OUTFRONT Media Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk related to commodity prices and foreign currency exchange rates, and to a limited extent, interest rates and credit risks. Commodity Price Risk We incur various operating costs that are subject to price risk caused by volatility in underlying commodity values. Commodity price risk is present in electricity costs associated with powering our digital billboard displays and lighting our traditional static billboard displays at night. We do not currently use derivatives or other financial instruments to mitigate our exposure to commodity price risk. However, we do enter into contracts with commodity providers to limit our exposure to commodity price fluctuations. For the year ended December 31, 2021, such contracts accounted for 11.5% of our total utility costs. As of March 31, 2022, we had active electricity purchase agreements with fixed contract rates for locations throughout Illinois, New Jersey, Pennsylvania and Texas, which expire at various dates through June 2024. 40 Table of Contents Foreign Exchange Risk Foreign currency translation risk is the risk that exchange rate gains or losses arise from translating our Canadian business’s statements of earnings and statements of financial position from functional currency to our reporting currency (the U.S. Dollar) for consolidation purposes. Any gain or loss on translation is included within comprehensive income and Accumulated other comprehensive income on our Consolidated Statement of Financial Position. The functional currency of our international subsidiaries is their respective local currency. As of March 31, 2022, we have $1.4 million of unrecognized foreign currency translation gains included within Accumulated other comprehensive loss on our Consolidated Statement of Financial Position. Substantially all of our transactions at our Canadian subsidiary are denominated in their local functional currency, thereby reducing our risk of foreign currency transaction gains or losses. We do not currently use derivatives or other financial instruments to mitigate foreign currency risk, although we may do so in the future. Interest Rate Risk We are subject to interest rate risk to the extent we have variable-rate debt outstanding including under the Senior Credit Facilities and the AR Facility. As of March 31, 2022, we had a $600.0 million variable-rate Term Loan due 2026 outstanding, which has an interest rate of 2.2% per year. An increase or decrease of 1/4% in our interest rate on the Term Loan will change our annualized interest expense by approximately $1.5 million. As of March 31, 2022, there were no outstanding borrowings under the AR Facility. We have an interest rate cash flow swap agreement to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate and hedge our interest rate risk related to such variable rate debt. The fair value of the swap position was a net unrecognized loss of approximately $0.1 million as of March 31, 2022, which is included in Other current liabilities on our Consolidated Statement of Financial Position. The following table provides information about our interest rate swap agreement, which is sensitive to changes in interest rates. Notional amounts are used to calculate the contractual cash flows to be exchanged under the agreement. (in millions, except percentages) 2022 2023 2024 2025 2026 2027 Thereafter Total Fair Value Loss as of 3/31/22 Pay fixed/receive variable $ 50.0 $ — $ — $ — $ — $ — $ — $ 50.0 $ 0.1 Average pay rate 1.8 % — % — % — % — % — % — % Average receive rate (a) one-month LIBOR — — — — — — (a) The one-month LIBOR rate was approximately 0.5% as of March 31, 2022. Credit Risk In the opinion of our management, credit risk is limited due to the large number of customers and advertising agencies utilized. We perform credit evaluations on our customers and agencies and believe that the allowances for credit losses are adequate. We experienced an increase in credit losses as a result of the COVID-19 pandemic and accordingly, we recorded additional provisions for doubtful accounts in 2020. Provisions for doubtful accounts have increased in the three months ended March 31, 2022, compared to the same prior-year period, driven by increased business activity. We expect provisions for doubtful accounts to continue to increase through the remainder of the year. We do not currently use derivatives or other financial instruments to mitigate credit risk. 41 Table of Contents