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 consolidated financial statements and related notes contained in Item 1 of this Quarterly Report on Form 10-Q and the Company's 2019 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:
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Overview – Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of the MD&A.
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•
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Results of Operations – An analysis of our financial results of operations at the consolidated and segment levels.
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•
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Liquidity and Capital Resources – Discussion of our cash flows, anticipated cash requirements, sources and uses of capital and liquidity, debt covenants and guarantor subsidiaries.
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Critical Accounting Estimates – Discussion of accounting estimates that we believe are most important to understanding the assumptions and judgments incorporated in our consolidated financial statements.
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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
Format of Presentation
Prior to the Separation from iHeartMedia and iHeartCommunications on May 1, 2019, the historical financial statements of the Company consisted of the carve-out financial statements of the Outdoor Business of CCH and its subsidiaries and excluded the portion of the radio businesses that had historically been owned by CCH and reported as part of iHeartMedia’s iHM segment. CCH, which was a holding company prior to the Separation, had no independent assets or operations. Upon the Separation and the transactions related thereto, the Company’s only assets, liabilities and operations were those of the Outdoor Business.
Certain prior period amounts included herein have been reclassified to conform to the 2020 presentation.
Description of Our Business
We changed our presentation of segment information during the first quarter of 2020 to reflect changes in the way the business is managed and resources are allocated by the Company's CODM. Effective January 1, 2020, there are two reportable business segments: Americas, which consists of operations primarily in the U.S., and Europe, which consists of operations in Europe and Singapore. Our remaining operating segments are China and Latin America, which do not meet the quantitative thresholds to qualify as reportable segments and are disclosed as "Other." We have conformed the segment disclosures for prior periods in this MD&A and throughout this Quarterly Report on Form 10-Q to the 2020 presentation. Refer to Note 11 to our Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details regarding our segments.
Macroeconomic Indicators, Seasonality and Recent Developments
Advertising revenue for our segments is correlated to changes in gross domestic product (“GDP”) as advertising spending has historically trended in line with GDP, both domestically and internationally. Additionally, our international results are impacted by the economic conditions in the foreign markets in which we have operations and fluctuations in foreign currency exchange rates.
The Company typically experiences its lowest financial performance in the first quarter of the calendar year, with our international businesses historically experiencing a loss from operations in that period. This is generally offset during the remainder of the year, as our international businesses typically experience their strongest performance in the second and fourth quarters of the calendar year.
COVID-19 Update
In the Company's 2019 Annual Report on Form 10-K, filed with the SEC on February 27, 2020, we disclosed that the outbreak of a new coronavirus, which was first reported in China in December 2019 and subsequently spread to a number of other countries, could have an adverse impact on our operations. Since this date, COVID-19 has spread to most countries around the globe. On March 11, 2020, the COVID-19 outbreak was characterized as a pandemic by the World Health Organization. The pandemic is still ongoing as of the filing date of this Quarterly Report on Form 10-Q. In an effort to slow the outbreak, governments around the world have placed significant restrictions on travel and closed businesses, resulting in unprecedented nationwide lock-downs. Our business, along with the global economy, has been adversely affected by these developments, which have resulted in a significant reduction in time spent out-of-home by consumers, reductions in consumer spending, large declines in GDP and volatile economic conditions, and business disruptions across markets globally.
Due to the timing and nature of the geographic spread of COVID-19, the adverse impacts to our results of operations for the three months ended March 31, 2020 were primarily limited to our operations in China and certain markets in Europe that experienced the most concentrated outbreaks during this time, intangible asset impairments and deferred taxes associated with valuation allowances. However, due to the continued global spread of COVID-19, including throughout the U.S., we anticipate significant adverse effects on our results of operations throughout our business during the second quarter. Specifically, shelter-in-place protocols have limited the behavior and movement of consumers and target audiences, making it difficult to predict and plan advertising campaigns, and we are experiencing a significant decline in near-term demand as more customers defer advertising buying decisions and reduce their marketing spend. Since the onset of the crisis in March, we have been experiencing a sharp decline in bookings, particularly in our European businesses. Further, as customers seek to conserve cash during the economic downturn, we are receiving an unprecedented level of requests to defer or cancel current contracts. We are closely monitoring the spread of COVID-19 and its impact on our global business, and we have taken and will continue to take steps to ensure the continuity of our platform and operations to serve our customers, as local conditions permit.
The extent to which COVID-19 will ultimately impact our results will depend on future developments, which are highly uncertain, but the curtailed customer demand we have experienced and are continuing to experience could materially adversely impact our business, results of operations and overall financial performance in future periods. To add to the uncertainty, it is unclear when an economic recovery could start and what a recovery will look like after this unprecedented shutdown of the economy. In light of the rapidly-evolving impact of the COVID-19 pandemic, the magnitude and duration of its impact on our results of operations and overall financial performance will not be known until future periods.
In light of these uncertainties, we are implementing specific actions to strengthen our financial position and support the continuity of our platform and operations, as further described under "Liquidity and Capital Resources" below. We believe that the combination of these initiatives and cash available to us will improve our liquidity position and provide us with additional flexibility during the economic downturn; however, given the quickly evolving economic environment, continuing downward pressure we are currently seeing in Europe and in the U.S., and the uncertainty around how long the economic downturn and its impact on our business will last, we are unable to accurately forecast future results. See "Risk Factors" in Item 1A of Part II of this Form 10-Q for further discussion of the possible impact of the COVID-19 pandemic on our business.
Executive Summary
The key developments in our business during the three months ended March 31, 2020 are summarized below:
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Consolidated revenue decreased $36.3 million, or 6.2%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $8.8 million impact from movements in foreign exchange rates, consolidated revenue decreased $27.5 million, or 4.7%. Revenue decreases in our Europe and Other businesses, driven primarily by lower revenues in China and certain European markets affected by COVID-19, were partially offset by revenue growth in our Americas business.
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On March 24, 2020, we made a cautionary draw of $150.0 million under our Revolving Credit Facility to enhance liquidity and preserve financial flexibility.
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On March 30, 2020, we entered into an agreement to sell our 50.91% stake in Clear Media, our indirect, non-wholly owned subsidiary based in China, to Ever Harmonic as part of a proposed voluntary conditional cash offer made by and on behalf of Ever Harmonic. On April 28, 2020, we tendered our shares representing our stake in Clear Media to Ever Harmonic for approximately $253 million, and following receipt of the tendered shares, Ever Harmonic declared its voluntary cash general offer unconditional in all respects. We expect to receive net cash proceeds of $220 million in respect of the Clear Media Disposition in May, which we intend to use to improve our liquidity position and increase financial flexibility, subject to any limitations set forth in our debt agreements.
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RESULTS OF OPERATIONS
The discussion of our results of operations is presented on both a consolidated and segment basis. Beginning in 2020, 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. Corporate expenses, depreciation and amortization, 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” in this MD&A are presented because 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 foreign exchange rates for the comparable period.
Due to seasonality, uncertainty surrounding COVID-19, and the sale of Clear Media, as previously described in the "Overview" discussion, the results for the interim period are not indicative of expected results for the full year.
Consolidated Results of Operations
The comparison of our historical results of operations for the three months ended March 31, 2020 to the three months ended March 31, 2019 is as follows:
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(In thousands)
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Three Months Ended
March 31,
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%
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2020
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2019
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Change
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Revenue
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$
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550,809
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$
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587,116
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(6.2)%
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Operating expenses:
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Direct operating expenses (excludes depreciation and amortization)
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350,269
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347,827
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0.7%
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Selling, general and administrative expenses (excludes depreciation and amortization)
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123,704
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122,966
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0.6%
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Corporate expenses (excludes depreciation and amortization)
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36,338
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28,614
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27.0%
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Depreciation and amortization
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75,753
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75,076
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0.9%
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Impairment charges
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123,137
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—
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Other operating expense, net
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(6,021
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)
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(3,522
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)
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71.0%
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Operating income (loss)
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(164,413
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)
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9,111
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Interest expense, net
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90,142
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114,863
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Loss on extinguishment of debt
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—
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(5,474
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)
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Other expense, net
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(18,889
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)
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(565
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)
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Loss before income taxes
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(273,444
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)
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(111,791
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)
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Income tax expense
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(15,779
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)
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(57,763
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)
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Consolidated net loss
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(289,223
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)
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(169,554
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)
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Less amount attributable to noncontrolling interest
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(11,732
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)
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(5,387
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)
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Net loss attributable to the Company
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$
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(277,491
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)
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$
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(164,167
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)
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Consolidated Revenue
Consolidated revenue decreased $36.3 million, or 6.2%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $8.8 million impact of movements in foreign exchange rates, consolidated revenue decreased $27.5 million, or 4.7%. The decrease was driven by a revenue decline of 16.1% in our Europe and Other businesses, excluding the impact of movements in foreign exchange rates, largely resulting from adverse impacts of COVID-19 in China and certain European markets. This was partially offset by revenue growth of 8.5% in our Americas business, largely related to digital displays.
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $2.4 million, or 0.7%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $7.2 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $9.6 million, or 2.8%. This was primarily driven by higher direct operating expenses in France and the U.K. and higher site lease expense in our Americas business, partially offset by lower direct operating expenses in Spain and Switzerland.
Restructuring and other costs included within consolidated direct operating expenses were $0.3 million and $0.2 million during the three months ended March 31, 2020 and 2019, respectively.
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $0.7 million, or 0.6%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $2.5 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $3.3 million, or 2.7%. Increases in SG&A expenses in our Americas and Other businesses were partially offset by a slight decrease in SG&A expenses in our Europe business.
Restructuring and other costs included within consolidated SG&A expenses were $1.6 million and $2.3 million during the three months ended March 31, 2020 and 2019, respectively.
Corporate Expenses
Corporate expenses increased $7.7 million, or 27.0%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $0.3 million impact of movements in foreign exchange rates, corporate expenses increased $8.0 million, or 28.1%. This increase was largely driven by incremental stand-alone costs associated with the build-out of new corporate functions after the Separation, including consulting and professional fees, compensation for new employees and information technology costs. Also contributing to the increase in corporate expenses were severance costs associated with cost savings initiatives.
Restructuring and other costs included within corporate expenses were $5.2 million and $3.4 million during the three months ended March 31, 2020 and 2019, respectively.
Depreciation and Amortization
Depreciation and amortization increased $0.7 million, or 0.9%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $1.1 million impact of movements in foreign exchange rates, depreciation and amortization increased $1.8 million, or 2.3%. This increase is primarily due to amortization of the Clear Channel trademark, which the Company received from iHeartCommunications as part of the Separation.
Impairment Charges
During the three months ended March 31, 2020, we recognized impairment charges of $123.1 million on indefinite-lived permits in multiple markets of our Americas segment, driven by reductions in projected cash flows related to the expected negative financial statement impacts from COVID-19, as well as an increased discount rate. Refer to Note 4 to our Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for a further description of the impairment charge. As expectations and projections of the financial statement impacts from COVID-19 are revised, our estimates and assumptions may change, and additional impairments may be recognized in future periods.
Interest Expense, Net
Interest expense, net, decreased $24.7 million during the three months ended March 31, 2020 compared to the same period of 2019. This decrease was driven by the lower rates of interest on the new debt from the August 2019 refinancing and the redemption of a portion of our CCWH Senior Notes in July 2019.
Loss on Extinguishment of Debt
During the three months ended March 31, 2019, we recognized a loss on extinguishment of debt of $5.5 million related to the refinancing of the 7.625% Series A and Series B Senior Subordinated Notes Due 2020. We did not extinguish any debt during the three months ended March 31, 2020.
Other Expense, Net
Other expense, net, increased $18.3 million during the three months ended March 31, 2020 compared to the same period of 2019 primarily due to increases in net foreign exchange losses recognized in connection with intercompany notes denominated in foreign currencies.
Income Tax Expense
For periods prior to the Separation, our operations were included in a consolidated income tax return filed by iHeartMedia. For our financial statements, however, our provision for income taxes was computed as if we filed separate consolidated federal income tax returns with our subsidiaries for all periods.
The effective tax rates for the three months ended March 31, 2020 and 2019 were (5.8)% and (51.7)%, respectively.
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The effective rate in 2020 was primarily 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 Company recorded deferred tax expense and an associated deferred tax liability of $44.8 million as a result of the Clear Media Disposition.
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The effective rate for 2019 was primarily impacted by the valuation allowance recorded against deferred tax assets resulting from current period net operating losses in U.S. federal, state and certain foreign jurisdictions due to uncertainty regarding the Company's ability to realize those assets in future periods.
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On March 27, 2020, the CARES Act was signed into law in the U.S. to provide certain relief as a result of the COVID-19 pandemic. The CARES Act, among other things, relaxes the limitation for business interest deductions for 2019 and 2020 by allowing taxpayers to deduct interest up to the sum of 50% of adjusted taxable income and permits net operating loss carryovers to offset 100% of taxable income for taxable years beginning before 2021. As of March 31, 2020, the CARES Act did not have significant impact on our effective tax rate.
Americas Results of Operations
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(In thousands)
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Three Months Ended
March 31,
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%
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2020
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2019
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Change
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Revenue
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$
|
295,787
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|
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$
|
272,722
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|
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8.5%
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Direct operating expenses1
|
135,223
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|
|
130,519
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|
|
3.6%
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SG&A expenses1
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53,329
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|
|
51,636
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|
|
3.3%
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Segment Adjusted EBITDA
|
107,958
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|
|
91,129
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|
|
18.5%
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1
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Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
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Revenue increased $23.1 million, or 8.5%, during the three months ended March 31, 2020 compared to the same period of 2019. The largest driver was an increase in digital revenue from billboards and street furniture of $10.7 million, or 18.2%, which was driven by a combination of organic growth and the deployment of new digital displays. Increases in revenue from print billboards and digital airport displays of $7.8 million and $4.4 million, respectively, also contributed to the growth in revenue. Americas total digital revenue increased $16.6 million, or 20.2%, to $98.8 million for the three months ended March 31, 2020, including $69.9 million from billboards and street furniture. Revenue generated from national sales comprised 37.7% and 37.4% of total revenue for the three months ended March 31, 2020 and 2019, respectively, while the remainder of revenue was generated from local sales.
Direct operating expenses increased $4.7 million, or 3.6%, during the three months ended March 31, 2020 compared to the same period of 2019 primarily due to higher site lease expense related to higher revenue.
SG&A expenses increased $1.7 million, or 3.3%, during the three months ended March 31, 2020 compared to the same period of 2019 due to higher bad debt expense and employee sales commissions, partially offset by a lower bonus accrual.
Europe Results of Operations
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|
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(In thousands)
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Three Months Ended
March 31,
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%
|
|
2020
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2019
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|
Change
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Revenue
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$
|
211,690
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|
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$
|
243,895
|
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(13.2)%
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Direct operating expenses1
|
173,596
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|
|
173,907
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|
|
(0.2)%
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SG&A expenses1
|
53,131
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|
|
55,204
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(3.8)%
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Segment Adjusted EBITDA
|
(14,111
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)
|
|
16,481
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|
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(185.6)%
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|
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1
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Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
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Revenue decreased $32.2 million, or 13.2%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $6.3 million impact of movements in foreign exchange rates, revenue decreased $25.9 million, or 10.6%. Revenue in our Europe segment, particularly in France, Spain, Italy and Switzerland, was adversely affected by COVID-19 as governments locked down countries experiencing concentrated outbreaks of the virus, resulting in reduced customer demand and the loss of advertising campaigns. The non-renewal of certain contracts in Spain and Switzerland also contributed to the overall decrease in revenue, which was partially offset by a new contract in France and higher revenue from digital display expansion in the United Kingdom ("U.K."). Digital revenue increased $0.2 million, or 0.3%, to $64.2 million for the three months ended March 31, 2020. Excluding the $2.0 million impact of movements in foreign exchange rates, digital revenue increased $2.2 million, or 3.4%.
Direct operating expenses decreased $0.3 million, or 0.2%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $5.0 million impact of movements in foreign exchange rates, direct operating expenses increased $4.7 million, or 2.7%. The largest drivers of this increase were higher fixed site lease expense related to the new contract in France and higher variable expenses in the U.K. resulting from higher revenue. These increases were partially offset by lower direct operating expenses in Spain and Switzerland related to the non-renewal of certain contracts.
SG&A expenses decreased $2.1 million, or 3.8% during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $1.6 million impact of movements in foreign exchange rates, SG&A expenses decreased $0.5 million, or 0.8%.
Other Results of Operations
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|
|
|
|
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|
|
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(In thousands)
|
Three Months Ended
March 31,
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%
|
|
2020
|
|
2019
|
|
Change
|
Revenue
|
$
|
43,332
|
|
|
$
|
70,499
|
|
|
(38.5)%
|
Direct operating expenses1
|
41,450
|
|
|
43,401
|
|
|
(4.5)%
|
SG&A expenses1
|
17,244
|
|
|
16,126
|
|
|
6.9%
|
Segment Adjusted EBITDA
|
(15,187
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)
|
|
11,220
|
|
|
(235.4)%
|
|
|
1
|
Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA.
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Revenue decreased $27.2 million, or 38.5%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $2.5 million impact of movements in foreign exchange rates, revenue decreased $24.7 million, or 35.0%. Revenue, particularly in China, was adversely affected by COVID-19.
Direct operating expenses decreased $2.0 million, or 4.5%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $2.2 million impact of movements in foreign exchange rates, direct operating expenses increased $0.3 million, or 0.6%.
SG&A expenses increased $1.1 million, or 6.9%, during the three months ended March 31, 2020 compared to the same period of 2019. Excluding the $0.9 million impact of movements in foreign exchange rates, SG&A expenses increased $2.0 million, or 12.6%.
As described previously in the "Overview" section of this MD&A, on March 30, 2020 we entered into an agreement to sell our 50.91% stake in Clear Media, our Chinese subsidiary, and on April 28, 2020, we tendered our shares representing our stake in Clear Media to Ever Harmonic.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows
The following discussion highlights cash flow activities during the three months ended March 31, 2020 and 2019:
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|
|
|
|
|
|
|
(In thousands)
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
Net cash provided by (used for):
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|
|
|
Operating activities
|
$
|
(98,621
|
)
|
|
$
|
(47,680
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)
|
Investing activities
|
$
|
(35,944
|
)
|
|
$
|
(27,576
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)
|
Financing activities
|
$
|
144,600
|
|
|
$
|
60,340
|
|
Operating Activities
Net cash used for operating activities was $98.6 million during the three months ended March 31, 2020 compared to $47.7 million of net cash used for operating activities during the three months ended March 31, 2019.
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•
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During the three months ended March 31, 2020, net loss as adjusted for non-cash and non-operating items, most notably impairment charges, depreciation and amortization, foreign exchange transaction loss and deferred taxes, resulted in $40.2 million of net cash outflows from operating activities. Additionally, changes in working capital balances resulted in $58.5 million of net cash outflows, primarily driven by the semi-annual interest payments on the CCWH Senior Notes and the 5.125% Senior Secured Notes due 2027 (the "CCOH Senior Secured Notes"), payment of the 2019 bonus to employees, and the timing of invoice payments. This was partially offset by a decrease in accounts receivable as collections in Europe exceeded sales, driven by a combination of normal seasonality of the business and the adverse impact of COVID-19.
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|
|
•
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During the three months ended March 31, 2019, net loss as adjusted for non-cash and non-operating items, most notably depreciation and amortization, resulted in $95.2 million of net cash outflows from operating activities. This was partially offset by changes in working capital balances, which resulted in $47.6 million of net cash inflows, driven primarily by the timing of payments.
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Cash paid for interest increased $43.4 million, to $145.9 million during the three months ended March 31, 2020 compared to $102.6 million during the same period of 2019, primarily driven by a change in the timing of our interest payments on most of our outstanding debt from weekly payments prior to the Separation to semi-annual payments (in February and August) upon Separation.
Investing Activities
Net cash used for investing activities primarily reflects our capital expenditures as follows:
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|
|
|
|
|
|
|
|
(In thousands)
|
Three Months Ended March 31,
|
|
2020
|
|
2019
|
Americas(1)
|
$
|
15,817
|
|
|
$
|
11,408
|
|
Europe(2)
|
10,095
|
|
|
11,934
|
|
Other(3)
|
6,342
|
|
|
2,885
|
|
Corporate(4)
|
3,640
|
|
|
1,946
|
|
Total
|
$
|
35,894
|
|
|
$
|
28,173
|
|
|
|
(1)
|
Construction and sustaining activities for billboards and other out-of-home advertising displays, including digital boards
|
|
|
(2)
|
Construction and sustaining activities for our street furniture and other out-of-home advertising displays, including digital boards
|
|
|
(3)
|
Transit advertising structure additions and purchase of concession rights in China
|
|
|
(4)
|
Equipment and software purchases
|
Financing Activities
Net cash provided by financing activities during the three months ended March 31, 2020 primarily reflected the cautionary draw of $150.0 million that we made under our Revolving Credit Facility to enhance liquidity and preserve financial flexibility during the economic downturn resulting from COVID-19, partially offset by a principal payment of $5.0 million on our Term Loan Facility in accordance with the terms of the Senior Secured Credit Agreement.
Net cash provided by financing activities during the three months ended March 31, 2019 reflected net transfers of $52.2 million in cash from iHeartCommunications and a net increase in cash of $8.2 million related to our February 2019 refinancing of the CCWH Subordinated Notes with the proceeds from the issuance of the CCWH Senior Notes.
Anticipated Cash Requirements
Trends and Uncertainties
Although our Americas segment continued to deliver strong growth during the first quarter of 2020, we began seeing weakness in certain European markets affected by COVID-19, and we expect to see increased adverse effects in revenues across our overall business during the second quarter. In light of the uncertainty presented by the unprecedented pandemic, future results are difficult to forecast.
We are implementing and evaluating additional actions to strengthen our financial position and support the continuity of our platform and operations. These initiatives include but are not limited to:
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|
•
|
Negotiations with landlords to align fixed site lease expenses with revenue during the economic downturn;
|
|
|
•
|
Savings from lower variable compensation expense, temporary salary reductions, reduced hours for hourly employees, hiring freezes and furloughs;
|
|
|
•
|
Reducing discretionary expenses;
|
|
|
•
|
Deferring discretionary capital expenditures; and
|
|
|
•
|
Exploring options to defer our committed capital expenditures.
|
We believe the anticipated net proceeds from the Clear Media Disposition of approximately $220 million combined with our cash on hand, including the $150 million recently drawn from the Revolving Credit Facility, additional availability under our credit facilities and the initiatives that we are actively pursuing will enable us to meet our working capital, capital expenditure, debt service, preferred stock and other funding requirements for at least the next 12 months. However, our anticipated results are subject to significant uncertainty, and our ability to meet our funding requirements depends on the uncertainties related to the COVID-19 pandemic, our future operating performance, our cash flow from operations, and our ability to manage our liquidity and obtain supplemental liquidity, if necessary. Additional factors may emerge as a result of the COVID-19 pandemic that could cause our expectations to change. If we are unable to generate sufficient cash through our operations or obtain sources of supplemental liquidity, we could face substantial liquidity problems, which could have a material adverse effect on our financial condition and on our ability to meet our obligations. We may take further cost-cutting measures beyond those discussed above to generate short-term liquidity in the event of an unanticipated need for cash. In addition, we regularly consider, and enter into discussions with our lenders related to, potential financing alternatives, which may include supplemental liquidity through issuances of secured or unsecured debt, other capital raising transactions, or, given the current environment, a potential amendment to our debt agreements.
We frequently evaluate strategic opportunities both within and outside our existing lines of business, and we expect from time to time to dispose of certain businesses and may pursue acquisitions. These dispositions or acquisitions could be material. Specifically, as we continue to focus on operational efficiencies that drive greater margin and cash flow, we will continue to review and consider opportunities to unlock shareholder value, which may include, among other things, potential asset or operational divestitures intended to deleverage and increase free cash flow.
Sources of Capital and Liquidity
Our primary sources of liquidity are cash on hand, cash flow from operations, our Senior Secured Credit Facilities and our Receivables-Based Credit Facility. As of March 31, 2020, we had $371.8 million of cash on our balance sheet, including $68.8 million of cash held outside the U.S. by our subsidiaries (excludes cash held by Clear Media which is classified as held-for-sale at March 31, 2020). Additionally, we had excess availability of $74.4 million under our Receivables-Based Credit Facility and $4.8 million under our Revolving Credit Facility, subject to limitations in the CCWH Senior Notes Indenture.
We expect to receive net proceeds of approximately $220 million from the Clear Media Disposition in May 2020, which we intend to use to improve our liquidity position and increase financial flexibility, subject to any limitations set forth in our debt agreements.
Uses of Capital and Liquidity
Our primary uses of liquidity are for our working capital used to fund the operations of the business, capital expenditures, debt service, and dividend payments on outstanding shares of mandatorily-redeemable preferred stock (the "Preferred Stock").
The primary driver of our capital expenditure requirements is the construction of new advertising structures, including the deployment of digital displays in accordance with our long-term strategy to digitize our network as an alternative to traditional methods of displaying our clients' advertisements. As previously described, in light of the rapidly-evolving impact of COVID-19 and the uncertainty around the related economic downturn, we are actively identifying opportunities to significantly reduce annual capital expenditures, including largely deferring discretionary growth capital expenditures, deferring sustaining capital expenditures to the extent possible, and exploring deferral options with respect to committed capital expenditures.
A substantial amount of our cash requirements is for debt service obligations. During the three months ended March 31, 2020, we spent $145.9 million of cash to pay interest on our debt and made a $5.0 million principal payment on the Term Loan Facility. In April 2020, we elected to change the payment terms for interest on our Senior Secured Credit Facilities from monthly to every three months. As such, we anticipate having approximately $174.5 million of cash interest payment obligations and making $15.0 million of additional principal payments on the Term Loan Facility during the remainder 2020, and we anticipate having approximately $331.8 million of cash interest payment obligations in 2021. Our next material debt maturity is in 2024 when $1.9 billion of CCWH Senior Notes and $150.0 million outstanding under the Revolving Credit Facility are due. Refer to Note 5 to our Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for a detail of our debt outstanding as of March 31, 2020.
Dividends on our Preferred Stock accrue daily at a rate based on the then-current liquidation preference and are payable quarterly in cash or added to the liquidation preference. In accordance with our current strategy of increasing liquidity during the economic downturn, dividends accrued on the Preferred Stock during the first quarter of 2020 were added to the liquidation preference rather than being declared and paid in cash, resulting in a liquidation preference of approximately $47.6 million as of March 31, 2020.
We also have future cash obligations under various types of contracts, including non-cancelable operating leases and other non-cancelable contracts. As previously described, we are continuing discussions with landlords to align fixed site lease expenses with revenue during the economic downturn, and we have begun to see some success in this effort in both the U.S. and Europe.
Debt Covenants
The Senior Secured Credit Agreement contains a springing financial covenant, applicable solely to the Revolving Credit Facility if the balance of the Revolving Credit Facility is greater than $0 and undrawn letters of credit exceed $10 million, that requires compliance with a first lien net leverage ratio of 7.60 to 1.00, with a stepdown to 7.10 to 1.00 commencing with the last day of the fiscal quarter ending June 30, 2021. Our first lien leverage ratio, which is calculated by dividing first lien debt by EBITDA (as defined by the Senior Secured Credit Agreement) for the preceding four quarters, was 5.37 to 1.00 as of March 31, 2020.
First lien debt and EBITDA (as defined in the Senior Secured Credit Agreement) are presented herein because they are material components of the first lien net leverage ratio contained in the Senior Secured Credit Agreement. Our inability to comply with the first lien leverage ratio would be a default under the Senior Secured Credit Agreement and could lead to a renegotiation of the Senior Secured Credit Agreement or a termination of the Senior Secured Credit Agreement and any outstanding debt thereunder becoming due prior to scheduled maturity.
The following table presents a calculation of our first lien debt for the four quarters ended March 31, 2020:
|
|
|
|
|
|
Four Quarters Ended
|
(In millions)
|
March 31,
2020
|
Term Loan Facility
|
$
|
1,990.0
|
|
Revolving Credit Facility
|
150.0
|
|
Clear Channel Outdoor Holdings 5.125% Senior Notes Due 2027
|
1,250.0
|
|
Other debt
|
4.1
|
|
Less: Cash and cash equivalents(1)
|
(402.6
|
)
|
First lien debt(2)
|
$
|
2,991.5
|
|
|
|
(1)
|
Includes cash and cash equivalents of Clear Media, which are held for sale on the Consolidated Balance Sheet at March 31, 2020. Refer to Note 12 in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details.
|
|
|
(2)
|
Due to rounding, the total may not equal the sum of the line items in the table above.
|
As required by the definition of EBITDA in the Senior Secured Credit Agreement, our EBITDA (as defined in the Senior Secured Credit Agreement) for the preceding four quarters of $557.2 million is calculated as operating income (loss) before depreciation and amortization, impairment charges and share-based compensation, further adjusted for the following: (i) interest income; (ii) charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges; (iii) certain adjustments for pro forma "run rate" cost savings, operating expense reductions and other synergies related to acquisitions, dispositions and other specified transactions or related to restructuring initiatives, cost savings initiatives, entry into new contracts or other initiatives; and (iv) various other items.
The following table reflects a reconciliation of EBITDA (as defined by the Senior Secured Credit Agreement) to operating income and net cash provided by operating activities for the four quarters ended March 31, 2020:
|
|
|
|
|
|
Four Quarters Ended
|
(In millions)
|
March 31,
2020
|
EBITDA (as defined by the Senior Secured Credit Agreement)
|
$
|
557.2
|
|
Less adjustments to EBITDA (as defined by the Senior Secured Credit Agreement):
|
|
Charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges
|
(14.1
|
)
|
Other items
|
(1.2
|
)
|
Less: Depreciation and amortization, Impairment charges, Share-based compensation and Interest income
|
(462.6
|
)
|
Operating income(1)
|
79.4
|
|
Plus: Depreciation and amortization, Impairment charges, Loss (gain) on disposal of operating and other assets, net and Share-based compensation
|
456.3
|
|
Less: Interest expense, net
|
(394.8
|
)
|
Plus: Current income tax benefit
|
25.5
|
|
Less: Other expense, net
|
(33.7
|
)
|
Adjustments to reconcile consolidated net loss to net cash provided by operating activities (including Provision for doubtful accounts, Amortization of deferred financing charges and note discounts, net, Foreign exchange transaction loss and Other reconciling items, net)
|
34.1
|
|
Change in operating assets and liabilities, net
|
(3.3
|
)
|
Net cash provided by operating activities(1)
|
$
|
163.6
|
|
|
|
(1)
|
Due to rounding, the total may not equal the sum of the line items in the table above.
|
In addition, each of our debt agreements includes negative covenants that, subject to significant exceptions, limit our ability and the ability of our restricted subsidiaries to, among other things, incur or guarantee additional indebtedness or issue certain preferred stock; incur certain liens; engage in mergers, consolidations, liquidations and dissolutions; sell certain assets, including capital stock of our subsidiaries; pay dividends and distributions or repurchase capital stock; make certain investments, loans, or advances; redeem, purchase or retire subordinated debt; engage in certain transactions with affiliates; enter into agreements which limit our ability and the ability of our restricted subsidiaries to incur restrictions on the ability to make distributions; and amend or waive organizational documents.
As of March 31, 2020, we were in compliance with the covenants contained in our financing agreements. The springing financial covenant is expected to increase during the second quarter of 2020 due to the impacts of COVID-19 and the exclusion of results from Clear Media. Consequently, the Company is actively considering options with respect to additional liquidity measures and/or covenant flexibility.
Guarantor Subsidiaries
The Company and certain of the Company’s direct and indirect wholly-owned domestic subsidiaries (the “Obligor Group") fully and unconditionally guarantee, on a joint and several basis, the CCWH Senior Notes. On February 28, 2020, the Company and the guarantors under the CCWH Senior Notes Indenture filed a registration statement with the SEC to register the offer to exchange the CCWH Senior Notes and the guarantees thereof for a like principal amount of CCWH Senior Notes and guarantees thereof that have been registered under the Securities Act, in accordance with the deadlines set forth in the Registration Rights Agreement. The registration statement, as amended on April 6, 2020, became effective on April 7, 2020.
In our Annual Report on Form 10-K for the year ended December 31, 2019, we included certain consolidating information with respect to the Company, Clear Channel Worldwide Holdings, Inc. (“CCWH”) and our wholly-owned subsidiaries that guarantee the CCWH Senior Notes in the notes to our audited consolidated financial statements pursuant to Rule 3-10 of Regulation S-X. In March 2020, the SEC adopted amendments to Rule 3-10 of Regulation S-X to simplify the financial disclosure requirements for guarantors and issuers of guaranteed registered securities. The amendments will be effective January 4, 2021, but voluntary compliance with the amendments in advance of January 4, 2021 is permitted. As a result of these amendments, starting with this Quarterly Report on Form 10-Q, we will no longer include consolidating financial information in the notes to our consolidated financial statements, and we will instead include certain summary financial information in accordance with Rule 13-01 of Regulation S-X.
The following summary financial information of the Obligor Group, which includes the parent guarantor, the issuer and the subsidiary guarantors, is provided in conformity with the SEC’s Regulation S-X Rule 13-01:
|
|
|
|
|
|
|
|
|
(In thousands)
|
Three Months Ended March 31, 2020
|
|
Year Ended December 31, 2019
|
Results of Operations Data:
|
|
|
|
Revenue
|
$
|
293,728
|
|
|
$
|
1,263,657
|
|
Operating income (loss)
|
(84,314
|
)
|
|
239,307
|
|
Net loss attributable to the Obligor Group
|
(175,126
|
)
|
|
(292,916
|
)
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
(In thousands)
|
March 31, 2020
|
|
December 31, 2019
|
Select Asset and Liability Data:
|
|
|
|
Cash and cash equivalents
|
$
|
302,990
|
|
|
$
|
287,773
|
|
Other current assets
|
271,356
|
|
|
265,368
|
|
Property, plant and equipment, net
|
646,888
|
|
|
669,402
|
|
Notes receivable from related-party non-guarantors
|
304,333
|
|
|
306,679
|
|
Other assets(1)
|
2,688,571
|
|
|
2,794,351
|
|
Current liabilities (excluding current portion of long-term debt)
|
313,657
|
|
|
397,107
|
|
Long-term debt (including current portion of long-term debt)
|
5,230,902
|
|
|
5,083,988
|
|
Mandatorily-redeemable preferred stock
|
46,421
|
|
|
44,912
|
|
Notes payable to related-party non-guarantors
|
78,821
|
|
|
80,146
|
|
Other non-current liabilities
|
1,420,714
|
|
|
1,422,997
|
|
(1) Investments in non-guarantor subsidiaries have been excluded from the presentation of Other assets.
As of March 31, 2020, CCWH had $1,901.5 million of CCWH Senior Notes outstanding. The CCWH Senior Notes are guaranteed, jointly and severally, irrevocably and unconditionally, on an unsecured senior basis, by the Company and certain of the Company’s existing and future subsidiaries (the “Guarantors”). Not all of the Company’s subsidiaries guarantee the CCWH Senior Notes. The Company’s subsidiaries that do not guarantee the CCWH Senior Notes (the “Non-Guarantor Subsidiaries”) include all foreign subsidiaries of the Company, all non-wholly-owned subsidiaries of the Company, certain domestic subsidiaries and all immaterial subsidiaries. The CCWH Senior Notes are structurally subordinated to all existing and future obligations of the Non-Guarantor Subsidiaries, and the claims of creditors of the Non-Guarantor Subsidiaries, including trade creditors, will have priority as to the assets of these subsidiaries. In the event of a bankruptcy, liquidation or reorganization of any of the Non-Guarantor Subsidiaries, holders of their indebtedness and their trade and other creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to CCWH and, in turn, to its creditors.
In addition, as of March 31, 2020, CCWH guaranteed $1,250.0 million principal amount of CCOH Senior Secured Notes, $1,990.0 million of borrowings under the Term Loan Facility, $150.0 million of borrowings and $20.2 million of letters of credit under the Revolving Credit Facility, and $50.6 million of letters of credit under the Receivables-Based Credit Facility. All of the subsidiaries of CCOH that guarantee the CCWH Senior Notes are guarantors of this secured indebtedness. The CCWH Senior Notes are effectively subordinated to, and the guarantee of each Guarantor of the CCWH Senior Notes is effectively subordinated to, the CCOH Senior Secured Notes, the Term Loan Facility, the Revolving Credit Facility and the Receivables-Based Credit Facility, to the extent of the value of the assets securing such indebtedness.
The obligations of each Guarantor under its guarantee are limited as necessary to prevent such guarantee from constituting a fraudulent conveyance under applicable law. If a guarantee were to be rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the Guarantor, and, depending on the amount of such indebtedness, a Guarantor’s liability on its guarantee could be reduced to zero. Each guarantee by a Guarantor provides by its terms that it shall be automatically and unconditionally released and discharged upon: (1) any sale, exchange or transfer (by merger or otherwise) of the Guarantor in a manner in compliance with the applicable provisions of the CCWH Senior Notes Indenture; (2) the designation of any restricted subsidiary that is a Guarantor as an unrestricted subsidiary; (3) CCWH’s exercising legal defeasance or covenant defeasance in accordance with the relevant provisions of the CCWH Senior Notes Indenture, or (4) a Guarantor ceasing to be a restricted subsidiary as a result of a transaction or designation permitted under the CCWH Senior Notes Indenture.
CCWH is a holding company with no significant operations or material assets other than the direct and indirect equity interests in its subsidiaries. CCWH derives all of its operating income from its subsidiaries. As a result, its cash flow and the ability to service its indebtedness, including the CCWH Senior Notes, depends on the performance of its subsidiaries and the ability of those entities to distribute funds to it.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amount of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates that are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. The results of these evaluations form the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenue and expenses that are not readily apparent from other sources. Because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such difference could be material. Management believes that certain accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. These critical accounting estimates, management's judgments and assumptions, and the effect if actual results differ from these assumptions are described under Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2019 Annual Report on Form 10-K.
In March 2020, COVID-19 was categorized as a pandemic by the World Health Organization. While the duration and severity of the effects of COVID-19 are currently unknown, we anticipate significant adverse effects on our results of operations throughout our business as more customers defer advertising buying decisions and reduce marketing spend. As such, we have updated certain of our estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of expenses during the reporting period, as described below. There continues to be a high level of uncertainty in estimating our expected economic and operational impacts relative to COVID-19 as it is an evolving situation. As expected impacts from COVID-19 are revised, our estimates and assumptions may change, and we may experience further potential impacts to our financial statements in future periods.
Impairment Tests
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets, such as our billboard permits, are reviewed at least annually for possible impairment and whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable using the direct valuation method as prescribed in ASC 805-20-S99. Under the direct valuation method, the estimated fair value of the indefinite-lived intangible assets is calculated at the market level as prescribed by ASC 350-30-35, and it is assumed that rather than acquiring indefinite-lived intangible assets as a part of a going concern business, the buyer hypothetically develops indefinite-lived intangible assets and builds a new operation with similar attributes from scratch. Thus, the buyer incurs start-up costs during the build-up phase that are normally associated with going concern value. Initial capital costs are deducted from the discounted cash flow model to calculate the value that is directly attributable to the indefinite-lived intangible assets. Our key assumptions using the direct valuation method are market revenue growth rates, market share, profit margin, duration and profile of the build-up period, estimated start-up capital costs and losses incurred during the build-up period, the risk-adjusted discount rate and terminal values. This data is populated using industry-normalized information representing an average asset within a market.
In light of the expected impacts from COVID-19, we tested our intangible assets for impairment during the first quarter of 2020, resulting in an impairment charge of $123.1 million related to permits in multiple markets in our Americas segment, primarily driven by reductions in projected cash flows and an increased discount rate. In determining the fair value of our billboard permits, the following key assumptions were used:
|
|
•
|
Industry revenue growth forecasts used for the initial four-year period, which varied by market, included an average growth of 2.4% over the next two years, factoring in the impacts related to the COVID-19 pandemic, and between 2.9% and 3.0% during the remaining two years;
|
|
|
•
|
Revenue growth beyond the initial four-year period was assumed to be 3.0%;
|
|
|
•
|
Revenue was grown over a build-up period, reaching maturity by the second year;
|
|
|
•
|
Operating margins gradually climb to the industry average margin (as high as 53.3%, depending on market size) by the third year; and
|
|
|
•
|
Discount rate was assumed to be 10.0%.
|
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the fair value of our indefinite-lived intangible assets, it is possible that a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decrease in the fair value of our indefinite-lived intangible assets that would result from decreases of 100 basis points in our discrete and terminal period revenue growth rate and profit margin assumptions and an increase of 100 basis points in our discount rate assumption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Revenue growth rate
|
|
Profit margin
|
|
Discount rate
|
Decrease in fair value of:
|
|
(100 basis point decrease)
|
|
(100 basis point decrease)
|
|
(100 basis point increase)
|
Billboard permits
|
|
$
|
(523,700
|
)
|
|
$
|
(119,100
|
)
|
|
$
|
(504,000
|
)
|
The estimated fair value of our billboard permits at March 31, 2020 was $1.9 billion while the carrying value was $0.8 billion after recording an impairment of $0.1 billion during the first quarter of 2020.
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations. We test goodwill at interim dates if events or changes in circumstances indicate that goodwill might be impaired. The fair value of our reporting units is used to apply value to the net assets of each reporting unit. To the extent that the carrying amount of net assets would exceed the fair value, an impairment charge is recorded. The discounted cash flow approach that we use for valuing goodwill as part of the impairment testing approach involves estimating future cash flows expected to be generated from the related assets, discounted to their present value using a risk-adjusted discount rate. Terminal values are also estimated and discounted to their present value.
As previously described, we changed our presentation of segment information as of January 1, 2020 to reflect changes in the way the business is managed and resources are allocated by the CODM. This resulted in a change to our operating segments and certain reporting units. Corresponding with the change in our reporting units, we tested goodwill for impairment immediately before and after the change utilizing a discount rate of approximately 8.5% to 10.0% for each of our reporting units and an estimated perpetual growth rate of 3.0%. This testing did not identify impairment. Additionally, due to the expected impacts from COVID-19, we tested our goodwill for impairment as of March 31, 2020 in accordance with ASC 350-20-35; however, this did not result in any impairment of goodwill during the three months ended March 31, 2020. In determining the fair value of our reporting units, we used the following assumptions:
|
|
•
|
Expected cash flows underlying our business plans for the periods 2020 through 2024, which are based on detailed, multi-year forecasts performed by each of our operating segments and reflect the advertising outlook across our businesses;
|
|
|
•
|
Cash flows beyond 2024 are projected to grow at a perpetual growth rate, which we estimated at 3.0%; and
|
|
|
•
|
In order to risk-adjust the cash flow projections in determining fair value, we utilized a discount rate of approximately 9.5% to 11.0% for each of our reporting units.
|
Based on our annual assessment using the assumptions described above, a hypothetical 10% reduction in the estimated fair value in each of our reporting units would not result in a material impairment condition.
While we believe we have made reasonable estimates and utilized appropriate assumptions to calculate the estimated fair value of our reporting units, it is possible a material change could occur. If future results are not consistent with our assumptions and estimates, we may be exposed to impairment charges in the future. The following table shows the decrease in the fair value of each of our reporting units with goodwill that would result from decreases of 100 basis points in our discrete and terminal period revenue growth rate and profit margin assumptions and an increase of 100 basis points in our discount rate assumption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In thousands)
|
|
Revenue growth rate
|
|
Profit margin
|
|
Discount rate
|
Decrease in fair value of reporting unit:
|
|
(100 basis point decrease)
|
|
(100 basis point decrease)
|
|
(100 basis point increase)
|
Americas
|
|
$
|
(410,000
|
)
|
|
$
|
(120,000
|
)
|
|
$
|
(400,000
|
)
|
Europe
|
|
$
|
(116,000
|
)
|
|
$
|
(135,000
|
)
|
|
$
|
(105,000
|
)
|
Latin America
|
|
$
|
(14,000
|
)
|
|
$
|
(5,000
|
)
|
|
$
|
(15,000
|
)
|
NEW ACCOUNTING PRONOUNCEMENTS
For a description of the expected impact of newly issued but not yet adopted accounting pronouncements on our financial position and results of operations, refer to Note 1 to our Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q.
Cautionary Statement Concerning Forward-Looking Statements
This report contains various forward-looking statements which represent our expectations or beliefs concerning future events, including, without limitation, our future operating and financial performance, our ability to comply with the covenants in the agreements governing our indebtedness and the availability of capital and the terms thereof. Statements expressing expectations and projections with respect to future matters are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which provides a safe harbor for forward-looking statements made by us or on our behalf. We caution that these forward-looking statements involve a number of risks and uncertainties and are subject to many variables that could impact our future performance. These statements are made on the basis of management’s views and assumptions, as of the time the statements are made, regarding future events and performance. There can be no assurance, however, that management’s expectations will necessarily come to pass. Actual future events and performance may differ materially from the expectations reflected in our forward-looking statements. We do not intend, nor do we undertake any duty, to update any forward-looking statements.
A wide range of factors could materially affect future developments and performance, including, but not limited to:
|
|
•
|
the magnitude of the impact of the COVID-19 pandemic on our operations and on general economic conditions;
|
|
|
•
|
risks associated with weak or uncertain global economic conditions and their impact on the level of expenditures on advertising;
|
|
|
•
|
our ability to service our debt obligations and to fund our operations and capital expenditures;
|
|
|
•
|
industry conditions, including competition;
|
|
|
•
|
our ability to obtain key municipal concessions for our street furniture and transit products;
|
|
|
•
|
fluctuations in operating costs;
|
|
|
•
|
technological changes and innovations;
|
|
|
•
|
shifts in population and other demographics;
|
|
|
•
|
other general economic and political conditions in the U.S. and in other countries in which we currently do business, including those resulting from recessions, political events and acts or threats of terrorism or military conflicts;
|
|
|
•
|
changes in labor conditions and management;
|
|
|
•
|
the impact of future dispositions, acquisitions and other strategic transactions;
|
|
|
•
|
legislative or regulatory requirements;
|
|
|
•
|
regulations and consumer concerns regarding privacy and data protection;
|
|
|
•
|
a breach of our information security measures;
|
|
|
•
|
restrictions on outdoor advertising of certain products;
|
|
|
•
|
fluctuations in exchange rates and currency values;
|
|
|
•
|
risks of doing business in foreign countries;
|
|
|
•
|
third-party claims of intellectual property infringement, misappropriation or other violation against us;
|
|
|
•
|
the risk that the Separation could result in significant tax liability or other unfavorable tax consequences to us and impair our ability to utilize our federal income tax net operating loss carryforwards in future years;
|
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the risk that we may be more susceptible to adverse events following the Separation;
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the risk that we may be unable to replace the services iHeartCommunications provided us in a timely manner or on comparable terms;
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our dependence on our management team and other key individuals;
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the risk that indemnities from iHeartMedia will not be sufficient to insure us against the full amount of certain liabilities;
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volatility of our stock price;
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the impact of our substantial indebtedness, including the effect of our leverage on our financial position and earnings;
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the ability of our subsidiaries to dividend or distribute funds to us in order for us to repay our debts;
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the restrictions contained in the agreements governing our indebtedness and our Preferred Stock limiting our flexibility in operating our business;
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the effect of analyst or credit ratings downgrades;
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our ability to regain compliance with the continued listing criteria of the New York Stock Exchange ("NYSE") and continue to comply with other applicable listing standards within the available cure period; and
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certain other factors set forth in our other filings with the SEC.
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This list of factors that may affect future performance and the accuracy of forward-looking statements is illustrative and is not intended to be exhaustive. Accordingly, all forward-looking statements should be evaluated with the understanding of their inherent uncertainty.