10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 7, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2023
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.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Class | Outstanding at August 3, 2023 | ||||
- - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
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, 2023 |
December 31, 2022 |
|||||||||
(Unaudited) | |||||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Current assets held for sale | |||||||||||
Total Current Assets | |||||||||||
PROPERTY, PLANT AND EQUIPMENT | |||||||||||
Structures, net | |||||||||||
Other property, plant and equipment, net | |||||||||||
INTANGIBLE ASSETS AND GOODWILL | |||||||||||
Permits, net | |||||||||||
Other intangible assets, net | |||||||||||
Goodwill | |||||||||||
OTHER ASSETS | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Other assets held for sale | |||||||||||
Total Assets | $ | $ | |||||||||
CURRENT LIABILITIES | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current operating lease liabilities | |||||||||||
Accrued interest | |||||||||||
Deferred revenue | |||||||||||
Current portion of long-term debt | |||||||||||
Current liabilities held for sale | |||||||||||
Total Current Liabilities | |||||||||||
NON-CURRENT LIABILITIES | |||||||||||
Long-term debt | |||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other liabilities | |||||||||||
Other liabilities held for sale | |||||||||||
Total Liabilities | |||||||||||
Commitments and Contingencies (Note 6) |
|||||||||||
STOCKHOLDERS’ DEFICIT | |||||||||||
Noncontrolling interests | |||||||||||
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 Condensed Notes to Consolidated Financial Statements
3
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In thousands, except per share data) | June 30, | June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Direct operating expenses(1)
|
|||||||||||||||||||||||
Selling, general and administrative expenses(1)
|
|||||||||||||||||||||||
Corporate expenses(1)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Other operating (income) expense, net | ( |
( |
( |
||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Interest expense, net | ( |
( |
( |
( |
|||||||||||||||||||
Other income (expense), net | ( |
( |
|||||||||||||||||||||
Loss before income taxes | ( |
( |
( |
( |
|||||||||||||||||||
Income tax benefit (expense) | ( |
( |
( |
||||||||||||||||||||
Consolidated net loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interests | |||||||||||||||||||||||
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)
Three Months Ended | Six Months Ended | ||||||||||||||||||||||
(In thousands) | June 30, | June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Other comprehensive (loss) income: | |||||||||||||||||||||||
Foreign currency translation adjustments | ( |
( |
|||||||||||||||||||||
Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sales of businesses(1)
|
( |
( |
|||||||||||||||||||||
Other comprehensive (loss) income | ( |
( |
|||||||||||||||||||||
Comprehensive loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interests | ( |
( |
|||||||||||||||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)Included in “Other operating (income) expense, net” on Consolidated Statements of Loss
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 | |||||||||||||||||||||||||||||||||||||||||||||||
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 June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests, net | ( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Disposition of businesses | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Three Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at March 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests, net | ( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Six 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 | ||||||||||||||||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests, net | ( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | — | — | — | ( |
— | ( |
|||||||||||||||||||||||||||||||||||||||||
Disposition of businesses | — | — | — | — | ( |
— | ( |
||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2021 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | ( |
— | — | ( |
|||||||||||||||||||||||||||||||||||||||||
Release of stock awards and exercise of stock options | — | ( |
— | — | ( |
( |
|||||||||||||||||||||||||||||||||||||||||
Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Payments to noncontrolling interests, net | ( |
— | — | — | — | — | ( |
||||||||||||||||||||||||||||||||||||||||
Foreign currency translation adjustments | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
See Condensed Notes to Consolidated Financial Statements
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands) | Six Months Ended June 30, | ||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Depreciation, amortization and impairment charges | |||||||||||
Non-cash operating lease expense | |||||||||||
Deferred taxes | |||||||||||
Share-based compensation | |||||||||||
Net gain on disposition of businesses and/or operating assets | ( |
( |
|||||||||
Foreign exchange transaction (gain) loss | ( |
||||||||||
Other reconciling items, net | |||||||||||
Changes in operating assets and liabilities, net of effects of dispositions: | |||||||||||
Decrease in accounts receivable | |||||||||||
Increase in prepaid expenses and other operating assets | ( |
( |
|||||||||
Decrease in accounts payable and accrued expenses | ( |
( |
|||||||||
Decrease in operating lease liabilities | ( |
( |
|||||||||
Increase in accrued interest | |||||||||||
Increase in deferred revenue | |||||||||||
(Decrease) increase in other operating liabilities | ( |
||||||||||
Net cash (used for) provided by operating activities | ( |
||||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | ( |
( |
|||||||||
Asset acquisitions | ( |
( |
|||||||||
Net proceeds from disposition of businesses and/or assets | |||||||||||
Other investing activities, net | ( |
( |
|||||||||
Net cash provided by (used for) investing activities | ( |
||||||||||
Cash flows from financing activities: | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Debt issuance costs | ( |
||||||||||
Taxes paid related to net share settlement of equity awards | ( |
( |
|||||||||
Payments to noncontrolling interests, net | ( |
( |
|||||||||
Net cash 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
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Principles of Consolidation
These 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.
Preparation of Interim Financial Statements
The accompanying consolidated financial statements were prepared 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. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year.
Pursuant to the rules and regulations of the Securities and Exchange Commission (“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 2022 Annual Report on Form 10-K, filed with the SEC on February 28, 2023.
Use of Estimates
Presentation Changes
NOTE 2 – DISPOSITIONS
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.
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, recorded within “Other operating (income) expense, net” 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. (“CCIBV”), a wholly-owned subsidiary of the Company, entered into agreements with subsidiaries of JCDecaux SE (“JCDecaux”), among other related parties, with respect to the sales of the Company’s businesses in Italy and Spain.
The sale of the Company’s business in Italy closed on May 31, 2023. The Company received cash proceeds, net of customary closing adjustments and cash sold, of $5.1 million, which are reflected as cash from investing activities within “Net proceeds from disposition of businesses and/or assets” on the Consolidated Statement of Cash Flows. Upon sale, the Company recognized a gain of $11.2 million, recorded within “Other operating (income) expense, net” on the Consolidated Statement of Loss.
8
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 the Company expects to receive cash consideration of approximately $64.3 million. Assets and liabilities of the Company’s business in Spain are presented as held for sale on the Company’s Consolidated Balance Sheet as of June 30, 2023.
Potential Disposition of Business in France
On July 17, 2023, the Company announced that it has entered into exclusive discussions to sell its business in France to Equinox Industries. The proposed transaction is expected to be completed in the fourth quarter of 2023, 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. The transaction is not subject to regulatory approval.
Assets and Liabilities Held for Sale
The Company classifies assets and liabilities of 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.
As described above, assets and liabilities of the Company’s businesses in Spain and Switzerland were presented as held for sale on the Company’s Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022, respectively. As such, these assets and liabilities have been excluded from relevant disclosures as of these respective dates within these Condensed Notes to the Consolidated Financial Statements.
The following table presents the major categories of assets and liabilities held for sale as of June 30, 2023 and December 31, 2022:
(In thousands) | June 30, 2023 |
December 31, 2022 |
|||||||||
Assets held for sale: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Structures, net | |||||||||||
Other property, plant and equipment, net | |||||||||||
Goodwill | |||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Assets held for sale | $ | $ | |||||||||
Liabilities held for sale: | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other liabilities | |||||||||||
Liabilities held for sale | $ | $ |
9
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 – SEGMENT DATA
The Company has four reportable segments, which it believes best reflect how the Company is currently managed: America, Airports, Europe-North and Europe-South. The Company's remaining operations in Latin America and Singapore are disclosed as “Other.”
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.
The following table presents the Company’s reportable segment results for the three and six months ended June 30, 2023 and 2022. As described in Note 1, the Company has revised its segment disclosures for the prior period to conform to the current period presentation. As described in Note 2, the Company sold its operations in Switzerland and Italy on March 31, 2023 and May 31, 2023, respectively. Accordingly, Europe-South segment results include these entities through their respective dates of sale.
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Europe-South | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Capital Expenditures(1)
|
|||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Europe-South | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Segment Adjusted EBITDA | |||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Europe-South | ( |
( |
|||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
10
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
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 (income) expense, net | ( |
( |
|||||||||||||||||||||
Consolidated net loss before income taxes | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)In addition to payments that occurred during the period for capital expenditures, as disclosed here and in the Consolidated Statements of Cash Flows, the Company had $14.4 million and $14.6 million of accrued capital expenditures that remained unpaid as of June 30, 2023 and 2022, respectively.
(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.
(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.
11
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – 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 Company’s remaining revenue transactions are accounted for as revenue from contracts with customers in accordance with ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue, disaggregated by geography, for the three and six months ended June 30, 2023 and 2022:
(In thousands) | Revenue from contracts with customers | Total revenue | |||||||||||||||
Three Months Ended June 30, 2023 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Three Months Ended June 30, 2022 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Six Months Ended June 30, 2023 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Six Months Ended June 30, 2022 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ |
(1)U.S. revenue, which also includes revenue derived from airport displays in the Caribbean, is comprised of revenue from the Company’s America and Airports segments.
(2)Europe revenue is comprised of revenue from the Company’s Europe-North and Europe-South segments. As discussed in Note 2, the Company sold its former businesses in Switzerland and Italy on March 31, 2023 and May 31, 2023, respectively. Accordingly, Europe revenue includes these businesses through their respective dates of sale.
(3)Other includes the Company’s businesses in Latin America and Singapore.
12
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 June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands) |
2023(1)
|
2022 |
2023(1)
|
2022 | |||||||||||||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | |||||||||||||||||||||||
Deferred revenue from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance |
(1)The beginning and ending balances for the three and six months ended June 30, 2023 exclude accounts receivable and deferred revenue from contracts with customers that were held for sale as of the respective balance sheet dates. As such, the changes in the accounts receivable and deferred revenue balances from contracts with customers during these periods were largely impacted by the sale of our former business in Italy and anticipated sale of our business in Spain.
During the three months ended June 30, 2023 and 2022, respectively, the Company recognized $44.1 million and $45.0 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective quarters. During the six months ended June 30, 2023 and 2022, respectively, the Company recognized $29.1 million and $35.9 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective years.
The Company’s contracts with customers generally have terms of one year or less. However, as of June 30, 2023, the Company expected to recognize $108.4 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 .
13
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding as of June 30, 2023 and December 31, 2022 consisted of the following:
(In thousands) | June 30, 2023 |
December 31, 2022 |
|||||||||
Term Loan Facility Due 2026(1),(2)
|
$ | $ | |||||||||
Revolving Credit Facility Due 2026(3)
|
|||||||||||
Receivables-Based Credit Facility Due 2026(4)
|
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel International B.V. |
|||||||||||
Other debt(5)
|
|||||||||||
Original issue discount | ( |
( |
|||||||||
Long-term debt fees | ( |
( |
|||||||||
Total debt | |||||||||||
Less: Current portion | |||||||||||
Total long-term debt | $ | $ |
(1)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. In accordance with these terms, the Company paid $10.0 million of the outstanding principal on the Term Loan Facility during the six months ended June 30, 2023.
(2)In February 2023, the Senior Secured Credit Agreement 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)In June 2023, the Senior Secured Credit Agreement was amended to extend the maturity date of a substantial portion of 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.
(4)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.
(5)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 $32.7 million at current exchange rates.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.0 billion and $4.7 billion as of June 30, 2023 and December 31, 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 June 30, 2023, the Company was in compliance with all covenants contained in its debt agreements.
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.
14
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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.
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.
15
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Letters of Credit, Surety Bonds and Guarantees
As of June 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 $43.1 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $116.2 million of excess availability. Additionally, as of June 30, 2023, the Company had $79.2 million and $30.9 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $8.5 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.
NOTE 6 – 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
Prior 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, were convicted in China of certain crimes, including the crime of misappropriation of Clear Media funds, and sentenced to 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”) of the investigation of Clear Media. Subsequent to the announcement that the Company was considering a strategic review of its stake in Clear Media, in March 2020, the Company received a subpoena from the staff of the SEC and a Grand Jury subpoena from the U.S. Attorney’s Office for the Eastern District of New York in connection with the investigation of Clear Media. In May 2020, the Company finalized the sale of its 50.91 % stake in Clear Media.
As previously disclosed, the Company has been engaging with the SEC and the DOJ regarding the potential resolution of these matters and, during the first quarter of 2022, recorded an estimated liability related to such matters. The Company has now reached an agreement in principle, on a neither admit nor deny basis, with the SEC to settle the claims against the Company. If a definitive order is finalized and approved by the SEC under the currently preliminary terms, the Company expects to pay approximately $26.1 million to settle the claims. Based on these developments, the Company recorded an incremental liability of $19.0 million for the second quarter of 2023 related to the potential settlement of this matter to equal the amount of the expected payment.
There can be no assurance that the Company’s efforts to reach a final resolution with the SEC and the DOJ will be successful or that the preliminary terms, including the accrued estimate of liability, will not change significantly.
16
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 – INCOME TAXES
Income Tax Benefit (Expense)
The Company’s income tax benefit (expense) for the three and six months ended June 30, 2023 and 2022 consisted of the following components:
(In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Current tax expense | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Deferred tax benefit (expense) | ( |
( |
( |
||||||||||||||||||||
Income tax benefit (expense) | $ | $ | ( |
$ | ( |
$ | ( |
The effective tax rates for the three and six months ended June 30, 2023 were 4.6 % and (9.2 )%, respectively, compared to (55.9 )% and (15.4 )% for the three and six months ended June 30, 2022, respectively. The effective tax rates for each period were 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. Additionally, the effective tax rate for the six months ended June 30, 2023 was largely impacted by the sale of the Company’s former business in Switzerland.
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of June 30, 2023 and December 31, 2022:
(In thousands) | June 30, 2023 |
December 31, 2022 |
|||||||||
Structures(1)
|
$ | $ | |||||||||
Furniture and other equipment | |||||||||||
Land, buildings and improvements(1)
|
|||||||||||
Construction in progress | |||||||||||
Property, plant and equipment, gross | |||||||||||
Less: Accumulated depreciation | ( |
( |
|||||||||
Property, plant and equipment, net(2)
|
$ | $ |
(1)During the six months ended June 30, 2023, the Company acquired billboard structures and land of $1.0 million and $0.1 million, respectively, as part of asset acquisitions.
(2)The decrease in property, plant and equipment, net, during the six months ended June 30, 2023 was largely driven by the sale of our former business in Italy and anticipated sale of our business in Spain, which, in the aggregate, had a balance of $50.1 million at December 31, 2022.
17
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 – 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, 2023 and December 31, 2022:
(In thousands) | June 30, 2023 | December 31, 2022 | |||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
Permits(1)
|
$ | $ | ( |
$ | $ | ( |
|||||||||||||||||
Transit, street furniture and other outdoor contractual rights | ( |
( |
|||||||||||||||||||||
Permanent easements(1)
|
|||||||||||||||||||||||
Trademarks | ( |
( |
|||||||||||||||||||||
Other | ( |
( |
|||||||||||||||||||||
Total intangible assets | $ | $ | ( |
$ | $ | ( |
(1)During the six months ended June 30, 2023, the Company acquired permits and permanent easements of $7.0 million and $3.8 million, respectively, as part of asset acquisitions. The acquired permits have amortization periods of 11 and 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 2022 Annual Report on Form 10-K. Due to rising interest rates and inflation in 2022, the Company tested certain of its then-indefinite-lived permits for impairment during the second quarter of 2022, resulting in an impairment charge of $21.8 million during the three and six months ended June 30, 2022. There were no indicators of impairment as of June 30, 2023.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the six months ended June 30, 2023:
(In thousands) | America | Airports | Europe-North | Consolidated | |||||||||||||||||||
Balance as of December 31, 2022(1)
|
$ | $ | $ | $ | |||||||||||||||||||
Foreign currency impact | |||||||||||||||||||||||
Balance as of June 30, 2023 | $ | $ | $ | $ |
(1)The balance at December 31, 2022 is net of cumulative impairments of $2.6 billion for America, $79.4 million for Europe-North, $128.9 million for Europe-South and $90.4 million for Other.
NOTE 10 – COST-SAVINGS INITIATIVES
Restructuring Plan to Reduce Headcount
During 2020, the Company committed to a restructuring plan to reduce headcount in its Europe business, which was executed through the fourth quarter of 2021 when the impacted employees were terminated. Since then, any additional costs incurred, or in some cases reversed, related to residual restructuring activity in the Company’s Europe-South segment. As of June 30, 2023, the Company had incurred cumulative costs of $37.4 million in its Europe-South segment in connection with this restructuring plan. Substantially all costs have been severance benefits and related costs, and remaining costs associated with this restructuring plan are not expected to be significant.
18
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of June 30, 2023, the remaining liability related to this restructuring plan was $4.1 million. The Company expects most of this balance to be settled by the end of 2023. The following table presents changes in this liability balance during the six months ended June 30, 2023:
(In thousands) | Europe-South | ||||
Liability balance as of December 31, 2022 |
$ | ||||
Costs incurred, net(1)
|
|||||
Costs paid or otherwise settled | ( |
||||
Foreign currency impact | |||||
Liability balance as of June 30, 2023 |
$ |
(1)Costs are reported in “Direct operating expenses” and “Selling, general and administrative expenses” on the Consolidated Statements of Loss. They are categorized as Restructuring and other costs and are therefore excluded from Segment Adjusted EBITDA.
NOTE 11 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three and six months ended June 30, 2023 and 2022:
(In thousands, except per share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Numerator: | |||||||||||||||||||||||
Net loss attributable to the Company – common shares | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Denominator: | |||||||||||||||||||||||
Weighted average common shares outstanding – basic | |||||||||||||||||||||||
Weighted average common shares outstanding – diluted | |||||||||||||||||||||||
Net loss attributable to the Company per share of common stock: | |||||||||||||||||||||||
Basic | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Diluted | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Outstanding equity awards of 20.5 million and 23.7 million shares for the three months ended June 30, 2023 and 2022, respectively, and 19.8 million and 25.7 million shares for the six months ended June 30, 2023 and 2022, respectively, were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.
NOTE 12 — 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) | June 30, 2023 |
December 31, 2022 |
|||||||||
Cash and cash equivalents in the Balance Sheets | $ | $ | |||||||||
Cash and cash equivalents included in Current assets held for sale | |||||||||||
Restricted cash included in: | |||||||||||
Other current assets | |||||||||||
Current assets held for sale | |||||||||||
Other assets | |||||||||||
Total cash, cash equivalents and restricted cash in the Statements of Cash Flows | $ | $ |
19
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Accounts Receivable
The following table discloses the components of “Accounts receivable, net,” as reported in the Consolidated Balance Sheets:
(In thousands) | June 30, 2023 |
December 31, 2022 |
|||||||||
Accounts receivable | $ | $ | |||||||||
Less: Allowance for credit losses | ( |
( |
|||||||||
Accounts receivable, net(1)
|
$ | $ |
(1)The decrease in accounts receivable, net, during the six months ended June 30, 2023 was largely driven by the sale of our former business in Italy and anticipated sale of our business in Spain, which, in the aggregate, had a balance of $62.9 million at December 31, 2022.
Credit loss expense (reversal) related to accounts receivable was $(1.0 ) million and $0.5 million during the three months ended June 30, 2023 and 2022, respectively, and $1.7 million and $0.8 million during the six months ended June 30, 2023 and 2022, respectively.
Accrued Expenses
The following table discloses the components of “Accrued expenses” as of June 30, 2023 and December 31, 2022:
(In thousands) | June 30, 2023 |
December 31, 2022 |
|||||||||
Accrued rent | $ | $ | |||||||||
Accrued employee compensation and benefits | |||||||||||
Accrued taxes | |||||||||||
Accrued other | |||||||||||
Total accrued expenses(1)
|
$ | $ |
(1)The decrease in total accrued expenses during the six months ended June 30, 2023 was largely driven by the sale of our former business in Italy and anticipated sale of our business in Spain, which, in the aggregate, had a balance of $33.6 million at December 31, 2022.
Share-Based Compensation
On May 2, 2023, the Compensation Committee of the Company’s Board of Directors (the “Board”) approved grants of 15.0 million restricted stock units (“RSUs”) and 3.4 million performance stock units (“PSUs”) to certain of its employees.
•The RSUs generally vest in three equal annual installments on each of April 1, 2024, April 1, 2025 and April 1, 2026, provided that the recipient is still employed by, or providing services to, the Company on each such vesting date.
•The PSUs 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, 2023 and ending on March 31, 2026 (the “Performance Period”). If the Company achieves Relative TSR at the 75th percentile or higher, the PSUs will be earned at 150 % of the target number of shares; if the Company achieves Relative TSR at the 50th percentile, the PSUs will be earned at 100 % of the target number of shares; if the Company achieves Relative TSR at the 25th percentile, the PSUs will be earned at 50 % of the target number of shares; and if the Company achieves Relative TSR below the 25th 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.
During the three and six months ended June 30, 2023, the Company recognized foreign currency transaction gains of $12.5 million and $21.7 million, respectively. During the three and six months ended June 30, 2022, the Company recognized foreign currency transaction losses of $27.6 million and $34.2 million, respectively.
Other Comprehensive (Loss) Income
There were no significant changes in deferred income tax liabilities resulting from adjustments to other comprehensive (loss) income during the three and six months ended June 30, 2023 and 2022.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management’s discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with the condensed consolidated financial statements and related notes contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company's 2022 Annual Report on Form 10-K. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
The MD&A is organized as follows:
•Overview – Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of this MD&A.
•Results of Operations – Analysis of our financial results of operations at the consolidated and segment levels.
•Liquidity and Capital Resources – Analysis of our short- and long-term liquidity and discussion of our material cash requirements and the anticipated sources of funds needed to satisfy such requirements.
This discussion contains forward-looking statements that are subject to risks and uncertainties, and actual results may differ materially from those contained in any forward-looking statements. See “Cautionary Statement Concerning Forward-Looking Statements” contained at the end of this MD&A.
OVERVIEW
Description of Our Business and Segments
Our revenue is derived from selling advertising space on the out-of-home displays that we own or operate in various key markets using assorted digital and traditional display types. Effective December 31, 2022, we have four reportable business segments: America, which consists of our U.S. operations excluding airports; Airports, which includes revenue from U.S. and Caribbean airports; Europe-North, which consists of operations in the United Kingdom (the “U.K.”), the Nordics and several other countries throughout northern and central Europe; and Europe-South, which consists of operations in France and Spain, and prior to their sales on March 31, 2023 and May 31, 2023, respectively, Switzerland and Italy. Our remaining operations in Latin America and Singapore are disclosed as “Other.” We have conformed the segment disclosures for the prior period in this MD&A and throughout this Quarterly Report on Form 10-Q to the current period presentation.
Macroeconomic Trends and Seasonality
Our results are impacted by the economic conditions in the 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 the first half of the year, we experienced weakness in revenue within certain of our larger U.S. markets, primarily the San Francisco/Bay Area market as specific macroeconomic trends affecting this market have resulted, and could continue to result, in lower spend on out-of-home advertising. These negative impacts have been mostly offset by higher revenue generated in various other U.S. markets.
•During the first half of the year, we saw economic variability throughout Europe impacting country level growth rates in our European businesses. Civil unrest and protests in France and an economic downturn in Sweden negatively impacted demand for out-of-home advertising in these countries during the second quarter 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 Annual Report on Form 10-K, global inflation increased in 2022, and in response, central banks, including the U.S. Federal Reserve, raised interest rates significantly, resulting in an increase in our weighted average cost of debt. Interest rates have continued to rise in the first half of 2023, and while inflation rates have slowed, global inflation remains high and has impacted our results due to higher costs, particularly in our Europe segments. We believe we have partially offset higher costs by increasing the effective advertising rates for most of our products.
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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 British pound sterling, among other European currencies, peaking in the third quarter. The U.S. dollar has since trended weaker, and fluctuations in foreign currency exchange rates did not have a significant impact on our reported results in the first half of 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 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.
Dispositions and Strategic Reviews
We entered into an agreement in December 2022 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 also 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. We intend to use the anticipated 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.
On July 17, 2023, we announced that we have entered into exclusive discussions to sell our business in France to Equinox Industries. The proposed transaction is expected to be completed in the fourth quarter of 2023, 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. The transaction is not subject to regulatory approval.
Our Board is continuing its review of strategic alternatives for our remaining European businesses, as well as evaluating a range of other strategic opportunities to enhance value. However, there can be no assurance that these reviews will result in any additional transactions or particular outcomes. Further, we have not set a timetable for completion of these processes and may suspend them at any time.
RESULTS OF OPERATIONS
The discussion of our results of operations is presented on both a consolidated and segment basis.
•Our operating segment profit measure is Segment Adjusted EBITDA, which is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. The material components of Segment Adjusted EBITDA are discussed below on both a consolidated and segment basis.
•Corporate expenses, depreciation and amortization, impairment charges, other operating income and expense, all non-operating income and expenses, and income taxes are managed on a total company basis and are therefore included only in our discussion of consolidated results.
Revenue and expenses “excluding the impact of movements in foreign exchange rates” are presented in this MD&A 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 same period of the prior year.
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Consolidated Results of Operations
(In thousands) | Three Months Ended June 30, |
% | Six Months Ended June 30, |
% | |||||||||||||||||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | ||||||||||||||||||||||||||||||
Revenue | $ | 637,239 | $ | 643,380 | (1.0)% | $ | 1,182,674 | $ | 1,169,068 | 1.2% | |||||||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||||||
Direct operating expenses(1)
|
346,560 | 331,325 | 4.6% | 691,410 | 652,527 | 6.0% | |||||||||||||||||||||||||||||
Selling, general and administrative expenses(1)
|
113,183 | 118,294 | (4.3)% | 231,379 | 227,251 | 1.8% | |||||||||||||||||||||||||||||
Corporate expenses(1)
|
57,557 | 39,081 | 47.3% |