Form: 8-K

Current report filing

August 9, 2017

Exhibit 99.1

The charts below summarize the breakdown of our revenue by geography and product offering for the year ended December 31, 2016. For a description of the major markets in which we operate, see “Business—Our Major Markets.”

 

LOGO

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following table sets forth summary historical consolidated financial data as of the dates and for the periods indicated. The summary historical consolidated financial data for the years ended December 31, 2016, 2015 and 2014, and as of December 31, 2016 and 2015, are derived from our audited consolidated financial statements, which are included elsewhere in this offering circular. The summary historical consolidated financial data for the six months ended June 30, 2017 and 2016 and as of June 30, 2017 are derived from our unaudited consolidated financial statements, which are included elsewhere in this offering circular. The summary historical consolidated financial data as of December 31, 2014 and June 30, 2016 are derived from our audited and unaudited consolidated financial statements, respectively, which are not included in this offering circular. In the opinion of management, the interim financial data reflects all adjustments (consisting only of normal and recurring adjustments) necessary for a fair presentation of the results for the interim periods. The summary historical financial information for the twelve months ended June 30, 2017 are derived by adding the historical financial information for the six months ended June 30, 2017 to the historical financial information for the year ended December 31, 2016 and subtracting the historical financial information for the six months ended June 30, 2016. Historical results are not necessarily indicative of the results to be expected for future periods and the interim results are not necessarily indicative of the results that may be expected for the full year.

The summary historical consolidated financial and other data should be read in conjunction with “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Selected Issuer, Guarantor and Non-Guarantor Financial Data” and our consolidated financial statements and the related notes thereto included elsewhere in this offering circular. The amounts in the tables may not sum due to rounding.

 

1


    Year Ended
December 31,
    Six Months Ended
June 30,
    Twelve Months
Ended

June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  

Results of Operations Data:

           

Revenue

  $ 1,168,707     $ 1,222,400     $ 1,381,653     $ 502,712     $ 574,492     $ 1,096,927  

Operating expenses:

           

Direct operating expenses

    753,610       792,566       897,136       345,353       376,160       722,803  

Selling, general and administrative expenses

    247,277       254,004       279,237       109,091       127,663       228,705  

Corporate expenses

    37,179       37,745       45,996       24,459       19,889       41,749  

Depreciation and amortization

    97,607       118,892       138,878       35,250       48,534       84,323  

Impairment charges

    7,274       —         —         —         —         7,274  

Other operating income (expense)—net

    74,980       4,617       4,539       7,866       (55,908     138,754  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

    100,740       23,810       24,945       (3,575     (53,662     150,827  

Interest expense—net

    37,899       68,112       72,147       16,893       20,175       34,617  

Equity in earnings (loss) of equity method investees

    (2,837     (1,935     2,038       (805     (1,333     (2,309

Other income (expense)—net

    (9,246     (3,381     6,176       (1,353     (6,839     (3,760
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) from continuing operations before income taxes

    50,758       (49,618     (38,988     (22,626     (82,009     110,141  

Income tax (benefit) expense

    (32,315     12,282       4,244       4,717       11,005       (38,603
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Consolidated net income (loss)

    83,073       (61,900     (43,232     (27,343     (93,014     148,744  

Less amount attributable to noncontrolling interest

    6,167       7,095       8,814       1       2,919       3,249  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to the Company

    76,906       (68,995     (52,046     (27,344     (95,933     145,495  

Other comprehensive income (loss), net of tax

    105,434       98,576       103,443       (23,829     58,430       23,175  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

    182,340       29,581       51,397       (51,173     (37,503     168,670  

Less amount attributable to noncontrolling interest

    1,444       (4,026     (3,916     108       1,006       546  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to the Company

  $ 180,896     $ 33,607     $ 55,313     $ (51,281   $ (38,509   $ 168,124  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash Flow Data:

           

Capital expenditures

  $ 88,522     $ 70,222     $ 57,453     $ 43,716     $ 39,810     $ 92,428  

Net cash provided by (used for) operating activities

    135,592       46,322       39,452       (9,356     23,476       102,760  

Net cash provided by (used for) investing activities

    99,130       (319,681     (45,095     (32,052     (39,854     106,932  

Net cash provided by (used for) financing activities

    (214,928     282,342       (26,407     3,072       (1,352     (210,504

Other Financial Data:

           

EBITDA (1)

    186,264       137,386       172,037       29,517       (13,300     229,081  

OIBDAN (1)

    135,274       140,732       161,837       24,427       53,619       106,082  

Adjusted EBITDA (1)

    134,483       160,485       162,079           118,337  

 

2


    Year Ended
December 31,
    Six Months Ended
June 30,
    Twelve Months
Ended

June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  

Other Adjusted Financial Data:

           

Revenue, excluding results from Australia and Turkey businesses sold (2)(3)(4)

    1,050,950       1,078,709       1,219,014       502,712       503,097       1,050,565  

OIBDAN, excluding results from Australia and Turkey businesses sold (2)(3)(4)

    110,447       110,496       122,824       24,427       40,441       94,433  

Capital expenditures, excluding capital expenditures from Australia and Turkey businesses sold (2)(3)(4)

    73,439       60,780       48,354       43,716       30,150       87,005  

Ratio of senior debt to Adjusted EBITDA after giving effect to the notes offered hereby (1)(5)

 

    3.0:1  

Balance Sheet Data (at end of period):

           

Cash and cash equivalents

  $ 64,437     $ 47,869     $ 43,938     $ 29,267     $ 29,469     $ 29,267  

Current assets

    393,767       467,522       464,650       395,063       408,990       395,063  

Property, plant and equipment—net

    265,658       343,131       397,302       290,809       331,126       290,809  

Total assets

    1,203,207       1,347,340       1,182,372       1,249,536       1,283,503       1,249,536  

Current liabilities

    369,799       416,984       417,411       382,518       386,724       382,518  

Related party subordinated notes payable

    963,706       986,089       1,745,056       1,045,868       1,011,579       1,045,868  

Shareholder’s deficit

    (470,070     (380,690     (1,080,061     (526,210     (443,518     (526,210

 

(1) We define EBITDA as consolidated net income (loss) before interest expense, net, income tax (benefit) expense, depreciation and amortization. We define OIBDAN as EBITDA adjusted for non-cash compensation expenses and the following line items presented in our Consolidated Statements of Comprehensive Income (Loss): impairment charges, other operating income, net, equity in income (loss) of non-consolidated affiliates and other income (expense), net. We define Adjusted EBITDA as OIBDAN adjusted for costs incurred in connection with severance, retention charges and other activities, non-cash charges, management and advisory fees, disposals and other items. Each of EBITDA, OIBDAN and Adjusted EBITDA is a non-GAAP financial measure. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. EBITDA, OIBDAN and Adjusted EBITDA do not represent and should not be considered as alternatives to net income or cash flow from operations, as determined under GAAP. We believe that EBITDA, OIBDAN and Adjusted EBITDA provide investors with helpful information with respect to our operations. We present EBITDA, OIBDAN and Adjusted EBITDA to provide additional information with respect to our ability to meet our future debt service, capital expenditures and working capital requirements.

 

3


     The following table summarizes the calculation of our historical EBITDA, OIBDAN and Adjusted EBITDA and provides a reconciliation to our consolidated net income (loss) for the periods indicated:

 

    Year Ended
December 31,
    Six Months
Ended
June 30,
    Twelve Months
Ended

June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  
                                     

Consolidated net income (loss)

  $ 83,073     $ (61,900   $ (43,232   $ (27,343   $ (93,014   $ 148,744  

Interest expense, net

    37,899       68,112       72,147       16,893       20,175       34,617  

Income tax expense (benefit)

    (32,315     12,282       4,244       4,717       11,005       (38,603

Depreciation and amortization

    97,607       118,892       138,878       35,250       48,534       84,323  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

EBITDA

  $ 186,264     $ 137,386     $ 172,037     $ 29,517     $ (13,300   $ 229,081  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
           

Shared-based compensation

  $ 4,633     $ 2,647     $ 2,553     $ 618     $ 2,839     $ 2,412  

Other (income) expense, net

    9,246       3,381       (6,176     1,353       6,839       3,760  

Equity in (earnings) loss of nonconsolidated affiliates

    2,837       1,935       (2,038     805       1,333       2,309  

Other operating (income) expense, net

    (74,980     (4,617     (4,539     (7,866     55,908       (138,754

Impairment charges

    7,274       —         —         —         —         7,274  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDAN

  $ 135,274     $ 140,732     $ 161,837     $ 24,427     $ 53,619     $ 106,082  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Costs incurred in connection with severance, retention charges and other activities

    11,893       35,276       19,250           13,969  

Non-cash charges (a)

    10,582       15,178       18,492           7,831  

Management and advisory fees (b)

    1,345       1,547       1,368           1,341  

Disposals (c)

    (24,827     (30,236     (39,013         (11,649

Other items (d)

    216       (2,012     145           763  
 

 

 

   

 

 

   

 

 

       

 

 

 

Adjusted EBITDA

  $ 134,483     $ 160,485     $ 162,079         $ 118,337  
 

 

 

   

 

 

   

 

 

       

 

 

 

 

  (a) Represents $10.2 million, $17.2 million, $16.0 million and $6.6 million, respectively, of straight-line rent adjustments and $0.4 million, $(2.0) million, $2.5 million and $1.2 million, respectively, of adjustments related to changes in accruals.
  (b) Represents our portion of the management fees payable to iHeartCommunications and Parent for management, monitoring, consulting, transaction and advisory fees and related expenses.
  (c) Represents the effect of the dispositions of our Turkey and Australia businesses as if they occurred at the beginning of the relevant period.
  (d) Represents the net amount of any other non-cash activity not otherwise included in the calculation of EBITDA required to be deducted from Adjusted EBITDA under the terms of the indenture governing the existing notes and the notes offered hereby.
(2) Excluding the $32.0 million and $176.2 million impact, respectively, from fluctuations in foreign exchange, revenue, excluding the results from our Turkey and Australia businesses sold, increased $4.3 million, or 0.4%, during 2016 compared to 2015, and increased $35.9 million, or 2.9%, during 2015 compared to 2014. Excluding the $24.4 million impact from fluctuations in foreign exchange rates, revenue, excluding the results from our Turkey and Australia businesses sold, increased $24.0 million, or 4.8%, during the six months ended June 30, 2017 compared to the same period of 2016.

 

     Excluding the $5.6 million and $19.9 million impact, respectively, from fluctuations in foreign exchange rates, OIBDAN, excluding the results from our Turkey and Australia businesses sold, increased $5.5 million, or 5.0%, during 2016 compared to 2015, and increased $7.5 million, or 6.1%, during 2015 compared to 2014. Excluding the $2.1 million impact from fluctuations in foreign exchange rates, OIBDAN, excluding the results from our Turkey and Australia businesses sold, decreased $13.9 million, or 34.4%, during the six months ended June 30, 2017 compared to the same period of 2016.

 

     Excluding the $4.9 million and $7.7 million impact, respectively, from fluctuations in foreign exchange rates, capital expenditures, excluding the capital expenditures from our Turkey and Australia businesses sold, increased $17.6 million, or 29.0%, during 2016 compared to 2015, and increased $20.1 million, or 41.6%, during 2015 compared to 2014. Excluding the $2.5 million impact from fluctuations in foreign exchange rates, capital expenditures, excluding the capital expenditures from our Turkey and Australia businesses sold, increased $16.0 million, or 53.2%, during the six months ended June 30, 2017 compared to the same period of 2016.

 

4


(3) The impact of foreign exchange rates fluctuations is calculated by applying the prior comparative period foreign currency exchange rates to the current applicable period financial data in local currencies.
(4) The following tables summarize the reconciliation of “Revenue, excluding results from Australia and Turkey businesses sold” to “Revenue”, “OIBDAN, excluding the results from Australia and Turkey businesses sold” to “OIBDAN” and “Capital expenditures, excluding capital expenditures from Australia and Turkey businesses sold” to “Capital expenditures”:

 

    Year Ended
December 31,
    Six Months
Ended
June 30,
    Twelve Months
Ended

June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  
                                     

Revenue

  $ 1,168,707     $ 1,222,400     $ 1,381,653     $ 502,712     $ 574,492     $ 1,096,927  

Excluding: Revenue from Australia and Turkey businesses

    117,757       143,691       162,639       —         71,395       46,362  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Revenue, excluding results from Australia and Turkey businesses sold

  $ 1,050,950     $ 1,078,709     $ 1,219,014     $ 502,712     $ 503,097     $ 1,050,565  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Year Ended
December 31,
    Six Months
Ended
June 30,
    Twelve Months
Ended

June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  
                                     

OIBDAN

  $ 135,274     $ 140,732     $ 161,837     $ 24,427     $ 53,619     $ 106,082  

Excluding: Disposals of Australia and Turkey businesses

    24,827       30,236       39,013       —         13,178       11,649  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OIBDAN, excluding results from Australia and Turkey businesses sold

  $ 110,447     $ 110,496     $ 122,824     $ 24,427     $ 40,441     $ 94,433  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Year Ended December 31,     Six Months Ended
June 30,
    Twelve Months
Ended
June 30,
 
(U.S. dollars in thousands)   2016     2015     2014     2017     2016     2017  

Capital expenditures

  $ 88,522     $ 70,222     $ 57,453     $ 43,716     $ 39,810     $ 92,428  

Excluding: Capital expenditures from Australia and Turkey businesses

    15,083       9,442       9,099       —         9,660       5,423  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Capital expenditures, excluding capital expenditures from Australia and Turkey businesses sold

  $ 73,439     $ 60,780     $ 48,354     $ 43,716     $ 30,150     $ 87,005  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(5) Does not reflect indebtedness outstanding under the related party subordinated notes payable. See “Certain Relationships and Related Party Transactions—Related Party Subordinated Notes Payable” for further information regarding the related party subordinated notes payable.

 

5


Our Major Markets

As of June 30, 2017, we owned and operated more than 400,000 advertising displays across 17 countries in eight major markets: France, the United Kingdom and Ireland, Nordics and Poland (comprised of Denmark, Finland, Norway, Sweden, Estonia, Lithuania, Latvia and Poland), Southern Europe (comprised of Italy and Spain), Switzerland, Belgium, Singapore and the Netherlands. For the year ended December 31, 2016, each of these regions represented 23%, 18%, 17%, 14%, 7%, 6%, 2% and 3% of our revenues, respectively.

Our display count includes displays with multiple faces on a single structure, as well as displays with one face on a single structure.

The major European markets in which we operate include France, the United Kingdom, Italy, Sweden, Switzerland, Belgium and Spain.

France

As of June 30, 2017, we owned or operated more than 100,000 advertising displays in France, which were sold primarily through our local and national sales teams. The market in France has a long-established out-of-home tradition.

Our strategy in France focuses on building commercial capability, innovating our product offering (including providing digital creative services and audience-based selling), and proactively optimizing our portfolio. Our efforts to optimize the French portfolio concentrate on refocusing our national classic street furniture network, streamlining our billboard portfolio and building the largest retail presence within our business. Our expansion into the retail space has resulted in strong relationships with retailers.

United Kingdom

As of June 30, 2017, we owned or operated more than 44,000 advertising displays in the United Kingdom.

Our strategy in the United Kingdom focuses principally on fostering and maintaining strong relationships with advertisers and advertising agencies as well as on proactively transforming our portfolio. Our efforts to transform our portfolio concentrate on expanding the use of digital displays. For the six month period ended June 30, 2017, a significant portion of revenues in the United Kingdom were generated by our digital networks, which currently include a national digital street furniture network, digital networks at the point-of-sale in malls and supermarkets and super-premium digital billboards.

Italy

As of June 30, 2017, we owned or operated more than 35,000 advertising displays in Italy. We believe we are a market leader in Italy. To support our operations in Italy, we have implemented a Sales Force Effectiveness program, implemented our innovative SmartBike program, and deployed new digital screens.

 

6


Switzerland

As of June 30, 2017, we owned or operated more than 17,000 advertising displays in Switzerland. Due in great part to our historical focus on billboards, our business in Switzerland is similar to that of Clear Channel in the United States with private landlords owning a majority of the sites we lease. Our strategy in Switzerland focuses on upgrading our commercial capabilities, expanding our portfolio, and developing innovative advertiser solutions. Such solutions include:

 

  •   Mobility Map, which enables advertisers to plan campaigns using mapping software and a database including information on all of our assets in Switzerland, average daily traffic and pedestrian flows around the country, and behavioral data; and

 

  •   through a strategic partnership, tools that enable advertisers to retarget people who have seen a particular campaign on our out-of-home displays on their mobile phone.

We believe we will benefit from the upcoming digitalization of the market in Switzerland in the coming years.

Sweden

As of June 30, 2017, we owned or operated more than 115,000 advertising displays in Sweden, which primarily included smaller transit displays, but excluded over 288,000 displays on supermarket trollies. We believe we are a market leader in Sweden due to our position in Stockholm. Our strategy in Sweden focuses principally on leveraging data and expertise to price, package and sell our assets in an optimal way, while continuing to optimize our portfolio.

Belgium

As of June 30, 2017, we owned or operated more than 12,000 advertising displays in Belgium. We offer four national street furniture networks that allow us to support national advertising campaigns. We also offer premium billboards.

Spain

As of June 30, 2017, we owned or operated more than 32,000 advertising displays in Spain. We have presence in 45 out of 50 Spanish provinces. We also operate a successful SmartBike program in several cities in the country. Our main focus in Spain is on expanding our reach, driving relationships with the creative and advertising community and expanding our digital presence.

 

7