What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-26 compared with 2020-02-26 · 591 added, 603 removed, 784 unchanged (60% of the section changed)

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We have audited the accompanying consolidated statements of financial position of OUTFRONT Media Inc.

and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended December 31, 2019, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of operations, of comprehensive income (loss), of equity and of cash flows for each of the three years in the period ended December 31, 2020, including the related notes and financial statement schedules listed in the index appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

We also have audited the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Recoverability of Prepaid MTA Equipment Deployment Costs

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Accounting for the MTA Agreement

As described in Notes 2 and 19 to the consolidated financial statements, the Company has an agreement with the New York Metropolitan Transportation Authority (“MTA”).

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Title of the various digital displays transfers to the MTA on installation.

As disclosed by management, the Company is entitled to generate revenue through the sale of advertising on transit advertising displays and incurs transit franchise fees payable to MTA, which are calculated based on a percentage of the advertising revenues generated under the contract, subject to a minimum guarantee.

As disclosed by management, the Company is entitled to generate revenue through the sale of advertising on transit advertising displays and incurs transit franchise fees payable to the MTA, which are calculated based on a percentage of the advertising revenues generated under the contract, subject to a minimum guarantee.

In June 2020, the Company entered into an amendment to the MTA agreement, pursuant to which (i) for up to $143.0 million of MTA equipment deployment costs to be incurred under the MTA agreement after June 2020, the MTA and the Company will directly pay 70% and 30% of the costs, respectively, instead of the costs being recoupable from incremental revenues generated under the agreement, and (ii) any guaranteed minimum annual payment amounts that would have been paid for the period from April 1, 2020 through December 31, 2020 (less any revenue share amounts actually paid during this period using an increased revenue share percentage of 65%) will instead be added in equal increments to the guaranteed minimum annual payment amounts owed for the period from January 1, 2022, through December 31, 2026.

The portion of deployment costs expected to be reimbursed from transit franchise fees that would otherwise be payable to the MTA are recorded as prepaid MTA equipment deployment costs, which were $204.6 million as of December 31, 2020.

Management assesses the prepaid MTA equipment deployment costs for recoverability on a quarterly basis.

This assessment requires evaluating qualitative and quantitative factors to determine if there is an indication that the carrying amount may not be recoverable.

Management applies significant judgment in assessing these factors, including evaluating macroeconomic conditions, industry trends, and events specific to the Company, including monitoring the Company’s actual installation of digital displays against the initial deployment schedule.

Additionally, management assesses quantitative factors by comparing revenue projections of the deployed digital displays to actual financial results.

The principal considerations for our determination that performing procedures relating to the recoverability of prepaid MTA equipment deployment costs is a critical audit matter are there was significant judgment by management in evaluating the qualitative and quantitative factors to determine if there is an indication that the carrying amount may not be recoverable, which in turn led to significant auditor judgment and effort in performing procedures relating to management’s assessment of these qualitative and quantitative factors and in evaluating audit evidence.

The portion of deployment costs expected to be reimbursed from advertising revenues that would otherwise be retained by the Company are recorded as intangible assets, which were $58.4 million as of December 31, 2020.

Management assesses the recoverability of the MTA contract on an as needed basis and applies significant judgment in assessing factors to determine if there is an indication that the revenues expected to be generated over the term of the agreement will not be sufficient to cover all or a portion of the equipment deployment costs, including evaluating macroeconomic conditions, industry trends, and events specific to the Company, including monitoring the Company’s actual installation of digital displays against the deployment schedule.

Additionally, management’s assessment includes a comparison of revenue projections of the deployed digital displays to actual financial results.

The principal considerations for our determination that performing procedures relating to the accounting for the MTA agreement is a critical audit matter are the significant judgment by management in evaluating the accounting for the arrangement and associated amendments, and factors to determine if there is an indication that the revenues expected to be generated over the term of the agreement will not be sufficient to cover all or a portion of the equipment deployment costs, which in turn led to significant auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence relating to management’s assessment of these factors.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the MTA equipment deployment costs, including management’s controls over evaluating the recoverability of prepaid MTA equipment deployment costs.

These procedures also included, among others, (i) reading the agreement and any amendments to date, (ii) evaluating the actual revenue generated from the deployed digital displays in comparison to management’s initial revenue projections, (iii) evaluating the Company’s actual installation of digital displays against the initial deployment schedule, and (iv) evaluating qualitative factors to determine whether there were any adverse or negative factors that would impact the revenue projections, including the impact of macroeconomic conditions and industry trends.

When evaluating management’s recoverability assessment, we also considered whether management’s conclusions were reasonable considering

the past performance of the Company and known events, and considered whether they were consistent with evidence obtained in other areas of the audit.

/s/ Pricewaterhouse Coopers LLP

These procedures included testing the effectiveness of controls relating to the MTA equipment deployment costs, including controls over evaluating the recoverability of the MTA agreement.

These procedures also included, among others (i) reading the agreement and associated amendments to assess the accounting implications, (ii) evaluating the actual revenue generated from the deployed digital displays in comparison to management’s

initial revenue projections, (iii) evaluating the Company’s actual installation of digital displays against the deployment schedule, and (iv) evaluating whether there were any adverse or negative factors that would impact the revenue projections, related to the impact of macroeconomic conditions, industry trends, and events specific to the Company.

When evaluating management’s assessment, we also considered whether management’s conclusions were reasonable considering (i) the past performance of the Company, (ii) known events, and (iii) whether they were consistent with evidence obtained in other areas of the audit.

Goodwill Impairment Assessment - U.S.

Transit and Canada Reporting Units

As described in Notes 2 and 5 to the consolidated financial statements, the Company’s goodwill balance was $2,077.8 million as of December 31, 2020, and the goodwill balances associated with the U.S.

Transit and Canada reporting units were $47.6 million and $23.8 million, respectively.

The Company tests goodwill qualitatively and/or quantitatively at the reporting-unit level annually for impairment as of October 31 of each year and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount.

As disclosed by management, management computes the estimated fair value of each reporting unit for which they perform a quantitative assessment by adding the present value of the estimated annual cash flows over a discrete projection period to the terminal value, which represents the value of the projected cash flows beyond the discrete projection period.

This technique requires management to use significant estimates and assumptions such as revenue growth rates, terminal growth rates, projected billboard lease and transit franchise expenses, projected other operating and selling, general, and administrative expenses, capital expenditures and discount rates.

The estimated revenue growth rates, projected billboard lease and transit franchise expenses, projected other operating and selling, general, and administrative expenses, and capital expenditures for the projection period are based on internal forecasts of future performance as well as historical trends.

The terminal value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections.

The discount rates represent the weighted average cost of capital derived using known and estimated market metrics.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the U.S.

Transit and Canada reporting units is a critical audit matter are the significant judgment by management when developing the fair value measurement of the reporting units, which in turn led to significant auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence related to management’s estimated fair value of each reporting unit and significant assumptions related to the revenue growth rate, projected other operating and selling, general, and administrative expenses, and the discount rate for the U.S.

Transit reporting unit, as well as the revenue growth rate, projected billboard lease and transit franchise expenses, and projected other operating and selling, general, and administrative expenses for the Canada reporting unit.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the U.S.

Transit and Canada reporting units and development of the significant assumptions related to the revenue growth rate, projected other operating and selling, general, and administrative expenses, and the discount rate for the U.S.

These procedures also included, among others (i) testing management’s process for developing the fair value of the reporting units, (ii) evaluating the appropriateness of the valuation technique, (iii) testing the completeness and accuracy of data used in the valuation technique, and (iv) evaluating the reasonableness of significant assumptions related to the revenue growth rate, projected other operating and selling, general, and administrative expenses, and the discount rate for the U.S.

Evaluating management’s assumptions related to the revenue growth rates, projected billboard lease and transit franchise expenses, and projected other operating and selling, general, and administrative expenses involved evaluating whether the assumptions were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether they were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation technique and the discount rate assumption.

/s/ PricewaterhouseCoopers LLP

New York, New York

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Prepaid lease and franchise costs 5.4 8.6

Prepaid MTA equipment deployment costs (Note 19)

Prepaid MTA equipment deployment costs (Notes 5 and 19) — 55.4

Other prepaid expenses 14.4 15.8

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Operating lease assets (Note 6) 1,421.3 1,457.0

Prepaid MTA equipment deployment costs (Note 19)

Prepaid MTA equipment deployment costs (Notes 5 and 19) 204.6 116.1

Other assets 36.8 73.2

Total assets $ 5,896.9 $ 5,382.3

Current liabilities:

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Commitments and contingencies (Note 19)

Preferred stock (2020 - 50.0 shares authorized, and 0.4 shares of Series A Preferred Stock issued and outstanding;

2019- 50.0 shares authorized, and no shares issued and outstanding) (Note 11)

Stockholders’ equity (Note 11):

Common stock 2020 - 450.0 shares authorized, and 144.5 shares issued and outstanding;

2018 - 450.0 shares authorized, and 140.2 shares authorized, issued or outstanding)

2019 - 450.0 shares authorized, and 143.6 shares issued or outstanding)

Additional paid-in capital 2,090.8 2,074.7

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Non-controlling interests 26.5 32.6

Total equity 1,383.7 1,126.4

Total liabilities and equity $ 5,896.9 $ 5,382.3

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(in millions, except per share amounts) 2020 2019 2018

Billboard $ 978.6 $ 1,189.9 $ 1,112.4

Transit and other 257.7 592.3 493.8

Total revenues 1,236.3 1,782.2 1,606.2

Operating 710.8 958.6 859.9

Selling, general and administrative 315.1 371.7 330.2

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Impairment charge — — 42.9

Depreciation 84.5 87.3 85.9

Amortization 61.3 59.0 55.9

Total expenses 1,163.8 1,473.1 1,371.4

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Other income (expense), net 0.1 0.1 ( 0.4 )

Income before provision for income taxes and equity in earnings of investee companies

Income (loss) before provision for income taxes and equity in earnings of investee companies ( 58.5 ) 145.8 108.7

Provision for income taxes ( 1.1 ) ( 10.9 ) ( 4.9 )

Equity in earnings of investee companies, net of tax ( 0.6 ) 5.7 4.1

Net income before allocation to non-controlling interests

Net income (loss) before allocation to non-controlling interests ( 60.2 ) 140.6 107.9

Net income attributable to non-controlling interests 0.8 0.5 —

Net income attributable to OUTFRONT Media Inc.

Net income per common share:

Net income (loss) attributable to OUTFRONT Media Inc.

$ ( 61.0 ) $ 140.1 $ 107.9

Net income (loss) per common share:

Basic $ ( 0.56 ) $ 0.97 $ 0.76

Diluted $ ( 0.56 ) $ 0.97 $ 0.75

Weighted average shares outstanding:

Basic 144.3 142.5 139.3

Diluted 144.3 143.2 139.6

See accompanying notes to consolidated financial statements.

OUTFRONT Media Inc.

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Year Ended December 31,

(in millions) 2020 2019 2018

Net income before allocation to non-controlling interests

Net income (loss) before allocation to non-controlling interests $ ( 60.2 ) $ 140.6 $ 107.9

Net income attributable to non-controlling interests 0.8 0.5 —

Net income attributable to OUTFRONT Media Inc.

Net income (loss) attributable to OUTFRONT Media Inc.

( 61.0 ) 140.1 107.9

Other comprehensive income (loss), net of tax:

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Total other comprehensive income (loss), net of tax ( 0.3 ) 4.3 ( 14.3 )

Total comprehensive income

Total comprehensive income (loss) $ ( 61.3 ) $ 144.4 $ 93.6

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Equity

(in millions, except per share amounts)

Shares of Common Stock

Common Stock ($0.01 per share par value)

Additional Paid-In Capital

Distribution in Excess of Earnings

Accumulated Other Comprehensive Loss

Total Stockholders’ Equity

Non-Controlling Interests

Stockholders’ Equity

(in millions, except per share amounts) Shares of Common Stock Common Stock $ 0.01 per share par value)

Additional Paid-In Capital Distribution in Excess of Earnings Accumulated Other Comprehensive Loss Total Stockholders’ Equity Non-Controlling Interests Total Equity

Balance as of December 31, 2017

Other comprehensive income

138.6 $ 1.4 $ 1,963.0 $ ( 775.6 ) $ ( 7.7 ) $ 1,181.1 $ 45.5 $ 1,226.6

Net income — — — 107.9 — 107.9 — 107.9

Other comprehensive loss — — — — ( 14.3 ) ( 14.3 ) — ( 14.3 )

Stock-based payments:

Cumulative prior period adjustment to amortization of estimated forfeitures

Exercise of stock options

1.0 — — — — — — —

— — 20.2 — — 20.2 — 20.2

Shares paid for tax withholding for stock-based payments

Issuance of stock for purchase of property and equipment

( 0.3 ) — ( 8.4 ) — — ( 8.4 ) — ( 8.4 )

Class A equity interest redemptions

0.2 — 4.8 — — 4.8 ( 4.8 ) —

Shares issued under the ATM Program

0.7 — 15.3 — — 15.3 — 15.3

Dividends ($ 1.44 per share)

— — — ( 203.9 ) — ( 203.9 ) — ( 203.9 )

— — 0.1 — — 0.1 1.8 1.9

Balance as of December 31, 2018

Other comprehensive loss

140.2 $ 1.4 $ 1,995.0 $ ( 871.6 ) $ ( 22.0 ) $ 1,102.8 $ 42.5 $ 1,145.3

Cumulative effect of a new accounting standard — — — ( 24.8 ) — ( 24.8 ) — ( 24.8 )

Net income — — — 140.1 — 140.1 0.5 140.6

Other comprehensive income — — — — 4.3 4.3 — 4.3

Stock-based payments:

1.0 — — — — — — —

Amortization — — 22.3 — — 22.3 — 22.3

Shares paid for tax withholding for stock-based payments

( 0.4 ) — ( 7.9 ) — — ( 7.9 ) — ( 7.9 )

Class A equity interest redemptions

0.6 — 14.3 — — 14.3 ( 14.3 ) —

Shares issued under the ATM Program

2.2 — 50.8 — — 50.8 — 50.8

Dividends ($ 1.44 per share)

— — — ( 208.3 ) — ( 208.3 ) — ( 208.3 )

— — 0.2 — — 0.2 3.9 4.1

Balance as of December 31, 2019

143.6 $ 1.4 $ 2,074.7 $ ( 964.6 ) $ ( 17.7 ) $ 1,093.8 $ 32.6 $ 1,126.4

OUTFRONT Media Inc.

Consolidated Statements of Equity (Continued)

(in millions, except per share amounts)

Shares of Common Stock

Common Stock ($0.01 per share par value)

Additional Paid-In Capital

Distribution in Excess of Earnings

Accumulated Other Comprehensive Income (Loss)

Total Stockholders’ Equity

Non-Controlling Interests

Stockholders’ Equity

(in millions, except per share amounts) Shares of Series A Preferred Stock Series A Preferred Stock ($ 0.01 per share par value)

Shares of Common Stock Common Stock ($ 0.01 per share par value)

Additional Paid-In Capital Distribution in Excess of Earnings Accumulated Other Comprehensive Income (Loss) Total Stockholders’ Equity Non-Controlling Interests Total Equity

Balance as of December 31, 2019

Cumulative effect of a new accounting standard (Note 2)

— $ — 143.6 $ 1.4 $ 2,074.7 $ ( 964.6 ) $ ( 17.7 ) $ 1,093.8 $ 32.6 $ 1,126.4

Net loss — — — — — ( 61.0 ) — ( 61.0 ) 0.8 ( 60.2 )

Other comprehensive income — — — — — — ( 0.3 ) ( 0.3 ) — ( 0.3 )

Stock-based payments:

— — 1.1 — — — — — — —

Amortization — — — — 23.8 — — 23.8 — 23.8

Shares paid for tax withholding for stock-based payments

— — ( 0.4 ) — ( 12.8 ) — — ( 12.8 ) — ( 12.8 )

New share issues 0.4 383.4 — — — — — — — 383.4

Class A equity interest redemptions

Shares issued under the ATM Program

— — 0.2 — 5.1 — — 5.1 ( 5.1 ) —

Series A Preferred Stock dividends 7 %)

— — — — — ( 19.5 ) — ( 19.5 ) — ( 19.5 )

Dividends ($ 0.38 per share)

— — — — — ( 55.3 ) — ( 55.3 ) — ( 55.3 )

— — — — — — — — ( 1.8 ) ( 1.8 )

Balance as of December 31, 2020

0.4 $ 383.4 144.5 $ 1.4 $ 2,090.8 $ ( 1,100.4 ) $ ( 18.0 ) $ 973.8 $ 26.5 $ 1,383.7

See accompanying notes to consolidated financial statements.

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Operating activities:

Net income attributable to OUTFRONT Media Inc.

Net income (loss) attributable to OUTFRONT Media Inc.

$ ( 61.0 ) $ 140.1 $ 107.9

Adjustments to reconcile net income to net cash flow provided by operating activities:

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Amortization of deferred financing costs and debt discount and premium

Cash paid for direct lease acquisition costs

Change in assets and liabilities, net of investing and financing activities:

Increase in receivables

(Increase) decrease in receivables 60.8 ( 29.5 ) ( 37.2 )

Increase in prepaid MTA equipment deployment costs ( 33.1 ) ( 92.0 ) ( 74.8 )

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Increase (decrease) in income taxes 0.5 0.2 ( 3.1 )

Other, net 4.0 2.4 ( 18.3 )

Net cash flow provided by operating activities 130.6 276.9 214.3

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Capital expenditures ( 53.5 ) ( 89.9 ) ( 82.3 )

Acquisitions ( 18.1 ) ( 69.7 ) ( 7.0 )

MTA franchise rights ( 23.6 ) ( 24.0 ) ( 13.3 )

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Payments of debt extinguishment charges — ( 20.6 ) —

Proceeds from Series A Preferred Stock issuances 383.4 — —

Proceeds from shares issued under the ATM Program — 50.9 15.3

Proceeds from stock option exercises

Earnout payment related to prior acquisition — — ( 0.4 )

Taxes withheld for stock-based compensation ( 12.6 ) ( 7.9 ) ( 8.4 )

Net cash flow used for financing activities

Dividends ( 75.1 ) ( 208.1 ) ( 203.9 )

Net cash flow provided by (used for) financing activities 573.0 ( 94.3 ) ( 117.7 )

OUTFRONT Media Inc.

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Effect of exchange rate changes on cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

0.7 0.5 ( 0.4 )

Net increase in cash, cash equivalents and restricted cash 651.1 6.8 5.8

Cash, cash equivalents and restricted cash at beginning of year 60.9 54.1 48.3

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Cash paid for interest 127.6 121.5 117.5

Non-cash investing and financing activities:

Non-cash operating, investing and financing activities:

Accrued purchases of property and equipment $ 3.3 $ 7.7 $ 5.8

Accrued MTA franchise rights 6.5 4.0 1.4

Issuance of shares of a subsidiary for an acquisition

Non-cash effect of straight-line rent 11.2 6.9 1.9

Taxes withheld for stock-based compensation 0.2 — —

See accompanying notes to consolidated financial statements.

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Our inventory consists of billboard displays, which are primarily located on the most heavily traveled highways and roadways in top Nielsen Designated Market Areas (“DMAs”), and transit advertising displays operated under exclusive multi-year contracts with municipalities in large cities across the U.S.

We also have marketing and multimedia rights agreements with colleges, universities and other educational institutions, which entitle us to operate on-campus advertising displays, as well as manage marketing opportunities, media rights and experiential entertainment at sporting events.

In total, we have displays in all of the 25 largest markets in the U.S.

and 145 markets across the U.S.

We manage our operations through three operating segments—(1) U.S.

We currently manage our operations through two operating segments—U.S.

Billboard and Transit, which is included in our U.S.

Media reportable segment, (2) International and (3) Sports Marketing.

Media reportable segment, and International.

In the third quarter of 2020, we sold all of our equity interests in certain of our subsidiaries (the “Sports Disposition”), which held all of the assets of our Sports Marketing operating segment, for a purchase price of approximately $ 34.6 million in cash, subject to closing and post-closing adjustments (see Note 14.

Acquisitions and Dispositions :

Dispositions to the Consolidated Financial Statements).

The Sports Marketing operating segment was the marketing and multimedia rights holder for a variety of colleges, universities and other educational institutions across the United States.

The operating results of our Sports Marketing operating segment through June 30, 2020, are included in our Consolidated Financial Statements.

Basis of Presentation and Use of Estimates

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In the opinion of our management, the accompanying financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair presentation of our financial position, results of operations and cash flows for the years presented.

Certain previously reported amounts have been reclassified to conform with the current 2018 presentation.

Certain reclassifications of prior years’ data have been made to conform to the current period’s presentation.

Consistent with 2020, amortization of direct lease acquisition costs previously reported in Amortization have been reclassified to conform with the current presentation.

The impact of the reclassification is a decrease in Amortization of $ 48.2 million in 2019 and $ 43.2 million in 2018 and a corresponding increase in Selling, general and administrative expenses (“ SG&A ”) on the Consolidated Statements of Operations.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, including the impact of extraordinary events such as the novel coronavirus (COVID-19) pandemic, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ materially from these estimates under different assumptions or conditions, including the severity and duration of the COVID-19 pandemic.

The COVID-19 pandemic and the related preventative measures taken to help curb the spread, have had, and may continue to have, a significant impact on the global economy and our business.

In order to preserve financial flexibility and increase liquidity and reduce expenses in light of the current uncertainty in the global economy and our business, we undertook the following actions in 2020, among others:

completed the Private Placement (see Note 11.

Equity to the Consolidated Financial Statements), issued $ 400.0 million aggregate principal amount of the 2025 Notes (as defined below) and amended the Credit Agreement (as defined below) to modify the calculation of the Company’s financial maintenance covenant ratio (see Note 9.

Debt to the Consolidated Financial Statements) and reduced capital expenditures and expenses through cost savings initiatives.

Given the uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to the COVID-19 pandemic, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic on our business, financial condition and results of operations at this time, which may be material.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

Summary of Significant Accounting Policies

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Receivables —Receivables consist primarily of trade receivables from customers, net of advertising agency commissions, and are stated net of an allowance for doubtful accounts.

The provision for doubtful accounts is estimated based on historical bad debt experience, the aging of accounts receivable, industry trends and economic indicators, as well as recent payment history for specific customers.

The provision for doubtful accounts is estimated based on historical bad debt experience, the aging of accounts receivable, industry trends and economic indicators, recent payment history for specific customers and expected future trends.

New York Metropolitan Transportation Authority (the “MTA”) Agreement— Under the MTA Agreement, as title of the various digital displays we are obligated to deploy transfers to the MTA on installation, the cost of deploying these screens throughout the transit system does not represent our property and equipment.

The portion of deployment costs expected to be reimbursed from transit franchise fees that would otherwise be payable to the MTA are recorded as Prepaid MTA equipment deployment costs on the Consolidated Statement of Financial Position and charged to operating expenses as advertising revenue is generated.

The short-term portion of Prepaid MTA equipment deployment costs represents the costs that we expect to recover

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

from the MTA in the next twelve months.

The short-term portion of Prepaid MTA equipment deployment costs represents the costs that we expect to recover from the MTA in the next twelve months.

The portion of deployment costs expected to be reimbursed from advertising revenues that would otherwise be retained by us under the contract are recorded as Intangible assets on the Consolidated Statement of Financial Position and charged to amortization expense on a straight line basis over the contract period.

We assess the recoverability of the MTA contract on an as-needed basis and apply significant judgment in assessing factors to determine if there is an indication that the revenues generated over the term of the agreement will be sufficient to cover all or a portion of the equipment deployment costs, including evaluating macroeconomic conditions (such as the impact of the COVID-19 pandemic), industry trends, and events specific to the Company, including monitoring the Company’s actual installation of digital displays against the deployment schedule.

Additionally, we assess these factors by comparing revenue projections of the deployed digital displays to actual financial results.

Property and Equipment —Property and equipment is stated at cost.

Depreciation is computed using the straight-line method over the estimated useful lives as follows:

Buildings and improvements

20 to 40 years

Advertising structures

5 to 20 years

Furniture, equipment and other

3 to 10 years

Buildings 20 to 40 years

Advertising structures 5 to 20 years

Furniture, equipment and other 3 to 10 years

For advertising structures associated with a contract, the assets are depreciated over the shorter of the contract term or useful life.

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If the assets acquired and liabilities assumed constitute a business, the purchase price is allocated to the tangible and identifiable intangible net assets acquired based on their estimated fair values with the excess of the purchase price over those estimated fair values recorded as goodwill.

If the acquired assets do not constitute a business, we allocate the purchase price to the individual tangible and intangible assets acquired based on their relative fair values.

If the acquired assets do

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

not constitute a business, we allocate the purchase price to the individual tangible and intangible assets acquired based on their relative fair values.

Impairment of Long-Lived Assets— Long-lived assets are assessed for impairment whenever there is an indication that the carrying amount of the asset may not be recoverable.

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Long-lived assets held for sale are required to be measured at the lower of their carrying value (including unrecognized foreign currency translation adjustment losses) or fair value less cost to sell.

Goodwill and Intangible Assets— Goodwill is allocated to various reporting units.

Goodwill— Goodwill is allocated to various reporting units.

Goodwill is not amortized but is tested qualitatively and/or quantitatively at the reporting-unit level annually for impairment as of October 31 of each year and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying amount.

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We may also choose to only perform a quantitative assessment.

We compute the estimated fair value of each reporting unit for which we perform a quantitative assessment by adding the present value of the estimated annual cash flows over a discrete projection period to the residual value of the business at the end of the projection period.

This technique requires us to use significant estimates and assumptions such as growth rates, operating margins, capital expenditures and discount rates.

The estimated growth rates, operating margins and capital expenditures for the projection period are based on our internal forecasts of future performance as well as historical trends.

The residual value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections.

The discount rates are determined based on the weighted average cost of capital of comparable entities.

We compute the estimated fair value of each reporting unit for which we perform a quantitative assessment using an income approach.

Under the income approach, the fair value is determined using a discounted cash flow model.

Our discounted cash flow value is calculated by adding the present value of the estimated annual cash flows over a discrete projection period to the terminal value, which represents the value of the projected cash flows beyond the discrete projection period.

Our discounted cash flow model requires us to use significant estimates and assumptions such as revenue growth rates, terminal growth rates, projected billboard lease and transit franchise expenses, projected other operating and selling, general and administrative expenses, capital expenditures and discount rates.

The estimated revenue growth rates, projected billboard lease and transit franchise expenses, projected other operating and selling, general and administrative expenses and capital expenditures for the projection period are based on our internal forecasts of future performance as well as historical trends.

The terminal value is estimated based on a perpetual nominal growth rate, which is based on projected long-range inflation and long-term industry projections.

The discount rates represent the weighted average cost of capital derived using known and estimated market metrics.

There can be no assurance that these estimates and assumptions will prove to be an accurate prediction of the future, and a downward revision of these estimates and/or assumptions would decrease the fair values of our reporting units, which could result in additional impairment charges in the future.

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The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Intangible assets, which primarily consist of acquired permits and leasehold

Intangible Assets —Intangible assets, which primarily consist of acquired permits and leasehold agreements and franchise agreements, are amortized by the straight-line method over their estimated useful lives, which range from five to 40 years.

Leases (Lessees) —We generally lease the underlying sites upon which the physical billboard structures on which we display advertising copy for our customers are located.

We also have leases for office and warehouse spaces.

All leases are recorded on the Consolidated Statement of Financial Position and we recognize lease expense on a straight-line basis over the lease term.

We do not separate lease and non-lease components from contracts.

Many of our leases include one or more options to renew, with renewal terms that can extend the lease term for varying lengths of time.

These renewal provisions typically require consent of both parties.

Many of our leases also contain termination provisions at our option, based on a variety of factors, including termination due to changing economic conditions of the related billboard location.

Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

When available, we use the rate implicit in the lease to discount lease payments to present value;

however, most of our leases do not provide a readily determinable implicit rate.

Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement or amendment.

We rent or sublease certain real estate to third parties.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

agreements and franchise agreements, are amortized by the straight-line method over their estimated useful lives, which range from five to 40 years .

As a result of the adoption of the lease standard on January 1, 2019, we recorded a cumulative-effect adjustment of $ 24.8 million to beginning Distribution in excess of earnings on the Consolidated Statement of Equity for lease costs which would have been recognized in prior periods as a result of the change in the lease term.

Leases (Lessors) —Our agreements with customers to advertise on our billboards are considered operating leases.

Substantially all of our advertising structures (see Note 4.

Property and Equipment, Net ) are utilized to lease advertising space to customers, for which the contracts are accounted for as rental income.

Billboard display revenues are recognized as rental income on a straight-line basis over the customer lease term.

We exclude from rental income all taxes assessed by a governmental authority that we collect from customers.

These operating leases are short-term in duration, typically a term of 4 weeks to one year and do not include any variable lease provisions or options to extend the lease.

Certain contracts may include provisions for the early termination of the lease after an agreed upon notice period.

We account for non-lease installation services and the lease associated with providing advertising space on our billboards as a combined component under the lease standard.

Hedging Activities —We utilize interest rate cash flow swap agreements to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate.

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Transit display revenues are recognized based on the level of units displayed in proportion to the total units to be displayed over the contract period.

Other revenues are derived primarily from (i) providing print production services for advertisements to be displayed on our billboards or other outdoor sites, or on displays that we operate within transit systems, and (ii) revenues from marketing and multimedia rights agreements with colleges, universities and other educational institutions, which entitle us to operate on-campus advertising displays, as well as manage marketing opportunities, media rights and experiential entertainment at sporting events.

Other revenues are derived primarily from providing print production services for advertisements to be displayed on our billboards or other outdoor sites, or on displays that we operate within transit systems.

Print production services are not interrelated with the provision of advertising space and are considered a distinct performance obligation.

Production revenue is recognized over the production period, which is typically very short in duration.

Revenues from our Sports Marketing operating segment are principally derived from advertising and marketing arrangements and are recognized over the contract period.

Our billboard display and transit display contracts with customers range from four weeks to one year and billing commences at the beginning of the contract term, with payment generally due within 30 days of billing.

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Deferred revenues primarily consist of revenues paid in advance of being earned.

For all revenue sources, we evaluate whether we should be considered the principal (i.e., report revenues on a gross basis) or an agent (i.e., report revenues on a net basis).

We are considered the principal in our arrangements and report revenues on a gross basis, wherein the amounts billed to customers are recorded as revenues, and amounts paid to municipalities, transit operators and suppliers are recorded as expenses.

We are considered the principal because we control the advertising space before and after the contract term, are primarily responsible to our customers, have discretion in pricing and typically have inventory risk.

For space provided to advertisers through the use of an advertising agency whose commission is calculated based on a stated percentage of gross advertising spending, our Revenues are reported net of agency commissions.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

Concentration of Credit Risk— In the opinion of management, credit risk is limited due to the large number of customers and advertising agencies utilized.

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The fixed component of lease costs is expensed evenly over the non-cancellable contract term, and contingent rent is expensed as incurred when the related revenues are recognized.

Transit franchise agreements generally provide for payment to the municipality or transit operator of the greater of a percentage of the revenues that we generate under the related transit contract and a specified guaranteed minimum payment.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

which are determined based on a percentage of revenues are expensed as incurred when the related revenues are recognized, and the minimum guarantee is expensed over the contract term.

Our transit franchise agreements have fixed terms, are typically terminable for convenience at the option of the governmental entity (other than with respect to the New York Metropolitan Transportation Authority (the “MTA”)), and generally provide for payments to the governmental entity based on a percentage of revenues generated under the contract and/or a guaranteed minimum annual payment.

The costs which are determined based on a percentage of revenues are expensed as incurred when the related revenues are recognized, and the guaranteed minimum annual payment is expensed over the contract term.

Direct Lease Acquisition Costs— Variable commissions directly associated with billboard revenues are amortized on a straight-line basis over the related customer lease term, which generally ranges from four weeks to one year .

Amortization of direct lease acquisition costs is presented within Amortization expense in the accompanying Consolidated Statements of Operations.

Amortization of direct lease acquisition costs are presented within SG&A in the accompanying Consolidated Statements of Operations.

Foreign Currency Translation and Transactions— The assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the balance sheet date, while results of operations are translated at average exchange rates for the respective periods.

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Accretion of the liability is recognized in selling, general and administrative expenses and the capitalized cost is depreciated over the expected useful life of the related asset.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

Stock-based Compensation —We measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

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Adoption of New Accounting Standards

In the first quarter of 2019, we adopted the Financial Accounting Standards Board’s (the “FASB’s”) guidance addressing the recognition, measurement, presentation and disclosure of leases for both lessees and lessors using the modified retrospective transition method to adopt the new lease standard.

The modified retrospective transition method allows entities to apply the new lease standard at the adoption date rather than adjusting each period presented at the date of adoption.

The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating based on the principle of whether or not the lease is effectively a financed purchase by the lessee.

This classification determines whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively.

A lessee is also required to record a right-of-use asset and a lease liability for all leases regardless of their classification.

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward our historical lease classification.

We also elected the practical expedient related to land easements, which allowed us to carry forward our accounting treatment for land easements on existing leases.

In addition we elected the hindsight practical expedient which resulted in increasing the length of our lease term for existing leases with cancellation provisions.

At adoption, we had approximately 23,600 lease agreements as lessee, all of which were classified as operating leases.

On January 1, 2019, the adoption of this standard resulted in the recognition of an operating lease liability of $ 1.2 billion and a right-of-use operating lease asset of the same amount.

Existing prepaid and accrued lease costs were reclassified to the right-of-use operating lease asset, resulting in a net asset of $ 1.3 billion on the Consolidated Statement of Financial Position.

As a result of the adoption of this standard, we also recorded a cumulative-effect adjustment of $ 24.8 million to beginning Distribution in excess of earnings on the Consolidated Statement of Equity for lease costs which would have been recognized in prior periods as a result of the change in the lease term.

Under the new guidance, lessors account for leases using an approach that is substantially equivalent to previous guidance for sales-type leases, direct financing leases and operating leases.

Our billboard lease revenues will continue to be recognized on a straight-line basis over their respective lease terms.

Adoption of this guidance did not have a material effect on our consolidated financial statements.

In the first quarter of 2020, we adopted the Financial Accounting Standards Board’s (the “FASB’s”) guidance for evaluating and determining when a cloud computing arrangement (hosting arrangement) includes a software license.

The adoption of this guidance did not have a material effect on our consolidated financial statements.

In the first quarter of 2020, we adopted the FASB’s guidance which requires a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amount expected to be collected.

The application of this guidance was limited to our receivables that are not related to rental income, which is accounted for under the lease accounting standard.

The adoption of this guidance did not have a material effect on our financial statements.

We have recorded a Provision for doubtful accounts of $ 20.1 million in 2020, for all receivables, which includes an estimate of the impact from the COVID-19 pandemic on future collections.

Recent Pronouncements

In April 2015 (updated in August 2018), the FASB updated their guidance for evaluating and determining when a cloud computing arrangement (hosting arrangement) includes a software license.

The new guidance is effective for annual and interim periods beginning after December 15, 2019.

We do not expect this guidance to have a material effect on our consolidated financial statements.

In June 2016 (updated in May 2019 and November 2019), the FASB issued guidance which requires a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amount expected to be collected.

The new guidance is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted.

We do not expect this guidance to have a material effect on our consolidated financial statements.

In December 2019, the FASB issued guidance simplifying the accounting for income taxes by removing certain exceptions to the general principles of Accounting Standards Codification Topic 740, Income Taxes .

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We do not expect this guidance to have a material effect on our consolidated financial statements.

In March 2020 (updated in January 2021), the FASB issued guidance providing optional expedients and exceptions for accounting for contracts, hedging relationships and other transactions that reference to LIBOR or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met.

The guidance is effective for all entities as of March 12, 2020, through December 31, 2022.

We do not expect this guidance to impact our accounting for our existing debt and hedging instruments.

Restricted Cash

In 2018, we entered into an escrow agreement in connection with one of our transit franchise contracts, which requires us to deposit funds into an escrow account to fund capital expenditures over the term of the transit franchise contract.

We have an escrow agreement in connection with one of our transit franchise contracts, which requires us to deposit funds into an escrow account to fund capital expenditures over the term of the transit franchise contract.

As of December 31, 2020, we have $ 1.6 million of restricted cash deposited in the escrow account.

(in millions)

December 31, 2019

December 31, 2018

December 31, 2017

(in millions) December 31, 2020 December 31, 2019 December 31, 2018

Cash and cash equivalents $ 710.4 $ 59.1 $ 52.7

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Cash, cash equivalents and restricted cash $ 712.0 $ 60.9 $ 54.1

Effective January 1, 2019, we adopted the FASB’s guidance addressing the recognition, measurement, presentation and disclosure of leases for both lessees and lessors using the transition method to adopt the new lease standard.

Summary of Significant Accounting Policies:

Adoption of New Accounting Standards .

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements (Continued)

We generally lease the underlying sites upon which the physical billboard structures on which we display advertising copy for our customers are located.