Clear Channel Outdoor(CCO) - 2021 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for Q1 2021 detail financial performance, including a net loss and asset changes Note 1. Basis of Presentation This note outlines financial statement preparation, COVID-19 impacts, and the April 2020 Clear Media disposition - In response to COVID-19, the company has been renegotiating contracts, applying for government aid, and reducing headcount[29] - During Q1 2021, the company recognized $22.7 million in rent expense reductions and received $4.7 million in European governmental support and wage subsidies[29] - On April 28, 2020, the company sold its 50.91% stake in Clear Media Limited, a subsidiary based in China[30] Note 2. Segment Data This note details the Americas and Europe segments, with 'Other' including Latin America and former China operations, showing significant Q1 2021 declines Segment Revenue (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Americas | $211,884 | $295,787 | | Europe | $149,524 | $211,690 | | Other | $9,500 | $43,332 | | Total | $370,908 | $550,809 | Segment Adjusted EBITDA (in thousands) | Segment | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Americas | $64,220 | $107,958 | | Europe | $(67,629) | $(14,111) | | Other | $(3,825) | $(15,187) | | Total | $(7,234) | $78,660 | Note 4. Long-Term Debt This note details the company's long-term debt structure, including a Q1 2021 new note issuance and redemption, resulting in a loss on extinguishment - On February 17, 2021, the company issued $1.0 billion in 7.75% Senior Notes due 2028[46][47] - Net proceeds were used to redeem $940.0 million of the 9.25% Senior Notes due 2024, resulting in a $51.1 million loss on debt extinguishment in Q1 2021[46] Total Debt (in thousands) | Date | Amount | | :--- | :--- | | March 31, 2021 | $5,625,675 | | December 31, 2020 | $5,572,286 | Note 8. Intangible Assets and Goodwill This note details the Q1 2021 impairment test on indefinite-lived permits, resulting in a charge due to increased discount rates and COVID-19 impacts - The company recorded an impairment charge of $119.0 million on indefinite-lived permits during Q1 2021[63] - The impairment was triggered by an increase in the discount rate and the expected negative financial impacts from COVID-19[63] Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2021 (In thousands) | December 31, 2020 (In thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | $642,191 | $785,308 | | Total Current Assets | $1,087,718 | $1,334,760 | | Total Assets | $5,316,843 | $5,755,273 | | Total Current Liabilities | $1,009,380 | $1,090,206 | | Long-term debt | $5,604,322 | $5,550,890 | | Total Liabilities | $8,447,469 | $8,537,875 | | Total Stockholders' Deficit | $(3,130,626) | $(2,782,602) | Consolidated Statement of Loss Highlights (Unaudited) | Account | Three Months Ended March 31, 2021 (In thousands) | Three Months Ended March 31, 2020 (In thousands) | | :--- | :--- | :--- | | Revenue | $370,908 | $550,809 | | Operating loss | $(224,913) | $(164,413) | | Consolidated net loss | $(333,456) | $(289,223) | | Net loss attributable to the Company | $(332,353) | $(277,491) | | Net loss per share — basic and diluted | $(0.71) | $(0.60) | Consolidated Statement of Cash Flows Highlights (Unaudited) | Activity | Three Months Ended March 31, 2021 (In thousands) | Three Months Ended March 31, 2020 (In thousands) | | :--- | :--- | :--- | | Net cash used for operating activities | $(124,341) | $(98,621) | | Net cash used for investing activities | $(17,645) | $(35,944) | | Net cash provided by (used for) financing activities | $(920) | $144,600 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant adverse impact of COVID-19 on Q1 2021 financial results, including revenue decline, cost-saving measures, and financing activities - Consolidated revenue for Q1 2021 decreased 32.7% to $370.9 million, primarily driven by the COVID-19 pandemic's impact on the global advertising market and the sale of the Clear Media business[80][86] - The company issued $1.0 billion in new senior notes to redeem $940.0 million of higher-interest notes, extending its debt maturity profile[80] - Cost-saving measures in Q1 2021 included recognizing $22.7 million in rent abatements and receiving $4.7 million in European governmental support[80][87] Results of Operations This section details operational performance by segment, showing significant revenue declines across Americas, Europe, and 'Other' due to reduced demand and the Clear Media sale Revenue by Segment (in thousands) | Segment | Q1 2021 | Q1 2020 | % Change | | :--- | :--- | :--- | :--- | | Americas | $211,884 | $295,787 | (28.4)% | | Europe | $149,524 | $211,690 | (29.4)% | | Other | $9,500 | $43,332 | (78.1)% | - In the Americas segment, revenue from airport displays saw the largest decline, falling 62.4% to $19.5 million[99] - Europe's revenue decline was driven by renewed COVID-19 lockdowns and mobility restrictions, with the largest reductions in France, the U.K., Sweden, and Spain[102] - An impairment charge of $119.0 million was recognized in Q1 2021 on indefinite-lived permits in the Americas segment, driven by higher discount rates and reduced cash flow projections due to COVID-19[92] Liquidity and Capital Resources This section details the company's liquidity position, including cash on hand, operating cash flow, and reduced capital expenditures, with ongoing COVID-19 uncertainty - As of March 31, 2021, the company had $642.2 million of cash on its balance sheet[115] - Capital expenditures were reduced to $17.9 million in Q1 2021, compared to $35.9 million in Q1 2020, as a measure to preserve liquidity[112] - The company amended its Senior Secured Credit Agreement in May 2021 to extend the suspension of its springing financial covenant through December 31, 2021, providing additional financial flexibility[120] Critical Accounting Estimates This section details the impairment testing of indefinite-lived intangible assets, specifically billboard permits, conducted in Q1 2021 due to an increased discount rate - An impairment test on indefinite-lived billboard permits was performed in Q1 2021 due to an increase in the discount rate[130][133] - Key assumptions for the valuation included a 10.5% discount rate, average annual revenue growth of 4.9% from year two to four, and a long-term growth rate of 3.0%[133] - A 100 basis point increase in the discount rate would result in an additional impairment of $77.8 million[133] Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including foreign currency fluctuations, interest rate changes, and inflation - A hypothetical 10% increase in the U.S. dollar's value would have decreased the company's Q1 2021 net loss by $10.1 million[141] - As of March 31, 2021, 37% of the company's long-term debt bore interest at floating rates. A 50% increase in LIBOR would have increased Q1 2021 interest expense by an estimated $0.6 million[142] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2021[144] - There were no material changes in internal control over financial reporting during Q1 2021[144] PART II—OTHER INFORMATION Legal Proceedings This section refers to Note 5 of the financial statements for details on material pending legal proceedings, including investigations and a settled tax matter - For details on material legal proceedings, the report refers to Note 5 of the financial statements[146] Risk Factors This section updates risk factors, emphasizing the ongoing negative impact of the COVID-19 pandemic on advertising spend, mobility, and financial performance - The risk factor for the COVID-19 pandemic has been updated to reflect its ongoing negative effects on business, operating results, and financial condition[147] - The company continues to experience significantly reduced advertising spend and mobility levels below pre-pandemic norms, particularly in its transit and European businesses[149] - The duration and severity of the pandemic's effects remain uncertain and depend on factors like vaccine program speed, new COVID-19 variants, and government containment actions[149] Other Information This section details the May 5, 2021, Second Amendment to the Credit Agreement, extending the suspension of the springing financial covenant and minimum liquidity requirement - On May 5, 2021, the company entered into a Second Amendment to its Credit Agreement[151] - The amendment extends the suspension of the springing financial covenant from June 30, 2021, to December 31, 2021[151] - The requirement to maintain minimum liquidity of $150 million was extended for reporting periods through March 31, 2022[151]