UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2024
For the transition period from to
Commission File Number: 001-32663
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| | |||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
| (Registrant's telephone number, including area code) | |||||||||||
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| Class | Outstanding at August 2, 2024 | ||||
| - - - - - - - - - - - - - - - - - - - - - - - - - - | - - - - - - - - - - - - - - - - - - - - - - - - - - | ||||
| Common Stock, $0.01 par value per share | |||||
CLEAR CHANNEL OUTDOOR HOLDINGS, INC.
TABLE OF CONTENTS
| Page Number | ||||||||
| PART I—FINANCIAL INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| PART II—OTHER INFORMATION | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 5. | ||||||||
| Item 6. | ||||||||
1
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| Page Number | |||||
| Financial Statements: | |||||
| Condensed Notes to Consolidated Financial Statements: | |||||
2
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
| (In thousands, except share and per share data) | June 30, 2024 | December 31, 2023 | |||||||||
| (Unaudited) | |||||||||||
| CURRENT ASSETS | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Current assets of discontinued operations | |||||||||||
| Total Current Assets | |||||||||||
| PROPERTY, PLANT AND EQUIPMENT | |||||||||||
| Structures, net | |||||||||||
| Other property, plant and equipment, net | |||||||||||
| INTANGIBLE ASSETS AND GOODWILL | |||||||||||
| Permits, net | |||||||||||
| Other intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| OTHER ASSETS | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
| Total Assets | $ | $ | |||||||||
| CURRENT LIABILITIES | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Accrued expenses | |||||||||||
| Current operating lease liabilities | |||||||||||
| Accrued interest | |||||||||||
| Deferred revenue | |||||||||||
| Current portion of long-term debt | |||||||||||
| Current liabilities of discontinued operations | |||||||||||
| Total Current Liabilities | |||||||||||
| NON-CURRENT LIABILITIES | |||||||||||
| Long-term debt | |||||||||||
| Non-current operating lease liabilities | |||||||||||
| Deferred tax liabilities, net | |||||||||||
| Other liabilities | |||||||||||
| Total Liabilities | |||||||||||
Commitments and Contingencies (Note 6) | |||||||||||
| STOCKHOLDERS’ DEFICIT | |||||||||||
| Noncontrolling interests | |||||||||||
Common stock, par value $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
Treasury stock ( | ( | ( | |||||||||
| Total Stockholders' Deficit | ( | ( | |||||||||
| Total Liabilities and Stockholders' Deficit | $ | $ | |||||||||
See Condensed Notes to Consolidated Financial Statements
3
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
(UNAUDITED)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In thousands, except per share data) | June 30, | June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
Direct operating expenses(1) | |||||||||||||||||||||||
Selling, general and administrative expenses(1) | |||||||||||||||||||||||
Corporate expenses(1) | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Impairment charges | |||||||||||||||||||||||
| Other operating expense, net | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense, net | ( | ( | ( | ( | |||||||||||||||||||
Loss on extinguishment of debt | ( | ||||||||||||||||||||||
| Other income (expense), net | ( | ( | |||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax benefit attributable to continuing operations | |||||||||||||||||||||||
| Loss from continuing operations | ( | ( | ( | ( | |||||||||||||||||||
| Consolidated net loss | ( | ( | ( | ( | |||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | |||||||||||||||||||||||
| Net loss attributable to the Company | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net income (loss) attributable to the Company per share of common stock — Basic and Diluted: | |||||||||||||||||||||||
Net loss from continuing operations attributable to the Company per share of common stock | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Net income from discontinued operations attributable to the Company per share of common stock | |||||||||||||||||||||||
Net loss attributable to the Company per share of common stock — Basic and Diluted(2) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)Excludes depreciation and amortization
(2)Due to rounding, the total may not equal the sum of the line items in the table above.
See Condensed Notes to Consolidated Financial Statements
4
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(UNAUDITED)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In thousands) | June 30, | June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Net loss attributable to the Company | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Foreign currency translation adjustments | ( | ( | ( | ( | |||||||||||||||||||
Reclassification adjustment for realized gains from cumulative translation adjustments and pension related to sold businesses(1) | ( | ( | |||||||||||||||||||||
| Other comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
| Comprehensive loss | ( | ( | ( | ( | |||||||||||||||||||
| Less: Comprehensive income (loss) attributable to noncontrolling interests | ( | ||||||||||||||||||||||
| Comprehensive loss attributable to the Company | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)Included in “” on Consolidated Statements of Loss
See Condensed Notes to Consolidated Financial Statements
5
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Shares Issued | Non-controlling Interests | Controlling Interest | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Release of stock-based awards and exercise of stock options | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests, net | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances at March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Release of stock-based awards and exercise of stock options | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests, net | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
Disposition of business | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
Six Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||
| Controlling Interest | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||||||||
| (In thousands, except share data) | Common Shares Issued | Non-controlling Interests | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Release of stock-based awards and exercise of stock options | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests, net | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances at December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Release of stock-based awards and exercise of stock options | — | ( | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Payments to noncontrolling interests, net | ( | — | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||
Disposition of businesses | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Balances at June 30, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||
See Condensed Notes to Consolidated Financial Statements
6
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| (In thousands) | Six Months Ended June 30, | ||||||||||
| 2024 | 2023 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Consolidated net loss | $ | ( | $ | ( | |||||||
| Reconciling items: | |||||||||||
| Depreciation, amortization and impairment | |||||||||||
| Non-cash operating lease expense | |||||||||||
| Loss on extinguishment of debt and debt modification expense | |||||||||||
| Deferred taxes | ( | ||||||||||
| Share-based compensation | |||||||||||
| Amortization of deferred financing charges and note discounts | |||||||||||
| Credit loss expense | |||||||||||
Gain on disposition of businesses and/or operating assets, net | ( | ( | |||||||||
| Foreign exchange transaction gain | ( | ( | |||||||||
| Other reconciling items, net | ( | ||||||||||
Changes in operating assets and liabilities, net of effects of dispositions: | |||||||||||
| Decrease in accounts receivable | |||||||||||
| Decrease (increase) in prepaid expenses and other operating assets | ( | ||||||||||
| Decrease in accounts payable and accrued expenses | ( | ( | |||||||||
| Decrease in operating lease liabilities | ( | ( | |||||||||
| (Decrease) increase in accrued interest | ( | ||||||||||
| Increase in deferred revenue | |||||||||||
| Decrease in other operating liabilities | ( | ( | |||||||||
| Net cash used for operating activities | ( | ( | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Asset acquisitions | ( | ( | |||||||||
Net proceeds from disposition of businesses and/or assets | |||||||||||
| Other investing activities, net | ( | ( | |||||||||
| Net cash (used for) provided by investing activities | ( | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from long-term debt | |||||||||||
| Payments on long-term debt | ( | ( | |||||||||
| Debt issuance and modification costs | ( | ( | |||||||||
| Taxes paid related to net share settlement of equity awards | ( | ( | |||||||||
| Payments to noncontrolling interests, net | ( | ( | |||||||||
| Net cash used for financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
| Supplemental disclosures: | |||||||||||
| Cash paid for interest | $ | $ | |||||||||
| Cash paid for income taxes, net of refunds | $ | $ | |||||||||
See Condensed Notes to Consolidated Financial Statements
7
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 – BASIS OF PRESENTATION
Principles of Consolidation
These consolidated financial statements include the accounts of Clear Channel Outdoor Holdings, Inc. (“CCOH”) and its subsidiaries, as well as entities in which the Company has a controlling financial interest or for which the Company is the primary beneficiary. Intercompany transactions have been eliminated in consolidation. All references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us” and “our” refer to Clear Channel Outdoor Holdings, Inc. and its consolidated subsidiaries.
Preparation of Interim Financial Statements
The accompanying consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements, and, in the opinion of management, include all normal and recurring adjustments necessary to present fairly the results of the interim periods shown. Due to seasonality and other factors, the results for the interim periods may not be indicative of results for the full year.
Pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”), certain information and footnote disclosures required by GAAP for annual financial statements have been condensed or omitted from these interim financial statements. Accordingly, the financial statements contained herein should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2023 Annual Report on Form 10-K, filed with the SEC on February 26, 2024.
Use of Estimates
The Company’s consolidated financial statements presented herein reflect estimates and assumptions made by management that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from those estimates.
Discontinued Operations
As described in the Company’s 2023 Annual Report on Form 10-K, during the third quarter of 2023, the Company’s plan to sell the businesses comprising its Europe-South segment met the criteria to be reported as discontinued operations. In accordance with GAAP, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets, and results of discontinued operations are reported as a separate component of “Consolidated net loss” in the Consolidated Statements of Loss, for all periods presented, resulting in changes to the presentation of certain prior period amounts. Cash flows from discontinued operations are not reported separately in the Consolidated Statements of Cash Flows.
NOTE 2 – DISPOSITIONS AND DISCONTINUED OPERATIONS
On March 31, 2023, the Company sold its former business in Switzerland for cash proceeds of $84.9 million (net of direct costs to transact the sale and cash sold) and recognized a gain on sale of $96.4 million. On May 31, 2023, the Company sold its former business in Italy for cash proceeds of $4.3 million (net of direct costs to transact the sale and cash sold) and recognized a gain on sale of $11.2 million. Gains related to these sales are included within “Income from discontinued operations” on the Consolidated Statements of Loss, and net cash proceeds are reflected within “Net proceeds from disposition of businesses and/or assets” in the investing activities section of the Consolidated Statement of Cash Flows.
In May 2023, the Company also entered into an agreement to sell its business in Spain, which is expected to close in 2024 upon receipt of regulatory approval and satisfaction of other customary closing conditions. Subsequently, in October 2023, the Company sold its former business in France. The Company’s business in Spain, together with its former businesses in Switzerland, Italy and France, comprised the Company’s entire Europe-South segment.
The Company concluded that, in aggregate, the sales of these businesses met the criteria for discontinued operations presentation in the third quarter of 2023. As a result, each of these businesses has been reclassified to discontinued operations in these financial statements for all periods presented.
8
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Assets and Liabilities of Discontinued Operations
As previously described, assets and liabilities of discontinued operations are presented separately in the Consolidated Balance Sheets for all periods presented. At June 30, 2024 and December 31, 2023, these balances consisted of assets and liabilities of the Company’s business in Spain, which are all classified as current as the sale of this business is expected to close in 2024.
The following table presents a reconciliation of the carrying amounts of the major classes of these assets and liabilities to the current assets and liabilities of discontinued operations as presented on the Company’s Consolidated Balance Sheets:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||
| Assets of discontinued operations: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Accounts receivable, net | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Property, plant and equipment, net | |||||||||||
| Operating lease right-of-use assets | |||||||||||
| Other assets | |||||||||||
Current assets of discontinued operations | $ | $ | |||||||||
| Liabilities of discontinued operations: | |||||||||||
Accounts payable and accrued expenses | $ | $ | |||||||||
| Operating lease liabilities | |||||||||||
| Deferred revenue | |||||||||||
Other liabilities | |||||||||||
Current liabilities of discontinued operations | $ | $ | |||||||||
Letters of Credit, Surety Bonds and Guarantees
A portion of the Company’s letters of credit and guarantees outstanding at June 30, 2024 related to discontinued operations, as follows:
•Related to the former business in France, the Company has a $20.2 million letter of credit. In connection with the sale of this business, and pursuant to the related share purchase agreement, the Company’s former French business and/or the buyer will either replace, or procure a counter-guarantee of, the Company’s payment obligation under the letter of credit. Additionally, the Company retains an indemnity of $15.7 million related to a surety bond held by the former business in France. The Company has been indemnified by the former French business for this amount and will be released from any remaining obligation by March 2025.
•Related to the business in Spain, the Company had a $6.5 million of letter of credit and $8.5 million of bank guarantees outstanding at June 30, 2024, a portion of which was supported by $0.7 million of cash collateral. These will remain obligations of the Company until the sale of this business closes or, if sooner, their expiration date.
9
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Income from Discontinued Operations
Discontinued operations for the three and six months ended June 30, 2024 consists of results from the Company’s business in Spain, whereas discontinued operations for the three and six months ended June 30, 2023 consists of results from the Company’s business in Spain and former businesses in Switzerland (through March 31, 2023), Italy (through May 31, 2023) and France.
The following table provides details about the major classes of line items constituting “” as presented on the Company’s Consolidated Statements of Loss:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In thousands) | June 30, | June 30, | |||||||||||||||||||||
2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||
Expenses: | |||||||||||||||||||||||
Direct operating expenses(1) | |||||||||||||||||||||||
Selling, general and administrative expenses(1),(2) | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Other expense (income), net | ( | ( | |||||||||||||||||||||
Income (loss) from discontinued operations before gain on disposal and income taxes | ( | ( | |||||||||||||||||||||
Gain on disposal | |||||||||||||||||||||||
Income tax benefit (expense) attributable to discontinued operations(3) | ( | ||||||||||||||||||||||
Income from discontinued operations, net of income taxes | $ | $ | $ | $ | |||||||||||||||||||
(1)Excludes depreciation and amortization.
(2)Certain costs that were historically allocated to the Company’s Europe-South segment and reported within selling, general and administrative expenses on the Consolidated Statement of Loss have been deemed to be costs of continuing operations and are now reported within corporate expenses on the Consolidated Statement of Loss. As such, amounts for prior periods totaling $1.0 million and $2.9 million for the three and six months ended June 30, 2023, respectively, have been reclassified to conform to the current period presentation.
(3)Most of the income tax expense attributable to discontinued operations for the six months ended June 30, 2023 was driven by the sale of the Company’s former business in Switzerland.
Capital Expenditures of Discontinued Operations
The following table presents the capital expenditures for discontinued operations for the three and six months ended June 30, 2024 and 2023:
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||
| (In thousands) | June 30, | June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Capital expenditures(1) | $ | $ | $ | $ | |||||||||||||||||||
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $1.2 million and $3.5 million of accrued capital expenditures related to discontinued operations that remained unpaid as of June 30, 2024 and 2023, respectively.
10
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 3 – SEGMENT DATA
The Company has four reportable segments, which it believes best reflect how the Company is currently managed: America, Airports, Europe-North and Europe-South. The Company's remaining operations in Latin America and Singapore are disclosed as “Other.” As described in Note 2, the Company’s Europe-South segment met the criteria to be reported as discontinued operations during the third quarter of 2023. As such, results of this segment are excluded from the table below, which only reflects continuing operations, for all periods presented.
Segment Adjusted EBITDA is the profitability metric reported to the Company’s chief operating decision maker (“CODM”) for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Segment Adjusted EBITDA is calculated as revenue less direct operating expenses and selling, general and administrative expenses, excluding restructuring and other costs, which are defined as costs associated with cost-saving initiatives such as severance, consulting and termination costs and other special costs. Segment information for total assets is not presented as this information is not used by the Company’s CODM in measuring segment performance or allocating resources between segments.
The following table presents the Company’s reportable segment results for continuing operations for the three and six months ended June 30, 2024 and 2023:
| (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| America | $ | $ | $ | $ | |||||||||||||||||||
| Airports | |||||||||||||||||||||||
| Europe-North | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
Capital Expenditures(1) | |||||||||||||||||||||||
| America | $ | $ | $ | $ | |||||||||||||||||||
| Airports | |||||||||||||||||||||||
| Europe-North | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
| Segment Adjusted EBITDA | |||||||||||||||||||||||
| America | $ | $ | $ | $ | |||||||||||||||||||
| Airports | |||||||||||||||||||||||
| Europe-North | |||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||||||||
11
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Reconciliation of Segment Adjusted EBITDA to Loss From Continuing Operations Before Income Taxes | |||||||||||||||||||||||
| Segment Adjusted EBITDA | $ | $ | $ | $ | |||||||||||||||||||
| Less reconciling items: | |||||||||||||||||||||||
Corporate expenses(2) | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Impairment charges | |||||||||||||||||||||||
Restructuring and other costs(3) | |||||||||||||||||||||||
| Other operating expense, net | |||||||||||||||||||||||
| Interest expense, net | |||||||||||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||||||||
| Other (income) expense, net | ( | ( | |||||||||||||||||||||
| Loss from continuing operations before income taxes | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)In addition to payments that occurred during the period for capital expenditures, the Company had $10.3 million and $10.9 million of accrued capital expenditures related to continuing operations that remained unpaid as of June 30, 2024 and 2023, respectively.
(2)Corporate expenses include expenses related to infrastructure and support, including information technology, human resources, legal (including estimated costs for legal liabilities), finance and administrative functions of each of the Company’s reportable segments, as well as overall executive, administrative and support functions. Share-based payments and certain restructuring and other costs are recorded in corporate expenses.
(3)The restructuring and other costs line item in this reconciliation excludes those restructuring and other costs related to corporate functions, which are included within the Corporate expenses line item.
12
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 – REVENUE
The Company generates revenue primarily from the sale of advertising on printed and digital out-of-home advertising displays. Certain of these revenue transactions are considered leases for accounting purposes as the contracts convey to customers the right to control the use of the Company’s advertising displays for a period of time. The Company accounts for revenue from leases in accordance with Accounting Standards Codification (“ASC”) Topic 842, while the Company’s remaining revenue transactions are accounted for as revenue from contracts with customers in accordance with ASC Topic 606.
Disaggregation of Revenue
The following table shows revenue from contracts with customers, revenue from leases and total revenue from continuing operations, disaggregated by geography, for the three and six months ended June 30, 2024 and 2023:
| (In thousands) | Revenue from contracts with customers | Total revenue | |||||||||||||||
| Three Months Ended June 30, 2024 | |||||||||||||||||
U.S.(1) | $ | $ | $ | ||||||||||||||
Europe(2) | |||||||||||||||||
Other(3) | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Three Months Ended June 30, 2023 | |||||||||||||||||
U.S.(1) | $ | $ | $ | ||||||||||||||
Europe(2) | |||||||||||||||||
Other(3) | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Six Months Ended June 30, 2024 | |||||||||||||||||
U.S.(1) | $ | $ | $ | ||||||||||||||
Europe(2) | |||||||||||||||||
Other(3) | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
| Six Months Ended June 30, 2023 | |||||||||||||||||
U.S.(1) | $ | $ | $ | ||||||||||||||
Europe(2) | |||||||||||||||||
Other(3) | |||||||||||||||||
| Total | $ | $ | $ | ||||||||||||||
(1)U.S. revenue, which also includes an immaterial amount of revenue derived from airport displays in the Caribbean, is comprised of revenue from the Company’s America and Airports segments.
(2)Europe revenue is comprised of revenue from the Company’s Europe-North segment.
(3)Other includes the Company’s businesses in Latin America and Singapore.
13
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Revenue from Contracts with Customers
The following table shows the Company’s beginning and ending accounts receivable and deferred revenue balances from contracts with customers:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| (In thousands) | 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||
| Accounts receivable, net of allowance, from contracts with customers: | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Ending balance | |||||||||||||||||||||||
| Deferred revenue from contracts with customers: | |||||||||||||||||||||||
| Beginning balance | $ | $ | $ | $ | |||||||||||||||||||
| Ending balance | |||||||||||||||||||||||
During the three months ended June 30, 2024 and 2023, respectively, the Company recognized $26.3 million and $33.6 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective quarters. During the six months ended June 30, 2024 and 2023, respectively, the Company recognized $21.3 million and $20.7 million of revenue that was included in the deferred revenue from contracts with customers balance at the beginning of the respective years.
The Company’s contracts with customers generally have terms of one year or less. As of June 30, 2024, the Company expected to recognize $92.5 million of revenue in future periods for remaining performance obligations from current contracts with customers that have an original expected duration of greater than one year, with the majority of this amount to be recognized over the next five years .
14
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 5 – LONG-TERM DEBT
Long-term debt outstanding as of June 30, 2024 and December 31, 2023 consisted of the following:
| (In thousands) | Maturity | June 30, 2024 | December 31, 2023 | ||||||||||||||
Receivables-Based Credit Facility | August 2026 | $ | $ | ||||||||||||||
Revolving Credit Facility | August 2026 | ||||||||||||||||
Term Loan Facility(1) | August 2028 | ||||||||||||||||
Clear Channel Outdoor Holdings | August 2027 | ||||||||||||||||
Clear Channel Outdoor Holdings | September 2028 | ||||||||||||||||
Clear Channel Outdoor Holdings | April 2030 | ||||||||||||||||
Clear Channel Outdoor Holdings | April 2028 | ||||||||||||||||
Clear Channel Outdoor Holdings | June 2029 | ||||||||||||||||
Clear Channel International B.V. | August 2025 | ||||||||||||||||
Clear Channel International B.V. Term Loan Facility(2) | April 2027 | ||||||||||||||||
Finance leases | |||||||||||||||||
| Original issue discount | ( | ( | |||||||||||||||
| Long-term debt fees | ( | ( | |||||||||||||||
| Total debt | |||||||||||||||||
Less: Current portion | |||||||||||||||||
| Total long-term debt | $ | $ | |||||||||||||||
(1)On March 18, 2024, the Company issued $865.0 million aggregate principal amount of 7.875 % Senior Secured Notes Due 2030 (the “CCOH 7.875 % Senior Secured Notes”) and used a portion of the proceeds therefrom to prepay $835.0 million of borrowings outstanding under the Term Loan Facility. At the same time, the Company amended its Senior Secured Credit Agreement to, among other things, refinance the $425.0 million remaining principal balance on the Term Loan Facility and to extend its maturity date from 2026 to 2028, subject to certain conditions. The new refinanced term loans were issued at a 1 % discount, and the Company used the proceeds therefrom, along with the remaining proceeds from the CCOH 7.875 % Senior Secured Notes issuance and cash on hand, to pay off the original term loans, $14.9 million of accrued interest on the prepaid and refinanced Term Loan principal and $14.6 million of fees and expenses related to these transactions. At June 30, 2024, the Company had an accrual of $0.7 million for unpaid fees and expenses. Related to these transactions, the Company recognized a loss on debt extinguishment of $2.4 million and debt modification expense of $10.0 million.
(2)On March 22, 2024, the Company’s indirect wholly-owned subsidiary, Clear Channel International B.V. (“CCIBV”), entered into a credit agreement comprising two tranches of term loans (the “CCIBV Term Loan Facility”) totaling an aggregate principal amount of $375.0 million, which was issued at a 1 % discount. The Company used the proceeds therefrom, along with cash on hand, to redeem all of the outstanding $375.0 million aggregate principal amount of 6.625 % Senior Secured Notes Due 2025 (the “CCIBV Senior Secured Notes”) and to pay $11.8 million of accrued interest related thereto and $4.2 million of related transaction fees and expenses. At June 30, 2024, the Company had an accrual of $1.6 million for unpaid fees and expenses. Related to this transaction, the Company recognized a loss on debt extinguishment of $2.4 million and debt modification expense of $2.0 million. As a result of this redemption, CCIBV and the guarantors of the CCIBV Senior Secured Notes have been released from their remaining obligations under the indenture governing such notes, and such indenture has ceased to be of further effect.
The aggregate market value of the Company’s debt based on market prices for which quotes were available was approximately $5.4 billion and $5.3 billion as of June 30, 2024 and December 31, 2023, respectively. Under the fair value hierarchy established by ASC Section 820-10-35, the inputs used to determine the market value of the Company’s debt are classified as Level 1.
As of June 30, 2024, the Company was in compliance with all covenants contained in its debt agreements.
Amendment to Senior Secured Credit Facilities
On March 18, 2024, the Senior Secured Credit Agreement, which governs the Company’s Term Loan Facility and Revolving Credit Facility, was amended to, among other things: extend the maturity date of the Term Loan Facility to August 23, 2028, subject to certain conditions; increase the Applicable Rate (as defined therein) for the Term Loan Facility by 50 basis points; and provide for a prepayment penalty in certain circumstances. These amendments are reflected in the information below.
15
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Maturity
The term loans under the Term Loan Facility amortize in equal quarterly installments in an aggregate annual amount equal to 1.00 % of the original principal amount of such term loans. In August 2023, the Company made a prepayment that satisfied the remaining quarterly payment obligations, and the remaining balance is payable on August 23, 2028, subject to certain conditions.
Prepayments
The Senior Secured Credit Agreement, as amended, provides for a prepayment penalty of 1.00 % for certain prepayments of, or amendments to, the Term Loan Facility effected on or prior to September 18, 2024. Thereafter, the Company may voluntarily repay outstanding term loans under the Senior Secured Credit Facilities without penalty.
CCOH 7.875
On March 18, 2024, the Company completed the sale of $865.0 million in aggregate principal amount of the CCOH 7.875 % Senior Secured Notes. The CCOH 7.875 % Senior Secured Notes were issued pursuant to an indenture, dated as of March 18, 2024 (the “CCOH 7.875 % Senior Secured Notes Indenture”), among the Company, the subsidiaries of the Company acting as guarantors party thereto and U.S. Bank Trust Company, National Association, as trustee and as collateral agent.
The CCOH 7.875 7.875 7.875
Guarantees and Security
The CCOH 7.875
The CCOH 7.875
The CCOH 7.875
Redemptions
The Company may redeem all or a portion of the CCOH 7.875 7.875
Certain Covenants
The CCOH 7.875
CCIBV Term Loan Facility Due 2027
On March 22, 2024 (the “Closing Date”), CCIBV entered into a credit agreement (the “CCIBV Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and J.P. Morgan SE, as lead arranger and bookrunner. The CCIBV Credit Agreement governs the CCIBV Term Loan Facility and the term loans incurred thereunder.
16
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Size and Availability
The CCIBV Term Loan Facility is comprised of two tranches of term loans totaling an aggregate principal amount of $375.0 million: (1) a “fixed rate” tranche of term loans in an aggregate principal amount of $300.0 million (the “Fixed Rate Term Loan Tranche”); and (2) a “floating rate” tranche of term loans in an aggregate principal amount of $75.0 million (the “Floating Rate Term Loan Tranche”).
Interest Rate
The CCIBV Term Loan Facility bears interest: (1) at a fixed rate of 7.5 % per annum, payable semi-annually in arrears on April 1 and October 1 of each year for the Fixed Rate Term Loan Tranche and (2) at a floating rate equal to the benchmark rate “Term SOFR” plus 2.25 % per annum (subject to a floor rate of 5.25 % per annum), payable at one-, three- or six- month intervals, effective April 1, 2024 for the Floating Rate Term Loan Tranche.
Amortization and Maturity
The CCIBV Term Loan Facility matures on April 1, 2027 and has no scheduled amortization payments prior to this date.
Prepayments
The CCIBV Credit Agreement requires CCIBV to make certain mandatory prepayments, subject to certain requirements and exceptions, and permits CCIBV to make voluntary prepayments at its discretion. The Fixed Rate Term Loan Tranche and the Floating Rate Term Loan Tranche will participate in any voluntary or mandatory repayments or prepayments on a pro rata basis.
Guarantees and Security
The CCIBV Term Loan Facility is fully guaranteed by certain of CCIBV’s subsidiaries. The Company does not guarantee and has not otherwise assumed any liability under the CCIBV Term Loan Facility. The CCIBV Term Loan Facility and certain of the guarantees thereunder (the “Secured Guarantees”) are secured by security interests in, and pledges over, certain assets and property (including, without limitation, capital stock, material bank accounts and intercompany receivables) of or in CCIBV and its guarantors (the “Security Interests”), in each case subject to certain agreed security principles, permitted liens and other customary exceptions and qualifications.
The CCIBV Term Loan Facility is a senior secured obligation that ranks, in right of payment, pari passu to all unsubordinated indebtedness of CCIBV and senior to all subordinated indebtedness of CCIBV and ranks, in right of security, senior to all unsecured and junior lien indebtedness of CCIBV to the extent of the value of the assets that constitute collateral after giving effect to the Security Interests and the Secured Guarantees. The guarantees that are not Secured Guarantees are unsecured senior obligations that rank, in right of payment, pari passu to all unsubordinated indebtedness of the guarantors and senior to all subordinated indebtedness of the guarantors and rank, in right of security, junior to all secured indebtedness of the guarantors to the extent of the value of the assets securing such indebtedness and pari passu to all unsecured indebtedness of the guarantors.
Certain Covenants
The CCIBV Credit Agreement contains covenants that limit CCIBV’s ability and the ability of its restricted subsidiaries to, among other things (but subject to certain exceptions): pay dividends, redeem stock or make other distributions or investments; incur additional debt or issue certain preferred stock; transfer or sell assets; create liens on assets; engage in certain transactions with affiliates; create restrictions on dividends or other payments by the restricted subsidiaries; and merge, consolidate or effect other fundamental changes to CCIBV’s assets.
Letters of Credit, Surety Bonds and Guarantees
The Company has letters of credit, surety bonds and bank guarantees related to various operational matters, including insurance, bid, concession and performance bonds, as well as other items.
As of June 30, 2024, the Company had $43.2 million of letters of credit outstanding under its Revolving Credit Facility, resulting in $106.8 million of remaining excess availability, and $49.8 million of letters of credit outstanding under its Receivables-Based Credit Facility, resulting in $108.2 million of excess availability. Additionally, as of June 30, 2024, the Company had $41.6 million and $24.8 million of surety bonds and bank guarantees outstanding, respectively, a portion of which was supported by $5.2 million of cash collateral.
A portion of these letters of credit and guarantees at June 30, 2024 related to discontinued operations that were sold or held for sale as of this date. Please refer to Note 2 for additional information.
17
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company and its subsidiaries are involved in certain legal proceedings arising in the ordinary course of business and, as required, have accrued an estimate of the probable costs for the resolution of those claims for which the occurrence of loss is probable and the amount can be reasonably estimated. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings. Additionally, due to the inherent uncertainty of litigation, there can be no assurance that the resolution of any particular claim or proceeding would not have a material adverse effect on the Company’s financial condition or results of operations.
Although the Company is involved in a variety of legal proceedings in the ordinary course of business, a large portion of the Company’s litigation arises in the following contexts: commercial disputes, employment- and benefits-related claims, land use and zoning disputes, governmental fines, intellectual property claims, personal injury claims and tax disputes.
NOTE 7 – INCOME TAXES
Income Tax Benefit Attributable to Continuing Operations
The Company’s income tax benefit attributable to continuing operations for the three and six months ended June 30, 2024 and 2023 consisted of the following components:
| (In thousands) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| Current tax expense attributable to continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Deferred tax benefit attributable to continuing operations | |||||||||||||||||||||||
| Income tax benefit attributable to continuing operations | $ | $ | $ | $ | |||||||||||||||||||
The effective tax rates for continuing operations for the three and six months ended June 30, 2024 were 4.8 % and 1.6 %, respectively, compared to 3.2 % and 8.2 % for the three and six months ended June 30, 2023, respectively. The effective tax rates for each period were 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.
NOTE 8 – PROPERTY, PLANT AND EQUIPMENT
The Company’s property, plant and equipment consisted of the following classes of assets as of June 30, 2024 and December 31, 2023:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||
Structures(1) | $ | $ | |||||||||
| Furniture and other equipment | |||||||||||
Land, buildings and improvements | |||||||||||
| Construction in progress | |||||||||||
| Property, plant and equipment, gross | |||||||||||
| Less: Accumulated depreciation | ( | ( | |||||||||
Property, plant and equipment, net | $ | $ | |||||||||
(1)During the six months ended June 30, 2024, the Company acquired digital billboard structures of $1.1 million as part of asset acquisitions.
As a result of impairment tests performed in the second quarter of 2024, the Company reduced the carrying value of “Property, plant and equipment, net” by $8.1 million. Refer to Note 11 for more information.
18
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 9 – INTANGIBLE ASSETS AND GOODWILL
Intangible Assets
The following table presents the gross carrying amount and accumulated amortization for each major class of intangible assets as of June 30, 2024 and December 31, 2023:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Gross Carrying Amount | Accumulated Amortization | ||||||||||||||||||||
Permits(1) | $ | $ | ( | $ | $ | ( | |||||||||||||||||
| Transit, street furniture and other outdoor contractual rights | ( | ( | |||||||||||||||||||||
Permanent easements(1) | |||||||||||||||||||||||
| Trademarks | ( | ( | |||||||||||||||||||||
| Other | ( | ( | |||||||||||||||||||||
| Total intangible assets | $ | $ | ( | $ | $ | ( | |||||||||||||||||
(1)During the six months ended June 30, 2024, the Company acquired permits of $7.7 million and permanent easements of $0.2 million as part of asset acquisitions. The acquired permits have amortization periods ranging from 22 to 28 years.
Goodwill
The following table presents changes in the goodwill balance for the Company’s segments with goodwill during the six months ended June 30, 2024:
| (In thousands) | America | Airports | Europe-North | Consolidated | |||||||||||||||||||
Balance as of December 31, 2023(1) | $ | $ | $ | $ | |||||||||||||||||||
| Foreign currency impact | ( | ( | |||||||||||||||||||||
| Balance as of June 30, 2024 | $ | $ | $ | $ | |||||||||||||||||||
(1)The balance at December 31, 2023 is net of cumulative impairments of $2.6 billion for America, $79.4 million for Europe-North and $90.4 million for Other, which has been fully impaired.
19
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10 – NET LOSS PER SHARE
The following table presents the computation of net loss per share for the three and six months ended June 30, 2024 and 2023:
| (In thousands, except per share data) | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
Numerators: | |||||||||||||||||||||||
| Loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Less: Net income from continuing operations attributable to noncontrolling interests | |||||||||||||||||||||||
| Net loss from continuing operations attributable to the Company | ( | ( | ( | ( | |||||||||||||||||||
| Less: Net income from discontinued operations attributable to noncontrolling interests | |||||||||||||||||||||||
| Net income from discontinued operations attributable to the Company | |||||||||||||||||||||||
| Net loss attributable to the Company | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
Denominators: | |||||||||||||||||||||||
| Weighted average common shares outstanding – Basic | |||||||||||||||||||||||
| Weighted average common shares outstanding – Diluted | |||||||||||||||||||||||
Net income (loss) attributable to the Company per share of common stock — Basic and Diluted: | |||||||||||||||||||||||
| Net loss from continuing operations attributable to the Company per share of common stock | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Net income from discontinued operations attributable to the Company per share of common stock | |||||||||||||||||||||||
Net loss attributable to the Company per share of common stock — Basic and Diluted(1) | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
(1)Due to rounding, the total may not equal the sum of the line items in the table above.
Outstanding equity awards equivalent to 27.9 million and 20.5 million shares for the three months ended June 30, 2024 and 2023, respectively, and 28.2 million and 19.8 million shares for the six months ended June 30, 2024 and 2023, respectively, were not included in the computation of diluted earnings per share because to do so would have been anti-dilutive.
20
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 11 — OTHER INFORMATION
Reconciliation of Cash, Cash Equivalents and Restricted Cash
The following table reconciles cash and cash equivalents reported in the Consolidated Balance Sheets to the cash, cash equivalents and restricted cash reported in the Consolidated Statements of Cash Flows:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||
| Cash and cash equivalents in the Balance Sheets | $ | $ | |||||||||
Cash and cash equivalents included in Current assets of discontinued operations | |||||||||||
| Restricted cash included in: | |||||||||||
| Other current assets | |||||||||||
Current assets of discontinued operations | |||||||||||
| Other assets | |||||||||||
| Total cash, cash equivalents and restricted cash in the Statements of Cash Flows | $ | $ | |||||||||
Accounts Receivable
The following table discloses the components of “Accounts receivable, net,” as reported in the Consolidated Balance Sheets:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||
| Accounts receivable | $ | $ | |||||||||
| Less: Allowance for credit losses | ( | ( | |||||||||
| Accounts receivable, net | $ | $ | |||||||||
Credit loss expense (reversal) related to accounts receivable of continuing operations was $1.1 million and $(0.9 ) million during the three months ended June 30, 2024 and 2023, respectively, and $0.0 million and $1.7 million during the six months ended June 30, 2024 and 2023, respectively.
Accrued Expenses
The following table discloses the components of “Accrued expenses” as reported in the Consolidated Balance Sheets:
| (In thousands) | June 30, 2024 | December 31, 2023 | |||||||||
| Accrued rent | $ | $ | |||||||||
| Accrued employee compensation and benefits | |||||||||||
| Accrued taxes | |||||||||||
Accrued agency commissions and incentives | |||||||||||
| Accrued other | |||||||||||
| Total accrued expenses | $ | $ | |||||||||
Share-Based Compensation
Share-based compensation expense for continuing operations, which is recognized within “Corporate expenses” on the Consolidated Statements of Loss, was $7.5 million and $6.1 million during the three months ended June 30, 2024 and 2023, respectively, and $12.8 million and $10.1 million during the six months ended June 30, 2024 and 2023, respectively.
On May 15, 2024, the Compensation Committee of the CCOH Board of Directors approved grants of 13.1 million restricted stock units (“RSUs”) and 2.6 million performance stock units (“PSUs”) to certain of its employees as part of those employees’ annual compensation.
•The RSUs vest in three equal installments on each of April 1, 2025, April 1, 2026 and April 1, 2027, provided that the recipient is still employed by, or providing services to, the Company on each such vesting date.
21
CLEAR CHANNEL OUTDOOR HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
•The PSUs vest and become earned based on the achievement of the Company’s total shareholder return relative to the Company’s peer group (the “Relative TSR”) over a performance period commencing on April 1, 2024 and ending on March 31, 2027 (the “Performance Period”). If the Company achieves Relative TSR at the 75th percentile or higher, the PSUs will be earned at 150 % of the target number of shares; if the Company achieves Relative TSR at the 50th percentile, the PSUs will be earned at 100 % of the target number of shares; if the Company achieves Relative TSR at the 25th percentile, the PSUs will be earned at 50 % of the target number of shares; and if the Company achieves Relative TSR below the 25th percentile, no PSUs will be earned. To the extent Relative TSR is between achievement levels, the portion of the PSUs that is earned will be determined using straight-line interpolation. Notwithstanding the foregoing, to the extent the Company’s absolute total shareholder return over the Performance Period is less than 0 %, the maximum payout shall not be greater than 100 % of the target number of shares.
On May 16, 2024, the Company’s stockholders approved the adoption of the 2012 Third Amended and Restated Stock Incentive Plan (the “2024 Plan”), which amends and restates the 2012 Second Amended and Restated Stock Incentive Plan. The 2024 Plan is a broad-based incentive compensation plan that provides for granting stock options, stock appreciation rights, restricted stock, restricted stock units, and performance-based cash and stock awards to any of the Company’s or its subsidiaries’ present or future directors, officers, employees, consultants or advisors.
Effective May 31, 2024, certain executive officers of the Company received one-time PSU awards, totaling 6.1 million in aggregate, which are eligible to vest and become earned shares in one-third increments based on achievement of specified stock price performance hurdles of $2.50 , $3.25 and $4.25 during the four-year period, beginning on May 31, 2024, subject to additional service-based vesting conditions set forth in the applicable award agreement. The maximum number of shares that may be earned with respect to these PSUs is 100 % of the PSUs granted.
As of June 30, 2024, the Company had 37,028,376 shares available for issuance under the 2024 Plan, assuming a 100% payout of the Company’s outstanding performance stock units.
Impairment of Long-Lived Assets
The Company tests its long-lived assets for impairment whenever events and circumstances indicate that their carrying amount may exceed the undiscounted cash flows they are expected to generate. When a long-lived asset or asset group is determined to be unrecoverable, its cost basis is reduced to reflect the current fair market value, and an impairment loss is recognized.
During the second quarter of 2024, in connection with the Company’s ongoing sale process of its businesses in Latin America, the Company identified impairment indicators for the long-lived assets of several of its Latin American businesses (each of which is a separate asset group) and determined certain of these asset groups to be unrecoverable. The Company utilized a market approach to estimate the fair value of each asset group and reduced the carrying values of “Structures, net,” “Other property, plant and equipment, net,” “Operating lease right-of-use assets,” and “Other assets” on the Consolidated Balance Sheet accordingly, resulting in an impairment charge of $18.1
Other Income (Expense), Net
The Company recognized net foreign currency transaction gains related to continuing operations of $0.2 million and $12.3 million during the three months ended June 30, 2024 and 2023, respectively, and $4.0 million and $21.2 million during the six months ended June 30, 2024 and 2023, respectively.
During the six months ended June 30, 2024, other expense, net, included $12.0 million of debt modification expense related to the debt transactions the Company completed in March 2024, further described in Note 5.
Other Comprehensive Loss
There were no
22
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 condensed consolidated financial statements and related notes contained in Item 1 of Part I of this Quarterly Report on Form 10-Q and the Company’s 2023 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:
•Overview – Discussion of the nature, key developments and trends of our business in order to provide context for the remainder of this MD&A.
•Results of Operations – Analysis of our financial results of operations at the consolidated and segment levels.
•Liquidity and Capital Resources – Analysis of our short- and long-term liquidity and discussion of our material cash requirements and the anticipated sources of funds needed to satisfy such requirements.
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
Description of Our Business and Segments
Our revenue is derived from selling advertising space on the out-of-home displays that we own or operate in various markets using assorted digital and traditional display types. We have four reportable business segments: America, which consists of our U.S. operations excluding airports; Airports, which includes revenue from U.S. and Caribbean airports; Europe-North, which consists of operations in the United Kingdom (the “U.K.”), the Nordics and several other countries throughout northern and central Europe; and Europe-South, which consists of operations in Spain and, prior to their sales in 2023, also consisted of operations in Switzerland, Italy and France. Our remaining operations in Latin America, including in Mexico, Brazil, Chile and Peru, and in Singapore are disclosed as “Other.”
Dispositions and Discontinued Operations
In 2023, we sold our businesses in Switzerland, Italy and France on March 31, May 31 and October 31, respectively. Additionally, in May 2023, we entered into an agreement to sell our business in Spain to JCDecaux for cash consideration of approximately $64.3 million. This transaction is expected to close in 2024, upon receipt of regulatory approval and satisfaction of other customary closing conditions. We have used, and intend to continue to use, the net proceeds from these sales, after payment of transaction-related fees and expenses, to improve liquidity and increase financial flexibility of the business as permitted under our debt agreements.
In aggregate, the sales of our businesses in Switzerland, Italy and France, along with the agreement to sell our business in Spain (collectively comprising our entire Europe-South segment), met the criteria for discontinued operations presentation during the third quarter of 2023. As a result, each of these businesses has been reclassified to discontinued operations in the financial statements included in this Quarterly Report on Form 10-Q for all periods presented, resulting in changes to the presentation of certain amounts for prior periods. Unless otherwise noted, the remaining discussion in this MD&A presents the results of continuing operations and excludes amounts related to discontinued operations for all periods presented.
International Sales Processes
In 2023, we initiated processes to sell our businesses comprising our Europe-North segment and our businesses in Latin America, which remain ongoing. There can be no assurance that these processes will result in any transactions or particular outcomes. We have not set a timetable for completion of these processes, may suspend the processes at any time and may decide not to make further announcements regarding the processes unless and until our Board of Directors approves a course of action for which further disclosure is appropriate.
23
Macroeconomic Trends and Seasonality
As described in our 2023 Annual Report on Form 10-K, global inflation increased over the last few years and has affected our results due to higher costs, particularly in our European businesses. Although global inflation has slowed from the peak reached in 2022, it remains elevated. In response to the heightened levels of inflation, central banks, including the U.S. Federal Reserve, raised interest rates significantly, resulting in an increase in our weighted average cost of debt. Future fluctuations in these economic indicators are uncertain and could result in further adverse impacts to our reported results. Our international results are also impacted by fluctuations in foreign currency exchange rates, but volatility did not have a significant impact on our reported results for the first half of 2024. The market risks that our business is subject to are further described in Item 3 of Part I of this Quarterly Report on Form 10-Q.
Additionally, our segment results are impacted by economic conditions in the specific markets and industries in which we operate as advertising revenue is highly correlated to, and has historically trended in line with, changes in gross domestic product. Certain of these trends have affected our financial results:
•In 2023, we experienced weakness in revenue within certain of our larger U.S. markets, most notably those in California, as specific macroeconomic trends affecting these markets resulted in lower spend on out-of-home advertising. Additionally, in the second quarter of 2023, demand for out-of-home advertising in Sweden was negatively impacted by an economic downturn in that country. Improved conditions in these markets have resulted in revenue growth during the first half of 2024 compared to the same period of 2023.
•Continued growth in the travel industry has been a driver of strengthened performance in our Airports segment. As daily passenger volume through U.S. airports has reached record-breaking levels in the first half of 2024, we have experienced strong revenue growth.
Due to seasonality, the results for this interim period are not indicative of expected results for the full year. We typically experience our weakest financial performance in the first quarter of the calendar year, which is generally offset during the remainder of the year as our business typically experiences its strongest performance in the second and fourth quarters of the calendar year.
Debt Activity
On March 18, 2024, we issued $865.0 million aggregate principal amount of 7.875% Senior Secured Notes Due 2030 (the “CCOH 7.875% Senior Secured Notes”) and used a portion of the proceeds therefrom to prepay $835.0 million of borrowings outstanding under our Term Loan Facility. At the same time, we amended our Senior Secured Credit Agreement to, among other things, refinance the $425.0 million remaining principal balance on the Term Loan Facility and to extend its maturity date from 2026 to 2028, subject to certain conditions.
On March 22, 2024, our indirect wholly-owned subsidiary, Clear Channel International B.V. (“CCIBV”), entered into a credit agreement comprising two tranches of term loans (the “CCIBV Term Loan Facility”) totaling an aggregate principal amount of $375.0 million, which mature in 2027, and used the proceeds therefrom to redeem all of the outstanding 6.625% Senior Secured Notes Due 2025 (the “CCIBV Senior Secured Notes”).
Taken together, these transactions are referred to herein as the “March 2024 Debt Transactions.” Please refer to Note 5 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details.
RESULTS OF OPERATIONS
The discussion of our results of operations is presented on both a consolidated and segment basis.
•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 of continuing operations.
•Results of discontinued operations are presented and discussed below separately from results of continuing operations.
24
Revenue and expenses “excluding the impact of movements in foreign exchange rates” are presented in this MD&A because Company 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 monthly foreign exchange rates for the same period of the prior year.
Consolidated Results of Continuing Operations
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenue | $ | 558,541 | $ | 530,820 | 5.2% | $ | 1,040,293 | $ | 968,240 | 7.4% | |||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||||||||
Direct operating expenses(1) | 281,625 | 266,226 | 5.8% | 542,462 | 518,829 | 4.6% | |||||||||||||||||||||||||||||
Selling, general and administrative expenses(1) | 98,897 | 89,314 | 10.7% | 191,565 | 179,209 | 6.9% | |||||||||||||||||||||||||||||
Corporate expenses(1) | 44,704 | 58,316 | (23.3)% | 84,830 | 94,496 | (10.2)% | |||||||||||||||||||||||||||||
| Depreciation and amortization | 53,883 | 64,502 | (16.5)% | 108,173 | 128,710 | (16.0)% | |||||||||||||||||||||||||||||
| Impairment charges | 18,073 | — | 18,073 | — | |||||||||||||||||||||||||||||||
| Other operating expense, net | 4,622 | 23 | 6,061 | 3,943 | |||||||||||||||||||||||||||||||
| Operating income | 56,737 | 52,439 | 89,129 | 43,053 | |||||||||||||||||||||||||||||||
| Interest expense, net | (107,410) | (104,733) | (215,065) | (207,233) | |||||||||||||||||||||||||||||||
Loss on extinguishment of debt | — | — | (4,787) | — | |||||||||||||||||||||||||||||||
| Other income (expense), net | (98) | 12,211 | (8,444) | 20,991 | |||||||||||||||||||||||||||||||
| Loss from continuing operations before income taxes | (50,771) | (40,083) | (139,167) | (143,189) | |||||||||||||||||||||||||||||||
| Income tax benefit attributable to continuing operations | 2,458 | 1,277 | 2,191 | 11,778 | |||||||||||||||||||||||||||||||
| Loss from continuing operations | (48,313) | (38,806) | (136,976) | (131,411) | |||||||||||||||||||||||||||||||
| Income from discontinued operations | 9,679 | 2,227 | 9,259 | 59,410 | |||||||||||||||||||||||||||||||
| Consolidated net loss | (38,634) | (36,579) | (127,717) | (72,001) | |||||||||||||||||||||||||||||||
| Less: Net income attributable to noncontrolling interests | 536 | 718 | 1,120 | 208 | |||||||||||||||||||||||||||||||
| Net loss attributable to the Company | $ | (39,170) | $ | (37,297) | $ | (128,837) | $ | (72,209) | |||||||||||||||||||||||||||
(1)Excludes depreciation and amortization
Consolidated Revenue
Consolidated revenue increased $27.7 million, or 5.2%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.0 million impact of movements in foreign exchange rates, consolidated revenue increased $28.7 million, or 5.4%.
Consolidated revenue increased $72.1 million, or 7.4%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $2.7 million impact of movements in foreign exchange rates, consolidated revenue increased $69.4 million, or 7.2%.
In both periods, these increases were driven by higher demand and our continued investment in digital infrastructure throughout the business, with the most significant growth in our Airports and Europe-North segments.
25
The following table provides information about consolidated digital revenue:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Digital revenue | $ | 258,371 | $ | 235,856 | 9.5% | $ | 470,167 | $ | 419,965 | 12.0% | |||||||||||||||||||||||||
| Percent of total consolidated revenue | 46.3 | % | 44.4 | % | 45.2 | % | 43.4 | % | |||||||||||||||||||||||||||
| Digital revenue, excluding movements in foreign exchange rates | $ | 258,501 | $ | 235,856 | 9.6% | $ | 467,765 | $ | 419,965 | 11.4% | |||||||||||||||||||||||||
Consolidated Direct Operating Expenses
Consolidated direct operating expenses increased $15.4 million, or 5.8%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.8 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $16.2 million, or 6.1%.
Consolidated direct operating expenses increased $23.6 million, or 4.6%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.4 million impact of movements in foreign exchange rates, consolidated direct operating expenses increased $22.2 million, or 4.3%.
In both periods, the largest driver of these increases was higher site lease expense, driven by higher revenue and lower rent abatements, partially offset by the impact of certain contract losses and renegotiations.
The following table provides additional information about certain drivers of consolidated direct operating expenses:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Site lease expense | $ | 204,466 | $ | 195,267 | 4.7 | % | $ | 392,417 | $ | 379,627 | 3.4 | % | |||||||||||||||||||||||
| Site lease expense, excluding movements in foreign exchange rates | 205,067 | 195,267 | 5.0 | % | 391,966 | 379,627 | 3.3 | % | |||||||||||||||||||||||||||
Reductions of rent expense on lease and non-lease contracts from rent abatements | 823 | 6,951 | (88.2) | % | 5,647 | 14,224 | (60.3) | % | |||||||||||||||||||||||||||
Restructuring and other costs(1) | 344 | — | NM | 978 | 193 | NM | |||||||||||||||||||||||||||||
(1)Percentage changes that are so large as to not be meaningful have been designated as “NM.”
Consolidated Selling, General and Administrative (“SG&A”) Expenses
Consolidated SG&A expenses increased $9.6 million, or 10.7%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $9.9 million, or 11.1%.
Consolidated SG&A expenses increased $12.4 million, or 6.9%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.5 million impact of movements in foreign exchange rates, consolidated SG&A expenses increased $11.9 million, or 6.6%.
In both periods, the largest driver of these increases was higher employee compensation costs, primarily due to higher variable-incentive compensation, increased sales headcount and pay increases.
The following table provides the restructuring and other costs included within SG&A expenses during the three and six months ended June 30, 2024 and 2023:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Restructuring and other costs | $ | 354 | $ | 312 | 13.5 | % | $ | 544 | $ | 367 | 48.2 | % | |||||||||||||||||||||||
26
Corporate Expenses
Corporate expenses decreased $13.6 million, or 23.3%, and $9.7 million, or 10.2%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, corporate expenses decreased $13.6 million, or 23.4%, and $10.0 million, or 10.6%, during the three- and six-month comparison periods, respectively, primarily driven by a $19.0 million legal liability recorded in the second quarter of 2023 for the resolution of the investigation of the Company’s former indirect, non-wholly-owned subsidiary, Clear Media Limited. Such expense is included in “Restructuring and other costs” in the table below. This corporate expense decrease was partially offset by cost increases of $5.6 million and $9.9 million during the three- and six-month comparison periods, respectively, for higher employee compensation costs (excluding share-based compensation), largely driven by bonuses and insurance benefits, and certain legal costs associated with property and casualty settlements.
The following table provides additional information about certain drivers of corporate expenses:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
Share-based compensation expense(1) | $ | 7,525 | $ | 6,116 | 23.0 | % | $ | 12,802 | $ | 10,147 | 26.2 | % | |||||||||||||||||||||||
Restructuring and other costs | 1,382 | 19,655 | (93.0) | % | 3,866 | 19,600 | (80.3) | % | |||||||||||||||||||||||||||
(1)Excludes share-based compensation expense for employees of discontinued operations for all periods presented.
Depreciation and Amortization
Depreciation and amortization decreased $10.6 million, or 16.5%, and $20.5 million, or 16.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, as certain structures became fully depreciated in the third quarter of 2023.
Impairment Charges
In the second quarter of 2024, we recognized impairment charges of $18.1 million related to long-lived assets within certain of our Latin American businesses. We did not recognize any impairment charges during 2023.
Other Operating Expense, Net
Other operating expense, net, increased $4.6 million and $2.1 million during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by higher transaction costs related to our international sales processes and other structural initiatives. During the six-month period, the increase in transaction costs was partially offset by a gain on the disposition of certain assets in our America segment during the first quarter of 2024.
Other operating expense, net, included transaction costs of $5.7 million and $1.9 million during the three months ended June 30, 2024 and 2023, respectively, and $11.9 million and $3.2 million during the six months ended June 30, 2024 and 2023, respectively. In each period, these costs were partially offset by net gains on the disposition of operating assets.
Interest Expense, Net
Interest expense, net, increased $2.7 million and $7.8 million during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by higher interest rates.
Loss on Extinguishment of Debt
During the six months ended June 30, 2024, we recognized a loss on extinguishment of debt of $4.8 million related to the March 2024 Debt Transactions, including $2.4 million related to the prepayment and amendment of the Term Loan Facility and $2.4 million related to the redemption of the CCIBV Senior Secured Notes.
Other Income (Expense), Net
During the three months and six months ended June 30, 2024, we recognized other expense, net, of $0.1 million, and $8.4 million, respectively, compared to other income, net, of $12.2 million and $21.0 million during the same periods of 2023, respectively. The increases in expense were largely driven by lower net foreign currency transaction gains recognized in connection with intercompany notes denominated in a currency other than the functional currency. Additionally, during the six months ended June 30, 2024, we incurred $12.0 million of debt modification expense related to the March 2024 Debt Transactions.
27
Income Tax Benefit Attributable to Continuing Operations
The effective tax rates for continuing operations for the three and six months ended June 30, 2024 were 4.8% and 1.6%, respectively, compared to 3.2% and 8.2% for the three and six months ended June 30, 2023, respectively. The effective tax rates for each period were 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.
America Results of Operations
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenue | $ | 290,207 | $ | 287,517 | 0.9% | $ | 539,984 | $ | 523,566 | 3.1% | |||||||||||||||||||||||||
Direct operating expenses(1) | 109,065 | 109,156 | (0.1)% | 214,447 | 213,973 | 0.2% | |||||||||||||||||||||||||||||
SG&A expenses(1) | 54,269 | 48,848 | 11.1% | 103,571 | 98,729 | 4.9% | |||||||||||||||||||||||||||||
| Segment Adjusted EBITDA | 126,980 | 129,513 | (2.0)% | 222,444 | 210,878 | 5.5% | |||||||||||||||||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
America Revenue
America revenue increased $2.7 million, or 0.9%, and $16.4 million, or 3.1%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by increased demand and the deployment of new digital billboards. In both periods, most of our U.S. markets experienced revenue growth, led by Miami.
Additionally, during the first half of 2023, America revenue was negatively impacted by weak economic conditions in certain markets, most notably those in California. As conditions in these markets have improved, demand for out-of-home advertising has increased in the current year.
The following table provides information about America digital revenue:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Digital revenue | $ | 102,427 | $ | 98,357 | 4.1% | $ | 186,646 | $ | 176,375 | 5.8% | |||||||||||||||||||||||||
| Percent of total segment revenue | 35.3 | % | 34.2 | % | 34.6 | % | 33.7 | % | |||||||||||||||||||||||||||
Revenue generated from national sales comprised 35.0% of America revenue for both the three months ended June 30, 2024 and 2023, and 34.8% and 34.2% of America revenue for the six months ended June 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.
America Direct Operating Expenses
America direct operating expenses decreased $0.1 million, or 0.1%, during the three months ended June 30, 2024 compared to the same period of 2023. Lower site lease expense, driven by the renegotiation of an existing contract and lower revenue-share rent payments, was largely offset by increases in production, installation and maintenance costs.
America direct operating expenses increased $0.5 million, or 0.2%, during the six months ended June 30, 2024 compared to the same period of 2023. Higher employee compensation costs were offset by lower site lease expense driven by the renegotiation of an existing contract.
The following table provides information about America site lease expense and rent abatements:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
Site lease expense | $ | 84,703 | $ | 85,548 | (1.0)% | $ | 167,551 | $ | 168,578 | (0.6)% | |||||||||||||||||||||||||
| Reductions of rent expense on lease and non-lease contracts from rent abatements | 15 | 2,065 | (99.3)% | 30 | 3,269 | (99.1)% | |||||||||||||||||||||||||||||
28
America SG&A Expenses
America SG&A expenses increased $5.4 million, or 11.1%, during the three months ended June 30, 2024 compared to the same period of 2023, primarily due to higher employee compensation costs driven by increased sales headcount, pay increases and higher variable-incentive compensation, as well as higher credit loss expense related to specific reserves for certain customers.
America SG&A expenses increased $4.8 million, or 4.9%, during the six months ended June 30, 2024 compared to the same period of 2023, due to higher employee compensation costs driven by increased sales headcount, pay increases and higher variable-incentive compensation. This increase was partially offset by lower credit loss expense driven by improved collections and specific reserves recorded in the prior year.
Airports Results of Operations
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenue | $ | 86,219 | $ | 71,045 | 21.4% | $ | 163,145 | $ | 124,834 | 30.7% | |||||||||||||||||||||||||
Direct operating expenses(1) | 57,757 | 46,986 | 22.9% | 106,824 | 86,637 | 23.3% | |||||||||||||||||||||||||||||
SG&A expenses(1) | 9,382 | 7,725 | 21.4% | 18,255 | 15,599 | 17.0% | |||||||||||||||||||||||||||||
| Segment Adjusted EBITDA | 19,082 | 16,334 | 16.8% | 38,164 | 22,598 | 68.9% | |||||||||||||||||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
Airports Revenue
Airports revenue increased $15.2 million, or 21.4%, and $38.3 million, or 30.7%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, driven by strong demand across the portfolio, most significantly at the Port Authority of New York and New Jersey airports and the San Francisco International Airport. Our continued investment in premium inventory in high-volume locations has allowed us to capitalize on this demand, with much of our revenue growth attributable to new advertising customers.
The following table provides information about Airports digital revenue:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Digital revenue | $ | 48,310 | $ | 42,147 | 14.6% | $ | 90,920 | $ | 71,725 | 26.8% | |||||||||||||||||||||||||
| Percent of total segment revenue | 56.0 | % | 59.3 | % | 55.7 | % | 57.5 | % | |||||||||||||||||||||||||||
Revenue generated from national sales comprised 57.7% and 59.7% of Airports revenue for the three months ended June 30, 2024 and 2023, respectively, and 56.5% and 59.8% of Airports revenue for the six months ended June 30, 2024 and 2023, respectively, while the remainder of revenue was generated from local sales.
Airports Direct Operating Expenses
Airports direct operating expenses increased $10.8 million, or 22.9%, and $20.2 million, or 23.3%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, primarily driven by higher site lease expense resulting from higher revenue and lower rent abatements. We also incurred higher production, installation and maintenance costs related to the growth in revenue.
The following table provides information about Airports site lease expense and rent abatements:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
Site lease expense | $ | 52,827 | $ | 42,802 | 23.4% | $ | 96,840 | $ | 79,052 | 22.5% | |||||||||||||||||||||||||
| Reductions of rent expense on lease and non-lease contracts from rent abatements | 799 | 4,540 | (82.4)% | 5,598 | 10,047 | (44.3)% | |||||||||||||||||||||||||||||
29
Airports SG&A Expenses
Airports SG&A expenses increased $1.7 million, or 21.4%, and $2.7 million, or 17.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023, most notably due to higher employee compensation costs largely driven by sales commissions.
Europe-North Results of Operations
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenue | $ | 164,735 | $ | 149,909 | 9.9% | $ | 304,128 | $ | 278,412 | 9.2% | |||||||||||||||||||||||||
Direct operating expenses(1) | 104,002 | 97,709 | 6.4% | 200,388 | 193,741 | 3.4% | |||||||||||||||||||||||||||||
SG&A expenses(1) | 27,997 | 26,278 | 6.5% | 55,875 | 51,811 | 7.8% | |||||||||||||||||||||||||||||
| Segment Adjusted EBITDA | 32,649 | 26,234 | 24.5% | 46,974 | 33,406 | 40.6% | |||||||||||||||||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
Europe-North Revenue
Europe-North revenue increased $14.8 million, or 9.9%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, Europe-North revenue increased $15.2 million, or 10.1%.
Europe-North revenue increased $25.7 million, or 9.2%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $3.0 million impact of movements in foreign exchange rates, Europe-North revenue increased $22.8 million, or 8.2%.
In both periods, revenue increased in most of the Europe-North countries in which we operate, most significantly in the U.K. and Sweden, due to increased demand and the deployment of additional digital displays. These increases were partially offset by the loss of a transit contract in Norway.
The following table provides information about Europe-North digital revenue:
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Digital revenue | $ | 93,864 | $ | 79,535 | 18.0% | $ | 167,361 | $ | 144,852 | 15.5% | |||||||||||||||||||||||||
| Percent of total segment revenue | 57.0 | % | 53.1 | % | 55.0 | % | 52.0 | % | |||||||||||||||||||||||||||
| Digital revenue, excluding movements in foreign exchange rates | $ | 93,761 | $ | 79,535 | 17.9% | $ | 165,047 | $ | 144,852 | 13.9% | |||||||||||||||||||||||||
Europe-North Direct Operating Expenses
Europe-North direct operating expenses increased $6.3 million, or 6.4%, during the three months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.3 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $6.5 million, or 6.7%, primarily due to higher property taxes, higher rental costs for additional digital displays and higher site lease expense.
Europe-North direct operating expenses increased $6.6 million, or 3.4%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $1.8 million impact of movements in foreign exchange rates, Europe-North direct operating expenses increased $4.8 million, or 2.5%, mainly driven by higher property taxes and higher rental costs for additional digital displays. These increases were partially offset by lower site lease expense.
30
The following table provides information about Europe-North site lease expense and rent abatements. In both comparison periods, increases in site lease expense due to higher revenue and new contracts were offset by the impact of the contract loss in Norway and certain contract renegotiations.
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
Site lease expense | $ | 59,242 | $ | 58,336 | 1.6% | $ | 113,641 | $ | 115,070 | (1.2)% | |||||||||||||||||||||||||
| Site lease expense, excluding movements in foreign exchange rates | 59,487 | 58,336 | 2.0% | 112,926 | 115,070 | (1.9)% | |||||||||||||||||||||||||||||
| Reductions of rent expense on lease and non-lease contracts from rent abatements | — | 342 | (100.0)% | — | 821 | (100.0)% | |||||||||||||||||||||||||||||
Europe-North SG&A Expenses
Europe-North SG&A expenses increased $1.7 million, or 6.5%, during the three months ended June 30, 2024 compared to the same period of 2023. The impact of movements in foreign exchange rates was not significant.
Europe-North SG&A expenses increased $4.1 million, or 7.8%, during the six months ended June 30, 2024 compared to the same period of 2023. Excluding the $0.7 million impact of movements in foreign exchange rates, Europe-North SG&A expenses increased $3.4 million, or 6.6%.
In both periods, these increases were primarily due to higher employee compensation costs driven by pay increases and variable-incentive compensation.
Other Results of Operations
| (In thousands) | Three Months Ended June 30, | % | Six Months Ended June 30, | % | |||||||||||||||||||||||||||||||
| 2024 | 2023 | Change | 2024 | 2023 | Change | ||||||||||||||||||||||||||||||
| Revenue | $ | 17,380 | $ | 22,349 | (22.2)% | $ | 33,036 | $ | 41,428 | (20.3)% | |||||||||||||||||||||||||
Direct operating expenses(1) | 10,801 | 12,375 | (12.7)% | 20,803 | 24,478 | (15.0)% | |||||||||||||||||||||||||||||
SG&A expenses(1) | 7,249 | 6,463 | 12.2% | 13,864 | 13,070 | 6.1% | |||||||||||||||||||||||||||||
| Segment Adjusted EBITDA | 6 | 3,511 | (99.8)% | 206 | 3,880 | (94.7)% | |||||||||||||||||||||||||||||
(1)Includes restructuring and other costs that are excluded from Segment Adjusted EBITDA
Other revenue decreased $5.0 million, or 22.2%, and $8.4 million, or 20.3%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other revenue decreased $4.3 million, or 19.2%, and $8.1 million, or 19.6%, during the three- and six-month comparison periods, respectively, driven by the loss of a contract in Singapore.
Other direct operating expenses decreased $1.6 million, or 12.7%, and $3.7 million, or 15.0%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other direct operating expenses decreased $1.1 million, or 8.5%, and $3.2 million, or 13.3%, during the three- and six-month comparison periods, respectively, driven by the loss of a contract in Singapore.
Other SG&A expenses increased $0.8 million, or 12.2%, and $0.8 million, or 6.1%, during the three and six months ended June 30, 2024, respectively, compared to the same periods of 2023. Excluding the impact of movements in foreign exchange rates, Other SG&A expenses increased $1.1 million, or 16.5%, and $1.0 million, or 7.3%, during the three- and six-month comparison periods, respectively.
Income from Discontinued Operations
Income from discontinued operations of $9.7 million and $9.3 million during the three and six months ended June 30, 2024, respectively, reflects the net income generated during these periods by operations in Spain.
Income from discontinued operations of $2.2 million during the three months ended June 30, 2023 reflects a gain on the sale of our former business in Italy of $11.2 million, partially offset by the net loss collectively generated during the three-month period by operations in Italy (through its sale date), France and Spain.
31
Income from discontinued operations of $59.4 million during the six months ended June 30, 2023 reflects gains on the sales of our former businesses in Switzerland and Italy of $96.4 million and $11.2 million, respectively, partially offset by the net loss collectively generated during the six-month period by operations in Switzerland and Italy (through their sale dates), France and Spain, as well as income tax expense related to the sale of our former business in Switzerland.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity Analysis
Short-Term Liquidity
Our main cash requirements are for working capital used to fund the operations of the business, capital expenditures and debt service. We typically meet these requirements with cash on hand, internally-generated cash flow from operations and, if necessary, borrowings under our credit facilities. We believe that our current sources of funds will be sufficient to meet our cash requirements for at least the next 12 months.
Long-Term Liquidity
Our long-term future cash requirements will depend on many factors, including the growth of our business, investments in digital conversions and new technologies, and the pursuit and outcome of strategic opportunities, including the ongoing processes to sell our businesses comprising our Europe-North segment and our businesses in Latin America. In addition, we have long-term cash requirements related to the repayment of our outstanding debt, which is scheduled to mature over the next six years. We believe that our sources of funds will be adequate to meet our cash requirements in the long-term.
However, our ability to meet these cash requirements through cash from operations will depend on our future operating results and financial performance, which are subject to significant uncertainty and may be affected by events beyond our control, including macro-economic events that may result in economic weakness globally or in certain specific markets, higher interest rates, currency fluctuations, and geopolitical events such as the Russia-Ukraine war and the Middle East conflicts. Additionally, our significant interest payment obligations reduce our financial flexibility, make us more vulnerable to changes in operating performance and economic downturns generally, and reduce our liquidity over time.
We regularly consider, and enter into discussions with our lenders and other parties related to, potential financing alternatives. In the future, we may need to obtain supplemental liquidity through additional financing from banks or other lenders; public offerings or private placements of debt, equity or equity-linked securities; strategic relationships or other arrangements; or from a combination of these sources. In addition, from time to time we have explored, and expect to continue to explore, a variety of transactions to improve our liquidity and/or to refinance our indebtedness. However, there can be no assurance that financing alternatives or liquidity-generating or debt-refinancing transactions will be available in sufficient amounts or on terms acceptable to us in the future due to market conditions, our financial condition, our liquidity constraints or other factors, many of which are beyond our control. Even if financing alternatives are available, we may not find them suitable or at reasonable interest rates, and the terms of our existing or future debt agreements may restrict us from securing financing on terms that are available to us at that time or at all.
If we are unable to generate sufficient cash through our operations or obtain sources of supplemental liquidity as needed, 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.
Cash Requirements
Working Capital Needs
We utilize working capital to fund the operations of our business and have certain related contractual obligations, including commitments under site leases and other non-cancelable contracts.
One of our largest cash requirements is for site lease costs, which includes payments for land or space used by our advertising displays for both lease and non-lease contracts, including minimum guaranteed payments and revenue-sharing arrangements. During the six months ended June 30, 2024 and 2023, we incurred site lease expense for our continuing operations of $392.4 million and $379.6 million, respectively, which are included within “Direct operating expenses” on our Consolidated Statements of Loss. During the six months ended June 30, 2024 and 2023, we reduced our site lease expense for continuing operations by rent abatements of $5.6 million and $14.2 million, respectively.
32
Capital Expenditures and Asset Acquisitions
We made the following capital expenditures during the six months ended June 30, 2024 and 2023:
| (In thousands) | Six Months Ended June 30, | ||||||||||
| 2024 | 2023 | ||||||||||
| America | $ | 22,273 | $ | 35,696 | |||||||
| Airports | 3,446 | 7,310 | |||||||||
| Europe-North | 14,128 | 11,147 | |||||||||
| Other | 2,094 | 2,957 | |||||||||
| Corporate | 4,928 | 6,656 | |||||||||
Capital expenditures for continuing operations | 46,869 | 63,766 | |||||||||
Capital expenditures for discontinued operations(1) | 4,959 | 11,365 | |||||||||
Total capital expenditures(2),(3) | $ | 51,828 | $ | 75,131 | |||||||
(1)Capital expenditures for discontinued operations have decreased as the businesses in Switzerland, Italy and France were sold in 2023.
(2)In addition to payments that occurred during the period for capital expenditures, we had $10.3 million and $10.9 million of accrued capital expenditures related to continuing operations that remained unpaid as of June 30, 2024 and 2023, respectively, and $1.2 million and $3.5 million of accrued capital expenditures related to discontinued operations that remained unpaid as of June 30, 2024 and 2023, respectively.
(3)Excludes asset acquisitions.
During the six months ended June 30, 2024 and 2023, we completed certain acquisitions of out-of-home advertising assets in our America segment for total cash consideration of $8.8 million and $11.6 million, respectively. These asset acquisitions primarily consisted of digital billboard structures, permits and permanent easements.
Debt Activity and Service Obligations
In March 2024, we issued $865.0 million aggregate principal amount of CCOH 7.875% Senior Secured Notes, which mature in April 2030, and used a portion of the proceeds therefrom to prepay $835.0 million of the borrowings outstanding under the Term Loan Facility. At the same time, we entered into an amendment to the Senior Secured Credit Agreement to, among other things, refinance the $425.0 million remaining principal balance on the Term Loan Facility and to extend its maturity date from August 2026 to August 2028, subject to certain conditions. The new refinanced term loans were issued at a 1% discount, and we used the proceeds therefrom, along with the remaining proceeds from the CCOH 7.875% Senior Secured Notes issuance and cash on hand, to pay off the original term loans, to pay $14.9 million of accrued interest on the prepaid and refinanced Term Loan principal, and to pay $14.6 million of fees and expenses related to these transactions. At June 30, 2024, we had an accrual of $0.7 million for unpaid fees and expenses, which we expect to pay in the second half of 2024.
In March 2024, CCIBV entered into the CCIBV Term Loan Facility totaling an aggregate principal amount of $375.0 million, which matures in April 2027. The CCIBV Term Loan Facility, which was issued at 1% discount, is comprised of two tranches of term loans: fixed rate term loans in an aggregate principal amount of $300.0 million that bear interest at 7.5% per annum, and floating rate term loans in an aggregate principal amount of $75.0 million that bear interest equal to Term SOFR plus 2.25% per annum (subject to a floor rate of 5.25% per annum). We used the proceeds from the CCIBV Term Loan Facility, along with cash on hand, to redeem all of the outstanding $375.0 million aggregate principal amount of CCIBV Senior Secured Notes, which were scheduled to mature in August 2025, and to pay $11.8 million of accrued interest related thereto and $4.2 million of related transaction fees and expenses. At June 30, 2024, we had an accrual of $1.6 million for unpaid fees and expenses, which we expect to pay in the second half of 2024.
In accordance with the terms of the Senior Secured Credit Agreement, we were historically required to make principal payments on the Term Loan Facility of $5.0 million quarterly and, accordingly, made $10.0 million of such principal payments during the six months ended June 30, 2023. However, the remaining quarterly payment obligations under this agreement were satisfied by a prepayment that we made on the Term Loan Facility in August 2023 using proceeds from the issuance of the 9.000% Senior Secured Notes Due 2028 (the “CCOH 9.000% Senior Secured Notes”). Our next debt maturities are in 2027 when the $1.25 billion aggregate principal amount of 5.125% Senior Secured Notes Due 2027 and the $375.0 million principal amount outstanding under the CCIBV Term Loan Facility become due.
33
During the six months ended June 30, 2024 and 2023, we paid interest of $218.5 million and $202.7 million, respectively. The increase was driven by higher interest rates and the first semi-annual interest payment on the CCOH 9.000% Senior Secured Notes, partially offset by lower interest paid on the Term Loan Facility as the result of the principal prepayments made in August 2023 and March 2024. We anticipate having cash interest payment obligations of approximately $216 million during the remainder of the year, including the first semi-annual interest payment on the CCOH 7.875% Senior Secured Notes in October, and $422 million in 2025, assuming that we do not refinance or incur additional debt.
Please refer to Note 5 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional details on our outstanding long-term debt. As of June 30, 2024, we were in compliance with all of the covenants contained in our debt agreements.
Sources of Capital and Liquidity
Cash On Hand
As of June 30, 2024, we had $189.3 million of cash on our balance sheet, including $44.6 million of cash held outside the U.S. by our subsidiaries (excludes cash held by our business in Spain, which is a discontinued operation). Excess cash from our foreign operations may generally be transferred to our operations in the U.S. if needed, subject to the foreseeable cash needs of our foreign operations and restrictions in the credit agreement governing the CCIBV Term Loan Facility. We could presently repatriate excess cash with minimal U.S. tax consequences, as calculated for tax law purposes, and dividend distributions from our international subsidiaries may not result in a U.S. federal income tax liability.
Cash Flow from Operations
During the six months ended June 30, 2024 and 2023, we used net cash for operating activities of $4.0 million and $54.4 million, respectively, as cash paid for interest exceeded other net cash inflows from operations in each period. However, this impact was less significant in the current year compared to the prior year.
Cash paid for interest increased $15.9 million during the six months ended June 30, 2024, compared to the same period of the prior year, due to higher interest rates and timing of interest payments in connection with the issuance of the CCOH 9.000% Senior Secured Notes in August 2023 and the March 2024 Debt Transactions.
Other net cash inflows from operations improved due to the improvement of our underlying business performance and the disposal of certain of our former Europe-South businesses in 2023, particularly France, which generated negative operating cash flow during the six months ended June 30, 2023.
Dispositions
During the six months ended June 30, 2024, we received net cash proceeds from the disposition of assets of $10.3 million. During the six months ended June 30, 2023, we received net cash proceeds from the disposition of businesses and assets of $101.0 million, primarily related to the sales of our former businesses in Switzerland and Italy.
We expect to receive cash proceeds of approximately $64.3 million from the sale of our business in Spain, which is expected to close in 2024 upon receipt of regulatory approval and satisfaction of other customary closing conditions. We have entered into a hedge arrangement to mitigate exchange rate-risk related to these anticipated proceeds. Pursuant to the terms of the CCIBV Term Loan Facility, we intend to use the net proceeds from the sale, after payment of transaction-related fees and expenses, to payoff outstanding term loans thereunder.
34
Credit Facilities
We have access to a Revolving Credit Facility and Receivables-Based Credit Facility, both of which include sub-facilities for letters of credit and short-term borrowings and are scheduled to mature on August 23, 2026 in the amounts set forth below. The table below presents our borrowings and excess availability under these credit facilities as of June 30, 2024:
| (in millions) | Revolving Credit Facility | Receivables-Based Credit Facility | Total Credit Facilities(3) | ||||||||||||||
Borrowing limit(1) | $ | 150.0 | $ | 158.0 | $ | 308.0 | |||||||||||
| Borrowings outstanding | — | — | — | ||||||||||||||
Letters of credit outstanding(2) | 43.2 | 49.8 | 93.0 | ||||||||||||||
Excess availability(3) | $ | 106.8 | $ | 108.2 | $ | 215.0 | |||||||||||
(1)The borrowing limit of the Revolving Credit Facility is $150.0 million, with the full $150.0 million of commitments available through August 23, 2024 and $115.8 million available through August 23, 2026. The borrowing limit of the Receivables-Based Credit Facility is equal to the lesser of $175.0 million and the borrowing base, which is calculated based on our accounts receivable balance each period in accordance with our Receivables-Based Credit Agreement.
(2)Letters of credit outstanding under the Revolving Credit Facility at June 30, 2024 included a $20.2 million letter of credit related to our former business in France. In connection with the sale of this business, and pursuant to the related share purchase agreement, our former French business and/or the buyer will either replace, or procure a counter-guarantee of, our payment obligation under the letter of credit. Letters of credit outstanding under the Receivables-Based Credit Facility at June 30, 2024 included a $6.5 million letter of credit related to our business in Spain.
(3)Due to rounding, the total may not equal the sum of the columns or the difference of the line items in the table above.
Senior Secured Credit Agreement Financial Covenant
The Senior Secured Credit Agreement contains a springing financial covenant, applicable solely to the Revolving Credit Facility if its balance is greater than $0 and undrawn letters of credit exceed $10 million, that requires compliance with a first lien leverage ratio of less than 7.10 to 1.00. 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 5.39 to 1.00 as of June 30, 2024. First lien debt and EBITDA, which both exclude discontinued operations, are presented herein because they are material components of the calculation of the first lien leverage ratio.
First Lien Debt
The following table presents a calculation of our first lien debt as of June 30, 2024:
| (In millions) | June 30, 2024 | ||||
| Receivables-Based Credit Facility | $ | — | |||
| Revolving Credit Facility | — | ||||
| Term Loan Facility | 425.0 | ||||
| Clear Channel Outdoor Holdings 5.125% Senior Secured Notes Due 2027 | 1,250.0 | ||||
Clear Channel Outdoor Holdings 9.000% Senior Secured Notes Due 2028 | 750.0 | ||||
Clear Channel Outdoor Holdings 7.875% Senior Secured Notes Due 2030 | 865.0 | ||||
Finance leases | 3.9 | ||||
Less: Cash and cash equivalents | (189.3) | ||||
First lien debt(1) | $ | 3,104.6 | |||
(1)Due to rounding, the total may not equal the sum of the line items in the table above.
EBITDA
As required by the definition of “EBITDA” in the Senior Secured Credit Agreement, our EBITDA for the preceding four quarters of $576.4 million is calculated as operating income from continuing operations before depreciation and amortization, impairment charges and share-based compensation; further adjusted for unusual or nonrecurring gains, losses, charges or expenses and any charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges; and various other items.
35
The following table reconciles EBITDA to operating income from continuing operations and consolidated net cash provided by operating activities for the four quarters ended June 30, 2024:
| Four Quarters Ended | |||||
| (In millions) | June 30, 2024 | ||||
EBITDA (as defined by the Senior Secured Credit Agreement) | $ | 576.4 | |||
| Depreciation and amortization, impairment charges and share-based compensation | (262.3) | ||||
Unusual or nonrecurring gain, loss, charge or expense and any charges, expenses or reserves in respect of any restructuring, relocation, redundancy or severance expense or one-time compensation charges | (8.8) | ||||
Other items(1) | (22.3) | ||||
Operating income from continuing operations(2) | 283.0 | ||||
Interest expense, net; loss on extinguishment of debt, net; other expense, net; and income tax benefit attributable to continuing operations | (445.6) | ||||
Loss from discontinued operations | (201.9) | ||||
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | |||||
Reconciling items for non-cash and non-operating activity(3) | 751.4 | ||||
| Changes in operating assets and liabilities | (305.2) | ||||
Net cash provided by operating activities(2) | $ | 81.7 | |||
(1)Primarily comprised of interest income and costs related to strategic transactions and reviews.
(2)Due to rounding, the total may not equal the sum of the line items in the table above.
(3)Includes depreciation, amortization and impairment charges; non-cash operating lease expense; loss on extinguishment of debt and debt modification expense; deferred taxes; share-based compensation; amortization of deferred financing charges and note discounts; credit loss expense; loss on disposition of businesses and/or operating assets, net; foreign exchange transaction loss; and other reconciling items.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our financial statements in conformity with U.S. generally accepted accounting principles requires Company 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. For a description of the critical accounting estimates, management's judgments and assumptions, and the potential effects if actual results differ from these assumptions, refer to Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains various forward-looking statements that represent our expectations or beliefs concerning future events, including, without limitation, our guidance, outlook, long-term forecast, goals or targets; our business plans and strategies; our expectations about the timing, closing, satisfaction of closing conditions, use of proceeds and benefits of the sales of our European businesses; expectations about certain markets; the conduct of, and expectations about, international business sales processes; industry and market trends; and our liquidity. 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.
36
A wide range of factors could materially affect future developments and performance, including, but not limited to: continued economic uncertainty, an economic slowdown or a recession; our ability to service our debt obligations and to fund our operations, business strategy and capital expenditures; the impact of our substantial indebtedness, including the effect of our leverage on our financial position and earnings; the difficulty, cost and time required to implement our strategy, including optimizing our portfolio, and the fact that we may not realize the anticipated benefits therefrom; our ability to obtain and renew key contracts with municipalities, transit authorities and private landlords; competition; regulations and consumer concerns regarding privacy, digital services, data protection and the use of artificial intelligence; a breach of our information security measures; legislative or regulatory requirements; restrictions on out-of-home advertising of certain products; environmental, health, safety and land use laws and regulations, as well as various actual and proposed environmental, social and governance policies, regulations and disclosure standards; the impact of the processes to sell our businesses comprising our Europe-North segment and our businesses in Latin America; the impact of the recent dispositions or agreements to dispose of the businesses in our Europe-South segment and the potential dispositions of our other international businesses, as well as other strategic transactions or acquisitions; third-party claims of intellectual property infringement, misappropriation or other violation against us or our suppliers; risks of doing business in foreign countries; fluctuations in exchange rates and currency values; volatility of our stock price; the impacts on our stock price as a result of future sales of common stock, or the perception thereof, and dilution resulting from additional capital raised through the sale of common stock or other equity-linked instruments; our ability to continue to comply with the applicable listing standards of the New York Stock Exchange; the restrictions contained in the agreements governing our indebtedness limiting our flexibility in operating our business; the effect of analyst or credit ratings downgrades; our dependence on our senior management team and other key individuals; continued scrutiny and changing expectations from investors, lenders, customers, government regulators, municipalities, activists and other stakeholders; and certain other factors set forth in our other filings with the SEC.
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risks arising from changes in market rates and prices, including movements in foreign currency exchange rates, interest rates and inflation, which are generally interrelated.
Foreign Currency Exchange Rate Risk
We have operations in America, Europe, Singapore and Latin America. Foreign operations are measured in their local currencies, and as a result, our financial results are affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which we operate. Fluctuations in foreign currency exchange rates impacted reported Segment Adjusted EBITDA for our Europe-North segment by $(0.1) million and $0.5 million during the three and six months ended June 30, 2024, respectively.
Our Europe-North segment reported Segment Adjusted EBITDA of $32.6 million and $47.0 million for the three and six months ended June 30, 2024, respectively. We estimate that a 10% increase in the value of the U.S. dollar relative to foreign currencies would have decreased Europe-North Segment Adjusted EBITDA by $3.3 million and $4.7 million for the three and six months ended June 30, 2024, respectively, while a 10% decrease in the value of the U.S. dollar relative to foreign currencies would have increased Europe-North Segment Adjusted EBITDA by corresponding amounts. This analysis does not consider the implications that such currency fluctuations could have on the overall economic activity in the U.S. or foreign countries or on the results of operations of the foreign entities comprising our Europe-North segment.
In 2023, we purchased a foreign currency exchange option to sell Euros and purchase U.S. Dollars to hedge the anticipated proceeds from the sale of our business in Spain, which is expected to close in 2024 upon receipt of regulatory approval and satisfaction of other customary closing conditions.
Interest Rate Risk
Our financial results are affected by changes in interest rates as our Term Loan Facility, Revolving Credit Facility, Receivables-Based Credit Facility and a portion of our CCIBV Term Loan Facility bear interest at variable rates. At June 30, 2024, following the March 2024 Debt Transactions, variable-rate debt accounted for approximately 9% of our aggregate principal amount of long-term debt, a significant decrease from 22% as of December 31, 2023.
As described in our 2023 Annual Report on Form 10-K, the U.S. Federal Reserve raised interest rates significantly in 2022 and 2023 in response to high levels of inflation, resulting in an increase to our weighted average cost of debt. However, the federal funds rate has remained steady since July 2023 and this, in combination with the lower proportion of variable-rate debt in our portfolio as a result of the March 2024 Debt Transactions, resulted in a slight decrease in our weighted average cost of debt from 7.5% at December 31, 2023 to 7.4% at June 30, 2024.
37
Generally, increases in interest rates adversely impact our reported results. Assuming the current level of borrowings and a 100 basis point increase in the Secured Overnight Financing Rate, it is estimated that our interest expense for the three and six months ended June 30, 2024 would have increased by $1.3 million and $2.5 million, respectively. If future increases in interest rates materially affect interest expense, Company management may take actions to mitigate our exposure. However, due to the uncertainty of the actions that would be taken and their possible effects, the preceding interest rate sensitivity analysis assumes no such actions. Further, the analysis does not consider the effects of the change in the level of overall economic activity that could exist in such an environment. Conversely, if future interest rates decline, Company management may take actions to capitalize on such movement.
Inflation Risk
Inflation is a factor in the economies in which we do business, and we continue to seek ways to mitigate its effect. While inflation rates have slowed from the peak reached in 2022, global inflation remains high and, in the past, has affected our results due to higher costs for electricity, labor, rent, materials and equipment. Although the exact impact of inflation on our margins and earnings is indeterminable, we believe we have partially offset higher costs by increasing the effective advertising rates for most of our out-of-home displays.
ITEM 4. CONTROLS AND PROCEDURES
As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of Company management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we have carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Our disclosure controls and procedures are designed to provide reasonable assurance that information we are required to disclose in reports that are filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and is recorded, processed, summarized and reported within the time periods specified by the SEC. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures were effective as of June 30, 2024 at the reasonable assurance level.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
38
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
For information regarding our legal proceedings, please refer to Note 6 to our Condensed Consolidated Financial Statements located in Item 1 of Part I of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
Information regarding our risk factors is disclosed in Item 1A of our 2023 Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Issuer Purchases of Equity Securities
The following table sets forth our purchases of shares of our common stock made during the quarter ended June 30, 2024:
| Period | Total number of shares purchased(1) | Average price paid per share(1) | Total number of shares purchased as part of publicly announced plans or programs | Maximum number of shares that may yet be purchased under the plans or programs | |||||||||||||||||||
April 1 through April 30 | 2,851,106 | $ | 1.61 | — | — | ||||||||||||||||||
May 1 through May 31 | 9,227 | 1.54 | — | — | |||||||||||||||||||
June 1 through June 30 | 17,246 | 1.44 | — | — | |||||||||||||||||||
| Total | 2,877,579 | $ | 1.61 | — | — | ||||||||||||||||||
(1)The shares indicated consist of shares of our common stock tendered to us by employees during the period to satisfy such employees’ tax withholding obligations in connection with the vesting and release of restricted stock units, which are withheld by us at their fair market value on the date the relevant transaction occurs and added back to treasury stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements
During the quarter ended June 30, 2024, none of our directors or officers (as defined in Section 16 of the Securities Exchange Act of 1934, as amended) adopted terminated
Adoption of Executive Change in Control Severance Plan
On August 5, 2024, the Compensation Committee (the “Committee”) of the Company’s Board of Directors adopted the Clear Channel Outdoor Holdings, Inc. Executive Change in Control Severance Plan (the “Severance Plan”). The Severance Plan will be administered by the Committee.
The Severance Plan provides certain severance pay and benefits to eligible executives participating in the Severance Plan (including named executive officers, Scott Wells, Lynn Feldman, and Jason Dilger, and chief financial officer, David Sailer (the foregoing individuals, collectively, the “Executives”)) whose employment is terminated by the Company or any of its subsidiaries or affiliates (collectively, the “Company Group”) without “cause” or due to a resignation by such participant for “good reason” (each as defined in the Severance Plan, and each, a “Qualifying Termination”) during the 12-month period following the consummation of a Change in Control (as defined in the Severance Plan, and such 12-month period, the “Change in Control Protection Period”) on or after August 5, 2024.
Upon a Qualifying Termination during the Change in Control Protection Period, subject to the participant’s execution and non-revocation of a general release of claims and continued compliance with the participant’s restrictive covenant obligations, the participant will be entitled to receive:
39
(i) a cash payment equal to the product of (A) the applicable severance multiple (“Applicable Severance Multiple”) for the participant, multiplied by (B) the sum of such participant’s (1) annual base salary and (2) target annual bonus opportunity, payable in a lump sum as soon as administratively practicable following the date the release becomes effective and non-revocable;
(ii) a pro-rated portion of the annual bonus the participant was eligible to earn for the calendar year in which the termination date occurs, with the amount paid calculated based on actual performance through the termination date, payable in a lump sum as soon as administratively practicable following the date the release becomes effective and non-revocable;
(iii) payment of any earned but unpaid annual bonus for the year prior to the year in which the termination date occurs, if any, payable in a lump sum at the same time that any such annual bonuses are paid to similarly-situated employees of the Company Group generally; and
(iv) subject to the terms of the Severance Plan, payment or reimbursement (at the applicable member of the Company Group’s option) on a monthly basis during the participant’s applicable benefit period (“Applicable Benefit Period”) for the amount the participant is required to pay for such participant and his or her dependents to effect and continue coverage under COBRA.
In the event a participant’s employment with any member of the Company Group terminates (pursuant to a Qualifying Termination or otherwise), all outstanding and unvested equity incentive awards then held by the participant will be treated in accordance with the award agreement applicable to such award or the participant’s employment agreement, as applicable.
The Executives participate in the Severance Plan with the following Applicable Severance Multiples and Applicable Benefit Periods: (i) Scott Wells: 2x Applicable Severance Multiple and 24 months Applicable Benefit Period; (ii) David Sailer and Lynn Feldman: 1.5x Applicable Severance Multiple and 18 months Applicable Benefit Period; and (iii) Jason Dilger: 1x Applicable Severance Multiple and 12 months Applicable Benefit Period. Pursuant to the Severance Plan, the Executives will be required to comply with the restrictive covenant obligations set forth in their respective employment agreements as a condition each such Executive’s participation in the Severance Plan.
The foregoing description of the Severance Plan does not purport to be complete and is qualified in its entirety by reference to the terms of the Severance Plan, a copy of which is filed herewith as Exhibit 10.3 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
40
ITEM 6. EXHIBITS
| Exhibit Number | Description | |||||||
| 3.1 | ||||||||
3.2 | ||||||||
3.3 | ||||||||
10.1 | ||||||||
10.2 | ||||||||
10.3* | ||||||||
| 31.1* | ||||||||
| 31.2* | ||||||||
| 32.1** | ||||||||
| 32.2** | ||||||||
| 101.INS* | XBRL Instance Document | |||||||
| 101.SCH* | XBRL Taxonomy Extension Schema Document | |||||||
| 101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |||||||
| 101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |||||||
| 101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |||||||
| 101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |||||||
| 104 | Cover Page Interactive Data File (formatted as inline XBRL) | |||||||
__________________
* Filed herewith.
** Furnished herewith.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CLEAR CHANNEL OUTDOOR HOLDINGS, INC. | ||||||||
| August 7, 2024 | /s/ JASON A. DILGER | |||||||
| Jason A. Dilger | ||||||||
| Chief Accounting Officer | ||||||||
41