the Company, in which case in respect to any such vote concerning the matters described in clause (b), the holders of Class B common stock are entitled to vote with the holders of the Class A common stock, with each share of common stock having one vote and voting together as a single class. Holders of shares of the Successor Company's Class B common stock are generally entitled to convert shares of Class B common stock into shares of Class A common stock on a one -for-one basis, subject to the Company’s ability to restrict conversion in order to comply with the Communications Act and FCC regulations. Holders of shares of the Successor Company's Class B common stock are entitled to receive dividends when and if declared by the Company's Board out of funds legally available therefor and whenever any dividend is made on the shares of the Successor Company's Class A common stock subject to certain exceptions set forth in our certificate of incorporation. Upon our dissolution or liquidation or the sale of all or substantially all of our assets, after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, the holders of shares of the Successor Company's Class B common stock will be entitled to receive pro rata with holders of the Successor Company's Class A common stock our remaining assets available for distribution. During the years ended December 31, 2021 and December 31, 2020, 7,634,045 and 20,080 shares of the Class B common stock were converted into Class A common stock, respectively. During the period from May 2, 2019 to December 31, 2019, 53,317 shares of the Class B common stock were converted into Class A common stock. Special Warrants Each Special Warrant issued under the special warrant agreement entered into in connection with the Reorganization may be exercised by its holder to purchase one share of Successor Class A common stock or Successor Class B common stock at an exercise price of $ 0.001 per share, unless the Company in its sole discretion believes such exercise would, alone or in combination with any other existing or proposed ownership of common stock, result in, subject to certain exceptions, (a) such exercising holder owning more than 4.99 percent of the Successor Company's outstanding Class A common stock, (b) more than 22.5 percent of the Successor Company's capital stock or voting interests being owned directly or indirectly by foreign individuals or entities, (c) the Company exceeding any foreign ownership threshold set by the FCC pursuant to a declaratory ruling or specific approval requirement or (d) the Company violating any provision of the Communications Act or restrictions on ownership or transfer imposed by the Company's certificate of incorporation or the decisions, rules and policies of the FCC. Any holder exercising Special Warrants must complete and timely deliver to the warrant agent the required exercise forms and certifications required under the special warrant agreement. To the extent there are any dividends declared or distributions made with respect to the Successor Class A common stock or Successor Class B common stock, those dividends or distributions will also be made to holders of Special Warrants concurrently and on a pro rata basis based on their ownership of common stock underlying their Special Warrants on an as-exercised basis; provided , that no such distribution will be made to holders of Special Warrants if (x) the Communications Act or an FCC rule prohibits such distribution to holders of Special Warrants or (y) our FCC counsel opines that such distribution is reasonably likely to cause (i) the Company to violate the Communications Act or any applicable FCC rule or (ii) any such holder not to be deemed to hold a noncognizable (under FCC rules governing foreign ownership) future equity interest in the Company; provided further , that, if any distribution of common stock or any other securities to a holder of Special Warrants is not permitted pursuant to clauses (x) or (y), the Company will cause economically equivalent warrants to be distributed to such 108 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS holder in lieu thereof, to the extent that such distribution of warrants would not violate the Communications Act or any applicable FCC rules. The Special Warrants will expire on the earlier of the twentieth anniversary of the issuance date and the occurrence of a change in control of the Company. During the year ended December 31, 2021, stockholders exercised 47,197,139 and 22,337,312 Special Warrants for an equivalent number of shares of Class A common stock and Class B common stock, respectively. During the year ended December 31, 2020, stockholders exercised 6,205,617 and 2,095 Special Warrants for an equivalent number of shares of Class A common stock and Class B common stock, respectively. During the period from May 2, 2019 through ended December 31, 2019, stockholders exercised 216,921 and 10,660 Special Warrants for an equivalent number of Class A common stock and Class B common stock, respectively. January 2021 Exchange Substantially Expanding Class A and Class B Shares Outstanding On January 8, 2021, the Company completed an exchange of 67,471,123 Special Warrants into 45,133,811 shares of Class A common stock, the Company’s publicly traded equity, and 22,337,312 shares of Class B common stock. The exchange was authorized by a previously issued Declaratory Ruling from the Federal Communications Commission approving an increase in iHeartMedia’s authorized aggregate foreign ownership from 25% to 100%, subject to certain conditions set forth in the Declaratory Ruling. Certain shares of Class B common stock and Special Warrants were not converted into Class A Common Stock due to current regulatory restrictions applicable to certain shareholders. There were 5,293,069 Special Warrants outstanding on February 18, 2022. Share-Based Compensation Cost The share-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense on a straight-line basis over the vesting period. Share-based compensation payments are recorded in corporate expenses and were $ 23.5 million, $ 22.9 million and $ 26.4 million for the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019, respectively. Share-based compensation expenses for the Predecessor Company were $ 0.5 million during the period from January 1, 2019 through May 1, 2019. The tax benefit related to the share-based compensation expense for the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019 was $ 3.5 million, $ 3.1 million and $ 2.9 million, respectively. The tax benefit related to the share-based compensation expense for the Predecessor Company for the period from January 1, 2019 through May 1, 2019 was $ 0.1 million. As of December 31, 2021, there was $ 39.6 million of unrecognized compensation cost related to unvested share-based compensation arrangements that will vest based on service conditions. This cost is expected to be recognized over a weighted average period of approximately 2.1 years. 109 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Income (Loss) per Share (In thousands, except per share data) Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 NUMERATOR: Net income (loss) attributable to the Company – common shares $ ( 159,199 ) $ ( 1,914,699 ) $ 112,548 $ 11,184,141 Exclude: Income from discontinued operations, net of tax $ — $ — $ — $ 1,685,123 Noncontrolling interest from discontinued operations, net of tax - common shares — — 19,028 Total income from discontinued operations, net of tax - common shares $ — $ — $ — $ 1,704,151 Total income (loss) from continuing operations $ ( 159,199 ) $ ( 1,914,699 ) $ 112,548 $ 9,479,990 Noncontrolling interest from continuing operations, net of tax - common shares ( 810 ) 523 ( 751 ) — Income (loss) from continuing operations $ ( 158,389 ) $ ( 1,915,222 ) $ 113,299 $ 9,479,990 DENOMINATOR (1) : Weighted average common shares outstanding - basic 146,726 145,979 145,608 86,241 Stock options and restricted stock (2) : — — 187 — Weighted average common shares outstanding - diluted 146,726 145,979 145,795 86,241 Net income (loss) attributable to the Company per common share: From continuing operations - Basic $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 109.92 From discontinued operations - Basic $ — $ — $ — $ 19.76 From continuing operations - Diluted $ ( 1.09 ) $ ( 13.12 ) $ 0.77 $ 109.92 From discontinued operations - Diluted $ — $ — $ — $ 19.76 (1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Successor Company for the year ended December 31, 2021, December 31, 2020 and the period from May 2, 2019 through December 31, 2019. (2) Outstanding equity awards representing 10.5 million, 9.1 million and 5.9 million shares of Class A common stock of the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 , and the period from May 2, 2019 through December 31, 2019, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive. Outstanding equity awards representing 5.9 million shares of Class A common stock of the Predecessor Company for the period for the period from January 1, 2019 through May 1, 2019 were not included in the computation of diluted earnings per share because to do so would have been antidilutive. Stockholder Rights Plan On May 5, 2020, the Board approved the adoption of a short-term stockholder rights plan (the “Stockholder Rights Plan”). Pursuant to the stockholder rights plan, the Board declared a dividend distribution of one right on each outstanding share of Class A common stock, share of Class B common stock and special warrant issued in connection with the Plan of Reorganization. The record date for such dividend distribution was May 18, 2020. Under the Stockholder Rights Plan, subject to certain exceptions, the rights were generally exercisable only if, in a transaction not approved by the Board, a person or group acquired beneficial ownership of 10 % or more of the Company’s Class A common stock (or 20 % in the case of certain passive investors), including through such person’s ownership of the convertible Class B common stock and/or special warrants, as further detailed in the Stockholder Rights Plan. In that situation, each holder of a right (other than the acquiring person or group) would have the right to purchase, upon payment of the exercise price, a 110 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS number of shares of the Company’s Class A common stock, Class B common stock or special warrants, as applicable, having a market value of twice such price. In addition, the Stockholder Rights Plan contained a similar provision if the Company was acquired in a merger or other business combination after an acquiring person acquires beneficial ownership of 10 % or more of the Company’s Class A common stock (or 20 % in the case of certain passive investors). The Stockholder Rights Plan expired on May 5, 2021. The adoption of the Stockholder Rights Plan was not a taxable event and did not have any impact on the Company’s financial reporting. NOTE 10 – EMPLOYEE BENEFIT PLANS iHeartCommunications has various 401(k) savings and other plans for the purpose of providing retirement benefits for substantially all employees. Under these plans, an employee can make pre-tax contributions and iHeartCommunications will match a portion of such an employee’s contribution. Employees vest in these iHeartCommunications matching contributions based upon their years of service to iHeartCommunications. In April 2020, the Company announced incremental operating-expense-saving initiatives in response to the economic environment resulting from the COVID-19 pandemic, which included a temporary suspension of the Company's 401(k) matching program that continued through December 31, 2021. Contributions of $ 4.5 million, $ 8.6 million and $ 6.1 million were made to these plans for the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor), respectively, were expensed. Starting January 1, 2022, the Company recommenced its 401(k) matching program. iHeartCommunications offers a non-qualified deferred compensation plan for a select group of management or highly compensated employees, under which such employees were able to make an annual election to defer up to 50 % of their annual salary and up to 80 % of their bonus before taxes. iHeartCommunications suspended all salary and bonus deferrals and company matching contributions to the deferred compensation plan on January 1, 2010. iHeartCommunications accounts for the plan in accordance with the provisions of ASC 710-10, Compensation—General . Matching credits on amounts deferred may be made in iHeartCommunications' sole discretion and iHeartCommunications retains ownership of all assets until distributed. Participants in the plan have the opportunity to allocate their deferrals and any iHeartCommunications matching credits among different investment options, the performance of which is used to determine the amounts to be paid to participants under the plan. In accordance with the provisions of ASC 710-10, Compensation—General , the assets and liabilities of the non-qualified deferred compensation plan are presented in “Other assets” and “Other long-term liabilities” in the accompanying consolidated balance sheets, respectively. The asset and liability under the deferred compensation plan at December 31, 2021 (Successor) was approximately $ 12.9 million recorded in “Other assets” and $ 12.9 million recorded in “Other long-term liabilities”, respectively. The asset and liability under the deferred compensation plan at December 31, 2020 (Successor) was approximately $ 12.3 million recorded in “Other assets” and $ 12.3 million recorded in “Other long-term liabilities”, respectively. NOTE 11 — OTHER INFORMATION OTHER INCOME (EXPENSE), NET The following table discloses the components of "Other income (expense), net" for the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor), the period from May 2, 2019 through December 31, 2019 (Successor) and the period from January 1, 2019 through May 1, 2019 (Predecessor), respectively: (In thousands) Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 Professional fees $ ( 1,389 ) $ ( 6,278 ) $ ( 26,487 ) $ ( 156 ) Loss on extinguishment of debt ( 11,600 ) — — — Other ( 1,987 ) ( 1,473 ) 8,221 179 Total other income (expense), net $ ( 14,976 ) $ ( 7,751 ) $ ( 18,266 ) $ 23 111 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Other income (expense), net for the year ended December 31, 2021 (Successor), the year ended December 31, 2020 (Successor) and the period from May 2, 2019 through December 31, 2019 (Successor) included $ 1.4 million , $ 6.3 million and $ 26.5 million, respectively, in expenses incurred in connection with our bankruptcy. OTHER CURRENT ASSETS The following table discloses the components of “Other current assets” as of December 31, 2021 and 2020, respectively: (In thousands) Successor Company As of December 31, 2021 2020 Inventory $ 3,154 $ 1,153 Deposits 3,098 2,680 Restricted cash 425 — Due from related parties 391 549 Other receivables 17,363 11,905 Other — 1,139 Total other current assets $ 24,431 $ 17,426 OTHER ASSETS The following table discloses the components of “Other assets” as of December 31, 2021 and 2020, respectively: Successor Company (In thousands) As of December 31, 2021 2020 Investments in, and advances to, nonconsolidated affiliates $ 10,617 $ 11,065 Other investments 41,440 28,053 Available-for-sale debt securities, net of reserve of $ 7,975 in 2021 and $ 4,167 in 2020 33,868 31,456 Deposits 4,769 4,553 Prepaid rent 17,182 8,882 Non-qualified plan assets 12,909 12,265 Other 5,928 9,350 Total other assets $ 126,713 $ 105,624 OTHER LONG-TERM LIABILITIES The following table discloses the components of “Other long-term liabilities” as of December 31, 2021 and 2020, respectively: (In thousands) Successor Company As of December 31, 2021 2020 Unrecognized tax benefits $ 20,685 $ 18,183 Asset retirement obligation 4,491 3,951 Non-qualified plan liabilities 12,909 12,265 Deferred income 28,020 22,018 Other 14,792 14,800 Total other long-term liabilities $ 80,897 $ 71,217 112 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) The following table discloses the components of “Accumulated other comprehensive income (loss),” net of tax, as of December 31, 2021 and 2020, respectively: (In thousands) Successor Company As of December 31, 2021 2020 Cumulative currency translation adjustment $ ( 257 ) $ 194 Cumulative other adjustments — — Total accumulated other comprehensive income (loss) $ ( 257 ) $ 194 NOTE 12 – SEGMENT DATA As discussed in Note 1, Summary of Significant Accounting Policies , in connection with certain leadership and organizational changes implemented in the first quarter 2021, the Company revised its segment reporting as of January 1, 2021. The corresponding current and prior period segment disclosures were recast to reflect the current segment presentation. Segment Adjusted EBITDA is the segment profitability metric reported to the Company’s Chief Operating Decision Maker for purposes of decisions about allocation of resources to, and assessing performance of, each reportable segment. The Company’s primary businesses are included in its Multiplatform Group and Digital Audio Group segments. Revenue and expenses earned and charged between Multiplatform Group, Digital Audio Group, Corporate and the Company's Audio & Media Services Group are eliminated in consolidation. The Multiplatform Group provides media and entertainment services via broadcast delivery and also includes the Company’s events and national syndication businesses. The Digital Audio Group provides media and entertainment services via digital delivery. The Audio & Media Services Group provides other audio and media services, including the Company’s media representation business (Katz Media) and its provider of scheduling and broadcast software (RCS). Corporate includes infrastructure and support, including executive, information technology, human resources, legal, finance and administrative functions for the Company’s businesses. Share-based payments are recorded in Selling, general and administrative expense. 113 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company's segment results for the Successor Company for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019: Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Year Ended December 31, 2021 Revenue $ 2,489,018 $ 834,482 $ 247,957 $ — $ ( 13,117 ) $ 3,558,340 Operating expenses (1) 1,745,680 573,835 171,766 269,043 ( 13,117 ) 2,747,207 Segment Adjusted EBITDA (2) $ 743,338 $ 260,647 $ 76,191 $ ( 269,043 ) $ — $ 811,133 Depreciation and amortization ( 469,417 ) Impairment charges ( 57,734 ) Other operating expense, net ( 32,320 ) Restructuring expenses ( 73,262 ) Share-based compensation expense ( 23,543 ) Operating income $ 154,857 Segment assets $ 6,953,772 $ 1,088,471 $ 438,773 $ 403,898 $ ( 3,605 ) $ 8,881,309 Intersegment revenues 670 5,845 6,602 — — 13,117 Capital expenditures 130,894 23,907 14,515 14,056 — 183,372 Share-based compensation expense — — — 23,543 — 23,543 Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Year Ended December 31, 2020 Revenue $ 2,206,854 $ 474,371 $ 274,749 $ — $ ( 7,756 ) $ 2,948,218 Operating expenses (1) 1,723,449 343,598 180,081 170,173 ( 7,756 ) 2,409,545 Segment Adjusted EBITDA (2) $ 483,405 $ 130,773 $ 94,668 $ ( 170,173 ) $ — $ 538,673 Depreciation and amortization ( 402,929 ) Impairment charges ( 1,738,752 ) Other operating expense, net ( 11,344 ) Restructuring expenses ( 100,410 ) Share-based compensation expense ( 22,862 ) Operating loss $ ( 1,737,624 ) Segment assets $ 7,736,229 $ 187,051 $ 473,628 $ 809,638 $ ( 3,585 ) $ 9,202,961 Intersegment revenues 670 — 7,086 — — 7,756 Capital expenditures 51,559 16,086 5,105 12,455 — 85,205 Share-based compensation expense — — — 22,862 — 22,862 114 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Period from May 2, 2019 through December 31, 2019 Revenue $ 2,174,411 $ 273,389 $ 167,292 $ — $ ( 5,036 ) $ 2,610,056 Operating expenses (1) 1,381,073 194,366 120,685 143,420 ( 5,036 ) 1,834,508 Segment Adjusted EBITDA (2) $ 793,338 $ 79,023 $ 46,607 $ ( 143,420 ) $ — $ 775,548 Depreciation and amortization ( 249,623 ) Impairment charges — Other operating expense, net ( 8,000 ) Restructuring expenses ( 51,878 ) Share-based compensation expense ( 26,411 ) Operating income $ 439,636 Segment Assets $ 9,949,638 $ 73,108 $ 486,551 $ 515,580 $ ( 3,778 ) $ 11,021,099 Intersegment revenues $ 447 $ — $ 4,589 $ — $ — $ 5,036 Capital expenditures $ 48,096 $ 10,505 $ 3,980 $ 13,412 $ — $ 75,993 Share-based compensation expense $ — $ — $ — $ 26,411 $ — $ 26,411 115 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table presents the Company's segment results for the Predecessor Company for the period from January 1, 2019 through May 1, 2019: Segments (In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated Period from January 1, 2019 through May 1, 2019 Revenue $ 903,888 $ 102,789 $ 69,362 $ — $ ( 2,568 ) $ 1,073,471 Operating expenses (1) 635,205 88,621 55,278 71,785 ( 2,568 ) 848,321 Segment Adjusted EBITDA (2) $ 268,683 $ 14,168 $ 14,084 $ ( 71,785 ) $ — $ 225,150 Depreciation and amortization ( 52,834 ) Impairment charges ( 91,382 ) Other operating expense, net ( 154 ) Restructuring expenses ( 13,242 ) Share-based compensation expense ( 498 ) Operating loss $ 67,040 Intersegment revenues $ 243 $ — $ 2,325 $ — $ — $ 2,568 Capital expenditures $ 25,270 $ 4,694 $ 1,263 $ 4,970 $ — $ 36,197 Share-based compensation expense $ — $ — $ — $ 498 $ — $ 498 (1) Consolidated operating expenses consist of Direct operating expenses and Selling, general and administrative expenses and exclude Restructuring expenses, share-based compensation expenses and depreciation and amortization. (2) For a definition of Adjusted EBITDA for the consolidated company and a reconciliation to Operating income, the most closely comparable GAAP measure, and to Net income (loss), please see "Reconciliation of Operating Income (Loss) to Adjusted EBITDA" and "Reconciliation of Net Income (Loss) to EBITDA and Adjusted EBITDA" in Item 7 of this Annual Report on Form 10-K. Beginning on January 1, 2021, Segment Adjusted EBITDA became the segment profitability metric reported to the Company's Chief Operating Decision Maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. NOTE 13 – CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Tax Matters Agreement On the Effective Date, the Company entered into the Tax Matters Agreement by and among the Company, iHeartCommunications, iHeart Operations, CCH, CCOH and Clear Channel Outdoor, Inc., to allocate the responsibility of the Company and its subsidiaries, on the one hand, and the Outdoor Group, on the other, for the payment of taxes arising prior and subsequent to, and in connection with, the Separation (the “Tax Matters Agreement”). For information regarding the Tax Matters Agreement, refer to Note 16, Discontinued Operations . 116 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 14 - EMERGENCE FROM VOLUNTARY REORGANIZATION UNDER CHAPTER 11 PROCEEDINGS Plan of Reorganization As described in Note 1, Summary of Significant Accounting Policies , on May 1, 2019, the Company and the other Debtors emerged from bankruptcy pursuant to the Plan of Reorganization. Capitalized terms not defined in this note are defined in the Plan of Reorganization. On or following the Effective Date and pursuant to the Plan of Reorganization, the following occurred: ▪ CCOH was separated from and ceased to be controlled by iHeartCommunications and its subsidiaries. ▪ The existing indebtedness of iHeartCommunications of approximately $ 16 billion was discharged, the Company entered into the Term Loan Facility ($ 3,500 million) and issued the 6.375 % Senior Secured Notes ($ 800 million) and the Senior Unsecured Notes ($ 1,450 million), collectively the “Successor Emergence Debt.” ▪ The Company adopted an amended and restated certificate of incorporation and bylaws. ▪ Shares of the Predecessor Company’s issued and outstanding common stock immediately prior to the Effective Date were canceled, and on the Effective Date, reorganized iHeartMedia issued an aggregate of 56,861,941 shares of iHeartMedia Class A common stock, 6,947,567 shares of Class B common stock and special warrants to purchase 81,453,648 shares of Class A common stock or Class B common stock to holders of claims pursuant to the Plan of Reorganization. ▪ The following classes of claims received the Successor Emergence Debt and 99.1 % of the new equity, as defined in the Plan of Reorganization: ▪ Secured Term Loan / 2019 PGN Claims (Class 4) ▪ Secured Non- 9.0 % PGN Due 2019 Claims Other Than Exchange 11.25 % PGN Claims (Class 5A) ▪ Secured Exchange 11.25 % PGN Claims (Class 5B) ▪ iHC 2021 / Legacy Notes Claims (Class 6) ▪ Guarantor Funded Debt against other Guarantor Debtors Other than CCH and TTWN (Class 7) ▪ The holders of the Guarantor Funded Debt Unsecured Claims Against CCH (Class 7F) received their Pro Rata share of 100 percent of the CCOH Interests held by the Debtors and CC Finco, LLC and Broader Media, LLC. Refer to the discussion below regarding the Separation Transaction. ▪ Settled the following classes of claims in cash: • General Unsecured Claims Against Non-Obligor Debtors (Class 7A); paid in full • General Unsecured Claims Against TTWN Debtors (Class 7B); paid in full • iHC Unsecured Claims (Class 7D); paid 14.44 % of allowed claim • Guarantor General Unsecured Claims (Class 7G); paid minimum of 45 % and maximum of 55 % of allowed claim ▪ The CCOH Due From Claims (Class 8) represent the negotiated claim between iHeartMedia and CCOH, which was settled in cash on the date of emergence at 14.44 %. ▪ The Predecessor Company’s common stockholders (Class 9) received their pro rata share of 1 % of the new common stock; provided that 0.1 % of the new common stock that otherwise would have been distributed to the Company's former sponsors was instead distributed to holders of Legacy Notes Claims. 117 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ▪ The Company entered into a new $ 450.0 million ABL Facility, which was undrawn at emergence. ▪ The Company funded the Guarantor General Unsecured Recovery Cash Pool for $ 17.5 million in order to settle the Class 7G General Unsecured Claims. ▪ The Company funded the Professional Fee Escrow Account. ▪ On the Effective Date, the iHeartMedia, Inc. 2019 Incentive Equity Plan (the “Post-Emergence Equity Plan”) became effective. The Post-Emergence Equity Plan allowed the Company to grant stock options and restricted stock units representing up to 12,770,387 shares of Class A common stock for key members of management and service providers and up to 1,596,298 for non-employee members of the board of directors. The amounts of Class A common stock reserved under the Post-Emergence Equity Plan were equal to 8 % and 1 %, respectively, of the Company’s fully-diluted and distributed shares of Class A common stock as of the Effective Date. In addition, as part of the Separation, iHeartCommunications and CCOH consummated the following transactions: ▪ the cash sweep agreement under the then-existing corporate services agreement and any agreements or licenses requiring royalty payments to iHeartMedia by CCOH for trademarks or other intellectual property (“Trademark License Fees”) were terminated; ▪ iHeartCommunications, iHeartMedia, iHeartMedia Management Services, Inc. (“iHM Management Services”) and CCOH entered into a transition services agreement (the “Transition Services Agreement”) pursuant to which, the Company or its subsidiaries provided administrative services historically provided to CCOH by iHeartCommunications for a period of one year after the Effective Date, which was terminated on August 31, 2020; ▪ the Trademark License Fees charged to CCOH during the post-petition period were waived by iHeartMedia; ▪ iHeartMedia contributed the rights, title and interest in and to all tradenames, trademarks, service marks, common law marks and other rights related to the Clear Channel tradename (the “CC Intellectual Property”) to CCOH; ▪ iHeartMedia paid $ 115.8 million to CCOH, which consisted of the $ 149.0 million payment by iHeartCommunications to CCOH as CCOH’s recovery of its claims under the Due from iHeartCommunications Note, partially offset by the $ 33.2 million net amount payable to iHeartCommunications under the post-petition intercompany balance between iHeartCommunications and CCOH after adjusting for the post-petition Trademark License Fees which were waived as part of the settlement agreement; ▪ iHeartCommunications entered into a revolving loan agreement with Clear Channel Outdoor, LLC (“CCOL”) and Clear Channel International, Ltd., wholly-owned subsidiaries of CCOH, to provide a line of credit in an aggregate amount not to exceed $ 200 million at the prime rate of interest, which was terminated by the borrowers on July 30, 2019 in connection with the closing of an underwritten public offering of common stock by CCOH; and ▪ iHeart Operations, Inc. issued $ 60.0 million in preferred stock to a third party for cash, which was repurchased on October 27, 2021 (see Note 6, Long-Term Debt ). NOTE 15 - FRESH START ACCOUNTING Fresh Start In connection with the Company's emergence from bankruptcy and in accordance with ASC 852, Reorganizations , the Company qualified for and adopted fresh start accounting on the Effective Date. The Company was 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 the Company's 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, Reorganizations , with the application of fresh start accounting, the Company allocated its reorganization value to its individual assets based on their estimated fair values in conformity with ASC 805, Business 118 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. As a result of the application of fresh start accounting and the effects of the implementation of the Plan of Reorganization, the consolidated financial statements after May 1, 2019 are not comparable with the consolidated financial statements as of or prior to that date. 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, the Company 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 approach and the selected transactions analysis approach were all utilized in estimating the 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 (referred to as "OIBDAN" in the documents filed with the Bankruptcy Court), 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. 119 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table reconciles the enterprise value per the Plan of Reorganization to the implied value (for fresh start accounting purposes) of the Successor Company's common stock as of the Effective Date: (In thousands, except per share data) Enterprise Value $ 8,750,000 Plus: Cash and cash equivalents 63,142 Less: Debt issued upon emergence ( 5,748,178 ) Finance leases and short-term notes ( 61,939 ) Mandatorily Redeemable Preferred Stock ( 60,000 ) Changes in deferred tax liabilities (1) ( 163,910 ) Noncontrolling interest ( 8,943 ) Implied value of Successor Company common stock $ 2,770,172 Shares issued upon emergence (2) 145,263 Per share value $ 19.07 (1) Difference in the assumed effect of deferred taxes in the calculation of enterprise value versus the actual effect of deferred taxes as of May 1. (2) Includes the Class A Common Stock, Class B Common Stock and Special Warrants issued at emergence. The reconciliation of the Company’s enterprise value to reorganization value as of the Effective Date is as follows: (In thousands) Enterprise Value $ 8,750,000 Plus: Cash and cash equivalents 63,142 Current liabilities (excluding Current portion of long-term debt) 426,944 Deferred tax liability 596,850 Other long-term liabilities 54,393 Noncurrent operating lease obligations 818,879 Reorganization value $ 10,710,208 Consolidated Balance Sheet The adjustments set forth in the following consolidated balance sheet as of May 1, 2019 reflect the effect of the Separation (reflected in the column "Separation of CCOH Adjustments"), the consummation of the transactions contemplated by the Plan of Reorganization that are incremental to the Separation (reflected in the column "Reorganization Adjustments") and the fair value adjustments as a result of applying fresh start accounting (reflected in the column "Fresh Start Adjustments"). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities, as well as significant assumptions or inputs. 120 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands) Separation of CCOH Adjustments Reorganization Adjustments Fresh Start Adjustments Predecessor (A) (B) (C) Successor CURRENT ASSETS Cash and cash equivalents $ 175,811 $ — $ ( 112,669 ) (1) $ — $ 63,142 Accounts receivable, net 748,326 — — ( 10,810 ) (1) 737,516 Prepaid expenses 127,098 — — ( 24,642 ) (2) 102,456 Other current assets 22,708 — 8,125 (2) ( 1,668 ) (3) 29,165 Current assets of discontinued operations 1,000,753 ( 1,000,753 ) (1) — — — Total Current Assets 2,074,696 ( 1,000,753 ) ( 104,544 ) ( 37,120 ) 932,279 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment, net 499,001 — — 333,991 (4) 832,992 INTANGIBLE ASSETS AND GOODWILL Indefinite-lived intangibles - licenses 2,326,626 — — ( 44,906 ) (5) 2,281,720 Other intangibles, net 104,516 — — 2,240,890 (5) 2,345,406 Goodwill 3,415,492 — — ( 92,127 ) (5) 3,323,365 OTHER ASSETS Operating lease right-of-use assets 355,826 — — 554,278 (6) 910,104 Other assets 139,409 — ( 384 ) (3) ( 54,683 ) (2) 84,342 Long-term assets of discontinued operations 5,351,513 ( 5,351,513 ) (1) — — — Total Assets $ 14,267,079 $ ( 6,352,266 ) $ ( 104,928 ) $ 2,900,323 $ 10,710,208 CURRENT LIABILITIES Accounts payable $ 41,847 $ — $ 3,061 (4) $ — $ 44,908 Current operating lease liabilities 470 — 31,845 (7) 39,092 (6) 71,407 Accrued expenses 208,885 — ( 32,250 ) (5) 2,328 (9) 178,963 Accrued interest 462 — ( 462 ) (6) — — Deferred revenue 128,452 — — 3,214 (7) 131,666 Current portion of long-term debt 46,618 — 6,529 (7) 40 (6) 53,187 Current liabilities of discontinued operations 999,778 ( 999,778 ) (1) — — — Total Current Liabilities 1,426,512 ( 999,778 ) 8,723 44,674 480,131 Long-term debt — — 5,758,516 (8) ( 1,586 ) (8) 5,756,930 Series A Mandatorily Redeemable Preferred Stock — — 60,000 (9) — 60,000 Noncurrent operating lease liabilities 828 — 398,154 (7) 419,897 (6) 818,879 Deferred income taxes — — 575,341 (10) 185,419 (10) 760,760 Other long-term liabilities 121,081 — ( 64,524 ) (11) ( 2,164 ) (7) 54,393 Liabilities subject to compromise 16,770,266 — ( 16,770,266 ) (7) — — Long-term liabilities of discontinued operations 7,472,633 ( 7,472,633 ) (1) — — — Commitments and contingent liabilities (Note 7) STOCKHOLDERS’ EQUITY (DEFICIT) Noncontrolling interest 13,584 ( 13,199 ) (1) — 8,558 (11) 8,943 Predecessor common stock 92 — ( 92 ) (12) — — Successor Class A Common Stock — — 57 (13) — 57 Successor Class B Common Stock — — 7 (13) — 7 Predecessor additional paid-in capital 2,075,130 — ( 2,075,130 ) (12) — — Successor additional paid-in capital — — 2,770,108 (13) — 2,770,108 Accumulated deficit ( 13,288,497 ) 1,825,531 (1) 9,231,616 (14) 2,231,350 (12) — Accumulated other comprehensive loss ( 321,988 ) 307,813 (1) — 14,175 (12) — Cost of share held in treasury ( 2,562 ) — 2,562 (12) — — Total Stockholders' Equity (Deficit) ( 11,524,241 ) 2,120,145 9,929,128 2,254,083 2,779,115 Total Liabilities and Stockholders' Equity (Deficit) $ 14,267,079 $ ( 6,352,266 ) $ ( 104,928 ) $ 2,900,323 $ 10,710,208 121 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A. Separation of CCOH Adjustments (1) On May 1, 2019, as part of the Separation, the outstanding shares of both classes of CCOH common stock were consolidated such that CCH held all of the outstanding CCOH Class A common stock that was held by subsidiaries of iHeartCommunications, through a series of share distributions by other subsidiaries that held CCOH common stock and a conversion of CCOH Class B common stock that CCH held to CCOH Class A common stock. Prior to the Separation, iHeartCommunications owned approximately 89.1 % of the economic rights and approximately 99 % of the voting rights of CCOH. To complete the Separation, CCOH merged with and into CCH, with CCH surviving the merger and changing its name to Clear Channel Outdoor Holdings, Inc. (“New CCOH”), and pre-merger shares of CCOH Class A common stock (other than shares of CCOH Class A common stock held by CCH or any direct or indirect wholly-owned subsidiary of CCH) were converted into an equal number of shares of post-merger common stock of New CCOH. iHeartCommunications transferred the post-merger common stock of New CCOH it held to Claimholders pursuant to the Plan of Reorganization but retained 31,269,762 shares. Such retained shares were distributed to two affiliated Claimholders on July 18, 2019. Upon completion of the merger and Separation, New CCOH became an independent public company. Upon distribution of the shares held by iHeartCommunications, the Company does not hold any ownership interest in CCOH. The assets and liabilities of CCOH have been classified as discontinued operations. The discontinued operations reflect the assets and liabilities of CCOH, which are presented as discontinued operations as of the Effective Date. CCOH’s assets and liabilities are adjusted to: (1) eliminate the balance on the Due from iHeartCommunications Note and the balance on the intercompany payable due to iHeartCommunications from CCOH’s consolidated balance sheet, which are intercompany amounts that were eliminated in consolidation; (2) eliminate CCOH’s Noncontrolling interest and treasury shares; and (3) eliminate other intercompany balances. B. Reorganization Adjustments In accordance with the Plan of Reorganization, the following adjustments were made: (1) The table below reflects the sources and uses of cash on the Effective Date from implementation of the Plan: (In thousands) Cash at May 1, 2019 (excluding discontinued operations) $ 175,811 Sources: Proceeds from issuance of Mandatorily Redeemable Preferred Stock $ 60,000 Release of restricted cash from other assets into cash 3,428 Total sources of cash $ 63,428 Uses: Payment of Mandatorily Redeemable Preferred Stock issuance costs $ ( 1,513 ) Payment of New Term Loan Facility to settle certain creditor claims ( 1,822 ) Payments for Emergence debt issuance costs ( 7,213 ) Funding of the Guarantor General Unsecured Recovery Cash Pool ( 17,500 ) Payments for fully secured claims and general unsecured claims ( 1,990 ) Payment of contract cure amounts ( 15,763 ) Payment of consenting stakeholder fees ( 4,000 ) Payment of professional fees ( 85,091 ) (a) Funding of Professional Fees Escrow Account ( 41,205 ) (a) Total uses of cash $ ( 176,097 ) Net uses of cash $ ( 112,669 ) Cash upon emergence $ 63,142 122 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (a) Approximately $ 30.5 million of professional fees paid at emergence were accrued as of May 1, 2019. These payments also reflect both the payment of success fees for $ 86.1 million and other professionals paid directly at emergence. (2) Pursuant to the terms of the Plan of Reorganization, on the Effective Date, the Company funded the Guarantor General Unsecured Recovery Cash Pool account in the amount of $ 17.5 million, which was reclassified as restricted cash within Other current assets. The Company made payments of $ 6.0 million through the Cash Pool at the time of emergence. Additionally, $ 3.4 million of restricted cash previously held to pay critical utility vendors was reclassified to cash. (3) Reflects the write-off of prepaid expenses related to the $ 2.3 million of prepaid premium for Predecessor Company's director and officer insurance policy, offset by the accrual of future reimbursements of $ 1.9 million for negotiated discounts related to the professional fee escrow account. (4) Reflects the reinstatement of $ 3.1 million of accounts payable included within Liabilities subject to compromise to be satisfied in the ordinary course of business. (5) Reflects the reduction of accrued expenses related to the $ 21.2 million of professional fees paid directly, $ 9.3 million of professional fees paid through the Professional Fee Escrow Account and other accrued expense items. Additionally, the Company reinstated accrued expenses included within Liabilities subject to compromise to be satisfied in the ordinary course of business. (In thousands) Reinstatement of accrued expenses $ 551 Payment of professional fees ( 21,177 ) Payment of professional fees through the escrow account ( 9,260 ) Impact on other accrued expenses ( 2,364 ) Net impact on Accrued expenses $ ( 32,250 ) (6) Reflects the write-off of the DIP facility accrued interest associated with the DIP facility fees paid at emergence. (7) As part of the Plan of Reorganization, the Bankruptcy Court approved the settlement of claims reported within Liabilities subject to compromise in the Company's Consolidated balance sheet at their respective allowed claim amounts. 123 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The table below indicates the disposition of Liabilities subject to compromise: (In thousands) Liabilities subject to compromise pre-emergence $ 16,770,266 To be reinstated on the Effective Date: Deferred taxes $ ( 596,850 ) Accrued expenses ( 551 ) Accounts payable ( 3,061 ) Finance leases and other debt ( 16,867 ) (a) Current operating lease liabilities ( 31,845 ) Noncurrent operating lease liabilities ( 398,154 ) Other long-term liabilities ( 14,518 ) (b) Total liabilities reinstated $ ( 1,061,846 ) Less amounts settled per the Plan of Reorganization Issuance of new debt $ ( 5,750,000 ) Payments to cure contracts ( 15,763 ) Payments for settlement of general unsecured claims from escrow account ( 5,822 ) Payments for fully secured and other claim classes at emergence ( 1,990 ) Equity issued at emergence to creditors in settlement of Liabilities subject to Compromise ( 2,742,471 ) Total amounts settled ( 8,516,046 ) Gain on settlement of Liabilities Subject to Compromise $ 7,192,374 (a) Includes finance lease liabilities and other debt of $ 6.6 million and $ 10.3 million classified as current and long-term debt, respectively. (b) Reinstatement of Other long-term liabilities were as follows: (In thousands) Reinstatement of long-term asset retirement obligations $ 3,527 Reinstatement of non-qualified deferred compensation plan 10,991 Total reinstated Other long-term liabilities $ 14,518 124 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (8) The exit financing consists of the Term Loan Facility of approximately $ 3.5 billion and 6.375 % Senior Secured Notes totaling $ 800 million, both maturing seven years from the date of issuance, the Senior Unsecured Notes totaling $ 1.45 billion, maturing eight years from the date of issuance, and a $ 450 million ABL Facility with no amount drawn at emergence, which matures on June 14, 2023. Upon emergence, the Company paid cash of $ 1.8 million to settle certain creditor claims for which claims were designated to receive term loans pursuant to the Plan of Reorganization. The remaining $ 10.3 million is related to the reinstatement of the Long-term portion of finance leases and other debt as described above. (In thousands) Term Interest Rate Amount Term Loan Facility 7 years Libor + 4.00 % $ 3,500,000 6.375 % Senior Secured Notes 7 years 6.375 % 800,000 Senior Unsecured Notes 8 years 8.375 % 1,450,000 Asset-based Revolving Credit Facility 4 years Varies (a) — Total Long-Term Debt - Exit Financing $ 5,750,000 Less: Payment of Term Loan Facility to settle certain creditor claims ( 1,822 ) Net proceeds from exit financing at emergence $ 5,748,178 Long-term portion of finance leases and other debt reinstated 10,338 Net impact on Long-term debt $ 5,758,516 (a) Borrowings under the ABL Facility bear interest at a rate per annum equal to the applicable rate plus, at iHeartCommunications’ option, either (x) a eurocurrency rate or (y) a base rate. The applicable margin for borrowings under the ABL Facility range from 1.25 % to 1.75 % for eurocurrency borrowings and from 0.25 % to 0.75 % for base-rate borrowings, in each case, depending on average excess availability under the ABL Facility based on the most recently ended fiscal quarter. (9) Reflects the issuance by iHeart Operations of $ 60.0 million in aggregate liquidation preference of its Series A Perpetual Preferred Stock, par value $ 0.001 per share. On May 1, 2029, the shares of the Preferred Stock would have been subject to mandatory redemption for $ 60.0 million in cash, plus any accrued and unpaid dividends. However, these shares were repurchased for cash on October 27, 2021. (10) Reflects the reinstatement of deferred tax liabilities included within Liabilities subject to compromise of $ 596.9 million, offset by an adjustment to net deferred tax liabilities of $ 21.5 million. Upon emergence from the Chapter 11 Cases, iHeartMedia’s federal and state net operating loss carryforwards were reduced in accordance with Section 108 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), due to cancellation of debt income, which is excluded from U.S. federal taxable income. The estimated remaining deferred tax assets attributed to federal and state net operating loss carryforwards upon emergence totaled $ 114.9 million. The adjustments reflect a reduction in deferred tax assets for federal and state net operating loss carryforwards as described above, a reduction in deferred tax liabilities attributed to long-term debt as a result of the restructuring of our indebtedness upon emergence and a reduction in valuation allowance. 125 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (11) Reflects the reinstatement of Other long-term liabilities from Liabilities subject to compromise, offset by the reduction of liabilities for unrecognized tax benefits classified as Other long-term liabilities that were discharged and effectively settled upon emergence. (In thousands) Reinstatement of long-term asset retirement obligations $ 3,527 Reinstatement of non-qualified pension plan 10,991 Reduction of liabilities for unrecognized tax benefits ( 79,042 ) Net impact to Other long-term liabilities $ ( 64,524 ) (12) Pursuant to the terms of the Plan of Reorganization, as of the Effective Date, all Predecessor common stock and stock-based compensation awards were canceled without any distribution. As a result of the cancellation, the Company recognized $ 1.5 million in compensation expense related to the unrecognized portion of share-based compensation as of the Effective Date. (13) Reflects the issuance of Successor Company equity, including the issuance of 56,861,941 shares of iHeartMedia Class A common stock, 6,947,567 shares of Class B common stock and special warrants to purchase 81,453,648 shares of Class A common stock or Class B common stock in exchange for claims against or interests in iHeartMedia pursuant to the Plan of Reorganization. (In thousands) Equity issued to Class 9 Claimholders (prior equity holders) $ 27,701 Equity issued to creditors in settlement of Liabilities subject to compromise 2,742,471 Total equity issued at emergence $ 2,770,172 (14) The table reflects the cumulative impact of the reorganization adjustments discussed above: (In thousands) Gain on settlement of Liabilities subject to compromise $ 7,192,374 Payment of professional fees upon emergence ( 11,509 ) Payment of success fees upon emergence ( 86,065 ) Cancellation of unvested stock-based compensation awards ( 1,530 ) Cancellation of Predecessor prepaid director and officer insurance policy ( 2,331 ) Write-off of debt issuance and Mandatorily Redeemable Preferred Stock costs incurred at emergence ( 8,726 ) Total Reorganization items, net $ 7,082,213 Income tax benefit $ 102,914 Cancellation of Predecessor Equity 2,074,190 (a) Issuance of Successor Equity to prior equity holders ( 27,701 ) Net Impact on Accumulated deficit $ 9,231,616 (a) This value is reflective of Predecessor common stock, Additional paid in capital and the recognition of $ 1.5 million in compensation expense related to the unrecognized portion of share-based compensation, less Treasury stock. 126 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS C. Fresh Start Adjustments We have applied fresh start accounting in accordance with ASC 852, Reorganizations . Fresh start accounting requires the revaluation of our assets and liabilities to fair value, including both existing and new intangible assets, such as FCC licenses, developed technology, customer relationships and tradenames. Fresh start accounting also requires the elimination of all predecessor earnings or deficits in Accumulated deficit and Accumulated other comprehensive loss. These adjustments reflect the actual amounts recorded as of the Effective Date. (1) Reflects the fair value adjustment as of May 1, 2019 made to accounts receivable to reflect management's best estimate of the expected collectability of accounts receivable balances. (2) Reflects the fair value adjustment as of May 1, 2019 to eliminate certain prepaid expenses related to software implementation costs and other upfront payments. The Company historically incurred third-party implementation fees in connection with installing various cloud-based software products, and these amounts were recorded as prepaid expenses and recognized as a component of selling, general and administrative expense over the term of the various contracts. The Company determined that the remaining unamortized costs related to such implementation fees do not provide any rights that result in future economic benefits. In addition, the Company pays signing bonuses to certain of its on-air personalities, and these amounts were recorded as prepaid expenses and recognized as a component of Direct operating expenses over the terms of the various contracts. To the extent these contracts do not contain substantive claw-back provisions, these prepaid amounts do not provide any enforceable rights that result in future economic benefits. Accordingly, the balances related to these contracts as of May 1, 2019 were adjusted to zero. (3) Reflects the fair value adjustment to eliminate receivables related to tenant allowances per certain lease agreements. These receivables were incorporated into the recalculated lease obligations per ASC 842. (4) Reflects the fair value adjustment to recognize the Company’s property, plant and equipment as of May 1, 2019 based on the fair values of such property, plant and equipment. Property was valued using a market approach comparing similar properties to recent market transactions. Equipment and towers were valued primarily using a replacement cost approach. Internally-developed and owned software technology assets were valued primarily using the Royalty Savings Method, similar to the approach used in valuing the Company’s tradenames and trademarks. Estimated royalty rates were determined for each of the software technology assets considering the relative contribution to the Company’s overall profitability as well as available public market information regarding market royalty rates for similar assets. The selected royalty rates were applied to the revenue generated by the software technology assets. The forecasted cash flows expected to be generated as a result of the royalty savings were discounted to present value utilizing a discount rate considering overall business risks and risks associated with the asset being valued. For certain of the software technology assets, the Company used the cost approach which utilized historical financial data regarding development costs and expected future profit associated with the assets. The adjustment to the Company’s property, plant and equipment consists of a $ 182.9 million increase in tangible property and equipment and a $ 151.0 million increase in software technology assets (5) Historical goodwill and other intangible assets have been eliminated and the Company has recognized certain intangible assets at estimated current fair values as part of the application of fresh start accounting, with the most material intangible assets being the FCC licenses related to the Company’s 854 radio stations. The Company has also recorded customer-related and marketing-related intangible assets, including the iHeart tradename. 127 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table sets forth estimated fair values of the components of these intangible assets and their estimated useful lives: (In thousands) Estimated Fair Value Estimated Useful Life FCC licenses $ 2,281,720 (a) Indefinite Customer / advertiser relationships 1,643,670 (b) 5 - 15 years Talent contracts 373,000 (b) 2 - 10 years Trademarks and tradenames 321,928 (b) 7 - 15 years Other 6,808 (c) Total intangible assets upon emergence $ 4,627,126 Elimination of historical acquired intangible assets ( 2,431,142 ) Fresh start adjustment to acquired intangible assets $ 2,195,984 (a) FCC licenses. The fair value of the indefinite-lived FCC licenses was determined primarily using the direct valuation method of the Income Approach and, for smaller markets a combination of the Income approach and the Market Approach. The Company engaged a third-party valuation firm to assist it in the development of the assumptions and the Company’s determination of the fair value of its FCC licenses. Under the direct valuation method, the fair value of the FCC licenses was calculated at the market level as prescribed by ASC 350, Intangibles-Goodwill and Other . The application of the direct valuation method attempts to isolate the income that is properly attributable to the FCC licenses alone (that is, apart from tangible and identified intangible assets and goodwill). It is based upon modeling a hypothetical “greenfield” build-up to a “normalized” enterprise that, by design, lacks inherent goodwill and whose only other assets have essentially been paid for (or added) as part of the build-up process. Under the direct valuation method, it is assumed that rather than acquiring FCC licenses as part of a going concern business, the buyer hypothetically obtains FCC licenses and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase which are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model which results in value that is directly attributable to the FCC licenses. In applying the direct valuation method to the Company’s FCC licenses, the licenses are grouped by type (e.g. FM licenses vs. AM licenses) and market size in order to ensure appropriate assumptions are used in valuing the various FCC licenses based on population and demographics that influence the level of revenues generated by each FCC license, using industry projections. The key assumptions used in applying the direct valuation method include market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate (“WACC”) and terminal values. The WACC was calculated by weighting the required returns on interest-bearing debt and common equity capital in proportion to their estimated percentages based on a market participant capital structure. For licenses valued using the Market Transaction Method, the Company used publicly available data, which included sales of comparable radio stations and FCC auction data involving radio broadcast licenses to estimate the fair value of FCC licenses. Similar to the application of the Income approach for the FCC licenses, the Company grouped licenses by type and market size for comparison to historical market transactions. The historical book value of the FCC licenses as of May 1, 2019 was subtracted from the fair value of the FCC licenses to determine the adjustment to decrease the value of Indefinite-lived intangible assets-licenses by $ 44.9 million. (b) Other intangible assets. Definite-lived intangible assets include customer/advertiser relationships, talent contracts for on-air personalities, trademarks and tradenames and other intangible assets. The Company engaged a third-party valuation firm to assist in developing the assumptions and determining the fair values of each of these assets. For purposes of estimating the fair values of customer/advertiser relationships and talent contracts, the Company primarily utilized the Income Approach (specifically, the multi-period excess earnings method, or MPEEM) to 128 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS estimate fair value based on the present value of the incremental after-tax cash flows attributable only to the subject intangible assets after deducting contributory asset charges. The cash flows attributable to each grouping of customer/advertiser relationships were adjusted for the appropriate contributory asset charges (e.g., FCC licenses, working capital, tradenames, technology, workforce, etc.). The discount rate utilized to present-value the after-tax cash flows was selected based on consideration of the overall business risks and the risks associated with the specific assets being valued. Additionally, for certain advertiser relationships the Company used the Cost Approach using historical financial data regarding the sales, administrative and overhead expenses related to the Company’s selling efforts associated with revenue for both existing and new advertisers. The ratio of expenses for selling efforts to revenue was applied to total revenue from new customers to determine an estimated cost per revenue dollar of revenue generated by new customers. This ratio was applied to total revenue from existing customers to estimate the replacement cost of existing customer/advertiser relationships. The historical book value of customer/advertiser relationships as of May 1, 2019 was subtracted from the fair value of the customer/advertiser relationships determined as described above to determine the adjustment to increase the value of the customer/advertiser relationship intangible assets by $ 1,604.1 million. For purposes of estimating the fair value of trademarks and tradenames, the Company primarily used the Royalty Savings Method, a variation of the Income approach. Estimated royalty rates were determined for each of the trademarks and tradenames considering the relative contribution to the Company’s overall profitability as well as available public information regarding market royalty rates for similar assets. The selected royalty rates were applied to the revenue generated by the trademarks and tradenames to determine the amount of royalty payments saved as a result of owning these assets. The forecasted cash flows expected to be generated as a result of the royalty savings were discounted to present value utilizing a discount rate considering overall business risks and risks associated with the asset being valued. The historical book values of talent contracts, trademarks and tradenames and other intangible assets as of May 1, 2019 were subtracted from the fair values determined as described above to determine the adjustments as follows: (In millions) Customer/advertiser relationships $ 1,604.1 increase in value Talent contracts 361.6 increase in value Trademarks and tradenames 274.4 increase in value Other 0.8 increase in value Total fair value adjustment $ 2,240.9 increase in value (c) Included within other intangible assets are permanent easements, which have an indefinite useful life. All other intangible assets are amortized over the respective lives of the agreements, or over the period of time the assets are expected to contribute directly or indirectly to the Company’s future cash flows. The following table sets forth the adjustments to goodwill: (In thousands) Reorganization value $ 10,710,208 Less: Fair value of assets (excluding goodwill) ( 7,386,843 ) Total goodwill upon emergence 3,323,365 Elimination of historical goodwill ( 3,415,492 ) Fresh start adjustment to goodwill $ ( 92,127 ) (6) The operating lease obligation as of May 1, 2019 had been calculated using an incremental borrowing rate applicable to the Company while it was a debtor-in-possession before its emergence from bankruptcy. Upon application of fresh start accounting, the lease obligation was recalculated using the incremental borrowing rate applicable to the Company after emergence from bankruptcy and commensurate to its new capital structure. The incremental borrowing rate used decreased from 12.44 % as of March 31, 2019 to 6.54 % as of May 1, 2019. As a result of this decrease, the Company's Operating lease liabilities and corresponding Operating lease right-of-use assets increased by $ 541.2 million to reflect the higher balances resulting from the application of a lower incremental borrowing rate. The Operating lease right-of-use-assets were 129 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS further adjusted to reflect the resetting of the Company's straight-line lease calculation. In addition, the Company increased the Operating lease right-of-use assets to recognize $ 13.1 million related to the favorable lease contracts. (7) Reflects the fair value adjustment to adjust deferred revenue and other liabilities as of May 1, 2019 to its estimated fair value. The fair value of the deferred revenue was determined using the market approach and the cost approach. The market approach values deferred revenue based on the amount an acquirer would be required to pay a third party to assume the remaining performance obligations. The cost approach values deferred revenue utilizing estimated costs that will be incurred to fulfill the obligation plus a normal profit margin for the level of effort or assumption of risk by the acquirer. Additionally, a deferred gain was recorded at the time of the certain historical sale-leaseback transaction. During the implementation of ASC 842, Leases , the operating portion was written off as of January 1, 2019. The financing lease deferred gain remained. As part of fresh start accounting, this balance of $ 0.9 million was written off. (8) Reflects the fair value adjustment to adjust Long-term debt as of May 1, 2019. This adjustment is to state the Company's finance leases and other pre-petition debt at estimated fair values. (9) Reflects the fair value adjustment to adjust Accrued expenses as of May 1, 2019. This adjustment primarily relates to adjusting vacation accruals to estimated fair values. (10) Reflects a net increase to deferred tax liabilities for fresh start adjustments attributed primarily to property, plant and equipment and intangible assets, the effects of which are partially offset by a decrease in the valuation allowance. The Company believes it is more likely than not that its deferred tax assets remaining after the Reorganization and emergence will be realized based on taxable income from reversing deferred tax liabilities primarily attributable to property, plant and equipment and intangible assets. (11) Reflects the adjustment as of May 1, 2019 to state the noncontrolling interest balance at estimated fair value. 130 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (12) The table below reflects the cumulative impact of the fresh start adjustments as discussed above: (In thousands) Fresh start adjustment to Accounts receivable, net $ ( 10,810 ) Fresh start adjustment to Other current assets ( 1,668 ) Fresh start adjustment to Prepaid expenses ( 24,642 ) Fresh start adjustment to Property, plant and equipment, net 333,991 Fresh start adjustment to Intangible assets 2,195,984 Fresh start adjustment to Goodwill ( 92,127 ) Fresh start adjustment to Operating lease right-of-use assets 554,278 Fresh start adjustment to Other assets ( 54,683 ) Fresh start adjustment to Accrued expenses ( 2,328 ) Fresh start adjustment to Deferred revenue ( 3,214 ) Fresh start adjustment to Debt 1,546 Fresh start adjustment to Operating lease obligations ( 458,989 ) Fresh start adjustment to Other long-term liabilities 2,164 Fresh start adjustment to Noncontrolling interest ( 8,558 ) Total Fresh Start Adjustments impacting Reorganization items, net $ 2,430,944 Reset of Accumulated other comprehensive income ( 14,175 ) Income tax expense ( 185,419 ) Net impact to Accumulated deficit $ 2,231,350 Reorganization Items, Net The tables below present the Reorganization items incurred and cash paid for Reorganization items as a result of the Chapter 11 Cases during the periods presented: (In thousands) Successor Company Predecessor Company Year Ended December 31, Period from May 2, 2019 through December 31, Period from January 1, 2019 through May 1, 2021 2020 2019 2019 Professional fees and other bankruptcy related costs — — — ( 157,487 ) Net gain on settlement of Liabilities subject to compromise — — — 7,192,374 Impact of fresh start adjustments — — — 2,430,944 Other items, net — — — ( 4,005 ) Reorganization items, net $ — $ — $ — $ 9,461,826 Cash payments for Reorganization items, net $ — $ 443 $ 18,360 $ 183,291 The Successor Company incurred additional professional fees related to the bankruptcy, post-emergence, of $ 1.4 million, $ 6.3 million and $ 26.5 million for the year ended December 31, 2021, the year ended December 31, 2020 and the period from May 2, 2019 through December 31, 2019, respectively, which are included within Other income (expense), net in the Company's Consolidated Statements of Comprehensive Income (Loss). 131 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 16 - DISCONTINUED OPERATIONS Discontinued operations relate to our domestic and international outdoor advertising businesses and were previously reported as the Americas outdoor and International outdoor segments prior to the Separation. Revenue, expenses and cash flows for these businesses are separately reported as revenue, expenses and cash flows from discontinued operations in the Company's financial statements for all periods presented. Financial Information for Discontinued Operations Income Statement Information The following shows the revenue, income (loss) from discontinued operations and gain on disposal of the Predecessor Company's discontinued operations for the period from January 1, 2019 through May 1, 2019: (In thousands) Predecessor Company Period from January 1, 2019 through May 1, 2019 Revenue $ 804,566 Loss from discontinued operations before income taxes $ ( 133,475 ) Income tax expense ( 6,933 ) Loss from discontinued operations, net of taxes $ ( 140,408 ) Gain on disposals before income taxes $ 1,825,531 Income tax expense — Gain on disposals, net of taxes $ 1,825,531 Income from discontinued operations, net of taxes $ 1,685,123 In connection with the Separation, the Company and its subsidiaries entered into the agreements described below. Transition Services Agreement On the Effective Date, the Company, iHM Management Services, iHeartCommunications and CCOH entered into a transition services agreement (the “Transition Services Agreement”), pursuant to which iHM Management Services agreed to provide, or cause the Company and its subsidiaries 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, for one year from the Effective Date (subject to certain rights of CCOH to extend up to one additional year). The allocation of cost was based on various measures depending on the service provided, which measures include relative revenue, employee headcount, number of users of a service or other factors. CCOH terminated the Transition Services Agreement on August 31, 2020. 132 IHEARTMEDIA, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Tax Matters Agreement On the Effective Date, the Company entered into the Tax Matters Agreement to allocate the responsibility of the Company and its subsidiaries, on the one hand, and the Outdoor Group, on the other, for the payment of taxes arising prior and subsequent to, and in connection with, the Separation. The Tax Matters Agreement requires that the Company 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 the Company 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 the Company 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 the Company 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 the Company or its subsidiaries, then the Company is required to reimburse CCOH for the use of such attributes based on the amount of tax benefit realized. The 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 the Company or iHeartCommunications to reimburse CCOH for such reduction). The Tax Matters Agreement also requires that (i) CCOH indemnify the Company for any income taxes paid by the Company 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 the Company 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 indemnify the Company 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. Any tax liability of CCH attributable to any taxable period ending on or before the date of the completion of the Separation, other than any such tax liability resulting from CCH’s being a successor of CCOH in connection with the merger of CCOH with and into CCOH 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 Tax Matters Agreement. 133 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not Applicable.