UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from	to

Commission File Number: 001-36367

OUTFRONT Media Inc.

(Exact name of registrant as specified in its charter)

Maryland	46-4494703
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
405 Lexington Avenue, 17th Floor New York, NY	10174
(Address of principal executive offices)	(Zip Code)

(212) 297-6400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x Yes        o No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).        x Yes     o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    o    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    o Yes    x No

As of November 5, 2018, the number of shares outstanding of the registrant’s common stock was 139,453,420.

OUTFRONT MEDIA INC.

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2018

TABLE OF CONTENTS

PART I	3
Item 1. Financial Statements (Unaudited)	3
Consolidated Statements of Financial Position as of September 30, 2018, and December 31, 2017	3
Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017	4
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2018 and 2017	5
Consolidated Statements of Equity for the three and nine months ended September 30, 2018 and 2017	6
Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017	8
Notes to Consolidated Financial Statements	10
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	57
Item 4. Controls and Procedures	58
PART II	59
Item 1. Legal Proceedings	59
Item 1A. Risk Factors	59
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3. Defaults Upon Senior Securities	59
Item 4. Mine Safety Disclosures	59
Item 5. Other Information	59
Item 6. Exhibits	59
SIGNATURES	61

PART 1

Item 1.    Financial Statements.

OUTFRONT Media Inc.

Consolidated Statements of Financial Position

(Unaudited)

	As of
(in millions)	September 30, 2018			December 31, 2017
Assets:
Current assets:
Cash and cash equivalents	$	56.7		$	48.3
Restricted cash	1.4			—
Receivables, less allowance ($10.5 in 2018 and $11.5 in 2017)	260.8			231.1
Prepaid lease and transit franchise costs	62.9			68.6
Prepaid MTA equipment deployment costs (Note 17)	20.2			4.7
Other prepaid expenses	18.2			13.5
Other current assets	9.8			9.8
Total current assets	430.0			376.0
Property and equipment, net (Note 3)	657.5			662.1
Goodwill (Note 4)	2,082.6			2,128.0
Intangible assets (Note 4)	548.0			580.9
Prepaid MTA equipment deployment costs (Note 17)	33.3			—
Other assets	64.6			61.2
Total assets	$	3,816.0		$	3,808.2
Liabilities:
Current liabilities:
Accounts payable	$	47.7		$	56.1
Accrued compensation	34.4			34.6
Accrued interest	25.9			16.1
Accrued lease costs	29.6			30.5
Other accrued expenses	38.2			42.3
Deferred revenues	30.1			21.3
Short-term debt (Note 8)	175.0			80.0
Other current liabilities	17.5			18.7
Total current liabilities	398.4			299.6
Long-term debt, net (Note 8)	2,158.5			2,145.3
Deferred income tax liabilities, net	19.8			19.6
Asset retirement obligation (Note 6)	34.6			34.7
Other liabilities	81.0			82.4
Total liabilities	2,692.3			2,581.6
Commitments and contingencies (Note 17)
Stockholders’ equity (Note 9):
Common stock (2018 - 450.0 shares authorized, and 139.5 shares issued
and outstanding; 2017 - 450.0 shares authorized, and 138.6 issued and outstanding)	1.4			1.4
Additional paid-in capital	1,974.5			1,963.0
Distribution in excess of earnings	(877.6		)	(775.6		)
Accumulated other comprehensive loss	(16.9		)	(7.7		)
Total stockholders’ equity	1,081.4			1,181.1
Non-controlling interests	42.3			45.5
Total equity	1,123.7			1,226.6
Total liabilities and equity	$	3,816.0		$	3,808.2

See accompanying notes to unaudited consolidated financial statements.

3

OUTFRONT Media Inc.

Consolidated Statements of Operations

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in millions, except per share amounts)	2018			2017			2018			2017
Revenues:
Billboard	$	290.6		$	272.4		$	810.3		$	782.6
Transit and other	123.6			120.0			343.5			336.6
Total revenues	414.2			392.4			1,153.8			1,119.2
Expenses:
Operating	215.3			212.6			624.4			617.8
Selling, general and administrative	74.4			64.2			209.1			194.5
Restructuring charges	0.1			1.6			1.4			6.3
Net gain on dispositions	(1.3		)	(14.1		)	(4.2		)	(13.6		)
Impairment charge	—			—			42.9			—
Depreciation	21.0			22.3			63.4			68.3
Amortization	25.8			25.5			73.3			74.6
Total expenses	335.3			312.1			1,010.3			947.9
Operating income	78.9			80.3			143.5			171.3
Interest expense, net	(32.0		)	(29.2		)	(93.0		)	(85.9		)
Other income (expense), net	0.2			0.2			(0.1		)	0.3
Income before benefit (provision) for income taxes and equity in earnings of investee companies	47.1			51.3			50.4			85.7
Benefit (provision) for income taxes	(1.0		)	(2.0		)	(2.4		)	0.8
Equity in earnings of investee companies, net of tax	0.7			1.4			2.7			3.8
Net income	$	46.8		$	50.7		$	50.7		$	90.3
Net income per common share:
Basic	$	0.33		$	0.36		$	0.35		$	0.65
Diluted	$	0.33		$	0.36		$	0.35		$	0.65
Weighted average shares outstanding:
Basic	139.3			138.6			139.1			138.5
Diluted	141.5			140.9			139.4			139.7

See accompanying notes to unaudited consolidated financial statements.

4

OUTFRONT Media Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
(in millions)	2018		2017			2018			2017
Net income	$	46.8	$	50.7		$	50.7		$	90.3
Other comprehensive income (loss), net of tax:
Cumulative translation adjustments	1.7		8.6			(9.8		)	14.1
Net actuarial gain (loss)	—		(0.3		)	0.6			(0.4		)
Total other comprehensive income (loss), net of tax	1.7		8.3			(9.2		)	13.7
Total comprehensive income	$	48.5	$	59.0		$	41.5		$	104.0

See accompanying notes to unaudited consolidated financial statements.

5

OUTFRONT Media Inc.

Consolidated Statements of Equity

(Unaudited)

(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 June 30, 2017	138.6	$	1.4	$	1,953.9		$	(760.3	)	$	(13.1	)	$	1,181.9		$	44.7		$	1,226.6
Net income	—	—		—			50.7			—			50.7			—			50.7
Other comprehensive income	—	—		—			—			8.3			8.3			—			8.3
Stock-based payments:
Amortization	—	—		5.2			—			—			5.2			—			5.2
Shares paid for tax withholding for stock-based payments	—	—		(0.4		)	—			—			(0.4		)	—			(0.4		)
Dividends ($0.36 per share)	—	—		—			(50.7		)	—			(50.7		)	—			(50.7		)
Other	—	—		—			—			—			—			0.8			0.8
Balance as of September 30, 2017	138.6	$	1.4	$	1,958.7		$	(760.3	)	$	(4.8	)	$	1,195.0		$	45.5		$	1,240.5
Balance as of June 30, 2018	139.3	$	1.4	$	1,965.5		$	(873.5	)	$	(18.6	)	$	1,074.8		$	45.7		$	1,120.5
Net income	—	—		—			46.8			—			46.8			—			46.8
Other comprehensive loss	—	—		—			—			1.7			1.7			—			1.7
Stock-based payments:
Amortization	—	—		4.8			—			—			4.8			—			4.8
Shares paid for tax withholding for stock-based payments	—	—		(0.1		)	—			—			(0.1		)	—			(0.1		)
Dividends ($0.36 per share)	—	—		—			(50.9		)	—			(50.9		)	—			(50.9		)
Class A equity interest redemptions	0.2	—		4.2			—			—			4.2			(4.2		)	—
Other	—	—		0.1			—			—			0.1			0.8			0.9
Balance as of September 30, 2018	139.5	$	1.4	$	1,974.5		$	(877.6	)	$	(16.9	)	$	1,081.4		$	42.3		$	1,123.7

6

OUTFRONT Media Inc.

Consolidated Statements of Equity (Continued)

(Unaudited)

(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, 2016	138.0		$	1.4	$	1,949.5		$	(699.5	)	$	(18.5	)	$	1,232.9		$	0.1		$	1,233.0
Net income	—		—		—			90.3			—			90.3			—			90.3
Other comprehensive income	—		—		—			—			13.7			13.7			—			13.7
Stock-based payments:
Cumulative prior period adjustment to amortization of estimated forfeitures	—		—		0.5			(0.5		)	—			—			—			—
Vested	0.7		—		—			—			—			—			—			—
Exercise of stock options	0.2		—		1.2			—			—			1.2			—			1.2
Amortization	—		—		16.1			—			—			16.1			—			16.1
Shares paid for tax withholding for stock-based payments	(0.3	)	—		(8.6		)	—			—			(8.6		)	—			(8.6		)
Issuance of shares of a subsidiary	—		—		—			—			—			—			44.6			44.6
Dividends ($1.08 per share)	—		—		—			(150.6		)	—			(150.6		)	—			(150.6		)
Other	—		—		—			—			—			0.0			0.8			0.8
Balance as of September 30, 2017	138.6		$	1.4	$	1,958.7		$	(760.3	)	$	(4.8	)	$	1,195.0		$	45.5		$	1,240.5
Balance as of December 31, 2017	138.6		$	1.4	$	1,963.0		$	(775.6	)	$	(7.7	)	$	1,181.1		$	45.5		$	1,226.6
Net income	—		—		—			50.7			—			50.7			—			50.7
Other comprehensive loss	—		—		—			—			(9.2		)	(9.2		)	—			(9.2		)
Stock-based payments:
Vested	1.0		—		—			—			—			—			—			—
Amortization	—		—		15.4			—			—			15.4			—			15.4
Shares paid for tax withholding for stock-based payments	(0.3	)	—		(8.2		)	—			—			(8.2		)	—			(8.2		)
Class A equity interest redemptions	0.2		—		4.2			—			—			4.2			(4.2		)	—
Dividends ($1.08 per share)	—		—		—			(152.7		)	—			(152.7		)	—			(152.7		)
Other	—		—		0.1			—			—			0.1			1.0			1.1
Balance as of September 30, 2018	139.5		$	1.4	$	1,974.5		$	(877.6	)	$	(16.9	)	$	1,081.4		$	42.3		$	1,123.7

See accompanying notes to unaudited consolidated financial statements.

7

OUTFRONT Media Inc.

Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30,
(in millions)	2018			2017
Operating activities:
Net income	$	50.7		$	90.3
Adjustments to reconcile net income to net cash flow provided by operating activities:
Depreciation and amortization	136.7			142.9
Deferred tax benefit	(1.8		)	(3.9		)
Stock-based compensation	15.4			16.1
Provision for doubtful accounts	0.7			2.3
Accretion expense	1.8			1.8
Net gain on dispositions	(4.2		)	(13.6		)
Impairment charge	42.9			—
Equity in earnings of investee companies, net of tax	(2.7		)	(3.8		)
Distributions from investee companies	1.5			2.1
Amortization of deferred financing costs and debt discount and premium	4.2			4.6
Cash paid for direct lease acquisition costs	(30.2		)	(30.0		)
Change in assets and liabilities, net of investing and financing activities:
Increase in receivables	(30.9		)	(16.6		)
Increase in prepaid MTA equipment deployment costs	(48.8		)	—
Decrease in prepaid expenses and other current assets	1.1			19.0
Decrease in accounts payable and accrued expenses	(0.4		)	(34.9		)
Increase in deferred revenues	8.8			8.6
Decrease in income taxes	(3.1		)	(3.5		)
Other, net	(4.3		)	1.2
Net cash flow provided by operating activities	137.4			182.6
Investing activities:
Capital expenditures	(62.1		)	(58.6		)
Acquisitions	(5.6		)	(62.8		)
MTA franchise rights	(9.4		)	—
Net proceeds from dispositions	6.0			1.6
Net cash flow used for investing activities	(71.1		)	(119.8		)
Financing activities:
Proceeds from long-term debt borrowings	89.0			8.3
Repayments of long-term debt borrowings	(79.0		)	—
Proceeds from borrowings under short-term debt facilities	200.0			223.0
Repayments of borrowings under short-term debt facilities	(105.0		)	(150.0		)
Payments of deferred financing costs	(0.2		)	(7.7		)
Proceeds from stock option exercises	—			1.2
Earnout payment related to prior acquisition	—			(2.0		)
Taxes withheld for stock-based compensation	(8.2		)	(8.2		)
Dividends	(152.9		)	(151.0		)
Other	—			(0.2		)
Net cash flow used for financing activities	(56.3		)	(86.6		)

8

OUTFRONT Media Inc.

Consolidated Statements of Cash Flows (Continued)

(Unaudited)

	Nine Months Ended
	September 30,
(in millions)	2018			2017
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(0.2		)	0.6
Net increase (decrease) in cash, cash equivalents and restricted cash	9.8			(23.2		)
Cash, cash equivalents and restricted cash at beginning of period	48.3			65.2
Cash, cash equivalents and restricted cash at end of period	$	58.1		$	42.0
Supplemental disclosure of cash flow information:
Cash paid for income taxes	$	7.2		$	6.6
Cash paid for interest	79.2			72.8
Non-cash investing and financing activities:
Accrued purchases of property and equipment	$	6.1		$	5.4
Issuance of shares of a subsidiary for an acquisition	—			44.6
Acquisitions	—			(15.4		)
Dispositions	—			15.4
Taxes withheld for stock-based compensation	—			0.3

See accompanying notes to unaudited consolidated financial statements.

9

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. 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 sports events. In total, we have displays in all of the 25 largest markets in the U.S. and approximately 140 markets across the U.S. and Canada. We manage our operations through three operating segments—(1) U.S. Billboard and Transit, which is included in our U.S. Media reportable segment, (2) International and (3) Sports Marketing.

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. Certain reclassifications of prior year’s data have been made to conform to the current period’s presentation. 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, 2017, filed with the SEC on February 28, 2018.

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 as of 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.

Note 2. New Accounting Standards

Adoption of New Accounting Standards

Goodwill

In the second quarter of 2018, we early adopted the Financial Accounting Standard Board’s (the “FASB’s”) guidance simplifying the test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. Step 2 measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying value of that goodwill. Under that new guidance, which is applied prospectively, if the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference up to the carrying value of the goodwill. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In the second quarter of 2018, we recorded an impairment charge of $42.9 million on the Consolidated Statements of Operations and an impairment balance of $42.9 million in Goodwill on the Consolidated Statement of Financial Position related to our Canadian reporting unit. (See Note 4. Goodwill and Other Intangible Assets to the Consolidated Financial Statements.)

Revenue from Contracts with Customers

In the first quarter of 2018, we adopted the FASB’s principles-based guidance addressing revenue recognition issues, applying the modified retrospective method of adoption. The guidance is being applied to all contracts with customers regardless of industry-specific or transaction-specific fact patterns. The guidance requires that the amount of revenue a company should recognize reflect the consideration it expects to be entitled to in exchange for goods and services. The revenue recognition

10

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements

(Unaudited)

guidance is primarily applicable to our multi-year transit advertising contracts with municipalities in the U.S. and Canada, and marketing and multimedia rights agreements with colleges, universities and other educational institutions. Our billboard lease revenues are recognized under the lease accounting standard. The adoption of this guidance did not impact revenues from our multi-year transit advertising contracts, but resulted in the recognition of additional revenues of $1.8 million, additional operating expenses of $1.3 million and additional selling, general and administrative expenses of $0.5 million in our Sports Marketing operating segment in the three months ended September 30, 2018, and additional revenues of $5.6 million, additional operating expenses of $3.9 million and additional selling, general and administrative expenses of $1.7 million in our Sports Marketing operating segment in the nine months ended September 30, 2018, related to revenues that would have been recognized on a net basis under the old standard. Adoption of this guidance did not have a material effect on our consolidated financial statements. (See Note 10. Revenues to the Consolidated Financial Statements.)

Recent Pronouncements

Leases

In February 2016 (updated in July 2018), the FASB issued guidance addressing the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. 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 will determine 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 with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. Lessors will account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The update in July 2018 provides an additional (optional) transition method to adopt the new lease standard, allowing entities to apply the new lease standard at the adoption date rather than adjusting each period presented at the date of adoption. The update also provides lessors a practical expedient to allow them to not separate non-lease components from the associated lease component and instead to account for those components as a single component if certain criteria are met. We plan to utilize the updated transition method beginning January 1, 2019. The updated practical expedient for lessors will not have a material effect on our consolidated financial statements.

As of September 30, 2018, we had approximately 20,900 lease agreements in the U.S. and approximately 2,800 lease agreements in Canada, the majority of which will be classified as operating leases under the new guidance. We are currently evaluating our lease contracts and are in the process of implementing a new lease software system which will enable us to comply with this standard. This standard will require us to recognize a right-of-use asset and lease liability for the present value of minimum lease payments for operating leases with a term greater than 12 months and will have a significant impact on our consolidated financial statements. Our billboard lease revenues will continue to be recognized on a straight-line basis over their respective lease terms.

11

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements

(Unaudited)

Note 3. Property and Equipment

The table below presents the balances of major classes of assets and accumulated depreciation.

		As of
(in millions)	Estimated Useful Lives	September 30, 2018		December 31, 2017
Land		$	97.7	$	94.4
Buildings	20 to 40 years	49.7		51.3
Advertising structures	5 to 20 years	1,788.3		1,750.8
Furniture, equipment and other	3 to 10 years	127.9		120.7
Construction in progress		23.5		27.4
		2,087.1		2,044.6
Less: accumulated depreciation		1,429.6		1,382.5
Property and equipment, net		$	657.5	$	662.1

Depreciation expense was $21.0 million in the three months ended September 30, 2018, and $22.3 million in the three months ended September 30, 2017. Depreciation expense was $63.4 million in the nine months ended September 30, 2018, and $68.3 million in the nine months ended September 30, 2017.

Note 4. Goodwill and Other Intangible Assets

Goodwill

For the nine months ended September 30, 2018 and the year ended December 31, 2017, the changes in the book value of goodwill by segment were as follows:

(in millions)	U.S. Media		Other			Total
As of December 31, 2016	$	2,054.0	$	35.4		$	2,089.4
Currency translation adjustments	—		4.3			4.3
Additions(a)	—		34.3			34.3
As of December 31, 2017	2,054.0		74.0			2,128.0
Currency translation adjustments	—		(2.5		)	(2.5		)
Impairment	—		(42.9		)	(42.9		)
As of September 30, 2018	$	2,054.0	$	28.6		$	2,082.6

(a) Non-tax deductible goodwill associated with the Transaction (as defined below, see Note 9. Equity and Note 12. Acquisitions to the Consolidated Financial Statements).

On April 1, 2018, we early adopted the FASB’s guidance simplifying the test for goodwill impairment by eliminating Step 2 from the goodwill impairment test. (See Note 2. New Accounting Standards to the Consolidated Financial Statements.) If the carrying value of a reporting unit is greater than its fair value, a goodwill impairment charge will be recorded for the difference up to the carrying value of the goodwill. The loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Goodwill is not amortized but is tested at the reporting-unit level annually for impairment and between annual tests if events occur or circumstances change that would more likely than not reduce the fair value below its carrying value. We compute the estimated fair value of each reporting unit 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. There can be no assurance that these estimates and assumptions will

12

OUTFRONT Media Inc.

Notes to Consolidated Financial Statements

(Unaudited)

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.

The estimated fair value of the Canadian reporting unit exceeded its carrying value by 2.9% as of December 31, 2017, based on our goodwill impairment assessment in the prior year. In the second quarter of 2018, our Canadian reporting unit did not meet revenue expectations and pacing reflected a decline as compared to the 2018 forecast due to the underperformance of our static poster assets and digital displays. As a result, we determined that there was a decline in the outlook for our Canadian reporting unit. This determination constituted a triggering event, requiring an interim goodwill impairment analysis of our Canadian reporting unit.

As a result of the impairment analysis performed during the second quarter of 2018, we determined that the carrying value of our Canadian reporting unit exceeded its fair value and we recorded an impairment charge of $42.9 million in the Consolidated Statements of Operations. As of September 30, 2018, goodwill related to our Canadian reporting unit, net of accumulated impairment of $42.9 million, was $22.7 million. As of December 31, 2017, goodwill associated with our Canadian reporting unit was $68.1 million.

Other 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			Net
As of September 30, 2018:
Permits and leasehold agreements	$	1,109.6	$	(688.8	)	$	420.8
Franchise agreements(a)	465.6		(354.3		)	111.3
Other intangible assets	47.1		(31.2		)	15.9
Total intangible assets	$	1,622.3	$	(1,074.3	)	$	548.0
As of December 31, 2017:
Permits and leasehold agreements	$	1,111.3	$	(661.6	)	$	449.7
Franchise agreements(a)	455.4		(346.2		)	109.2
Other intangible assets	47.1		(25.1		)	22.0
Total intangible assets	$	1,613.8	$	(1,032.9	)	$