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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022 | |
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________ TO __________ | |
Commission File Number
001-38987
IHEARTMEDIA, INC.
(Exact name of registrant as specified in its charter)
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Delaware | | 26-0241222 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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20880 Stone Oak Parkway | | |
San Antonio, | Texas | | 78258 |
(Address of principal executive offices) | | (Zip Code) |
(210) 822-2828
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Class A Common Stock | IHRT | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. |
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| Class | | Outstanding at October 31, 2022 | |
| ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ | | ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ | |
| Class A Common Stock, $.001 par value | | 121,761,907 | | | |
| Class B Common Stock, $.001 par value | | 21,477,181 | | | |
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IHEARTMEDIA, INC.
INDEX
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| | Page No. |
Part I – Financial Information | |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
Part II – Other Information | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
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Item 3. | | |
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Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| | | | | | | | | | | |
(In thousands, except share and per share data) | September 30, 2022 | | December 31, 2021 |
| (Unaudited) | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 295,399 | | | $ | 352,129 | |
Accounts receivable, net of allowance of $27,405 in 2022 and $29,270 in 2021 | 981,144 | | | 1,030,380 | |
Prepaid expenses | 113,718 | | | 65,927 | |
| | | |
Other current assets | 18,316 | | | 24,431 | |
Total Current Assets | 1,408,577 | | | 1,472,867 | |
PROPERTY, PLANT AND EQUIPMENT | | | |
Property, plant and equipment, net | 692,321 | | | 782,093 | |
INTANGIBLE ASSETS AND GOODWILL | | | |
Indefinite-lived intangibles - licenses and other | 1,476,319 | | | 1,778,045 | |
Other intangibles, net | 1,477,342 | | | 1,666,600 | |
Goodwill | 2,313,182 | | | 2,313,581 | |
OTHER ASSETS | | | |
Operating lease right-of-use assets | 791,804 | | | 741,410 | |
Other assets | 170,154 | | | 126,713 | |
Total Assets | $ | 8,329,699 | | | $ | 8,881,309 | |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 204,916 | | | $ | 206,007 | |
Current operating lease liabilities | 48,088 | | | 88,585 | |
Accrued expenses | 271,852 | | | 353,045 | |
| | | |
Accrued interest | 63,458 | | | 67,983 | |
Deferred revenue | 151,065 | | | 133,123 | |
Current portion of long-term debt | 665 | | | 673 | |
Total Current Liabilities | 740,044 | | | 849,416 | |
Long-term debt | 5,553,049 | | | 5,738,195 | |
Noncurrent operating lease liabilities | 850,412 | | | 738,814 | |
Deferred income taxes | 526,928 | | | 558,222 | |
Other long-term liabilities | 66,456 | | | 80,897 | |
Commitments and contingent liabilities (Note 6) | | | |
STOCKHOLDERS’ EQUITY | | | |
Noncontrolling interest | 9,059 | | | 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 122,341,086 and 120,633,937 shares in 2022 and 2021, respectively | 123 | | | 120 | |
Class B Common Stock, par value $.001 per share, authorized 1,000,000,000 shares, issued 21,479,356 and 21,590,192 shares in 2022 and 2021, respectively | 21 | | | 22 | |
Special Warrants, 5,111,312 and 5,304,430 issued and outstanding in 2022 and 2021, respectively | — | | | — | |
Additional paid-in capital | 2,901,625 | | | 2,876,571 | |
Accumulated deficit | (2,307,363) | | | (1,962,819) | |
Accumulated other comprehensive loss | (1,760) | | | (257) | |
Cost of shares (593,032 in 2022 and 389,814 in 2021) held in treasury | (8,895) | | | (6,282) | |
Total Stockholders' Equity | 592,810 | | | 915,765 | |
Total Liabilities and Stockholders' Equity | $ | 8,329,699 | | | $ | 8,881,309 | |
See Notes to Consolidated Financial Statements
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except per share data) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Revenue | $ | 988,930 | | | $ | 928,051 | | | $ | 2,786,393 | | | $ | 2,496,321 | |
Operating expenses: | | | | | | | |
Direct operating expenses (excludes depreciation and amortization) | 371,719 | | | 325,766 | | | 1,067,625 | | | 939,094 | |
Selling, general and administrative expenses (excludes depreciation and amortization) | 399,892 | | | 390,086 | | | 1,163,293 | | | 1,105,056 | |
Depreciation and amortization | 109,305 | | | 108,100 | | | 334,144 | | | 343,408 | |
Impairment charges | 309,750 | | | 11,647 | | | 311,329 | | | 49,391 | |
Other operating expense, net | 9,451 | | | 12,341 | | | 25,985 | | | 27,491 | |
Operating income (loss) | (211,187) | | | 80,111 | | | (115,983) | | | 31,881 | |
Interest expense, net | 87,890 | | | 82,481 | | | 248,603 | | | 252,489 | |
Gain (loss) on investments, net | (3,466) | | | (10,367) | | | 4,359 | | | 39,468 | |
Equity in loss of nonconsolidated affiliates | (132) | | | (1,056) | | | (190) | | | (1,115) | |
Gain (loss) on extinguishment of debt | 6,892 | | | (7,896) | | | 15,095 | | | (7,896) | |
Other expense, net | (581) | | | (1,785) | | | (3,026) | | | (2,955) | |
Loss before income taxes | (296,364) | | | (23,474) | | | (348,348) | | | (193,106) | |
Income tax benefit (expense) | (13,412) | | | 27,147 | | | 5,015 | | | (77,237) | |
Net income (loss) | (309,776) | | | 3,673 | | | (343,333) | | | (270,343) | |
Less amount attributable to noncontrolling interest | 587 | | | 493 | | | 1,211 | | | 486 | |
Net income (loss) attributable to the Company | $ | (310,363) | | | $ | 3,180 | | | $ | (344,544) | | | $ | (270,829) | |
Other comprehensive loss, net of tax: | | | | | | | |
Foreign currency translation adjustments | (606) | | | (131) | | | (1,503) | | | (387) | |
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Other comprehensive loss, net of tax | (606) | | | (131) | | | (1,503) | | | (387) | |
Comprehensive income (loss) | (310,969) | | | 3,049 | | | (346,047) | | | (271,216) | |
Less amount attributable to noncontrolling interest | — | | | — | | | — | | | — | |
Comprehensive income (loss) attributable to the Company | $ | (310,969) | | | $ | 3,049 | | | $ | (346,047) | | | $ | (271,216) | |
Net income (loss) attributable to the Company per common share: | | | | | | | |
Basic | $ | (2.09) | | | $ | 0.02 | | | $ | (2.33) | | | $ | (1.85) | |
Weighted average common shares outstanding - Basic | 148,299 | | | 147,040 | | | 147,957 | | | 146,591 | |
Diluted | $ | (2.09) | | | $ | 0.02 | | | $ | (2.33) | | | $ | (1.85) | |
Weighted average common shares outstanding - Diluted | 148,299 | | | 150,397 | | | 147,957 | | | 146,591 | |
| | | | | | | |
See Notes to Consolidated Financial Statements
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 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 | |
Net income (loss) | | | | | | | 587 | | | — | | | — | | | (310,363) | | | — | | | — | | | (309,776) | |
Vesting of restricted stock and other | 178,506 | | | | | | | — | | | 1 | | | 59 | | | — | | | — | | | (539) | | | (479) | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | — | | | — | | | 10,437 | | | — | | | — | | | — | | | 10,437 | |
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
Conversion of Special Warrants to Class A or Class B Shares | 85,141 | | | 96,602 | | | (181,743) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Conversion of Class B Shares to Class A Shares | 9,218 | | | (9,218) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Other | | | | | | | (187) | | | — | | | — | | | — | | | — | | | — | | | (187) | |
Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (606) | | | — | | | (606) | |
Balances at September 30, 2022 | 122,341,086 | | | 21,479,356 | | | 5,111,312 | | | $ | 9,059 | | | $ | 144 | | | $ | 2,901,625 | | | $ | (2,307,363) | | | $ | (1,760) | | | $ | (8,895) | | | $ | 592,810 | |
(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
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 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 | |
Net income | | | | | | | 493 | | | — | | | — | | | 3,180 | | | — | | | — | | | 3,673 | |
Vesting of restricted stock and other | 216,707 | | | | | | | — | | | (1) | | | 745 | | | — | | | — | | | (916) | | | (172) | |
Share-based compensation | | | | | | | — | | | — | | | 5,993 | | | — | | | — | | | — | | | 5,993 | |
| | | | | | | | | | | | | | | | | | | |
Conversion of Special Warrants to Class A and Class B Shares | 60,698 | | | | | (60,698) | | | — | | | 1 | | | (1) | | | — | | | — | | | — | | | — | |
Conversion of Class B Shares to Class A Shares | 1,130,851 | | | (1,130,851) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Other | | | | | | | (187) | | | — | | | — | | | — | | | — | | | — | | | (187) | |
Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (131) | | | — | | | (131) | |
Balances at September 30, 2021 | 119,669,831 | | | 22,505,661 | | | 5,304,430 | | | $ | 8,274 | | | $ | 142 | | | $ | 2,870,394 | | | $ | (2,074,449) | | | $ | (193) | | | $ | (6,147) | | | $ | 798,021 | |
| | | | | | | | | | | | | | | | | | | |
(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
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) | | | | | | | 1,211 | | | — | | | — | | | (344,544) | | | — | | | — | | | (343,333) | |
Vesting of restricted stock and other | 1,403,195 | | | | | | | — | | | 2 | | | 472 | | | — | | | — | | | (2,613) | | | (2,139) | |
| | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | — | | | — | | | 24,582 | | | — | | | — | | | — | | | 24,582 | |
Conversion of Special Warrants to Class A or Class B Shares | 96,516 | | | 96,602 | | | (193,118) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Conversion of Class B Shares to Class A Shares | 207,438 | | | (207,438) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Other | | | | | | | (562) | | | — | | | — | | | — | | | — | | | — | | | (562) | |
Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (1,503) | | | — | | | (1,503) | |
Balances at September 30, 2022 | 122,341,086 | | | 21,479,356 | | | 5,111,312 | | | $ | 9,059 | | | $ | 144 | | | $ | 2,901,625 | | | $ | (2,307,363) | | | $ | (1,760) | | | $ | (8,895) | | | $ | 592,810 | |
(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
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 income (loss) | | | | | | | 486 | | | — | | | — | | | (270,829) | | | — | | | — | | | (270,343) | |
Vesting of restricted stock | 1,027,252 | | | | | | | — | | | — | | | 3,863 | | | — | | | — | | | (2,948) | | | 915 | |
| | | | | | | | | | | | | | | | | | | |
Share-based compensation | | | | | | | — | | | — | | | 17,581 | | | — | | | — | | | — | | | 17,581 | |
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 | 6,718,576 | | | (6,718,576) | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | |
Other | | | | | 2,982 | | | (562) | | | — | | | — | | | — | | | — | | | — | | | (562) | |
Other comprehensive loss | | | | | | | — | | | — | | | — | | | — | | | (387) | | | — | | | (387) | |
Balances at September 30, 2021 | 119,669,831 | | | 22,505,661 | | | 5,304,430 | | | $ | 8,274 | | | $ | 142 | | | $ | 2,870,394 | | | $ | (2,074,449) | | | $ | (193) | | | $ | (6,147) | | | $ | 798,021 | |
(1) The 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
IHEARTMEDIA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
(In thousands) | Nine Months Ended September 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Net loss | $ | (343,333) | | | $ | (270,343) | |
Reconciling items: | | | |
Impairment charges | 311,329 | | | 49,391 | |
Depreciation and amortization | 334,144 | | | 343,408 | |
Deferred taxes | (31,304) | | | 64,520 | |
Provision for doubtful accounts | 10,137 | | | 2,919 | |
Amortization of deferred financing charges and note discounts, net | 4,589 | | | 4,508 | |
| | | |
Share-based compensation | 24,582 | | | 17,581 | |
Loss on disposal of operating and other assets | 24,547 | | | 22,771 | |
Gain on investments | (4,359) | | | (39,468) | |
Equity in loss of nonconsolidated affiliates | 190 | | | 1,115 | |
(Gain) loss on extinguishment of debt | (15,095) | | | 7,896 | |
Barter and trade income | (27,174) | | | (9,418) | |
Other reconciling items, net | 1,504 | | | 764 | |
Changes in operating assets and liabilities, net of effects of acquisitions and dispositions: | | | |
(Increase) decrease in accounts receivable | 38,685 | | | (37,776) | |
Increase in prepaid expenses and other current assets | (47,561) | | | (33,486) | |
Increase in other long-term assets | (5,817) | | | (7,392) | |
Increase (decrease) in accounts payable | (927) | | | 25,673 | |
Increase (decrease) in accrued expenses | (84,308) | | | 48,861 | |
Increase (decrease) in accrued interest | (4,524) | | | 1,766 | |
Increase in deferred income | 18,392 | | | 2,500 | |
Increase in other long-term liabilities | 3,002 | | | 803 | |
Cash provided by operating activities | 206,699 | | | 196,593 | |
Cash flows from investing activities: | | | |
Business combinations | — | | | (245,462) | |
Proceeds from sale of other investments | 32 | | | 50,757 | |
Purchases of property, plant and equipment | (112,567) | | | (101,335) | |
Proceeds from disposal of assets | 34,690 | | | 36,330 | |
| | | |
Change in other, net | (4,962) | | | (188) | |
Cash used for investing activities | (82,807) | | | (259,898) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
| | | |
Payments on long-term debt and credit facilities | (173,990) | | | (288,484) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Change in other, net | (5,667) | | | 366 | |
Cash used for financing activities | (179,657) | | | (288,118) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (965) | | | (244) | |
Net decrease in cash, cash equivalents and restricted cash | (56,730) | | | (351,667) | |
Cash, cash equivalents and restricted cash at beginning of period | 352,554 | | | 721,187 | |
Cash, cash equivalents and restricted cash at end of period | $ | 295,824 | | | $ | 369,520 | |
SUPPLEMENTAL DISCLOSURES: | | | |
Cash paid for interest | $ | 249,910 | | | $ | 247,513 | |
Cash paid for income taxes | 12,054 | | | 7,900 | |
See Notes to Consolidated Financial Statements
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.
Economic Conditions
The Company's advertising revenue is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP. GDP decreased in the first and second quarters of 2022 and increased in the third quarter of 2022 while there was an increase in GDP in each quarter in 2021. The rise in interest rates and historically high inflation have also contributed to a more challenging macroeconomic environment. This challenging environment has led to market uncertainty which impacted 2022 Multiplatform Group revenues, particularly during the third quarter.
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 September 30, 2022, the Company had approximately $295.4 million in cash and cash equivalents. 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.
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) | September 30, 2022 | | December 31, 2021 |
Cash and cash equivalents | $ | 295,399 | | | $ | 352,129 | |
Restricted cash included in: | | | |
Other current assets | 425 | | | 425 | |
| | | |
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows | $ | 295,824 | | | $ | 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.
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 nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Multiplatform Group | | Digital Audio Group | | Audio & Media Services Group | | Eliminations | | Consolidated |
Three Months Ended September 30, 2022 |
Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 485,571 | | | $ | — | | | $ | — | | | $ | — | | | $ | 485,571 | |
Networks(2) | 127,239 | | | — | | | — | | | — | | | 127,239 | |
Sponsorship and Events(3) | 42,562 | | | — | | | — | | | — | | | 42,562 | |
Digital, excluding Podcast(4) | — | | | 162,700 | | | — | | | (1,314) | | | 161,386 | |
Podcast(5) | — | | | 91,253 | | | — | | | — | | | 91,253 | |
Audio & Media Services(6) | — | | | — | | | 77,794 | | | (1,287) | | | 76,507 | |
Other(7) | 4,106 | | | — | | | — | | | (112) | | | 3,994 | |
Total | 659,478 | | | 253,953 | | | 77,794 | | | (2,713) | | | 988,512 | |
Revenue from leases(8) | 418 | | | — | | | — | | | — | | | 418 | |
Revenue, total | $ | 659,896 | | | $ | 253,953 | | | $ | 77,794 | | | $ | (2,713) | | | $ | 988,930 | |
| | | | | | | | | |
Three Months Ended September 30, 2021 |
Revenue from contracts with customers: | | | | | | | | | |
Broadcast Radio(1) | $ | 483,456 | | | $ | — | | | $ | — | | | $ | — | | | $ | 483,456 | |
Networks(2) | 127,920 | | | — | | | — | | | — | | | |