10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 9, 2022
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022
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 August 4, 2022 | ||||
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
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. AND SUBSIDIARIES
INDEX TO CONDENSED 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) | June 30, 2022 |
December 31, 2021 |
|||||||||
(Unaudited) | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
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 | |||||||||||
Accrued interest | |||||||||||
Deferred revenue | |||||||||||
Current portion of long-term debt | |||||||||||
Total Current Liabilities | |||||||||||
NON-CURRENT LIABILITIES | |||||||||||
Long-term debt | |||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other long-term liabilities | |||||||||||
Total Liabilities | |||||||||||
Commitments and Contingencies (Note 5) |
|||||||||||
STOCKHOLDERS’ DEFICIT | |||||||||||
Noncontrolling interest | |||||||||||
Common stock, par value $ |
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Additional paid-in capital | |||||||||||
Accumulated deficit | ( |
( |
|||||||||
Accumulated other comprehensive loss | ( |
( |
|||||||||
Treasury stock ( |
( |
( |
|||||||||
Total Stockholders' Deficit | ( |
( |
|||||||||
Total Liabilities and Stockholders' Deficit | $ | $ |
See Condensed Notes to Consolidated Financial Statements
3
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
(In thousands, except per share data) | Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Direct operating expenses(1)
|
|||||||||||||||||||||||
Selling, general and administrative expenses(1)
|
|||||||||||||||||||||||
Corporate expenses(1)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Other operating expense (income), net | ( |
( |
( |
||||||||||||||||||||
Operating income (loss) | ( |
||||||||||||||||||||||
Interest expense, net | ( |
( |
( |
( |
|||||||||||||||||||
Loss on extinguishment of debt | ( |
( |
|||||||||||||||||||||
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 | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss attributable to the Company per share of common stock — basic and diluted | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
(1)Excludes depreciation and amortization
See Condensed Notes to Consolidated Financial Statements
4
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
(In thousands) | Three Months Ended | Six Months Ended | |||||||||||||||||||||
June 30, | June 30, | ||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Foreign currency translation adjustments | ( |
||||||||||||||||||||||
Reclassification adjustments | |||||||||||||||||||||||
Other comprehensive income (loss) | ( |
||||||||||||||||||||||
Comprehensive loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interest | ( |
( |
( |
||||||||||||||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
See Condensed Notes to Consolidated Financial Statements
5
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Three Months Ended June 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 | ||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Six Months Ended June 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 | ||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Condensed Notes to Consolidated Financial Statements
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
Three Months Ended June 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 March 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Six Months Ended June 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 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net loss | ( |
— | — | ( |
— | — | ( |
||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and release of stock awards |
— | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation |
— | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests |
( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | ( |
— | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Condensed Notes to Consolidated Financial Statements
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) | Six Months Ended June 30, | ||||||||||
2022 | 2021 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Depreciation, amortization and impairment charges | |||||||||||
Non-cash operating lease expense | |||||||||||
Loss on extinguishment of debt | |||||||||||
Deferred taxes | ( |
||||||||||
Gain on disposal of operating and other assets, net | ( |
( |
|||||||||
Foreign exchange transaction loss (gain) | ( |
||||||||||
Other reconciling items, net | |||||||||||
Changes in operating assets and liabilities: | |||||||||||
Decrease (increase) in accounts receivable | ( |
||||||||||
Increase in prepaid expenses and other operating assets | ( |
( |
|||||||||
Decrease in accounts payable and accrued expenses | ( |
( |
|||||||||
Decrease in operating lease liabilities | ( |
( |
|||||||||
Increase (decrease) in accrued interest | ( |
||||||||||
Increase in deferred revenue | |||||||||||
Increase (decrease) in other operating liabilities | ( |
||||||||||
Net cash provided by (used for) operating activities | ( |
||||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | ( |
( |
|||||||||
Asset acquisitions | ( |
( |
|||||||||
Proceeds from disposal of assets | |||||||||||
Other investing activities, net | ( |
||||||||||
Net cash used for investing activities | ( |
( |
|||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from long-term debt | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Debt issuance costs | ( |
||||||||||
Taxes paid related to net share settlement of equity awards | ( |
( |
|||||||||
Other financing activities, net | ( |
( |
|||||||||
Net cash provided by (used for) financing activities | ( |
||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
( |
|||||||||
Net decrease 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 | $ | $ | |||||||||
Cash paid for income taxes, net of refunds | $ | $ |
See Condensed Notes to Consolidated Financial Statements
8
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 in which the Company has a controlling financial interest or for which the Company is the primary beneficiary. Intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
The accompanying consolidated financial statements were prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted pursuant to such SEC rules and regulations. Management believes that the disclosures made are adequate to make the information presented not misleading. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year. The financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2021 Annual Report on Form 10-K, filed with the SEC on February 24, 2022.
Use of Estimates
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; defined-benefit plan obligations; the allowance for credit losses; assessment of lease and non-lease contract expenses; measurement of compensation cost for bonus and other compensation plans; and litigation accruals.
Asset Acquisitions
During the six months ended June 30, 2022, the Company completed several acquisitions of out-of-home advertising assets, which included digital billboard structures, land, indefinite-lived permits and permanent easements, for total cash consideration of $24.3 million.
New Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
For the last several years, there has been an ongoing effort amongst regulators, standard setters, financial institutions and other market participants to replace interbank offered rates, including the London Interbank Offered Rate (“LIBOR”), with alternative reference rates. In the United States (“U.S.”), the Alternative Reference Rates Committee has formally recommended forward-looking Secured Overnight Financing Rate term rates as the replacement for USD LIBOR, while various other risk-free rates have been selected to replace LIBOR for other currencies. After December 31, 2021, 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. The Company will continue to work with the administrative agents of its Senior Secured Credit Facilities and Receivables-Based Credit Facility to agree on replacement rates but does not expect the replacement of LIBOR to result in a material impact on its consolidated financial statements.
In March 2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting, in order to ease the potential burden of accounting for reference rate reform initiatives. The update provides temporary optional expedients and exceptions for applying GAAP contract modification accounting to contracts and other transactions affected by reference rate reform if certain criteria are met and may be applied through December 31, 2022. The Company is assessing whether it will use these optional expedients and exceptions but does not expect adoption of this guidance to have a material impact on the Company’s consolidated financial statements or disclosures. The Company will continue to monitor and assess regulatory developments during the transition period.
9
ASU 2021-10
In November 2021, the FASB issued ASU 2021-10, Disclosures by Business Entities about Government Assistance, which requires disclosures that increase the transparency of certain transactions with governments. The amendments in this ASU are effective for annual periods beginning after December 15, 2021 and may be applied prospectively or retrospectively. The Company does not expect to be materially impacted by the implementation of this ASU.
NOTE 2 – SEGMENT DATA
The Company has two reportable segments, which it believes best reflect how the Company is currently managed: Americas and Europe. The Americas segment consists of operations primarily in the U.S., and the Europe segment consists of 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 is disclosed as “Other” herein. Each segment provides out-of-home advertising services in its respective geographic region using various digital and traditional display types, consisting primarily of billboards, street furniture displays and transit displays.
Segment Adjusted EBITDA is the profitability metric reported to the Company’s Chief Operating Decision Maker (“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.
10
The following table presents the Company’s reportable segment results for the three and six months ended June 30, 2022 and 2021:
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Capital Expenditures | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Segment Adjusted EBITDA | |||||||||||||||||||||||
Americas | $ | $ | $ | $ | |||||||||||||||||||
Europe | ( |
||||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Reconciliation of Segment Adjusted EBITDA to Consolidated Net Loss Before Income Taxes | |||||||||||||||||||||||
Segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
Less reconciling items: | |||||||||||||||||||||||
Corporate expenses(1)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Restructuring and other costs(2)
|
|||||||||||||||||||||||
Other operating expense (income), net | ( |
( |
( |
||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Other reconciling items(3)
|
|||||||||||||||||||||||
Consolidated net loss before income taxes | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal, finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(2)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 income (expense), net.
NOTE 3 – REVENUE
11
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by segment, for the three and six months ended June 30, 2022 and 2021:
(In thousands) | Revenue from contracts with customers | Revenue from leases | Total Revenue | ||||||||||||||
Three Months Ended June 30, 2022 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Three Months Ended June 30, 2021 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Six Months Ended June 30, 2022 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Six Months Ended June 30, 2021 | |||||||||||||||||
Americas(1)
|
$ | $ | $ | ||||||||||||||
Europe | |||||||||||||||||
Other | |||||||||||||||||
Total | $ | $ | $ |
(1)Americas total revenue for the three months ended June 30, 2022 and 2021 includes revenue from transit displays of $65.1 million and $27.0 million, respectively, including revenue from airport displays of $61.1 million and $24.6 million, respectively. Americas total revenue for the six months ended June 30, 2022 and 2021 includes revenue from transit displays of $124.1 million and $48.4 million, respectively, including revenue from airport displays of $117.0 million and $44.1 million, respectively.
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | $ | $ | $ | $ | |||||||||||||||||||
Deferred revenue from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | $ | $ | $ | $ |
12
During the three months ended June 30, 2022 and 2021, respectively, the Company recognized $45.0 million and $36.8 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective quarter. During the six months ended June 30, 2022 and 2021, respectively, the Company recognized $35.9 million and $34.5 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective year.
The Company’s contracts with customers generally have terms of one year or less. However, as of June 30, 2022, the Company expects to recognize $89.8 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with the majority of this amount to be recognized over the next five years .
NOTE 4 – LONG-TERM DEBT
Long-term debt outstanding as of June 30, 2022 and December 31, 2021 consisted of the following:
(In thousands) | June 30, 2022 |
December 31, 2021 |
|||||||||
Term Loan Facility(1)
|
$ | $ | |||||||||
Revolving Credit Facility | |||||||||||
Receivables-Based Credit Facility | |||||||||||
Clear Channel Outdoor Holdings |
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Clear Channel Outdoor Holdings |
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Clear Channel Outdoor Holdings |
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Clear Channel International B.V. |
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Other debt(2)
|
|||||||||||
Original issue discount | ( |
( |
|||||||||
Long-term debt fees | ( |
( |
|||||||||
Total debt | |||||||||||
Less: Current portion | |||||||||||
Total long-term debt | $ | $ |
(1)During the six months ended June 30, 2022, the Company paid $10.0 million of the outstanding principal on the Term Loan Facility in accordance with the terms of the senior secured credit agreement (the "Senior Secured Credit Agreement") governing the Senior Secured Credit Facilities, which consist of the Term Loan Facility and the Revolving Credit Facility.
(2)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 $31.4 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 will be 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.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $4.7 billion and $5.9 billion as of June 30, 2022 and December 31, 2021, respectively. Under the fair value hierarchy established by ASC 820-10-35, the inputs used to determine the market value of the Company’s debt are classified as Level 1.
As of June 30, 2022, the Company was in compliance with all covenants contained in its debt agreements.
Letters of Credit, Surety Bonds and Guarantees
As of June 30, 2022, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $131.8 million of remaining excess availability. Additionally, as of June 30, 2022, the Company had $43.5 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $81.5 million of excess availability. As of June 30, 2022, the Company had $84.9 million and $27.7 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $8.8 million of cash collateral. These letters of credit, surety bonds and bank guarantees relate to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
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NOTE 5 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies, in each case related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes, employment and benefits related claims, land use and zoning disputes, governmental fines, intellectual property claims and tax disputes.
China Investigation
The Company advised both the SEC and the U.S. Department of Justice (the "DOJ") of the investigation of Clear Media and is cooperating to provide documents, interviews and information to these agencies. Subsequent to the announcement that the Company was considering a strategic review of its stake in Clear Media, in March 2020, Clear Channel Outdoor Holdings, Inc. received a subpoena from the staff of the SEC and a Grand Jury subpoena from the U.S. Attorney's Office for the Eastern District of New York, both in connection with the previously disclosed investigations. On April 28, 2020, the Company tendered the shares representing its 50.91 % stake in Clear Media to Ever Harmonic Global Limited (“Ever Harmonic”), a special-purpose vehicle wholly-owned by a consortium of investors, which includes the chief executive officer and an executive director of Clear Media, and on May 14, 2020, the Company received the final proceeds of the sale. In connection with the sale of its shares in Clear Media, the Company entered into an Investigation and Litigation Support Agreement with Clear Media and Ever Harmonic that 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 Litigation Support Agreement expired in March 2022.
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 meeting with these agencies to engage in discussions about potential resolution of these matters, including potential settlement. Based on the discussions to date, the Company recorded an estimated liability during the first quarter of 2022 to account for a potential resolution of these matters. However, at this time, the Company cannot predict the eventual scope, duration or outcome of these discussions, including whether a settlement will be reached, the amount of any potential monetary payments or the scope of injunctive or other relief, the results of which may be materially adverse to the Company, its financial condition and its results of operations. At this time, the Company is unable to reasonably estimate, or provide any assurance regarding, the amount of any potential loss in excess of the amount accrued relating to this investigation.
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NOTE 6 – INCOME TAXES
Income Tax Benefit (Expense)
The Company’s income tax benefit (expense) for the three and six months ended June 30, 2022 and 2021 consisted of the following components:
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
Current tax benefit (expense) | $ | ( |
$ | ( |
$ | ( |
$ | ||||||||||||||||
Deferred tax benefit (expense) | ( |
( |
|||||||||||||||||||||
Income tax benefit (expense) | $ | ( |
$ | $ | ( |
$ |
NOTE 7 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of June 30, 2022 and December 31, 2021:
(In thousands) | June 30, 2022 |
December 31, 2021 |
|||||||||
Structures | $ | $ | |||||||||
Furniture and other equipment | |||||||||||
Land, buildings and improvements | |||||||||||
Construction in progress | |||||||||||
Property, plant and equipment, gross | |||||||||||
Less: Accumulated depreciation | ( |
( |
|||||||||
Property, plant and equipment, net | $ | $ |
NOTE 8 – INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets as of June 30, 2022 and December 31, 2021:
(In thousands) | June 30, 2022 | December 31, 2021 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
Indefinite-lived permits | $ |