UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 20222023
☐ 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
001-32663
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| | | | | | | | | | | |
Delaware | | 88-0318078 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
|
4830 North Loop 1604 West, | Suite 111 | | |
San Antonio, | Texas | | 78249 |
(Address of principal executive offices) | | (Zip Code) |
|
(210) | 547-8800 |
(Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered |
Common Stock, $0.01 par value per share | CCO | New York Stock Exchange |
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 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”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 ☐
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| | | | | |
Class | Outstanding at May 5, 20224, 2023 |
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - |
Common Stock, $0.01 par value per share | 475,290,559482,843,052 |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
TABLE OF CONTENTS
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| | Page Number |
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PART I—FINANCIAL INFORMATION | |
Item 1. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
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PART II—OTHER INFORMATION | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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| Page Number |
Financial Statements: | |
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Condensed Notes to Consolidated Financial Statements: | |
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CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (In thousands, except share and per share data) | (In thousands, except share and per share data) | March 31, 2022 | | December 31, 2021 | (In thousands, except share and per share data) | March 31, 2023 | | December 31, 2022 |
| | (Unaudited) | | | | (Unaudited) | | |
CURRENT ASSETS | CURRENT ASSETS | | | | CURRENT ASSETS | | | |
Cash and cash equivalents | Cash and cash equivalents | $ | 431,877 | | | $ | 410,767 | | Cash and cash equivalents | $ | 339,976 | | | $ | 286,781 | |
| Accounts receivable, net | Accounts receivable, net | 534,911 | | | 643,116 | | Accounts receivable, net | 523,008 | | | 619,829 | |
Prepaid expenses | Prepaid expenses | 54,895 | | | 54,180 | | Prepaid expenses | 74,072 | | | 55,371 | |
Other current assets | Other current assets | 27,617 | | | 26,458 | | Other current assets | 31,783 | | | 27,395 | |
| Assets held for sale | | Assets held for sale | — | | | 131,540 | |
Total Current Assets | Total Current Assets | 1,049,300 | | | 1,134,521 | | Total Current Assets | 968,839 | | | 1,120,916 | |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT | | | PROPERTY, PLANT AND EQUIPMENT | | |
Structures, net | Structures, net | 605,879 | | | 622,738 | | Structures, net | 555,423 | | | 556,312 | |
Other property, plant and equipment, net | Other property, plant and equipment, net | 194,688 | | | 204,508 | | Other property, plant and equipment, net | 214,280 | | | 231,236 | |
INTANGIBLE ASSETS AND GOODWILL | INTANGIBLE ASSETS AND GOODWILL | | | | INTANGIBLE ASSETS AND GOODWILL | | | |
Indefinite-lived permits | 714,174 | | | 717,666 | | |
Permits, net | | Permits, net | 710,665 | | | 723,061 | |
Other intangible assets, net | Other intangible assets, net | 266,120 | | | 271,448 | | Other intangible assets, net | 249,216 | | | 251,121 | |
Goodwill | Goodwill | 694,741 | | | 698,704 | | Goodwill | 652,173 | | | 650,643 | |
OTHER ASSETS | OTHER ASSETS | | OTHER ASSETS | |
Operating lease right-of-use assets | Operating lease right-of-use assets | 1,572,470 | | | 1,567,468 | | Operating lease right-of-use assets | 1,522,402 | | | 1,479,634 | |
Other assets | Other assets | 83,667 | | | 82,302 | | Other assets | 75,925 | | | 73,088 | |
Total Assets | Total Assets | $ | 5,181,039 | | | $ | 5,299,355 | | Total Assets | $ | 4,948,923 | | | $ | 5,086,011 | |
CURRENT LIABILITIES | CURRENT LIABILITIES | | | | CURRENT LIABILITIES | | | |
Accounts payable | Accounts payable | $ | 96,789 | | | $ | 108,567 | | Accounts payable | $ | 86,469 | | | $ | 101,621 | |
Accrued expenses | Accrued expenses | 462,760 | | | 523,364 | | Accrued expenses | 441,950 | | | 488,782 | |
Current operating lease liabilities | Current operating lease liabilities | 313,605 | | | 316,692 | | Current operating lease liabilities | 256,749 | | | 254,217 | |
Accrued interest | Accrued interest | 95,359 | | | 66,444 | | Accrued interest | 109,762 | | | 80,133 | |
Deferred revenue | Deferred revenue | 103,425 | | | 76,712 | | Deferred revenue | 95,204 | | | 60,408 | |
Current portion of long-term debt | Current portion of long-term debt | 21,090 | | | 21,165 | | Current portion of long-term debt | 27,002 | | | 25,218 | |
| Liabilities held for sale | | Liabilities held for sale | — | | | 111,161 | |
Total Current Liabilities | Total Current Liabilities | 1,093,028 | | | 1,112,944 | | Total Current Liabilities | 1,017,136 | | | 1,121,540 | |
NON-CURRENT LIABILITIES | NON-CURRENT LIABILITIES | | NON-CURRENT LIABILITIES | |
Long-term debt | Long-term debt | 5,579,813 | | | 5,583,788 | | Long-term debt | 5,564,940 | | | 5,568,799 | |
Non-current operating lease liabilities | Non-current operating lease liabilities | 1,302,484 | | | 1,310,917 | | Non-current operating lease liabilities | 1,310,665 | | | 1,277,854 | |
Deferred tax liabilities, net | Deferred tax liabilities, net | 322,846 | | | 324,579 | | Deferred tax liabilities, net | 249,051 | | | 243,668 | |
Other long-term liabilities | Other long-term liabilities | 157,799 | | | 161,097 | | Other long-term liabilities | 140,988 | | | 136,956 | |
Total Liabilities | Total Liabilities | 8,455,970 | | | 8,493,325 | | Total Liabilities | 8,282,780 | | | 8,348,817 | |
| Commitments and Contingencies (Note 5) | Commitments and Contingencies (Note 5) | 0 | | 0 | Commitments and Contingencies (Note 5) | |
| STOCKHOLDERS’ DEFICIT | STOCKHOLDERS’ DEFICIT | | STOCKHOLDERS’ DEFICIT | |
Noncontrolling interest | 10,994 | | | 11,060 | | |
Common stock, par value $0.01 per share: 2,350,000,000 shares authorized (475,023,448 shares issued as of March 31, 2022; 474,480,862 shares issued as of December 31, 2021) | 4,750 | | | 4,745 | | |
Noncontrolling interests | | Noncontrolling interests | 12,452 | | | 12,864 | |
Common stock, par value $0.01 per share: 2,350,000,000 shares authorized (491,325,901 shares issued as of March 31, 2023; 483,639,206 shares issued as of December 31, 2022) | | Common stock, par value $0.01 per share: 2,350,000,000 shares authorized (491,325,901 shares issued as of March 31, 2023; 483,639,206 shares issued as of December 31, 2022) | 4,913 | | | 4,836 | |
Additional paid-in capital | Additional paid-in capital | 3,527,076 | | | 3,522,367 | | Additional paid-in capital | 3,547,471 | | | 3,543,424 | |
Accumulated deficit | Accumulated deficit | (6,463,217) | | | (6,373,349) | | Accumulated deficit | (6,504,865) | | | (6,469,953) | |
Accumulated other comprehensive loss | Accumulated other comprehensive loss | (346,679) | | | (350,950) | | Accumulated other comprehensive loss | (371,733) | | | (335,189) | |
Treasury stock (3,675,965 shares held as of March 31, 2022; 3,671,788 shares held as of December 31, 2021) | (7,855) | | | (7,843) | | |
Treasury stock (9,878,963 shares held as of March 31, 2023; 7,325,251 shares held as of December 31, 2022) | | Treasury stock (9,878,963 shares held as of March 31, 2023; 7,325,251 shares held as of December 31, 2022) | (22,095) | | | (18,788) | |
Total Stockholders' Deficit | Total Stockholders' Deficit | (3,274,931) | | | (3,193,970) | | Total Stockholders' Deficit | (3,333,857) | | | (3,262,806) | |
Total Liabilities and Stockholders' Deficit | Total Liabilities and Stockholders' Deficit | $ | 5,181,039 | | | $ | 5,299,355 | | Total Liabilities and Stockholders' Deficit | $ | 4,948,923 | | | $ | 5,086,011 | |
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
| | | | | | | | | | | | | | | Three Months Ended |
(In thousands, except per share data) | (In thousands, except per share data) | | Three Months Ended | (In thousands, except per share data) | | March 31, |
| | March 31, | |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
Revenue | Revenue | | $ | 525,688 | | | $ | 370,908 | | Revenue | | $ | 545,435 | | | $ | 525,688 | |
Operating expenses: | Operating expenses: | | | Operating expenses: | | |
Direct operating expenses(1) | Direct operating expenses(1) | | 321,202 | | | 283,290 | | Direct operating expenses(1) | | 344,850 | | | 321,202 | |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | | 108,957 | | | 97,570 | | Selling, general and administrative expenses(1) | | 118,196 | | | 108,957 | |
Corporate expenses(1) | Corporate expenses(1) | | 43,645 | | | 34,042 | | Corporate expenses(1) | | 34,541 | | | 43,645 | |
Depreciation and amortization | Depreciation and amortization | | 60,407 | | | 61,852 | | Depreciation and amortization | | 72,963 | | | 60,407 | |
Impairment charges | | — | | | 118,950 | | |
| Other operating expense (income), net | | (4,911) | | | 117 | | |
| Operating loss | | (3,612) | | | (224,913) | | |
Other operating income, net | | Other operating income, net | | (91,276) | | | (4,911) | |
| Operating income (loss) | | Operating income (loss) | | 66,161 | | | (3,612) | |
Interest expense, net | Interest expense, net | | (82,798) | | | (92,693) | | Interest expense, net | | (102,753) | | | (82,798) | |
Loss on extinguishment of debt | | — | | | (51,101) | | |
| Other income (expense), net | Other income (expense), net | | (5,999) | | | 6,554 | | Other income (expense), net | | 9,004 | | | (5,999) | |
Loss before income taxes | Loss before income taxes | | (92,409) | | | (362,153) | | Loss before income taxes | | (27,588) | | | (92,409) | |
Income tax benefit | | 2,680 | | | 28,697 | | |
Income tax benefit (expense) | | Income tax benefit (expense) | | (7,834) | | | 2,680 | |
Consolidated net loss | Consolidated net loss | | (89,729) | | | (333,456) | | Consolidated net loss | | (35,422) | | | (89,729) | |
Less amount attributable to noncontrolling interest | | 139 | | | (1,103) | | |
Less amount attributable to noncontrolling interests | | Less amount attributable to noncontrolling interests | | (510) | | | 139 | |
Net loss attributable to the Company | Net loss attributable to the Company | | $ | (89,868) | | | $ | (332,353) | | Net loss attributable to the Company | | $ | (34,912) | | | $ | (89,868) | |
| | Net loss attributable to the Company per share of common stock — basic and diluted | Net loss attributable to the Company per share of common stock — basic and diluted | | $ | (0.19) | | | $ | (0.71) | | Net loss attributable to the Company per share of common stock — basic and diluted | | $ | (0.07) | | | $ | (0.19) | |
|
(1)Excludes depreciation and amortization
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended |
| | | March 31, |
| | | | | 2022 | | 2021 |
Net loss attributable to the Company | | | | | $ | (89,868) | | | $ | (332,353) | |
Other comprehensive income (loss): | | | | | | | |
Foreign currency translation adjustments | | | | | 4,265 | | | (19,346) | |
Reclassification adjustments | | | | | — | | | 944 | |
| | | | | | | |
Other comprehensive income (loss) | | | | | 4,265 | | | (18,402) | |
Comprehensive loss | | | | | (85,603) | | | (350,755) | |
Less amount attributable to noncontrolling interest | | | | | (6) | | | (10) | |
Comprehensive loss attributable to the Company | | | | | $ | (85,597) | | | $ | (350,745) | |
| | | | | | | |
| | | | | | | | | | | | | | | |
| | | Three Months Ended |
(In thousands) | | | March 31, |
| | | | | 2023 | | 2022 |
Net loss attributable to the Company | | | | | $ | (34,912) | | | $ | (89,868) | |
| | | | | | | |
Foreign currency translation adjustments | | | | | (3,680) | | | 4,265 | |
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Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sale of Swiss business, included in “Other operating income, net” | | | | | (32,862) | | | — | |
Comprehensive loss | | | | | (71,454) | | | (85,603) | |
Less amount attributable to noncontrolling interests | | | | | 2 | | | (6) | |
Comprehensive loss attributable to the Company | | | | | $ | (71,456) | | | $ | (85,597) | |
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| | | | | Controlling Interest | | Total |
(In thousands, except share data) | Common Shares Issued | | Non-controlling Interest | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | |
Balances at December 31, 2021 | 474,480,862 | | | $ | 11,060 | | | $ | 4,745 | | | $ | 3,522,367 | | | $ | (6,373,349) | | | $ | (350,950) | | | $ | (7,843) | | | $ | (3,193,970) | |
| | | | | | | | | | | | | | | |
Net income (loss) | | | 139 | | | — | | | — | | | (89,868) | | | — | | | — | | | (89,729) | |
Exercise of stock options and release of stock awards | 542,586 | | | — | | | 5 | | | (5) | | | — | | | — | | | (12) | | | (12) | |
Share-based compensation | | | — | | | — | | | 4,714 | | | — | | | — | | | — | | | 4,714 | |
| | | | | | | | | | | | | | | |
Payments to noncontrolling interests | | | (199) | | | — | | | — | | | — | | | — | | | — | | | (199) | |
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Other comprehensive income (loss) | | | (6) | | | — | | | — | | | — | | | 4,271 | | | — | | | 4,265 | |
| | | | | | | | | | | | | | | |
Balances at March 31, 2022 | 475,023,448 | | | $ | 10,994 | | | $ | 4,750 | | | $ | 3,527,076 | | | $ | (6,463,217) | | | $ | (346,679) | | | $ | (7,855) | | | $ | (3,274,931) | |
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| Three Months Ended March 31, 2023 |
| | | | | Controlling Interest | | Total Stockholders’ Deficit |
(In thousands, except share data) | Common Shares Issued | | Non-controlling Interests | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | |
Balances at December 31, 2022 | 483,639,206 | | | $ | 12,864 | | | $ | 4,836 | | | $ | 3,543,424 | | | $ | (6,469,953) | | | $ | (335,189) | | | $ | (18,788) | | | $ | (3,262,806) | |
| | | | | | | | | | | | | | | |
Net loss | | | (510) | | | — | | | — | | | (34,912) | | | — | | | — | | | (35,422) | |
Release of stock awards and exercise of stock options | 7,686,695 | | | — | | | 77 | | | (77) | | | — | | | — | | | (3,307) | | | (3,307) | |
Share-based compensation | | | — | | | — | | | 4,124 | | | — | | | — | | | — | | | 4,124 | |
Payments from noncontrolling interests | | | 96 | | | — | | | — | | | — | | | — | | | — | | | 96 | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | 2 | | | — | | | — | | | — | | | (3,682) | | | — | | | (3,680) | |
Disposal of Swiss business | | | — | | | — | | | — | | | — | | | (32,862) | | | — | | | (32,862) | |
| | | | | | | | | | | | | | | |
Balances at March 31, 2023 | 491,325,901 | | | $ | 12,452 | | | $ | 4,913 | | | $ | 3,547,471 | | | $ | (6,504,865) | | | $ | (371,733) | | | $ | (22,095) | | | $ | (3,333,857) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2021 |
| | | | | Controlling Interest | | Total |
(In thousands, except share data) | Common Shares Issued | | Non-controlling Interest | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | |
Balances at December 31, 2020 | 468,703,164 | | | $ | 10,855 | | | $ | 4,687 | | | $ | 3,502,991 | | | $ | (5,939,534) | | | $ | (358,520) | | | $ | (3,081) | | | $ | (2,782,602) | |
| | | | | | | | | | | | | | | |
Net loss | | | (1,103) | | | — | | | — | | | (332,353) | | | — | | | — | | | (333,456) | |
Exercise of stock options and release of stock awards | 520,343 | | | — | | | 5 | | | (4) | | | — | | | — | | | (9) | | | (8) | |
Share-based compensation | | | — | | | — | | | 3,951 | | | — | | | — | | | — | | | 3,951 | |
Payments to noncontrolling interests | | | (109) | | | — | | | — | | | — | | | — | | | — | | | (109) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other comprehensive loss | | | (10) | | | — | | | — | | | — | | | (18,392) | | | — | | | (18,402) | |
| | | | | | | | | | | | | | | |
Balances at March 31, 2021 | 469,223,507 | | | $ | 9,633 | | | $ | 4,692 | | | $ | 3,506,938 | | | $ | (6,271,887) | | | $ | (376,912) | | | $ | (3,090) | | | $ | (3,130,626) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2022 |
| | | | | Controlling Interest | | Total Stockholders’ Deficit |
(In thousands, except share data) | Common Shares Issued | | Non-controlling Interests | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | |
Balances at December 31, 2021 | 474,480,862 | | | $ | 11,060 | | | $ | 4,745 | | | $ | 3,522,367 | | | $ | (6,373,349) | | | $ | (350,950) | | | $ | (7,843) | | | $ | (3,193,970) | |
| | | | | | | | | | | | | | | |
Net income (loss) | | | 139 | | | — | | | — | | | (89,868) | | | — | | | — | | | (89,729) | |
Release of stock awards and exercise of stock options | 542,586 | | | — | | | 5 | | | (5) | | | — | | | — | | | (12) | | | (12) | |
Share-based compensation | | | — | | | — | | | 4,714 | | | — | | | — | | | — | | | 4,714 | |
Payments to noncontrolling interests | | | (199) | | | — | | | — | | | — | | | — | | | — | | | (199) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | (6) | | | — | | | — | | | — | | | 4,271 | | | — | | | 4,265 | |
| | | | | | | | | | | | | | | |
Balances at March 31, 2022 | 475,023,448 | | | $ | 10,994 | | | $ | 4,750 | | | $ | 3,527,076 | | | $ | (6,463,217) | | | $ | (346,679) | | | $ | (7,855) | | | $ | (3,274,931) | |
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Consolidated net loss | $ | (89,729) | | | $ | (333,456) | |
Reconciling items: | | | |
Depreciation, amortization and impairment charges | 60,407 | | | 180,802 | |
Non-cash operating lease expense | 83,594 | | | 88,499 | |
Loss on extinguishment of debt | — | | | 51,101 | |
Deferred taxes | (1,749) | | | (26,634) | |
Gain on disposal of operating and other assets, net | (11,841) | | | (72) | |
Foreign exchange transaction loss (gain) | 6,686 | | | (5,431) | |
Other reconciling items, net | 7,487 | | | 4,932 | |
Changes in operating assets and liabilities: | | | |
Decrease in accounts receivable | 109,948 | | | 114,998 | |
Increase in prepaid expenses and other operating assets | (11,042) | | | (10,193) | |
Decrease in accounts payable and accrued expenses | (53,772) | | | (40,098) | |
Decrease in operating lease liabilities | (98,948) | | | (106,282) | |
Increase (decrease) in accrued interest | 29,106 | | | (55,661) | |
Increase in deferred revenue | 18,705 | | | 11,573 | |
Increase in other operating liabilities | 613 | | | 1,581 | |
Net cash provided by (used for) operating activities | 49,465 | | | (124,341) | |
Cash flows from investing activities: | | | |
Purchases of property, plant and equipment | (35,809) | | | (17,918) | |
Asset acquisitions | (2,518) | | | (1,507) | |
Proceeds from disposal of assets | 19,359 | | | 1,667 | |
Other investing activities, net | 154 | | | 113 | |
Net cash used for investing activities | (18,814) | | | (17,645) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Proceeds from long-term debt | — | | | 1,000,000 | |
Payments on long-term debt | (5,542) | | | (989,014) | |
Debt issuance costs | — | | | (11,789) | |
| | | |
| | | |
| | | |
Other financing activities, net | (211) | | | (117) | |
Net cash used for financing activities | (5,753) | | | (920) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (2,270) | | | (880) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 22,628 | | | (143,786) | |
Cash, cash equivalents and restricted cash at beginning of period | 419,971 | | | 795,061 | |
Cash, cash equivalents and restricted cash at end of period | $ | 442,599 | | | $ | 651,275 | |
Supplemental disclosures: | | | |
Cash paid for interest | $ | 51,575 | | | $ | 145,207 | |
Cash paid for income taxes, net of refunds | $ | 774 | | | $ | 1,103 | |
| | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, |
| 2023 | | 2022 |
Cash flows from operating activities: | | | |
Consolidated net loss | $ | (35,422) | | | $ | (89,729) | |
Reconciling items: | | | |
Depreciation and amortization | 72,963 | | | 60,407 | |
Non-cash operating lease expense | 85,152 | | | 83,594 | |
| | | |
Deferred taxes | 5,412 | | | (1,749) | |
Share-based compensation | 4,124 | | | 4,714 | |
Net gain on disposal of business and operating assets | (96,749) | | | (11,841) | |
Foreign exchange transaction loss (gain) | (9,137) | | | 6,686 | |
| | | |
Other reconciling items, net | 5,894 | | | 2,773 | |
Changes in operating assets and liabilities, net of effects of disposition: | | | |
Decrease in accounts receivable | 110,532 | | | 109,948 | |
Increase in prepaid expenses and other operating assets | (31,266) | | | (11,042) | |
Decrease in accounts payable and accrued expenses | (63,904) | | | (53,772) | |
Decrease in operating lease liabilities | (93,357) | | | (98,948) | |
Increase in accrued interest | 29,711 | | | 29,106 | |
Increase in deferred revenue | 23,599 | | | 18,705 | |
Increase in other operating liabilities | 3,356 | | | 613 | |
Net cash provided by operating activities | 10,908 | | | 49,465 | |
Cash flows from investing activities: | | | |
Capital expenditures | (38,427) | | | (35,809) | |
Asset acquisitions | (5,675) | | | (2,518) | |
Net proceeds from disposal of business and assets | 93,523 | | | 19,359 | |
Other investing activities, net | (320) | | | 154 | |
Net cash provided by (used for) investing activities | 49,101 | | | (18,814) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
| | | |
Payments on long-term debt | (5,501) | | | (5,542) | |
| | | |
Taxes paid related to net share settlement of equity awards | (3,307) | | | (12) | |
Other financing activities, net | 96 | | | (199) | |
Net cash used for financing activities | (8,712) | | | (5,753) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 1,079 | | | (2,270) | |
Net increase in cash, cash equivalents and restricted cash | 52,376 | | | 22,628 | |
Cash, cash equivalents and restricted cash at beginning of period | 298,682 | | | 419,971 | |
Cash, cash equivalents and restricted cash at end of period | $ | 351,058 | | | $ | 442,599 | |
Supplemental disclosures: | | | |
Cash paid for interest | $ | 72,320 | | | $ | 51,575 | |
Cash paid for income taxes, net of refunds | $ | 2,122 | | | $ | 774 | |
| | | |
| | | |
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
TheThese consolidated financial statements include the accounts of Clear Channel Outdoor Holdings, Inc. and its subsidiaries, as well as entities in which the Company has a controlling financial interest or for which the Company is the primary beneficiary. Intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, 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 (the “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. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 20212022 Annual Report on Form 10-K, filed with the SEC on February 24, 2022.
Use of Estimates28, 2023.
The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the amounts reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofin the consolidated financial statements and reported amounts of revenueaccompanying notes. The Company bases its estimates on historical experience and expenseson various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
As described in the Company’s 2022 Annual Report on Form 10-K, the Company changed segments during the periods presented. Such estimatesfourth quarter of 2022 to reflect changes in the way the business is managed and assumptions affect, among other things,resources are allocated by the Company’s goodwill, long-livedchief operating decision maker (“CODM”). As such, the Company has revised its segment disclosures for prior periods to conform to the current period presentation. Additionally, certain prior period amounts in the Consolidated Statement of Cash Flows have been reclassified to conform to the 2023 presentation.
Disposition
As disclosed in the Company’s 2022 Annual Report on Form 10-K, in December 2022, Clear Channel International Limited, a wholly-owned subsidiary of the Company, entered into a definitive agreement to sell its business in Switzerland to Goldbach Group AG. As such, assets and indefinite-lived intangible assets; operating lease right-of-use assets and operating lease liabilities; assessmentliabilities of the annual effective tax rate; valuationCompany’s business in Switzerland were presented as held for sale on the Company’s Consolidated Balance Sheet as of deferred income taxes and income tax contingencies; defined-benefit plan obligations; the allowance for credit losses; assessment of lease and non-lease contract expenses; measurement of compensation cost for bonus and other compensation plans; and litigation accruals. The Company’s assessment of conditions and events, considered in the aggregate, indicates that the Company will be able to meet its obligations as they become due within one year after the date of these financial statements.
New Accounting Pronouncements Not Yet Adopted
In November 2021, the Financial Accounting Standards Board (the “FASB”) issued ASU 2021-10, Disclosures by Business Entities about Government Assistance, which requires disclosures that increase the transparency of certain transactions with governments. The amendments in this ASU are effective for annual periods beginning after December 15, 2021 and may be applied prospectively or retrospectively. The Company does not expect to be materially impacted by the implementation of this ASU.
Reference Rate Reform
For the last several years, there has been an ongoing effort amongst regulators, standard setters, financial institutions and other market participants to replace interbank offered rates, including the London Interbank Offered Rate (“LIBOR”), with alternative reference rates. In the United States (“U.S.”), the Alternative Reference Rates Committee has formally recommended forward-looking Secured Overnight Financing Rate term rates as the replacement for USD LIBOR, while various other risk-free rates have been selected to replace LIBOR for other currencies. After December 31, 2021,2022.
The conditions to closing were satisfied during the ICE Benchmark Administration, LIBOR’s administrator, ceased publicationfirst quarter of certain LIBOR rates,2023, and the remaining USD LIBOR rates will be published through June 30,sale of the Company’s business in Switzerland was completed on March 31, 2023. The Company is currently working with the administrative agentrecognized a gain on sale of its Senior Secured Credit Facilities and Receivables-Based Credit Facility to finalize replacement rates but does not expect the replacement of LIBOR to result in a material impact on its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, in order to ease the potential burden of accounting for reference rate reform initiatives. The update provides temporary optional expedients and exceptions for applying GAAP contract modification accounting to contracts and other transactions affected by reference rate reform if certain criteria are met and may be applied through December 31, 2022. The Company is assessing whether it will use these optional expedients and exceptions but does not expect adoption of this guidance to have a material impact$96.4 million, recorded within “Other operating income, net” on the Company’s consolidated financial statements or disclosures. The Company will continue to monitorConsolidated Statement of Loss for the three months ended March 31, 2023. Gross cash proceeds of $94.2 million are reflected as cash from investing activities within “Net proceeds from disposal of business and assess regulatory developments duringassets” on the transition period.Consolidated Statement of Cash Flows for the three months ended March 31, 2023.
NOTE 2 – SEGMENT DATA
The Company has 2four reportable segments, which it believes best reflect how the Company is currently managed – Americasmanaged: America, Airports, Europe-North and Europe.Europe-South. The Americas segment consists of operations primarily in the U.S., and the Europe segment consists ofCompany's remaining operations in Europe and Singapore. The Company’s remaining operating segment, Latin America does not meet the quantitative threshold to qualify as a reportable segment and isSingapore are disclosed as “Other” herein. Each segment provides out-of-home advertising services in its respective geographic region using various digital and traditional display types, consisting primarily of billboards, street furniture displays and transit displays.“Other.”
Segment Adjusted EBITDA is the profitability metric reported to the Company’s Chief Operating Decision Maker (“CODM”)CODM for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. Segment information for total assets is not presented as this information is not used by the Company’s CODM in measuring segment performance or allocating resources between the Company’s segments.
The following table presents the Company’s reportable segment results for the three months ended March 31, 20222023 and 2021:
| | | | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Revenue | | | | | | | |
Americas | | | | | $ | 295,139 | | | $ | 211,884 | |
Europe | | | | | 217,072 | | | 149,524 | |
Other | | | | | 13,477 | | | 9,500 | |
Total | | | | | $ | 525,688 | | | $ | 370,908 | |
| | | | | | | |
Capital Expenditures | | | | | | | |
Americas | | | | | $ | 17,812 | | | $ | 5,725 | |
Europe | | | | | 15,205 | | | 8,050 | |
Other | | | | | 871 | | | 1,313 | |
Corporate | | | | | 1,921 | | | 2,830 | |
Total | | | | | $ | 35,809 | | | $ | 17,918 | |
| | | | | | | |
Segment Adjusted EBITDA | | | | | | | |
Americas | | | | | $ | 110,336 | | | $ | 64,220 | |
Europe | | | | | (13,754) | | | (67,629) | |
Other | | | | | (619) | | | (3,825) | |
Total | | | | | $ | 95,963 | | | $ | (7,234) | |
| | | | | | | |
Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | | | | | | | |
Segment Adjusted EBITDA | | | | | $ | 95,963 | | | $ | (7,234) | |
Less reconciling items: | | | | | | | |
Corporate expenses(1) | | | | | 43,645 | | | 34,042 | |
Depreciation and amortization | | | | | 60,407 | | | 61,852 | |
Impairment charges | | | | | — | | | 118,950 | |
Restructuring and other costs(2) | | | | | 434 | | | 2,718 | |
| | | | | | | |
| | | | | | | |
Other operating expense (income), net | | | | | (4,911) | | | 117 | |
Interest expense, net | | | | | 82,798 | | | 92,693 | |
Other reconciling items(3) | | | | | 5,999 | | | 44,547 | |
Consolidated net loss before income taxes | | | | | $ | (92,409) | | | $ | (362,153) | |
2022. As described in Note 1, the Company has revised its segment disclosures for the prior period to conform to the current period presentation.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Revenue | | | | | | | |
America | | | | | $ | 236,049 | | | $ | 239,256 | |
Airports | | | | | 53,789 | | | 55,883 | |
Europe-North | | | | | 128,503 | | | 122,098 | |
Europe-South | | | | | 108,015 | | | 89,550 | |
Other | | | | | 19,079 | | | 18,901 | |
Total | | | | | $ | 545,435 | | | $ | 525,688 | |
| | | | | | | |
Capital Expenditures(1) | | | | | | | |
America | | | | | $ | 16,808 | | | $ | 14,800 | |
Airports | | | | | 4,751 | | | 3,012 | |
Europe-North | | | | | 7,066 | | | 6,450 | |
Europe-South | | | | | 5,051 | | | 8,623 | |
Other | | | | | 1,921 | | | 1,003 | |
Corporate | | | | | 2,830 | | | 1,921 | |
Total | | | | | $ | 38,427 | | | $ | 35,809 | |
| | | | | | | |
Segment Adjusted EBITDA | | | | | | | |
America | | | | | $ | 81,365 | | | $ | 100,406 | |
Airports | | | | | 6,264 | | | 9,930 | |
Europe-North | | | | | 7,172 | | | 6,974 | |
Europe-South | | | | | (12,220) | | | (21,807) | |
Other | | | | | 369 | | | 460 | |
Total | | | | | $ | 82,950 | | | $ | 95,963 | |
| | | | | | | |
Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | | | | | | | |
Segment Adjusted EBITDA | | | | | $ | 82,950 | | | $ | 95,963 | |
Less reconciling items: | | | | | | | |
Corporate expenses(2) | | | | | 34,541 | | | 43,645 | |
Depreciation and amortization | | | | | 72,963 | | | 60,407 | |
| | | | | | | |
Restructuring and other costs(3) | | | | | 561 | | | 434 | |
| | | | | | | |
| | | | | | | |
Other operating income, net | | | | | (91,276) | | | (4,911) | |
Interest expense, net | | | | | 102,753 | | | 82,798 | |
Other expense (income), net | | | | | (9,004) | | | 5,999 | |
Consolidated net loss before income taxes | | | | | $ | (27,588) | | | $ | (92,409) | |
(1)In addition to payments that occurred during the period for capital expenditures, as disclosed here and in the Consolidated Statements of Cash Flows, the Company had $18.0 million and $16.6 million of accrued capital expenditures that remained unpaid as of March 31, 2023 and 2022, respectively.
(2)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(2)(3)The restructuring and other costs line item in this reconciliation excludes those restructuring and other costs related to corporate functions, which are included within the Corporate expenses line item.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 – REVENUE
The Company generates revenue primarily from the sale of advertising space on printed and digital out-of-home advertising displays. Certain of these revenue transactions are considered leases for accounting purposes as the contracts convey to customers the right to control the use of the Company’s advertising displays for a period of time. The Company accounts for revenue from leases in accordance with Accounting Standards Codification (“ASC”) Topic 842, while the lease accounting guidance under ASC Topic 842. AllCompany’s remaining revenue transactions are accounted for as revenue from contracts with customers underin accordance with ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by segment,geography, for the three months ended March 31, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | |
(In thousands) | Revenue from contracts with customers | | Revenue from leases | | Total Revenue |
|
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Three Months Ended March 31, 2022 |
Americas(1) | $ | 147,880 | | | $ | 147,259 | | | $ | 295,139 | |
Europe | 196,882 | | | 20,190 | | | 217,072 | |
| | | | | |
| | | | | |
Other | 10,616 | | | 2,861 | | | 13,477 | |
Total | $ | 355,378 | | | $ | 170,310 | | | $ | 525,688 | |
| | | | | |
Three Months Ended March 31, 2021 |
Americas(1) | $ | 94,068 | | | $ | 117,816 | | | $ | 211,884 | |
Europe | 131,678 | | | 17,846 | | | 149,524 | |
| | | | | |
| | | | | |
Other | 7,630 | | | 1,870 | | | 9,500 | |
Total | $ | 233,376 | | | $ | 137,532 | | | $ | 370,908 | |
| | | | | | | | | | | | | | | | | |
(In thousands) | Revenue from contracts with customers | | Revenue from leases | | Total revenue |
|
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
|
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Three Months Ended March 31, 2023 |
U.S.(1) | $ | 144,557 | | | $ | 145,281 | | | $ | 289,838 | |
| | | | | |
| | | | | |
Europe(2) | 219,034 | | | 17,484 | | | 236,518 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 13,413 | | | 5,666 | | | 19,079 | |
Total | $ | 377,004 | | | $ | 168,431 | | | $ | 545,435 | |
| | | | | |
Three Months Ended March 31, 2022 |
U.S.(1) | $ | 147,880 | | | $ | 147,259 | | | $ | 295,139 | |
| | | | | |
| | | | | |
Europe(2) | 194,100 | | | 17,548 | | | 211,648 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 13,398 | | | 5,503 | | | 18,901 | |
Total | $ | 355,378 | | | $ | 170,310 | | | $ | 525,688 | |
(1)Americas totalU.S. revenue, for the three months ended March 31, 2022 and 2021which also includes revenue from transit displays of $59.0 million and $21.4 million, respectively, including revenuederived from airport displays in the Caribbean, is comprised of $55.9 millionrevenue from the Company’s America and $19.5 million, respectively.Airports segments.
(2)Europe revenue is comprised of revenue from the Company’s Europe-North and Europe-South segments.
(3)Other includes the Company’s businesses in Latin America and Singapore.
Revenue from Contracts with Customers
The following tables show the Company’s beginning and ending accounts receivable and deferred revenue balances from contracts with customers:
| | | | Three Months Ended March 31, | | | Three Months Ended March 31, |
(In thousands) | (In thousands) | | 2022 | | 2021 | (In thousands) | | 2023(1) | | 2022 |
Accounts receivable, net of allowance, from contracts with customers: | Accounts receivable, net of allowance, from contracts with customers: | | | | | Accounts receivable, net of allowance, from contracts with customers: | | | | |
Beginning balance | Beginning balance | | $ | 492,706 | | | $ | 349,799 | | Beginning balance | | $ | 480,016 | | | $ | 492,706 | |
Ending balance | Ending balance | | $ | 390,049 | | | $ | 243,689 | | Ending balance | | 392,838 | | | 390,049 | |
| Deferred revenue from contracts with customers: | Deferred revenue from contracts with customers: | | | Deferred revenue from contracts with customers: | | |
Beginning balance | Beginning balance | | $ | 42,016 | | | $ | 37,712 | | Beginning balance | | $ | 32,369 | | | $ | 42,016 | |
Ending balance | Ending balance | | $ | 56,955 | | | $ | 46,773 | | Ending balance | | 54,521 | | | 56,955 | |
(1)The beginning balances for the three months ended March 31, 2023 exclude accounts receivable and deferred revenue from contracts with customers that were held for sale as of December 31, 2022.
During the three months ended March 31, 20222023 and 2021,2022, respectively, the Company recognized $32.3$26.0 million and $28.0$32.3 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective periods.year.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company’s contracts with customers generally have terms of one year or less. However, as of March 31, 2022,2023, the Company expectsexpected to recognize $90.5$83.6 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with the majority of this amount to be recognized over the next five years.
NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of March 31, 20222023 and December 31, 20212022 consisted of the following:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Term Loan Facility(1) | $ | 1,950,000 | | | $ | 1,955,000 | | |
Revolving Credit Facility | — | | | — | | |
Receivables-Based Credit Facility | — | | | — | | |
Term Loan Facility Due 2026(1),(2) | | Term Loan Facility Due 2026(1),(2) | $ | 1,930,000 | | | $ | 1,935,000 | |
Revolving Credit Facility Due 2024 | | Revolving Credit Facility Due 2024 | — | | | — | |
Receivables-Based Credit Facility Due 2024 | | Receivables-Based Credit Facility Due 2024 | — | | | — | |
Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | 1,250,000 | | | 1,250,000 | | Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | 1,250,000 | | | 1,250,000 | |
Clear Channel Outdoor Holdings 7.75% Senior Notes Due 2028 | Clear Channel Outdoor Holdings 7.75% Senior Notes Due 2028 | 1,000,000 | | | 1,000,000 | | Clear Channel Outdoor Holdings 7.75% Senior Notes Due 2028 | 1,000,000 | | | 1,000,000 | |
Clear Channel Outdoor Holdings 7.5% Senior Notes Due 2029 | Clear Channel Outdoor Holdings 7.5% Senior Notes Due 2029 | 1,050,000 | | | 1,050,000 | | Clear Channel Outdoor Holdings 7.5% Senior Notes Due 2029 | 1,050,000 | | | 1,050,000 | |
| Clear Channel International B.V. 6.625% Senior Secured Notes Due 2025 | Clear Channel International B.V. 6.625% Senior Secured Notes Due 2025 | 375,000 | | | 375,000 | | Clear Channel International B.V. 6.625% Senior Secured Notes Due 2025 | 375,000 | | | 375,000 | |
Other debt(2)(3) | Other debt(2)(3) | 37,178 | | | 39,006 | | Other debt(2)(3) | 36,844 | | | 36,798 | |
Original issue discount | Original issue discount | (6,637) | | | (6,976) | | Original issue discount | (5,242) | | | (5,596) | |
Long-term debt fees | Long-term debt fees | (54,638) | | | (57,077) | | Long-term debt fees | (44,660) | | | (47,185) | |
Total debt | Total debt | 5,600,903 | | | 5,604,953 | | Total debt | 5,591,942 | | | 5,594,017 | |
Less: Current portion | Less: Current portion | 21,090 | | | 21,165 | | Less: Current portion | 27,002 | | | 25,218 | |
Total long-term debt | Total long-term debt | $ | 5,579,813 | | | $ | 5,583,788 | | Total long-term debt | $ | 5,564,940 | | | $ | 5,568,799 | |
(1)DuringThe term loans under the three months ended March 31, 2022,Term Loan Facility amortize in equal quarterly installments in an aggregate annual amount equal to 1.00% of the original principal amount of such term loans, with the balance being payable on August 23, 2026. In accordance with these terms, the Company paid $5.0 million of the outstanding principal on the Term Loan Facility in accordance withduring the terms of the senior secured credit agreement ("Senior Secured Credit Agreement") governingthree months ended March 31, 2023.
(2)On February 20, 2023, the Senior Secured Credit Facilities, which consistAgreement was amended to establish Adjusted Term Secured Overnight Financing Rate (“SOFR”) (as defined therein) as the alternate rate of interest applicable to the Company’s Term Loan Facility andin connection with the Revolving Credit Facility.cessation of London Interbank Offered Rate (“LIBOR”). Please refer to the Company’s 2022 Annual Report on Form 10-K for additional details regarding this amendment.
(2)(3)Other debt includes finance leases and various borrowings utilized for general operating purposes, including a state-guaranteed loan with a third-party lender of €30.0 million, or approximately $33.2$32.5 million at current exchange rates. This loan bears an interest rate of 0% through June 2022, at which point the Company must pay a fee relating to the state guarantee equal to 0.5% of the amount of the loan. In April 2022, the Company elected to extend the loan’s maturity date to June 29, 2027, with quarterly principal repayments of €1.875 million due beginning in September 2023. The interest rate for the extended period is currently being negotiated with the lender. The annual cost of the state guarantee will be 1.0% for the next two years and 2.0% for the remainder of the loan term.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.6$4.8 billion and $5.9$4.7 billion as of March 31, 20222023 and December 31, 2021,2022, respectively. Under the fair value hierarchy established by ASC Section 820-10-35, the inputs used to determine the market value of the Company’s debt are classified as Level 1.
As of March 31, 2022,2023, the Company was in compliance with all covenants contained in its debt agreements.
Letters of Credit, Surety Bonds and Guarantees
As of March 31, 2022,2023, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $131.8 million of remaining excess availability. Additionally, as of March 31, 2022, the Company had $40.9availability, and $43.1 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $84.1$73.5 million of excess availability. AsAdditionally, as of March 31, 2022,2023, the Company had $87.8$86.0 million and $29.2$32.1 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $9.3$9.0 million of cash collateral. These letters of credit, surety bonds and bank guarantees relate to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
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 in each case 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 disputes, employment and benefits related claims, land use and zoning disputes, governmental fines, intellectual property claims and tax disputes.
China Investigation
NaNTwo former employees of Clear Media Limited (“Clear Media”), a former indirect, non-wholly-owned subsidiary of the Company, have been convicted in China of certain crimes, including the crime of misappropriation of Clear Media funds, and sentenced to imprisonment. The Company is not aware of any litigation, claim or assessment pending against the Company in relation to this proceeding.
The Company advised both the SEC and the United StatesU.S. Department of Justice ("DOJ"(the “DOJ”) of the investigation of Clear Media and is cooperatingcontinues to provide documents, interviews and information tocooperate with these agencies. Subsequent to the announcement that the Company was considering a strategic review of its stake in Clear Media, in March 2020, Clear Channel Outdoor Holdings, Inc.the Company received a subpoena from the staff of the SEC and a Grand Jury subpoena from the U.S. Attorney's Office for the Eastern District of New York, both in connection with the previously disclosed investigations. On April 28, 2020, the Company tendered the shares representing its 50.91% stake in Clear Media to Ever Harmonic Global Limited, (“Ever Harmonic”), a special-purpose vehicle wholly-owned by a consortium of investors, which includes the chief executive officer and an executive director of Clear Media, and on May 14, 2020, the Company received the final proceeds of the sale. In connection with the sale of its shares in Clear Media, the Company entered into an Investigation and Litigation Support Agreement with Clear Media and Ever Harmonic that requires Clear Media, if requested by the SEC and/or the DOJ, to use reasonable efforts to timely provide relevant factual information to the SEC and/or the DOJ, among other obligations.
In connection with its investigation, the SEC has also requested information regarding the Company’s historical oversight of its business in Italy and the misstatements and related forensic investigation. The Company is cooperating to provide documents and information responsive to the SEC’s inquiries and is voluntarily sharing the documents and information with the DOJ.
The SEC and DOJ investigation could implicate the books and records, internal controls and anti-bribery provisions of the U.S. Foreign Corrupt Practices Act, which statute and regulations provide for potential monetary penalties as well as criminal and civil sanctions. As previously disclosed, the Company has begunis meeting with these agencies to engage in discussions about potential resolution of these matters, including potential settlement. Based on the discussions to date, the Company recorded an estimated liability during the first quarter of 2022 to account for a potential resolution of these matters. However, at this time, the Company cannot predict the eventual scope, duration or outcome of these discussions, including whether a settlement will be reached, the amount of any potential monetary payments or the scope of injunctive or other relief, the results of which may be materially adverse to the Company, its financial condition and its results of operations. At this time, the Company is unable to reasonably estimate, or provide any assurance regarding, the amount of any potential loss in excess of the amount accrued relating to this investigation.
NOTE 6 – INCOME TAXES
Income Tax Benefit (Expense)
The Company’s income tax benefit (expense) for the three months ended March 31, 20222023 and 20212022 consisted of the following components:
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Current tax benefit | | | | | $ | 931 | | | $ | 2,063 | |
Deferred tax benefit | | | | | 1,749 | | | 26,634 | |
Income tax benefit | | | | | $ | 2,680 | | | $ | 28,697 | |
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2023 | | 2022 |
Current tax benefit (expense) | | | | | $ | (2,422) | | | $ | 931 | |
Deferred tax benefit (expense) | | | | | (5,412) | | | 1,749 | |
Income tax benefit (expense) | | | | | $ | (7,834) | | | $ | 2,680 | |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The effective tax rates for the three months ended March 31, 2023 and 2022 were (28.4)% and 2021 were 2.9% and 7.9%, respectively. These rates were primarily impacted by the valuation allowance recorded against current period deferred tax assets resulting from losses and interest expense carryforwards in the U.S. and certain foreign jurisdictions due to uncertainty regarding the Company’s ability to realize those assets in future periods. The effective tax rate for the three months ended March 31, 2023 was also impacted by the sale of the Company’s business in Switzerland.
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of March 31, 20222023 and December 31, 2021:2022:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Structures | Structures | $ | 2,356,068 | | | $ | 2,356,245 | | Structures | $ | 2,341,336 | | | $ | 2,317,552 | |
Furniture and other equipment | Furniture and other equipment | 250,715 | | | 251,084 | | Furniture and other equipment | 250,153 | | | 244,154 | |
Land, buildings and improvements | Land, buildings and improvements | 145,197 | | | 146,064 | | Land, buildings and improvements | 153,014 | | | 154,439 | |
Construction in progress | Construction in progress | 48,239 | | | 54,361 | | Construction in progress | 64,304 | | | 80,567 | |
Property, plant and equipment, gross | Property, plant and equipment, gross | 2,800,219 | | | 2,807,754 | | Property, plant and equipment, gross | 2,808,807 | | | 2,796,712 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | (1,999,652) | | | (1,980,508) | | Less: Accumulated depreciation | (2,039,104) | | | (2,009,164) | |
Property, plant and equipment, net | Property, plant and equipment, net | $ | 800,567 | | | $ | 827,246 | | Property, plant and equipment, net | $ | 769,703 | | | $ | 787,548 | |
NOTE 8 – INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets as of March 31, 20222023 and December 31, 2021:2022:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
| | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization | | Gross Carrying Amount | | Accumulated Amortization |
Indefinite-lived permits | $ | 714,174 | | | $ | — | | | $ | 717,666 | | | $ | — | | |
Permits(1) | | Permits(1) | $ | 742,732 | | | $ | (32,067) | | | $ | 739,119 | | | $ | (16,058) | |
Transit, street furniture and other outdoor contractual rights | Transit, street furniture and other outdoor contractual rights | 442,925 | | | (396,170) | | | 446,976 | | | (397,778) | | Transit, street furniture and other outdoor contractual rights | 422,386 | | | (386,610) | | | 420,838 | | | (383,184) | |
Permanent easements(1) | Permanent easements(1) | 160,288 | | | — | | | 161,079 | | | — | | Permanent easements(1) | 162,759 | | | — | | | 160,688 | | | — | |
Trademarks | Trademarks | 83,569 | | | (24,642) | | | 83,569 | | | (22,560) | | Trademarks | 83,569 | | | (32,971) | | | 83,569 | | | (30,889) | |
Other | Other | 1,398 | | | (1,248) | | | 1,307 | | | (1,145) | | Other | 1,384 | | | (1,301) | | | 1,302 | | | (1,203) | |
Total intangible assets | Total intangible assets | $ | 1,402,354 | | | $ | (422,060) | | | $ | 1,410,597 | | | $ | (421,483) | | Total intangible assets | $ | 1,412,830 | | | $ | (452,949) | | | $ | 1,405,516 | | | $ | (431,334) | |
The Company performs its annual impairment test for indefinite-lived intangible assets as of July 1 of each year and more frequently as events or changes in circumstances warrant, as described in the Company's 2021 Annual Report on Form 10-K. (1)During the three months ended March 31, 2021,2023, the Company tested its indefinite-livedacquired permits for impairment due toand permanent easements of $3.5 million and $2.1 million, respectively, as part of asset acquisitions. The acquired permit has an increase in the discount rate, resulting in an impairment chargeamortization period of $119.0 million. The Company did not perform an impairment test during the three months ended March 31, 2022 as there were no indicators of impairment.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the three months ended March 31, 2022:2023:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Americas | | Europe | | Other | | Consolidated |
Balance as of December 31, 2021(1) | $ | 507,819 | | | $ | 190,885 | | | $ | — | | | $ | 698,704 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Foreign currency | — | | | (3,963) | | | — | | | (3,963) | |
| | | | | | | |
Balance as of March 31, 2022 | $ | 507,819 | | | $ | 186,922 | | | $ | — | | | $ | 694,741 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | America | | Airports | | Europe-North | | | | | | Consolidated |
Balance as of December 31, 2022(1) | $ | 482,937 | | | $ | 24,882 | | | $ | 142,824 | | | | | | | $ | 650,643 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency impact | — | | | — | | | 1,530 | | | | | | | 1,530 | |
| | | | | | | | | | | |
Balance as of March 31, 2023 | $ | 482,937 | | | $ | 24,882 | | | $ | 144,354 | | | | | | | $ | 652,173 | |
(1)The balance at December 31, 20212022 is net of cumulative impairments of $2.6 billion $191.4for America, $79.4 million for Europe-North, $128.9 million for Europe-South and $90.4 million for Americas, Europe and Other, respectively.Other.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 – COST-SAVINGS INITIATIVES
Restructuring Plan to Reduce Headcount
During 2020, the Company committed to a restructuring plan to reduce headcount in its Europe segment, uponbusiness, which it continued to executewas executed through the fourth quarter of 2021 when the impacted employees were terminated. DuringSince then, any additional costs incurred, or in some cases reversed, related to residual restructuring activity in the three months endedCompany’s Europe-South segment. As of March 31, 2022, it was determined that actual2023, the Company had incurred cumulative costs would be less than previously estimated due to former employees no longer being eligible forof $37.4 million in its Europe-South segment in connection with this restructuring plan. Substantially all costs have been severance upon finding alternative employment in accordance with the terms of the restructuring plan, resulting in a net reversal ofbenefits and related costs, during the period. Remainingand remaining costs associated with this restructuring plan are not expected to be significant.
As of March 31, 2023, the remaining liability related to this restructuring plan was $5.7 million. The Company expects to pay most of this balance by the end of 2023. The following table presents net costs incurred (reversed)changes in the Company’s Europe segment in connection with this restructuring planliability balance during the three months ended March 31, 2022 and 2021 and since the plan was initiated:2023:
| | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, | | Total to date |
| | | | | 2022 | | 2021 | | March 31, 2022 |
Costs incurred (reversed) in Europe segment, net: | | | | | | | | | |
Direct operating expenses(1) | | | | | $ | (349) | | | $ | 285 | | | $ | 16,348 | |
Selling, general and administrative expenses(1) | | | | | 117 | | | 1,380 | | | 22,579 | |
Total charges (reversals), net | | | | | $ | (232) | | | $ | 1,665 | | | $ | 38,927 | |
| | | | | | | | | | | | | | | |
(In thousands) | | | | | Europe-South | | | | | | |
Liability balance as of December 31, 2022 | | | | | $ | 7,203 | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Costs incurred, net(1) | | | | | 157 | | | | | | | |
Costs paid or otherwise settled | | | | | (1,745) | | | | | | | |
Foreign currency impact | | | | | 90 | | | | | | | |
| | | | | | | | | | | |
Liability balance as of March 31, 2023 | | | | | $ | 5,705 | | | | | | | |
(1)Costs are reported in “Direct operating expenses” and “Selling, general and administrative expenses” on the Consolidated Statements of Loss. They are categorized as Restructuring and other costs and are therefore excluded from Segment Adjusted EBITDA.
Additionally, the Company recognized $0.9 million of corporate costs related to this restructuring plan during the three months ended March 31, 2021.
As of March 31, 2022, the total liability related to this restructuring plan was $18.2 million, which the Company expects to pay this year, although payments may be made through the end of the second quarter of 2023 in accordance with the terms of the restructuring plan. The following table presents changes in this liability balance during the three months ended March 31, 2022:
| | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | Europe | | | | Corporate | | Total |
Liability balance as of December 31, 2021 | | | $ | 23,860 | | | | | $ | 456 | | | $ | 24,316 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Costs reversed, net(1) | | | (232) | | | | | — | | | (232) | |
Costs paid or otherwise settled | | | (5,862) | | | | | — | | | (5,862) | |
| | | | | | | | | |
Liability balance as of March 31, 2022 | | | $ | 17,766 | | | | | $ | 456 | | | $ | 18,222 | |
(1)Substantially all costs related to this restructuring plan were severance benefits and related costs.
Other Restructuring Costs
In addition, the Company has incurred restructuring costs associated with various other cost-savings initiatives outside of the aforementioned restructuring plan, primarily related to one-time termination benefits, including $1.0 million and $0.2 million in Corporate and Europe, respectively, during the three months ended March 31, 2022 and $1.4 million in Corporate during the three months ended March 31, 2021. As of March 31, 2022, the total remaining liability related to these other cost-savings initiatives was approximately $2.1 million and is expected to be paid through the first quarter of 2023.
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three months ended March 31, 20222023 and 2021:2022:
| (In thousands, except per share data) | (In thousands, except per share data) | | Three Months Ended March 31, | (In thousands, except per share data) | | Three Months Ended March 31, |
| | | 2022 | | 2021 | | | 2023 | | 2022 |
Numerator: | Numerator: | | | | | Numerator: | | | | |
Net loss attributable to the Company – common shares | Net loss attributable to the Company – common shares | | $ | (89,868) | | | $ | (332,353) | | Net loss attributable to the Company – common shares | | $ | (34,912) | | | $ | (89,868) | |
Denominator: | Denominator: | | | | | Denominator: | | | | |
Weighted average common shares outstanding – basic | Weighted average common shares outstanding – basic | | 470,568 | | | 465,865 | | Weighted average common shares outstanding – basic | | 478,501 | | | 470,568 | |
| Weighted average common shares outstanding – diluted | Weighted average common shares outstanding – diluted | | 470,568 | | | 465,865 | | Weighted average common shares outstanding – diluted | | 478,501 | | | 470,568 | |
Net loss attributable to the Company per share of common stock: | Net loss attributable to the Company per share of common stock: | | | | | Net loss attributable to the Company per share of common stock: | | | | |
Basic | Basic | | $ | (0.19) | | | $ | (0.71) | | Basic | | $ | (0.07) | | | $ | (0.19) | |
Diluted | Diluted | | $ | (0.19) | | | $ | (0.71) | | Diluted | | $ | (0.07) | | | $ | (0.19) | |
Outstanding equity awards of 27.619.2 million and 25.927.6 million for the three months ended March 31, 20222023 and 2021,2022, respectively, were not included in the computation of diluted earnings per share because doingto do so would have been anti-dilutive.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 — OTHER INFORMATION
Reconciliation of Cash, Cash Equivalents and Restricted Cash
The following table reconciles cash and cash equivalents reported in the Consolidated Balance Sheets to the cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Cash and cash equivalents in the Balance Sheet | $ | 431,877 | | | $ | 410,767 | | |
| Cash and cash equivalents in the Balance Sheets | | Cash and cash equivalents in the Balance Sheets | $ | 339,976 | | | $ | 286,781 | |
Cash and cash equivalents included in Assets held for sale | | Cash and cash equivalents included in Assets held for sale | — | | | 569 | |
Restricted cash included in: | Restricted cash included in: | | Restricted cash included in: | |
Other current assets | Other current assets | 1,592 | | | 1,685 | | Other current assets | 2,764 | | | 2,763 | |
| Assets held for sale | | Assets held for sale | — | | | 512 | |
Other assets | Other assets | 9,130 | | | 7,519 | | Other assets | 8,318 | | | 8,057 | |
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows | $ | 442,599 | | | $ | 419,971 | | |
Total cash, cash equivalents and restricted cash in the Statements of Cash Flows | | Total cash, cash equivalents and restricted cash in the Statements of Cash Flows | $ | 351,058 | | | $ | 298,682 | |
Accounts Receivable and Allowance for Credit Losses
The following table discloses the components of “Accounts receivable, net,” as reported in the Consolidated Balance Sheets:
| (In thousands) | (In thousands) | March 31, 2022 | | December 31, 2021 | (In thousands) | March 31, 2023 | | December 31, 2022 |
Accounts receivable | Accounts receivable | $ | 558,462 | | | $ | 666,888 | | Accounts receivable | $ | 547,582 | | | $ | 642,390 | |
Less: Allowance for credit losses | Less: Allowance for credit losses | (23,551) | | | (23,772) | | Less: Allowance for credit losses | (24,574) | | | (22,561) | |
Accounts receivable, net | Accounts receivable, net | $ | 534,911 | | | $ | 643,116 | | Accounts receivable, net | $ | 523,008 | | | $ | 619,829 | |
Credit loss expense (reversal) related to accounts receivable was $0.3$2.7 million and $(0.7)$0.3 million during the three months ended March 31, 2023 and 2022, and 2021, respectively.
Other Comprehensive Income (Loss)
There were no significant changes in deferred income tax liabilities resulting from adjustments to other comprehensive income (loss) during the three months ended March 31, 2022 and 2021. The increase was driven by specific reserves for certain customers.
Share-Based Compensation
On May 4, 2022,2, 2023, the Compensation Committee of the Company’s Board of Directors approved grants of 5.215.0 million restricted stock units (“RSUs”) and 1.83.4 million performance stock units (“PSUs”) to certain of its employees.
•The RSUs generally vest in 3three equal annual installments on each of April 1, 2023,2024, April 1, 20242025 and April 1, 2025,2026, provided that the recipient is still employed by, or providing services to, the Company on each such vesting date.
•The PSUs will vest and become earned based on the achievement of the Company’s total shareholder return relative to the Company’s peer group (the “Relative TSR”) over a performance period commencing on April 1, 20222023 and ending on March 31, 20252026 (the “Performance Period”). If the Company achieves Relative TSR at the 9075th percentile or higher, the PSUs will be earned at 150% of the target number of shares; if the Company achieves Relative TSR at the 6050th percentile, the PSUPSUs will be earned at 100% of the target number of shares; if the Company achieves Relative TSR at the 3025th percentile, the PSUs will be earned at 50% of the target number of shares; and if the Company achieves Relative TSR below the 3025th percentile, no PSUs will be earned. To the extent Relative TSR is between achievement levels, the portion of the PSUs that is earned will be determined using straight-line interpolation. Notwithstanding the foregoing, to the extent the Company’s absolute total shareholder return over the Performance Period is less than 0%, the maximum payout shall not be greater than 100% of the target number of shares. The PSUs are considered market-condition awards pursuant to ASC Topic 260, Earnings Per Share.
Other Comprehensive Income (Loss)
There were no significant changes in deferred income tax liabilities resulting from adjustments to other comprehensive income (loss) during the three months ended March 31, 2023 and 2022.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company's 20212022 Annual Report on Form 10-K. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries. The MD&A is organized as follows:
•Overview – Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of this MD&A. •Results of Operations – Analysis of our financial results of operations at the consolidated and segment levels. •Liquidity and Capital Resources – Analysis of our short- and long-term liquidity and discussion of our material cash requirements and the anticipated sources of funds needed to satisfy such requirements. This discussion contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements” contained at the end of this MD&A. OVERVIEW
Description of Our Business and Segments
Our revenue is derived from selling advertising space on the out-of-home displays we own or operate in key markets worldwide. We have two reportable business segments, which we believe reflect how the Company is currently managed: Americas, which consists of operations primarily in the U.S., and Europe, which consists of operations in Europe and Singapore. Our remaining operating segment of Latin America does not meet the quantitative threshold to qualify as a reportable segment and is disclosed as “Other” herein. Each segment provides out-of-home advertising services in its respective geographic regionworldwide using various digital and traditional display types. Effective December 31, 2022, we have four reportable business segments: America, which consists of our U.S. operations excluding airports; Airports, which includes revenue from U.S. and Caribbean airports; Europe-North, which consists of operations in the United Kingdom (the “U.K.”), the Nordics and several other countries throughout northern and central Europe; and Europe-South, which consists of operations in France, Switzerland (prior to its sale on March 31, 2023), Spain and Italy. Our remaining operations in Latin America and Singapore are disclosed as “Other.” We have conformed the segment disclosures for the prior period in this MD&A and throughout this Quarterly Report on Form 10-Q to the current period presentation.
Our BoardMacroeconomic Trends and Seasonality
As described in our 2022 Annual Report on Form 10-K, global inflation increased in 2022, and in response, central banks, including the U.S. Federal Reserve, raised interest rates significantly, resulting in an increase in our weighted average cost of Directorsdebt. Interest rates have continued to rise in the first quarter of 2023, and while inflation rates have slowed, global inflation remains high and has authorized a review of strategic alternativesimpacted our results due to higher costs, particularly in Europe. We believe we have partially offset these higher costs by increasing the effective advertising rates for our European business, including a possible sale. However, there can be no assurance that this strategic review will result in any transaction or particular outcome. We have not set a timetable for completion of this strategic review, may suspend the process at any time and do not intend to make further announcements regarding the process unless and until our Board of Directors approves a course of action for which further disclosure is appropriate.products.
Macroeconomic Indicators, Seasonality and Recent Developments
Advertising for our business is highly correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally. Additionally, our international results are impacted by the economic conditions in the foreign markets in which we have operationsoperate and by fluctuations in foreign currency exchange rates. During 2022, the U.S. dollar significantly strengthened against the Euro and British pound sterling, among other European currencies, peaking in the third quarter. The U.S. dollar has since trended weaker, and fluctuations in foreign currency exchange rates.rates did not have a significant impact on our reported results in the first quarter of 2023. While inflation, interest rates and foreign currency exchange rates may be less volatile in 2023, fluctuations in these indicators are uncertain and could result in further adverse impacts to our reported results. The market risks that our business is subject to are further described in Item 3 of Part I of this Quarterly Report on Form 10-Q.Subsequent to the filing of our 2022 Annual Report on Form 10-K on February 28, 2023, the U.S. banking market experienced increased volatility as a result of several distressed or closed banks. While we have not realized any losses as a result of this increased market volatility, we continue to monitor the situation and will take appropriate measures, as necessary, to minimize potential risk exposure to our customers’ and our cash and investment balances.
We believe the out-of-home industry has demonstrated resilience from macroeconomic events, and during the first quarter of 2023, we observed healthy demand from advertisers. However, we expect country level growth rates to vary throughout the year. During the quarter, we saw some weakness within the U.S. due to specific issues impacting certain national accounts that we do not believe are related to broader macroeconomic events.
Due to seasonality, the results for the interim period are not indicative of expected results for the full year. We typically experience our weakest financial performance in the first quarter of the calendar year, which is generally offset during the remainder of the year as our business typically experiences its strongest performance in the second and fourth quarters of the calendar year.
Disposition and Strategic Reviews
As described in our 20212022 Annual Report on Form 10-K, COVID-19 had a significant adverse impact onwe entered into an agreement in December 2022 to sell our resultsbusiness in Switzerland to Goldbach Group AG. On March 31, 2023, we completed this sale and received gross proceeds of operations during$94.2 million.
Our reviews of strategic alternatives for our other European businesses, including the first quarterpotential disposal of 2021. However, we saw positive trends in revenue for eachcertain of our segments duringEuropean assets, remain ongoing. However, there can be no assurance that these reviews will result in any transactions or particular outcomes. We have not set a timetable for completion of these reviews, may suspend the remainderprocesses at any time and do not intend to make further announcements regarding these processes unless and until our Board of 2021 as the relaxationDirectors approves a specific course of COVID-19 restrictions and increased vaccination levels led to an increase in mobility and increased time spent out-of-home. Beginning in the fourth quarter of 2021, we experienced a return to our pre-COVID-19 historical seasonal levels of revenue. To a large extent, we continued to experience similar levels of activity during the first quarter of 2022. As our operating performance has improved, we have ceased certain of the temporary operating cost savings initiatives we implemented in response to COVID-19 and have increased our investment in our business through additional capital expenditures. However, we continue to manage our cost base, including negotiating rent abatements in some of the markets inaction for which we operate that have been most affected by COVID-19.further disclosure is appropriate.
RESULTS OF OPERATIONS
The discussion of our results of operations is presented on both a consolidated and segment basis.
•Our operating segment profit measure is Segment Adjusted EBITDA, which is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. The material components of Segment Adjusted EBITDA are discussed below on both a consolidated and segment basis.
•Corporate expenses, depreciation and amortization, impairment charges, other operating income and expense, all non-operating income and expenses, and income taxes are managed on a total company basis and are therefore included only in our discussion of consolidated results.
Revenue and expenses “excluding the impact of movements in foreign exchange rates” in this MD&A are presented because management believes that viewing certain financial results without the impact of fluctuations in foreign currency rates facilitates period-to-period comparisons of business performance and provides useful information to investors. Revenue and expenses “excluding the impact of movements in foreign exchange rates” are calculated by converting the current period’s revenue and expenses in local currency to U.S. dollars using average monthly foreign exchange rates for the comparable period.same period of the prior year.
Consolidated Results of Operations
The comparison of our historical results of operations for the three months ended March 31, 2022 to the three months ended March 31, 2021 is as follows:
| (In thousands) | (In thousands) | | Three Months Ended March 31, | | % | (In thousands) | | | Three Months Ended March 31, | | % |
| | | 2022 | | 2021 | | Change | | | | 2023 | | 2022 | | Change |
Revenue | Revenue | | $ | 525,688 | | | $ | 370,908 | | | 41.7% | Revenue | | | $ | 545,435 | | | $ | 525,688 | | | 3.8% |
Operating expenses: | Operating expenses: | | | Operating expenses: | | |
Direct operating expenses(1) | Direct operating expenses(1) | | 321,202 | | | 283,290 | | | 13.4% | Direct operating expenses(1) | | | 344,850 | | | 321,202 | | | 7.4% |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | | 108,957 | | | 97,570 | | | 11.7% | Selling, general and administrative expenses(1) | | | 118,196 | | | 108,957 | | | 8.5% |
Corporate expenses(1) | Corporate expenses(1) | | 43,645 | | | 34,042 | | | 28.2% | Corporate expenses(1) | | | 34,541 | | | 43,645 | | | (20.9)% |
Depreciation and amortization | Depreciation and amortization | | 60,407 | | | 61,852 | | | (2.3)% | Depreciation and amortization | | | 72,963 | | | 60,407 | | | 20.8% |
Impairment charges | | — | | | 118,950 | | | |
Other operating expense (income), net | | (4,911) | | | 117 | | | |
Operating loss | | (3,612) | | | (224,913) | | | |
| Other operating income, net | | Other operating income, net | | | (91,276) | | | (4,911) | | |
Operating income (loss) | | Operating income (loss) | | | 66,161 | | | (3,612) | | |
Interest expense, net | Interest expense, net | | (82,798) | | | (92,693) | | | | Interest expense, net | | | (102,753) | | | (82,798) | | | |
Loss on extinguishment of debt | | — | | | (51,101) | | | |
| Other income (expense), net | Other income (expense), net | | (5,999) | | | 6,554 | | | | Other income (expense), net | | | 9,004 | | | (5,999) | | | |
Loss before income taxes | Loss before income taxes | | (92,409) | | | (362,153) | | | | Loss before income taxes | | | (27,588) | | | (92,409) | | | |
Income tax benefit | | 2,680 | | | 28,697 | | | | |
Income tax benefit (expense) | | Income tax benefit (expense) | | | (7,834) | | | 2,680 | | | |
Consolidated net loss | Consolidated net loss | | (89,729) | | | (333,456) | | | | Consolidated net loss | | | (35,422) | | | (89,729) | | | |
Less amount attributable to noncontrolling interest | Less amount attributable to noncontrolling interest | | 139 | | | (1,103) | | | | Less amount attributable to noncontrolling interest | | | (510) | | | 139 | | | |
Net loss attributable to the Company | Net loss attributable to the Company | | $ | (89,868) | | | $ | (332,353) | | | | Net loss attributable to the Company | | | $ | (34,912) | | | $ | (89,868) | | | |
(1)Excludes depreciation and amortization.amortization
Consolidated Revenue
Consolidated revenue increased $154.8$19.7 million, or 41.7%3.8%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $13.2$15.2 million impact of movements in foreign exchange rates, consolidated revenue increased $168.0$34.9 million, or 45.3%. During the first quarter of 2021, revenue throughout6.6%, driven by increased demand in our business was adversely affected by COVID-19. As restrictions have been liftedEurope-North and mobility levels have increased, we have seen increases in revenue across our portfolio.Europe-South segments.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $37.9$23.6 million, or 13.4%7.4%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $11.3$12.3 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $49.2$35.9 million, or 17.4%11.2%, primarilylargely due to higher site lease expense mainly driven by new and amended lease contracts and higher revenue. We also incurred higher production, installation and maintenance expenses largely driven by higher revenueprices and lower negotiated rent abatements and governmental rent subsidies. The remaining increase was driven by higher production, maintenance and installation expenses.increased sales activity in Europe.
The following table provides additional information about certain drivers of consolidated direct operating expenses for the three months ended March 31, 2022 and 2021:expenses:
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
Reductions of rent expense on lease and non-lease contracts from negotiated rent abatements | | | | | $ | 12,422 | | | $ | 22,652 | |
| | | | | | | |
Restructuring and other costs(1) | | | | | 4 | | | 897 | |
(1)Includes severance and related costs for our restructuring plans to reduce headcount of $(0.3) million and $0.3 million during the three months ended March 31, 2022 and 2021, respectively. | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, | | % |
| | | | | 2023 | | 2022 | | Change |
Site lease expense | | | | | $ | 240,312 | | | $ | 222,164 | | | 8.2 | % |
Site lease expense, excluding movements in foreign exchange rates | | | | | 247,601 | | | 222,164 | | | 11.4 | % |
Reductions of rent expense on lease and non-lease contracts from rent abatements | | | | | 7,273 | | | 9,603 | | | (24.3) | % |
| | | | | | | | | |
Restructuring and other costs | | | | | 508 | | | 4 | | | |
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $11.4$9.2 million, or 11.7%8.5%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $3.3$3.2 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $14.6$12.5 million, or 15.0%11.4%, primarilymost notably driven by higher employee compensation costs, higher credit loss expense due to improvements in operating performance.specific reserves for certain customers, and higher marketing costs.
The following table provides the restructuring and other costs included within SG&A expenses during the three months ended March 31, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, |
| | | | | 2022 | | 2021 |
| | | | | | | |
Restructuring and other costs(1) | | | | | 430 | | | 1,821 | |
(1)Includes severance and related costs for our restructuring plans to reduce headcount of $0.1 million and $1.4 million during the three months ended March 31, 2022 and 2021, respectively. | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | Three Months Ended March 31, | | % |
| | | | | 2023 | | 2022 | | Change |
| | | | | | | | | |
Restructuring and other costs | | | | | $ | 53 | | | $ | 430 | | | (87.7) | % |
Corporate Expenses
Corporate expenses increased $9.6decreased $9.1 million, or 28.2%20.9%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $0.1$0.8 million impact from movements in foreign exchange rates, corporate expenses increased $9.7decreased $8.3 million, or 28.6%19.0%, due to higherlower restructuring and other costs primarily from an increase inlargely driven by estimated legal liabilities higher incentive compensation on improved operating performance and higher employee health benefit costs.
The following table provides additional information about certain drivers of corporate expenses for the three months ended March 31, 2022 and 2021:expenses:
| (In thousands) | (In thousands) | | Three Months Ended March 31, | (In thousands) | | Three Months Ended March 31, | | % |
| | | 2022 | | 2021 | | | 2023 | | 2022 | | Change |
Share-based compensation expense | Share-based compensation expense | | $ | 4,714 | | | $ | 3,951 | | Share-based compensation expense | | $ | 4,124 | | | $ | 4,714 | | | (12.5) | % |
Restructuring and other costs(1) | | 9,070 | | | 4,654 | | |
Restructuring and other costs (reversals) | | Restructuring and other costs (reversals) | | (55) | | | 9,070 | | | (100.6) | % |
Depreciation and Amortization
Depreciation and amortization decreased $1.4increased $12.6 million, or 2.3%20.8%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $1.2 million impact of movements in foreign exchange rates, depreciation and amortization decreased $0.2increased $13.8 million, or 0.4%22.8%.
Impairment Charges
During the three months ended March 31, 2021, we recognized impairment charges of $119.0 million on our Americas indefinite-lived permits, The increase was driven by ana change in the classification of billboard permit intangible assets in our America segment from indefinite-lived to finite-lived in the fourth quarter of 2022, which resulted in a $16.0 million increase in the discount rate and reduction in projected cash flows related to the negative impacts of COVID-19. We did not recognize any impairment chargesamortization expense during the three months ended March 31, 2023 compared to the same period of 2022. This was partially offset by the impact of other assets becoming fully depreciated.
Other Operating Expense (Income),Income, Net
Other operating income, net, of $91.3 million during the three months ended March 31, 2023 was driven by a $96.4 million gain on the sale of our business in Switzerland, partially offset by costs related to the strategic reviews of our other Europe businesses.
Other operating income, net, of $4.9 million during the three months ended March 31, 2022 was driven by compensation received from local governments for the condemnation and removal of billboards, less a reduction in the underlying value of the condemned assets, in certain markets in our AmericasAmerica segment. This was partially offset by costs related to the strategic reviewreviews of our Europe segment. Other operatingbusinesses.
Interest Expense, Net
Interest expense, net, was $0.1increased $20.0 million during the three months ended March 31, 2021.2023 compared to the same period of 2022 driven by higher interest rates on our Term Loan Facility.
Interest Expense,Other Income (Expense), Net
InterestOther income, net, of $9.0 million and other expense, net, decreased $9.9of $6.0 million during the three months ended March 31, 2022 compared to the same period of 2021, driven by lower interest rates as a result of the refinancing of the Clear Channel Worldwide Holdings, Inc. 9.25% Senior Notes Due 2024 (the “CCWH Senior Notes”) in 20212023 and to a lesser extent, repayment of the $130.0 million draw under our Revolving Credit Facility in the fourth quarter of 2021.
Loss on Extinguishment of Debt
During the three months ended March 31, 2021, we recognized a loss on extinguishment of debt of $51.1 million related to the partial redemption of the CCWH Senior Notes. We did not extinguish any debt during the three months ended March 31, 2022.
Other Income (Expense), Net
For the three months ended March 31, 2022, and 2021, we recognized other expense, net, of $6.0 million and other income, net, of $6.6 million, respectively, primarily related toresulted from net foreign exchange lossesgains and gainslosses recognized in connection with intercompany notes denominated in a currency other than the functional currency, driven by fluctuations in the value of the U.S. dollar against foreign currencies.currencies, particularly the Euro and British pound sterling.
Income Tax Benefit (Expense)
The effective tax rates for the three months ended March 31, 2023 and 2022 were (28.4)% and 2021 were 2.9% and 7.9%, respectively. These rates were primarily impacted by the valuation allowance recorded against current period deferred tax assets resulting from losses and interest expense carryforwards in the U.S. and certain foreign jurisdictions due to uncertainty regarding the Company’s ability to realize those assets in future periods. The effective tax rate for the three months ended March 31, 2023 was also impacted by the sale of the Company’s business in Switzerland.
AmericasAmerica Results of Operations
| (In thousands) | (In thousands) | | Three Months Ended March 31, | | % | (In thousands) | | Three Months Ended March 31, | | % |
| | | 2022 | | 2021 | | Change | | | 2023 | | 2022 | | Change |
Revenue | Revenue | | $ | 295,139 | | | $ | 211,884 | | | 39.3% | Revenue | | $ | 236,049 | | | $ | 239,256 | | | (1.3)% |
Direct operating expenses(1) | Direct operating expenses(1) | | 133,088 | | | 105,831 | | | 25.8% | Direct operating expenses(1) | | 104,817 | | | 94,651 | | | 10.7% |
SG&A expenses(1) | SG&A expenses(1) | | 52,059 | | | 42,855 | | | 21.5% | SG&A expenses(1) | | 49,881 | | | 44,543 | | | 12.0% |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | | 110,336 | | | 64,220 | | | 71.8% | Segment Adjusted EBITDA | | 81,365 | | | 100,406 | | | (19.0)% |
|
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.EBITDA
AmericasAmerica Revenue
AmericasAmerica revenue increased $83.3decreased $3.2 million, or 39.3%1.3%, during the three months ended March 31, 20222023 compared to the same period of 2021. Americas2022. Lower revenue from print displays was adversely affectedpartially offset by COVID-19 during the first quarter of 2021. However, as our Americas segment recovered, we have seen increases inhigher revenue across all of our products, most notably airportfrom digital displays, which increased 186.6% to $55.9 million as compared to $19.5 million during the same period of 2021, and print and digital billboards.
Americas total digital revenue increased 68.3% during the three months ended March 31, 2022 as compared to the same period of 2021,3.6%, as follows:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2022 | | 2021 | | Change |
Digital revenue from billboards, street furniture and spectaculars | $ | 75,247 | | | $ | 56,261 | | | 33.7% |
Digital revenue from transit, including airports | 30,666 | | | 6,678 | | | 359.2% |
Total digital revenue | $ | 105,913 | | | $ | 62,939 | | | 68.3% |
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Digital revenue | $ | 78,018 | | | $ | 75,332 | | | 3.6% |
Percent of total segment revenue | 33.1 | % | | 31.5 | % | | |
Revenue generated from national sales comprised 38.9%33.1% and 36.0%35.8% of totalAmerica revenue for the three months ended March 31, 20222023 and 2021,2022, respectively, while the remainder of revenue was generated from local sales.
AmericasAmerica Direct Operating Expenses
AmericasAmerica direct operating expenses increased $27.3$10.2 million, or 25.8%10.7%, during the three months ended March 31, 20222023 compared to the same period of 2021,2022 primarily due to higher site lease expense mainly driven by higher revenuenew and to a lesser extent,amended lease contracts and lower negotiated rent abatements. Americas site lease expense increased 29.4% to $107.9 million during the three months ended March 31, 2022 as compared to $83.4 million during the same periodThe following table provides additional information about certain of 2021.these drivers:
Americas | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Site lease expense | $ | 83,030 | | | $ | 73,294 | | | 13.3% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 1,204 | | | 3,667 | | | (67.2)% |
America SG&A Expenses
America SG&A expenses increased $9.2$5.3 million, or 21.5%12.0%, during the three months ended March 31, 20222023 compared to the same period of 2021,2022 largely due to higher credit loss expense driven by specific reserves for certain customers and higher employee compensation costs largely driven by improvements in operating performance.increased headcount.
EuropeAirports Results of Operations
| (In thousands) | (In thousands) | | Three Months Ended March 31, | | % | (In thousands) | | Three Months Ended March 31, | | % |
| | | 2022 | | 2021 | | Change | | | 2023 | | 2022 | | Change |
Revenue | Revenue | | $ | 217,072 | | | $ | 149,524 | | | 45.2% | Revenue | | $ | 53,789 | | | $ | 55,883 | | | (3.7)% |
Direct operating expenses(1) | Direct operating expenses(1) | | 178,959 | | | 169,482 | | | 5.6% | Direct operating expenses(1) | | 39,651 | | | 38,437 | | | 3.2% |
SG&A expenses(1) | SG&A expenses(1) | | 51,957 | | | 49,367 | | | 5.2% | SG&A expenses(1) | | 7,874 | | | 7,516 | | | 4.8% |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | | (13,754) | | | (67,629) | | | 79.7% | Segment Adjusted EBITDA | | 6,264 | | | 9,930 | | | (36.9)% |
|
Airports Revenue
Airports revenue decreased $2.1 million, or 3.7%, during the three months ended March 31, 2023 compared to the same period of 2022 driven by the timing of campaign spending in certain airports. Digital revenue decreased 3.3% during the three months ended March 31, 2023 as compared to the same period of 2022, as follows:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Digital revenue | $ | 29,578 | | | $ | 30,581 | | | (3.3)% |
Percent of total segment revenue | 55.0 | % | | 54.7 | % | | |
Revenue generated from national sales comprised 60.1% and 55.2% of Airports revenue for the three months ended March 31, 2023 and 2022, respectively, while the remainder of revenue was generated from local sales.
Airports Direct Operating Expenses
Airports direct operating expenses increased $1.2 million, or 3.2%, during the three months ended March 31, 2023 compared to the same period of 2022 driven by higher site lease expense. The following table provides additional information about certain drivers of Airports direct operating expenses:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Site lease expense | $ | 36,250 | | | $ | 34,639 | | | 4.7% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 5,507 | | | 4,602 | | | 19.7% |
Europe-North Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | Three Months Ended March 31, | | % |
| | | | | | | 2023 | | 2022 | | Change |
Revenue | | | | | | | $ | 128,503 | | | $ | 122,098 | | | 5.2% |
Direct operating expenses(1) | | | | | | | 96,032 | | | 90,275 | | | 6.4% |
SG&A expenses(1) | | | | | | | 25,533 | | | 25,143 | | | 1.6% |
Segment Adjusted EBITDA | | | | | | | 7,172 | | | 6,974 | | | 2.8% |
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.EBITDA
Europe-North Revenue
Europe-North revenue increased $6.4 million, or 5.2%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $11.7 million impact of movements in foreign exchange rates, Europe-North revenue increased $18.1 million, or 14.9%, driven by increased demand and new contracts. We have seen year-over-year increases in revenue across all of our products and in all of the countries in which we operate, with the largest increases in Belgium, Sweden and the U.K.
Europe-North digital revenue increased 5.9% during the three months ended March 31, 2023 as compared to the same period of 2022, or 16.1% excluding the impact of movements in foreign exchange rates, as follows:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Digital revenue | $ | 65,317 | | | $ | 61,677 | | | 5.9% |
Percent of total segment revenue | 50.8 | % | | 50.5 | % | | |
Digital revenue, excluding movements in foreign exchange rates | 71,610 | | | 61,677 | | | 16.1% |
Europe-North Direct Operating Expenses
Europe-North direct operating expenses increased $5.8 million, or 6.4%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $8.9 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $14.7 million, or 16.2%, due to higher site lease expense largely driven by higher revenue and new contracts, higher maintenance costs driven by increased electricity prices, and higher production and installation costs driven by increased sales activity and higher prices.
The following table provides additional information about certain drivers of Europe-North direct operating expenses:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Site lease expense | $ | 56,734 | | | $ | 54,688 | | | 3.7% |
Site lease expense, excluding movements in foreign exchange rates | 62,126 | | | 54,688 | | | 13.6% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 479 | | | 681 | | | (29.7)% |
Europe-North SG&A Expenses
Europe-North SG&A expenses increased $0.4 million, or 1.6%, during the three months ended March 31, 2023 compared to the same period of 2022. Excluding the $2.3 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $2.7 million, or 10.5%, largely due to higher employee compensation costs driven by higher sales commissions and pay increases.
EuropeEurope-South Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | Three Months Ended March 31, | | % |
| | | | | | | 2023 | | 2022 | | Change |
Revenue | | | | | | | $ | 108,015 | | | $ | 89,550 | | | 20.6% |
Direct operating expenses(1) | | | | | | | 92,247 | | | 85,322 | | | 8.1% |
SG&A expenses(1) | | | | | | | 28,301 | | | 25,831 | | | 9.6% |
Segment Adjusted EBITDA | | | | | | | (12,220) | | | (21,807) | | | 44.0% |
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
Europe-South Revenue
EuropeEurope-South revenue increased $67.5$18.5 million, or 45.2%20.6%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $13.1$3.9 million impact of movements in foreign exchange rates, EuropeEurope-South revenue increased $80.7$22.4 million, or 53.9%25.0%. Europe revenue was adversely affected byAs this segment has continued to recover from the adverse effects of COVID-19, during the first quarter of 2021 due to widespread lockdowns and mobility restrictions. However, as restrictions have been largely lifted, we have seen increased mobility and corresponding increases in revenue driven by increased demand across all of our products, most notably street furniture, and in all of the countries in which we operate, with the largest increasesincrease in the U.K. and France.
EuropeEurope-South digital revenue increased 89.4%32.1% during the three months ended March 31, 20222023 as compared to the same period of 2021. Excluding2022, or 35.3% excluding the impact of movements in foreign exchange rates, Europe digital revenue increased 98.9%, as follows:
| (In thousands) | (In thousands) | Three Months Ended March 31, | | % | (In thousands) | Three Months Ended March 31, | | % |
| | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change |
Digital revenue | Digital revenue | $ | 80,664 | | | $ | 42,596 | | | 89.4% | Digital revenue | $ | 22,175 | | | $ | 16,788 | | | 32.1% |
Percent of total segment revenue | | Percent of total segment revenue | 20.5 | % | | 18.7 | % | |
Digital revenue, excluding movements in foreign exchange rates | Digital revenue, excluding movements in foreign exchange rates | 84,719 | | | 42,596 | | | 98.9% | Digital revenue, excluding movements in foreign exchange rates | 22,712 | | | 16,788 | | | 35.3% |
EuropeEurope-South Direct Operating Expenses
EuropeEurope-South direct operating expenses increased $9.5$6.9 million, or 5.6%8.1%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $11.1$3.6 million impact of movements in foreign exchange rates, EuropeEurope-South direct operating expenses increased $20.6$10.6 million, or 12.2%12.4%, largely due to higher site lease expense mainly driven by new contracts and higher revenue. The remaining increase was largely driven by higher site lease expense, whichproduction, installation and maintenance costs.
The following table provides additional information about certain drivers of Europe-South direct operating expenses:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, | | % |
| 2023 | | 2022 | | Change |
Site lease expense | $ | 55,952 | | | $ | 51,285 | | | 9.1% |
Site lease expense, excluding movements in foreign exchange rates | 58,061 | | | 51,285 | | | 13.2% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | — | | | 575 | | | (100.0)% |
Europe-South SG&A Expenses
Europe-South SG&A expenses increased 6.7% to $108.5$2.5 million, or 9.6%, during the three months ended March 31, 2022 as2023 compared to $101.6 million during the same period of 2021.2022. Excluding the $6.7$1.1 million impact of movements in foreign exchange rates, Europe site lease expenseEurope-South SG&A expenses increased $13.5$3.6 million, or 13.3%14.0%, largely driven by higher marketing and information technology costs.
Other Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | Three Months Ended March 31, | | % |
| | | | | | | 2023 | | 2022 | | Change |
Revenue | | | | | | | $ | 19,079 | | | $ | 18,901 | | | 0.9% |
Direct operating expenses | | | | | | | 12,103 | | | 12,517 | | | (3.3)% |
SG&A expenses | | | | | | | 6,607 | | | 5,924 | | | 11.5% |
Segment Adjusted EBITDA | | | | | | | 369 | | | 460 | | | (19.8)% |
Other revenue and lower negotiated rent abatements and governmental rent subsidies. The remaining increase was primarily driven by higher production, maintenance and installation expenses.
Europe SG&A expenses increased $2.6$0.2 million, or 5.2%0.9%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $3.2 million impact of movements in foreign exchange rates, Europe SG&A expenses increased $5.8 million, or 11.7%, due to higher employee compensation costs driven by improvements in operating performance and lower governmental support and wage subsidies.
Other Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | | | Three Months Ended March 31, | | % |
| | | | | | | 2022 | | 2021 | | Change |
Revenue | | | | | | | $ | 13,477 | | | $ | 9,500 | | | 41.9% |
Direct operating expenses(1) | | | | | | | 9,155 | | | 7,977 | | | 14.8% |
SG&A expenses(1) | | | | | | | 4,941 | | | 5,348 | | | (7.6)% |
Segment Adjusted EBITDA | | | | | | | (619) | | | (3,825) | | | 83.8% |
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
Other revenue increased $4.0 million, or 41.9%, during the three months ended March 31, 2022 compared to the same period of 2021. Excluding the $0.1$0.5 million impact of movements in foreign exchange rates, Other revenue increased $4.1decreased $0.3 million, or 43.3%1.4%, driven by our continued recovery from COVID-19the termination of a public bicycle rental program in Latin America.
Other direct operating expenses increased $1.2decreased $0.4 million, or 14.8%3.3%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $0.1$0.3 million impact of movements in foreign exchange rates, Other direct operating expenses increased $1.3decreased $0.7 million, or 16.6%5.4%, primarily driven by higher site lease expenselower expenses related to higher revenue.the termination of a public bicycle rental program in Latin America.
Other SG&A expenses decreased $0.4increased $0.7 million, or 7.6%11.5%, during the three months ended March 31, 20222023 compared to the same period of 2021.2022. Excluding the $0.1$0.2 million impact of movements in foreign exchange rates, Other SG&A expenses decreased $0.3increased $0.5 million, or 6.3%.8.6%, driven by higher employee compensation costs.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity Analysis
Short-Term Liquidity
Our main cash requirements are for working capital used to fund the operations of the business, capital expenditures and debt service. We typically meet these requirements with cash on hand, internally-generated cash flow from operations and, if necessary, borrowings under our credit facilities. We believe that our current sources of funds will be sufficient to meet our cash requirements for at least the next 12 months.
Long-Term Liquidity
Our long-term future cash requirements will depend on many factors, including the growth of our business, the outcome of our restructuring plans, investments in new technologies and the pursuit and outcome of strategic transactions,opportunities, including the outcome of the strategic reviewreviews of our European business.businesses. In addition, we have long-term cash requirements related to the repayment of our outstanding debt, which is scheduled to mature over the next eightseven years. We believe that our sources of funds will be adequate to meet our cash requirements in the long-term.
However, our ability to meet these cash requirements through cash from operations will depend on our future operating results and financial performance, which are subject to significant uncertainty and may be affected by events beyond our control, including prevailingmacro-economic events such as heightened inflation, higher interest rates, currency fluctuations and slower economic growth or recession; financial and industry conditions such as well as macro-economicvolatility in the U.S. and global banking market; and geopolitical events such as the war in Ukraine, continued significant inflationary pressure, rising interest rates and challenges in the supply chain.Ukraine. Please refer to Item 3 of Part I of this Quarterly Report on Form 10-Q for additional details about our market risks. Additionally, our significant interest payment obligations reduce our financial flexibility, make us more vulnerable to changes in operating performance and economic downturns generally, and reduce our liquidity over time. We regularly consider, and enter into discussions with our lenders and other parties related to, potential financing alternatives. In the future, we may need to obtain supplemental liquidity through additional financing from banks or other lenders,lenders; public offerings or private placements of debt, equity or equity,equity-linked securities; strategic relationships or other arrangements,arrangements; or from a combination of these sources. However, there can be no assurance that financing alternatives will be available to us in sufficient amounts or on terms acceptable to us in the future due to market conditions, our financial condition, our liquidity constraints or other factors, many of which are beyond our control, and even if financing alternatives are available, to us, we may not find them suitable or at reasonable interest rates. In addition, the terms of our existing or future debt agreements may restrict us from securing financing on terms that are available to us at that time or at all.
If we are unable to generate sufficient cash through our operations or obtain sources of supplemental liquidity as needed, we could face substantial liquidity problems, which could have a material adverse effect on our financial condition and on our ability to meet our obligations.
Cash Requirements
Working Capital Needs
We utilize working capital to fund the operations of our business and have certain related contractual obligations, including commitments under site leases and other non-cancelable contracts and our restructuring plans.
Site Lease Expensecontracts.
One of our largest cash requirements is for site lease costs, which includes payments for land or space used by our advertising displays for both lease and non-lease contracts, including minimum guaranteed payments and revenue-sharing arrangements. During the three months ended March 31, 20222023 and 2021,2022, we incurred site lease expense of $222.2$240.3 million and $190.0$222.2 million, respectively, which are included within direct operating expenses on our Consolidated Statements of Loss. As previously described, we successfully renegotiated contracts with landlords and municipalities in both the U.S. and Europe inIn order to better align fixed site lease expenses with the reductions in revenue we experienced due to COVID-19.COVID-19, we successfully renegotiated contracts with landlords and municipalities throughout our business. During the three months ended March 31, 2023 and 2022, we reduced our site lease expense by rent abatements of $7.3 million and $9.6 million, respectively. As our revenue continues to recover,business has generally recovered from the effects of COVID-19, we expect rent abatements to receive fewer rent abatements.
Restructuring Planscontinue to decline in future periods.
During the three months ended March 31, 20222023 and 2021,2022, we made cash expenditures for our restructuring plansplan to reduce headcount in Europe of $5.9$1.7 million and $4.6$5.9 million, respectively, and as of March 31, 2022,2023, we had $18.2$5.7 million of related future cash obligations. We expectRemaining costs are not expected to pay this liability this year, although payments may be made through the end of the second quarter of 2023 in accordance with the terms of the restructuring plan.significant. Please refer to Note 9 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details.
Capital Expenditures and Asset Acquisitions
We made the following capital expenditures during the three months ended March 31, 2023 and 2022:
| | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, |
| 2023 | | 2022 | | |
America | $ | 16,808 | | | $ | 14,800 | | | |
Airports | 4,751 | | | 3,012 | | | |
Europe-North | 7,066 | | | 6,450 | | | |
Europe-South | 5,051 | | | 8,623 | | | |
Other | 1,921 | | | 1,003 | | | |
Corporate | 2,830 | | | 1,921 | | | |
Total capital expenditures(1),(2) | $ | 38,427 | | | $ | 35,809 | | | |
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $18.0 million and $16.6 million of accrued capital expenditures that remained unpaid as of March 31, 2023 and 2022, and 2021:respectively.
| | | | | | | | | | | | | |
(In thousands) | Three Months Ended March 31, |
| 2022 | | 2021 | | |
Americas | $ | 17,812 | | | $ | 5,725 | | | |
Europe | 15,205 | | | 8,050 | | | |
Other | 871 | | | 1,313 | | | |
Corporate | 1,921 | | | 2,830 | | | |
Total capital expenditures | $ | 35,809 | | | $ | 17,918 | | | |
(2)Excludes asset acquisitions.During the three months ended March 31, 2021,2023 and 2022, we reduced or deferred capital expenditures as partcompleted certain acquisitions of our strategy to increase our liquidity and preserve and strengthen our financial flexibility given the adverse financial impacts and economic uncertainty resulting from COVID-19. As our operating performance has improved, we have increased our investmentout-of-home advertising assets in our business through capital expenditures.
As reported within the “Proceeds from disposalAmerica segment for total cash consideration of assets” line on the Consolidated Statements of Cash Flows, our cash outflows for capital expenditures in the Americas during the three months ended March 31, 2022 were offset by compensation received from local governments for the condemnation$5.7 million and removal of billboards in certain markets.$2.5 million, respectively. These asset acquisitions primarily included permits and permanent easements.
Debt Service Obligations
During the three months ended March 31, 20222023 and 2021,2022, we paid interest of $72.3 million and $51.6 million, and $145.2 million, respectively. The decrease wasrespectively, with the increase driven by timing of the semi-annualhigher interest paymentsrates on our refinanced debt — interest payments on the CCOH 7.75% Senior Notes Due 2028 and CCOH 7.5% Senior Notes Due 2029 (together, the “new CCOH Senior Notes”) are due in the second and fourth quarters, while interest payments on the refinanced CCWH Senior Notes were due in the first and third quarters.Term Loan Facility. We anticipate having cash interest paymentspayment obligations of $281.5$341.8 million during the remainder of the year, assuming current interest rates and that we do not refinance or incur additional debt.
Additionally, during each of the three months ended March 31, 20222023 and 2021,2022, we made $5.0 million of principal payments on the Term Loan Facility in accordance with the terms of the Senior Secured Credit Agreement and expect towill make additional principal payments on this debt totaling $15.0 million during the remainder of the year. During the second half of the year, we will make approximately $4.1 million of principal payments on the state-guaranteed loan held by one of our non-guarantor European subsidiaries.
Please refer to Note 4 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our outstanding long-term debt. As of March 31, 2022,2023, we were in compliance with all of the covenants contained in our debt agreements.
Sources of Capital and Liquidity
Cash On Hand
As of March 31, 2022,2023, we had $431.9$340.0 million of cash on our balance sheet, including $179.1$185.7 million of cash held outside the U.S. by our subsidiaries. Excess cash from our foreign operations may generally be transferred to our operations in the U.S. if needed, to fund operations in the U.S., subject to the foreseeable cash needs of our foreign operations and restrictions in the indenture governing the CCIBV Senior Secured Notes. In accordance with these restrictions, cash proceeds from the sale of our business in Switzerland must be reinvested into our European businesses or otherwise used in the manner set forth in the indenture. We could presently repatriate other excess cash with minimal U.S. tax consequences, as calculated for tax law purposes, and dividend distributions from our international subsidiaries may be exempt fromnot result in a U.S. federal income tax.tax liability.
Cash Flow from Operations
We have historically generated positive net cash flow from operations. However, we used net cash for operating activities during the periods in which we were negatively impacted by COVID-19 as cash paid for interest in these periods exceeded other net cash inflows from operations. During the three months ended March 31, 2022, we returned2023, net cash provided by operating activities was $10.9 million, a decrease of $38.6 million compared to positive operating cash flows as strong cashthe same period of 2022. Cash collections from customers driven by improvements in revenue, exceeded aggregate cash payments to vendors, lessors and employees and lenders.to a lesser extent than in the prior period. Additionally, cash paid for interest increased $20.7 million driven by higher interest rates, as previously described.
•During the three months ended March 31, 2022, net cash provided by operating activities was $49.5 million. Highermillion as cash collections from customers more than offset increasedexceeded aggregate cash payments driven by higher site lease, employee compensationto vendors, lessors, employees and other costs. Additionally, cashlenders. Cash paid for interest ofwas $51.6 million was significantly lower than interest paid during the first quarter of the prior year due to the timing of interest payments, as previously described.million.
•During the three months ended March 31, 2021,2023, we received net cash used for operating activities was $124.3proceeds from the disposal of assets of $93.5 million, driven by cash paid for interestincluding $94.2 million of $145.2 million. Although cash collectionsgross proceeds from customers exceeded cash paymentsthe sale of our business in Switzerland. We intend to vendors (including site lease costs) and our employees,use the net inflow was lower than usual dueproceeds, after payment of transaction-related fees and expenses, to improve liquidity and increase financial flexibility in our European businesses as permitted under our debt agreements.
During the adverse impactthree months ended March 31, 2022, we received cash proceeds from the disposal of COVID-19 on salesassets of $19.4 million, including compensation received from local governments for the condemnation and collections, which was only partially mitigated by reduced expenditures related to operating cost savings initiatives and working capital optimization, particularly around site lease costs.removal of billboards in certain markets in our America segment.
Credit Facilities
We have access to a Revolving Credit Facility and Receivables-Based Credit Facility, both of which include sub-facilities for letters of credit and short-term borrowings and are scheduled to mature on August 23, 2024. The table below presents our borrowings and excess availability under ourthese credit facilities as of March 31, 2022:2023:
| (in millions) | (in millions) | Revolving Credit Facility | | Receivables-Based Credit Facility | | Total Credit Facilities | (in millions) | Revolving Credit Facility | | Receivables-Based Credit Facility | | Total Credit Facilities |
Borrowing limit(1) | Borrowing limit(1) | $ | 175.0 | | | $ | 125.0 | | | $ | 300.0 | | Borrowing limit(1) | $ | 175.0 | | | $ | 116.6 | | | $ | 291.6 | |
Borrowings outstanding | Borrowings outstanding | — | | | — | | | — | | Borrowings outstanding | — | | | — | | | — | |
Letters of credit outstanding | Letters of credit outstanding | 43.2 | | | 40.9 | | | 84.1 | | Letters of credit outstanding | 43.2 | | | 43.1 | | | 86.3 | |
Excess availability | Excess availability | $ | 131.8 | | | $ | 84.1 | | | $ | 215.9 | | Excess availability | $ | 131.8 | | | $ | 73.5 | | | $ | 205.3 | |
(1)The borrowing limit of the Receivables-Based Credit Facility is equal to the lesser of $125.0 million and the borrowing base, which is calculated based on our accounts receivable balance each period in accordance with our Receivables-Based Credit Agreement.
Debt Activity
In February 2021, we issued $1.0 billion aggregate principal amount of CCOH 7.75% Senior Notes Due 2028 and, in March 2021, used the net proceeds therefrom to redeem $940.0 million of the CCWH Senior Notes at 104.625% of their principal amount. We did not enter into any significant debt transactions during the three months ended March 31, 2022.
In April 2022, we extended the maturity date of our €30.0 million state-guaranteed loan to June 29, 2027, with quarterly principal repayments of €1.875M due beginning in September 2023. The interest rate for periods after June 2022 is currently being negotiated with the lender, and the annual cost of the state guarantee will be 1.0% for the next two years and 2.0% for the remainder of the loan term.
Debt Covenants
In accordance with the amendments to our Senior Secured Credit Agreement made in 2020 and 2021, we were required to maintain minimum liquidity of $150 million, including cash on hand and availability under our Receivables-Based Credit Facility and Revolving Credit Facility, through delivery of the March 31, 2022 springing financial covenant calculation. We were in compliance with this covenant as of March 31, 2022.Financial Covenant
Additionally, theThe Senior Secured Credit Agreement contains a springing financial covenant, applicable solely to the Revolving Credit Facility if theits balance of the Revolving Credit Facility is greater than $0 and undrawn letters of credit exceed $10 million, that requires compliance with a first lien leverage ratio of 7.60 to 1.00, with a step-down to 7.10 to 1.00 scheduled to commence the last day of the fiscal quarter ending September 30, 2022.1.00. Our first lien leverage ratio, which is calculated by dividing first lien debt by EBITDA (as defined by the Senior Secured Credit Agreement) (“EBITDA”) for the preceding four quarters, was 5.385.25 to 1.00 as of March 31, 2022.2023. First lien debt and EBITDA are presented herein because they are material components of the calculation of the first lien leverage ratio.
First Lien Debt
The following table presents a calculation of our first lien debt as of March 31, 2022:2023:
| | | | | |
(In millions) | March 31,
20222023 |
Term Loan Facility | $ | 1,950.01,930.0 | |
Revolving Credit Facility | — | |
Receivables-Based Credit Facility | — | |
Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | 1,250.0 | |
Other debt | 4.04.3 | |
Less: Cash and cash equivalents | (431.9)(340.0) | |
First lien debt(1) | $ | 2,772.12,844.4 | |
(1)Due to rounding, the total may not equal the sum of the line items in the table above.
EBITDA
As required by the definition of “EBITDA” in the Senior Secured Credit Agreement, our EBITDA for the preceding four quarters of $514.8$542.3 million is calculated as operating income (loss) before depreciation and amortization, impairment charges and share-based compensation,compensation; further adjusted for the following: (i) interest income; (ii) charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges; (iii) certainand various other items, including adjustments for pro forma "run rate" cost savings, operating expense reductions and other synergies related to acquisitions, dispositions and other specified transactions or related to restructuring initiatives, cost savings initiatives, entry into new contracts or other initiatives; and (iv) various other items.sold businesses.
The following table reflects a reconciliation ofreconciles EBITDA to operating income and net cash provided by operating activities for the four quarters ended March 31, 2022:2023:
| | | | | |
| Four Quarters Ended |
(In millions) | March 31,
20222023 |
EBITDA (as defined by the Senior Secured Credit Agreement) | $ | 514.8542.3 | |
Depreciation and amortization, impairment charges and share-based compensation and interest income | (273.6)(326.5) | |
Charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges | (38.0)(7.9) | |
Other items(1) | 2.093.4 | |
Operating income(1)(2) | 205.1301.3 | |
Interest expense, net; loss on extinguishment of debt; other expense, net and income tax benefit | (394.5)(341.4) | |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | |
Reconciling items for non-cash and non-operating activity(2)(3) | 688.2533.2 | |
Changes in operating assets and liabilities | (458.5)(391.7) | |
Net cash provided by operating activities(1)(2) | $ | 40.3101.4 | |
(1)Includes a gain on the sale of our business in Switzerland of $96.4 million.
(2)Due to rounding, the total may not equal the sum of the line items in the table above.
(2)(3)Includes depreciation, amortization and impairment charges; non-cash operating lease expense; loss on extinguishment of debt; deferred taxes; gain on disposal of operating and other assets; foreign exchange transaction loss; share-based compensation; amortization of deferred financing charges and note discounts; credit loss expenseexpense; net gain on disposal of business and operating assets; foreign exchange transaction loss and other reconciling items.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with GAAPU.S. generally accepted accounting principles requires Company management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. There have been no material changes to the critical accounting estimates, management's judgments and assumptions, and the effecteffects if actual results differ from these assumptions describedthat were disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our 20212022 Annual Report on Form 10-K.
NEW ACCOUNTING PRONOUNCEMENTS
For a description of the expected impact of newly-issued but not yet adopted accounting pronouncements on our financial position and results of operations, please refer to Note 1 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q.CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This report contains various forward-looking statements that represent our expectations or beliefs concerning future events, including, without limitation, our future operatingguidance, outlook, long-term forecast, goals or targets; our business plans and financial performance,strategies; our ability to comply with the covenants in the agreements governingexpectations about certain markets and strategic review processes; and our indebtedness and the availability of capital and the terms thereof.liquidity. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a safe harbor for forward-looking statements made by us or on our behalf. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables that could impact our future performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements. We do not intend, nor do we undertake any duty, to update any forward-looking statements.
A wide range of factors could materially affect future developments and performance, including but not limited to: continued economic uncertainty, an economic slowdown or a recession; financial and industry conditions such as volatility in the U.S. and global banking market; the continued impact of the COVID-19 pandemic on our operations and on general economic conditions; the war in Ukraine and the associated global effects; risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures on advertising;pandemic; our ability to service our debt obligations and to fund our operations, business strategy and capital expenditures; the impact of our substantial indebtedness, including the effect of our leverage on our financial position and earnings; industry conditions, including competition;the difficulty, cost and time required to implement our strategy, and the fact that we may not realize the anticipated benefits therefrom; our ability to obtain and renew key contracts with municipalities, transit authorities and private landlords; competition; technological changes and innovations; shifts in population and other demographics; supply chain shortages; heightened levels of economic inflation and rising interest rates; fluctuations in operating costs; changes in labor conditions and management; regulations and consumer concerns regarding privacy and data protection; a breach of our information security measures; legislative or regulatory requirements; restrictions on out-of-home advertising of certain products; environmental, health, safety and land use laws and regulations, as well as various actual and proposed environmental, social and governance policies and regulations; the impact of the strategic review processes of our European business,businesses, including a possible sale thereof; our ability to execute restructuring plans;sales; the impact of future dispositions, acquisitions and other strategic transactions; third-party claims of intellectual property infringement, misappropriation or other violation against us or our suppliers; the risk that indemnities from iHeartMedia, Inc. will not be sufficient to insure us against the full amount of certain liabilities; risks of doing business in foreign countries; fluctuations in exchange rates and currency values; volatility of our stock price; the impacts on our stock price as a result of future sales of common stock, or the perception thereof, and dilution resulting from additional capital raised through the sale of common stock or other equity-linked instruments; the effect of analyst or credit ratings downgrades; our ability to continue to comply with the applicable listing standards of the New York Stock Exchange; the ability of our subsidiaries to dividend or distribute funds to us in order for us to repay our debts; the restrictions contained in the agreements governing our indebtedness limiting our flexibility in operating our business; the phasing out of LIBOR; our dependence on our management team and other key individuals; continued scrutiny and changing expectations from investors, lenders, customers, government regulators and other stakeholders; and certain other factors set forth in our other filings with the SEC.
This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates, interest rates and inflation.inflation, which are generally interrelated.
Foreign Currency Exchange Rate Risk
We have operations in America, Europe, Singapore and Latin America. Foreign operations are measured in their local currencies, and as a result, our financial results could beare affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. Changes in economic or political conditions in any of the foreign countries in which we operate could result in exchange rate movement, new currency or exchange controls or other currency restrictions being imposed.
Our foreign operations reported net losses of $51.4 million forDuring the three months ended March 31, 2022.2023, fluctuations in foreign currency exchange rates resulted in a net negative impact of $0.6 million to reported Segment Adjusted EBITDA for our Europe-North segment and a net positive impact of $0.8 million to reported Segment Adjusted EBITDA for our Europe-South segment, primarily driven by fluctuations of the U.S. dollar against the British pound sterling and Euro, respectively.
During the three months ended March 31, 2023, our Europe-North and Europe-South segments reported Segment Adjusted EBITDA of $7.2 million and $(12.2) million, respectively. We estimate that a 10% increase in the value of the U.S. dollar relative to foreign currencies would have decreased Segment Adjusted EBITDA for our net losses for the three months ended March 31, 2022Europe-North segment by $5.1$0.7 million and thatincreased Segment Adjusted EBITDA for our Europe-South segment by $1.2 million, while a 10% decrease in the value of the U.S. dollar relative to foreign currencies would have increased Segment Adjusted EBITDA for our net lossesEurope-North segment and decreased Segment Adjusted EBITDA for the three months ended March 31, 2022our Europe-South segment by a corresponding amount.amounts. This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity that could exist in such an environment in the U.S. or such foreign countries or on the results of operations of these foreign entities.
Interest Rate Risk
A portionAs of March 31, 2023, approximately 34% of our aggregate principal amount of long-term debt bearsbore interest at variable rates, and as a result, our financial results are affected by changes in interest rates. Asrates, primarily the Federal Funds Rate and LIBOR. In connection with the phasing-out of LIBOR, which will no longer be published after June 2023, we amended our Term Loan Facility in February 2023 to replace the LIBOR reference rate with SOFR plus a credit spread adjustment for new borrowings or the continuation of existing borrowings. We are continuing to work with the administrative agents of our Revolving Credit Facility and Receivables-Based Credit Facility to agree on replacement rates for those agreements. At this time, we do not expect the replacement of LIBOR to result in a material impact to our financial results.
In response to heightened levels of inflation, central banks raised interest rates significantly in 2022. The U.S. Federal Reserve further raised rates in the first quarter of 2023, resulting in a slight increase in our weighted average cost of debt from 7.1% at December 31, 2022 to 7.2% at March 31, 2022, approximately 34%2023. Governments may continue to increase interest rates to combat inflation, although the pace of our aggregate principal amount of long-term debt bore interest at floating rates.rate increases is expected to slow as inflation continues to decline. Assuming the current level of borrowings and a 100 basis point increase in LIBOR, it is estimated that our interest expense for the three months ended March 31, 20222023 would have increased by $4.9$4.8 million.
In connection with the phasing-out of LIBOR, we are currently working with the administrative agents under our credit agreements to finalize replacement rates. At this time, we do not expect the replacement of LIBOR to result in a material impact to our financial statements. In the event of an adverse change If further increases in interest rates materially affect interest expense, Company management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment.
Inflation Risk
Inflation is a factor in the economies in which we do business, and we continue to seek ways to mitigate its effect. CurrentIn 2022, there was a worldwide surge in inflation. While inflation rates have slowed in the first quarter of 2023, global inflation remains high. These heightened levels of global inflation may result in higher costs and decreased margins and earnings. Inflation hashave affected our performanceresults, particularly in terms ofEurope, due to higher costs for wages, salaries,electricity, employees, materials and equipment. Although the exact impact of inflation on our margins and earnings is indeterminable, we believe we have partially offset these higher costs by increasing the effective advertising rates offor most of our out-of-home display faces. In addition, our site leases, which are long-term in nature, are less impacted by short-term swings in inflation.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of Company management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive OfficerCEO and Chief Financial Officer,CFO, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC. Based on that evaluation, our Chief Executive OfficerCEO and Chief Financial OfficerCFO concluded that our disclosure controls and procedures were effective as of March 31, 20222023 at the reasonable assurance level.
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding our material pending legal proceedings, please refer to Note 5 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q. ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed under Part I,in Item 1A “Risk Factors” inof our 2022 Annual Report on Form 10-K for the year ended December 31, 2021.10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table sets forth our purchases of shares of our common stock made during the quarter ended March 31, 2022:2023:
| Period | Period | Total Number of Shares Purchased(1) | | Average Price Paid per Share(1) | | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs | Period | Total number of shares purchased(1) | | Average price paid per share(1) | | Total number of shares purchased as part of publicly announced plans or programs | | Maximum number of shares that may yet be purchased under the plans or programs |
January 1 through January 31 | January 1 through January 31 | — | | | | | — | | | — | | January 1 through January 31 | — | | | | | | — | | | — | |
February 1 through February 28 | February 1 through February 28 | 4,177 | | | $ | 3.00 | | | — | | | — | | February 1 through February 28 | 456,601 | | | $ | 1.73 | | | — | | | — | |
March 1 through March 31 | March 1 through March 31 | — | | | — | | | — | | March 1 through March 31 | 2,097,111 | | | $ | 1.20 | | | — | | | — | |
| Total | Total | 4,177 | | | $ | 3.00 | | | — | | | — | | Total | 2,553,712 | | | $ | 1.29 | | | — | | | — | |
(1)The shares indicated consist of shares of our common stock tendered to us by employees to us during the three months ended March 31, 20222023 to satisfy such employees’ tax withholding obligations in connection with the vesting and release of restricted shares, which are repurchased by us based on their fair market value on the date the relevant transaction occurs.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| | | | | | | | |
Exhibit Number | | Description |
3.1 | | |
3.2 | | |
10.1 | | |
| | |
| | |
10.4 | | |
31.1* | | |
31.2* | | |
32.1** | | |
32.2** | | |
101.INS* | | XBRL Instance Document.Document |
101.SCH* | | XBRL Taxonomy Extension Schema Document.Document |
101.CAL* | | XBRL Taxonomy Extension Calculation Linkbase Document. Document |
101.DEF* | | XBRL Taxonomy Extension Definition Linkbase Document. Document |
101.LAB* | | XBRL Taxonomy Extension Label Linkbase Document.Document |
101.PRE* | | XBRL Taxonomy Extension Presentation Linkbase Document.Document |
104 | | Cover Page Interactive Data File (formatted as inline XBRL). |
__________________
* Filed herewith.
** Furnished herewith.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | | | | |
| | CLEAR CHANNEL OUTDOOR HOLDINGS, INC. |
| | |
May 10, 20229, 2023 | | /s/ JASON A. DILGER |
| | Jason A. Dilger |
| | Chief Accounting Officer |