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 SEPTEMBER 30, 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)
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Delaware | | 88-0318078 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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4830 North Loop 1604 West, | Suite 111 | | |
San Antonio, | Texas | | 78249 |
(Address of principal executive offices) | | (Zip Code) |
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(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.
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Class | Outstanding at November 3, 20222023 |
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - |
Common Stock, $0.01 par value per share | 476,055,413483,009,818 |
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) | September 30, 2022 | | December 31, 2021 |
| (Unaudited) | | |
CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 327,429 | | | $ | 410,767 | |
| | | |
| | | |
Accounts receivable, net | 551,799 | | | 643,116 | |
Prepaid expenses | 65,440 | | | 54,180 | |
Other current assets | 26,481 | | | 26,458 | |
| | | |
Total Current Assets | 971,149 | | | 1,134,521 | |
PROPERTY, PLANT AND EQUIPMENT | | | |
Structures, net | 549,734 | | | 622,738 | |
Other property, plant and equipment, net | 205,829 | | | 204,508 | |
INTANGIBLE ASSETS AND GOODWILL | | | |
Indefinite-lived permits | 731,932 | | | 717,666 | |
Other intangible assets, net | 254,235 | | | 271,448 | |
Goodwill | 673,863 | | | 698,704 | |
OTHER ASSETS | | | |
Operating lease right-of-use assets | 1,522,135 | | | 1,567,468 | |
Other assets | 78,090 | | | 82,302 | |
Total Assets | $ | 4,986,967 | | | $ | 5,299,355 | |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 76,548 | | | $ | 108,567 | |
Accrued expenses | 454,211 | | | 523,364 | |
Current operating lease liabilities | 279,864 | | | 316,692 | |
Accrued interest | 104,739 | | | 66,444 | |
Deferred revenue | 90,928 | | | 76,712 | |
Current portion of long-term debt | 21,007 | | | 21,165 | |
| | | |
Total Current Liabilities | 1,027,297 | | | 1,112,944 | |
NON-CURRENT LIABILITIES | | | |
Long-term debt | 5,571,175 | | | 5,583,788 | |
Non-current operating lease liabilities | 1,299,130 | | | 1,310,917 | |
Deferred tax liabilities, net | 320,480 | | | 324,579 | |
Other long-term liabilities | 141,695 | | | 161,097 | |
Total Liabilities | 8,359,777 | | | 8,493,325 | |
| | | |
Commitments and Contingencies (Note 5) | | | |
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STOCKHOLDERS’ DEFICIT | | | |
Noncontrolling interest | 12,194 | | | 11,060 | |
Common stock, par value $0.01 per share: 2,350,000,000 shares authorized (483,135,562 shares issued as of September 30, 2022; 474,480,862 shares issued as of December 31, 2021) | 4,831 | | | 4,745 | |
Additional paid-in capital | 3,539,161 | | | 3,522,367 | |
Accumulated deficit | (6,568,638) | | | (6,373,349) | |
Accumulated other comprehensive loss | (341,795) | | | (350,950) | |
Treasury stock (7,111,940 shares held as of September 30, 2022; 3,671,788 shares held as of December 31, 2021) | (18,563) | | | (7,843) | |
Total Stockholders' Deficit | (3,372,810) | | | (3,193,970) | |
Total Liabilities and Stockholders' Deficit | $ | 4,986,967 | | | $ | 5,299,355 | |
(UNAUDITED)
| | | | | | | | | | | |
(In thousands, except share and per share data) | September 30, 2023 | | December 31, 2022 |
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CURRENT ASSETS | | | |
Cash and cash equivalents | $ | 313,406 | | | $ | 282,232 | |
| | | |
| | | |
Accounts receivable, net | 441,536 | | | 453,683 | |
Prepaid expenses | 50,612 | | | 44,989 | |
Other current assets | 23,244 | | | 17,482 | |
Current assets of discontinued operations | 41,449 | | | 322,530 | |
Total Current Assets | 870,247 | | | 1,120,916 | |
PROPERTY, PLANT AND EQUIPMENT | | | |
Structures, net | 453,545 | | | 468,935 | |
Other property, plant and equipment, net | 186,277 | | | 203,178 | |
INTANGIBLE ASSETS AND GOODWILL | | | |
Permits, net | 681,800 | | | 723,061 | |
Other intangible assets, net | 242,459 | | | 250,946 | |
Goodwill | 649,180 | | | 650,643 | |
OTHER ASSETS | | | |
Operating lease right-of-use assets | 1,444,263 | | | 1,404,269 | |
Other assets | 51,176 | | | 48,449 | |
Other assets of discontinued operations | 69,982 | | | 215,614 | |
Total Assets | $ | 4,648,929 | | | $ | 5,086,011 | |
CURRENT LIABILITIES | | | |
Accounts payable | $ | 55,310 | | | $ | 73,429 | |
Accrued expenses | 324,174 | | | 330,750 | |
Current operating lease liabilities | 203,243 | | | 211,952 | |
Accrued interest | 109,933 | | | 80,133 | |
Deferred revenue | 72,845 | | | 47,930 | |
Current portion of long-term debt | 556 | | | 21,203 | |
Current liabilities of discontinued operations | 267,162 | | | 356,143 | |
Total Current Liabilities | 1,033,223 | | | 1,121,540 | |
NON-CURRENT LIABILITIES | | | |
Long-term debt | 5,628,671 | | | 5,540,698 | |
Non-current operating lease liabilities | 1,285,715 | | | 1,237,530 | |
Deferred tax liabilities, net | 241,750 | | | 243,564 | |
Other liabilities | 97,083 | | | 93,748 | |
Other liabilities of discontinued operations | 25,014 | | | 111,737 | |
Total Liabilities | 8,311,456 | | | 8,348,817 | |
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Commitments and Contingencies (Note 6) | | | |
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STOCKHOLDERS’ DEFICIT | | | |
Noncontrolling interests | 11,247 | | | 12,864 | |
Common stock, par value $0.01 per share: 2,350,000,000 shares authorized (494,009,851 shares issued as of September 30, 2023; 483,639,206 shares issued as of December 31, 2022) | 4,940 | | | 4,836 | |
Additional paid-in capital | 3,558,683 | | | 3,543,424 | |
Accumulated deficit | (6,805,652) | | | (6,469,953) | |
Accumulated other comprehensive loss | (408,179) | | | (335,189) | |
Treasury stock (11,000,033 shares held as of September 30, 2023; 7,325,251 shares held as of December 31, 2022) | (23,566) | | | (18,788) | |
Total Stockholders' Deficit | (3,662,527) | | | (3,262,806) | |
Total Liabilities and Stockholders' Deficit | $ | 4,648,929 | | | $ | 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 | | Nine Months Ended |
(In thousands, except per share data) | (In thousands, except per share data) | Three Months Ended | | Nine Months Ended | (In thousands, except per share data) | September 30, | | September 30, |
| September 30, | | September 30, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Revenue | Revenue | $ | 602,907 | | | $ | 596,416 | | | $ | 1,771,975 | | | $ | 1,498,406 | | Revenue | $ | 526,786 | | | $ | 503,344 | | | $ | 1,495,026 | | | $ | 1,451,781 | |
Operating expenses: | Operating expenses: | | Operating expenses: | |
Direct operating expenses(1) | Direct operating expenses(1) | 323,543 | | | 324,707 | | | 976,070 | | | 914,221 | | Direct operating expenses(1) | 271,377 | | | 241,389 | | | 790,206 | | | 721,342 | |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | 118,453 | | | 118,158 | | | 345,704 | | | 328,593 | | Selling, general and administrative expenses(1) | 87,083 | | | 90,381 | | | 266,292 | | | 263,689 | |
Corporate expenses(1) | Corporate expenses(1) | 37,433 | | | 41,806 | | | 120,159 | | | 113,576 | | Corporate expenses(1) | 34,931 | | | 38,299 | | | 129,427 | | | 123,323 | |
Depreciation and amortization | Depreciation and amortization | 57,846 | | | 65,600 | | | 178,830 | | | 190,019 | | Depreciation and amortization | 57,699 | | | 49,871 | | | 186,409 | | | 152,352 | |
Impairment charges | Impairment charges | 871 | | | — | | | 22,676 | | | 118,950 | | Impairment charges | — | | | 871 | | | — | | | 22,676 | |
Other operating expense, net | | Other operating expense, net | 6,179 | | | 1,863 | | | 10,122 | | | 676 | |
Operating income | | Operating income | 69,517 | | | 80,670 | | | 112,570 | | | 167,723 | |
Interest expense, net | | Interest expense, net | (107,391) | | | (92,620) | | | (314,624) | | | (261,704) | |
Gain on extinguishment of debt | | Gain on extinguishment of debt | 3,817 | | | — | | | 3,817 | | | — | |
Other income (expense), net | | Other income (expense), net | (17,269) | | | (27,968) | | | 3,722 | | | (60,263) | |
Loss from continuing operations before income taxes | | Loss from continuing operations before income taxes | (51,326) | | | (39,918) | | | (194,515) | | | (154,244) | |
Income tax benefit attributable to continuing operations | | Income tax benefit attributable to continuing operations | 244 | | | 21,120 | | | 12,022 | | | 445 | |
Loss from continuing operations | | Loss from continuing operations | (51,082) | | | (18,798) | | | (182,493) | | | (153,799) | |
Loss from discontinued operations | | Loss from discontinued operations | (211,736) | | | (19,982) | | | (152,326) | | | (40,027) | |
Consolidated net loss | | Consolidated net loss | (262,818) | | | (38,780) | | | (334,819) | | | (193,826) | |
Less: Net income attributable to noncontrolling interests | | Less: Net income attributable to noncontrolling interests | 672 | | | 977 | | | 880 | | | 1,463 | |
Net loss attributable to the Company | | Net loss attributable to the Company | $ | (263,490) | | | $ | (39,757) | | | $ | (335,699) | | | $ | (195,289) | |
| Other operating expense (income), net | 3,764 | | | (2,422) | | | 220 | | | (4,045) | | |
| Operating income (loss) | 60,997 | | | 48,567 | | | 128,316 | | | (162,908) | | |
Interest expense, net | (92,878) | | | (84,276) | | | (262,270) | | | (267,211) | | |
Loss on extinguishment of debt | — | | | — | | | — | | | (102,757) | | |
Other expense, net | (27,857) | | | (11,973) | | | (60,091) | | | (1,788) | | |
Loss before income taxes | (59,738) | | | (47,682) | | | (194,045) | | | (534,664) | | |
Income tax benefit | 20,958 | | | 6,894 | | | 219 | | | 36,019 | | |
Consolidated net loss | (38,780) | | | (40,788) | | | (193,826) | | | (498,645) | | |
Less amount attributable to noncontrolling interest | 977 | | | 43 | | | 1,463 | | | (881) | | |
Net loss attributable to the Company | $ | (39,757) | | | $ | (40,831) | | | $ | (195,289) | | | $ | (497,764) | | |
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: | |
Net loss from continuing operations attributable to the Company per share of common stock | | Net loss from continuing operations attributable to the Company per share of common stock | $ | (0.11) | | | $ | (0.04) | | | $ | (0.38) | | | $ | (0.33) | |
Net loss from discontinued operations attributable to the Company per share of common stock | | Net loss from discontinued operations attributable to the Company per share of common stock | (0.44) | | | (0.04) | | | (0.32) | | | (0.08) | |
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 | $ | (0.55) | | | $ | (0.08) | | | $ | (0.70) | | | $ | (0.41) | |
| | Net loss attributable to the Company per share of common stock — basic and diluted | $ | (0.08) | | | $ | (0.09) | | | $ | (0.41) | | | $ | (1.06) | | |
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(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)
| | | | | | | | | | | | | | | | | | | | | | | Three Months Ended | | Nine Months Ended |
(In thousands) | (In thousands) | Three Months Ended | | Nine Months Ended | (In thousands) | September 30, | | September 30, |
| September 30, | | September 30, | |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Net loss attributable to the Company | Net loss attributable to the Company | $ | (39,757) | | | $ | (40,831) | | | $ | (195,289) | | | $ | (497,764) | | Net loss attributable to the Company | $ | (263,490) | | | $ | (39,757) | | | $ | (335,699) | | | $ | (195,289) | |
Other comprehensive income (loss): | Other comprehensive income (loss): | | Other comprehensive income (loss): | |
Foreign currency translation adjustments | Foreign currency translation adjustments | 3,669 | | | 876 | | | 9,128 | | | (17,044) | | Foreign currency translation adjustments | 732 | | | 3,669 | | | (5,345) | | | 9,128 | |
Reclassification adjustments | — | | | — | | | — | | | 944 | | |
| | Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sales of businesses(1) | | Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sales of businesses(1) | — | | | — | | | (67,648) | | | — | |
Other comprehensive income (loss) | Other comprehensive income (loss) | 3,669 | | | 876 | | | 9,128 | | | (16,100) | | Other comprehensive income (loss) | 732 | | | 3,669 | | | (72,993) | | | 9,128 | |
Comprehensive loss | Comprehensive loss | (36,088) | | | (39,955) | | | (186,161) | | | (513,864) | | Comprehensive loss | (262,758) | | | (36,088) | | | (408,692) | | | (186,161) | |
Less amount attributable to noncontrolling interest | (10) | | | (6) | | | (27) | | | (13) | | |
Less amount attributable to noncontrolling interests | | Less amount attributable to noncontrolling interests | (5) | | | (10) | | | (3) | | | (27) | |
Comprehensive loss attributable to the Company | Comprehensive loss attributable to the Company | $ | (36,078) | | | $ | (39,949) | | | $ | (186,134) | | | $ | (513,851) | | Comprehensive loss attributable to the Company | $ | (262,753) | | | $ | (36,078) | | | $ | (408,689) | | | $ | (186,134) | |
|
(1)Included in “Loss from discontinued operations” on Consolidated Statements of Loss
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
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| Three Months Ended |
| Common Shares Issued | | Non-controlling Interests | | Controlling Interest | | Total Stockholders’ Deficit |
(In thousands, except share data) | | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | |
Three Months Ended September 30, 2023 |
Balances at June 30, 2023 | 493,857,081 | | | $ | 10,643 | | | $ | 4,939 | | | $ | 3,553,624 | | | $ | (6,542,162) | | | $ | (408,916) | | | $ | (23,489) | | | $ | (3,405,361) | |
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Net income (loss) | | | 672 | | | — | | | — | | | (263,490) | | | — | | | — | | | (262,818) | |
Release of stock awards and exercise of stock options | 152,770 | | | — | | | 1 | | | (1) | | | — | | | — | | | (77) | | | (77) | |
Share-based compensation | | | — | | | — | | | 5,060 | | | — | | | — | | | — | | | 5,060 | |
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Payments to noncontrolling interests, net | | | (63) | | | — | | | — | | | — | | | — | | | — | | | (63) | |
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Foreign currency translation adjustments | | | (5) | | | — | | | — | | | — | | | 737 | | | — | | | 732 | |
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Balances at September 30, 2023 | 494,009,851 | | | $ | 11,247 | | | $ | 4,940 | | | $ | 3,558,683 | | | $ | (6,805,652) | | | $ | (408,179) | | | $ | (23,566) | | | $ | (3,662,527) | |
| | | Three Months Ended September 30, 2022 | |
| | Common Shares Issued | | Non-controlling Interest | | Controlling Interest | | Total | |
(In thousands, except share data) | | Common Stock | | Additional Paid-in Capital | | Accumulated Deficit | | Accumulated Other Comprehensive Loss | | Treasury Stock | | |
Three Months Ended September 30, 2022 | | Three Months Ended September 30, 2022 |
Balances at June 30, 2022 | Balances at June 30, 2022 | 482,887,254 | | | $ | 11,289 | | | $ | 4,829 | | | $ | 3,533,873 | | | $ | (6,528,881) | | | $ | (345,474) | | | $ | (17,886) | | | $ | (3,342,250) | | Balances at June 30, 2022 | 482,887,254 | | | $ | 11,289 | | | $ | 4,829 | | | $ | 3,533,873 | | | $ | (6,528,881) | | | $ | (345,474) | | | $ | (17,886) | | | $ | (3,342,250) | |
| Net income (loss) | Net income (loss) | | 977 | | | — | | | — | | | (39,757) | | | — | | | — | | | (38,780) | | Net income (loss) | | 977 | | | — | | | — | | | (39,757) | | | — | | | — | | | (38,780) | |
Exercise of stock options and release of stock awards | 248,308 | | | — | | | 2 | | | (2) | | | — | | | — | | | (677) | | | (677) | | |
Release of stock awards and exercise of stock options | | Release of stock awards and exercise of stock options | 248,308 | | | — | | | 2 | | | (2) | | | — | | | — | | | (677) | | | (677) | |
Share-based compensation | Share-based compensation | | — | | | — | | | 5,290 | | | — | | | — | | | — | | | 5,290 | | Share-based compensation | | — | | | — | | | 5,290 | | | — | | | — | | | — | | | 5,290 | |
| Payments to noncontrolling interests | | (62) | | | — | | | — | | | — | | | — | | | — | | | (62) | | |
Payments to noncontrolling interests, net | | Payments to noncontrolling interests, net | | (62) | | | — | | | — | | | — | | | — | | | — | | | (62) | |
| Other comprehensive income (loss) | | (10) | | | — | | | — | | | — | | | 3,679 | | | — | | | 3,669 | | |
Foreign currency translation adjustments | | Foreign currency translation adjustments | | (10) | | | — | | | — | | | — | | | 3,679 | | | — | | | 3,669 | |
| Balances at September 30, 2022 | Balances at September 30, 2022 | 483,135,562 | | | $ | 12,194 | | | $ | 4,831 | | | $ | 3,539,161 | | | $ | (6,568,638) | | | $ | (341,795) | | | $ | (18,563) | | | $ | (3,372,810) | | Balances at September 30, 2022 | 483,135,562 | | | $ | 12,194 | | | $ | 4,831 | | | $ | 3,539,161 | | | $ | (6,568,638) | | | $ | (341,795) | | | $ | (18,563) | | | $ | (3,372,810) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended |
| | | | | 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 | |
Nine Months Ended September 30, 2023 |
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 income (loss) | | | 880 | | | — | | | — | | | (335,699) | | | — | | | — | | | (334,819) | |
Release of stock awards and exercise of stock options | 10,370,645 | | | — | | | 104 | | | (104) | | | — | | | — | | | (4,778) | | | (4,778) | |
Share-based compensation | | | — | | | — | | | 15,363 | | | — | | | — | | | — | | | 15,363 | |
Payments to noncontrolling interests, net | | | (2,494) | | | — | | | — | | | — | | | — | | | — | | | (2,494) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Foreign currency translation adjustments | | | (3) | | | — | | | — | | | — | | | (5,342) | | | — | | | (5,345) | |
Disposition of businesses | | | — | | | — | | | — | | | — | | | (67,648) | | | — | | | (67,648) | |
Balances at September 30, 2023 | 494,009,851 | | | $ | 11,247 | | | $ | 4,940 | | | $ | 3,558,683 | | | $ | (6,805,652) | | | $ | (408,179) | | | $ | (23,566) | | | $ | (3,662,527) | |
| | | Nine Months Ended September 30, 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 | | |
Nine Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 |
Balances at December 31, 2021 | 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) | | 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) | Net income (loss) | | 1,463 | | | — | | | — | | | (195,289) | | | — | | | — | | | (193,826) | | Net income (loss) | | 1,463 | | | — | | | — | | | (195,289) | | | — | | | — | | | (193,826) | |
Exercise of stock options and release of stock awards | 8,654,700 | | | — | | | 86 | | | (86) | | | — | | | — | | | (10,720) | | | (10,720) | | |
Release of stock awards and exercise of stock options | | Release of stock awards and exercise of stock options | 8,654,700 | | | — | | | 86 | | | (86) | | | — | | | — | | | (10,720) | | | (10,720) | |
Share-based compensation | Share-based compensation | | — | | | — | | | 16,880 | | | — | | | — | | | — | | | 16,880 | | Share-based compensation | | — | | | — | | | 16,880 | | | — | | | — | | | — | | | 16,880 | |
| Payments to noncontrolling interests | | (302) | | | — | | | — | | | — | | | — | | | — | | | (302) | | |
Payments to noncontrolling interests, net | | Payments to noncontrolling interests, net | | (302) | | | — | | | — | | | — | | | — | | | — | | | (302) | |
| Other comprehensive income (loss) | | (27) | | | — | | | — | | | — | | | 9,155 | | | — | | | 9,128 | | |
| Foreign currency translation adjustments | | Foreign currency translation adjustments | | (27) | | | — | | | — | | | — | | | 9,155 | | | — | | | 9,128 | |
| Balances at September 30, 2022 | Balances at September 30, 2022 | 483,135,562 | | | $ | 12,194 | | | $ | 4,831 | | | $ | 3,539,161 | | | $ | (6,568,638) | | | $ | (341,795) | | | $ | (18,563) | | | $ | (3,372,810) | | Balances at September 30, 2022 | 483,135,562 | | | $ | 12,194 | | | $ | 4,831 | | | $ | 3,539,161 | | | $ | (6,568,638) | | | $ | (341,795) | | | $ | (18,563) | | | $ | (3,372,810) | |
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 September 30, 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 June 30, 2021 | 473,835,417 | | | $ | 9,769 | | | $ | 4,738 | | | $ | 3,511,398 | | | $ | (6,396,467) | | | $ | (375,489) | | | $ | (6,171) | | | $ | (3,252,222) | |
| | | | | | | | | | | | | | | |
Net income (loss) | | | 43 | | | — | | | — | | | (40,831) | | | | | — | | | (40,788) | |
Exercise of stock options and release of stock awards | 443,677 | | | — | | | 5 | | | 30 | | | — | | | — | | | (1,486) | | | (1,451) | |
Share-based compensation | | | — | | | — | | | 5,874 | | | — | | | — | | | — | | | 5,874 | |
| | | | | | | | | | | | | | | |
Payments to noncontrolling interests | | | (113) | | | — | | | — | | | — | | | — | | | — | | | (113) | |
| | | | | | | | | | | | | | | |
Other comprehensive income (loss) | | | (6) | | | — | | | — | | | — | | | 882 | | | — | | | 876 | |
| | | | | | | | | | | | | | | |
Balances at September 30, 2021 | 474,279,094 | | | $ | 9,693 | | | $ | 4,743 | | | $ | 3,517,302 | | | $ | (6,437,298) | | | $ | (374,607) | | | $ | (7,657) | | | $ | (3,287,824) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended September 30, 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 | | | (881) | | | — | | | — | | | (497,764) | | | — | | | — | | | (498,645) | |
Exercise of stock options and release of stock awards | 5,575,930 | | | — | | | 56 | | | (20) | | | — | | | — | | | (4,576) | | | (4,540) | |
Share-based compensation | | | — | | | — | | | 14,331 | | | — | | | — | | | — | | | 14,331 | |
Payments to noncontrolling interests | | | (268) | | | — | | | — | | | — | | | — | | | — | | | (268) | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Other comprehensive loss | | | (13) | | | — | | | — | | | — | | | (16,087) | | | — | | | (16,100) | |
| | | | | | | | | | | | | | | |
Balances at September 30, 2021 | 474,279,094 | | | $ | 9,693 | | | $ | 4,743 | | | $ | 3,517,302 | | | $ | (6,437,298) | | | $ | (374,607) | | | $ | (7,657) | | | $ | (3,287,824) | |
See Condensed Notes to Consolidated Financial Statements
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | |
(In thousands) | Nine Months Ended September 30, |
| 2022 | | 2021 |
Cash flows from operating activities: | | | |
Consolidated net loss | $ | (193,826) | | | $ | (498,645) | |
Reconciling items: | | | |
Depreciation, amortization and impairment charges | 201,506 | | | 308,969 | |
Non-cash operating lease expense | 250,710 | | | 273,334 | |
Loss on extinguishment of debt | — | | | 102,757 | |
Deferred taxes | (4,677) | | | (30,285) | |
Share-based compensation | 16,880 | | | 14,331 | |
Gain on disposal of operating and other assets, net | (12,598) | | | (4,697) | |
Foreign exchange transaction loss | 63,003 | | | 3,455 | |
| | | |
Other reconciling items, net | 7,050 | | | 5,725 | |
Changes in operating assets and liabilities: | | | |
Decrease (increase) in accounts receivable | 51,713 | | | (59,050) | |
Increase in prepaid expenses and other operating assets | (31,308) | | | (8,089) | |
Increase (decrease) in accounts payable and accrued expenses | (34,527) | | | 28,507 | |
Decrease in operating lease liabilities | (259,415) | | | (291,144) | |
Increase (decrease) in accrued interest | 38,495 | | | (5,889) | |
Increase in deferred revenue | 15,061 | | | 12,104 | |
Increase (decrease) in other operating liabilities | 5,921 | | | (5,656) | |
Net cash provided by (used for) operating activities | 113,988 | | | (154,273) | |
Cash flows from investing activities: | | | |
Capital expenditures | (124,418) | | | (82,438) | |
Asset acquisitions | (51,995) | | | (3,289) | |
Proceeds from disposal of assets | 20,785 | | | 5,671 | |
Other investing activities, net | 136 | | | 617 | |
Net cash used for investing activities | (155,492) | | | (79,439) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Proceeds from long-term debt | — | | | 2,085,570 | |
Payments on long-term debt | (16,125) | | | (2,005,905) | |
Debt issuance costs | — | | | (24,438) | |
Taxes paid related to net share settlement of equity awards | (10,720) | | | (4,576) | |
Other financing activities, net | (302) | | | (359) | |
Net cash provided by (used for) financing activities | (27,147) | | | 50,292 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | (13,189) | | | (2,807) | |
Net decrease in cash, cash equivalents and restricted cash | (81,840) | | | (186,227) | |
Cash, cash equivalents and restricted cash at beginning of period | 419,971 | | | 795,061 | |
Cash, cash equivalents and restricted cash at end of period | $ | 338,131 | | | $ | 608,834 | |
Supplemental disclosures: | | | |
Cash paid for interest | $ | 217,816 | | | $ | 264,387 | |
Cash paid for income taxes, net of refunds | $ | 3,824 | | | $ | 3,533 | |
| | | | | | | | | | | |
(In thousands) | Nine Months Ended September 30, |
| 2023 | | 2022 |
Cash flows from operating activities: | | | |
Consolidated net loss | $ | (334,819) | | | $ | (193,826) | |
Reconciling items: | | | |
Depreciation, amortization and impairment charges | 202,148 | | | 201,506 | |
Non-cash operating lease expense | 231,102 | | | 250,710 | |
Gain on extinguishment of debt | (3,817) | | | — | |
Deferred taxes | (1,706) | | | (4,677) | |
Share-based compensation | 15,363 | | | 16,880 | |
Loss (gain) on classification as held for sale and disposition of businesses and/or operating assets, net | 91,866 | | | (12,598) | |
Foreign exchange transaction (gain) loss | (7,935) | | | 63,003 | |
| | | |
Other reconciling items, net | 10,645 | | | 7,050 | |
Changes in operating assets and liabilities, net of effects of dispositions: | | | |
Decrease in accounts receivable | 46,697 | | | 51,713 | |
Increase in prepaid expenses and other operating assets | (48,384) | | | (31,308) | |
Decrease in accounts payable and accrued expenses | (18,353) | | | (34,527) | |
Decrease in operating lease liabilities | (245,808) | | | (259,415) | |
Increase in accrued interest | 30,030 | | | 38,495 | |
Increase in deferred revenue | 20,773 | | | 15,061 | |
Increase in other operating liabilities | 10,676 | | | 5,921 | |
Net cash (used for) provided by operating activities | (1,522) | | | 113,988 | |
Cash flows from investing activities: | | | |
Capital expenditures | (112,565) | | | (124,418) | |
Asset acquisitions | (12,140) | | | (51,995) | |
Net proceeds from disposition of businesses and/or assets | 103,118 | | | 20,785 | |
Other investing activities, net | (962) | | | 136 | |
Net cash used for investing activities | (22,549) | | | (155,492) | |
Cash flows from financing activities: | | | |
| | | |
| | | |
Proceeds from long-term debt | 750,000 | | | — | |
Payments on long-term debt | (683,277) | | | (16,125) | |
Debt issuance and modification costs | (12,457) | | | — | |
Taxes paid related to net share settlement of equity awards | (4,778) | | | (10,720) | |
Payments to noncontrolling interests, net | (2,494) | | | (302) | |
Net cash provided by (used for) financing activities | 46,994 | | | (27,147) | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 3,045 | | | (13,189) | |
Net increase (decrease) in cash, cash equivalents and restricted cash | 25,968 | | | (81,840) | |
Cash, cash equivalents and restricted cash at beginning of period | 298,682 | | | 419,971 | |
Cash, cash equivalents and restricted cash at end of period | $ | 324,650 | | | $ | 338,131 | |
Supplemental disclosures: | | | |
Cash paid for interest | $ | 283,746 | | | $ | 217,816 | |
Cash paid for income taxes, net of refunds | $ | 8,711 | | | $ | 3,824 | |
| | | |
| | | |
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
PreparationPrinciples of Interim Financial StatementsConsolidation
TheThese consolidated financial statements include the accounts of Clear Channel Outdoor Holdings, Inc. (“CCOH”) 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.
Preparation of Interim Financial Statements
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements, 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
Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures required by GAAP for annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, 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.
Certain prior period amounts in the Consolidated Statement of Cash Flows have been reclassified to conform to the 2022 presentation.28, 2023.
Use of Estimates
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.
Segment Presentation Changes and Discontinued Operations
As described in the Company’s 2022 Annual Report on Form 10-K, the Company changed segments during the fourth quarter of 2022 to reflect changes in the way the business is managed and resources are allocated by the Company’s chief operating decision maker (“CODM”). As such, the Company has revised its segment disclosures for prior periods to conform to the current period presentation.
Additionally, during the third quarter of 2023, the Company’s plan to sell the businesses comprising its Europe-South segment met the criteria to be reported as discontinued operations. In accordance with GAAP, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets, and results of discontinued operations are reported as a separate component of Consolidated net loss in the Consolidated Statements of Loss, for all periods presented, resulting in changes to the presentation of certain prior period amounts. Refer to Note 2 for additional discussion of discontinued operations. All other notes to these consolidated financial statements present the results of continuing operations and exclude amounts related to discontinued operations for all periods presented. Such estimates
NOTE 2 – DISPOSITIONS AND DISCONTINUED OPERATIONS
Strategic Review and assumptions affect,Dispositions
In 2022, the CCOH Board of Directors (the “Board”) authorized a review of strategic alternatives related to the potential disposal of certain of the Company’s lower-margin European assets (and/or other European assets of lower priority to the Company’s European business as a whole). Since that time, the Company has sold, or has entered into agreements to sell, its businesses in Switzerland, Italy, Spain and France, which comprised the Company’s entire Europe-South segment.
Sale of Business in Switzerland
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 liabilities of the Company’s business in Switzerland were presented as held for sale on the Company’s Consolidated Balance Sheet as of December 31, 2022.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The conditions to closing were satisfied during the first quarter of 2023, and the sale of the Company’s business in Switzerland was completed on March 31, 2023. Upon sale, the Company recognized a gain of $96.4 million, included within “Loss from discontinued operations” on the Consolidated Statement of Loss. Cash proceeds, net of customary closing adjustments and cash sold, of $89.4 million are reflected as cash from investing activities within “Net proceeds from disposition of businesses and/or assets” on the Consolidated Statement of Cash Flows.
Sale of Businesses in Italy and Spain
On May 30, 2023, Clear Channel International Holdings B.V., a wholly-owned subsidiary of the Company, entered into agreements with subsidiaries of JCDecaux SE, among other things,related parties, with respect to the sales of the Company’s goodwill, long-livedbusinesses in Italy and Spain.
The sale of the Company’s business in Italy closed on May 31, 2023. Upon sale, the Company recognized a gain of $11.2 million, included within “Loss from discontinued operations” on the Consolidated Statement of Loss. Cash proceeds, net of customary closing adjustments and cash sold, of $5.1 million are reflected as cash from investing activities within “Net proceeds from disposition of businesses and/or assets” on the Consolidated Statement of Cash Flows.
The sale of the Company’s business in Spain is expected to close in 2024, upon satisfaction of regulatory approval and other customary closing conditions, and assets and indefinite-lived intangible assets; operating lease right-of-use assets and operating lease liabilities; assessmentliabilities of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; defined-benefit plan obligations; the allowancethis business are considered to be held for credit losses; assessment of lease and non-lease contract expenses; measurement of compensation cost for bonus and other compensation plans; and litigation accruals.
Asset Acquisitions
During the nine months ended September 30, 2022, thesale. The Company completed several acquisitions of out-of-home advertising assets, which included permits, land, permanent easements and digital billboard structures, for totalexpects to receive cash consideration of $52.0 million.approximately $64.3 million and to recognize a gain on sale when this transaction closes.
New Accounting Pronouncements Not Yet AdoptedSale of Business in France
Reference Rate ReformOn July 17, 2023, the Company announced that it had entered into exclusive discussions to sell its business in France to Equinox Industries (“Equinox”), subject to an information and consultation process with Clear Channel France’s employee works council, execution of a share purchase agreement and the satisfaction of customary closing conditions. As a result, assets and liabilities of this business were considered to be held for sale at September 30, 2023. In connection with the anticipated sale, the Company recognized a loss of $200.6 million during the third quarter of 2023, included within “Loss from discontinued operations” on the Consolidated Statement of Loss.
ForThe information and consultation process with the last several years, there has been an ongoing effort amongst regulators, standard setters, financial institutionsemployee works council and execution of a share purchase agreement was completed in October, and the sale was completed on October 31, 2023. In accordance with the share purchase agreement, the Company delivered its business in France, including all related assets, to Equinox with approximately €42 million of cash, subject to adjustment for related customary items, tax and other market participantscosts, to replace interbank offered rates, includingsupport ongoing operations of the London Interbank Offered Rate (“LIBOR”), with alternative reference rates. Inbusiness, and Equinox assumed the United States (“U.S.”),€28.125 million state-guaranteed loan held by Clear Channel France. Equinox is required to repay the Alternative Reference Rates Committee has formally recommended forward-looking Secured Overnight Financing Rate term rates asCompany up to €4.5 million depending on the replacement for USD LIBOR, while various other risk-free rates have been selected to replace LIBOR for other currencies. After December 31, 2021, the ICE Benchmark Administration, LIBOR’s administrator, ceased publication of certain LIBOR rates, and the remaining USD LIBOR rates will be published through June 30, 2023.sold business’s full year 2023 revenue. The Company will continuerecord an adjustment to workthe loss during the fourth quarter as needed to reflect the final terms of the sale.
Discontinued Operations
The Company classifies a business as held for sale when the criteria prescribed by Accounting Standards Codification (“ASC”) Paragraph 205-20-45-1E are met, most notably when sale of the business is probable within the next year (with certain exceptions) and it is unlikely there will be significant changes to the plan of sale. Assets and liabilities held for sale are recorded at the lower of their carrying value or fair value less cost to sell.
The Company classifies a business that has been disposed of or is classified as held for sale as a discontinued operation when the criteria prescribed by ASC Paragraph 205-20-45-1B are met. While the sales of, or agreements to sell, the Company’s businesses in Switzerland, Italy and Spain did not previously qualify for presentation as discontinued operations, the Company concluded that, in aggregate, the sales of these businesses along with the administrative agentssale of its Senior Secured Credit Facilities and Receivables-Based Credit Facilitybusiness in France (collectively comprising the Company’s entire Europe-South segment) met the criteria for discontinued operations presentation during the third quarter of 2023. As a result, each of these businesses has been reclassified to agree on replacement rates but does not expect the replacement of LIBOR to resultdiscontinued operations in a material impact on its consolidatedthese financial statements.statements for all periods presented.
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, FacilitationAs part of the Effectssales agreements for each business, the Company has agreed to provide certain transitional services as defined within the respective Transition Services Agreement for a period of Reference Rate Reform on Financial Reporting, in ordertime after sale. Income and expenses related to ease the potential burdenthese transitional services are presented as part 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“Loss from continuing operations” on the Company’s consolidated financial statements or disclosures. The Company will continue to monitor and assess regulatory developments during the transition period.Consolidated Statement of Loss.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
ASU 2021-10CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Assets and Liabilities of Discontinued Operations
As previously described, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented. The following table presents a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations to the total assets and liabilities of discontinued operations as presented on the Company’s Consolidated Balance Sheets:
| | | | | | | | | | | |
(In thousands) | September 30, 2023(1) | | December 31, 2022(2) |
Assets of discontinued operations: | | | |
Cash and cash equivalents | $ | 1,139 | | | $ | 5,118 | |
Accounts receivable, net | 114,603 | | | 178,084 | |
Prepaid expenses and other current assets | 23,053 | | | 21,385 | |
Property, plant and equipment, net | 94,083 | | | 126,878 | |
Intangible assets, net and goodwill | 40 | | | 20,000 | |
Operating lease right-of-use assets | 63,618 | | | 160,841 | |
Other assets | 15,531 | | | 25,838 | |
Valuation allowance on business in France(3) | (200,636) | | | — | |
Total assets of discontinued operations on Consolidated Balance Sheets | $ | 111,431 | | | $ | 538,144 | |
| | | |
Liabilities of discontinued operations: | | | |
Accounts payable and accrued expenses | $ | 144,194 | | | $ | 201,161 | |
Operating lease liabilities | 70,277 | | | 169,229 | |
Deferred revenue | 11,695 | | | 16,902 | |
Long-term debt, including current portion | 29,734 | | | 32,116 | |
Other liabilities | 36,276 | | | 48,472 | |
Total liabilities of discontinued operations on Consolidated Balance Sheets | $ | 292,176 | | | $ | 467,880 | |
(1)As of September 30, 2023, all assets and liabilities of the Company’s business in France are classified as current on the Consolidated Balance Sheet as the sale occurred on October 31, 2023. Assets and liabilities of the Company’s business in Spain are classified as current or non-current in accordance with ASC Subtopic 210-10 as the time required to receive regulatory approval and satisfy other customary closing conditions may extend beyond 12 months.
(2)As of December 31, 2022, all assets and liabilities of the Company’s former business in Switzerland were classified as current on the Consolidated Balance Sheet as they were held for sale and the sale was expected to occur within a year of the balance sheet date. The remaining assets and liabilities of the Company’s discontinued operations are classified as current or non-current in accordance with their original classification at December 31, 2022.
(3)The valuation allowance on the business in France represents the loss recorded upon classification of the business as held for sale in order to reduce the carrying value of the business to fair value less costs to sell.
Letters of Credit, Surety Bonds and Guarantees
A portion of the Company’s letters of credit, surety bonds and guarantees outstanding at September 30, 2023 related to discontinued operations that were held for sale as of this date.
•Related to the business in France, the Company has a $20.2 million letter of credit in support of a $35.9 million surety bond outstanding at September 30, 2023. In November 2021,connection with the FASB issued ASU 2021-10,sale of this business, and pursuant to the related share purchase agreement, the Company’s former French business and/or Equinox will either replace, or procure a counter-guarantee of, the Company’s payment obligation under the letter of credit. Furthermore, the Company’s former French business indemnified the Company for the remaining $15.7 million balance of the surety bond outstanding, and the Company will be released from any remaining obligation related to the surety bond by March 2025. Separately, the business in France had Disclosures$7.3 million of bank guarantees outstanding at September 30, 2023, a portion of which was supported by Business Entities$3.2 million of cash collateral. The guarantees and cash collateral will remain with the French business upon its sale.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•Related to the business in Spain, the Company had a $6.5 million of letter of credit and $8.5 million of bank guarantees outstanding at September 30, 2023, a portion of which was supported by $0.7 million of cash collateral. These will remain obligations of the Company until the sale of this business closes in 2024 or, if sooner, their expiration date.
Loss from Discontinued Operations
The following table provides details about Government Assistancethe major classes of line items constituting “Loss from discontinued operations” as presented on the Company’s Consolidated Statements of Loss:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
(In thousands) | September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Revenue | $ | 85,680 | | | $ | 99,563 | | | $ | 300,114 | | | $ | 320,194 | |
Expenses: | | | | | | | |
Direct operating expenses(1) | 74,796 | | | 82,154 | | | 247,377 | | | 254,728 | |
Selling, general and administrative expenses(1),(2) | 19,389 | | | 27,021 | | | 68,685 | | | 78,265 | |
Depreciation and amortization | 348 | | | 7,975 | | | 15,739 | | | 26,478 | |
| | | | | | | |
| | | | | | | |
Other expense, net | 2,882 | | | 2,233 | | | 10,288 | | | 524 | |
Loss from discontinued operations before net loss on disposal and/or classification as held for sale and income taxes | (11,735) | | | (19,820) | | | (41,975) | | | (39,801) | |
Loss on disposal and/or classification as held for sale, net | (200,636) | | | — | | | (93,132) | | | — | |
Income tax benefit (expense) attributable to discontinued operations(3) | 635 | | | (162) | | | (17,219) | | | (226) | |
Loss from discontinued operations | $ | (211,736) | | | $ | (19,982) | | | $ | (152,326) | | | $ | (40,027) | |
| | | | | | | |
| | | | | | | |
(1), which requires disclosuresExcludes depreciation and amortization.
(2)Certain costs that increasewere historically allocated to the transparencyCompany’s Europe-South segment and reported within selling, general and administrative expenses on the Consolidated Statement 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 expectLoss have been deemed to be materially impactedcosts of continuing operations and are now reported within corporate expenses on the Consolidated Statement of Loss. As such, amounts for prior periods totaling $1.1 million and $3.8 million for the three and nine months ended September 30, 2022, respectively, have been reclassified to conform to the current period presentation.
(3)The income tax expense attributable to discontinued operations for the nine months ended September 30, 2023 was largely driven by the implementationsale of this ASU.the Company’s former business in Switzerland.
Capital Expenditures of Discontinued Operations
The following table presents the capital expenditures for discontinued operations for the three and nine months ended September 30, 2023 and 2022:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
(In thousands) | September 30, | | September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Capital expenditures(1) | $ | 4,764 | | | $ | 5,769 | | | $ | 16,129 | | | $ | 20,830 | |
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $3.5 million and $3.7 million of accrued capital expenditures related to discontinued operations that remained unpaid as of September 30, 2023 and 2022, respectively.
NOTE 23 – SEGMENT DATA
The Company has twofour reportable segments, which it believes best reflect how the Company is currently managed: AmericasAmerica, 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“Other.” As described in Note 2, the Company’s Europe-South segment provides out-of-home advertising services in its respective geographic region using various digital and traditional display types, consisting primarilymet the criteria to be reported as discontinued operations during the third quarter of billboards, street furniture displays and transit displays.2023. As such, results of this segment are excluded from the table below, which only reflects continuing operations, for all periods presented.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 continuing operations for the three and nine months ended September 30, 20222023 and 2021:2022. As described in Note 1, the Company has revised its segment disclosures for the prior periods to conform to the current period presentation.
| (In thousands) | (In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, | (In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
Revenue | Revenue | | | | | | | | Revenue | | | | | | | |
Americas | $ | 346,519 | | | $ | 319,020 | | | $ | 987,790 | | | $ | 802,524 | | |
Europe | 239,197 | | | 262,568 | | | 736,616 | | | 659,216 | | |
America | | America | $ | 278,760 | | | $ | 284,201 | | | $ | 802,326 | | | $ | 808,483 | |
Airports | | Airports | 75,558 | | | 62,318 | | | 200,392 | | | 179,307 | |
Europe-North | | Europe-North | 149,366 | | | 135,522 | | | 427,778 | | | 403,338 | |
| Other | Other | 17,191 | | | 14,828 | | | 47,569 | | | 36,666 | | Other | 23,102 | | | 21,303 | | | 64,530 | | | 60,653 | |
Total | Total | $ | 602,907 | | | $ | 596,416 | | | $ | 1,771,975 | | | $ | 1,498,406 | | Total | $ | 526,786 | | | $ | 503,344 | | | $ | 1,495,026 | | | $ | 1,451,781 | |
| Capital Expenditures | | |
Americas | $ | 21,584 | | | $ | 15,857 | | | $ | 69,620 | | | $ | 39,988 | | |
Europe | 16,856 | | | 12,992 | | | 43,590 | | | 30,298 | | |
Capital Expenditures(1) | | Capital Expenditures(1) | | | | | | | |
America | | America | $ | 16,148 | | | $ | 13,777 | | | $ | 51,844 | | | $ | 52,251 | |
Airports | | Airports | 3,072 | | | 7,807 | | | 10,382 | | | 17,369 | |
Europe-North | | Europe-North | 7,851 | | | 10,959 | | | 18,998 | | | 22,445 | |
| Other | Other | 1,106 | | | 862 | | | 2,212 | | | 3,082 | | Other | 1,577 | | | 1,234 | | | 4,534 | | | 2,527 | |
Corporate | Corporate | 3,764 | | | 2,961 | | | 8,996 | | | 9,070 | | Corporate | 4,022 | | | 3,764 | | | 10,678 | | | 8,996 | |
Total | Total | $ | 43,310 | | | $ | 32,672 | | | $ | 124,418 | | | $ | 82,438 | | Total | $ | 32,670 | | | $ | 37,541 | | | $ | 96,436 | | | $ | 103,588 | |
| Segment Adjusted EBITDA | Segment Adjusted EBITDA | | Segment Adjusted EBITDA | | | | | | | |
Americas | $ | 144,739 | | | $ | 139,086 | | | $ | 403,829 | | | $ | 330,527 | | |
Europe | 15,095 | | | 31,271 | | | 45,863 | | | (34,614) | | |
America | | America | $ | 121,335 | | | $ | 129,679 | | | $ | 332,213 | | | $ | 364,062 | |
Airports | | Airports | 15,522 | | | 15,060 | | | 38,120 | | | 39,767 | |
Europe-North | | Europe-North | 28,444 | | | 24,198 | | | 61,850 | | | 59,031 | |
| Other | Other | 2,598 | | | 425 | | | 3,689 | | | (4,321) | | Other | 3,290 | | | 2,991 | | | 7,170 | | | 5,282 | |
Total | Total | $ | 162,432 | | | $ | 170,782 | | | $ | 453,381 | | | $ | 291,592 | | Total | $ | 168,591 | | | $ | 171,928 | | | $ | 439,353 | | | $ | 468,142 | |
| Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | | |
Reconciliation of Segment Adjusted EBITDA to Loss From Continuing Operations Before Income Taxes | | Reconciliation of Segment Adjusted EBITDA to Loss From Continuing Operations Before Income Taxes | | | | | | | |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | $ | 162,432 | | | $ | 170,782 | | | $ | 453,381 | | | $ | 291,592 | | Segment Adjusted EBITDA | $ | 168,591 | | | $ | 171,928 | | | $ | 439,353 | | | $ | 468,142 | |
Less reconciling items: | Less reconciling items: | | Less reconciling items: | |
Corporate expenses(1) | 37,433 | | | 41,806 | | | 120,159 | | | 113,576 | | |
Corporate expenses(2) | | Corporate expenses(2) | 34,931 | | | 38,299 | | | 129,427 | | | 123,323 | |
Depreciation and amortization | Depreciation and amortization | 57,846 | | | 65,600 | | | 178,830 | | | 190,019 | | Depreciation and amortization | 57,699 | | | 49,871 | | | 186,409 | | | 152,352 | |
Impairment charges | Impairment charges | 871 | | | — | | | 22,676 | | | 118,950 | | Impairment charges | — | | | 871 | | | — | | | 22,676 | |
Restructuring and other costs(2) | 1,521 | | | 17,231 | | | 3,180 | | | 36,000 | | |
| Other operating expense (income), net | 3,764 | | | (2,422) | | | 220 | | | (4,045) | | |
Restructuring and other costs(3) | | Restructuring and other costs(3) | 265 | | | 354 | | | 825 | | | 1,392 | |
Other operating expense, net | | Other operating expense, net | 6,179 | | | 1,863 | | | 10,122 | | | 676 | |
Interest expense, net | Interest expense, net | 92,878 | | | 84,276 | | | 262,270 | | | 267,211 | | Interest expense, net | 107,391 | | | 92,620 | | | 314,624 | | | 261,704 | |
Other reconciling items(3) | 27,857 | | | 11,973 | | | 60,091 | | | 104,545 | | |
Consolidated net loss before income taxes | $ | (59,738) | | | $ | (47,682) | | | $ | (194,045) | | | $ | (534,664) | | |
Gain on extinguishment of debt | | Gain on extinguishment of debt | (3,817) | | | — | | | (3,817) | | | — | |
Other (income) expense, net | | Other (income) expense, net | 17,269 | | | 27,968 | | | (3,722) | | | 60,263 | |
Loss from continuing operations before income taxes | | Loss from continuing operations before income taxes | $ | (51,326) | | | $ | (39,918) | | | $ | (194,515) | | | $ | (154,244) | |
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $8.7 million and $12.4 million of accrued capital expenditures related to continuing operations that remained unpaid as of September 30, 2023 and 2022, respectively.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(2)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal (including legal liabilities and related estimates), 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.
(3)Other reconciling items includes Loss on extinguishment of debt and Other expense, net.
NOTE 34 – 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 ASC Topic 842, while the lease accounting guidance under Accounting Standards Codification (“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 from continuing operations, disaggregated by segment,geography, for the three and nine months ended September 30, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | |
(In thousands) | Revenue from contracts with customers | | Revenue from leases | | Total Revenue |
Three Months Ended September 30, 2022 |
Americas(1) | $ | 174,478 | | | $ | 172,041 | | | $ | 346,519 | |
Europe | 218,231 | | | 20,966 | | | 239,197 | |
| | | | | |
| | | | | |
Other | 14,196 | | | 2,995 | | | 17,191 | |
Total | $ | 406,905 | | | $ | 196,002 | | | $ | 602,907 | |
| | | | | |
Three Months Ended September 30, 2021 |
Americas(1) | $ | 154,843 | | | $ | 164,177 | | | $ | 319,020 | |
Europe | 235,082 | | | 27,486 | | | 262,568 | |
| | | | | |
| | | | | |
Other | 11,994 | | | 2,834 | | | 14,828 | |
Total | $ | 401,919 | | | $ | 194,497 | | | $ | 596,416 | |
| | | | | |
Nine Months Ended September 30, 2022 |
Americas(1) | $ | 496,234 | | | $ | 491,556 | | | $ | 987,790 | |
Europe | 672,113 | | | 64,503 | | | 736,616 | |
| | | | | |
| | | | | |
Other | 38,307 | | | 9,262 | | | 47,569 | |
Total | $ | 1,206,654 | | | $ | 565,321 | | | $ | 1,771,975 | |
| | | | | |
Nine Months Ended September 30, 2021 |
Americas(1) | $ | 370,815 | | | $ | 431,709 | | | $ | 802,524 | |
Europe | 584,937 | | | 74,279 | | | 659,216 | |
| | | | | |
| | | | | |
Other | 29,849 | | | 6,817 | | | 36,666 | |
Total | $ | 985,601 | | | $ | 512,805 | | | $ | 1,498,406 | |
| | | | | | | | | | | | | | | | | |
(In thousands) | Revenue from contracts with customers | | Revenue from leases | | Total revenue |
Three Months Ended September 30, 2023 |
U.S.(1) | $ | 184,506 | | | $ | 169,812 | | | $ | 354,318 | |
| | | | | |
| | | | | |
Europe(2) | 145,642 | | | 3,724 | | | 149,366 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 17,892 | | | 5,210 | | | 23,102 | |
Total | $ | 348,040 | | | $ | 178,746 | | | $ | 526,786 | |
| | | | | |
Three Months Ended September 30, 2022 |
U.S.(1) | $ | 174,478 | | | $ | 172,041 | | | $ | 346,519 | |
| | | | | |
| | | | | |
Europe(2) | 132,772 | | | 2,750 | | | 135,522 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 16,354 | | | 4,949 | | | 21,303 | |
Total | $ | 323,604 | | | $ | 179,740 | | | $ | 503,344 | |
| | | | | |
Nine Months Ended September 30, 2023 |
U.S.(1) | $ | 520,754 | | | $ | 481,964 | | | $ | 1,002,718 | |
| | | | | |
| | | | | |
Europe(2) | 419,253 | | | 8,525 | | | 427,778 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 48,625 | | | 15,905 | | | 64,530 | |
Total | $ | 988,632 | | | $ | 506,394 | | | $ | 1,495,026 | |
| | | | | |
Nine Months Ended September 30, 2022 |
U.S.(1) | $ | 496,234 | | | $ | 491,556 | | | $ | 987,790 | |
| | | | | |
| | | | | |
Europe(2) | 391,895 | | | 11,443 | | | 403,338 | |
| | | | | |
| | | | | |
| | | | | |
| | | | | |
Other(3) | 45,502 | | | 15,151 | | | 60,653 | |
Total | $ | 933,631 | | | $ | 518,150 | | | $ | 1,451,781 | |
(1)Americas totalU.S. revenue, for the three months ended September 30, 2022 and 2021which also includes revenue from transit displays of $66.1 million and $45.7 million, respectively, including revenuederived from airport displays of $62.3 million and $43.0 million, respectively. Americas total revenue forin the nine months ended September 30, 2022 and 2021 includesCaribbean, is comprised of revenue from transit displaysthe Company’s America and Airports segments.
(2)Europe revenue is comprised of $190.2 million and $94.1 million, respectively, including revenue from airport displaysthe Company’s Europe-North segment.
(3)Other includes the Company’s businesses in Latin America and Singapore.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 September 30, | | Nine Months Ended September 30, |
(In thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Accounts receivable, net of allowance, from contracts with customers: | | | | | | | |
Beginning balance | $ | 433,626 | | | $ | 346,306 | | | $ | 492,706 | | | $ | 349,799 | |
Ending balance | 404,082 | | | 390,053 | | | 404,082 | | | 390,053 | |
| | | | | | | |
Deferred revenue from contracts with customers: | | | | | | | |
Beginning balance | $ | 54,617 | | | $ | 50,067 | | | $ | 42,016 | | | $ | 37,712 | |
Ending balance | 53,326 | | | 53,916 | | | 53,326 | | | 53,916 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended September 30, | | Nine Months Ended September 30, |
(In thousands) | 2023 | | 2022 | | 2023 | | 2022 |
Accounts receivable, net of allowance, from contracts with customers: | | | | | | | |
Beginning balance | $ | 298,309 | | | $ | 274,143 | | | $ | 317,560 | | | $ | 322,789 | |
Ending balance | 304,620 | | | 278,067 | | | 304,620 | | | 278,067 | |
| | | | | | | |
Deferred revenue from contracts with customers: | | | | | | | |
Beginning balance | $ | 40,947 | | | $ | 40,391 | | | $ | 23,596 | | | $ | 31,519 | |
Ending balance | 42,940 | | | 40,726 | | | 42,940 | | | 40,726 | |
During the three months ended September 30, 20222023 and 2021,2022, respectively, the Company recognized $44.3$34.8 million and $42.9$34.4 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective quarter.quarters. During the nine months ended September 30, 20222023 and 2021,2022, respectively, the Company recognized $39.6$22.5 million and $36.8$29.8 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective year.years.
The Company’s contracts with customers generally have terms of one year or less. However, as of September 30, 2022,2023, the Company expectsexpected to recognize $88.1$92.0 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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 45 – LONG-TERM DEBT
Long-term debt outstanding as of September 30, 20222023 and December 31, 20212022 consisted of the following:
| (In thousands) | (In thousands) | September 30, 2022 | | December 31, 2021 | (In thousands) | September 30, 2023 | | December 31, 2022 |
Term Loan Facility(1) | $ | 1,940,000 | | | $ | 1,955,000 | | |
Revolving Credit Facility | — | | | — | | |
Receivables-Based Credit Facility | — | | | — | | |
Term Loan Facility Due 2026(1),(2),(3) | | Term Loan Facility Due 2026(1),(2),(3) | $ | 1,260,000 | | | $ | 1,935,000 | |
Revolving Credit Facility Due 2026(4) | | Revolving Credit Facility Due 2026(4) | — | | | — | |
Receivables-Based Credit Facility Due 2026(5) | | Receivables-Based Credit Facility Due 2026(5) | — | | | — | |
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 | 1,000,000 | | | 1,000,000 | | |
Clear Channel Outdoor Holdings 7.5% Senior Notes Due 2029 | 1,050,000 | | | 1,050,000 | | |
| Clear Channel Outdoor Holdings 9.000% Senior Secured Notes Due 2028(3) | | Clear Channel Outdoor Holdings 9.000% Senior Secured Notes Due 2028(3) | 750,000 | | | — | |
Clear Channel Outdoor Holdings 7.750% Senior Notes Due 2028(6) | | Clear Channel Outdoor Holdings 7.750% Senior Notes Due 2028(6) | 995,000 | | | 1,000,000 | |
Clear Channel Outdoor Holdings 7.500% Senior Notes Due 2029(6) | | Clear Channel Outdoor Holdings 7.500% Senior Notes Due 2029(6) | 1,040,000 | | | 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)(7) | Other debt(2)(7) | 32,774 | | | 39,006 | | Other debt(2)(7) | 4,221 | | | 4,682 | |
Original issue discount | Original issue discount | (5,947) | | | (6,976) | | Original issue discount | (2,923) | | | (5,596) | |
Long-term debt fees | Long-term debt fees | (49,645) | | | (57,077) | | Long-term debt fees | (42,071) | | | (47,185) | |
Total debt | Total debt | 5,592,182 | | | 5,604,953 | | Total debt | 5,629,227 | | | 5,561,901 | |
Less: Current portion(1) | Less: Current portion(1) | 21,007 | | | 21,165 | | Less: Current portion(1) | 556 | | | 21,203 | |
Total long-term debt | Total long-term debt | $ | 5,571,175 | | | $ | 5,583,788 | | Total long-term debt | $ | 5,628,671 | | | $ | 5,540,698 | |
(1)DuringThe term loans under the nine months ended September 30, 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 $15.0$10.0 million of the outstanding principal on the Term Loan Facility during the six months ended June 30, 2023. During the three months ended September 30, 2023, the Company made a prepayment, described in accordance withnote (3) to this table, that satisfied the terms ofremaining quarterly payment obligations. As such, the senior secured credit agreement (the "Senior Secured Credit Agreement") governingentire remaining balance is due in 2026 and is classified as non-current on the Consolidated Balance Sheet at September 30, 2023.
(2)In February 2023, the Senior Secured Credit Facilities, which consistAgreement was amended to establish Adjusted Term Secured Overnight Financing Rate (“SOFR”) as the alternate rate of interest applicable to the Company’s Term Loan Facility. Refer to the “Amendments to Senior Secured Credit Facilities” section below for more information.
(3)On August 22, 2023, the Company issued $750.0 million aggregate principal amount of 9.000% Senior Secured Notes due 2028. On the same date, the Company used a portion of the net proceeds from this issuance to prepay $665.0 million of outstanding principal on the Term Loan Facility, andwhich the Company repurchased at a 1% discount. The Company incurred costs of $12.3 million related to these transactions.
(4)In June 2023, the Senior Secured Credit Agreement was amended to extend the maturity date of a substantial portion of the commitments under the Company’s Revolving Credit Facility to August 2026, reduce the aggregate revolving credit commitments of the Revolving Credit Facility, and replace the benchmark interest rates applicable to the Revolving Credit Facility. Refer to the “Amendments to Senior Secured Credit Facilities” section below for more information.
(2)(5)In June 2023, the Receivables-Based Credit Agreement was amended to extend its maturity to August 2026, increase its aggregate revolving credit commitments, and replace the benchmark interest rates. Refer to the “Amendment to Receivables-Based Credit Facility” section below for more information.
(6)In September 2023, the Company repurchased in the open market $5.0 million of the CCOH 7.750% Senior Notes and $10.0 million of the CCOH 7.500% Senior Notes at a discount, resulting in a gain on extinguishment of $3.2 million. The repurchased notes are to be held by a subsidiary of the Company and have not been cancelled.
(7)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 $29.4 million at current exchange rates. In April 2022, as permitted under the terms of the loan agreement, 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. This loan did not originally bear interest, but effective June 29, 2022, the annual interest rate is 0.7%. Additionally, in June 2022, the Company paid a fee relating to the state guarantee equal to 0.5% of the outstanding amount of the loan. Effective June 29, 2022, the annual cost of the state guarantee is 1.0% of the outstanding loan amount through June 29, 2024 and 2.0% of the outstanding loan amount for the remainder of the loan term.purposes.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.7$5.1 billion and $5.9$4.7 billion as of September 30, 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 September 30, 2022,2023, the Company was in compliance with all covenants contained in its debt agreements.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amendments to Senior Secured Credit Facilities
On February 20, 2023, the Senior Secured Credit Agreement, which governs the Company’s Term Loan Facility and Revolving Credit Facility, was amended to establish Adjusted Term SOFR (as defined therein) as the alternate rate of interest applicable to the Company’s Term Loan Facility in connection with the cessation of London Interbank Offered Rate (“LIBOR”).
On June 12, 2023, the Senior Secured Credit Agreement was further amended to, among other things, reduce the aggregate revolving credit commitments of the Revolving Credit Facility from $175.0 million to $150.0 million, with the full $150.0 million of revolving credit commitments available through August 23, 2024 and $115.8 million of such revolving credit commitments extending and available through August 23, 2026, and amend the benchmark interest rate provisions to replace LIBOR with alternative reference rates.
These amendments are reflected in the information below.
Size and Availability
The Senior Secured Credit Agreement, as amended, provides for the Term Loan Facility in an aggregate principal amount of $2,000.0 million and the Revolving Credit Facility with $150.0 million of revolving credit commitments available through August 23, 2024, reducing to $115.8 million available through August 23, 2026.
Interest Rate and Fees
Effective June 12, 2023, new borrowings or the continuation of existing borrowings under the Senior Secured Credit Agreement bear interest at a rate per annum equal to the amended Applicable Rate (as defined therein) plus either: (a) a base rate equal to the highest of: (1) the rate of interest in effect for such date as publicly announced from time to time by the administrative agent as its “prime rate,” (2) the Federal Funds Rate plus 0.50%, (3) 0.00%, and (4) a rate based on the Secured Overnight Financing Rate (“Term SOFR”) plus an adjustment for a one-month tenor in effect on such day plus 1.00%; or (b)(1) a term rate based on Term SOFR plus an adjustment for loans denominated in dollars, the Canadian Dollar Offered Rate (“CDOR”) for loans denominated in Canadian dollars, and the Euro Interbank Offered Rate (“EURIBOR”) for loans denominated in euros, or (2) a daily rate based on the Sterling Overnight Index Average (“SONIA”) plus an adjustment for loans denominated in pounds sterling.
In addition to paying interest on outstanding principal under the Senior Secured Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Senior Secured Credit Agreement in respect of the unutilized revolving commitments thereunder. The Company is also required to pay a customary letter of credit and fronting fee for each issued letter of credit.
Amortization and Maturity
The term loans under the 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. The Revolving Credit Facility also matures on August 23, 2026 in the amounts set forth above.
Amendment to Receivables-Based Credit Facility
On June 12, 2023, the Company entered into an amendment to the Receivables-Based Credit Agreement, which governs the Company’s Receivables-Based Credit Facility, to, among other things, extend the maturity date of the Receivables-Based Credit Facility from August 23, 2024 to August 23, 2026, increase the aggregate revolving credit commitments from $125.0 million to $175.0 million, and amend the benchmark interest rate provisions to replace LIBOR with alternative reference rates. These amendments are reflected in the information below.
Size and Availability
The Receivables-Based Credit Agreement provides for an asset-based revolving credit facility, with amounts available from time to time (including in respect of letters of credit) equal to the lesser of (a) the borrowing base, which equals 85.0% of the eligible accounts receivable of the borrower and the subsidiary borrowers, subject to customary eligibility criteria minus any reserves, and (b) the aggregate revolving credit commitments, which is $175.0 million.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest Rate and Fees
Effective June 12, 2023, new borrowings or the continuation of existing borrowings under the Receivables-Based Credit Agreement bear interest at a rate per annum equal to an amended Applicable Rate (defined therein) plus either: (a) a base rate equal to the highest of: (1) the rate of interest in effect for such date as publicly announced from time to time by the administrative agent as its “prime rate,” (2) the Federal Funds Rate plus 0.50%, (3) 0.00%, and (4) Term SOFR plus an adjustment for a one-month tenor in effect on such day plus 1.00%; or (b)(1) a term rate based on Term SOFR plus an adjustment for loans denominated in dollars, the CDOR rate for loans denominated in Canadian dollars, and the EURIBOR rate for loans denominated in euros, or (2) a daily rate based on the SONIA plus an adjustment for loans denominated in pounds sterling.
In addition to paying interest on outstanding principal under the Receivables-Based Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Receivables-Based Credit Agreement in respect of the unutilized revolving commitments thereunder. The Company is also required to pay a customary letter of credit and fronting fee for each issued letter of credit.
Maturity
Borrowings under the Receivables-Based Credit Agreement mature, and lending commitments thereunder terminate, on August 23, 2026.
CCOH 9.000% Senior Secured Notes Due 2028
On August 22, 2023, the Company completed the sale of $750.0 million in aggregate principal amount of 9.000% Senior Secured Notes due 2028 (the “CCOH 9.000% Senior Secured Notes”) in a private placement to persons reasonably believed to be qualified institutional buyers in reliance on the exemption from registration pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States in compliance with Regulation S under the Securities Act. The CCOH 9.000% Senior Secured Notes were issued pursuant to an indenture, dated as of August 22, 2023 (the “CCOH 9.000% Senior Secured Notes Indenture”), among the Company, the subsidiaries of the Company acting as guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee and as collateral agent.
The CCOH 9.000% Senior Secured Notes mature on September 15, 2028 and bear interest at a rate of 9.000% per annum. Interest on the CCOH 9.000% Senior Secured Notes is payable to the holders thereof semi-annually on March 15 and September 15 of each year, beginning on March 15, 2024.
Guarantees and Security
The CCOH 9.000% Senior Secured Notes are guaranteed fully and unconditionally on a senior secured basis by the subsidiaries of the Company acting as guarantors thereto and any of the Company’s future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Senior Secured Credit Facilities and the Receivables-Based Credit Facility.
The CCOH 9.000% Senior Secured Notes and the guarantees thereof are secured on a first-priority basis by security interests in all of the Company’s and guarantors’ assets securing the Senior Secured Credit Facilities and the CCOH 5.125% Senior Secured Notes, subject to certain exceptions, and on a second-priority basis by security interests in all of the Company’s and guarantors’ assets securing the Company’s Receivables-Based Credit Facility on a first-priority basis, in each case, other than any excluded assets.
Redemptions
The Company may redeem all or a portion of the CCOH 9.000% Senior Secured Notes at the redemption prices set forth in the CCOH 9.000% Senior Secured Notes Indenture.
Certain Covenants
The CCOH 9.000% Senior Secured Notes Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: incur or guarantee additional debt or issue certain preferred stock; redeem, purchase or retire subordinated debt; make certain investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries that are not guarantors of the debt; enter into certain transactions with affiliates; merge or consolidate with another person or sell or otherwise dispose of all or substantially all of the Company’s assets; sell certain assets, including capital stock of the Company’s subsidiaries; designate the Company’s subsidiaries as unrestricted subsidiaries; pay dividends, redeem or repurchase capital stock or make other restricted payments; and incur certain liens. As of September 30, 2023, the Company was in compliance with all covenants contained in the CCOH 9.000% Senior Secured Notes Indenture.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Letters of Credit, Surety Bonds and Guarantees
As of September 30, 2022, theThe Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $131.8 million of remaining excess availability, and $41.5 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $83.5 million of excess availability. Additionally, as of September 30, 2022, the Company had $82.5 million and $26.4 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $8.3 million of cash collateral. Thesehas letters of credit, surety bonds and bank guarantees relaterelated to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
As of September 30, 2023, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $106.8 million of remaining excess availability, and $40.2 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $111.1 million of excess availability. Additionally, as of September 30, 2023, the Company had $79.2 million and $29.2 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $8.0 million of cash collateral.
A portion of these letters of credit, surety bonds and guarantees at September 30, 2023 related to discontinued operations that were held for sale at September 30, 2023. Please refer to Note 2 for additional information.
NOTE 56 – 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 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
TwoPrior to the Company’s separation from iHeartCommunications, Inc. in 2019, two former employees of Clear Media Limited (“Clear Media”), a former indirect, non-wholly-owned subsidiary of the Company, have beenwere convicted in China of certain crimes, including the crime of misappropriation of Clear Media funds, and sentenced to imprisonment.imprisonment after a police investigation. 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 U.S. Department of Justice (the "DOJ"“DOJ”) of the investigation of Clear Media and is cooperating to provide documents, interviews and information to these agencies.Media. 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'sAttorney’s Office for the Eastern District of New York both in connection with the previously disclosed investigations. On April 28,investigation of Clear Media. In May 2020, the Company tenderedfinalized the shares representingsale of 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 required 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. The Investigation and Litigation Support Agreement expired in March 2022.Media.
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 is meetingengaged with these agencies to engage in discussions aboutthe SEC and the DOJ regarding the potential resolution of these matters, including potential settlement. Based on the discussions to date, the Company recorded an estimated liabilitythis matter and, during the first quarter of 2022, recorded an estimated liability of $7.1 million related to account for a potential resolution of these matters. However, at this time,such matter. Having reached an agreement in principle with the SEC to settle the claims against the Company, cannot predictand based on the eventual scope, duration or outcomeCompany’s expectations relating to a definitive order, the Company recorded an incremental liability of these discussions, including whether a settlement will be reached,$19.0 million for the second quarter of 2023 to equal the amount of any potential monetary paymentsthe expected settlement payment. In September 2023, the Company reached a settlement with the SEC. Without admitting or denying the scopeunderlying allegations, the Company has agreed to pay a total of injunctive or other relief,approximately $26.1 million in disgorgement, civil penalties and prejudgment interest to the resultsSEC in a series of installments over the next year, of which may be materially adverse toapproximately $13 million was paid in October 2023. As of June 30, 2023, the Company its financial condition and its resultshad recorded a liability for the full amount of operations. At this time,the potential settlement payment in anticipation of such settlement. In connection with the settlement, the DOJ declined to pursue any charges against the Company is unable to reasonably estimate, or provide any assurance regarding, the amount of any potential loss in excess of the amount accrued relatingrelated to this investigation.matter.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 67 – INCOME TAXES
Income Tax Benefit Attributable to Continuing Operations
The Company’s income tax benefit attributable to continuing operations for the three and nine months ended September 30, 2023 and 2022 consisted of the following components:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Current tax expense attributable to continuing operations | $ | (2,830) | | | $ | (1,299) | | | $ | (6,442) | | | $ | (3,493) | |
Deferred tax benefit attributable to continuing operations | 3,074 | | | 22,419 | | | 18,464 | | | 3,938 | |
Income tax benefit attributable to continuing operations | $ | 244 | | | $ | 21,120 | | | $ | 12,022 | | | $ | 445 | |
The effective tax rates for continuing operations for the three and nine months ended September 30, 2023 were 0.5% and 6.2%, respectively, compared to 52.9% and 0.3% for the three and nine months ended September 30, 2022, and 2021 consisted of the following components:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Current tax benefit (expense) | $ | (1,438) | | | $ | 4,713 | | | $ | (4,458) | | | $ | 5,734 | |
Deferred tax benefit | 22,396 | | | 2,181 | | | 4,677 | | | 30,285 | |
Income tax benefit | $ | 20,958 | | | $ | 6,894 | | | $ | 219 | | | $ | 36,019 | |
respectively. The effective tax rates for the three and nine months ended September 30, 2022each period were 35.1% and 0.1%, respectively, compared to 14.5% and 6.7% for the three and nine months ended September 30, 2021, 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.
NOTE 78 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of September 30, 20222023 and December 31, 2021:2022:
| (In thousands) | (In thousands) | September 30, 2022 | | December 31, 2021 | (In thousands) | September 30, 2023 | | December 31, 2022 |
Structures(1) | Structures(1) | $ | 2,295,132 | | | $ | 2,356,245 | | Structures(1) | $ | 2,133,246 | | | $ | 2,098,547 | |
Furniture and other equipment | Furniture and other equipment | 234,939 | | | 251,084 | | Furniture and other equipment | 220,453 | | | 211,319 | |
Land, buildings and improvements(1) | Land, buildings and improvements(1) | 148,194 | | | 146,064 | | Land, buildings and improvements(1) | 142,119 | | | 131,758 | |
Construction in progress | Construction in progress | 60,631 | | | 54,361 | | Construction in progress | 38,239 | | | 67,047 | |
Property, plant and equipment, gross | Property, plant and equipment, gross | 2,738,896 | | | 2,807,754 | | Property, plant and equipment, gross | 2,534,057 | | | 2,508,671 | |
Less: Accumulated depreciation | Less: Accumulated depreciation | (1,983,333) | | | (1,980,508) | | Less: Accumulated depreciation | (1,894,235) | | | (1,836,558) | |
Property, plant and equipment, net | Property, plant and equipment, net | $ | 755,563 | | | $ | 827,246 | | Property, plant and equipment, net | $ | 639,822 | | | $ | 672,113 | |
(1)During the nine months ended September 30, 2022,2023, the Company acquired $2.3 million of billboard structures and $6.3land of $1.5 million of landand $0.1 million, respectively, as part of asset acquisitions.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 89 – 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 September 30, 20222023 and December 31, 2021:2022:
| (In thousands) | (In thousands) | September 30, 2022 | | December 31, 2021 | (In thousands) | September 30, 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(1) | $ | 731,932 | | | $ | — | | | $ | 717,666 | | | $ | — | | |
Permits(1) | | Permits(1) | $ | 746,126 | | | $ | (64,326) | | | $ | 739,119 | | | $ | (16,058) | |
Transit, street furniture and other outdoor contractual rights | Transit, street furniture and other outdoor contractual rights | 413,451 | | | (374,761) | | | 446,976 | | | (397,778) | | Transit, street furniture and other outdoor contractual rights | 350,763 | | | (318,046) | | | 352,663 | | | (315,144) | |
Permanent easements(1) | Permanent easements(1) | 160,687 | | | — | | | 161,079 | | | — | | Permanent easements(1) | 163,293 | | | — | | | 160,688 | | | — | |
Trademarks | Trademarks | 83,569 | | | (28,807) | | | 83,569 | | | (22,560) | | Trademarks | 83,569 | | | (37,133) | | | 83,569 | | | (30,889) | |
Other | Other | 1,152 | | | (1,056) | | | 1,307 | | | (1,145) | | Other | 1,094 | | | (1,081) | | | 1,146 | | | (1,087) | |
Total intangible assets | Total intangible assets | $ | 1,390,791 | | | $ | (404,624) | | | $ | 1,410,597 | | | $ | (421,483) | | Total intangible assets | $ | 1,344,845 | | | $ | (420,586) | | | $ | 1,337,185 | | | $ | (363,178) | |
(1)During the nine months ended September 30, 2022,2023, the Company acquired $39.6permits and permanent easements of $7.0 million of permits and $3.8 million, of permanent easementsrespectively, as part of asset acquisitions. The acquired permits have amortization periods ranging from 11 to 16 years.
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 20212022 Annual Report on Form 10-K.
•During the second quarter of In 2022, the Company tested certain of its indefinite-livedthen-indefinite-lived permits for impairment during the second quarter due to rising interest rates and inflation, resulting in an impairment charge of $21.8 million. Additionally, the Company’s annual impairment test as of July 1, 2022 resulted in an impairment charge of $0.9 million related to its permanent easements during the third quarter of 2022.
•During No impairment was recognized during the first quarternine months ended September 30, 2023, and there were no indicators of 2021, the Company tested its indefinite-lived permits for impairment due to an increase in the discount rate, resulting in an impairment charge of $119.0 million. The Company’s annual impairment test as of July 1, 2021 did not result in any additional impairment.this date.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the nine months ended September 30, 2022:2023:
| (In thousands) | (In thousands) | Americas | | Europe | | Other | | Consolidated | (In thousands) | America | | Airports | | Europe-North | | | Consolidated |
Balance as of December 31, 2021(1) | $ | 507,819 | | | $ | 190,885 | | | $ | — | | | $ | 698,704 | | |
Balance as of December 31, 2022(1) | | Balance as of December 31, 2022(1) | $ | 482,937 | | | $ | 24,882 | | | $ | 142,824 | | | | $ | 650,643 | |
| Foreign currency impact | Foreign currency impact | — | | | (24,841) | | | — | | | (24,841) | | Foreign currency impact | — | | | — | | | (1,463) | | | | (1,463) | |
| Balance as of September 30, 2022 | $ | 507,819 | | | $ | 166,044 | | | $ | — | | | $ | 673,863 | | |
Balance as of September 30, 2023 | | Balance as of September 30, 2023 | $ | 482,937 | | | $ | 24,882 | | | $ | 141,361 | | | | $ | 649,180 | |
(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 and $90.4 million for Americas, Europe and Other, respectively.Other.
The Company performs its annual impairment test for goodwill as of July 1 of each year, and more frequently as events or changes in circumstances warrant, as described in the Company's 20212022 Annual Report on Form 10-K. No goodwill impairment was recognized during the nine months ended September 30, 20222023 or 2021.
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, upon which it continued to execute through the fourth quarter of 2021 when the impacted employees were terminated. In 2022, it was determined that certain costs would be less than previously estimated due to former employees no longer being eligible for severance upon finding alternative employment in accordance with the terms of the restructuring plan, resulting in a net reversal of these costs during the period. Remaining costs associated with this restructuring plan are not expected to be significant.
The following table presents net costs incurred (reversed) in the Company’s Europe segment in connection with this restructuring plan during the three and nine months ended September 30, 2022 and 2021 and since the plan was initiated:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, | | Total to date |
| 2022 | | 2021 | | 2022 | | 2021 | | September 30, 2022 |
Costs incurred (reversed) in Europe segment, net: | | | | | | | | | |
Direct operating expenses(1) | $ | (86) | | | $ | 7,984 | | | $ | (239) | | | $ | 17,119 | | | $ | 16,458 | |
Selling, general and administrative expenses(1) | 872 | | | 8,322 | | | 1,405 | | | 16,398 | | | 23,867 | |
Total charges, net | $ | 786 | | | $ | 16,306 | | | $ | 1,166 | | | $ | 33,517 | | | $ | 40,325 | |
(1)Costs are categorized as Restructuring and other costs and are therefore excluded from Segment Adjusted EBITDA.
Additionally, the Company recognized corporate costs related to this restructuring plan of $1.1 million during the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the Company reversed $0.5 million of these costs.2022.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
As of September 30, 2022, the total liability related to this restructuring plan was $10.1 million. The Company expects to pay most of this balance by the end of the second quarter of 2023. The following table presents changes in this liability balance during the nine months ended September 30, 2022:CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
| | | | | | | | | | | | | | | | | | | | | |
(In thousands) | | | Europe | | | | Corporate | | Total |
Liability balance as of December 31, 2021 | | | $ | 23,860 | | | | | $ | 456 | | | $ | 24,316 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Costs incurred (reversed), net(1) | | | 1,166 | | | | | (456) | | | 710 | |
Costs paid or otherwise settled | | | (11,209) | | | | | — | | | (11,209) | |
Foreign currency impact | | | (3,749) | | | | | — | | | (3,749) | |
| | | | | | | | | |
Liability balance as of September 30, 2022 | | | $ | 10,068 | | | | | $ | — | | | $ | 10,068 | |
(UNAUDITED)(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 corporate costs of $0.8 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively, and $3.1 million and $1.7 million during the nine months ended September 30, 2022 and 2021, respectively, as well as additional restructuring costs (reversals) in Europe of $(0.1) million and $0.3 million during the three months ended September 30, 2022 and 2021, respectively, and $0.3 million and $0.4 million during the nine months ended September 30, 2022 and 2021, respectively. As of September 30, 2022, the total remaining liability related to these other cost-savings initiatives was approximately $2.9 million and is expected to be paid through the first half of 2023.
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three and nine months ended September 30, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except per share data) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
Numerator: | | | | | | | |
Net loss attributable to the Company – common shares | $ | (39,757) | | | $ | (40,831) | | | $ | (195,289) | | | $ | (497,764) | |
Denominator: | | | | | | | |
Weighted average common shares outstanding – basic | 475,612 | | | 469,234 | | | 473,787 | | | 467,994 | |
| | | | | | | |
Weighted average common shares outstanding – diluted | 475,612 | | | 469,234 | | | 473,787 | | | 467,994 | |
Net loss attributable to the Company per share of common stock: | | | | | | | |
Basic | $ | (0.08) | | | $ | (0.09) | | | $ | (0.41) | | | $ | (1.06) | |
Diluted | $ | (0.08) | | | $ | (0.09) | | | $ | (0.41) | | | $ | (1.06) | |
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands, except per share data) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2023 | | 2022 | | 2023 | | 2022 |
Numerators: | | | | | | | |
Loss from continuing operations | $ | (51,082) | | | $ | (18,798) | | | $ | (182,493) | | | $ | (153,799) | |
Less: Net income from continuing operations attributable to noncontrolling interests | 648 | | | 977 | | | 823 | | | 1,529 | |
Net loss from continuing operations attributable to the Company | (51,730) | | | (19,775) | | | (183,316) | | | (155,328) | |
Loss from discontinued operations | (211,736) | | | (19,982) | | | (152,326) | | | (40,027) | |
Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | 24 | | | — | | | 57 | | | (66) | |
Net loss from discontinued operations attributable to the Company | (211,760) | | | (19,982) | | | (152,383) | | | (39,961) | |
Net loss attributable to the Company | $ | (263,490) | | | $ | (39,757) | | | $ | (335,699) | | | $ | (195,289) | |
| | | | | | | |
Denominators: | | | | | | | |
Weighted average common shares outstanding – Basic | 482,945 | | | 475,612 | | | 481,289 | | | 473,787 | |
| | | | | | | |
Weighted average common shares outstanding – Diluted | 482,945 | | | 475,612 | | | 481,289 | | | 473,787 | |
| | | | | | | |
Net loss attributable to the Company per share of common stock — Basic: | | | | | | | |
Net loss from continuing operations attributable to the Company per share of common stock | $ | (0.11) | | | $ | (0.04) | | | $ | (0.38) | | | $ | (0.33) | |
Net loss from discontinued operations attributable to the Company per share of common stock | (0.44) | | | (0.04) | | | (0.32) | | | (0.08) | |
Net loss attributable to the Company per share of common stock — Basic | $ | (0.55) | | | $ | (0.08) | | | $ | (0.70) | | | $ | (0.41) | |
| | | | | | | |
Net loss attributable to the Company per share of common stock — Diluted: | | | | | | | |
Net loss from continuing operations attributable to the Company per share of common stock | $ | (0.11) | | | $ | (0.04) | | | $ | (0.38) | | | $ | (0.33) | |
Net loss from discontinued operations attributable to the Company per share of common stock | (0.44) | | | (0.04) | | | (0.32) | | | (0.08) | |
Net loss attributable to the Company per share of common stock — Diluted | $ | (0.55) | | | $ | (0.08) | | | $ | (0.70) | | | $ | (0.41) | |
Outstanding equity awards of 24.229.2 million and 27.924.2 million shares for the three months ended September 30, 2023 and 2022, respectively, and 2021, respectively,23.0 million and 25.2 million and 25.5 millionshares for the nine months ended September 30, 20222023 and 2021,2022, respectively, were not included in the computation of diluted earnings per share because to 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) | September 30, 2022 | | December 31, 2021 | (In thousands) | September 30, 2023 | | December 31, 2022 |
Cash and cash equivalents in the Balance Sheet | $ | 327,429 | | | $ | 410,767 | | |
| Cash and cash equivalents in the Balance Sheets | | Cash and cash equivalents in the Balance Sheets | $ | 313,406 | | | $ | 282,232 | |
Cash and cash equivalents included in Current assets of discontinued operations | | Cash and cash equivalents included in Current assets of discontinued operations | 1,139 | | | 5,118 | |
Restricted cash included in: | Restricted cash included in: | | Restricted cash included in: | |
Other current assets | Other current assets | 2,506 | | | 1,685 | | Other current assets | 1,859 | | | 1,953 | |
| Current assets of discontinued operations | | Current assets of discontinued operations | 842 | | | 1,322 | |
Other assets | Other assets | 8,196 | | | 7,519 | | Other assets | 4,234 | | | 4,149 | |
Total cash, cash equivalents and restricted cash in the Statement of Cash Flows | $ | 338,131 | | | $ | 419,971 | | |
Other assets of discontinued operations | | Other assets of discontinued operations | 3,170 | | | 3,908 | |
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 | $ | 324,650 | | | $ | 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) | September 30, 2022 | | December 31, 2021 | (In thousands) | September 30, 2023 | | December 31, 2022 |
Accounts receivable | Accounts receivable | $ | 573,139 | | | $ | 666,888 | | Accounts receivable | $ | 455,193 | | | $ | 467,776 | |
Less: Allowance for credit losses | Less: Allowance for credit losses | (21,340) | | | (23,772) | | Less: Allowance for credit losses | (13,657) | | | (14,093) | |
Accounts receivable, net | Accounts receivable, net | $ | 551,799 | | | $ | 643,116 | | Accounts receivable, net | $ | 441,536 | | | $ | 453,683 | |
Credit loss expense (reversal) related to accounts receivable of continuing operations was $2.5less than $0.1 million and $(0.3)$1.7 million during the three months ended September 30, 20222023 and 2021,2022, respectively, and $3.3$1.7 million and $(3.4)$2.9 million during the nine months ended September 30, 20222023 and 2021,2022, respectively.
Other Comprehensive Income (Loss)Accrued Expenses
There were no significant changes in deferred income tax liabilities resulting from adjustments to other comprehensive income (loss) duringThe following table discloses the three and nine months endedcomponents of “Accrued expenses” as of September 30, 20222023 and 2021.December 31, 2022:
| | | | | | | | | | | |
(In thousands) | September 30, 2023 | | December 31, 2022 |
Accrued rent | $ | 89,790 | | | $ | 86,892 | |
Accrued employee compensation and benefits | 49,360 | | | 86,630 | |
Accrued taxes | 44,367 | | | 37,590 | |
Accrued other | 140,657 | | | 119,638 | |
Total accrued expenses | $ | 324,174 | | | $ | 330,750 | |
Share-Based Compensation
On May 4, 2022,2, 2023, the Compensation Committee of the Company’s Board of Directors approved grants of 5.214.7 million restricted stock units (“RSUs”) and 1.83.4 million performance stock units (“PSUs”) to certain of employees of its employees.continuing operations.
•The RSUs generally vest in three 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.
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•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 PSUs 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 Income (Expense), Net
During the three months ended September 30, 2023, the Company recognized a net foreign currency transaction loss related to continuing operations of $13.7 million, and during the nine months ended September 30, 2023, the Company recognized a net foreign currency transaction gain related to continuing operations of $7.4 million. During the three and nine months ended September 30, 2022, the Company recognized foreign currency transaction losses related to continuing operations of $28.8 million and $63.0 million, 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 and nine months ended September 30, 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 (the “MD(“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. •Critical Accounting Estimates – Discussion of our material accounting estimates that involve a significant level of estimation uncertainty, which we believe are most important to understanding the assumptions and judgments incorporated in our consolidated financial statements. 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 that we own or operate in various key markets worldwide. We have twousing assorted digital and traditional display types. Effective December 31, 2022, we had four reportable business segments, which we believe reflect how the Company is currently managed: Americas,segments: America, which consists of our U.S. operations primarily in theexcluding airports; Airports, which includes revenue from U.S., and Europe,Caribbean airports; Europe-North, which consists of operations in Europethe United Kingdom (the “U.K.”), the Nordics and Singapore.several other countries throughout northern and central Europe; and Europe-South, which consists of operations in Spain, and prior to their sales on March 31, 2023, May 31, 2023 and October 31, 2023, respectively, Switzerland, Italy and France. Our remaining operating segment ofoperations in Latin America, doesincluding in Mexico, Brazil, Chile and Peru, and in Singapore are disclosed as “Other.” We have conformed the segment disclosures for the prior periods in this MD&A and throughout this Quarterly Report on Form 10-Q to the current period presentation.
Dispositions
Since December 2022, we have sold, or have entered into agreements to sell, our businesses in Switzerland, Italy, Spain and France, comprising our entire Europe-South segment.
•In December 2022, we entered into an agreement to sell our business in Switzerland to Goldbach Group AG. On March 31, 2023, we completed this sale and received cash proceeds, net of customary closing adjustments and cash sold, of $89.4 million.
•On May 31, 2023, we sold our business in Italy to JCDecaux for cash proceeds, net of customary closing adjustments and cash sold, of $5.1 million.
•In May 2023, we entered into an agreement to sell our business in Spain to JCDecaux for cash consideration of approximately $64.3 million. This transaction is expected to close in 2024, upon satisfaction of regulatory approval and other customary closing conditions.
•In July 2023, we entered into exclusive discussions with Equinox Industries (“Equinox”) related to our business in France, and in October 2023, we entered into a share purchase agreement with Equinox to sell our business in France. The sale was subsequently completed on October 31, 2023, and in accordance with that share purchase agreement, we delivered our business in France to Equinox with approximately €42 million of cash, subject to adjustment for related customary items, tax and other costs, to support ongoing operations of the business, and Equinox assumed the €28.125 million state-guaranteed loan held by Clear Channel France.
We intend to use net proceeds from these sales, after payment of transaction-related fees and expenses, to improve liquidity and increase financial flexibility of the business as permitted under our debt agreements. As part of the sales agreements for each business, we have agreed to provide certain transitional services as defined within the respective Transition Services Agreement for a period of time after sale.
Discontinued Operations
While the sales of, or agreements to sell, our businesses in Switzerland, Italy and Spain did not meetpreviously qualify for presentation as discontinued operations, we concluded that, in aggregate, the quantitative thresholdsales of these businesses along with the agreement to qualify assell our business in France (collectively comprising our entire Europe-South segment) met the criteria for discontinued operations presentation during the third quarter of 2023. As a reportableresult, each of these businesses has been reclassified to discontinued operations in the financial statements included in this Quarterly Report on Form 10-Q for all periods presented, resulting in changes to the presentation of certain amounts for prior periods. Unless otherwise noted, the remaining discussion in this MD&A presents the results of continuing operations and excludes amounts related to discontinued operations for all periods presented.
Exploration of Strategic Alternatives
The Company has initiated a process to sell the businesses in its Europe-North segment and is disclosed as “Other” herein. Each segment provides out-of-home advertising services inhas also initiated a strategic review of its respective geographic region using various digital and traditional display types.
In December 2021, our Board of Directors authorized aLatin American businesses. There can be no assurance that the process to sell or the review of strategic alternatives for our European business, including a possible sale. Most recently, our Board of Directors authorized us to focus the strategic review on the potential disposal of certain of our lower-margin European assets (and/or other European assets of lower priority to our European business on the whole), while retaining, for now, our higher-margin European assets, which are performing well. However, there can be no assurance that this strategic reviewthese businesses will result in any transaction(s)additional transactions or particular outcome(s). We haveoutcomes. The Company has not set a timetable for completion of this strategic review,these reviews, may suspend the processprocesses at any time and dodoes not intend to make further announcements regarding the processprocesses unless and until ourthe Board of Directors approves a course of action for which further disclosure is appropriate.
Macroeconomic Indicators,Trends and 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 internationalOur results are impacted by the economic conditions in the foreign markets in which we operate as advertising revenue is highly correlated to, and has historically trended in line with, changes in gross domestic product, both domestically and internationally. However, we believe the diversity of our asset base and customer portfolio reduces our exposure to negative market- and industry-specific trends.
•During 2023, we have experienced weakness in revenue within certain of our larger U.S. markets, most notably the San Francisco/Bay Area market as specific macroeconomic trends affecting this market have resulted in lower spend on out-of-home advertising. Additionally, ongoing Hollywood labor union strikes, which began in May 2023, have negatively impacted out-of-home advertising sales in the media/entertainment industry across our U.S. markets. The negative impacts of these trends, which could continue in future periods, have been more than offset by fluctuationshigher revenue generated in foreign currency exchange rates. In earlycertain U.S. markets and our Airports segment.
•During 2023, we have also seen economic variability throughout Europe impacting country level growth rates in our European businesses. Economic downturns in Sweden and Norway have negatively impacted demand for out-of-home advertising in these countries and could continue to negatively impact results in future quarters; however, this was more than offset by higher revenue in most of the other European countries in which we operate.
As described in our 2022 worldwideAnnual Report on Form 10-K, global inflation began to increase. Inincreased in 2022, and in response, to heightened levels of inflation, central banks, including the U.S. Federal Reserve, and the European Central Bank, have increasedraised interest rates significantly, resulting in an increase in our weighted average cost of debt. Additionally, the U.S. dollarInterest rates have continued to rise in 2023, and while inflation rates have slowed, global inflation remains elevated and has significantly strengthened against the Euro and British pound sterling, resulting in an adverse impact on reportedimpacted our results due to higher costs, particularly in our Europe segment. The U.S. dollar may continue to strengthen against these foreign currencies if the Federal Reserve further raises the federal funds rate, which may result in downstream impacts to global exchange rates and further adverse impacts to our reported results in our Europe segment. While inflation has affected our performance in 2022, resulting in higher costs for wages, salaries, materials and equipment, webusinesses. We believe we have partially offset these higher costs by increasing the effective advertising rates for most of our out-of-home display faces,products.
Additionally, our international results are impacted by fluctuations in foreign currency exchange rates. During 2022, the U.S. dollar significantly strengthened against the Euro and to date, weBritish 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 have not suffered materialhad a significant impact on our reported results in 2023. While inflation, interest rates and foreign currency exchange rates have been less volatile in 2023, fluctuations in these indicators are uncertain and could result in further adverse impacts from the heightened levels of inflation experienced at a global level.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.
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.
Debt Activity
In June 2023, we amended our Receivables-Based Credit Facility to extend the maturity date to August 2026 and our Revolving Credit Facility to extend the maturity of a substantial portion of the commitments thereunder to August 2026. Additionally, the aggregate revolving credit commitments under each facility were revised.
On August 22, 2023, we issued $750.0 million aggregate principal amount of 9.000% Senior Secured Notes due 2028 (the “CCOH 9.000% Senior Secured Notes”) and used a portion of the net proceeds to prepay $665.0 million of outstanding principal on the Term Loan Facility, which we repurchased at a discount. We intend to use the remaining proceeds for general corporate purposes.
In September 2023, we repurchased in the open market $5.0 million principal amount of 7.750% Senior Notes due 2028 (the “CCOH 7.750% Senior Notes”) and $10.0 million principal amount of 7.500% Senior Notes due 2029 (the “CCOH 7.500% Senior Notes” and, together with the CCOH 7.750% Senior Notes, the “CCOH Senior Notes”) at a discount. The repurchased notes are to be held by a subsidiary of the Company and have not been cancelled.
Please refer to Note 5 to our 2021 AnnualCondensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-K, COVID-19 had a significant adverse impact on our results of operations during the first quarter of 2021, and we did not experience a return to our pre-COVID-19 historical seasonal levels of revenue until the fourth quarter of 2021. To a large extent, we have experienced similar, or have exceeded, pre-COVID-19 levels of activity during the first nine months 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 through10-Q for additional capital expenditures.details. 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 from continuing operations 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.results of continuing operations.
•Results of discontinued operations are presented and discussed below separately from results of continuing operations.
Revenue and expenses “excluding the impact of movements in foreign exchange rates” are presented in this MD&A are presented because Company 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 Continuing Operations
The comparison of our historical results of operations for the three and nine months ended September 30, 2022 to the three and nine months ended September 30, 2021 is as follows:
| (In thousands) | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Revenue | Revenue | $ | 602,907 | | | $ | 596,416 | | | 1.1% | | $ | 1,771,975 | | | $ | 1,498,406 | | | 18.3% | Revenue | $ | 526,786 | | | $ | 503,344 | | | 4.7% | | $ | 1,495,026 | | | $ | 1,451,781 | | | 3.0% |
Operating expenses: | Operating expenses: | | Operating expenses: | |
Direct operating expenses(1) | Direct operating expenses(1) | 323,543 | | | 324,707 | | | (0.4)% | | 976,070 | | | 914,221 | | | 6.8% | Direct operating expenses(1) | 271,377 | | | 241,389 | | | 12.4% | | 790,206 | | | 721,342 | | | 9.5% |
Selling, general and administrative expenses(1) | Selling, general and administrative expenses(1) | 118,453 | | | 118,158 | | | 0.2% | | 345,704 | | | 328,593 | | | 5.2% | Selling, general and administrative expenses(1) | 87,083 | | | 90,381 | | | (3.6)% | | 266,292 | | | 263,689 | | | 1.0% |
Corporate expenses(1) | Corporate expenses(1) | 37,433 | | | 41,806 | | | (10.5)% | | 120,159 | | | 113,576 | | | 5.8% | Corporate expenses(1) | 34,931 | | | 38,299 | | | (8.8)% | | 129,427 | | | 123,323 | | | 4.9% |
Depreciation and amortization | Depreciation and amortization | 57,846 | | | 65,600 | | | (11.8)% | | 178,830 | | | 190,019 | | | (5.9)% | Depreciation and amortization | 57,699 | | | 49,871 | | | 15.7% | | 186,409 | | | 152,352 | | | 22.4% |
Impairment charges | Impairment charges | 871 | | | — | | | 22,676 | | | 118,950 | | | Impairment charges | — | | | 871 | | | — | | | 22,676 | | |
Other operating expense (income), net | 3,764 | | | (2,422) | | | 220 | | | (4,045) | | | |
Operating income (loss) | 60,997 | | | 48,567 | | | 128,316 | | | (162,908) | | | |
Other operating expense, net | | Other operating expense, net | 6,179 | | | 1,863 | | | 10,122 | | | 676 | | |
Operating income | | Operating income | 69,517 | | | 80,670 | | | 112,570 | | | 167,723 | | |
Interest expense, net | Interest expense, net | (92,878) | | | (84,276) | | | | | (262,270) | | | (267,211) | | | | Interest expense, net | (107,391) | | | (92,620) | | | | | (314,624) | | | (261,704) | | | |
Loss on extinguishment of debt | — | | | — | | | — | | | (102,757) | | | |
Other expense, net | (27,857) | | | (11,973) | | | | | (60,091) | | | (1,788) | | | | |
Loss before income taxes | (59,738) | | | (47,682) | | | | | (194,045) | | | (534,664) | | | | |
Income tax benefit | 20,958 | | | 6,894 | | | | | 219 | | | 36,019 | | | | |
Gain on extinguishment of debt | | Gain on extinguishment of debt | 3,817 | | | — | | | 3,817 | | | �� | | |
Other income (expense), net | | Other income (expense), net | (17,269) | | | (27,968) | | | | | 3,722 | | | (60,263) | | | |
Loss from continuing operations before income taxes | | Loss from continuing operations before income taxes | (51,326) | | | (39,918) | | | | | (194,515) | | | (154,244) | | | |
Income tax benefit attributable to continuing operations | | Income tax benefit attributable to continuing operations | 244 | | | 21,120 | | | | | 12,022 | | | 445 | | | |
Loss from continuing operations | | Loss from continuing operations | (51,082) | | | (18,798) | | | | | (182,493) | | | (153,799) | | | |
Loss from discontinued operations | | Loss from discontinued operations | (211,736) | | | (19,982) | | | (152,326) | | | (40,027) | | |
Consolidated net loss | Consolidated net loss | (38,780) | | | (40,788) | | | | | (193,826) | | | (498,645) | | | | Consolidated net loss | (262,818) | | | (38,780) | | | (334,819) | | | (193,826) | | |
Less amount attributable to noncontrolling interest | 977 | | | 43 | | | | | 1,463 | | | (881) | | | | |
Less: Net income attributable to noncontrolling interests | | Less: Net income attributable to noncontrolling interests | 672 | | | 977 | | | | | 880 | | | 1,463 | | | |
Net loss attributable to the Company | Net loss attributable to the Company | $ | (39,757) | | | $ | (40,831) | | | | | $ | (195,289) | | | $ | (497,764) | | | | Net loss attributable to the Company | $ | (263,490) | | | $ | (39,757) | | | | | $ | (335,699) | | | $ | (195,289) | | | |
(1)Excludes depreciation and amortization.amortization
Consolidated Revenue
Consolidated revenue increased $6.5$23.4 million, or 1.1%4.7%, during the three months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $40.0$9.8 million impact of movements in foreign exchange rates, consolidated revenue increased $46.4$13.6 million, or 7.8%2.7%. As we have continued to recover from the adverse effects of COVID-19, strong customer demand, particularly in our transit business, has resulted in revenue (excluding the impact of movements in foreign exchange rates) exceeding pre-COVID-19 levels in the Americas and Europe reportable segments.
Consolidated revenue increased $273.6$43.2 million, or 18.3%3.0%, during the nine months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $88.8$2.7 million impact of movements in foreign exchange rates, consolidated revenue increased $362.4$46.0 million, or 24.2%3.2%. During 2021,
In both periods, higher revenue throughoutin our businessAirports and Europe-North segments driven by increased demand, new contracts and continued investment in digital infrastructure was adversely affectedpartially offset by COVID-19. However, aslower revenue in our business has recovered, we have seen increasesAmerica segment driven by weaknesses in revenue across almost allthe San Francisco/Bay Area market and the Media/Entertainment vertical.
The following table provides information about consolidated digital revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Digital revenue | $ | 239,056 | | $ | 220,039 | | 8.6% | | $ | 659,021 | | $ | 616,419 | | 6.9% |
Percent of total consolidated revenue | 45.4 | % | | 43.7 | % | | | | 44.1 | % | | 42.5 | % | | |
Digital revenue, excluding movements in foreign exchange rates | $ | 232,784 | | $ | 220,039 | | 5.8% | | $ | 658,595 | | $ | 616,419 | | 6.8% |
Consolidated Direct Operating Expenses
Consolidated direct operating expenses decreased $1.2increased $30.0 million, or 0.4%12.4%, during the three months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $28.3$5.3 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $27.1$24.7 million, or 8.4%10.2%.
Consolidated direct operating expenses increased $61.8$68.9 million, or 6.8%9.5%, during the nine months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $62.3$4.7 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $124.2$73.6 million, or 13.6%10.2%.
These increases were primarily driven bylargely due to higher site lease expense due todriven by lower rent abatements, higher revenue, and lower rent abatementsnew and governmental rent subsidies. We also experienced higher production and installationamended lease contracts. The remaining increase in direct operating expenses was driven by increased sales activity, partially offset by lowerhigher electricity and compensation costs, for our restructuring planas well as higher rental costs related to reduce headcount in our Europe segment.
additional digital displays. The following table provides the restructuring and other costs included withinadditional information about certain drivers of consolidated direct operating expenses during the three and nine months ended September 30, 2022 and 2021:expenses:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Restructuring and other costs(1) | $ | — | | | $ | 8,087 | | | $ | 240 | | | $ | 18,066 | |
(1)Includes severance and related costs for our restructuring plan to reduce headcount in our Europe segment of $8.0 million and $17.1 million during the three and nine months ended September 30, 2021, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Site lease expense | $ | 201,601 | | | $ | 175,767 | | | 14.7 | % | | $ | 581,228 | | | $ | 526,940 | | | 10.3 | % |
Site lease expense, excluding movements in foreign exchange rates | 198,741 | | | 175,767 | | | 13.1 | % | | 584,587 | | | 526,940 | | | 10.9 | % |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 4,403 | | | 15,752 | | | (72.0) | % | | 18,627 | | | 38,357 | | | (51.4) | % |
| | | | | | | | | | | |
Restructuring and other costs | 2 | | | 78 | | | (97.4) | % | | 195 | | | 470 | | | (58.5) | % |
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $0.3decreased $3.3 million, or 0.2%3.6%, during the three months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $9.0$2.1 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $9.3decreased $5.4 million, or 7.9%.5.9%, driven by reductions in property taxes and credit loss expense in our America segment.
Consolidated SG&A expenses increased $17.1$2.6 million, or 5.2%1.0%, during the nine months ended September 30, 20222023 compared to the same period of 2021. Excluding the $19.4 million2022, mainly due to higher employee compensation, facilities and information technology costs, partially offset by lower property taxes related to a legal settlement. There was no net impact of movements in foreign exchange rates consolidated SG&A expenses increased $36.5 million, or 11.1%.
These increases were mainly due to higher employee compensation costs largely driven by improvements in operating performance. Additionally, higher credit loss expense, driven by an increase in current year revenue and prior year reductions in our allowance for credit losses, and increases in other SG&A expenses were partially offset by lower costs for our restructuring plan to reduce headcount in our Europe segment.during this period.
The following table provides the restructuring and other costs included within SG&A expenses during the three and nine months ended September 30, 20222023 and 2021:2022:
| | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, |
| 2022 | | 2021 | | 2022 | | 2021 |
| | | | | | | |
Restructuring and other costs(1) | $ | 1,521 | | | $ | 9,144 | | | $ | 2,940 | | | $ | 17,934 | |
(1)Includes severance and related costs for our restructuring plan to reduce headcount in our Europe segment of $0.9 million and $8.3 million during the three months ended September 30, 2022 and 2021, respectively, and $1.4 million and $16.4 million during the nine months ended September 30, 2022 and 2021, respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
| | | | | | | | | | | |
Restructuring and other costs | $ | 263 | | | $ | 276 | | | (4.7) | % | | $ | 630 | | | $ | 922 | | | (31.7) | % |
Corporate Expenses
Corporate expenses decreased $4.4$3.4 million, or 10.5%8.8%, during the three months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $0.9 million impact of movements in foreign exchange rates, corporate expenses decreased $3.5$3.9 million, or 8.4%, primarily driven10.1%. Lower employee compensation related to variable incentives was partially offset by lowerhigher restructuring and other costs and share-based compensation.due to an insurance reimbursement received in the prior year for certain legal costs.
Corporate expenses increased $6.6$6.1 million, or 5.8%4.9%, during the nine months ended September 30, 20222023 compared to the same period of 2021.2022. Excluding the $1.7 million impact fromof movements in foreign exchange rates, corporate expenses increased $8.3$6.5 million, or 7.3%5.3%, primarily driven by higher employee compensation costs, including share-based compensation, and higherestimated legal liabilities recorded for the resolution of matters related to the investigation of the Company’s former indirect, non-wholly-owned subsidiary, Clear Media Limited. Such expenses are included in restructuring and other costs drivenin the table below. Please refer to Note 6 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details. This increase was partially offset by an increase in estimated legal liabilities.lower employee compensation largely related to variable incentives.
The following table provides additional information about certain drivers of corporate expenses for the three and nine months ended September 30, 2022 and 2021:expenses:
| (In thousands) | (In thousands) | Three Months Ended September 30, | | Nine Months Ended September 30, | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Share-based compensation expense(1) | Share-based compensation expense(1) | $ | 5,290 | | | $ | 5,874 | | | $ | 16,880 | | | $ | 14,331 | | Share-based compensation expense(1) | $ | 4,987 | | | $ | 5,124 | | | (2.7) | % | | $ | 15,134 | | | $ | 16,391 | | | (7.7) | % |
Restructuring and other costs (reversals)(1)(2) | Restructuring and other costs (reversals)(1)(2) | (806) | | | 1,498 | | | 9,742 | | | 8,612 | | Restructuring and other costs (reversals)(1)(2) | 569 | | | (806) | | | NM | | 20,169 | | | 9,705 | | | 107.8 | % |
(1)Includes severanceExcludes share-based compensation expense for employees of discontinued operations for all periods presented.
(2)Restructuring and relatedother costs (reversals) for our restructuring plan to reduce headcount in our Europe segment of $(0.5) million and $1.1 million during the nine months endedending September 30, 2023 and 2022 include liabilities of $19.0 million and 2021, respectively.
Depreciation and Amortization
Depreciation and amortization decreasedincreased $7.8 million, or 15.7%, and $34.1 million, or 22.4%, during the three and nine months ended September 30, 20222023, respectively, compared to the same periods of 2021 mainly due to assets becoming fully depreciated and the impact of movements in foreign exchange rates.
•Depreciation and amortization decreased $7.8 million, or 11.8%, during the three months ended September 30, 2022 compared to the same period of 2021.2022. Excluding the $2.9 million impact of movements in foreign exchange rates, depreciation and amortization decreased $4.9increased $7.3 million, or 7.4%.
•Depreciation14.6%, and amortization decreased $11.2$34.3 million, or 5.9%22.5%, during the three- and nine-month comparison periods, respectively.
These increases were primarily driven by a 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 increases in amortization expense of $16.1 million and $48.2 million during the three and nine months ended September 30, 20222023, respectively, compared to the same periodperiods of 2021. Excluding2022. This was partially offset by the $6.5 million impact of movements in foreign exchange rates, depreciation and amortization decreased $4.7 million, or 2.5%.other assets becoming fully depreciated.
Impairment Charges
During the three months ended September 30, 2022, we recognized an impairment charge of $0.9 million on our permanent easements as a result of our annual impairment test. Additionally, during the three months ended June 30, 2022, we recognized an impairment charge of $21.8 million on our Americas indefinite-lived permits in our America segment driven by rising interest rates and inflation, resulting in total impairment charges of $22.7 million during the nine months ended September 30, 2022.
During There were no impairment charges during the three or nine months ended September 30, 2021, we recognized an impairment charge of $119.0 million on our Americas indefinite-lived permits, driven by an increase in the discount rate and reduction in projected cash flows related to the negative impacts of COVID-19.2023.
Other Operating Expense, (Income), Net
Other operating expense, net, of $3.8increased $4.3 million during the three months ended September 30, 2023 compared to the same period of 2022 was driven by costs related to the strategic reviewreviews of our Europe segment and net losses on disposal of operating assets. Other operating income, net, of $2.4 million during the three months ended September 30, 2021 was driven by net gains on disposal of operating assets.remaining businesses.
Other operating expense, net, was $0.2increased $9.4 million during the nine months ended September 30, 2022 as costs related2023 compared to the strategic reviewsame period of our Europe segment were2022 largely offsetdriven by compensation received in the prior year 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. Other operating income, net was $4.0 million during the nine months ended September 30, 2021, primarily driven by net gains on disposal of operating assets.
Interest Expense, Net
Interest expense, net, increased $8.6$14.8 million and $52.9 million during the three and nine months ended September 30, 20222023, respectively, compared to the same periodperiods of 20212022 driven by higher interest rates on our Term Loan Facility, partially offset by lower interest due to repayment of the $130.0 million draw under our Revolving Credit Facility in the fourth quarter of 2021.
Interest expense, net, decreased $4.9 million during the nine months ended September 30, 2022 compared to the same period of 2021 driven by lower interest rates as a result of refinancing the Clear Channel Worldwide Holdings, Inc. 9.25% Senior Notes Due 2024 (the “CCWH Senior Notes”) in the first half of 2021 and, to a lesser extent, lower interest due to repayment of the $130.0 million draw under our Revolving Credit Facility in the fourth quarter of 2021. These decreases were partially offset by the impact of higher interest rates on our Term Loan Facility.
LossGain on Extinguishment of Debt
During the three and nine months ended September 30, 2021,2023, we recognized lossesa gain on extinguishment of debt of $102.8$3.8 million primarily related to the redemptionopen market repurchase of the CCWH$15.0 million principal amount of CCOH Senior Notes in the first half of the year. We did not extinguish any debt during the nine months ended September 30, 2022.at a discount.
Other Expense,Income (Expense), Net
Other expense,income (expense), net, is mainly comprised of $27.9 million and $12.0 million during the three months ended September 30, 2022 and 2021, respectively, and $60.1 million and $1.8 million during the nine months ended September 30, 2022 and 2021, respectively, primarily result from net foreign exchange gains and losses recognized in connection with intercompany notes denominated in foreign currencies. Asa currency other than the US.functional currency, and the decreases in other expense, net, of $10.7 million and $64.0 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods of 2022 were primarily driven by reduced volatility in the value of the U.S. dollar has strengthened against foreign currencies, particularly the Euro and British pound sterling, these losses have increased.sterling. These decreases in expense were partially offset by expenses related to the CCOH 9.000% Senior Secured Notes issuance and Term Loan Facility prepayment in the third quarter of 2023.
Income Tax Benefit Attributable to Continuing Operations
The effective tax rates were 35.1% and 14.5%for continuing operations for the three and nine months ended September 30, 20222023 were 0.5% and 2021,6.2%, respectively, compared to 52.9% and 0.1% and 6.7%0.3% for the three and nine months ended September 30, 2022, and 2021, respectively. TheseThe effective tax rates for each period 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.
AmericasAmerica Results of Operations
| (In thousands) | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Revenue | Revenue | $ | 346,519 | | | $ | 319,020 | | | 8.6% | | $ | 987,790 | | | $ | 802,524 | | | 23.1% | Revenue | $ | 278,760 | | | $ | 284,201 | | | (1.9)% | | $ | 802,326 | | | $ | 808,483 | | | (0.8)% |
Direct operating expenses(1) | Direct operating expenses(1) | 142,981 | | | 128,518 | | | 11.3% | | 417,129 | | | 334,491 | | | 24.7% | Direct operating expenses(1) | 112,325 | | | 104,612 | | | 7.4% | | 326,298 | | | 301,933 | | | 8.1% |
SG&A expenses(1) | SG&A expenses(1) | 59,144 | | | 51,824 | | | 14.1% | | 167,811 | | | 139,433 | | | 20.4% | SG&A expenses(1) | 45,131 | | | 50,255 | | | (10.2)% | | 143,860 | | | 143,467 | | | 0.3% |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | 144,739 | | | 139,086 | | | 4.1% | | 403,829 | | | 330,527 | | | 22.2% | Segment Adjusted EBITDA | 121,335 | | | 129,679 | | | (6.4)% | | 332,213 | | | 364,062 | | | (8.7)% |
|
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.EBITDA
Three Months
AmericasAmerica Revenue
AmericasAmerica revenue increased $27.5decreased $5.4 million, or 8.6%1.9%, and $6.2 million, or 0.8%, during the three and nine months ended September 30, 20222023, respectively, compared to the same periodperiods of 2021, most notably2022 largely driven by airport displays, which increased 45.0% to $62.3 million as compared to $43.0 millioncontinued weakness in the San Francisco/Bay Area market. Additionally, we saw a significant decrease in sales for the Media/Entertainment vertical during the same periodthird quarter of 2021.2023, driven in large part by the Hollywood labor union strikes. Overall, the decreases in both periods were driven by lower revenue from print displays.
Americas totalThe following table provides information about America digital revenue increased 16.6% during the three months ended September 30, 2022 as compared to the same period of 2021, as follows:revenue:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Digital revenue from billboards, street furniture & spectaculars | $ | 97,559 | | | $ | 91,361 | | | 6.8% |
Digital revenue from transit, including airports | 36,143 | | | 23,285 | | | 55.2% |
Total digital revenue | $ | 133,702 | | | $ | 114,646 | | | 16.6% |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Digital revenue | $ | 97,637 | | $ | 97,579 | | 0.1% | | $ | 274,012 | | $ | 268,953 | | 1.9% |
Percent of total segment revenue | 35.0 | % | | 34.3 | % | | | | 34.2 | % | | 33.3 | % | | |
Revenue generated from national sales comprised 39.7%32.7% and 37.1%37.8% of totalAmerica revenue for the three months ended September 30, 2023 and 2022, respectively, and 2021,33.7% and 36.5% of America revenue for the nine months ended September 30, 2023 and 2022, respectively, while the remainder of revenue was generated from local sales.
AmericasAmerica Direct Operating Expenses
AmericasAmerica direct operating expenses increased $14.5$7.7 million, or 11.3%7.4%, and $24.4 million, or 8.1%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods of 2022 due to higher site lease expense driven by lease renewals and amendments, including the renegotiation of a large existing site lease contract, and lower rent abatements.
The following table provides information about America site lease expense and rent abatements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Site lease expense | $ | 90,126 | | | $ | 81,648 | | | 10.4% | | $ | 258,704 | | | $ | 235,053 | | | 10.1% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 1,586 | | | 3,786 | | | (58.1)% | | 4,855 | | | 11,003 | | | (55.9)% |
America SG&A Expenses
America SG&A expenses decreased $5.1 million, or 10.2%, during the three months ended September 30, 20222023 compared to the same period of 20212022 driven by lower property taxes related to a legal settlement and lower credit loss expense largely due to higher site lease expense driven by higher revenue, most notablya specific reserve recorded in our airports business, partially offset by higher rent abatements. We also experienced higher production and installation expenses driven by increased sales activity. The following table provides additional information about certain drivers of Americas direct operating expenses for the three months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Site lease expense | $ | 113,569 | | | $ | 103,103 | | | 10.2% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 15,436 | | | 11,890 | | | 29.8% |
Americas SG&A expenses increased $7.3 million, or 14.1%, during the three months ended September 30, 2022 compared to the same period of 2021, largely due to higher employee compensation costs, driven in part by increased headcount, and higher credit loss expense.prior year.
Nine Months
Americas Revenue
Americas revenueAmerica SG&A expenses increased $185.3$0.4 million, or 23.1%0.3%, during the nine months ended September 30, 20222023 compared to the same period of 2021. Americas revenue was adversely affected by COVID-19 during 2021. However, as our Americas segment has recovered, we have seen increases in revenue across all of our products, most notably airport displays, which increased 105.9% to $179.3 million as compared to $87.1 million during the same period of 2021, and billboards.
Americas total digital revenue increased 40.8% during the nine months ended September 30, 2022 as compared to the same period of 2021, as follows:
| | | | | | | | | | | | | | | | | |
(In thousands) | Nine Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Digital revenue from billboards, street furniture and spectaculars | $ | 268,675 | | | $ | 222,364 | | | 20.8% |
Digital revenue from transit, including airports | 101,378 | | | 40,374 | | | 151.1% |
Total digital revenue | $ | 370,053 | | | $ | 262,738 | | | 40.8% |
Revenue generated from national sales comprised 39.1%higher marketing, information technology and 36.8% of total revenue for the nine months ended September 30, 2022 and 2021, respectively, while the remainder of revenue was generated from local sales.
Americas Expenses
Americas direct operating expenses increased $82.6 million, or 24.7%, during the nine months ended September 30, 2022 compared to the same period of 2021 primarily due to higher site lease expense driven by higher revenue and lower rent abatements. We also experienced higher production and installation expenses driven by increased sales activity, as well as higher maintenance expense. The following table provides additional information about certain drivers of Americas direct operating expenses for the nine months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
(In thousands) | Nine Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Site lease expense | $ | 335,938 | | | $ | 263,810 | | | 27.3% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 36,732 | | | 56,384 | | | (34.9)% |
Americas SG&A expenses increased $28.4 million, or 20.4%, during the nine months ended September 30, 2022 compared to the same period of 2021 largely due to higher employee compensation costs drivenwere largely offset by improvements in operating performance and increased headcount, as well as higher credit loss expense duelower property taxes related to an increase in current year revenue and prior year reductions in our allowance for credit losses.a legal settlement.
EuropeAirports Results of Operations
| (In thousands) | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Revenue | Revenue | $ | 239,197 | | | $ | 262,568 | | | (8.9)% | | $ | 736,616 | | | $ | 659,216 | | | 11.7% | Revenue | $ | 75,558 | | | $ | 62,318 | | | 21.2% | | $ | 200,392 | | | $ | 179,307 | | | 11.8% |
Direct operating expenses(1) | Direct operating expenses(1) | 171,060 | | | 187,080 | | | (8.6)% | | 530,351 | | | 554,087 | | | (4.3)% | Direct operating expenses(1) | 51,510 | | | 38,369 | | | 34.2% | | 138,147 | | | 115,196 | | | 19.9% |
SG&A expenses(1) | SG&A expenses(1) | 54,219 | | | 61,040 | | | (11.2)% | | 162,604 | | | 173,936 | | | (6.5)% | SG&A expenses(1) | 8,528 | | | 8,889 | | | (4.1)% | | 24,127 | | | 24,344 | | | (0.9)% |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | 15,095 | | | 31,271 | | | (51.7)% | | 45,863 | | | (34,614) | | | N/A | Segment Adjusted EBITDA | 15,522 | | | 15,060 | | | 3.1% | | 38,120 | | | 39,767 | | | (4.1)% |
|
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.EBITDA
Airports Revenue
Airports revenue increased $13.2 million, or 21.2%, and $21.1 million, or 11.8%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods of 2022 due to additional demand for airport advertising driven by a rebound in travel as U.S. airport traffic has returned to pre-pandemic levels, as well as our continued investment in digital media infrastructure.
The following table provides information about Airports digital revenue:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Digital revenue | $ | 41,753 | | $ | 36,123 | | 15.6% | | $ | 113,478 | | $ | 101,100 | | 12.2% |
Percent of total segment revenue | 55.3 | % | | 58.0 | % | | | | 56.6 | % | | 56.4 | % | | |
Revenue generated from national sales comprised 56.8% and 55.0% of Airports revenue for the three months ended September 30, 2023 and 2022, respectively, and 58.7% and 54.3% of Airports revenue for the nine months ended September 30, 2023 and 2022, respectively, while the remainder of revenue was generated from local sales.
Airports Direct Operating Expenses
Airports direct operating expenses increased $13.1 million, or 34.2%, and $23.0 million, or 19.9%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods of 2022 due to higher site lease expense driven by lower rent abatements and higher revenue.
The following table provides information about Airports site lease expense and rent abatements:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Site lease expense | $ | 47,220 | | | $ | 31,921 | | | 47.9% | | $ | 126,272 | | | $ | 100,885 | | | 25.2% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 2,655 | | | 11,650 | | | (77.2)% | | 12,702 | | | 25,729 | | | (50.6)% |
Airports SG&A Expenses
Airports SG&A expenses decreased $0.4 million, or 4.1%, and $0.2 million, or 0.9%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods of 2022 mainly driven by lower credit loss expense.
Three Months
Europe Revenue
Europe revenue decreased $23.4 million, or 8.9%, during the three months ended September 30, 2022 compared to the same period of 2021. Excluding the $39.5 million impact of movements in foreign exchange rates, Europe revenue increased $16.1 million, or 6.1%, driven by continued recovery and growth following the lifting of COVID-19 restrictions. Higher transit and street furniture revenue drove the overall revenue growth in Europe, with revenue increasing in most countries in which we operate, most notably Sweden. These increases were partially offset by lower revenue in France, which experienced a strong rebound from COVID-19 in the prior year.
Europe digital revenue increased 4.8% during the three months ended September 30, 2022 as compared to the same period of 2021. Excluding the impact of movements in foreign exchange rates, Europe digital revenue increased 22.4%, as follows:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Digital revenue | $ | 97,310 | | | $ | 92,879 | | | 4.8% |
Digital revenue, excluding movements in foreign exchange rates | 113,656 | | | 92,879 | | | 22.4% |
Europe Expenses
Europe direct operating expenses decreased $16.0 million, or 8.6%, during the three months ended September 30, 2022 compared to the same period of 2021. Excluding the $27.9 million impact of movements in foreign exchange rates, Europe direct operating expenses increased $11.9 million, or 6.4%, due to higher site lease expense driven by lower negotiated rent abatements, lower governmental rent subsidies and higher revenue. This increase was partially offset by lower costs for our restructuring plan to reduce headcount. The following table provides additional information about certain drivers of Europe direct operating expenses for the three months ended September 30, 2022 and 2021:
| | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Site lease expense | $ | 105,920 | | | $ | 100,641 | | | 5.2% |
Site lease expense, excluding movements in foreign exchange rates | 122,917 | | | 100,641 | | | 22.1% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 697 | | | 9,560 | | | (92.7)% |
Europe SG&A expenses decreased $6.8 million, or 11.2%, during the three months ended September 30, 2022 compared to the same period of 2021. Excluding the $8.8 million impact of movements in foreign exchange rates, Europe SG&A expenses increased $2.0 million, or 3.3%. Higher employee compensation costs, primarily driven by improvements in operating performance, and increases in other SG&A expenses were largely offset by lower costs for our restructuring plan to reduce headcount.
Nine Months
Europe Revenue
Europe revenue increased $77.4 million, or 11.7%, during the nine months ended September 30, 2022 compared to the same period of 2021. Excluding the $88.1 million impact of movements in foreign exchange rates, Europe revenue increased $165.5 million, or 25.1%. Europe revenue was adversely affected by COVID-19 during 2021. However, as our Europe segment has continued to recover, we have seen increases in revenue across our products, most notably street furniture and transit, and in almost all of the countries in which we operate, with the largest increases in Sweden, the United Kingdom (“the U.K.”) and France.
Europe digital revenue increased 32.3% during the nine months ended September 30, 2022 as compared to the same period of 2021. Excluding the impact of movements in foreign exchange rates, Europe digital revenue increased 48.0%, as follows:
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(In thousands) | Nine Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Digital revenue | $ | 285,510 | | | $ | 215,752 | | | 32.3% |
Digital revenue, excluding movements in foreign exchange rates | 319,265 | | | 215,752 | | | 48.0% |
Europe Expenses
Europe direct operating expenses decreased $23.7 million, or 4.3%, during the nine months ended September 30, 2022 compared to the same period of 2021. Excluding the $61.7 million impact of movements in foreign exchange rates, Europe direct operating expenses increased $38.0 million, or 6.9%, due to higher site lease expense driven by higher revenue, lower negotiated rent abatements and lower governmental rent subsidies. We also experienced higher production and installation expenses driven by increased sales activity and higher maintenance expense driven by higher prices. These increases were partially offset by lower costs for our restructuring plan to reduce headcount, lower rental costs due to the buy-out of certain digital screens and lower property taxes driven by government tax reliefs in certain countries. The following table provides additional information about certain drivers of Europe direct operating expenses for the nine months ended September 30, 2022 and 2021:
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(In thousands) | Nine Months Ended September 30, | | % |
| 2022 | | 2021 | | Change |
Site lease expense | $ | 326,069 | | | $ | 309,883 | | | 5.2% |
Site lease expense, excluding movements in foreign exchange rates | 363,706 | | | 309,883 | | | 17.4% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 2,447 | | | 21,547 | | | (88.6)% |
Europe SG&A expenses decreased $11.3 million, or 6.5%, during the nine months ended September 30, 2022 compared to the same period of 2021. Excluding the $19.1 million impact of movements in foreign exchange rates, Europe SG&A expenses increased $7.8 million, or 4.5%. Higher employee compensation costs due to improvements in operating performance and, to a lesser extent, lower governmental support and wage subsidies were partially offset by lower costs for our restructuring plan to reduce headcount.
OtherEurope-North Results of Operations
| (In thousands) | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % | (In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| | | 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
| | 2022 | | 2021 | | Change | | 2022 | | 2021 | | Change | |
Revenue | Revenue | $ | 17,191 | | | $ | 14,828 | | | 15.9% | | $ | 47,569 | | | $ | 36,666 | | | 29.7% | Revenue | $ | 149,366 | | | $ | 135,522 | | | 10.2% | | $ | 427,778 | | | $ | 403,338 | | | 6.1% |
Direct operating expenses(1) | Direct operating expenses(1) | 9,502 | | | 9,109 | | | 4.3% | | 28,590 | | | 25,643 | | | 11.5% | Direct operating expenses(1) | 95,036 | | | 86,165 | | | 10.3% | | 288,777 | | | 267,021 | | | 8.1% |
SG&A expenses(1) | SG&A expenses(1) | 5,090 | | | 5,294 | | | (3.9)% | | 15,289 | | | 15,224 | | | 0.4% | SG&A expenses(1) | 26,118 | | | 25,168 | | | 3.8% | | 77,929 | | | 77,699 | | | 0.3% |
Segment Adjusted EBITDA | Segment Adjusted EBITDA | 2,598 | | | 425 | | | N/A | | 3,689 | | | (4,321) | | | N/A | Segment Adjusted EBITDA | 28,444 | | | 24,198 | | | 17.5% | | 61,850 | | | 59,031 | | | 4.8% |
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(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.EBITDA
Europe-North Revenue
Europe-North revenue increased $13.8 million, or 10.2%, during the three months ended September 30, 2023 compared to the same period of 2022. Excluding the $7.7 million impact of movements in foreign exchange rates, Europe-North revenue increased $6.1 million, or 4.5%.
Europe-North revenue increased $24.4 million, or 6.1%, during the nine months ended September 30, 2023 compared to the same period of 2022. Excluding the $6.4 million impact of movements in foreign exchange rates, Europe-North revenue increased $30.8 million, or 7.6%.
In both periods, we saw increases in revenue across our products and in most of the countries in which we operate, most notably the U.K., Belgium and Denmark, driven by the deployment of additional digital displays, new contracts and increased demand. This was partially offset by lower revenues in Sweden and, to a lesser extent, Norway as demand in those countries has been negatively impacted by macroeconomic conditions in those countries.
The following table provides information about Europe-North digital revenue:
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(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Digital revenue | $ | 83,821 | | $ | 72,826 | | 15.1% | | $ | 228,673 | | $ | 210,234 | | 8.8% |
Percent of total segment revenue | 56.1 | % | | 53.7 | % | | | | 53.5 | % | | 52.1 | % | | |
Digital revenue, excluding movements in foreign exchange rates | $ | 78,999 | | $ | 72,826 | | 8.5% | | $ | 231,068 | | $ | 210,234 | | 9.9% |
Europe-North Direct Operating Expenses
Europe-North direct operating expenses increased $8.9 million, or 10.3%, during the three months ended September 30, 2023 compared to the same period of 2022. Excluding the $4.3 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $4.6 million, or 5.3%.
Europe-North direct operating expenses increased $21.8 million, or 8.1%, during the nine months ended September 30, 2023 compared to the same period of 2022. Excluding the $6.5 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $28.3 million, or 10.6%.
Higher site lease expense driven by higher revenue and new contracts was the largest driver of the increase in direct operating expenses in the nine-month comparison period; in the three-month comparison period, this increase was offset by reduced rent resulting from a contract renegotiation. The following table provides information about Europe-North site lease expense and rent abatements:
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(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
Site lease expense | $ | 55,600 | | | $ | 53,888 | | | 3.2% | | $ | 170,670 | | | $ | 166,416 | | | 2.6% |
Site lease expense, excluding movements in foreign exchange rates | 53,499 | | | 53,888 | | | (0.7)% | | 175,414 | | | 166,416 | | | 5.4% |
Reductions of rent expense on lease and non-lease contracts from rent abatements | 159 | | | 450 | | | (64.7)% | | 980 | | | 1,625 | | | (39.7)% |
The remaining increase in direct operating expenses in both the three- and nine-month comparison periods was due to higher electricity prices, higher rental costs related to additional digital displays, and higher compensation driven by higher labor costs and increased sales activity.
Europe-North SG&A Expenses
Europe-North SG&A expenses increased $1.0 million, or 3.8%, during the three months ended September 30, 2023 compared to the same period of 2022. Excluding the $1.4 million impact of movements in foreign exchange rates, Europe-North SG&A expenses decreased $0.5 million, or 1.9%, due to lower employee compensation costs primarily driven by lower sales commissions in Sweden.
Europe-North SG&A expenses increased $0.2 million, or 0.3%, during the nine months ended September 30, 2023 compared to the same period of 2022. Excluding the $1.1 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $1.3 million, or 1.7%, primarily due to higher facilities costs driven by rent increases.
Other Results of Operations
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
(In thousands) | Three Months Ended September 30, | | % | | Nine Months Ended September 30, | | % |
| 2023 | | 2022 | | Change | | 2023 | | 2022 | | Change |
| | | | | | | | | | | |
Revenue | $ | 23,102 | | | $ | 21,303 | | | 8.4% | | $ | 64,530 | | | $ | 60,653 | | | 6.4% |
Direct operating expenses | 12,506 | | | 12,243 | | | 2.1% | | 36,984 | | | 37,192 | | | (0.6)% |
SG&A expenses | 7,306 | | | 6,069 | | | 20.4% | | 20,376 | | | 18,179 | | | 12.1% |
Segment Adjusted EBITDA | 3,290 | | | 2,991 | | | 10.0% | | 7,170 | | | 5,282 | | | 35.7% |
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Other revenue increased $2.4$1.8 million, or 15.9%8.4%, and $10.9$3.9 million, or 29.7%6.4%, during the three and nine months ended September 30, 2022,2023, respectively, compared to the same periods of 2021.2022. Excluding the impact of movements in foreign exchange rates, Other revenue increased $2.8decreased $0.3 million, or 19.1%1.2%, during the three monththree-month comparison period and $11.7increased $0.2 million, or 31.8%0.4%, during the nine monthnine-month comparison period driven by our continued recovery from COVID-19period. In both periods, higher advertising revenue and the termination of a public bicycle rental program in Latin America.America largely offset each other.
Other direct operating expenses increased $0.4$0.3 million, or 4.3%2.1%, and $2.9decreased $0.2 million, or 11.5%0.6%, during the three and nine months ended September 30, 2022,2023, respectively, compared to the same periods of 2021.2022. Excluding the impact of movements in foreign exchange rates, Other direct operating expenses increased $0.7decreased $0.8 million, or 8.1%6.4%, during the three monththree-month comparison period and $3.6$2.0 million, or 13.9%,5.4% during the nine monthnine-month comparison period largely driven by higher site lease expense primarilylower expenses related to higher revenue.
a public bicycle rental program in Latin America. Other SG&A expenses decreased $0.2increased $1.2 million, or 3.9%20.4%, and increased $0.1$2.2 million, or 0.4%12.1%, during the three and nine months ended September 30, 2022,2023, respectively, compared to the same periods of 2021.2022. Excluding the impact of movements in foreign exchange rates, Other SG&A expenses remained flatincreased $0.6 million, or 10.1%, during the three-month comparison period and $1.2 million, or 6.3% during the nine-month comparison period. In both periods, higher employee compensation costs were partially offset by lower expenses related to the termination of a public bicycle rental program in Latin America.
Loss from Discontinued Operations
Loss from discontinued operations of $211.7 million during the three month comparison periodmonths ended September 30, 2023 was primarily driven by the loss of $200.6 million recognized upon classification of the business in France as held for sale. Loss from discontinued operations also reflects the net loss collectively generated by operations in France and increased $0.3Spain for the three-month period.
Loss from discontinued operations of $152.3 million or 2.1%, during the nine month comparisonmonths ended September 30, 2023 was driven by the loss of $200.6 million recognized upon classification of the business in France as held for sale, partially offset by gains on the sales of our former businesses in Switzerland and Italy of $96.4 million and $11.2 million, respectively. Loss from discontinued operations also reflects the net loss collectively generated by operations in France and Spain for the nine-month period dueand in Switzerland and Italy through their sale dates of March 31, 2023 and May 31, 2023, respectively, as well as income tax expense related to higher employee compensation.the sale of our former business in Switzerland.
Loss from discontinued operations of $20.0 million and $40.0 million during the three and nine months ended September 30, 2022, respectively, reflects the net loss collectively generated by operations of our Europe-South segment — specifically France, Switzerland, Spain and Italy — during these respective periods.
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 twelve12 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 opportunities, including the outcome of the strategic reviewreviews of our European business.and Latin American 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 sevensix 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 aremay be affected by events beyond our control, including prevailing economic, financialmacro-economic events that may result in weakness globally or in certain specific markets, higher interest rates, currency fluctuations, and industry conditions, as well as macro-economicgeopolitical events such as heightened inflation, higher interest ratesthe wars in Israel and currency fluctuations. These market risks are further described inUkraine. Please refer to Item 3 of Part I of this Quarterly Report on Form 10-Q. Other factors that may affect10-Q for additional details about our future results and financial performance and, therefore, our long-term liquidity are geopolitical events such as the war in Ukraine, slower economic growth or recession and persistent challenges to the supply chain. Other than currency fluctuations, none of these events have had a material effect on our results to date.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.
We and our subsidiaries have repurchased, and in the future may repurchase from time to time as part of various financing and investment strategies, outstanding notes in open market purchases, privately negotiated transactions or otherwise. Repurchased notes, if any, may be cancelled or remain outstanding. These repurchases, if any, could have a material positive or negative impact on our liquidity or on our consolidated results of operations. These transactions could also result in changes in our leverage or other financial ratios, which could have a material positive or negative impact on our ability to comply with the covenants contained in our debt agreements. These transactions, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
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 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 nine months ended September 30, 20222023 and 2021,2022, we incurred site lease expense for our continuing operations of $680.6$581.2 million and $590.1$526.9 million, respectively, which are included within direct operating expenses on our Consolidated Statements of Loss. In order to better align fixed site lease expenses with the reductions in revenue we experienced due to COVID-19, we successfully renegotiated contracts with landlords and municipalities in both the U.S. and Europe.throughout our business. During the nine months ended September 30, 20222023 and 2021,2022, we reduced our site lease expense for continuing operations by rent abatements of $39.2$18.6 million and $78.9$38.4 million, respectively. As our business continues to recoverhas generally recovered from the effects of the COVID-19, pandemic, we are receiving fewerexpect rent abatements.abatements to continue to decline in future periods.
Restructuring Plans
DuringAs previously disclosed, we engaged with the nine months ended September 30, 2022SEC and 2021, we made cash expenditures for restructuring plans to reduce headcountthe DOJ regarding the resolution of $11.2 million and $12.4 million, respectively, and as of September 30, 2022, we had $10.1 million of future cash obligationsthe matter related to an investigation of our Europe restructuring plan. We expectformer indirect, non-wholly-owned subsidiary, Clear Media Limited. In September 2023, without admitting or denying the underlying allegations, we reached a settlement with the SEC in which we agreed to pay mosta total of this balance byapproximately $26.1 million to the endSEC in a series of installments over the second quarternext year, of which approximately $13 million was paid in October 2023. Please refer to Note 96 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details.more information.Capital Expenditures and Asset Acquisitions
We made the following capital expenditures during the nine months ended September 30, 20222023 and 2021:2022:
| (In thousands) | (In thousands) | Nine Months Ended September 30, | (In thousands) | Nine Months Ended September 30, |
| | 2022 | | 2021 | | | 2023 | | 2022 | |
Americas | $ | 69,620 | | | $ | 39,988 | | | |
Europe | 43,590 | | | 30,298 | | | |
America | | America | $ | 51,844 | | | $ | 52,251 | | |
Airports | | Airports | 10,382 | | | 17,369 | | |
Europe-North | | Europe-North | 18,998 | | | 22,445 | | |
Other | Other | 2,212 | | | 3,082 | | | Other | 4,534 | | | 2,527 | | |
Corporate | Corporate | 8,996 | | | 9,070 | | | Corporate | 10,678 | | | 8,996 | | |
Total capital expenditures(1) | $ | 124,418 | | | $ | 82,438 | | | |
Capital expenditures for continuing operations | | Capital expenditures for continuing operations | 96,436 | | | 103,588 | | |
Capital expenditures for discontinued operations(1) | | Capital expenditures for discontinued operations(1) | 16,129 | | | 20,830 | | |
Total capital expenditures(2),(3) | | Total capital expenditures(2),(3) | $ | 112,565 | | | $ | 124,418 | | |
(1)Capital expenditures for discontinued operations have decreased in the current year as the businesses in Switzerland and Italy have been sold and are expected to continue to decline as the sales of the businesses in France and Spain close.
(2)In addition to payments that occurred during the period for capital expenditures, the Company had $8.7 million and $12.4 million of accrued capital expenditures related to continuing operations that remained unpaid as of September 30, 2023 and 2022, respectively, and $3.5 million and $3.7 million of accrued capital expenditures related to discontinued operations that remained unpaid as of September 30, 2023 and 2022, respectively.
(3)Excludes asset acquisitionsacquisitions.
During the nine months ended September 30, 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.America segment for total cash consideration of $12.1 million and $52.0 million, respectively. These asset acquisitions included billboard structures, land, permits and permanent easements.
Debt Service Obligations and Activity
During the nine months ended September 30, 2022, we completed several acquisitions of out-of-home advertising assets in our Americas segment, which included permits, land, permanent easements2023 and digital billboard structures, for total cash consideration of $52.0 million. During the nine months ended September 30, 2021, cash paid for asset acquisitions was $3.3 million.
As reported within the “Proceeds from disposal of assets” line on the Consolidated Statements of Cash Flows, our cash outflows for capital expenditures and asset acquisitions in the Americas during the nine months ended September 30, 2022, were partially offset by compensation received from local governments for the condemnation and removal of billboards in certain markets.
Debt Service Obligations
During the nine months ended September 30, 2022 and 2021, we paid interest of $217.8$283.7 million and $264.4$217.8 million, respectively. The decrease is primarilyrespectively, with the increase driven by the payment of accrued interest due upon redemption of the CCWH Senior Notes in the first half of 2021, as well as lowerhigher interest rates on the refinanced debt.our Term Loan Facility. We anticipate having cash interest paymentspayment obligations of $123.5$120.8 million during the remainder of the year and $436.8 million in 2024, assuming current interest rates do not change and that we do not refinance or incur additional debt.
Additionally, during eachIn August 2023, we issued $750.0 million aggregate principal amount of CCOH 9.000% Senior Secured Notes, which mature in September 2028, and used a portion of the nine months ended September 30, 2022 and 2021, we made $15.0net proceeds to prepay $665.0 million of outstanding principal payments on the Term Loan Facility, which we repurchased at a 1% discount. We incurred debt issuance costs of $12.3 million related to these transactions, and the first interest payment on the CCOH 9.000% Senior Secured Notes will be made in March 2024.
In accordance with the terms of the Senior Secured Credit Agreement, and expect to make an additionalwe have historically made a quarterly principal payment on the Term Loan Facility of $5.0 million, resulting in total principal payments on the Term Loan Facility of $15.0 million during the remaindernine months ended September 30, 2022 and $10.0 million during the six months ended June 30, 2023. The prepayment made on the Term Loan Facility in August 2023 satisfied the remaining quarterly payment obligations under the Senior Secured Credit Agreement; as such, the remaining principal outstanding on the Term Loan of $1,260.0 million is due at maturity in 2026. Our next material debt maturity is in 2025 when the CCIBV Senior Secured Notes become due.
At our option, we may redeem a portion of our outstanding debt prior to maturity in accordance with the terms of our debt agreements, and we may, from time to time, repurchase our outstanding debt securities in the open market, in privately negotiated transactions or otherwise. In September 2023, we repurchased in the open market $5.0 million principal amount of the year.CCOH 7.750% Senior Notes and $10.0 million principal amount of the CCOH 7.500% Senior Notes for a total cash payment of $11.8 million, excluding accrued interest. The repurchased notes are to be held by a subsidiary of the Company and have not been cancelled.
In September 2023, we also made the first quarterly principal repayment of €1.875 million on the state-guaranteed loan held by Clear Channel France. The remaining principal due on this loan was assumed by the buyer upon sale of the business in France in October 2023.
Please refer to Note 45 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 September 30, 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 September 30, 2022,2023, we had $327.4$313.4 million of cash on our balance sheet, including $114.5$121.4 million of cash held outside the U.S. by our subsidiaries.subsidiaries (excludes cash held by our businesses in Spain and France, which are discontinued operations). 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 sales of our former businesses in Switzerland and Italy must be reinvested in 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.
the purchase agreement for the sale of the business in France required us to deliver the business to the buyer with approximately €42 million of cash, subject to adjustment for related customary items, tax and other costs, to support ongoing operations of the business and the buyer’s assumption of liabilities. In order to meet these requirements, we transferred cash from continuing operations to the business in France in October 2023 prior to the close of the sale. The buyer is required to repay the Company up to €4.5 million depending on the business’s full year 2023 revenue. Cash Flow from Operations
We have historically generated positiveDuring the nine months ended September 30, 2023, net cash flow from operations. However, we used net cash for operating activities during the periods in which we were negatively impactedwas $1.5 million, including $18.2 million used by COVID-19, specifically 2021 and 2020, as cash paid for interest in these periods exceeded other net cash inflows fromdiscontinued operations. We returned to positive operating cash flows in 2022 as strongFor our continuing operations, cash collections from customers driven by improvements in revenue and our continued recovery from COVID-19, exceeded aggregate cash payments to vendors, lessors, employees and lenders.lenders, but to a lesser extent than in the prior year primarily driven by higher cash paid for interest and higher payments for site lease and other direct operating expenses.
•During the nine months ended September 30, 2022, net cash provided by operating activities was $114.0 million. Higher cash collections from customers more than offset increased cash payments drivenmillion, including $1.7 million provided by higher site lease, employee compensation and other costs. Additionally, cash paid for interest of $217.8 million was lower than interest paid during the same period of the prior year due to the refinancing of the CCWH Senior Notes, as previously described.discontinued operations.
•Dispositions
During the nine months ended September 30, 2021,2023, we received cash proceeds from the disposition of businesses and assets of $103.1 million, including proceeds, net of customary closing adjustments and cash used for operating activities was $154.3 million. Cash paid for interest was $264.4sold, of $89.4 million and $5.1 million from the sales of our former businesses in Switzerland and Italy, respectively. Additionally, we expect to receive cash proceeds of approximately $64.3 million from the sale of our business in Spain, which included accruedis expected to close in 2024 upon satisfaction of regulatory approval and unpaid interestother customary closing conditions. We have entered into a hedge arrangement to mitigate exchange rate-risk related to these anticipated proceeds. We intend to use the net proceeds from these sales, after payment of $34.5 million due upon redemptiontransaction-related fees and expenses, to improve liquidity and increase financial flexibility of the CCWH Senior Notes. Cash collectionsbusiness as permitted under our debt agreements.
During the nine months ended September 30, 2022, we received cash proceeds from customers exceeded cash payments to vendors (including site lease costs)the disposition of assets of $20.8 million, including compensation received from local governments for the condemnation and removal of billboards in certain markets in our employees; however, collections earlier in the period lagged primarily due to COVID-19’s impact on fourth quarter 2020 and first quarter 2021 sales. Additionally, cash payments during the period included the payment of site lease costs that were deferred from 2020.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 borrowingsborrowings. In June 2023, we amended the Senior Secured Credit Agreement and are scheduledReceivables-Based Credit Agreement to, mature onamong other things, extend the maturity date of substantially all commitments under these credit facilities to August 23, 2024. The2026 in the amounts set forth below.
These amendments also resulted in changes to the borrowing limit for each of these facilities, as reflected in the table below, which presents our borrowings and excess availability under ourthese credit facilities as of September 30, 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) | $ | 150.0 | | | $ | 151.3 | | | $ | 301.3 | |
Borrowings outstanding | Borrowings outstanding | — | | | — | | | — | | Borrowings outstanding | — | | | — | | | — | |
Letters of credit outstanding(2) | Letters of credit outstanding(2) | 43.2 | | | 41.5 | | | 84.7 | | Letters of credit outstanding(2) | 43.2 | | | 40.2 | | | 83.4 | |
Excess availability(3) | Excess availability(3) | $ | 131.8 | | | $ | 83.5 | | | $ | 215.3 | | Excess availability(3) | $ | 106.8 | | | $ | 111.1 | | | $ | 217.9 | |
(1)In June 2023, amendments to the Senior Secured Credit Agreement and Receivables-Based Credit Agreement resulted in changes to the borrowing limit for the Revolving Credit Facility and Receivables-Based Credit Facility. The borrowing limit of the Revolving Credit Facility was reduced from $175.0 million to $150.0 million, with the full $150.0 million of commitments available through August 23, 2024 and $115.8 million available through August 23, 2026. The maximum borrowing limit of the Receivables-Based Credit Facility was increased from $125.0 million to $175.0 million. The borrowing limit of the Receivables-Based Credit Facility is equal to the lesser of $125.0$175.0 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
(2)Letters of credit outstanding under the Revolving Credit Facility at September 30, 2023 included a $20.2 million letter of credit related to our business in France in support of a $35.9 million surety bond outstanding at September 30, 2023. In February 2021, we issued $1.0 billion aggregate principal amountconnection with the sale of CCOH 7.75% Senior Notes Due 2028this business, and in March 2021, usedpursuant to the net proceeds therefrom to redeem $940.0related share purchase agreement, our former French business and/or Equinox will either replace, or procure a counter-guarantee of, our payment obligation under the letter of credit. Furthermore, our former French business indemnified us for the remaining $15.7 million balance of the CCWH Senior Notessurety bond outstanding, and we will be released from any remaining obligation related to the surety bond by March 2025. Letters of credit outstanding under the Receivables-Based Credit Facility at 104.625% of their principal amount. In June 2021, we issued $1.05 billion aggregate principal amount of CCOH 7.5% Senior Notes Due 2029 and used the net proceeds therefrom to redeem the remaining outstanding $961.5 million of CCWH Senior Notes, also at 104.625% of their principal amount. Additionally in June 2021, a non-guarantor European subsidiary borrowed €30.0 million through a state-guaranteed loan program established in response to COVID-19.
We did not enter into any significant debt transactions during the nine months ended September 30, 2022. In April 2022, as permitted under2023 included a $6.5 million letter of credit related to our business in Spain.
(3)Due to rounding, the termstotal may not equal the difference of the loan agreement, we elected to extendline items in the maturity date of the €30.0 million European state-guaranteed loan to June 29, 2027, with quarterly principal repayments of €1.875 million due beginning in September 2023. The annual interest rate on this loan for periods after June 2022 is 0.7% (with no interest due prior thereto), and the annual cost of the state guarantee is 1.0% of the outstanding loan amount through June 29, 2024 and 2.0% of the outstanding loan amount for the remainder of the loan term.table above.
Debt CovenantsSenior Secured Credit Agreement Financial Covenant
The 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 7.10 to 1.00, a step-down that commenced on 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) for the preceding four quarters, was 4.985.59 to 1.00 as of September 30, 2022.2023. First lien debt and EBITDA, which both exclude discontinued operations, 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 September 30, 2022:2023:
| | | | | |
(In millions) | September 30,
20222023 |
Term Loan Facility | $ | 1,940.01,260.0 | |
Revolving Credit Facility | — | |
Receivables-Based Credit Facility | — | |
Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | 1,250.0 | |
Clear Channel Outdoor Holdings 9.000% Senior Secured Notes Due 2028 | 750.0 | |
Other debt | 3.44.2 | |
Less: Cash and cash equivalents | (327.4)(313.4) | |
First lien debt(1) | $ | 2,865.92,950.8 | |
(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 $575.0$527.6 million is calculated as operating income (loss)from continuing operations before depreciation and amortization, impairment charges and share-based compensation,compensation; further adjusted for unusual or nonrecurring gains, losses, charges or expenses and any charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation chargescharges; and various other items.
The following table reflects a reconciliation ofreconciles EBITDA to operating income from continuing operations and consolidated net cash provided by operating activities for the four quarters ended September 30, 2022:2023:
| | | | | |
| Four Quarters Ended |
(In millions) | September 30,
20222023 |
EBITDA (as defined by the Senior Secured Credit Agreement) | $ | 575.0527.6 | |
Depreciation and amortization, impairment charges and share-based compensation | (286.6)(271.1) | |
Charges,Unusual or nonrecurring gain, loss, charge or expense and any charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges(1)
| (7.9)(20.8) | |
Other items(2) | (5.5)(20.8) | |
Operating income(1)(3) | 275.0214.8 | |
Interest expense, net; gain on extinguishment of debt; other expense, netincome, net; and income tax expensebenefit attributable to continuing operations | (403.3)(291.5) | |
Loss from discontinued operations | (158.7) | |
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | |
Reconciling items for non-cash and non-operating activity(2)(4) | 685.1626.0 | |
Changes in operating assets and liabilities | (422.0)(366.1) | |
Net cash provided by operating activities(1)(3) | $ | 134.824.5 | |
(1)Includes accrual of $19.0 million for resolution of the matter related to the investigation of our former indirect, non-wholly owned subsidiary, Clear Media Limited.
(2)Primarily comprised of interest income and costs related to the strategic reviews of our remaining businesses.
(3)Due to rounding, the total may not equal the sum of the line items in the table above.
(2)(4)Includes depreciation, amortization and impairment charges; non-cash operating lease expense; gain on extinguishment of debt; deferred taxes; share-based compensation; amortization of deferred financing charges and note discounts; gain on disposalclassification as held for sale and disposition of businesses and/or operating and other assets, net; foreign exchange transaction lossgain; 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 effects if actual results differ from these assumptions that were disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021,2022, except that the critical accounting estimate set forth under “Annual Impairment Tests” is updated as follows:
Annual Impairment Tests
We perform impairment tests on indefinite-lived intangible assets and goodwill at least annually, as of July 1 of each year, and more frequently as events or changes in circumstances warrant. During the second quarter of 2022, we performed an impairment test on certain of our indefinite-lived billboard permits due to rising interest rates and inflation, resulting in an impairment charge of $21.8 million. Additionally, we performed ourOur annual impairment tests on indefinite-lived intangible assets and goodwill as of July 1, 2022, which resulted2023 did not result in an impairment charge of $0.9 million on our permanent easements. As of September 30, 2022,any impairment. Additionally, there were no indicators of impairment.impairment as of September 30, 2023.
Goodwill
Management’s judgements and assumptions used in our goodwill impairment teststest are detailed below. The assumptions used to perform our impairment tests are not indicative of future results. While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets and reporting units, the assumptions are not necessarily indicative of future results, and it is possible that a material change could occur. If future results are not consistent with our assumptions and estimates, or if the current macroeconomic situation worsens, we may be exposed to additional impairment charges in the future.
Indefinite-lived Intangible Assets
We review our indefinite-lived intangible assets for possible impairment using the direct valuation method as prescribed in ASC 805-20-S99. Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry-normalized information representing an average asset within a market, and we engage a third-party valuation firm to assist with the development of our assumptions used to determine the fair value of our indefinite-lived intangible assets.
In determining the fair value of our billboard permits as of July 1, 2022, we used the following key assumptions:
•Industry revenue growth forecasts used for the initial four-year period, which varied by market, started with the trailing twelve month forecast period ending July 1, 2022, and annual revenue growth on average of 6.1% was assumed from year two to year four;
•Revenue growth beyond the initial four-year period was assumed to be 3.0%;
•Revenue grew over a build-up period, reaching maturity by the second year;
•The operating industry average margin was assumed to be 39%; and
•The assumed discount rate was 11.5%.
The following table shows the decrease in the fair value of our billboard permits that would have resulted from decreases of 100 basis points in our discrete and terminal period revenue growth rate and profit margin assumptions and an increase of 100 basis points in our discount rate assumption as of the impairment testing date:
| | | | | | | | | | | | | | | | | | | | |
(In thousands) | | Revenue growth rate | | Profit margin | | Discount rate |
Decrease in fair value of billboard permits: | | (100 basis point decrease) | | (100 basis point decrease) | | (100 basis point increase) |
As of July 1, 2022(1) | | $ | (375,000) | | $ | (101,500) | | $ | (383,200) |
(1) The change in each assumption as of July 1, 2022 would have resulted in impairment charges of $48.4 million, $29.5 million and $48.9 million, respectively.
Goodwill
The discounted cash flow approach that we use for valuing goodwill as part of the impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value. Assessing the recoverability of goodwill requires us to make estimates and assumptions about sales, operating margins, growth rates and discount rates based on our budgets, business plans, economic projections, anticipated future cash flows and marketplace data.
We performed our annual impairment test as of July 1, 20222023 in accordance with ASC Section 350-30-35, which did not result in any goodwill impairment. In determining the fair value of our reporting units, we used the following assumptions:
•Expected cash flows underlying our business plans for the initial four-year4.5-year period were based on detailed, multi-year forecasts performed by each of our operating segments and reflect the advertising outlook across our businesses;
•Cash flows were projected to grow at a perpetual growth rate, which we estimated at 3.0%; and
•In order to risk-adjust the cash flow projections in determining fair value, we utilized a discount rate for each of our reporting units ranging from 11.0%10.5% to 12.0%15.0%.
Based on our assessment using the assumptions described above, a hypothetical 10% reduction in the estimated fair value of each of our reporting units with goodwill would not have resulted in a material impairment condition.an impairment.
The following table shows the decrease in the fair value of each of our reporting units with goodwill that would have resulted from decreases of 100 basis points in our discrete and terminal period revenue growth rate and profit margin assumptions and an increase of 100 basis points in our discount rate assumption as of July 1, 2022:2023:
| (In thousands) | (In thousands) | | Revenue growth rate | | Profit margin | | Discount rate | (In thousands) | | Revenue growth rate | | Profit margin | | Discount rate |
Decrease in fair value of reporting unit: | Decrease in fair value of reporting unit: | | (100 basis point decrease)(1) | | (100 basis point decrease)(1) | | (100 basis point increase)(1) | Decrease in fair value of reporting unit: | | (100 basis point decrease)(1) | | (100 basis point decrease)(1) | | (100 basis point increase)(1) |
Americas | | $ | (610,000) | | | $ | (160,000) | | | $ | (510,000) | | |
Europe | | (120,000) | | | (110,000) | | | (80,000) | | |
America | | America | | $ | (557,265) | | | $ | (123,428) | | | $ | (508,764) | |
Airports | | Airports | | (39,813) | | | (28,315) | | | (33,702) | |
Europe-North | | Europe-North | | (74,651) | | | (69,159) | | | (65,842) | |
(1) Changes to our assumptions by these amounts would not have resulted in goodwill impairment as the fair value of goodwill for each reporting unit would still be greater than its carrying value.
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 expectations about the impacttiming, closing, satisfaction of macro-economicclosing conditions, use of proceeds and other events onbenefits of the sales of our results,European businesses; expectations about certain markets; the conduct of, and expectations about, strategic review processes; industry and market trends; and our ability to fund our operations in the short- and long-term 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: risks associatedthe difficulty, cost and time required to implement our strategy, including optimizing our portfolio, and the fact that we may not realize the anticipated benefits therefrom; the delay or failure to satisfy the conditions to divest our business in Spain; the risk that indemnities from certain transactional counterparties will not be sufficient to insure us against the full amount of certain liabilities; our inability to complete the sales of our Europe-North segment businesses; our inability to complete any strategic transaction with weakrespect to our Latin American businesses; the impact of future dispositions, acquisitions and other strategic transactions; continued economic uncertainty, an economic slowdown or uncertain global economica recession; financial and industry conditions and their impact on the level of expenditures on advertising; heightened levels of economic inflation and rising interest rates; fluctuations in operating costs; supply chain shortages; our ability to achieve expected financial results and growth targets; geopolitical events, such as volatility in the war in UkraineU.S. and the associated global effects thereof; the continued impact of the COVID-19 pandemic on our operations and on general economic conditions;banking market; 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,the impact of our liquidity strategy, including competition;open market repurchases of outstanding notes; 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; changes in labor conditions and management; regulations and consumer concerns regarding privacy and data protection; a breach of our information security systems and measures; legislative or regulatory requirements; restrictions on out-of-home advertising of certain products; the impact of the continued strategic review of our European businessenvironmental, health, safety and assets, including a possible sale of all or a part thereof; our ability to execute restructuring plans; the impact of future dispositions, acquisitionsland use laws and other strategic transactions;regulations, as well as various actual and proposed environmental, social and governance policies and regulations; 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;countries, including the impact of geopolitical events such as the wars in Ukraine and Israel; fluctuations in exchange rates and currency values; the volatility of our stock price; the effectimpacts on our stock price as a result of analystfuture sales of common stock, or credit ratings downgrades;the perception thereof, and dilution resulting from additional capital raised through the sale of common stock or other equity-linked instruments; 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 outeffect of LIBOR;analyst or credit ratings downgrades; 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, which are generally interrelated.
In early 2022, worldwide inflation began to increase as a result of various factors, including COVID-19-related fiscal and monetary stimulus, supply chain shortages and, more recently, the war in Ukraine. In response to heightened levels of inflation, central banks, including the U.S. Federal Reserve and the European Central Bank, have increased interest rates. Governments may continue to increase interest rates to combat inflation. Additionally, the U.S. dollar has significantly strengthened against certain foreign currencies and could continue to strengthen as the Federal Reserve further raises the federal funds rate, resulting in downstream impacts to global exchange rates.
During the nine months ended September 30, 2022, rising interest rates and inflation have resulted in impairment charges of $21.8 million on certain of our indefinite-lived billboard permits and $0.9 million on permanent easements in our Americas segment. Although there were no indicators of impairment as of September 30, 2022, continued increases in interest rates and heightened inflation may result in additional impairment charges or have other adverse effects on our results of operations, as further described below.
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 are affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we have operations. The strengthening of the U.S. dollar against the local currencies of many of ourFluctuations in foreign operations, most notably the British pound sterling and Euro, negativelycurrency exchange rates positively impacted our reported Europe Segment Adjusted EBITDA for our Europe-North segment by $2.9$2.0 million and $7.5$1.2 million during the three and nine months ended September 30, 2022, respectively.2023, respectively, primarily driven by the weakening of the U.S. dollar against the British pound sterling, which peaked in the third quarter of 2022.
Our EuropeEurope-North segment reported Segment Adjusted EBITDA of $15.1$28.4 million and $45.9$61.9 million for the three and nine months ended September 30, 2022,2023, respectively. We estimate that an additionala 10% increase in the value of the U.S. dollar relative to foreign currencies would have decreased our EuropeEurope-North Segment Adjusted EBITDA for the three and nine months ended September 30, 2022 by $1.5$2.8 million and $4.6$6.2 million for each of these periods, respectively, andwhile a 10% decrease in the value of the U.S. dollar relative to foreign currencies would have increased our EuropeEurope-North Segment Adjusted EBITDA by corresponding 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. Changes in economic or political conditions in any of the foreign countriesentities comprising our Europe-North segment.
In May 2023, we purchased a foreign currency exchange option to sell Euros and purchase U.S. Dollars to hedge the anticipated proceeds from the sale of our business in Spain, which we operate could resultis expected to close in exchange rate movement, new currency or exchange controls or other currency restrictions being imposed.2024.
Interest Rate Risk
A portion of our long-term debt bears interest at variable rates, and as a result, ourOur financial results are affected by changes in interest rates as our Term Loan Facility, Revolving Credit Facility and Receivables-Based Credit Facility bear interest at variable rates. In connection with the phasing-out of LIBOR at the end of June 2023, we amended our Term Loan Facility in February 2023 and our Revolving Credit Facility and Receivables-Based Credit Facility in June 2023 to replace the LIBOR reference rate with SOFR plus a credit spread adjustment for new borrowings or the continuation of existing borrowings. We do not expect the replacement of LIBOR to result in a material impact to our financial results.
As of September 30, 2023, variable rate debt accounted for approximately 22% of our aggregate principal amount of long-term debt, a decrease from prior periods as we refinanced $665.0 million of outstanding principal on the Term Loan Facility in August 2023 using net proceeds from the issuance of the CCOH 9.000% Senior Secured Notes.
In response to heightened levels of inflation, central banks raised interest rates have continued to rise this year, we have seensignificantly in 2022. The U.S. Federal Reserve further raised rates in 2023, resulting in an increase in our weighted average cost of debt from 5.6%7.1% at December 31, 20212022 to 6.5%7.5% at September 30, 2022.2023. Governments may continue to increase interest rates to combat inflation, although the pace of interest rate increases is expected to slow as inflation continues to decline.
As of September 30, 2022, approximately 34% of our aggregate principal amount of long-term debt bore interest at floating rates. Assuming the current level of borrowings and a 100 basis point increase in LIBOR,SOFR, it is estimated that our interest expense for the three and nine months ended September 30, 20222023 would have increased by $5.0$3.2 million and $14.8$9.6 million, respectively. 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.
In connection with the phasing-out of LIBOR, we will continue to work with the administrative agents under our credit agreements to agree on replacement rates. At this time, we do not expect the replacement of LIBOR to result in a material impact to our financial statements.
Inflation Risk
Inflation is a factor in the economies in which we do business, and we continue to seek ways to mitigate its effects. Currenteffect. In 2022, there was a worldwide surge in inflation. While inflation rates have slowed in 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 2022, resulting inour Europe businesses, due to higher costs for wages, salaries,electricity, labor, rent, 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 for most of our out-of-home display faces, and to date, we have not suffered material impacts from the heightened levels of inflation experienced at a global level. In addition, our site leases, which are long-term in nature, are less impacted by short-term swings in inflation.faces.
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 CEO and 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 CEO and CFO concluded that our disclosure controls and procedures were effective as of September 30, 20222023 at the reasonable assurance level.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 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 56 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 September 30, 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 |
July 1 through July 31 | July 1 through July 31 | — | | | | | | — | | | — | | July 1 through July 31 | 3,969 | | | $ | 1.37 | | | — | | | — | |
August 1 through August 31 | August 1 through August 31 | — | | | | | | — | | | — | | August 1 through August 31 | — | | | | | | — | | | — | |
September 1 through September 30 | September 1 through September 30 | 352,763 | | | $ | 1.92 | | | — | | | — | | September 1 through September 30 | 44,327 | | | $ | 1.58 | | | — | | | — | |
Total | Total | 352,763 | | | $ | 1.92 | | | — | | | — | | Total | 48,296 | | | $ | 1.56 | | | — | | | — | |
(1)The shares indicated consist of shares of our common stock tendered to us by employees to us during the three months ended September 30, 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.Insider Trading Arrangements
During the quarter ended September 30, 2023, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement” (each as defined in Item 408(a) and (c) of Regulation S-K).
ITEM 6. EXHIBITS
| | | | | | | | |
Exhibit Number | | Description |
3.1 | | |
3.2 | | |
4.1 | | Indenture, dated as of August 22, 2023, by and among Clear Channel Outdoor Holdings, Inc., the guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee and as collateral agent, governing the 9.000% Senior Secured Notes due 2028 (incorporated by reference to Exhibit 4.1 to Clear Channel Outdoor Holdings, Inc.’s Current Report on Form 8-K filed on August 22, 2023). |
4.2 | | |
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. |
| | |
November 8, 20222023 | | /s/ JASON A. DILGER |
| | Jason A. Dilger |
| | Chief Accounting Officer |