10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on November 8, 2023
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 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 November 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
(UNAUDITED)
(In thousands, except share and per share data) | September 30, 2023 |
December 31, 2022 |
|||||||||
CURRENT ASSETS | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses | |||||||||||
Other current assets | |||||||||||
Current assets of discontinued operations | |||||||||||
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 of discontinued operations | |||||||||||
Total Assets | $ | $ | |||||||||
CURRENT LIABILITIES | |||||||||||
Accounts payable | $ | $ | |||||||||
Accrued expenses | |||||||||||
Current operating lease liabilities | |||||||||||
Accrued interest | |||||||||||
Deferred revenue | |||||||||||
Current portion of long-term debt | |||||||||||
Current liabilities of discontinued operations | |||||||||||
Total Current Liabilities | |||||||||||
NON-CURRENT LIABILITIES | |||||||||||
Long-term debt | |||||||||||
Non-current operating lease liabilities | |||||||||||
Deferred tax liabilities, net | |||||||||||
Other liabilities | |||||||||||
Other liabilities of discontinued operations | |||||||||||
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 | Nine Months Ended | ||||||||||||||||||||||
(In thousands, except per share data) | September 30, | September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||
Direct operating expenses(1)
|
|||||||||||||||||||||||
Selling, general and administrative expenses(1)
|
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Corporate expenses(1)
|
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Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Other operating expense, net | |||||||||||||||||||||||
Operating income | |||||||||||||||||||||||
Interest expense, net | ( |
( |
( |
( |
|||||||||||||||||||
Gain on extinguishment of debt |
|||||||||||||||||||||||
Other income (expense), net | ( |
( |
( |
||||||||||||||||||||
Loss from continuing operations before income taxes | ( |
( |
( |
( |
|||||||||||||||||||
Income tax benefit attributable to continuing operations | |||||||||||||||||||||||
Loss from continuing operations | ( |
( |
( |
( |
|||||||||||||||||||
Loss from discontinued operations | ( |
( |
( |
( |
|||||||||||||||||||
Consolidated net loss | ( |
( |
( |
( |
|||||||||||||||||||
Less: Net income attributable to noncontrolling interests | |||||||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss attributable to the Company per share of common stock — Basic and Diluted: |
|||||||||||||||||||||||
Net loss from continuing operations attributable to the Company per share of common stock |
$ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss from discontinued operations attributable to the Company per share of common stock |
( |
( |
( |
( |
|||||||||||||||||||
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 | Nine Months Ended | ||||||||||||||||||||||
(In thousands) | September 30, | September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Foreign currency translation adjustments | ( |
||||||||||||||||||||||
Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sales of businesses(1)
|
( |
||||||||||||||||||||||
Other comprehensive income (loss) | ( |
||||||||||||||||||||||
Comprehensive loss | ( |
( |
( |
( |
|||||||||||||||||||
Less amount attributable to noncontrolling interests | ( |
( |
( |
( |
|||||||||||||||||||
Comprehensive loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)Included in “Loss from discontinued operations” 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 September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 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 | ( |
— | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Balances at September 30, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at June 30, 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 September 30, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Nine Months Ended |
|||||||||||||||||||||||||||||||||||||||||||||||
Controlling Interest | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Common Shares Issued | Non-controlling Interests | Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Balances at December 31, 2022 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
||||||||||||||||||||||||||||||||||||
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 September 30, 2023 | $ | $ | $ | $ | ( |
$ | ( |
$ | ( |
$ | ( |
Nine Months Ended September 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 September 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) | Nine Months Ended September 30, | ||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Consolidated net loss | $ | ( |
$ | ( |
|||||||
Reconciling items: | |||||||||||
Depreciation, amortization and impairment charges | |||||||||||
Non-cash operating lease expense | |||||||||||
Gain on extinguishment of debt |
( |
||||||||||
Deferred taxes | ( |
( |
|||||||||
Share-based compensation | |||||||||||
Loss (gain) on classification as held for sale and disposition of businesses and/or operating assets, net |
( |
||||||||||
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 | |||||||||||
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 used for investing activities | ( |
( |
|||||||||
Cash flows from financing activities: | |||||||||||
Proceeds from long-term debt | |||||||||||
Payments on long-term debt | ( |
( |
|||||||||
Debt issuance and modification costs | ( |
||||||||||
Taxes paid related to net share settlement of equity awards | ( |
( |
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Payments to noncontrolling interests, net | ( |
( |
|||||||||
Net cash provided by (used for) financing activities | ( |
||||||||||
Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( |
||||||||||
Net increase (decrease) in cash, cash equivalents and restricted cash | ( |
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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. (“CCOH”) and its subsidiaries, as well as entities in which the Company has a controlling financial interest or for which the Company is the primary beneficiary. Intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
Preparation of Interim Financial Statements
The accompanying consolidated financial statements were prepared 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 (the “SEC”), certain information and footnote disclosures required by GAAP for annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, the financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2022 Annual Report on Form 10-K, filed with the SEC on February 28, 2023.
Use of Estimates
Segment Presentation Changes and Discontinued Operations
NOTE 2 – DISPOSITIONS AND DISCONTINUED OPERATIONS
Strategic Review and Dispositions
In 2022, the CCOH Board of Directors (the “Board”) authorized a review of strategic alternatives related to the potential disposal of certain of the Company’s lower-margin European assets (and/or other European assets of lower priority to the Company’s European business as a whole). Since that time, the Company has sold, or has entered into agreements to sell, its businesses in Switzerland, Italy, Spain and France, which comprised the Company’s entire Europe-South segment.
Sale of Business in Switzerland
In December 2022, Clear Channel International Limited, a wholly-owned subsidiary of the Company, entered into a definitive agreement to sell its business in Switzerland to Goldbach Group AG. As such, assets and liabilities of the Company’s business in Switzerland were presented as held for sale on the Company’s Consolidated Balance Sheet as of December 31, 2022.
8
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The conditions to closing were satisfied during the first quarter of 2023, and the sale of the Company’s business in Switzerland was completed on March 31, 2023. Upon sale, the Company recognized a gain of $96.4 million, included within “Loss from discontinued operations” on the Consolidated Statement of Loss. Cash proceeds, net of customary closing adjustments and cash sold, of $89.4 million are reflected as cash from investing activities within “Net proceeds from disposition of businesses and/or assets” on the Consolidated Statement of Cash Flows.
Sale of Businesses in Italy and Spain
On May 30, 2023, Clear Channel International Holdings B.V., a wholly-owned subsidiary of the Company, entered into agreements with subsidiaries of JCDecaux SE, among other 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. Upon sale, the Company recognized a gain of $11.2 million, included within “Loss from discontinued operations” on the Consolidated Statement of Loss. Cash proceeds, net of customary closing adjustments and cash sold, of $5.1 million are reflected as cash from investing activities within “Net proceeds from disposition of businesses and/or assets” on the Consolidated Statement of Cash Flows.
The sale of the Company’s business in Spain is expected to close in 2024, upon satisfaction of regulatory approval and other customary closing conditions, and assets and liabilities of this business are considered to be held for sale. The Company expects to receive cash consideration of approximately $64.3 million and to recognize a gain on sale when this transaction closes.
Sale of Business in France
On July 17, 2023, the Company announced that it had entered into exclusive discussions to sell its business in France to Equinox Industries (“Equinox”), subject to an information and consultation process with Clear Channel France’s employee works council, execution of a share purchase agreement and the satisfaction of customary closing conditions. As a result, assets and liabilities of this business were considered to be held for sale at September 30, 2023. In connection with the anticipated sale, the Company recognized a loss of $200.6 million during the third quarter of 2023, included within “Loss from discontinued operations” on the Consolidated Statement of Loss.
The information and consultation process with the employee works council and execution of a share purchase agreement was completed in October, and the sale was completed on October 31, 2023. In accordance with the share purchase agreement, the Company delivered its business in France, including all related assets, to Equinox with approximately €42 million of cash, subject to adjustment for related customary items, tax and other costs, to support ongoing operations of the business, and Equinox assumed the €28.125 million state-guaranteed loan held by Clear Channel France. Equinox is required to repay the Company up to €4.5 million depending on the sold business’s full year 2023 revenue. The Company will record an adjustment to the loss during the fourth quarter as needed to reflect the final terms of the sale.
Discontinued Operations
The Company classifies a business as held for sale when the criteria prescribed by Accounting Standards Codification (“ASC”) Paragraph 205-20-45-1E are met, most notably when sale of the business is probable within the next year (with certain exceptions) and it is unlikely there will be significant changes to the plan of sale. Assets and liabilities held for sale are recorded at the lower of their carrying value or fair value less cost to sell.
The Company classifies a business that has been disposed of or is classified as held for sale as a discontinued operation when the criteria prescribed by ASC Paragraph 205-20-45-1B are met. While the sales of, or agreements to sell, the Company’s businesses in Switzerland, Italy and Spain did not previously qualify for presentation as discontinued operations, the Company concluded that, in aggregate, the sales of these businesses along with the sale of its business in France (collectively comprising the Company’s entire Europe-South segment) met the criteria for discontinued operations presentation during the third quarter of 2023. As a result, each of these businesses has been reclassified to discontinued operations in these financial statements for all periods presented.
As part of the sales agreements for each business, the Company has agreed to provide certain transitional services as defined within the respective Transition Services Agreement for a period of time after sale. Income and expenses related to these transitional services are presented as part of “Loss from continuing operations” on the Consolidated Statement of Loss.
9
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Assets and Liabilities of Discontinued Operations
As previously described, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented. The following table presents a reconciliation of the carrying amounts of the major classes of assets and liabilities of discontinued operations to the total assets and liabilities of discontinued operations as presented on the Company’s Consolidated Balance Sheets:
(In thousands) |
September 30, 2023(1) |
December 31, 2022(2) |
|||||||||
Assets of discontinued operations: | |||||||||||
Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net | |||||||||||
Prepaid expenses and other current assets |
|||||||||||
Property, plant and equipment, net |
|||||||||||
Intangible assets, net and goodwill |
|||||||||||
Operating lease right-of-use assets | |||||||||||
Other assets | |||||||||||
Valuation allowance on business in France(3)
|
( |
||||||||||
Total assets of discontinued operations on Consolidated Balance Sheets | $ | $ | |||||||||
Liabilities of discontinued operations: | |||||||||||
Accounts payable and accrued expenses |
$ | $ | |||||||||
Operating lease liabilities | |||||||||||
Deferred revenue | |||||||||||
Long-term debt, including current portion |
|||||||||||
Other liabilities |
|||||||||||
Total liabilities of discontinued operations on Consolidated Balance Sheets | $ | $ |
(1)As of September 30, 2023, all assets and liabilities of the Company’s business in France are classified as current on the Consolidated Balance Sheet as the sale occurred on October 31, 2023. Assets and liabilities of the Company’s business in Spain are classified as current or non-current in accordance with ASC Subtopic 210-10 as the time required to receive regulatory approval and satisfy other customary closing conditions may extend beyond 12 months.
(2)As of December 31, 2022, all assets and liabilities of the Company’s former business in Switzerland were classified as current on the Consolidated Balance Sheet as they were held for sale and the sale was expected to occur within a year of the balance sheet date. The remaining assets and liabilities of the Company’s discontinued operations are classified as current or non-current in accordance with their original classification at December 31, 2022.
(3)The valuation allowance on the business in France represents the loss recorded upon classification of the business as held for sale in order to reduce the carrying value of the business to fair value less costs to sell.
Letters of Credit, Surety Bonds and Guarantees
A portion of the Company’s letters of credit, surety bonds and guarantees outstanding at September 30, 2023 related to discontinued operations that were held for sale as of this date.
•Related to the business in France, the Company has a $20.2 million letter of credit in support of a $35.9 million surety bond outstanding at September 30, 2023. In connection with the sale of this business, and pursuant to the related share purchase agreement, the Company’s former French business and/or Equinox will either replace, or procure a counter-guarantee of, the Company’s payment obligation under the letter of credit. Furthermore, the Company’s former French business indemnified the Company for the remaining $15.7 million balance of the surety bond outstanding, and the Company will be released from any remaining obligation related to the surety bond by March 2025. Separately, the business in France had $7.3 million of bank guarantees outstanding at September 30, 2023, a portion of which was supported by $3.2 million of cash collateral. The guarantees and cash collateral will remain with the French business upon its sale.
10
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•Related to the business in Spain, the Company had a $6.5 million of letter of credit and $8.5 million of bank guarantees outstanding at September 30, 2023, a portion of which was supported by $0.7 million of cash collateral. These will remain obligations of the Company until the sale of this business closes in 2024 or, if sooner, their expiration date.
Loss from Discontinued Operations
The following table provides details about the major classes of line items constituting “Loss from discontinued operations” as presented on the Company’s Consolidated Statements of Loss:
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(In thousands) | September 30, | September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | $ | $ | $ | $ | |||||||||||||||||||
Expenses: |
|||||||||||||||||||||||
Direct operating expenses(1)
|
|||||||||||||||||||||||
Selling, general and administrative expenses(1),(2)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Other expense, net | |||||||||||||||||||||||
Loss from discontinued operations before net loss on disposal and/or classification as held for sale and income taxes |
( |
( |
( |
( |
|||||||||||||||||||
Loss on disposal and/or classification as held for sale, net |
( |
( |
|||||||||||||||||||||
Income tax benefit (expense) attributable to discontinued operations(3)
|
( |
( |
( |
||||||||||||||||||||
Loss from discontinued operations | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
(1)Excludes depreciation and amortization.
(2)Certain costs that were historically allocated to the Company’s Europe-South segment and reported within selling, general and administrative expenses on the Consolidated Statement of Loss have been deemed to be costs of continuing operations and are now reported within corporate expenses on the Consolidated Statement of Loss. As such, amounts for prior periods totaling $1.1 million and $3.8 million for the three and nine months ended September 30, 2022, respectively, have been reclassified to conform to the current period presentation.
(3)The income tax expense attributable to discontinued operations for the nine months ended September 30, 2023 was largely driven by the sale of the Company’s former business in Switzerland.
Capital Expenditures of Discontinued Operations
The following table presents the capital expenditures for discontinued operations for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended | Nine Months Ended | ||||||||||||||||||||||
(In thousands) | September 30, | September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Capital expenditures(1)
|
$ | $ | $ | $ |
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $3.5 million and $3.7 million of accrued capital expenditures related to discontinued operations that remained unpaid as of September 30, 2023 and 2022, respectively.
NOTE 3 – SEGMENT DATA
11
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Segment Adjusted EBITDA is the profitability metric reported to the Company’s 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 continuing operations for the three and nine months ended September 30, 2023 and 2022. As described in Note 1, the Company has revised its segment disclosures for the prior periods to conform to the current period presentation.
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Revenue | |||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Capital Expenditures(1)
|
|||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Corporate | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Segment Adjusted EBITDA | |||||||||||||||||||||||
America | $ | $ | $ | $ | |||||||||||||||||||
Airports | |||||||||||||||||||||||
Europe-North | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Total | $ | $ | $ | $ | |||||||||||||||||||
Reconciliation of Segment Adjusted EBITDA to Loss From Continuing Operations Before Income Taxes | |||||||||||||||||||||||
Segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
Less reconciling items: | |||||||||||||||||||||||
Corporate expenses(2)
|
|||||||||||||||||||||||
Depreciation and amortization | |||||||||||||||||||||||
Impairment charges | |||||||||||||||||||||||
Restructuring and other costs(3)
|
|||||||||||||||||||||||
Other operating expense, net | |||||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||
Gain on extinguishment of debt | ( |
( |
|||||||||||||||||||||
Other (income) expense, net | ( |
||||||||||||||||||||||
Loss from continuing operations before income taxes | $ | ( |
$ | ( |
$ | ( |
$ | ( |
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $8.7 million and $12.4 million of accrued capital expenditures related to continuing operations that remained unpaid as of September 30, 2023 and 2022, respectively.
12
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(2)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal (including legal liabilities and related estimates), finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(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.
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 from continuing operations, disaggregated by geography, for the three and nine months ended September 30, 2023 and 2022:
(In thousands) | Revenue from contracts with customers | Total revenue | |||||||||||||||
Three Months Ended September 30, 2023 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Three Months Ended September 30, 2022 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Nine Months Ended September 30, 2023 | |||||||||||||||||
U.S.(1)
|
$ | $ | $ | ||||||||||||||
Europe(2)
|
|||||||||||||||||
Other(3)
|
|||||||||||||||||
Total | $ | $ | $ | ||||||||||||||
Nine Months Ended September 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 segment.
(3)Other includes the Company’s businesses in Latin America and Singapore.
13
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Contracts with Customers
The following tables show the Company’s beginning and ending accounts receivable and deferred revenue balances from contracts with customers:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
(In thousands) | 2023 |
2022 | 2023 |
2022 | |||||||||||||||||||
Accounts receivable, net of allowance, from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance | |||||||||||||||||||||||
Deferred revenue from contracts with customers: | |||||||||||||||||||||||
Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
Ending balance |
During the three months ended September 30, 2023 and 2022, respectively, the Company recognized $34.8 million and $34.4 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective quarters. During the nine months ended September 30, 2023 and 2022, respectively, the Company recognized $22.5 million and $29.8 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 September 30, 2023, the Company expected to recognize $92.0 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with the majority of this amount to be recognized over the next five years .
14
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 September 30, 2023 and December 31, 2022 consisted of the following:
(In thousands) | September 30, 2023 |
December 31, 2022 |
|||||||||
Term Loan Facility Due 2026(1),(2),(3)
|
$ | $ | |||||||||
Revolving Credit Facility Due 2026(4)
|
|||||||||||
Receivables-Based Credit Facility Due 2026(5)
|
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel Outdoor Holdings |
|||||||||||
Clear Channel International B.V. |
|||||||||||
Other debt(7)
|
|||||||||||
Original issue discount | ( |
( |
|||||||||
Long-term debt fees | ( |
( |
|||||||||
Total debt | |||||||||||
Less: Current portion(1)
|
|||||||||||
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. During the three months ended September 30, 2023, the Company made a prepayment, described in note (3) to this table, that satisfied the remaining quarterly payment obligations. As such, the entire remaining balance is due in 2026 and is classified as non-current on the Consolidated Balance Sheet at September 30, 2023.
(2)In February 2023, the Senior Secured Credit 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)On August 22, 2023, the Company issued $750.0 million aggregate principal amount of 9.000 % Senior Secured Notes due 2028. On the same date, the Company used a portion of the net proceeds from this issuance to prepay $665.0 million of outstanding principal on the Term Loan Facility, which the Company repurchased at a 1 % discount. The Company incurred costs of $12.3 million related to these transactions.
(4)In June 2023, the Senior Secured Credit Agreement was amended to extend the maturity date of a substantial portion of the commitments under the Company’s Revolving Credit Facility to August 2026, reduce the aggregate revolving credit commitments of the Revolving Credit Facility, and replace the benchmark interest rates applicable to the Revolving Credit Facility. Refer to the “Amendments to Senior Secured Credit Facilities” section below for more information.
(5)In June 2023, the Receivables-Based Credit Agreement was amended to extend its maturity to August 2026, increase its aggregate revolving credit commitments, and replace the benchmark interest rates. Refer to the “Amendment to Receivables-Based Credit Facility” section below for more information.
(6)In September 2023, the Company repurchased in the open market $5.0 million of the CCOH 7.750 % Senior Notes and $10.0 million of the CCOH 7.500 % Senior Notes at a discount, resulting in a gain on extinguishment of $3.2 million. The repurchased notes are to be held by a subsidiary of the Company and have not been cancelled.
(7)Other debt includes finance leases and various borrowings utilized for general operating purposes.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.1 billion and $4.7 billion as of September 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 September 30, 2023, the Company was in compliance with all covenants contained in its debt agreements.
15
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amendments to Senior Secured Credit Facilities
On February 20, 2023, the Senior Secured Credit Agreement, which governs the Company’s Term Loan Facility and Revolving Credit Facility, was amended to establish Adjusted Term SOFR (as defined therein) as the alternate rate of interest applicable to the Company’s Term Loan Facility in connection with the cessation of London Interbank Offered Rate (“LIBOR”).
On June 12, 2023, the Senior Secured Credit Agreement was further amended to, among other things, reduce the aggregate revolving credit commitments of the Revolving Credit Facility from $175.0 million to $150.0 million, with the full $150.0 million of revolving credit commitments available through August 23, 2024 and $115.8 million of such revolving credit commitments extending and available through August 23, 2026, and amend the benchmark interest rate provisions to replace LIBOR with alternative reference rates.
These amendments are reflected in the information below.
Size and Availability
The Senior Secured Credit Agreement, as amended, provides for the Term Loan Facility in an aggregate principal amount of $2,000.0 million and the Revolving Credit Facility with $150.0 million of revolving credit commitments available through August 23, 2024, reducing to $115.8 million available through August 23, 2026.
Interest Rate and Fees
Effective June 12, 2023, new borrowings or the continuation of existing borrowings under the Senior Secured Credit Agreement bear interest at a rate per annum equal to the amended Applicable Rate (as defined therein) plus either: (a) a base rate equal to the highest of: (1) the rate of interest in effect for such date as publicly announced from time to time by the administrative agent as its “prime rate,” (2) the Federal Funds Rate plus 0.50 %, (3) 0.00 %, and (4) a rate based on the Secured Overnight Financing Rate (“Term SOFR”) plus an adjustment for a one-month tenor in effect on such day plus 1.00 %; or (b)(1) a term rate based on Term SOFR plus an adjustment for loans denominated in dollars, the Canadian Dollar Offered Rate (“CDOR”) for loans denominated in Canadian dollars, and the Euro Interbank Offered Rate (“EURIBOR”) for loans denominated in euros, or (2) a daily rate based on the Sterling Overnight Index Average (“SONIA”) plus an adjustment for loans denominated in pounds sterling.
In addition to paying interest on outstanding principal under the Senior Secured Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Senior Secured Credit Agreement in respect of the unutilized revolving commitments thereunder. The Company is also required to pay a customary letter of credit and fronting fee for each issued letter of credit.
Amortization and Maturity
The term loans under the Term Loan Facility amortize in equal quarterly installments in an aggregate annual amount equal to 1.00 % of the original principal amount of such term loans, with the balance being payable on August 23, 2026. The Revolving Credit Facility also matures on August 23, 2026 in the amounts set forth above.
Amendment to Receivables-Based Credit Facility
On June 12, 2023, the Company entered into an amendment to the Receivables-Based Credit Agreement, which governs the Company’s Receivables-Based Credit Facility, to, among other things, extend the maturity date of the Receivables-Based Credit Facility from August 23, 2024 to August 23, 2026, increase the aggregate revolving credit commitments from $125.0 million to $175.0 million, and amend the benchmark interest rate provisions to replace LIBOR with alternative reference rates. These amendments are reflected in the information below.
Size and Availability
The Receivables-Based Credit Agreement provides for an asset-based revolving credit facility, with amounts available from time to time (including in respect of letters of credit) equal to the lesser of (a) the borrowing base, which equals 85.0 % of the eligible accounts receivable of the borrower and the subsidiary borrowers, subject to customary eligibility criteria minus any reserves, and (b) the aggregate revolving credit commitments, which is $175.0 million.
16
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Interest Rate and Fees
Effective June 12, 2023, new borrowings or the continuation of existing borrowings under the Receivables-Based Credit Agreement bear interest at a rate per annum equal to an amended Applicable Rate (defined therein) plus either: (a) a base rate equal to the highest of: (1) the rate of interest in effect for such date as publicly announced from time to time by the administrative agent as its “prime rate,” (2) the Federal Funds Rate plus 0.50 %, (3) 0.00 %, and (4) Term SOFR plus an adjustment for a one-month tenor in effect on such day plus 1.00 %; or (b)(1) a term rate based on Term SOFR plus an adjustment for loans denominated in dollars, the CDOR rate for loans denominated in Canadian dollars, and the EURIBOR rate for loans denominated in euros, or (2) a daily rate based on the SONIA plus an adjustment for loans denominated in pounds sterling.
In addition to paying interest on outstanding principal under the Receivables-Based Credit Agreement, the Company is required to pay a commitment fee to the lenders under the Receivables-Based Credit Agreement in respect of the unutilized revolving commitments thereunder. The Company is also required to pay a customary letter of credit and fronting fee for each issued letter of credit.
Maturity
Borrowings under the Receivables-Based Credit Agreement mature, and lending commitments thereunder terminate, on August 23, 2026.
CCOH 9.000 % Senior Secured Notes Due 2028
On August 22, 2023, the Company completed the sale of $750.0 million in aggregate principal amount of 9.000 % Senior Secured Notes due 2028 (the “CCOH 9.000 % Senior Secured Notes”) in a private placement to persons reasonably believed to be qualified institutional buyers in reliance on the exemption from registration pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and to persons outside the United States in compliance with Regulation S under the Securities Act. The CCOH 9.000 % Senior Secured Notes were issued pursuant to an indenture, dated as of August 22, 2023 (the “CCOH 9.000 % Senior Secured Notes Indenture”), among the Company, the subsidiaries of the Company acting as guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee and as collateral agent.
The CCOH 9.000 % Senior Secured Notes mature on September 15, 2028 and bear interest at a rate of 9.000 % per annum. Interest on the CCOH 9.000 % Senior Secured Notes is payable to the holders thereof semi-annually on March 15 and September 15 of each year, beginning on March 15, 2024.
Guarantees and Security
The CCOH 9.000 % Senior Secured Notes are guaranteed fully and unconditionally on a senior secured basis by the subsidiaries of the Company acting as guarantors thereto and any of the Company’s future wholly-owned domestic subsidiaries that guarantee the Company’s obligations under the Senior Secured Credit Facilities and the Receivables-Based Credit Facility.
The CCOH 9.000 % Senior Secured Notes and the guarantees thereof are secured on a first-priority basis by security interests in all of the Company’s and guarantors’ assets securing the Senior Secured Credit Facilities and the CCOH 5.125 % Senior Secured Notes, subject to certain exceptions, and on a second-priority basis by security interests in all of the Company’s and guarantors’ assets securing the Company’s Receivables-Based Credit Facility on a first-priority basis, in each case, other than any excluded assets.
Redemptions
The Company may redeem all or a portion of the CCOH 9.000 % Senior Secured Notes at the redemption prices set forth in the CCOH 9.000 % Senior Secured Notes Indenture.
Certain Covenants
The CCOH 9.000 % Senior Secured Notes Indenture contains covenants that limit the Company’s ability and the ability of its restricted subsidiaries to, among other things: incur or guarantee additional debt or issue certain preferred stock; redeem, purchase or retire subordinated debt; make certain investments; create restrictions on the payment of dividends or other amounts from the Company’s restricted subsidiaries that are not guarantors of the debt; enter into certain transactions with affiliates; merge or consolidate with another person or sell or otherwise dispose of all or substantially all of the Company’s assets; sell certain assets, including capital stock of the Company’s subsidiaries; designate the Company’s subsidiaries as unrestricted subsidiaries; pay dividends, redeem or repurchase capital stock or make other restricted payments; and incur certain liens. As of September 30, 2023, the Company was in compliance with all covenants contained in the CCOH 9.000 % Senior Secured Notes Indenture.
17
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Letters of Credit, Surety Bonds and Guarantees
The Company has letters of credit, surety bonds and bank guarantees related to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
As of September 30, 2023, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $106.8 million of remaining excess availability, and $40.2 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $111.1 million of excess availability. Additionally, as of September 30, 2023, the Company had $79.2 million and $29.2 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $8.0 million of cash collateral.
A portion of these letters of credit, surety bonds and guarantees at September 30, 2023 related to discontinued operations that were held for sale at September 30, 2023. Please refer to Note 2 for additional information.
NOTE 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 engaged with the SEC and the DOJ regarding the potential resolution of this matter and, during the first quarter of 2022, recorded an estimated liability of $7.1 million related to such matter. Having reached an agreement in principle with the SEC to settle the claims against the Company, and based on the Company’s expectations relating to a definitive order, the Company recorded an incremental liability of $19.0 million for the second quarter of 2023 to equal the amount of the expected settlement payment. In September 2023, the Company reached a settlement with the SEC. Without admitting or denying the underlying allegations, the Company has agreed to pay a total of approximately $26.1 million in disgorgement, civil penalties and prejudgment interest to the SEC in a series of installments over the next year, of which approximately $13 million was paid in October 2023. As of June 30, 2023, the Company had recorded a liability for the full amount of the potential settlement payment in anticipation of such settlement. In connection with the settlement, the DOJ declined to pursue any charges against the Company related to this matter.
18
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 7 – INCOME TAXES
Income Tax Benefit Attributable to Continuing Operations
The Company’s income tax benefit attributable to continuing operations for the three and nine months ended September 30, 2023 and 2022 consisted of the following components:
(In thousands) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Current tax expense attributable to continuing operations | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Deferred tax benefit attributable to continuing operations | |||||||||||||||||||||||
Income tax benefit attributable to continuing operations | $ | $ | $ | $ |
The effective tax rates for continuing operations for the three and nine months ended September 30, 2023 were 0.5 % and 6.2 %, respectively, compared to 52.9 % and 0.3 % for the three and nine months ended September 30, 2022, 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.
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of September 30, 2023 and December 31, 2022:
(In thousands) | September 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 |
$ | $ |
(1)During the nine months ended September 30, 2023, the Company acquired billboard structures and land of $1.5 million and $0.1 million, respectively, as part of asset acquisitions.
19
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 September 30, 2023 and December 31, 2022:
(In thousands) | September 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 nine months ended September 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 ranging from 11 to 16 years.
The Company performs its annual impairment test for indefinite-lived intangible assets as of July 1 of each year, and more frequently as events or changes in circumstances warrant, as described in the Company's 2022 Annual Report on Form 10-K. In 2022, the Company tested certain of its then-indefinite-lived permits for impairment during the second quarter due to rising interest rates and inflation, resulting in an impairment charge of $21.8 million. Additionally, the Company’s annual impairment test as of July 1, 2022 resulted in an impairment charge of $0.9 million related to its permanent easements during the third quarter of 2022. No impairment was recognized during the nine months ended September 30, 2023, and there were no indicators of impairment as of this date.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the nine months ended September 30, 2023:
(In thousands) | America | Airports | Europe-North | Consolidated | |||||||||||||||||||
Balance as of December 31, 2022(1)
|
$ | $ | $ | $ | |||||||||||||||||||
Foreign currency impact | ( |
( |
|||||||||||||||||||||
Balance as of September 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 and $90.4 million for Other.
The Company performs its annual impairment test for goodwill as of July 1 of each year, and more frequently as events or changes in circumstances warrant, as described in the Company's 2022 Annual Report on Form 10-K. No goodwill impairment was recognized during the nine months ended September 30, 2023 or 2022.
20
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three and nine months ended September 30, 2023 and 2022:
(In thousands, except per share data) | Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
Numerators: |
|||||||||||||||||||||||
Loss from continuing operations | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Less: Net income from continuing operations attributable to noncontrolling interests | |||||||||||||||||||||||
Net loss from continuing operations attributable to the Company | ( |
( |
( |
( |
|||||||||||||||||||
Loss from discontinued operations | ( |
( |
( |
( |
|||||||||||||||||||
Less: Net income (loss) from discontinued operations attributable to noncontrolling interests | ( |
||||||||||||||||||||||
Net loss from discontinued operations attributable to the Company | ( |
( |
( |
( |
|||||||||||||||||||
Net loss attributable to the Company | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Denominators: |
|||||||||||||||||||||||
Weighted average common shares outstanding – Basic | |||||||||||||||||||||||
Weighted average common shares outstanding – Diluted | |||||||||||||||||||||||
Net loss attributable to the Company per share of common stock — Basic: | |||||||||||||||||||||||
Net loss from continuing operations attributable to the Company per share of common stock | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss from discontinued operations attributable to the Company per share of common stock | ( |
( |
( |
( |
|||||||||||||||||||
Net loss attributable to the Company per share of common stock — Basic | $ | ( |
$ | ( |
$ | ( |
$ | ( |
|||||||||||||||
Net loss attributable to the Company per share of common stock — Diluted: | |||||||||||||||||||||||
Net loss from continuing operations attributable to the Company per share of common stock | $ | ( |