10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 9, 2020
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2020
FOR THE TRANSITION PERIOD FROM TO
Commission File Number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
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(Address of principal executive offices) | (Zip Code) | ||||||||||
(Registrant's telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class | Trading Symbol(s) | Name of Exchange on Which Registered | ||||||
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” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class | Outstanding at November 4, 2020 | ||||
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
Common Stock, $0.01 par value per share |
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
TABLE OF CONTENTS
Page Number | ||||||||
PART I—FINANCIAL INFORMATION | ||||||||
Item 1. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
PART II—OTHER INFORMATION | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | ||||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
1
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page Number | |||||
Financial Statements: | |||||
Condensed Notes to Consolidated Financial Statements: | |||||
2
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data) | September 30, 2020 |
December 31, 2019 |
|||||||||
(Unaudited) | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable | |||||||||||
Less: Allowance for credit losses | ( |
( |
|||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Total Current Assets | |||||||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||||||
Structures, net | |||||||||||
Other property, plant and equipment, net | |||||||||||
INTANGIBLE ASSETS AND GOODWILL | |||||||||||
Indefinite-lived permits | |||||||||||
Other intangible assets, net | |||||||||||
Goodwill | |||||||||||
OTHER ASSETS | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Total Assets | $ | $ | |||||||||
CURRENT LIABILITIES | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Accrued interest | |||||||||||
Current portion of long-term debt | |||||||||||
Total Current Liabilities | |||||||||||
NON-CURRENT LIABILITIES | |||||||||||
Long-term debt | |||||||||||
Mandatorily-redeemable preferred stock |
|||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liability | |||||||||||
Other long-term liabilities | |||||||||||
Total Liabilities | |||||||||||
Commitments and Contingencies (Note 5) |
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STOCKHOLDERS’ DEFICIT | |||||||||||
Noncontrolling interest | |||||||||||
Common stock, par value $ |
|||||||||||
Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
|||||||||
Accumulated other comprehensive loss | ( |
( |
|||||||||
Treasury stock ( |
( |
( |
|||||||||
Total Stockholders' Deficit | ( |
( |
|||||||||
Total Liabilities and Stockholders' Deficit | $ | $ |
See Notes to Consolidated Financial Statements
3
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands, except per share data) | Three Months Ended | Nine Months Ended | |||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Direct operating expenses (excludes depreciation and amortization) |
|||||||||||||||||||||||
Selling, general and administrative expenses (excludes depreciation and amortization) |
|||||||||||||||||||||||
Corporate expenses (excludes depreciation and amortization) |
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Other operating income (expense), net | ( |
( |
|||||||||||||||||||||
Operating income (loss) | ( |
( |
|||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Loss on extinguishment of debt | ( |
( |
( |
( |
|||||||||||||||||||
Loss on Due from iHeartCommunications | ( |
||||||||||||||||||||||
Other income (expense), net | ( |
( |
( |
||||||||||||||||||||
Loss before income taxes | ( |
( |
( |
( |
|||||||||||||||||||
Income tax benefit (expense) | ( |
( |
|||||||||||||||||||||
Consolidated net loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interest | ( |
( |
|||||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Foreign currency translation adjustments | $ | $ | ( |
$ | ( |
$ | ( |
||||||||||||||||
Reclassification adjustments | |||||||||||||||||||||||
Other adjustments to comprehensive income (loss), net of tax | |||||||||||||||||||||||
Other comprehensive income (loss) | ( |
( |
( |
||||||||||||||||||||
Comprehensive loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interest | ( |
( |
( |
||||||||||||||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss attributable to the Company per share of common stock | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
See Notes to Consolidated Financial Statements
4
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Shares Issued | Non-controlling Interest |
Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2020 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
Balances at September 30, 2020 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||
Common Shares Issued | Non-controlling Interest | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | |||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2019 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
— | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Net loss | ( |
— | — | ( |
— | — | ( |
||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Clear Media divestiture |
( |
— | — | — | ( |
||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( |
— | — | ( |
— | ( |
|||||||||||||||||||||||||||||||||||||||||
Balances at September 30, 2020 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Notes to Consolidated Financial Statements
5
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Separation | Post-Separation | Non-controlling Interest |
Controlling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Shares Issued |
Class B Common Shares Issued |
Common Shares Issued | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2019 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | — | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payments from noncontrolling interests | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock |
— | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss |
( |
— | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | ( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at September 30, 2019 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(In thousands, except share data) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Separation | Post-Separation | Non-controlling Interest |
Controlling Interest | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Class A Common Shares Issued |
Class B Common Shares Issued |
Common Shares Issued | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2018 | — | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||||||||||||||||||||||||||||||||||
— | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | ( |
— | — | ( |
— | — | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | — | — | ( |
( |
||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Recapitalization of equity | ( |
( |
— | ( |
( |
— | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital contributions | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Distributions | — | — | ( |
— | — | — | ( |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) |
( |
— | — | — | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | ( |
— | — | — | — | ( |
|||||||||||||||||||||||||||||||||||||||||||||||||||||
Balances at September 30, 2019 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Notes to Consolidated Financial Statements
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) | Nine Months Ended September 30, | ||||||||||
2020 | 2019 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Non-cash operating lease expense | |||||||||||
Depreciation and amortization | |||||||||||
Impairment charges | |||||||||||
Loss (gain) on disposal of operating and other assets, net | ( |
||||||||||
Deferred taxes | ( |
||||||||||
Foreign exchange transaction loss | |||||||||||
Credit losses | |||||||||||
Share-based compensation | |||||||||||
Amortization of deferred financing charges and note discounts, net | |||||||||||
Loss on extinguishment of debt | |||||||||||
Loss on Due from iHeartCommunications | |||||||||||
Other reconciling items, net | ( |
( |
|||||||||
Changes in operating assets and liabilities, net of effects of disposition: | |||||||||||
Decrease in accounts receivable | |||||||||||
Decrease (increase) in prepaid expenses | ( |
||||||||||
Increase in other current assets | ( |
( |
|||||||||
Decrease in other operating assets | |||||||||||
Increase (decrease) in accounts payable | ( |
||||||||||
Increase in accrued expenses | |||||||||||
Decrease in operating lease liabilities | ( |
( |
|||||||||
Increase in deferred revenue | |||||||||||
Increase (decrease) in accrued interest | ( |
||||||||||
Increase (decrease) in other operating liabilities | ( |
||||||||||
Net cash provided by (used for) operating activities | ( |
||||||||||
Cash flows from investing activities: | |||||||||||
Proceeds from disposal of assets, net | |||||||||||
Purchases of property, plant and equipment | ( |
( |
|||||||||
Purchases of concession rights | ( |
( |
|||||||||
Other investing activities, net | ( |
||||||||||
Net cash provided by (used for) investing activities | ( |
||||||||||
Cash flows from financing activities: | |||||||||||
Draws on credit facilities | |||||||||||
Proceeds from long-term debt | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Debt issuance costs | ( |
( |
|||||||||
Proceeds from issuance of mandatorily-redeemable preferred stock | |||||||||||
Net transfers from iHeartCommunications | |||||||||||
Proceeds from settlement of Due from iHeartCommunications | |||||||||||
Proceeds from issuance of common stock | |||||||||||
Other financing activities, net | ( |
( |
|||||||||
Net cash provided by financing activities | |||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
( |
|||||||||
Net increase in cash, cash equivalents and restricted cash | |||||||||||
Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental Disclosures: | |||||||||||
Cash paid for interest, including dividends on mandatorily-redeemable preferred stock | $ | $ | |||||||||
Cash paid for income taxes, net of refunds | $ | $ |
See Notes to Consolidated Financial Statements
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Preparation of Interim Financial Statements
The consolidated financial statements include the accounts of Clear Channel Outdoor Holdings, Inc. and its subsidiaries, as well as entities for which the Company has a controlling financial interest or is the primary beneficiary. All significant intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2019 Annual Report on Form 10-K, filed on February 27, 2020.
Prior to the Company's separation from iHeartMedia, Inc. ("iHeartMedia") and iHeartCommunications, Inc. ("iHeartCommunications") on May 1, 2019 (the "Separation"), the historical financial statements of the Company consisted of the carve-out financial statements of the outdoor businesses of Clear Channel Holdings, Inc. ("CCH"), Clear Channel Outdoor Holdings, Inc. ("CCOH") and its subsidiaries (the "Outdoor Business") and gave effect to allocations of expenses from iHeartMedia to the Company. The carve-out financial statements excluded the portion of the radio businesses previously owned by CCH, which had historically been reported as part of iHeartMedia’s iHM segment prior to the Separation, and amounts attributable to CCH, which was a holding company prior to the Separation with no independent assets or operations. Upon the Separation and the transactions related thereto, the Company’s only assets, liabilities and operations were those of the Outdoor Business.
In March 2020, the World Health Organization categorized coronavirus disease 2019 ("COVID-19") as a pandemic. The duration and severity of the effects of the pandemic remain unknown. In response, the Company has taken and continues to take actions, including cost reduction initiatives such as contract renegotiations, application for governmental aid and reductions in headcount to strengthen its financial position and support the continuity of its platform and operations.
•The Company continues to complete contract negotiations with landlords and municipalities to better align fixed site lease expenses with reductions in revenue. Where applicable, the Company has applied the April supplemental Financial Accounting Standards Board ("FASB") staff guidance regarding accounting for rent concessions resulting from COVID-19. During the three and nine months ended September 30, 2020, the Company recognized reductions of rent expense on lease and non-lease contracts due to negotiated rent abatements of $23.8 million and $53.1 million, respectively. Negotiated deferrals of rent payments did not result in a reduction of rent expense.
•During the three and nine months ended September 30, 2020, the Company received European governmental support and wage subsidies in response to COVID-19 of $7.2 million and $14.7 million, respectively, which have been recorded as reductions in compensation and rent costs.
8
•During the third quarter of 2020, the Company committed to a restructuring plan to reduce headcount in Europe and Latin America with estimated total charges in a range of approximately $21 million to $24 million. As of September 30, 2020, the Company had incurred total restructuring and other costs pursuant to this plan of $3.3 million recorded in its Europe segment, including $3.1 million within Selling, general and administrative expenses and the rest within Direct operating expenses. As of September 30, 2020, the Company had incurred total restructuring and other costs pursuant to the Latin America portion of the plan of $0.3 million recorded in "Other" within its segment disclosures. In addition, during the third quarter, the Company had incurred $1.7 million in restructuring and other costs pursuant to a separate plan to reduce headcount in its Americas segment. In conjunction with these plans, as of September 30, 2020, the Company incurred $1.9 million in restructuring and other costs that are included within Corporate expenses. Substantially all the plan charges recorded as restructuring and other costs are severance benefits and related costs. The Europe portion of the plan is anticipated to be completed by the end of 2021, the Latin America portion of the plan was substantially completed in the third quarter of 2020, and the Americas segment plan is anticipated to be completed with limited additional charges in the fourth quarter of 2020.
The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management 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 reported amounts of revenue and expenses during the periods presented. Such estimates and assumptions affect, among other things, the Company’s goodwill, long-lived assets and indefinite-lived intangible assets; operating lease right-of-use assets and operating lease liabilities; assessment of the annual effective tax rate; valuation of deferred income taxes and income tax contingencies; the allowance for doubtful accounts; assessment of our lease and non-lease contract expenses; and measurement of compensation cost for bonus and other compensation plans. The Company's assessment of conditions and events, considered in the aggregate, indicates that the Company will be able to meet its obligations as they become due within one year after the date of these financial statements. There continues to be a high level of uncertainty in estimating the expected economic and operational impacts relative to COVID-19 as it is an evolving situation. The estimates and assumptions used in these financial statements may change in future periods as the expected impacts from COVID-19 are revised, resulting in further potential impacts to the Company's financial statements.
Certain prior period amounts have been reclassified to conform to the 2020 presentation.
New Accounting Pronouncements Recently Adopted
As of January 1, 2020, the Company adopted Accounting Standards Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments, and all subsequently issued related amendments, which changed the methodology used to recognize impairment of the Company’s accounts receivable. Under the ASU, financial assets are presented at the net amount expected to be collected, requiring immediate recognition of estimated credit losses expected to occur over the asset's remaining life. This is in contrast to previous GAAP, under which credit losses were not recognized until it was probable that a loss had been incurred. The Company adopted the ASU on a modified-retrospective basis through a cumulative-effect adjustment to retained earnings as of January 1, 2020, resulting in a decrease to equity of $7.2 million. This adjustment includes $5.4 million related to Clear Media Limited ("Clear Media"), a former indirect, non-wholly owned subsidiary of the Company based in China that was sold on April 28, 2020. The Company performed its expected credit loss calculation separately by segment based on historical accounts receivable write-offs.
New Accounting Pronouncements Not Yet Adopted
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain existing exceptions to the general principles in Topic 740. The new guidance is effective for annual and interim periods beginning after December 2020, and early adoption is permitted; however, the Company does not expect the implementation of this ASU to have a material impact on its consolidated financial statements.
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NOTE 2 – SEGMENT DATA
As described in Note 1, the Company changed its presentation of segment information during the first quarter of 2020 to reflect changes in the way the business is managed and resources are allocated by the Company's CODM. Effective January 1, 2020, the Company has two reportable segments – Americas and Europe. The Company's remaining operating segments, which do not meet the quantitative thresholds to qualify as reportable segments, are disclosed as "Other." Each segment provides outdoor advertising services in its respective geographic region using various digital and traditional display types, consisting primarily of billboards, street furniture displays and transit displays.
Additionally, beginning in 2020, Segment Adjusted EBITDA is the profitability metric reported to the Company's 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 segments.
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The following tables present the Company's reportable segment results for the three and nine months ended September 30, 2020 and 2019. The Company has restated the segment information for prior periods to conform to the 2020 presentation.
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
Other(1)
|
|||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Capital Expenditures | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
Other(1)
|
|||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Segment Adjusted EBITDA | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | ( |
( |
|||||||||||||||||||||
Other(1)
|
( |
( |
|||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | |||||||||||||||||||||||
Segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
Less reconciling items: | |||||||||||||||||||||||
Corporate expenses(2)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Restructuring and other costs(3)
|
|||||||||||||||||||||||
Other operating (income) expense, net | ( |
( |
|||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Other charges(4)
|
( |
||||||||||||||||||||||
Consolidated net loss before income taxes | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)Other includes the Company's operations in Latin America and, for periods prior to the disposition of the Company's stake in Clear Media on April 28, 2020, China. Refer to Note 12 for additional details related to this disposition.
(2)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(3)The restructuring and other costs line item in this reconciliation excludes those restructuring and other costs related to corporate functions, which are included with the Corporate expenses line item.
(4)Other charges includes Loss on extinguishment of debt, Loss on Due from iHeartCommunications, and Other (income) expense, net.
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NOTE 3 – REVENUE
The Company generates revenue primarily from the sale of advertising space on printed and digital out-of-home advertising displays. Certain of these revenue transactions are considered leases for accounting purposes as the contracts convey to customers the right to control the use of the Company’s advertising displays for a period of time. The Company accounts for revenue from leases in accordance with the lease accounting guidance under Accounting Standards Codification ("ASC") Topic 842; all remaining revenue transactions are accounted for as revenue from contracts with customers under ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by geographical region, for the three and nine months ended September 30, 2020 and 2019:
(In thousands) | Revenue from contracts with customers | Revenue from leases | Total Revenue | ||||||||||||||
Three Months Ended September 30, 2020 | |||||||||||||||||
Americas | $ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other(1)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Three Months Ended September 30, 2019 | |||||||||||||||||
Americas | $ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other(1)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Nine Months Ended September 30, 2020 | |||||||||||||||||
Americas | $ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other(1)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Nine Months Ended September 30, 2019 | |||||||||||||||||
Americas | $ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other(1)
|
|||||||||||||||||
Total | $ | $ | $ |
(1)Other includes the Company's businesses in Latin America and, for periods prior to the disposition of the Company's stake in Clear Media on April 28, 2020, China. Refer to Note 12 for additional details related to this disposition.
12
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) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | $ | $ | $ | $ | |||||||||||||||||||
Deferred revenue from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | $ | $ |