Clear Channel Outdoor(CCO) - 2021 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements Unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2021, detail the company's financial position, results, and cash flows Consolidated Balance Sheets The Consolidated Balance Sheet as of September 30, 2021, shows decreased total assets and widened stockholders' deficit, while total liabilities increased slightly Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $1,220,376 | $1,334,760 | | Total Assets | $5,365,338 | $5,755,273 | | Total Current Liabilities | $1,109,574 | $1,090,206 | | Long-term Debt | $5,716,742 | $5,550,890 | | Total Liabilities | $8,653,162 | $8,537,875 | | Total Stockholders' Deficit | ($3,287,824) | ($2,782,602) | Consolidated Statements of Loss For Q3 2021, revenue increased significantly, leading to operating income and a narrowed net loss, with similar improvements for the nine-month period Consolidated Statement of Loss Highlights (in thousands) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $596,416 | $447,505 | $1,498,406 | $1,313,220 | | Operating Income (Loss) | $48,567 | ($75,913) | ($162,908) | ($308,918) | | Consolidated Net Loss | ($40,788) | ($135,844) | ($498,645) | ($567,670) | | Net Loss per Share (Basic & Diluted) | ($0.09) | ($0.29) | ($1.06) | ($1.19) | Consolidated Statements of Cash Flows Net cash used for operating activities increased for the nine months ended September 30, 2021, while investing activities shifted to a net use, and financing activities provided less cash Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash used for operating activities | ($154,273) | ($115,434) | | Net cash provided by (used for) investing activities | ($79,439) | $124,262 | | Net cash provided by financing activities | $50,292 | $444,973 | | Net increase (decrease) in cash | ($186,227) | $440,494 | Condensed Notes to Consolidated Financial Statements Detailed notes provide information on accounting policies, financial results, COVID-19 impacts, segment performance, and debt activities - The company recognized rent expense reductions of $21.6 million in Q3 2021 and $78.9 million in the first nine months of 2021 due to negotiated rent abatements related to COVID-19[30] - In Q1 2021, the company recognized an impairment charge of $119.0 million on its indefinite-lived permits due to an increase in the discount rate and negative financial impacts from COVID-19[66] - The company is executing a restructuring plan in Europe, expected to be complete by Q1 2023, with estimated total charges of $51 million to $56 million. As of September 30, 2021, $41.9 million of charges had been incurred[70] Segment Revenue and Adjusted EBITDA (in thousands) | Metric | Segment | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | Americas | $319,020 | $223,715 | $802,524 | $719,202 | | | Europe | $262,568 | $216,934 | $659,216 | $535,970 | | Segment Adjusted EBITDA | Americas | $139,086 | $70,716 | $330,527 | $225,693 | | | Europe | $31,271 | ($8,141) | ($34,614) | ($91,071) | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses the company's financial performance, highlighting revenue recovery, liquidity, capital resources, and critical accounting estimates, including significant debt refinancing and cost-saving initiatives Results of Operations The company experienced strong year-over-year recovery in Q3 2021, with consolidated revenue increasing significantly due to rebounding advertising markets in both Americas and Europe segments - Consolidated revenue for Q3 2021 increased 33.3% year-over-year to $596.4 million, reflecting recovery from COVID-19 impacts as lockdowns were lifted and mobility increased[94][95] - Americas revenue grew 42.6% in Q3 2021, driven by strong performance in print and digital billboards and an 88.7% increase in airport display revenue[109][110] - Europe revenue increased 21.0% in Q3 2021 (18.2% excluding currency effects), led by the U.K., as increased vaccination levels and eased restrictions boosted mobility and advertising demand[116][117] Liquidity and Capital Resources As of September 30, 2021, the company maintained $600.0 million in cash and undertook significant debt refinancing to extend maturities, ensuring sufficient liquidity for the next 12 months - As of September 30, 2021, the company had $600.0 million of cash on its balance sheet and excess availability of $64.4 million under its Receivables-Based Credit Facility and $1.8 million under its Revolving Credit Facility[136] - In 2021, the company issued a total of $2.05 billion in new senior notes to redeem all of its outstanding 9.25% CCWH Senior Notes due 2024, extending its debt maturity profile[88][89][136] - The company anticipates cash interest payments of approximately $123.2 million for the remainder of 2021 and $318.9 million in 2022[139] Critical Accounting Estimates This section details key assumptions for impairment tests of indefinite-lived intangible assets and goodwill, noting a $119.0 million impairment charge for billboard permits in Q1 2021 but no additional impairment in the annual test - An impairment test on indefinite-lived billboard permits as of March 31, 2021 resulted in a $119.0 million charge, primarily driven by an increase in the discount rate to 10.5% and revised cash flow projections due to COVID-19[145][146] - The annual impairment test for goodwill as of July 1, 2021, did not result in any impairment. The fair value of reporting units was determined using discount rates ranging from 9.5% to 12.0% and a perpetual growth rate of 3.0%[149] Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from foreign currency exchange rates, interest rates, and inflation due to international operations and variable-rate debt - A hypothetical 10% increase in the U.S. dollar's value would have decreased the company's net loss by $2.6 million for Q3 2021[158] - As of September 30, 2021, 36% of the company's long-term debt bore interest at floating rates. A 50% increase in LIBOR would have increased interest expense by an estimated $0.4 million for Q3 2021[159] Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[163] PART II—OTHER INFORMATION Legal Proceedings This section refers to Note 5 for details on material pending legal proceedings, including investigations related to a former subsidiary in China and a tax settlement in Italy - The company is cooperating with the SEC and DOJ regarding an investigation at its former Clear Media subsidiary in China, which could implicate the U.S. Foreign Corrupt Practices Act[61] - In February 2021, the company negotiated a final settlement with Italian tax authorities to repay approximately $21.7 million in VAT, penalties, and interest related to misstatements identified in its Italian business[62] Risk Factors While no material changes to risk factors occurred since the 2020 Annual Report, an updated risk highlights the ongoing negative effects of the COVID-19 pandemic, including uncertainty and potential inflationary pressures - The company updated its risk factor related to the COVID-19 pandemic, noting that while revenues have increased with higher mobility, the duration and severity of the pandemic's effects remain uncertain and could continue to materially impact financial performance[167] - A new risk mentioned is the potential for heightened economic inflation resulting from easing COVID-19 lockdowns, which could lead to higher costs for wages and equipment that may not be fully offset by advertising rate increases[167] Unregistered Sales of Equity Securities and Use of Proceeds The company reports common stock repurchases during Q3 2021, primarily from employees tendering shares to satisfy tax withholding obligations related to restricted share vesting Common Stock Purchases (Q3 2021) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 14,002 | $1.61 | | August 2021 | 2,409 | $1.88 | | September 2021 | 594,109 | $2.45 | | Total | 610,520 | $2.43 |