Item 1. Financial Statements
ITEM 1. FINANCIAL STATEMENTS
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) June 30,
2022 December 31,
2021
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $ 294,831 $ 352,129
Accounts receivable, net of allowance of $ 32,304 in 2022 and $ 29,270 in 2021
967,120 1,030,380
Prepaid expenses 94,099 65,927
Other current assets 16,067 24,431
Total Current Assets 1,372,117 1,472,867
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net 716,241 782,093
INTANGIBLE ASSETS AND GOODWILL
Indefinite-lived intangibles - licenses and other 1,778,405 1,778,045
Other intangibles, net 1,540,092 1,666,600
Goodwill 2,313,349 2,313,581
OTHER ASSETS
Operating lease right-of-use assets 807,994 741,410
Other assets 172,919 126,713
Total Assets $ 8,701,117 $ 8,881,309
CURRENT LIABILITIES
Accounts payable $ 198,983 $ 206,007
Current operating lease liabilities 41,962 88,585
Accrued expenses 288,363 353,045
Accrued interest 66,276 67,983
Deferred revenue 161,921 133,123
Current portion of long-term debt 675 673
Total Current Liabilities 758,180 849,416
Long-term debt 5,626,744 5,738,195
Noncurrent operating lease liabilities 859,417 738,814
Deferred income taxes 497,638 558,222
Other long-term liabilities 65,717 80,897
Commitments and contingent liabilities (Note 6)
STOCKHOLDERS’ EQUITY
Noncontrolling interest 8,659 8,410
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 122,068,221 and 120,633,937 shares in 2022 and 2021, respectively
122 120
Class B Common Stock, par value $ .001 per share, authorized 1,000,000,000 shares, issued 21,391,972 and 21,590,192 shares in 2022 and 2021, respectively
21 22
Special Warrants, 5,293,055 and 5,304,430 issued and outstanding in 2022 and 2021, respectively
— —
Additional paid-in capital 2,891,129 2,876,571
Accumulated deficit ( 1,997,000 ) ( 1,962,819 )
Accumulated other comprehensive loss ( 1,154 ) ( 257 )
Cost of shares ( 538,709 in 2022 and 389,814 in 2021) held in treasury
( 8,356 ) ( 6,282 )
Total Stockholders' Equity 893,421 915,765
Total Liabilities and Stockholders' Equity $ 8,701,117 $ 8,881,309
See Notes to Consolidated Financial Statements
1
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
(In thousands, except per share data) Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenue $ 954,005 $ 861,605 $ 1,797,463 $ 1,568,270
Operating expenses:
Direct operating expenses (excludes depreciation and amortization) 365,382 320,515 695,906 613,328
Selling, general and administrative expenses (excludes depreciation and amortization) 379,057 372,640 763,401 714,970
Depreciation and amortization 110,788 127,945 224,839 235,308
Impairment charges 245 — 1,579 37,744
Other operating expense, net 15,664 12,379 16,534 15,150
Operating income (loss) 82,869 28,126 95,204 ( 48,230 )
Interest expense, net 81,494 84,887 160,713 170,008
Gain on investments, net 9,590 49,644 7,825 49,835
Equity in loss of nonconsolidated affiliates ( 29 ) ( 31 ) ( 58 ) ( 59 )
Gain on extinguishment of debt 8,203 — 8,203 —
Other expense, net ( 2,175 ) ( 363 ) ( 2,445 ) ( 1,170 )
Income (loss) before income taxes 16,964 ( 7,511 ) ( 51,984 ) ( 169,632 )
Income tax benefit (expense) ( 1,782 ) ( 24,449 ) 18,427 ( 104,384 )
Net income (loss) 15,182 ( 31,960 ) ( 33,557 ) ( 274,016 )
Less amount attributable to noncontrolling interest 781 326 624 ( 7 )
Net income (loss) attributable to the Company $ 14,401 $ ( 32,286 ) $ ( 34,181 ) $ ( 274,009 )
Other comprehensive loss, net of tax:
Foreign currency translation adjustments ( 650 ) ( 40 ) ( 897 ) ( 256 )
Other comprehensive loss, net of tax ( 650 ) ( 40 ) ( 897 ) ( 256 )
Comprehensive income (loss) 13,751 ( 32,326 ) ( 35,078 ) ( 274,265 )
Less amount attributable to noncontrolling interest — — — —
Comprehensive income (loss) attributable to the Company $ 13,751 $ ( 32,326 ) $ ( 35,078 ) $ ( 274,265 )
Net income (loss) attributable to the Company per common share:
Basic $ 0.10 $ ( 0.22 ) $ ( 0.23 ) $ ( 1.87 )
Weighted average common shares outstanding - Basic 148,050 146,509 147,783 146,362
Diluted $ 0.10 $ ( 0.22 ) $ ( 0.23 ) $ ( 1.87 )
Weighted average common shares outstanding - Diluted 149,131 146,509 147,783 146,362
See Notes to Consolidated Financial Statements
2
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(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 Loss Treasury
Stock
Class A
Shares Class B
Shares Special Warrants Total
Balances at
March 31, 2022
121,402,390 21,430,500 5,293,069 $ 8,066 $ 143 $ 2,882,515 $ ( 2,011,401 ) $ ( 504 ) $ ( 6,798 ) $ 872,021
Net income 781 — — 14,401 — — 15,182
Vesting of restricted stock and other
627,289 — — 4 — — ( 1,558 ) ( 1,554 )
Share-based compensation — — 8,610 — — — 8,610
Conversion of Special Warrants to Class A Shares 14 ( 14 ) — — — — — — —
Conversion of Class B Shares to Class A Shares
38,528 ( 38,528 ) — — — — — — —
Other
( 188 ) — — — — — ( 188 )
Other comprehensive loss — — — — ( 650 ) — ( 650 )
Balances at
June 30, 2022
122,068,221 21,391,972 5,293,055 $ 8,659 $ 143 $ 2,891,129 $ ( 1,997,000 ) $ ( 1,154 ) $ ( 8,356 ) $ 893,421
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022.
See Notes to Consolidated Financial Statements
3
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share data) Controlling Interest
Common Shares (1)
Non-
controlling
Interest Common
Stock Additional
Paid-in
Capital Accumulated Deficit Accumulated
Other
Comprehensive Loss Treasury
Stock
Class A Shares Class B
Shares Special Warrants Total
Balances at
March 31, 2021
112,033,028 29,070,192 5,379,822 $ 7,830 $ 141 $ 2,854,647 $ ( 2,045,343 ) $ ( 22 ) $ ( 3,302 ) $ 813,951
Net income (loss) 326 — — ( 32,286 ) — — ( 31,960 )
Vesting of restricted stock and other 780,173 — 1 3,107 — — ( 1,929 ) 1,179
Share-based compensation
— — 5,903 — — — 5,903
Dividend declared and paid to noncontrolling interests ( 188 ) — — — — — ( 188 )
Conversion of Special Warrants to Class A Shares 14,694 ( 14,694 ) — — — — — — —
Conversion of Class B Shares to Class A Shares 5,433,680 ( 5,433,680 ) — — — — — — —
Other comprehensive loss — — — — ( 40 ) — ( 40 )
Balances at
June 30, 2021
118,261,575 23,636,512 5,365,128 $ 7,968 $ 142 $ 2,863,657 $ ( 2,077,629 ) $ ( 62 ) $ ( 5,231 ) $ 788,845
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2021.
See Notes to Consolidated Financial Statements
4
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share data) Controlling Interest
Common Shares (1)
Non-
controlling
Interest Common
Stock Additional
Paid-in
Capital Accumulated
Deficit Accumulated
Other
Comprehensive Loss Treasury
Stock
Class A
Shares Class B
Shares Special Warrants Total
Balances at
December 31, 2021
120,633,937 21,590,192 5,304,430 $ 8,410 $ 142 $ 2,876,571 $ ( 1,962,819 ) $ ( 257 ) $ ( 6,282 ) $ 915,765
Net income (loss) 624 — — ( 34,181 ) — — ( 33,557 )
Vesting of restricted stock and other
1,224,689 — 1 413 — — ( 2,074 ) ( 1,660 )
Share-based compensation — — 14,145 — — — 14,145
Conversion of Special Warrants to Class A Shares 11,375 ( 11,375 ) — — — — — — —
Conversion of Class B Shares to Class A Shares
198,220 ( 198,220 ) — — — — — — —
Other
( 375 ) — — — — — ( 375 )
Other comprehensive loss — — — — ( 897 ) — ( 897 )
Balances at
June 30, 2022
122,068,221 21,391,972 5,293,055 $ 8,659 $ 143 $ 2,891,129 $ ( 1,997,000 ) $ ( 1,154 ) $ ( 8,356 ) $ 893,421
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022 or 2021.
See Notes to Consolidated Financial Statements
5
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(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
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 loss ( 7 ) — — ( 274,009 ) — — ( 274,016 )
Vesting of restricted stock 810,545 — 1 3,118 — — ( 2,032 ) 1,087
Share-based compensation — — 11,588 — — — 11,588
Conversion of Special Warrants to Class A and Class B Shares 47,136,441 22,337,312 ( 69,473,753 ) — 69 ( 69 ) — — — —
Conversion of Class B Shares to Class A Shares 5,587,725 ( 5,587,725 ) — — — — — — —
Other 2,982 ( 375 ) — — — — — ( 375 )
Other comprehensive loss — — — — ( 256 ) — ( 256 )
Balances at
June 30, 2021
118,261,575 23,636,512 5,365,128 $ 7,968 $ 142 $ 2,863,657 $ ( 2,077,629 ) $ ( 62 ) $ ( 5,231 ) $ 788,845
(1) The Company's Preferred Stock is not presented in the data above as there were no shares issued and outstanding in 2022 or 2021.
See Notes to Consolidated Financial Statements
6
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net loss $ ( 33,557 ) $ ( 274,016 )
Reconciling items:
Impairment charges 1,579 37,744
Depreciation and amortization 224,839 235,308
Deferred taxes ( 60,587 ) 99,318
Provision for doubtful accounts 8,815 ( 2,003 )
Amortization of deferred financing charges and note discounts, net 2,942 3,055
Share-based compensation 14,145 11,588
Loss on disposal of operating and other assets 15,583 11,347
Gain on investments ( 7,825 ) ( 49,835 )
Equity in loss of nonconsolidated affiliates 58 59
Gain on extinguishment of debt ( 8,203 ) —
Barter and trade income ( 12,250 ) ( 4,469 )
Other reconciling items, net 680 278
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
Decrease in accounts receivable 54,240 36,289
Increase in prepaid expenses and other current assets ( 24,996 ) ( 40,651 )
Increase in other long-term assets ( 5,371 ) ( 6,919 )
Increase (decrease) in accounts payable ( 6,963 ) 18,783
Increase (decrease) in accrued expenses ( 75,154 ) 17,455
Decrease in accrued interest ( 1,706 ) ( 31 )
Increase in deferred income 15,261 6,847
Increase in other long-term liabilities 2,059 710
Cash provided by operating activities 103,589 100,857
Cash flows from investing activities:
Business combinations — ( 230,816 )
Proceeds from sale of other investments — 50,757
Purchases of property, plant and equipment ( 72,210 ) ( 51,061 )
Proceeds from disposal of assets 26,754 13,016
Change in other, net ( 4,201 ) ( 159 )
Cash used for investing activities ( 49,657 ) ( 218,263 )
Cash flows from financing activities:
Payments on long-term debt and credit facilities ( 105,749 ) ( 20,608 )
Change in other, net ( 4,962 ) 726
Cash used for financing activities ( 110,711 ) ( 19,882 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 519 ) ( 134 )
Net decrease in cash, cash equivalents and restricted cash ( 57,298 ) ( 137,422 )
Cash, cash equivalents and restricted cash at beginning of period 352,554 721,187
Cash, cash equivalents and restricted cash at end of period $ 295,256 $ 583,765
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 160,003 $ 168,294
Cash paid for income taxes 6,835 3,027
See Notes to Consolidated Financial Statements
7
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to iHeartMedia, Inc. and its consolidated subsidiaries. The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. The financial statements contained herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
The Company's reportable segments are:
▪ 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.
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 interest or is the primary beneficiary. Investments in companies which the Company does not control, but exercises significant influence over operating and financial policies of the company are accounted for under the equity method. All significant intercompany transactions are eliminated in the consolidation process.
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. Beginning in March 2020 and continuing through the remainder of 2020 and into 2021 revenue was significantly and negatively impacted as a result of a decline in advertising spend driven by COVID-19. As a result of continued recovery from the impact of COVID-19, our revenue for the three months ended June 30, 2022 increased compared to the three months ended June 30, 2021 across each of our reportable segments.
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 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 June 30, 2022, the Company had approximately $ 294.8 million in cash and cash equivalents. While 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.
Reclassifications
Certain prior period amounts have been reclassified to conform to the 2022 presentation.
8
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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) June 30,
2022 December 31,
2021
Cash and cash equivalents $ 294,831 $ 352,129
Restricted cash included in:
Other current assets 425 425
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows $ 295,256 $ 352,554
Certain Relationships and Related Party Transactions
From time to time, certain companies in which the Company holds minority equity interests, purchase advertising in the ordinary course. None of these ordinary course transactions have a material impact on the Company.
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 does not expect the adoption of this standard to materially impact the financial position, results of operations or cash flows.
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.
9
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 – REVENUE
Disaggregation of Revenue
The following tables show revenue streams for the three and six months ended June 30, 2022 and 2021:
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated
Three Months Ended June 30, 2022
Revenue from contracts with customers:
Broadcast Radio (1)
$ 463,304 $ — $ — $ — $ 463,304
Networks (2)
127,532 . — — 127,532
Sponsorship and Events (3)
38,064 — — — 38,064
Digital, excluding Podcast (4)
— 166,880 — ( 1,376 ) 165,504
Podcast (5)
— 85,681 — — 85,681
Audio & Media Services (6)
— — 71,065 ( 1,378 ) 69,687
Other (7)
4,035 — — ( 167 ) 3,868
Total 632,935 252,561 71,065 ( 2,921 ) 953,640
Revenue from leases (8)
365 — — — 365
Revenue, total $ 633,300 $ 252,561 $ 71,065 $ ( 2,921 ) $ 954,005
Three Months Ended June 30, 2021
Revenue from contracts with customers:
Broadcast Radio (1)
$ 451,142 $ — $ — $ — $ 451,142
Networks (2)
123,586 — — — 123,586
Sponsorship and Events (3)
28,585 — — — 28,585
Digital, excluding Podcast (4)
— 144,502 — ( 1,178 ) 143,324
Podcast (5)
— 53,428 — — 53,428
Audio & Media Services (6)
— — 61,175 ( 2,004 ) 59,171
Other (7)
2,192 — — ( 168 ) 2,024
Total 605,505 197,930 61,175 ( 3,350 ) 861,260
Revenue from leases (8)
345 — — — 345
Revenue, total $ 605,850 $ 197,930 $ 61,175 $ ( 3,350 ) $ 861,605
10
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Eliminations Consolidated
Six Months Ended June 30, 2022
Revenue from contracts with customers:
Broadcast Radio (1)
$ 879,785 $ — $ — $ — $ 879,785
Networks (2)
245,090 — — — 245,090
Sponsorship and Events (3)
71,665 — — — 71,665
Digital, excluding Podcast (4)
— 312,555 — ( 2,645 ) 309,910
Podcast (5)
— 154,225 — — 154,225
Audio & Media Services (6)
— — 131,922 ( 2,719 ) 129,203
Other (7)
7,265 — — ( 335 ) 6,930
Total 1,203,805 466,780 131,922 ( 5,699 ) 1,796,808
Revenue from leases (8)
655 — — — 655
Revenue, total $ 1,204,460 $ 466,780 $ 131,922 $ ( 5,699 ) $ 1,797,463
Six Months Ended June 30, 2021
Revenue from contracts with customers:
Broadcast Radio (1)
$ 809,678 $ — $ — $ — $ 809,678
Networks (2)
238,672 — — — 238,672
Sponsorship and Events (3)
50,978 — — — 50,978
Digital, excluding Podcast (4)
— 263,703 — ( 3,072 ) 260,631
Podcast (5)
— 91,780 — — 91,780
Audio & Media Services (6)
— — 116,312 ( 3,865 ) 112,447
Other (7)
3,590 — — ( 335 ) 3,255
Total 1,102,918 355,483 116,312 ( 7,272 ) 1,567,441
Revenue from leases (8)
829 — — — 829
Revenue, total $ 1,103,747 $ 355,483 $ 116,312 $ ( 7,272 ) $ 1,568,270
(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 & 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.
11
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Trade and Barter
Trade and barter transactions represent the exchange of advertising spots for merchandise, services, advertising and promotion 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, which are included in consolidated revenue and selling, general and administrative expenses, respectively, were as follows:
Three Months Ended
June 30, Six Months Ended
June 30,
(In thousands) 2022 2021 2022 2021
Trade and barter revenues $ 38,222 $ 46,508 $ 85,591 $ 78,454
Trade and barter expenses 29,336 40,045 75,751 68,043
Trade and barter revenue includes $ 5.3 million and $ 2.3 million during the three months ended June 30, 2022 and 2021, respectively, and $ 12.3 million and $ 4.5 million during the six months ended June 30, 2022 and 2021, respectively, in connection with investments made in companies in exchange for advertising services.
The following tables show the Company’s deferred revenue balance from contracts with customers:
Three Months Ended
June 30, Six Months Ended
June 30,
(In thousands) 2022 2021 2022 2021
Deferred revenue from contracts with customers:
Beginning balance (1)
$ 184,056 $ 165,330 $ 161,114 $ 145,493
Revenue recognized, included in beginning balance ( 61,973 ) ( 55,762 ) ( 90,406 ) ( 60,185 )
Additions, net of revenue recognized during period, and other 67,596 40,163 118,971 64,423
Ending balance $ 189,679 $ 149,731 $ 189,679 $ 149,731
(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.
The Company’s contracts with customers generally have terms of one year or less; however, as of June 30, 2022, the Company expects to recognize $ 391.9 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration 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.
12
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Leases
As of June 30, 2022, the future lease payments to be received by the Company are as follows:
(In thousands)
2022 $ 534
2023 782
2024 590
2025 405
2026 321
Thereafter 1,526
Total $ 4,158
NOTE 3 – 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 assets ("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.
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 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.
The Company tests for impairment of assets whenever events and circumstances indicate that such assets might be impaired. During the six months ended June 30, 2022, the Company recognized non-cash impairment charges of $ 1.6 million, including $ 1.4 million related to ROU assets, and $ 0.2 million related to leasehold improvements as a result of proactive decisions by management to abandon and sublease a number of operating leases in connection with strategic actions to streamline the Company’s real estate footprint as part of the Company’s modernization initiatives. During the six months ended June 30, 2021, the Company recognized non-cash impairment charges of $ 37.7 million, including $ 28.8 million related to ROU assets, and $ 8.9 million related to leasehold improvements also as a result of the proactive decisions by management discussed above.
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, 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."
13
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table provides supplemental cash flow information related to leases for the periods presented:
Six Months Ended June 30,
(In thousands) 2022 2021
Cash paid for amounts included in measurement of operating lease liabilities $ 76,153 $ 65,150
Lease liabilities arising from obtaining right-of-use assets (1)
135,128 17,156
(1) Lease liabilities from obtaining right-of-use assets include new leases entered into during the six months ended June 30, 2022 and 2021, respectively.
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 $ 43.3 million and $ 49.4 million for the six months ended June 30, 2022 and June 30, 2021, respectively.
NOTE 4– PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND GOODWILL
Property, Plant and Equipment
The Company’s property, plant and equipment consisted of the following classes of assets as of June 30, 2022 and December 31, 2021, respectively:
(In thousands) June 30,
2022 December 31,
2021
Land, buildings and improvements $ 319,463 $ 355,474
Towers, transmitters and studio equipment 195,860 180,571
Computer equipment and software 557,926 521,872
Furniture and other equipment 37,572 35,390
Construction in progress 68,588 64,732
1,179,409 1,158,039
Less: accumulated depreciation 463,168 375,946
Property, plant and equipment, net $ 716,241 $ 782,093
Indefinite-lived Intangible Assets
The Company’s indefinite-lived intangible assets primarily consist of Federal Communications Commission ("FCC") broadcast licenses in its Multiplatform Group segment.
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.
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IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the gross carrying amount and accumulated amortization for each major class of other intangible assets as of June 30, 2022 and December 31, 2021, respectively:
(In thousands) June 30, 2022 December 31, 2021
Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Customer / advertiser relationships $ 1,646,402 $ ( 546,135 ) $ 1,646,402 $ ( 459,620 )
Talent and other contracts 338,900 ( 138,956 ) 338,900 ( 117,337 )
Trademarks and tradenames 335,862 ( 105,328 ) 335,862 ( 88,252 )
Other 17,794 ( 8,447 ) 17,794 ( 7,149 )
Total $ 2,338,958 $ ( 798,866 ) $ 2,338,958 $ ( 672,358 )
Total amortization expense related to definite-lived intangible assets for the Company for the three months ended June 30, 2022 and 2021 was $ 63.4 million and $ 87.4 million, respectively. Total amortization expense related to definite-lived intangible assets for the Company for the six months ended June 30, 2022 and 2021 was $ 126.5 million and $ 153.7 million, respectively.
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)
2023 $ 244,387
2024 243,194
2025 212,001
2026 200,251
2027 176,171
Goodwill
The following table presents the changes in the carrying amount of goodwill:
(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
Dispositions ( 15 ) — — ( 15 )
Foreign currency — — ( 217 ) ( 217 )
Balance as of June 30, 2022
$ 1,462,023 $ 747,350 $ 103,976 $ 2,313,349
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IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding for the Company as of June 30, 2022 and December 31, 2021 consisted of the following:
(In thousands) June 30, 2022 December 31, 2021
Term Loan Facility due 2026 $ 1,864,032 $ 1,864,032
Incremental Term Loan Facility due 2026 401,220 401,220
Asset-based Revolving Credit Facility due 2023 (1)
— —
Asset-based Revolving Credit Facility due 2027 (1)(2)
— —
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 (3)
4,577 5,350
Total consolidated secured debt 4,319,829 4,320,602
8.375 % Senior Unsecured Notes due 2027 (4)
1,336,450 1,450,000
Other unsecured subsidiary debt 69 90
Original issue discount ( 12,027 ) ( 13,454 )
Long-term debt fees ( 16,902 ) ( 18,370 )
Total debt 5,627,419 5,738,868
Less: Current portion 675 673
Total long-term debt $ 5,626,744 $ 5,738,195
(1) On May 17, 2022, we entered into a $ 450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility. Refer to the 'Asset-based Revolving Credit Facility due 2027' section below for more information.
(2) As of June 30, 2022, the New ABL Facility had a facility size of $ 450.0 million, no outstanding borrowings and $ 29.4 million of outstanding letters of credit, resulting in $ 420.6 million of borrowing base availability.
(3) Other secured subsidiary debt consists of finance lease obligations maturing at various dates from 2023 through 2045.
(4) During the three months ended June 30, 2022, we repurchased $ 113.5 million aggregate principal amount of iHeartCommunications Inc.'s 8.375 % Senior Unsecured Notes due 2027 for $ 105.3 million in cash, excluding accrued interest, via open market transactions. The repurchased notes were subsequently cancelled and retired, resulting in a gain on extinguishment of debt of $ 8.2 million.
The Company’s weighted average interest rate was 5.9 % and 5.4 % as of June 30, 2022 and December 31, 2021, respectively. The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $ 4.9 billion and $ 5.9 billion as of June 30, 2022 and December 31, 2021, respectively. Under the fair value hierarchy established by ASC 820-10-35, the market value of the Company’s debt is classified as either Level 1 or Level 2.
Asset-based Revolving Credit Facility due 2027
On May 17, 2022, iHeartCommunications, Inc., as borrower, entered into a Credit Agreement (the “New ABL Credit Agreement”) with iHeartMedia Capital I, LLC, the direct parent of iHeartCommunications, Inc., as parent guarantor, certain subsidiaries of iHeartCommunications, Inc. party thereto, Bank of America, N.A., as administrative and collateral agent, and each other lender party thereto from time to time, governing a new $ 450.0 million New ABL Facility, maturing in 2027, which refinanced and replaced in its entirety the Existing ABL Facility. The New ABL Facility includes a letter of credit sub-facility and a swingline loan sub-facility.
Size and Availability
The New 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
16
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 June 30, 2022, the New ABL Facility had a facility size of $ 450.0 million, no outstanding borrowings and $ 29.4 million of outstanding letters of credit, resulting in $ 420.6 million of borrowing base availability.
Interest Rate and Fees
Borrowings under the New ABL Facility bear interest at a rate per annum equal to the applicable rate plus, at iHeartCommunications’ option, either (1) a base rate, (2) a term secured overnight financing rate ("SOFR") (which includes a credit spread adjustment of 10 basis points) or (3) for certain foreign currencies, a eurocurrency rate. The applicable margin for borrowings under the New ABL Facility range from 1.25 % to 1.75 % for both eurocurrency and term SOFR borrowings and from 0.25 % to 0.75 % for base-rate borrowings, in each case, depending on average excess availability under the New ABL Facility based on the most recently ended fiscal quarter.
In addition to paying interest on outstanding principal under the New ABL Facility, iHeartCommunications is required to pay a commitment fee to the lenders under the New 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 New ABL Facility will mature, and commitments thereunder will terminate, on May 17, 2027.
Prepayments
If at any time, the sum of the outstanding amounts under the New 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 New 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 New ABL Facility.
Guarantees and Security
The New ABL Facility is guaranteed by the guarantors of iHeartCommunications’ existing Term Loan Facility. All obligations under the New 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 all of the guarantors’ accounts receivable, qualified cash and related assets and proceeds thereof that is senior to the security interest of iHeartCommunications’ existing 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 New 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 for fiscal quarters ending on or after the occurrence of the Trigger Event, and must continue to comply with this minimum fixed charge coverage ratio until borrowing availability exceeds the greater of (x) $ 40.0 million and (y) 10 % of the aggregate commitments under the New ABL Facility, in each case, for 20 consecutive calendar days, at which time the Trigger Event shall no longer be deemed to be occurring. As of June 30, 2022, no Trigger Event had occurred, and iHeartCommunications was not required to comply with this minimum fixed charge coverage ratio.
17
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Surety Bonds, Letters of Credit and Guarantees
As of June 30, 2022, the Company and its subsidiaries had outstanding surety bonds, commercial standby letters of credit and bank guarantees of $ 8.3 million, $ 29.8 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 6 – COMMITMENTS AND CONTINGENCIES
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 the Company’s litigation arises in the following contexts: commercial/contract disputes; defamation matters; employment and benefits related claims; intellectual property claims; real estate matters; governmental investigations; and tax disputes.
Alien Ownership Restrictions and FCC 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. On November 5, 2020, the FCC issued a declaratory ruling, which permits the Company to be up to 100 % foreign owned, subject to certain conditions, as described further in Note 8, Stockholders' Equity (the "2020 Declaratory Ruling").
NOTE 7 – INCOME TAXES
The Company’s income tax benefit (expense) for the three and six months ended June 30, 2022 and the three and six months ended June 30, 2021 consisted of the following components:
(In thousands) Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
Current tax expense $ ( 38,581 ) $ ( 3,477 ) $ ( 42,160 ) $ ( 5,066 )
Deferred tax benefit (expense) 36,799 ( 20,972 ) 60,587 ( 99,318 )
Income tax benefit (expense) $ ( 1,782 ) $ ( 24,449 ) $ 18,427 $ ( 104,384 )
The effective tax rates for the three and six months ended June 30, 2022 were 10.5 % and 35.4 %, respectively. The effective tax rates were primarily impacted by the forecasted increase in valuation allowance against certain deferred tax assets, related primarily to disallowed interest expense carryforwards and net operating loss carryforwards, due to uncertainty regarding the Company’s ability to utilize those assets in future periods.
The effective tax rates for the three and six months ended June 30, 2021 were ( 325.5 )% and ( 61.5 )%, respectively. The effective tax rates were primarily impacted by the deferred tax expense recorded for the valuation allowance against certain deferred tax assets for disallowed interest expense and net operating loss carryforwards due to the uncertainty of the Company’s ability to utilize those assets in future periods.
18
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8 – STOCKHOLDERS' EQUITY
Pursuant to the Company's 2019 Eq uity Incentive Plan (the "2019 Plan"), the Company historically granted restricted stock units and options to purchase shares of the Company's Class A common stock to certain key individuals. On April 21, 2021, our 2021 Long-Term Incentive Award Plan (the “2021 Plan”) was approved by stockholders and replaced the 2019 Plan. Pursuant to our 2021 Plan, we will continue to grant equity awards covering shares of the Company's Class A common stock to certain key individuals.
Share-based Compensation
Share-based compensation expenses are recorded in Selling, general and administrative expenses and were $ 8.6 million and $ 5.9 million for the Company for the three months ended June 30, 2022 and June 30, 2021, respectively. Share-based compensation expenses were $ 14.1 million and $ 11.6 million for the Company for the six months ended June 30, 2022 and June 30, 2021, respectively.
In August 2020, the Company issued performance-based restricted stock units ("Performance RSUs") to certain key employees. Such Performance RSUs vest upon the achievement of critical operational (cost savings) improvements and specific environmental, social and governance initiatives, which were being measured over an approximately 18-month period from the date of issuance. In the three and six months ended June 30, 2021, the Company recognized $ 0.5 million and $ 1.0 million in relation to these Performance RSUs.
On March 28, 2022, the Company issued performance-based restricted stock units ("Q1 2022 Performance RSUs") to certain key employees. Such Q1 2022 Performance RSUs vest upon the achievement of total stockholder return goals and continued service, which are being measured over an approximately 50-month period from the date of issuance. In the three and six months ended June 30, 2022, the Company recognized $ 0.8 million in relation to these Q1 2022 Performance RSUs.
On May 9, 2022, the Company issued performance-based restricted stock units ("Q2 2022 Performance RSUs") and restricted stock units ("2022 RSUs") to certain key employees. Such Q2 2022 Performance RSUs vest upon the achievement of certain total stockholder return goals, Adjusted EBITDA goals, Diversity, Equity and Inclusion goals, and continued service. Such 2022 RSUs vest upon continued service. These awards are being recognized ratably over a 3-year period from the date of issuance. In the three and six months ended June 30, 2022, the Company recognized $ 0.7 million in relation to these Q2 2022 Performance RSUs.
As of June 30, 2022, there was $ 62.0 million of unrecognized compensation cost related to unvested share-based compensation arrangements with vesting based on service conditions. This cost is expected to be recognized over a weighted average period of approximately 3.8 years. In addition, as of June 30, 2022, there were unrecognized compensation costs of $ 11.7 million for the Q1 2022 Performance RSUs and $ 14.7 million for the Q2 2022 Performance RSUs related to unvested share-based compensation arrangements that will vest based on certain performance and service conditions. These costs will be recognized over a 50-month period from the date of issuance for the Q1 2022 Performance RSUs and over the 3-year period from the date of issuance for the Q2 2022 Performance RSUs.
Common Stock and Special Warrants
The Company is authorized to issue 2,100,000,000 shares, consisting of (a) 1,000,000,000 shares of Class A Common Stock, par value $ 0.001 per share (the “Class A Common Stock”), (b) 1,000,000,000 shares of Class B Common Stock, par value $ 0.001 per share (the “Class B Common Stock”), and (c) 100,000,000 shares of preferred stock, par value $ 0.001 per share (the “Preferred Stock”).
19
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following table presents the Company's Class A Common Stock, Class B Common Stock and Special Warrants issued as of June 30, 2022:
June 30,
2022
Class A Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized
122,068,221
Class B Common Stock, par value $ .001 per share, 1,000,000,000 shares authorized
21,391,972
Special Warrants 5,293,055
Total Class A Common Stock, Class B Common Stock and Special Warrants issued 148,753,248
During the three and six months ended June 30, 2022, stockholders converted 38,528 and 198,220 shares of the Class B common stock into Class A common stock. During the three and six months ended June 30, 2021, stockholders converted 5,433,680 and 5,587,725 shares of the Class B common stock into Class A common stock.
Special Warrants
Each Special Warrant issued under the special warrant agreement entered into in connection with the Company's emergence from bankruptcy in 2019 may be exercised by its holder to purchase one share of Class A common stock or 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 Company's outstanding Class A common stock, (b) more than 22.5 percent of the Company's capital stock or voting interests being owned directly or indirectly by foreign individuals or entities, (c) the Company exceeding any other applicable foreign ownership threshold or (d) violation of 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. The Communications Act and FCC regulations prohibit foreign entities or individuals from indirectly (i.e., through a parent company) owning or voting more than 25 percent of a licensee’s equity, unless the FCC determines that greater indirect foreign ownership is in the public interest. As described further in Note 6 above, November 5, 2020, the FCC issued the 2020 Declaratory Ruling, which permits the Company to be up to 100 % foreign owned.
During the three and six months ended June 30, 2022, stockholders exercised 14 and 11,375 Special Warrants for an equivalent number of shares of Class A common stock. There were no Special Warrants exercised for shares of Class B common stock during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, stockholders exercised 14,694 and 47,136,441 Special Warrants for an equivalent number of shares of Class A common stock. During the six months ended June 30, 2021, stockholders exercised 22,337,312 Special Warrants for an equivalent number of shares of Class B common stock.
20
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Computation of Income (Loss) per Share
(In thousands, except per share data) Three Months Ended
June 30, Six Months Ended
June 30,
2022 2021 2022 2021
NUMERATOR:
Net income (loss) attributable to the Company – common shares $ 14,401 $ ( 32,286 ) $ ( 34,181 ) $ ( 274,009 )
DENOMINATOR (1) :
Weighted average common shares outstanding - basic 148,050 146,509 147,783 146,362
Stock options and restricted stock (2) :
1,081 — — —
Weighted average common shares outstanding - diluted 149,131 146,509 147,783 146,362
Net income (loss) attributable to the Company per common share:
Basic $ 0.10 $ ( 0.22 ) $ ( 0.23 ) $ ( 1.87 )
Diluted $ 0.10 $ ( 0.22 ) $ ( 0.23 ) $ ( 1.87 )
(1) All of the outstanding Special Warrants are included in both the basic and diluted weighted average common shares outstanding of the Company for the three and six months ended June 30, 2022 and 2021.
(2) Outstanding equity awards representing 6.2 million and 10.8 million shares of Class A common stock of the Company for the three months ended June 30, 2022 and 2021, respectively, and 10.4 million and 10.8 million for the six months ended June 30, 2022 and 2021, respectively, were not included in the computation of diluted earnings per share because to do so would have been antidilutive.
NOTE 9 – SEGMENT DATA
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.
21
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following tables present the Company's segment results for the Company for the three and six months ended June 30, 2022 and 2021:
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Three Months Ended June 30, 2022
Revenue $ 633,300 $ 252,561 $ 71,065 $ — $ ( 2,921 ) $ 954,005
Operating expenses (1)
438,804 173,678 48,995 58,264 ( 2,921 ) 716,820
Segment Adjusted EBITDA (2)
$ 194,496 $ 78,883 $ 22,070 $ ( 58,264 ) $ — $ 237,185
Depreciation and amortization ( 110,788 )
Impairment charges ( 245 )
Other operating expense, net ( 15,664 )
Restructuring expenses ( 19,009 )
Share-based compensation expense ( 8,610 )
Operating income $ 82,869
Intersegment revenues $ 167 $ 1,376 $ 1,378 $ — $ — $ 2,921
Capital expenditures 36,378 5,912 2,423 4,940 — 49,653
Share-based compensation expense — — — 8,610 — 8,610
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Three Months Ended June 30, 2021
Revenue $ 605,850 $ 197,930 $ 61,175 $ — $ ( 3,350 ) $ 861,605
Operating expenses (1)
424,452 143,640 40,704 71,651 ( 3,350 ) 677,097
Segment Adjusted EBITDA (2)
$ 181,398 $ 54,290 $ 20,471 $ ( 71,651 ) $ — $ 184,508
Depreciation and amortization ( 127,945 )
Impairment charges —
Other operating expense, net ( 12,379 )
Restructuring expenses ( 10,155 )
Share-based compensation expense ( 5,903 )
Operating income $ 28,126
Intersegment revenues $ 168 $ 1,178 $ 2,004 $ — $ — $ 3,350
Capital expenditures 21,371 6,286 1,144 3,310 — 32,111
Share-based compensation expense — — — 5,903 — 5,903
22
IHEARTMEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Six Months Ended June 30, 2022
Revenue $ 1,204,460 $ 466,780 $ 131,922 $ — $ ( 5,699 ) $ 1,797,463
Operating expenses (1)
876,057 335,389 93,465 115,848 ( 5,699 ) 1,415,060
Segment Adjusted EBITDA (2)
$ 328,403 $ 131,391 $ 38,457 $ ( 115,848 ) $ — $ 382,403
Depreciation and amortization ( 224,839 )
Impairment charges ( 1,579 )
Other operating expense, net ( 16,534 )
Restructuring expenses ( 30,102 )
Share-based compensation expense ( 14,145 )
Operating income $ 95,204
Intersegment revenues $ 335 $ 2,645 $ 2,719 $ — $ — $ 5,699
Capital expenditures 48,716 11,068 4,122 8,304 — 72,210
Share-based compensation expense — — — 14,145 — 14,145
Segments
(In thousands) Multiplatform Group Digital Audio Group Audio & Media Services Group Corporate and other reconciling items Eliminations Consolidated
Six Months Ended June 30, 2021
Revenue $ 1,103,747 $ 355,483 $ 116,312 $ — $ ( 7,272 ) $ 1,568,270
Operating expenses (1)
817,558 261,182 80,492 129,555 ( 7,272 ) 1,281,515
Segment Adjusted EBITDA (2)
$ 286,189 $ 94,301 $ 35,820 $ ( 129,555 ) $ — $ 286,755
Depreciation and amortization ( 235,308 )
Impairment charges ( 37,744 )
Other operating expense, net ( 15,150 )
Restructuring expenses ( 35,195 )
Share-based compensation expense ( 11,588 )
Operating loss $ ( 48,230 )
Intersegment revenues $ 335 $ 3,072 $ 3,865 $ — $ — $ 7,272
Capital expenditures 31,440 11,711 2,191 5,719 — 51,061
Share-based compensation expense — — — 11,588 — 11,588
(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 (loss), 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 2 of this Quarterly Report on Form 10-Q. 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.
23