Clear Channel Outdoor(CCO) - 2024 Q1 - Quarterly Report

PART I—FINANCIAL INFORMATION Financial Statements This section presents the unaudited condensed consolidated financial statements for the quarterly period ended March 31, 2024, including the Consolidated Balance Sheets, Statements of Loss, Statements of Comprehensive Loss, Statements of Changes in Stockholders' Deficit, and Statements of Cash Flows, along with detailed condensed notes to these financial statements Consolidated Balance Sheet Summary (Unaudited) | Account | March 31, 2024 (In thousands) | December 31, 2023 (In thousands) | | :--- | :--- | :--- | | Total Assets | $4,559,443 | $4,722,475 | | Total Current Assets | $818,693 | $957,401 | | Total Liabilities | $8,105,935 | $8,173,218 | | Long-term debt | $5,651,485 | $5,631,291 | | Total Stockholders' Deficit | ($3,546,492) | ($3,450,743) | Consolidated Statement of Loss Summary (Unaudited) | Account | Three Months Ended Mar 31, 2024 (In thousands) | Three Months Ended Mar 31, 2023 (In thousands) | | :--- | :--- | :--- | | Revenue | $481,752 | $437,420 | | Operating income (loss) | $32,392 | ($9,386) | | Loss from continuing operations | ($88,663) | ($92,605) | | Consolidated net loss | ($89,083) | ($35,422) | | Net loss attributable to the Company | ($89,667) | ($34,912) | | Net loss per share — Basic and Diluted | ($0.19) | ($0.07) | Note 2: Dispositions and Discontinued Operations This note details the reclassification of the company's Europe-South segment (Switzerland, Italy, France, and Spain) to discontinued operations, with the sale of the Swiss business completed on March 31, 2023, for $84.9 million in net proceeds, resulting in a $96.4 million gain, and the sale of the Spanish business expected to close in 2024 - The company's entire Europe-South segment has been reclassified to discontinued operations following the sale of its businesses in Switzerland, Italy, and France in 2023, and the pending sale of its business in Spain[87][88] - On March 31, 2023, the company sold its Swiss business for net cash proceeds of $84.9 million, recognizing a gain on sale of $96.4 million[98] Income (Loss) from Discontinued Operations (In thousands) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $22,481 | $108,015 | | Gain on disposal | $0 | $96,350 | | Income (loss) from discontinued operations | ($420) | $57,183 | Note 5: Long-Term Debt This note outlines the company's long-term debt structure, which totaled $5.65 billion as of March 31, 2024, detailing significant debt refinancing activities completed in March 2024, including the issuance of $865.0 million of 7.875% Senior Secured Notes due 2030 to refinance a portion of the Term Loan Facility, and a new $375.0 million CCIBV Term Loan Facility due 2027 to redeem notes due in 2025, with the company in compliance with all debt covenants - Total long-term debt stood at $5.65 billion as of March 31, 2024, slightly up from $5.63 billion at year-end 2023[151] - In March 2024, the company issued $865.0 million in new 7.875% Senior Secured Notes due 2030 and used proceeds to prepay $835.0 million of its Term Loan Facility, extending the maturity of the remaining balance to 2028[151] - Subsidiary CCIBV entered into a new $375.0 million Term Loan Facility due 2027 to redeem all of its outstanding 6.625% Senior Secured Notes due 2025[151][169] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management provides an overview of the business, key developments, and macroeconomic trends, detailing a 10.1% increase in consolidated revenue for Q1 2024, driven by strong performance across all continuing segments, and addressing the company's liquidity position, capital resources, and recent major debt refinancing transactions Overview The company derives revenue from out-of-home advertising across four segments, with Europe-South now discontinued operations, and is exploring sales of its Europe-North and Latin American businesses, having completed significant debt refinancing transactions in Q1 2024 - The company's business is organized into four reportable segments: America, Airports, Europe-North, and Europe-South. The Europe-South segment is now classified as discontinued operations[7][14] - Processes to sell the businesses comprising the Europe-North segment and operations in Latin America have been initiated[15] - In March 2024, the company completed major debt transactions, including issuing $865.0 million in new notes to prepay its Term Loan Facility and refinancing its CCIBV Senior Secured Notes with a new $375.0 million term loan facility[18][19][20] Results of Operations For Q1 2024, consolidated revenue from continuing operations increased 10.1% to $481.8 million, resulting in operating income of $32.4 million, a significant improvement from the prior-year period's operating loss, with all continuing segments showing revenue growth Consolidated Results of Continuing Operations (In thousands) | Metric | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $481,752 | $437,420 | 10.1% | | Operating income (loss) | $32,392 | ($9,386) | N/A | | Loss from continuing operations | ($88,663) | ($92,605) | N/A | - Consolidated revenue increased by $44.3 million (10.1%), or 9.3% excluding foreign exchange impacts, driven by increased demand and deployment of digital displays[35] Segment Adjusted EBITDA (In thousands) | Segment | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | America | $95,464 | $81,365 | 17.3% | | Airports | $19,082 | $6,264 | 204.6% | | Europe-North | $14,325 | $7,172 | 99.7% | | Total Segment Adjusted EBITDA | $129,071 | $95,170 | 35.6% | Liquidity and Capital Resources The company's primary cash needs are for working capital, capital expenditures, and debt service, with $193.2 million cash on hand as of March 31, 2024, and management believing current funds are sufficient for at least the next 12 months, supplemented by available credit facilities - As of March 31, 2024, the company had $193.2 million of cash on its balance sheet, with $59.3 million held by foreign subsidiaries[142] Capital Expenditures (In thousands) | Category | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Continuing operations | $24,035 | $33,376 | | Discontinued operations | $2,169 | $5,051 | | Total capital expenditures | $26,204 | $38,427 | Available Credit Facilities (as of March 31, 2024) | Facility | Borrowing Limit (in millions) | Excess Availability (in millions) | | :--- | :--- | :--- | | Revolving Credit Facility | $150.0 | $106.8 | | Receivables-Based Credit Facility | $138.1 | $89.2 | | Total | $288.1 | $196.1 | Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risks, including foreign currency exchange rates, interest rates, and inflation, noting reduced interest rate sensitivity after March 2024 debt transactions and efforts to mitigate inflation impacts - The company is exposed to foreign currency risk from its operations in Europe, Singapore, and Latin America. A 10% change in the U.S. dollar value would impact Europe-North Segment Adjusted EBITDA by approximately $1.4 million[164][177] - Interest rate risk has been reduced, with variable rate debt accounting for only 9% of total debt at March 31, 2024, down from 22% at year-end 2023. A 100 basis point increase in SOFR would increase quarterly interest expense by an estimated $1.3 million[178] - Inflation remains a risk, affecting costs for electricity, labor, and materials. The company aims to mitigate this by increasing advertising rates[179] Controls and Procedures Based on an evaluation as of March 31, 2024, the company's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective at a reasonable assurance level, 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 March 31, 2024[180] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[180] PART II—OTHER INFORMATION Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business, for which it has accrued estimates for probable costs where the amount can be reasonably estimated, with further details in Note 6 of the Condensed Consolidated Financial Statements - The company is involved in legal proceedings in the ordinary course of business, including commercial disputes, employment claims, and land use disputes[203] - An estimate of probable costs has been accrued for claims where loss is probable and the amount can be reasonably estimated[203] Risk Factors This section states that information regarding the company's risk factors is disclosed in Item 1A of its 2023 Annual Report on Form 10-K - For details on risk factors, the report refers to the company's 2023 Annual Report on Form 10-K[184] Unregistered Sales of Equity Securities and Use of Proceeds During the first quarter of 2024, the company purchased 40,862 shares of its common stock, tendered by employees to satisfy tax withholding obligations related to the vesting of restricted stock units, and not part of a publicly announced repurchase plan Issuer Purchases of Equity Securities (Q1 2024) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2024 | 40,862 | $1.66 | | February 2024 | 0 | N/A | | March 2024 | 0 | N/A | | Total | 40,862 | $1.66 | - The share purchases were made to satisfy employee tax withholding obligations in connection with vested restricted stock units[195] Other Information The company reports that none of its directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter ended March 31, 2024 - No directors or officers adopted or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024[196] Exhibits This section lists the exhibits filed with the Form 10-Q, including key debt agreements related to the March 2024 refinancing transactions and certifications from the CEO and CFO as required by the Sarbanes-Oxley Act - Key exhibits filed include debt agreements related to the March 2024 refinancing transactions and officer certifications[198]