iHeartMedia 2014 Annual Report Download - page 32

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illumination, proximity to other displays and the speed and viewing angle of approaching traffic. In addition, because our
International outdoor advertising operations are conducted in foreign markets, including Europe, Asia, Australia and Latin America,
management reviews the operating results from our foreign operations on a constant dollar basis. A constant dollar basis allows for
comparison of operations independent of foreign exchange movements.
Our International display inventory is typically sold to clients through network packages, with client contract terms typically
ranging from one to two weeks with terms of up to one year available as well. Internationally, contracts with municipal and transit
authorities for the right to place our street furniture and transit displays typically provide for terms ranging from three to 15 years. The
major difference between our International and Americas street furniture businesses is in the nature of the municipal contracts. In our
International outdoor business, these contracts typically require us to provide the municipality with a broader range of metropolitan
amenities in exchange for which we are authorized to sell advertising space on certain sections of the structures we erect in the public
domain. A different regulatory environment for billboards and competitive bidding for street furniture and transit display contracts,
which constitute a larger portion of our business internationally, may result in higher site lease costs in our International business. As
a result, our margins are typically lower in our International business than in our Americas outdoor business.
Macroeconomic Indicators
Our advertising revenue for all of our segments is highly correlated to changes in gross domestic product (“GDP”) as
advertising spending has historically trended in line with GDP, both domestically and internationally. According to the U.S.
Department of Commerce, estimated U.S. GDP growth for 2014 was 2.4%. Internationally, our results are impacted by fluctuations in
foreign currency exchange rates as well as the economic conditions in the foreign markets in which we have operations.
Executive Summary
The key developments in our business for the year ended December 31, 2014 are summarized below:
Consolidated revenue increased $75.5 million including a decrease of $22.7 million from movements in foreign
exchange during 2014 compared to 2013. Excluding foreign exchange impacts, consolidated revenue increased $98.2
million over 2013.
iHM revenue increased $29.9 million during 2014 compared to 2013 primarily driven by increased revenues from
political advertising, our traffic and weather business, and core national broadcast radio.
Americas outdoor revenue decreased $37.3 million compared to 2013, including a decrease of $3.4 million from
movements in foreign exchange. Excluding foreign exchange impacts, revenue decreased $33.9 million over 2013
primarily driven by lower national advertising revenues.
International outdoor revenue increased $52.3 million compared to 2013, including a decrease of $19.3 million from
movements in foreign exchange. Excluding foreign exchange impacts, revenue increased $71.6 million compared to
2013 primarily driven by growth in both Europe and emerging markets.
Revenues in our Other category increased $33.1 million compared to 2013 primarily as a result of higher political
revenues and a contract termination fee of $15 million earned by our media representation business.
We spent $70.6 million on strategic revenue and cost-saving initiatives during 2014 to realign and improve our on-going
business operations—an increase of $12.7 million compared to 2013.
During 2014, we completed several refinancing transactions, including a $1,000.0 million issuance of 9.0% Priority
Guarantee Notes due 2022, an $850.0 million issuance of 10.0% Senior Notes due 2018, and a new issuance and sale to a
subsidiary of $222.2 million of 14.0% Senior Notes due 2021. The proceeds from these transactions were used to repay
or redeem our existing indebtedness, as well as pay associated fees and expenses.
Throughout 2014, CC Finco, LLC (“CC Finco”), an indirect wholly-owned subsidiary of ours, repurchased $239.0
million principal amount of notes, for a total purchase price of $222.4 million, including accrued interest. Of these notes
repurchased, $177.1 million principal amount were not cancelled and remain outstanding.
On December 11, 2014, our Parent announced that its subsidiary had entered into an agreement with Vertical Bridge
Acquisitions, LLC (“Buyer”), for the sale of 411 of our broadcast communications tower sites and related assets for up to
$400.0 million (the “Tower Portfolio”). The acquisition of the Tower Portfolio may occur in one or more closings, and
the transaction is subject to due diligence and other customary closing conditions. The Buyer is required to acquire at
least 85% of the Tower Portfolio. Simultaneous with each closing of the sale of the towers, we will enter into lease
agreements for the continued use of the subject towers. The initial term of each lease will be fifteen years followed by
three option periods of five years each, subject to exclusions and limitations. If Buyer acquires the entire Tower
Portfolio, we will have annual lease payments of approximately $22.7 million, a loss of annual tenant revenues of
approximately $11.6 million and a reduction of direct operating expenses of approximately $3.8 million annually.