Item 1. Financial Statements
Item 1. Financial Statements.
OUTFRONT Media Inc.
Consolidated Statements of Financial Position
(Unaudited)
As of
(in millions) June 30,
2023 December 31,
2022
Assets:
Current assets:
Cash and cash equivalents $ 42.2 $ 40.4
Receivables, less allowance ($ 17.2 in 2023 and $ 20.2 in 2022)
293.0 315.5
Prepaid lease and franchise costs 6.5 9.1
Other prepaid expenses 21.3 19.8
Other current assets 6.9 5.6
Total current assets 369.9 390.4
Property and equipment, net (Note 3) 694.3 699.8
Goodwill (Note 4) 2,029.3 2,076.4
Intangible assets (Note 4) 779.6 858.5
Operating lease assets (Note 5) 1,679.4 1,562.6
Prepaid MTA equipment deployment costs (Note 16) — 363.2
Other assets 33.4 39.1
Total assets $ 5,585.9 $ 5,990.0
Liabilities:
Current liabilities:
Accounts payable $ 54.8 $ 65.4
Accrued compensation 35.0 68.0
Accrued interest 31.6 31.1
Accrued lease and franchise costs 58.7 64.9
Other accrued expenses 54.3 47.6
Deferred revenues 48.0 35.3
Short-term debt (Note 8) 135.0 30.0
Short-term operating lease liabilities (Note 5) 202.9 188.1
Other current liabilities 19.4 21.2
Total current liabilities 639.7 551.6
Long-term debt, net (Note 8) 2,628.6 2,626.0
Deferred income tax liabilities, net 15.6 15.2
Asset retirement obligation (Note 6) 38.0 37.8
Operating lease liabilities (Note 5) 1,477.8 1,369.0
Other liabilities 41.6 41.2
Total liabilities 4,841.3 4,640.8
Commitments and contingencies (Note 16)
Preferred stock (2023 - 50.0 shares authorized, and 0.1 shares of Series A Preferred Stock issued and outstanding; 2022 - 50.0 shares authorized, and 0.1 shares of Series A Preferred Stock issued and outstanding) (Note 9)
119.8 119.8
Stockholders’ equity (Note 9):
Common stock (2023 - 450.0 shares authorized, and 165.0 shares issued and outstanding; 2022 - 450.0 shares authorized, and 164.2 issued and outstanding)
1.7 1.6
Additional paid-in capital 2,419.6 2,416.3
Distribution in excess of earnings ( 1,794.9 ) ( 1,183.4 )
Accumulated other comprehensive loss ( 6.3 ) ( 9.1 )
Total stockholders’ equity 620.1 1,225.4
Non-controlling interests 4.7 4.0
Total equity 744.6 1,349.2
Total liabilities and equity $ 5,585.9 $ 5,990.0
See accompanying notes to unaudited consolidated financial statements.
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OUTFRONT Media Inc.
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions, except per share amounts) 2023 2022 2023 2022
Revenues:
Billboard $ 371.6 $ 354.0 $ 692.2 $ 652.2
Transit and other 97.2 96.2 172.4 171.5
Total revenues 468.8 450.2 864.6 823.7
Expenses:
Operating 245.9 226.5 481.4 439.3
Selling, general and administrative 108.6 106.9 216.5 205.3
Net (gain) loss on dispositions ( 0.1 ) 0.2 0.2 ( 0.1 )
Impairment charges 511.4 — 511.4 —
Depreciation 19.7 19.4 39.8 38.7
Amortization 21.5 17.3 43.3 32.1
Total expenses 907.0 370.3 1,292.6 715.3
Operating income (loss) ( 438.2 ) 79.9 ( 428.0 ) 108.4
Interest expense, net ( 39.7 ) ( 31.6 ) ( 77.4 ) ( 62.3 )
Other expense, net 0.2 0.1 0.2 —
Income (loss) before benefit (provision) for income taxes and equity in earnings of investee companies ( 477.7 ) 48.4 ( 505.2 ) 46.1
Benefit (provision) for income taxes ( 0.4 ) ( 1.2 ) ( 0.8 ) 0.9
Equity in earnings of investee companies, net of tax ( 0.3 ) 1.2 ( 1.1 ) 1.5
Net income (loss) before allocation to non-controlling interests ( 478.4 ) 48.4 ( 507.1 ) 48.5
Net income attributable to non-controlling interests 0.5 0.4 0.7 0.6
Net income (loss) attributable to OUTFRONT Media Inc. $ ( 478.9 ) $ 48.0 $ ( 507.8 ) $ 47.9
Net income (loss) per common share:
Basic $ ( 2.92 ) $ 0.28 $ ( 3.11 ) $ 0.25
Diluted $ ( 2.92 ) $ 0.28 $ ( 3.11 ) $ 0.25
Weighted average shares outstanding:
Basic 165.0 164.0 164.8 158.0
Diluted 165.0 164.6 164.8 158.8
See accompanying notes to unaudited consolidated financial statements.
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OUTFRONT Media Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Net income (loss) before allocation to non-controlling interests $ ( 478.4 ) $ 48.4 $ ( 507.1 ) $ 48.5
Net income attributable to non-controlling interests 0.5 0.4 0.7 0.6
Net income (loss) attributable to OUTFRONT Media Inc. ( 478.9 ) 48.0 ( 507.8 ) 47.9
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments 2.5 ( 4.3 ) 2.8 ( 1.6 )
Change in fair value of interest rate swap agreements — 0.1 — 0.4
Total other comprehensive income (loss), net of tax 2.5 ( 4.2 ) 2.8 ( 1.2 )
Total comprehensive income (loss) $ ( 476.4 ) $ 43.8 $ ( 505.0 ) $ 46.7
See accompanying notes to unaudited consolidated financial statements.
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OUTFRONT Media Inc.
Consolidated Statements of Equity
(Unaudited)
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 Loss Total Stockholders’ Equity Non-Controlling Interests Total Equity
Balance as of
March 31, 2022 0.1 $ 119.8 164.0 $ 1.6 $ 2,391.3 $ ( 1,176.8 ) $ ( 1.4 ) $ 1,214.7 $ 4.4 $ 1,338.9
Net income — — — — — 48.0 — 48.0 0.4 48.4
Other comprehensive loss — — — — — — ( 4.2 ) ( 4.2 ) — ( 4.2 )
Stock-based payments:
Amortization — — — — 8.5 — — 8.5 — 8.5
Series A Preferred Stock dividends ( 7 %)
— — — — — ( 2.2 ) — ( 2.2 ) — ( 2.2 )
Dividends ($ 0.30 per share)
— — — — — ( 49.4 ) — ( 49.4 ) — ( 49.4 )
Other — — — — — — — — ( 0.7 ) ( 0.7 )
Balance as of
June 30, 2022 0.1 $ 119.8 164.0 $ 1.6 $ 2,399.8 $ ( 1,180.4 ) $ ( 5.6 ) $ 1,215.4 $ 4.1 $ 1,339.3
Balance as of
March 31, 2023 0.1 $ 119.8 165.0 $ 1.6 $ 2,411.8 $ ( 1,264.2 ) $ ( 8.8 ) $ 1,140.4 $ 4.1 $ 1,264.3
Net income (loss) — — — — — ( 478.9 ) — ( 478.9 ) 0.5 ( 478.4 )
Other comprehensive income — — — — — — 2.5 2.5 — 2.5
Stock-based payments:
Vested — — 0.1 0.1 — — — 0.1 — 0.1
Amortization — — — — 7.9 — — 7.9 — 7.9
Shares paid for tax withholding for stock-based payments — — ( 0.1 ) — ( 0.1 ) — — ( 0.1 ) — ( 0.1 )
Series A Preferred Stock dividends ( 7 %)
— — — — — ( 2.2 ) — ( 2.2 ) — ( 2.2 )
Dividends ($ 0.30 per share)
— — — — — ( 49.6 ) — ( 49.6 ) — ( 49.6 )
Other — — — — — — — — 0.1 0.1
Balance as of
June 30, 2023 0.1 $ 119.8 165.0 $ 1.7 $ 2,419.6 $ ( 1,794.9 ) $ ( 6.3 ) $ 620.1 $ 4.7 $ 744.6
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OUTFRONT Media Inc.
Consolidated Statements of Equity (Continued)
(Unaudited)
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 Loss Total Stockholders’ Equity Non-Controlling Interests Total Equity
Balance as of December 31, 2021 0.4 $ 383.4 145.6 $ 1.5 $ 2,119.0 $ ( 1,122.0 ) $ ( 4.4 ) $ 994.1 $ 13.0 $ 1,390.5
Net income — — — — — 47.9 — 47.9 0.6 48.5
Other comprehensive loss — — — — — — ( 1.2 ) ( 1.2 ) — ( 1.2 )
Stock-based payments:
Vested — — 1.0 — — — — — — —
Amortization — — — — 16.4 — — 16.4 — 16.4
Shares paid for tax withholding for stock-based payments — — ( 0.4 ) — ( 10.9 ) — — ( 10.9 ) — ( 10.9 )
Class A equity interest redemptions — — 0.4 — 8.6 — — 8.6 ( 8.6 ) —
Series A Preferred Stock conversions ( 0.3 ) ( 266.8 ) 17.4 0.1 266.7 — — 266.8 — —
Series A Preferred Stock dividends ( 7 %)
— 3.2 — — — ( 7.6 ) — ( 7.6 ) — ( 4.4 )
Dividends ($ 0.60 per share)
— — — — — ( 98.7 ) — ( 98.7 ) — ( 98.7 )
Other — — — — — — — — ( 0.9 ) ( 0.9 )
Balance as of
June 30, 2022 0.1 $ 119.8 164.0 $ 1.6 $ 2,399.8 $ ( 1,180.4 ) $ ( 5.6 ) $ 1,215.4 $ 4.1 $ 1,339.3
Balance as of December 31, 2022 0.1 $ 119.8 164.2 $ 1.6 $ 2,416.3 $ ( 1,183.4 ) $ ( 9.1 ) $ 1,225.4 $ 4.0 $ 1,349.2
Net income (loss) — — — — — ( 507.8 ) — ( 507.8 ) 0.7 ( 507.1 )
Other comprehensive income — — — — — — 2.8 2.8 — 2.8
Stock-based payments:
Vested — — 1.5 0.1 — — — 0.1 — 0.1
Amortization — — — — 15.7 — — 15.7 — 15.7
Shares paid for tax withholding for stock-based payments — — ( 0.7 ) — ( 12.4 ) — — ( 12.4 ) — ( 12.4 )
Series A Preferred Stock dividends ( 7 %)
— — — — — ( 4.4 ) — ( 4.4 ) — ( 4.4 )
Dividends ($ 0.60 per share)
— — — — — ( 99.3 ) — ( 99.3 ) — ( 99.3 )
Balance as of
June 30, 2023 0.1 $ 119.8 165.0 $ 1.7 $ 2,419.6 $ ( 1,794.9 ) $ ( 6.3 ) $ 620.1 $ 4.7 $ 744.6
See accompanying notes to unaudited consolidated financial statements.
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OUTFRONT Media Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
June 30,
(in millions) 2023 2022
Operating activities:
Net income (loss) attributable to OUTFRONT Media Inc.
$ ( 507.8 ) $ 47.9
Adjustments to reconcile net income (loss) to net cash flow provided by operating activities:
Net income attributable to non-controlling interests 0.7 0.6
Depreciation and amortization 83.1 70.8
Deferred tax (benefit) provision 0.1 ( 2.5 )
Stock-based compensation 15.7 16.4
Provision for doubtful accounts 0.7 1.7
Accretion expense 1.5 1.4
Net (gain) loss on dispositions 0.2 ( 0.1 )
Impairment charges 511.4 —
Equity in earnings of investee companies, net of tax 1.1 ( 1.5 )
Distributions from investee companies 0.8 0.4
Amortization of deferred financing costs and debt discount 3.4 3.3
Change in assets and liabilities, net of investing and financing activities:
Decrease in receivables 22.3 20.1
Increase in prepaid MTA equipment deployment costs ( 21.8 ) ( 48.1 )
Decrease in prepaid expenses and other current assets 1.3 4.5
Decrease in accounts payable and accrued expenses ( 40.5 ) ( 24.9 )
Increase in operating lease assets and liabilities 8.9 2.9
Increase in deferred revenues 12.7 11.0
Decrease in income taxes ( 4.8 ) ( 1.3 )
Other, net ( 1.3 ) ( 1.5 )
Net cash flow provided by operating activities
87.7 101.1
Investing activities:
Capital expenditures ( 44.9 ) ( 41.8 )
Acquisitions ( 27.4 ) ( 248.6 )
MTA franchise rights 0.6 ( 5.1 )
Net proceeds from dispositions 0.2 1.1
Net cash flow used for investing activities
( 71.5 ) ( 294.4 )
Financing activities:
Proceeds from borrowings under short-term debt facilities 105.0 —
Payments of deferred financing costs ( 3.7 ) ( 0.4 )
Taxes withheld for stock-based compensation ( 12.3 ) ( 10.9 )
Dividends ( 103.7 ) ( 102.9 )
Net cash flow used for financing activities
( 14.7 ) ( 114.2 )
Effect of exchange rate changes on cash and cash equivalents
0.3 ( 0.3 )
Net increase (decrease) in cash and cash equivalents
1.8 ( 307.8 )
Cash and cash equivalents at beginning of period
40.4 424.8
Cash and cash equivalents at end of period
$ 42.2 $ 117.0
Supplemental disclosure of cash flow information:
Cash paid for income taxes
$ 5.5 $ 2.9
Cash paid for interest
74.4 59.6
Non-cash investing and financing activities:
Accrued purchases of property and equipment
$ 3.9 $ 4.9
Accrued MTA franchise rights 2.9 3.6
Taxes withheld for stock-based compensation 0.1 —
See accompanying notes to unaudited consolidated financial statements.
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Description of Business and Basis of Presentation
Description of Business
OUTFRONT Media Inc. (the “Company”) and its subsidiaries (collectively, “we,” “us” or “our”) is a real estate investment trust (“REIT”), which provides advertising space (“displays”) on out-of-home advertising structures and sites in the United States (the “U.S.”) and Canada. 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. and Canada. In total, we have displays in all of the 25 largest markets in the U.S. and approximately 150 markets across the U.S. and Canada. We currently manage our operations through two operating segments—U.S. Billboard and Transit, which is included in our U.S. Media reportable segment, and International.
Basis of Presentation and Use of Estimates
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”). In the opinion of our management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. These financial statements should be read in conjunction with the more detailed financial statements and notes thereto, included in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 23, 2023.
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, including the impact of events such as the COVID-19 pandemic and the current heightened levels of inflation, 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.
Out-of-Period Adjustment
For the three months ended March 31, 2023, the Company recorded an out-of-period adjustment relating to variable billboard property lease expenses and accrued lease and franchise costs in 2022, resulting in a $ 5.2 million increase in Operating expenses for the three months ended March 31, 2023. The Company assessed the materiality of the amount reflected in this adjustment on its previously issued financial statements in accordance with the SEC’s Staff Accounting Bulletin (“SAB”) No. 99 and SAB No. 108 and concluded that the amount was not material, individually or in the aggregate, to any of its previously issued financial statements .
Note 2. New Accounting Standards
Adoption of New Accounting Standards
In the first quarter of 2023, we adopted the Financial Accounting Standards Board’s (the “FASB”) guidance on the recognition and measurement of contract assets and contract liabilities acquired in a business combination. At the acquisition date, the acquirer should account for the related revenue contracts as if it had originated the contracts. The guidance also provides certain practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. We will implement this guidance when accounting for business combinations in the future.
Recent Pronouncements
In March 2020 and December 2022, the FASB issued guidance providing optional expedients and exceptions for accounting for contracts, hedging relationships and other transactions that reference to the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform, if certain criteria are met. The guidance is
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
effective for all entities as of March 12, 2020, through December 31, 2024. This guidance did not have a significant impact on our accounting for our existing debt.
Note 3. Property and Equipment, Net
The table below presents the balances of major classes of assets and accumulated depreciation.
As of
(in millions) Estimated Useful Lives June 30,
2023 December 31,
2022
Land $ 112.3 $ 112.2
Buildings 15 to 35 years
57.5 56.5
Advertising structures 3 to 20 years
2,042.9 2,006.8
Furniture, equipment and other 3 to 10 years
192.9 183.4
Construction in progress 43.4 38.5
2,449.0 2,397.4
Less: Accumulated depreciation 1,754.7 1,697.6
Property and equipment, net $ 694.3 $ 699.8
Depreciation expense was $ 19.7 million in the three months ended June 30, 2023, $ 19.4 million in the three months ended June 30, 2022, $ 39.8 million in the six months ended June 30, 2023, and $ 38.7 million in the six months ended June 30, 2022.
Note 4. Long-Lived Assets
By the end of the first half of 2023, our U.S. Transit and Other reporting unit did not meet revenue expectations and as of June 30, 2023, our revenue pacing and outlook for the remainder of 2023 reflects a continued decline in transit revenues as compared to our 2023 forecast due to underperformance across our transit business, including the New York Metropolitan Transportation Authority (the “MTA”) transit system. As a result, we determined that there was a decline in the long-term outlook for our U.S. Transit and Other reporting unit constituting a triggering event, which requires an interim impairment analysis of goodwill and long-lived assets.
Goodwill
For the six months ended June 30, 2023, and the year ended December 31, 2022, the changes in the book value of goodwill by segment were as follows:
(in millions) U.S. Media Other Total
As of December 31, 2021 $ 2,054.0 $ 23.8 $ 2,077.8
Currency translation adjustments — ( 1.4 ) ( 1.4 )
As of December 31, 2022 $ 2,054.0 $ 22.4 $ 2,076.4
Currency translation adjustments — 0.5 0.5
Impairment ( 47.6 ) — ( 47.6 )
As of As of June 30, 2023 $ 2,006.4 $ 22.9 $ 2,029.3
The estimated fair value of our U.S. Transit and Other reporting unit exceeded its carrying value by 28 % as of December 31, 2022, based on our goodwill impairment assessment in the prior year. As a result of the impairment analysis performed during the second quarter of 2023, we determined that the carrying value of our U.S. Transit and Other reporting unit exceeded its fair value and we recorded an impairment charge of $ 47.6 million in the Consolidated Statements of Operations.
As of June 30, 2023, the goodwill balances associated with the U.S. Billboard reporting unit was $ 2,006.4 million and the Canada reporting unit was $ 22.9 million.
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Intangible Assets
Our identifiable intangible assets primarily consist of acquired permits and leasehold agreements, and franchise agreements, which grant us the right to operate out-of-home structures in specified locations and the right to provide advertising space on railroad and municipal transit properties. Identifiable intangible assets are amortized on a straight-line basis over their estimated useful life, which is the respective life of the agreement that in some cases includes historical experience of renewals.
Our identifiable intangible assets consist of the following:
(in millions) Gross Accumulated Amortization Impairment Net
As of June 30, 2023:
Permits and leasehold agreements $ 1,620.1 $ ( 901.0 ) $ — $ 719.1
Franchise agreements (a)
917.4 ( 427.3 ) ( 444.8 ) 45.3
Other intangible assets 21.0 ( 5.8 ) — 15.2
Total intangible assets $ 2,558.5 $ ( 1,334.1 ) $ ( 444.8 ) $ 779.6
As of December 31, 2022:
Permits and leasehold agreements $ 1,597.6 $ ( 868.7 ) $ — $ 728.9
Franchise agreements 533.2 ( 418.6 ) — 114.6
Other intangible assets 18.9 ( 3.9 ) — 15.0
Total intangible assets $ 2,149.7 $ ( 1,291.2 ) $ — $ 858.5
(a) We reclassified all Prepaid MTA equipment deployment costs (see Note 16. Commitments and Contingencies ) and recorded an impairment due to a decline in the long-term outlook of our U.S. Transit and Other reporting unit.
In the six months ended June 30, 2023, we acquired approximately 440 displays, resulting in amortizable intangible assets for permits and leasehold agreements of $ 23.8 million, which are amortized using the straight-line method over their estimated useful lives, an average period of 14.9 years.
All of our intangible assets, except goodwill, are subject to amortization. Amortization expense was $ 21.5 million in the three months ended June 30, 2023, $ 17.3 million in the three months ended June 30, 2022, $ 43.3 million in the six months ended June 30, 2023, and $ 32.1 million in the six months ended June 30, 2022.
We performed an analysis of carrying value of our long-lived asset groups within our U.S. Transit and Other reporting unit as a result of the triggering event noted above utilizing undiscounted cash flows compared to the carrying value of the asset groups. As a result, we recorded an impairment charge of $ 463.5 million in the second quarter of 2023, primarily representing a $ 443.1 million impairment charge related to our MTA asset group.
Note 5. Leases
Lessee
The following table presents our operating lease assets and liabilities:
As of
(in millions, except years and percentages) June 30,
2023 December 31,
2022
Operating lease assets $ 1,679.4 $ 1,562.6
Short-term operating lease liabilities 202.9 188.1
Non-current operating lease liabilities 1,477.8 1,369.0
Weighted-average remaining lease term 10.8 years 11.0 years
Weighted-average discount rate 6.1 % 5.8 %
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
The components of our lease expenses were as follows:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Operating expenses (a)
$ 128.1 $ 111.7 $ 249.0 $ 218.4
Selling, general and administrative expenses 3.2 2.7 6.3 5.4
Variable costs (a)
38.1 27.8 70.6 52.8
Cash paid for operating leases 113.2 106.3 250.9 224.7
Leased assets obtained in exchange for new operating lease liabilities 83.9 70.4 256.0 152.3
(a) Includes an out-of-period adjustment of $ 5.2 million recorded in the first quarter of 2023 related to variable billboard property lease expenses (see Note 1. Description of Business and Basis of Presentation ).
For each of the three and six months ended June 30, 2023 and 2022, sublease income related to office properties was immaterial.
Lessor
We recorded rental income of $ 349.3 million for the three months ended June 30, 2023, and $ 342.2 million for the three months ended June 30, 2022, $ 647.7 million for the six months ended June 30, 2023, and $ 630.5 million for the six months ended June 30, 2022, in Revenues on our Consolidated Statement of Operations.
Note 6. Asset Retirement Obligation
The following table sets forth the change in the asset retirement obligations associated with our advertising structures located on leased properties. The obligation is calculated based on the assumption that all of our advertising structures will be removed within the next 50 years. The estimated annual costs to dismantle and remove the structures upon the termination or non-renewal of our leases are consistent with our historical experience.
(in millions)
As of December 31, 2022 $ 37.8
Accretion expense 1.5
Additions 0.1
Liabilities settled ( 1.5 )
Foreign currency translation adjustments 0.1
As of June 30, 2023 $ 38.0
Note 7. Related Party Transactions
On January 18, 2023, we entered into a transaction with an affiliate of Providence Equity Partners L.L.C. (the “Providence Affiliate”) in connection with the Providence Affiliate’s purchase of a lease for certain outdoor advertising assets (the “Assets”) from a third-party seller. Pursuant to an agreement between us and the Providence Affiliate (the “Billboard Agreement”), we agreed to exclusively market, license and make advertising space available on the Assets to third-party advertisers for a term of up to ten years (the “Transaction”). In return, we will retain all revenues from the sale of advertising with respect to the Assets less the following payments to the Providence Affiliate or its payment designee, as applicable: (i) a minimum annual guarantee payment paid to the Providence Affiliate’s payment designee that increases from approximately $ 1.8 million to $ 3.5 million during the term of the Billboard Agreement; (ii) a minimum annual guarantee payment paid to the Providence Affiliate that increases from $ 8.5 million to $ 12.0 million by year six and adjusted for inflation thereafter through year ten; (iii) a percentage revenue share payment on gross revenues generated above $ 22.0 million paid to the Providence Affiliate during the term of the Billboard Agreement; (iv) a percentage revenue share payment on net revenues until $ 100.0 million is paid to the Providence Affiliate or its payment designee, as applicable; and (v) a one-time payment of $ 10.0 million paid to the Providence Affiliate on the fifth anniversary of the closing of the Transaction (the “Transaction Closing”) if we have not yet acquired the Assets as
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
described below. The Billboard Agreement also provides that (i) we have the option to acquire the Assets from the Providence Affiliate between the third and seventh anniversaries of the Transaction Closing at pre-agreed prices depending on the time at which we exercise the option; (ii) prior to the seventh anniversary of the Transaction Closing, we have a right of first offer prior to any sale of the Assets by the Providence Affiliate to a third-party; and (iii) in the event of a termination of the Billboard Agreement by the Providence Affiliate after a sale to a third-party, we may in certain circumstances be entitled to receive a termination payment. As of June 30, 2023, operating lease assets related to the Billboard Agreement were $ 95.2 million and non-current operating lease liabilities related to the Billboard Agreement were $ 94.1 million , and are included in Operating lease assets and non-current Operating lease liabilities , respectively, on the Consolidated Statements of Financial Position. Billboard revenues related to the Billboard Agreement were $ 1.9 million in the three months ended June 30, 2023, and $ 3.8 million in the six months ended June 30, 2023, and recorded in Revenues on the Consolidated Statement of Operations. Operating lease expenses related to the Billboard Agreement were $ 2.6 million in the three months ended June 30, 2023, and $ 4.9 million in the six months ended June 30, 2023, and recorded in Operating expenses on the Consolidated Statement of Operations.
We have a 50 % ownership interest in two joint ventures that operate transit shelters in the greater Los Angeles area and Vancouver, and four joint ventures which currently operate a total of seven billboard displays in New York and Boston. All of these joint ventures are accounted for as equity investments. These investments totaled $ 10.3 million as of June 30, 2023, and $ 12.2 million as of December 31, 2022, and are included in Other assets on the Consolidated Statements of Financial Position. We provided sales and management services to these joint ventures and recorded management fees in Revenues on the Consolidated Statement of Operations of $ 1.4 million in the three months ended June 30, 2023, $ 2.3 million in the three months ended June 30, 2022, $ 2.4 million in the six months ended June 30, 2023, and $ 4.0 million in the six months ended June 30, 2022.
Note 8. Debt
Debt, net, consists of the following:
As of
(in millions, except percentages) June 30,
2023 December 31,
2022
Short-term debt:
AR Facility $ 135.0 $ 30.0
Total short-term debt 135.0 30.0
Long-term debt:
Term loan, due 2026 598.8 598.6
Senior unsecured notes:
6.250 % senior unsecured notes, due 2025
400.0 400.0
5.000 % senior unsecured notes, due 2027
650.0 650.0
4.250 % senior unsecured notes, due 2029
500.0 500.0
4.625 % senior unsecured notes, due 2030
500.0 500.0
Total senior unsecured notes 2,050.0 2,050.0
Debt issuance costs ( 20.2 ) ( 22.6 )
Total long-term debt, net 2,628.6 2,626.0
Total debt, net $ 2,763.6 $ 2,656.0
Weighted average cost of debt 5.4 % 5.2 %
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Term Loan
The interest rate on the term loan due in 2026 (the “Term Loan”) was 6.9 % per annum as of June 30, 2023. As of June 30, 2023, a discount of $ 1.2 million on the Term Loan remains unamortized. The discount is being amortized through Interest expense, net , on the Consolidated Statement of Operations.
Revolving Credit Facility
We also have a $ 500.0 million revolving credit facility, which matures in 2028 (the “Revolving Credit Facility,” together with the Term Loan, the “Senior Credit Facilities”).
During the second quarter of 2023, the Company, along with its wholly-owned subsidiaries, Outfront Media Capital LLC (“Finance LLC”) and Outfront Media Capital Corporation (together with Finance LLC, the “Borrowers”), and the other guarantors party thereto, entered into two amendments (the “Amendments”) to the Credit Agreement (as defined below). The Amendments provide for (i) the replacement of the London Interbank Offered Rate with the Secured Overnight Financing Rate as the interest rate benchmark , (ii) the extension of the maturity date of the Revolving Credit Facility from its previous maturity date of November 18, 2024 to June 15, 2028, and (iii) an increase in the interest rate margins applicable to the Borrowers under the Revolving Credit Facility from a range of 1.25 % to 1.75 % to a range of 1.75 % to 2.25 %, in the case of Secured Overnight Financing Rate borrowings, based on the Borrowers’ leverage ratio. The Amendments also include springing maturity refinancing provisions with respect to the Borrowers’ outstanding term loan indebtedness and certain series of senior notes issued by the Borrowers, in each case, which have maturity dates prior to June 15, 2028, as well as other clarifying, conforming and ministerial changes to the Credit Agreement.
As of June 30, 2023, there were no outstanding borrowings under the Revolving Credit Facility.
The commitment fee based on the amount of unused commitments under the Revolving Credit Facility was $ 0.4 million in each of the three months ended June 30, 2023 and 2022, $ 0.8 million in each of the six months ended June 30, 2023 and 2022. As of June 30, 2023, we had issued letters of credit totaling approximately $ 6.5 million against the letter of credit facility sublimit under the Revolving Credit Facility.
Standalone Letter of Credit Facilities
As of June 30, 2023, we had issued letters of credit totaling approximately $ 77.1 million under our aggregate $ 81.0 million standalone letter of credit facilities. The total fees under the letter of credit facilities were immaterial in each of the three and six months ended June 30, 2023 and 2022.
Accounts Receivable Securitization Facility
As of June 30, 2023, we have a $ 150.0 million revolving accounts receivable securitization facility (the “AR Facility”), which terminates in May 2025, unless further extended.
In connection with the AR Facility, Outfront Media LLC and Outfront Media Outernet Inc., each a wholly-owned subsidiary of the Company, and certain of the Company’s taxable REIT subsidiaries (“TRSs”) (the “Originators”), will sell and/or contribute their respective existing and future accounts receivable and certain related assets to either Outfront Media Receivables LLC, a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company’s qualified REIT subsidiary accounts receivable assets (the “QRS SPV”) or Outfront Media Receivables TRS, LLC a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company’s TRS accounts receivable assets (the “TRS SPV” and together with the QRS SPV, the “SPVs”). The SPVs may transfer undivided interests in their respective accounts receivable assets to certain purchasers from time to time (the “Purchasers”). The SPVs are separate legal entities with their own separate creditors who will be entitled to access the SPVs’ assets before the assets become available to the Company. Accordingly, the SPVs’ assets are not available to pay creditors of the Company or any of its subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers and other creditors of the SPVs may be remitted to the Company. Outfront Media LLC will service the accounts receivables on behalf of the SPVs for a fee. The Company has agreed to guarantee the performance of the Originators and Outfront Media LLC, in its capacity as servicer, of their respective obligations under the agreements governing the AR Facility. Neither the Company, the Originators nor the SPVs guarantee the collectability of the receivables under the AR Facility. Further, the TRS SPV and the QRS SPV are jointly and severally liable for their respective obligations under the agreements governing the AR Facility.
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
As of June 30, 2023, there were $ 135.0 million outstanding borrowings under the AR Facility, at a borrowing rate of 6.2 %. As of June 30, 2023, borrowing capacity remaining under the AR Facility was $ 15.0 million based on approximately $ 320.0 million of accounts receivable that could be used as collateral for the AR Facility in accordance with the agreements governing the AR Facility. The commitment fee based on the amount of unused commitments under the AR Facility was immaterial for the three months ended June 30, 2023, $ 0.1 million for the six months ended June 30, 2023, and immaterial for each of the three and six months ended June 30, 2022.
Debt Covenants
Our credit agreement, dated as of January 31, 2014 (as amended, restated, amended and restated, supplemented or otherwise modified, the “Credit Agreement”), governing the Senior Credit Facilities, the agreements governing the AR Facility, and the indentures governing our senior unsecured notes contain customary affirmative and negative covenants, subject to certain exceptions, including but not limited to those that restrict the Company’s and its subsidiaries’ abilities to (i) pay dividends on, repurchase or make distributions in respect to the Company’s or its wholly-owned subsidiary, Outfront Media Capital LLC’s capital stock or make other restricted payments other than dividends or distributions necessary for us to maintain our REIT status, subject to certain conditions and exceptions, (ii) enter into agreements restricting certain subsidiaries’ ability to pay dividends or make other intercompany or third-party transfers, and (iii) incur additional indebtedness. One of the exceptions to the restriction on our ability to incur additional indebtedness is satisfaction of a Consolidated Total Leverage Ratio, which is the ratio of our consolidated total debt to our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 6.0 to 1.0. As of June 30, 2023, our Consolidated Total Leverage Ratio was 5.1 to 1.0 in accordance with the Credit Agreement.
The terms of the Credit Agreement (and under certain circumstances, the agreements governing the AR Facility) require that we maintain a Consolidated Net Secured Leverage Ratio, which is the ratio of (i) our consolidated secured debt (less up to $ 150.0 million of unrestricted cash) to (ii) our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 4.5 to 1.0. As of June 30, 2023, our Consolidated Net Secured Leverage Ratio was 1.1 to 1.0 in accordance with the Credit Agreement. As of June 30, 2023, we are in compliance with our debt covenants.
Deferred Financing Costs
As of June 30, 2023, we had deferred $ 25.7 million in fees and expenses associated with the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes. We are amortizing the deferred fees through Interest expense, net, on our Consolidated Statement of Operations over the respective terms of the Term Loan, Revolving Credit Facility, AR Facility and our senior unsecured notes.
Fair Value
Under the fair value hierarchy, observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities are defined as Level 1; observable inputs other than quoted prices included within Level 1 that are either directly or indirectly observable for the asset or liability are defined as Level 2; and unobservable inputs for the asset or liability are defined as Level 3. The aggregate fair value of our debt, which is estimated based on quoted market prices of similar liabilities, was approximately $ 2.6 billion as of June 30, 2023, and $ 2.5 billion as of December 31, 2022. The fair value of our debt as of both June 30, 2023, and December 31, 2022, is classified as Level 2.
Note 9. Equity
As of June 30, 2023, 450,000,000 shares of our common stock, par value $ 0.01 per share, were authorized; 165,042,433 shares were issued and outstanding; and 50,000,000 shares of our preferred stock, par value $ 0.01 per share, were authorized, with 125,000 shares of our Series A Convertible Perpetual Preferred Stock (the “Series A Preferred Stock”), par value $ 0.01 per share, issued and outstanding.
The Series A Preferred Stock ranks senior to the shares of the Company’s common stock with respect to dividend and distribution rights. Holders of the Series A Preferred Stock are entitled to a cumulative dividend accruing at the initial rate of 7.0 % per year, payable quarterly in arrears, subject to increases as set forth in the Articles Supplementary, effective as of April 20, 2020 (the “Articles”). Dividends may, at the option of the Company, be paid in cash, in-kind, through the issuance of additional shares of Series A Preferred Stock or a combination of cash and in-kind, until April 20, 2028, after which time
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
dividends will be payable solely in cash. So long as any shares of Series A Preferred Stock remain outstanding, the Company may not, without the consent of a specified percentage of holders of shares of Series A Preferred Stock, declare a dividend on, or make any distributions relating to, capital stock that ranks junior to, or on a parity basis with, the Series A Preferred Stock, subject to certain exceptions, including but not limited to (i) any dividend or distribution in cash or capital stock of the Company on or in respect of the capital stock of the Company to the extent that such dividend or distribution is necessary to maintain the Company’s status as a REIT; and (ii) any dividend or distribution in cash in respect of our common stock that, together with the dividends or distributions during the 12 -month period immediately preceding such dividend or distribution, is not in excess of 5 % of the aggregate dividends or distributions paid by the Company necessary to maintain its REIT status during such 12 -month period. If any dividends or distributions in respect of the shares of our common stock are paid in cash, the shares of Series A Preferred Stock will participate in the dividends or distributions on an as-converted basis up to the amount of their accrued dividend for such quarter, which amounts will reduce the dividends payable on the shares of Series A Preferred Stock dollar-for-dollar for such quarter. The Series A Preferred Stock is convertible at the option of any holder at any time into shares of our common stock at an initial conversion price of $ 16.00 per share and an initial conversion rate of 62.50 shares of our common stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments and a share cap as set forth in the Articles. Subject to certain conditions set forth in the Articles (including a change of control), each of the Company and the holders of the Series A Preferred Stock may convert or redeem the Series A Preferred Stock at the prices set forth in the Articles, plus any accrued and unpaid dividends.
During the three months ended June 30, 2023, we paid cash dividends of $ 2.2 million on the Series A Preferred Stock and during the six months ended June 30, 2023, we paid cash dividends of $ 4.4 million on the Series A Preferred Stock. As of June 30, 2023, the maximum number of shares of common stock that could be required to be issued on conversion of the outstanding shares of Series A Preferred Stock was approximately 7.8 million shares.
We have a sales agreement in connection with an “at-the-market” equity offering program (the “ATM Program”), under which we may, from time to time, issue and sell shares of our common stock up to an aggregate offering price of $ 300.0 million. We have no obligation to sell any of our common stock under the sales agreement and may at any time suspend solicitations and offers under the sales agreement. No shares were sold under the ATM Program during the six months ended June 30, 2023. As of June 30, 2023, we had approximately $ 232.5 million of capacity remaining under the ATM Program.
On August 3, 2023 , we announced that our board of directors approved a quarterly cash dividend of $ 0.30 per share on our common stock, payable on September 29, 2023 , to stockholders of record at the close of business on September 1, 2023 .
Note 10. Revenues
The following table summarizes revenues by source:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Billboard:
Static displays $ 244.5 $ 241.7 $ 459.6 $ 447.7
Digital displays 113.9 99.9 202.8 181.3
Other 13.2 12.4 29.8 23.2
Billboard revenues 371.6 354.0 692.2 652.2
Transit:
Static displays 52.1 55.5 90.9 96.7
Digital displays 35.1 32.2 63.2 58.1
Other 8.1 7.1 14.6 13.5
Total transit revenues 95.3 94.8 168.7 168.3
Other 1.9 1.4 3.7 3.2
Transit and other revenues 97.2 96.2 172.4 171.5
Total revenues $ 468.8 $ 450.2 $ 864.6 $ 823.7
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Rental income was $ 349.3 million in the three months ended June 30, 2023, $ 342.2 million in the three months ended June 30, 2022, $ 647.7 million in the six months ended June 30, 2023, and $ 630.5 million in the six months ended June 30, 2022, and is recorded in Billboard revenues on the Consolidated Statement of Operations.
The following table summarizes revenues by geography:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
United States:
Billboard $ 352.2 $ 332.1 $ 658.3 $ 615.5
Transit and other 90.8 90.4 161.1 161.2
Other 1.9 1.4 3.7 3.2
Total United States revenues 444.9 423.9 823.1 779.9
Canada 23.9 26.3 41.5 43.8
Total revenues $ 468.8 $ 450.2 $ 864.6 $ 823.7
We recognized substantially all of the Deferred revenues on the Consolidated Statement of Financial Position as of December 31, 2022, during the three months ended March 31, 2023.
Note 11. Acquisitions
We completed several asset acquisitions for a total purchase price of approximately $ 27.4 million in the six months ended June 30, 2023, and $ 248.6 million in the six months ended June 30, 2022. The value of the assets acquired during 2023 and 2022 has primarily been allocated to the related permits and leasehold agreements intangible assets (see Note 4. Long-Lived Assets ).
Note 12. Stock-Based Compensation
Effective as of June 6, 2023, we amended and restated the OUTFRONT Media Inc. Amended and Restated Omnibus Stock Incentive Plan (as amended and restated, the “Stock Plan”) to, among other things, increase the number of shares of our common stock reserved for issuance under our prior plan by 6,475,000 shares, so that the aggregate number of shares reserved for issuance under the Stock Plan is 19,575,000 shares of our common stock.
The following table summarizes our stock-based compensation expense for the three and six months ended June 30, 2023 and 2022.
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Stock-based compensation expenses (restricted share units (“RSUs”) and performance-based RSUs (“PRSUs”)), before income taxes $ 7.9 $ 8.5 $ 15.7 $ 16.4
Tax benefit ( 0.1 ) ( 0.4 ) ( 0.5 ) ( 0.8 )
Stock-based compensation expense, net of tax $ 7.8 $ 8.1 $ 15.2 $ 15.6
As of June 30, 2023, total unrecognized compensation cost related to non-vested RSUs and PRSUs was $ 44.9 million, which is expected to be recognized over a weighted average period of 1.9 years.
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Notes to Consolidated Financial Statements
(Unaudited)
RSUs and PRSUs
The following table summarizes activity for the six months ended June 30, 2023, of RSUs and PRSUs issued to our employees.
Activity Weighted Average Per Share Grant Date Fair Market Value
Non-vested as of December 31, 2022 2,644,039 $ 24.28
Granted:
RSUs 1,109,485 19.03
PRSUs 619,687 20.64
Vested:
RSUs ( 928,942 ) 24.56
PRSUs ( 516,609 ) 25.36
Forfeitures:
RSUs ( 31,374 ) 22.14
PRSUs ( 2,877 ) 23.64
Non-vested as of June 30, 2023 2,893,409 21.11
Note 13. Retirement Benefits
The following table presents the components of net periodic pension cost and amounts recognized in other comprehensive income (loss) for our pension plans:
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Components of net periodic pension cost:
Interest cost $ 0.5 $ 0.5 $ 1.1 $ 1.0
Expected return on plan assets ( 0.7 ) ( 0.7 ) ( 1.4 ) ( 1.4 )
Net periodic pension cost $ ( 0.2 ) $ ( 0.2 ) $ ( 0.3 ) $ ( 0.4 )
In 2023, we do not expect to contribute to our defined benefit pension plans.
Note 14. Income Taxes
We are organized in conformity with the requirements for qualification and taxation as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”) and, accordingly, we have not provided for U.S. federal income tax on our REIT taxable income that we distribute to our stockholders. We have elected to treat our subsidiaries that participate in certain non-REIT qualifying activities as TRSs. As such, we have provided for their federal, state and foreign income taxes.
Tax years 2019 to present are open for examination by the tax authorities.
Our effective income tax rate represents a combined annual effective tax rate for federal, state, local and foreign taxes applied to interim operating results.
In the three and six months ended June 30, 2023 and 2022, our effective tax rate differed from the U.S. federal statutory income tax rate primarily due to our REIT status, including the dividends paid deduction, the impact of state and local taxes, and the effect of foreign operations.
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 15. Earnings Per Share (“EPS”)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Net income (loss) available for common stockholders $ ( 478.9 ) $ 48.0 $ ( 507.8 ) $ 47.9
Less: Distributions to holders of Series A Preferred Stock
2.2 2.2 4.4 7.6
Less: Distributions to holders of Class A equity interests of a subsidiary
— — — 0.1
Net income (loss) available for common stockholders, basic and diluted $ ( 481.1 ) $ 45.8 $ ( 512.2 ) $ 40.2
Weighted average shares for basic EPS 165.0 164.0 164.8 158.0
Dilutive potential shares from grants of RSUs and PRSUs (a)
— 0.6 — 0.8
Weighted average shares for basic and diluted EPS (a)(b)(c)
165.0 164.6 164.8 158.8
(a) The potential impact of 2.5 million granted RSUs and PRSUs in the three months ended June 30, 2023, 1.1 million granted RSUs and PRSUs in the three months ended June 30, 2022, 2.1 million granted RSUs and PRSUs in the six months ended June 30, 2023, were antidilutive. The potential impact of antidilutive granted RSUs and PRSUs in the six months ended June 30, 2022, was immaterial.
(b) The potential impact of 7.8 million shares of our common stock issuable upon conversion of the Series A Preferred Stock in each of the three and six months ended June 30, 2023, were antidilutive. The potential impact of 7.8 million shares of our common stock issuable upon conversion of the Series A Preferred Stock in the three months ended June 30, 2022, and 13.4 million shares of our common stock issuable upon conversion of the Series A Preferred Stock in the six months ended June 30, 2022, were antidilutive.
(c) The potential impact of 0.2 million of Class A equity interests of a subsidiary of the Company that controls its Canadian business in the six months ended June 30, 2022, was antidilutive.
Note 16. Commitments and Contingencies
Off-Balance Sheet Arrangements
Our off-balance sheet commitments primarily consist of guaranteed minimum annual payments. These arrangements result from our normal course of business and represent obligations that are payable over several years.
Contractual Obligations
We have agreements with municipalities and transit operators which entitle us to operate advertising displays within their transit systems, including on the interior and exterior of rail and subway cars and buses, as well as on benches, transit shelters, street kiosks, and transit platforms. Under most of these franchise agreements, the franchisor is entitled to receive the greater of a percentage of the relevant revenues, net of agency fees, or a specified guaranteed minimum annual payment.
Under the current MTA agreement, which was amended in June 2020 and July 2021 and is subject to modification as agreed-upon by us and the MTA (as amended, the “MTA Agreement”):
• Deployments . We must deploy, over a number of years, (i) 5,433 digital advertising screens on subway and train platforms and entrances, (ii) 15,896 smaller-format digital advertising screens on rolling stock, and (iii) 9,283 MTA communications displays. We are also obligated to deploy certain additional digital advertising screens and MTA communications displays in subway and train stations and rolling stock that the MTA may build or acquire in the future (collectively, the “New Inventory”).
• Recoupment of Equipment Deployment Costs. We may retain incremental revenues that exceed an annual base revenue amount for the cost of deploying advertising and communications displays throughout the transit system. As presented in the table below, recoupable MTA equipment deployment costs are recorded as Prepaid MTA equipment deployment costs and Intangible assets on our Consolidated Statement of Financial Position, and as these costs are recouped from incremental revenues that the MTA would otherwise be entitled to receive, Prepaid MTA equipment deployment costs will be reduced. If incremental revenues generated over the term of the agreement are not sufficient to cover all or a portion of the equipment deployment costs, the costs will not be recouped, which could have an adverse effect on our
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OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)
business, financial condition and results of operations, including impairment charges (see Note 4. Long-Lived Assets ). If we do not recoup all costs of deploying advertising and communications screens with respect to the New Inventory by the end of the term of the MTA Agreement, the MTA will be obligated to reimburse us for these costs. Deployment costs in an amount not to exceed $ 50.7 million, which are deemed authorized before December 31, 2020, will be paid directly by the MTA. For any deployment costs deemed authorized after December 31, 2020, the MTA and the Company will no longer be obligated to directly pay 70 % and 30 % of the costs, respectively, and these costs will be subject to recoupment in accordance with the MTA Agreement. We did not recoup any equipment deployment costs in the six months ended June 30, 2023, and we do not expect to recoup any equipment deployment costs in the remainder of 2023.
• Payments . We must pay to the MTA the greater of a percentage of revenues or a guaranteed minimum annual payment. Our payment obligations with respect to guaranteed minimum annual payment amounts owed to the MTA resumed on January 1, 2021, in accordance with the terms of the MTA Agreement, and 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 MTA Agreement also provides that if prior to April 1, 2028 the balance of unrecovered costs of deploying advertising and communications screens throughout the transit system is equal to or less than zero , then in any year following the year in which such recoupment occurs (the “Recoupment Year”), the MTA is entitled to receive an additional payment equal to 2.5 % of the annual base revenue amount for such year calculated in accordance with the MTA Agreement, provided that gross revenues in such year (i) were at least equal to the gross revenues generated in the Recoupment Year, and (ii) did not decline by more than 5 % from the prior year.
• Term . In July 2021, we extended the initial 10 -year term of the MTA Agreement to a 13 -year base term (the “Amended Term”). We have the option to extend the Amended Term for an additional five-year period at the end of the Amended Term, subject to satisfying certain quantitative and qualitative conditions.
During the six months ended June 30, 2023, we had no recoupment from incremental revenues. As of June 30, 2023, 16,758 digital displays had been installed, composed of 5,135 digital advertising screens on subway and train platforms and entrances, 6,952 smaller-format digital advertising screens on rolling stock and 4,671 MTA communications displays. In the three months ended June 30, 2023, 1,558 installations occurred, for a total of 2,605 installations occurring in the six months ended June 30, 2023.
We performed an analysis of carrying value of our long-lived asset groups within our U.S. Transit and Other reporting unit as a result of the triggering event noted above utilizing undiscounted cash flows compared to the carrying value of the asset groups. As a result we recorded an impairment charge of $ 463.5 million in the second quarter of 2023, primarily representing a $ 443.1 million impairment charge related to our MTA asset group. (See Note 4. Long-Lived Assets .)
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Notes to Consolidated Financial Statements
(Unaudited)
(in millions) Beginning Balance Deployment Costs Incurred Recoupment/MTA Funding Amortization/Impairment Reclassification Ending Balance
Six months ended June 30, 2023:
Prepaid MTA equipment deployment costs $ 363.2 $ 21.8 $ — $ — $ ( 385.0 ) $ —
Other current assets 1.6 ( 0.4 ) ( 0.1 ) — — 1.1
Intangible assets (franchise agreements) 62.0 ( 0.8 ) — ( 446.2 ) 385.0 —
Total $ 426.8 $ 20.6 $ ( 0.1 ) $ ( 446.2 ) $ — $ 1.1
Year ended December 31, 2022:
Prepaid MTA equipment deployment costs $ 279.8 $ 83.4 $ — $ — $ — $ 363.2
Other current assets 5.2 0.1 ( 3.7 ) — — 1.6
Intangible assets (franchise agreements) 63.0 5.4 — ( 6.4 ) — 62.0
Total $ 348.0 $ 88.9 $ ( 3.7 ) $ ( 6.4 ) $ — $ 426.8
Letters of Credit
We have indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. As of June 30, 2023, the outstanding letters of credit were approximately $ 83.6 million and outstanding surety bonds were approximately $ 170.0 million, and were not recorded on the Consolidated Statements of Financial Position.
Legal Matters
On an ongoing basis, we are engaged in lawsuits and governmental proceedings and respond to various investigations, inquiries, notices and claims from national, state and local governmental and other authorities (collectively, “litigation”). Litigation is inherently uncertain and always difficult to predict. Although it is not possible to predict with certainty the eventual outcome of any litigation, in our opinion, none of our current litigation is expected to have a material adverse effect on our results of operations, financial position or cash flows.
Note 17. Segment Information
We currently manage our operations through two operating segments—U.S. Billboard and Transit, which is included in our U.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other .
The following tables set forth our financial performance by segment.
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Revenues:
U.S. Media $ 443.0 $ 422.5 $ 819.4 $ 776.7
Other 25.8 27.7 45.2 47.0
Total revenues $ 468.8 $ 450.2 $ 864.6 $ 823.7
We present Operating income before Depreciation , Amortization , Net (gain) loss on dispositions, Stock-based compensation and Impairment charges (“Adjusted OIBDA”) as the primary measure of profit and loss for our operating segments.
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Notes to Consolidated Financial Statements
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Net income (loss) before allocation to non-controlling interests $ ( 478.4 ) $ 48.4 $ ( 507.1 ) $ 48.5
(Benefit) provision for income taxes 0.4 1.2 0.8 ( 0.9 )
Equity in earnings of investee companies, net of tax 0.3 ( 1.2 ) 1.1 ( 1.5 )
Interest expense, net 39.7 31.6 77.4 62.3
Other expense, net ( 0.2 ) ( 0.1 ) ( 0.2 ) —
Operating income (loss) ( 438.2 ) 79.9 ( 428.0 ) 108.4
Net (gain) loss on dispositions ( 0.1 ) 0.2 0.2 ( 0.1 )
Impairment charges 511.4 — 511.4 —
Depreciation and amortization 41.2 36.7 83.1 70.8
Stock-based compensation 7.9 8.5 15.7 16.4
Total Adjusted OIBDA $ 122.2 $ 125.3 $ 182.4 $ 195.5
Adjusted OIBDA:
U.S. Media $ 128.1 $ 129.2 $ 200.2 $ 209.3
Other 6.7 7.8 7.8 8.4
Corporate ( 12.6 ) ( 11.7 ) ( 25.6 ) ( 22.2 )
Total Adjusted OIBDA $ 122.2 $ 125.3 $ 182.4 $ 195.5
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Notes to Consolidated Financial Statements
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 2023 2022 2023 2022
Operating income (loss):
U.S. Media $ ( 420.9 ) $ 95.3 $ ( 387.6 ) $ 144.6
Other 3.2 4.8 0.9 2.4
Corporate ( 20.5 ) ( 20.2 ) ( 41.3 ) ( 38.6 )
Total operating income $ ( 438.2 ) $ 79.9 $ ( 428.0 ) $ 108.4
Net gain (loss) on dispositions:
U.S. Media $ ( 0.1 ) $ 0.2 $ 0.2 $ ( 0.1 )
Total gain (loss) on dispositions $ ( 0.1 ) $ 0.2 $ 0.2 $ ( 0.1 )
Impairment charges (a) :
U.S. Media $ 511.4 $ — $ 511.4 $ —
Total impairment charges $ 511.4 $ — $ 511.4 $ —
Depreciation and amortization:
U.S. Media $ 37.7 $ 33.7 $ 76.2 $ 64.8
Other 3.5 3.0 6.9 6.0
Total depreciation and amortization $ 41.2 $ 36.7 $ 83.1 $ 70.8
Capital expenditures:
U.S. Media $ 19.6 $ 24.2 $ 41.6 $ 40.3
Other 2.7 0.7 3.3 1.5
Total capital expenditures $ 22.3 $ 24.9 $ 44.9 $ 41.8
(a) The Impairment charges relates to a decline in the long-term outlook of our U.S. Transit and Other reporting unit (see Note 4. Long-Lived Assets) and an other-than-temporary decline in fair value of a cost-method investment.
As of
(in millions) June 30,
2023 December 31, 2022
Assets:
U.S. Media $ 5,304.4 $ 5,732.1
Other 249.0 240.4
Corporate 32.5 17.5
Total assets $ 5,585.9 $ 5,990.0
As of
(in millions) June 30,
2023 December 31, 2022
Long-lived assets (a) :
United States (b)
$ 5,004.6 $ 5,391.0
Canada 200.9 195.8
Total assets $ 5,205.5 $ 5,586.8
(a) Reflects total assets less current assets, investments and non-current deferred tax assets.
(b) Reflects a decline in the long-term outlook of our U.S. Transit and Other reporting unit in 2023 (see Note 4. Long-Lived Assets ).
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