0001579877-19-000094.txt : 20191105 0001579877-19-000094.hdr.sgml : 20191105 20191105160457 ACCESSION NUMBER: 0001579877-19-000094 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 103 CONFORMED PERIOD OF REPORT: 20190930 FILED AS OF DATE: 20191105 DATE AS OF CHANGE: 20191105 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTFRONT Media Inc. CENTRAL INDEX KEY: 0001579877 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 000000000 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-36367 FILM NUMBER: 191193256 BUSINESS ADDRESS: STREET 1: 405 LEXINGTON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10174 BUSINESS PHONE: 212-297-6400 MAIL ADDRESS: STREET 1: 405 LEXINGTON AVENUE STREET 2: 17TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10174 FORMER COMPANY: FORMER CONFORMED NAME: CBS OUTDOOR AMERICAS INC. DATE OF NAME CHANGE: 20130621 10-Q 1 a20190930-10xqxoutfront.htm 10-Q Document
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xbrli:shares out:markets out:segment xbrli:pure out:Displays out:leases iso4217:USD
Table of Contents        

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2019
or
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.     Yes         No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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).         Yes      No

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes     No
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
,
$0.01
, par value
OUT
New York Stock Exchange

As of November 4, 2019, the number of shares outstanding of the registrant’s common stock was 143,524,982.




OUTFRONT MEDIA INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2019
TABLE OF CONTENTS



PART 1

Item 1.    Financial Statements.

OUTFRONT Media Inc.
Consolidated Statements of Financial Position
(Unaudited)
 
 
As of
(in millions)
 
September 30,
2019
 
December 31,
2018
Assets:
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
58.3

 
$
52.7

Restricted cash
 
5.4

 
1.4

Receivables, less allowance ($11.9 in 2019 and $10.7 in 2018)
 
290.7

 
264.9

Prepaid lease and transit franchise costs
 
12.5

 
69.3

Prepaid MTA equipment deployment costs (Note 18)
 
60.7

 
18.9

Other prepaid expenses
 
21.9

 
13.9

Other current assets
 
10.5

 
8.4

Total current assets
 
460.0

 
429.5

Property and equipment, net (Note 5)
 
665.8

 
652.9

Goodwill
 
2,082.8

 
2,079.7

Intangible assets (Note 6)
 
548.6

 
537.2

Operating lease assets (Note 4)
 
1,408.1

 

Prepaid MTA equipment deployment costs (Note 18)
 
83.0

 
60.6

Other assets
 
72.6

 
68.8

Total assets
 
$
5,320.9

 
$
3,828.7

 
 
 
 
 
Liabilities:
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
53.4

 
$
56.5

Accrued compensation
 
45.1

 
47.1

Accrued interest
 
23.6

 
19.1

Accrued lease and transit franchise costs
 
48.6

 
44.2

Other accrued expenses
 
38.4

 
31.2

Deferred revenues
 
38.9

 
29.8

Short-term debt (Note 9)
 
210.0

 
160.0

Short-term operating lease liabilities (Note 4)
 
169.4

 

Other current liabilities
 
17.7

 
14.7

Total current liabilities
 
645.1

 
402.6

Long-term debt, net (Note 9)
 
2,212.5

 
2,149.6

Deferred income tax liabilities, net
 
18.7

 
17.0

Asset retirement obligation (Note 7)
 
35.0

 
34.2

Operating lease liabilities (Note 4)
 
1,237.7

 

Other liabilities
 
45.7

 
80.0

Total liabilities
 
4,194.7

 
2,683.4

 
 
 
 
 
Commitments and contingencies (Note 18)
 


 


 
 
 
 
 
Stockholders’ equity (Note 10):
 
 
 
 
Common stock (2019 - 450.0 shares authorized, and 143.5 shares issued
 
 
 
 
 and outstanding; 2018 - 450.0 shares authorized, and 140.2 issued and outstanding)
 
1.4

 
1.4

Additional paid-in capital
 
2,067.6

 
1,995.0

Distribution in excess of earnings
 
(957.3
)
 
(871.6
)
Accumulated other comprehensive loss
 
(18.7
)
 
(22.0
)
Total stockholders’ equity
 
1,093.0

 
1,102.8

Non-controlling interests
 
33.2

 
42.5

Total equity
 
1,126.2

 
1,145.3

Total liabilities and equity
 
$
5,320.9

 
$
3,828.7

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)
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Billboard
 
$
312.0

 
$
290.6

 
$
868.8

 
$
810.3

Transit and other
 
150.5

 
123.6

 
425.3

 
343.5

Total revenues
 
462.5

 
414.2

 
1,294.1

 
1,153.8

Expenses:
 
 
 
 
 
 
 
 
Operating
 
245.5

 
215.3

 
702.7

 
624.4

Selling, general and administrative
 
82.3

 
74.4

 
237.1

 
209.1

Restructuring charges
 

 
0.1

 
0.3

 
1.4

Net gain on dispositions
 
(1.9
)
 
(1.3
)
 
(3.0
)
 
(4.2
)
Impairment charge
 

 

 

 
42.9

Depreciation
 
22.4

 
21.0

 
64.9

 
63.4

Amortization
 
28.7

 
25.8

 
81.0

 
73.3

Total expenses
 
377.0

 
335.3

 
1,083.0

 
1,010.3

Operating income
 
85.5

 
78.9

 
211.1

 
143.5

Interest expense, net
 
(33.9
)
 
(32.0
)
 
(100.5
)
 
(93.0
)
Loss on extinguishment of debt
 
(11.0
)
 

 
(11.0
)
 

Other income (expense), net
 

 
0.2

 
0.1

 
(0.1
)
Income before provision for income taxes and equity in earnings of investee companies
 
40.6

 
47.1

 
99.7

 
50.4

Provision for income taxes
 
(3.3
)
 
(1.0
)
 
(8.5
)
 
(2.4
)
Equity in earnings of investee companies, net of tax
 
1.4

 
0.7

 
3.9

 
2.7

Net income
 
$
38.7

 
$
46.8

 
$
95.1

 
$
50.7

 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
Basic
 
$
0.27

 
$
0.33

 
$
0.66

 
$
0.35

Diluted
 
$
0.27

 
$
0.33

 
$
0.66

 
$
0.35

 
 
 
 
 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
143.4

 
139.3

 
142.1

 
139.1

Diluted
 
144.2

 
141.5

 
142.7

 
139.4

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)
 
2019
 
2018
 
2019
 
2018
Net income
 
$
38.7

 
$
46.8

 
$
95.1

 
$
50.7

Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
 
Cumulative translation adjustments
 
(0.8
)
 
1.7

 
6.4

 
(9.8
)
Net actuarial gain
 
0.2

 

 
0.1

 
0.6

Change in fair value of interest rate swap agreements
 
(0.4
)
 

 
(3.2
)
 

Total other comprehensive income (loss), net of tax
 
(1.0
)
 
1.7

 
3.3

 
(9.2
)
Total comprehensive income
 
$
37.7

 
$
48.5

 
$
98.4

 
$
41.5

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, 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 income
 

 

 

 

 
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
)
Class A equity interest redemptions
 
0.2

 

 
4.2

 

 

 
4.2

 
(4.2
)
 

Dividends ($0.36 per share)
 

 

 

 
(50.9
)
 

 
(50.9
)
 

 
(50.9
)
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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
June 30, 2019
 
143.3

 
$
1.4

 
$
2,057.9

 
$
(943.9
)
 
$
(17.7
)
 
$
1,097.7

 
$
37.2

 
$
1,134.9

Net income
 

 

 

 
38.7

 

 
38.7

 

 
38.7

Other comprehensive income
 

 

 

 

 
(1.0
)
 
(1.0
)
 

 
(1.0
)
Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
 

 

 
5.6

 

 

 
5.6

 

 
5.6

Class A equity interest redemptions
 
0.2

 

 
4.1

 

 

 
4.1

 
(4.1
)
 

Dividends ($0.36 per share)
 

 

 

 
(52.1
)
 

 
(52.1
)
 

 
(52.1
)
Other
 

 

 

 

 

 

 
0.1

 
0.1

Balance as of
September 30, 2019
 
143.5

 
$
1.4

 
$
2,067.6

 
$
(957.3
)
 
$
(18.7
)
 
$
1,093.0

 
$
33.2

 
$
1,126.2

 

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, 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

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
December 31, 2018
 
140.2

 
$
1.4

 
$
1,995.0

 
$
(871.6
)
 
$
(22.0
)
 
$
1,102.8

 
$
42.5

 
$
1,145.3

Cumulative effect of a new accounting standard (Note 2)
 

 

 

 
(24.8
)
 

 
(24.8
)
 

 
(24.8
)
Net income
 

 

 

 
95.1

 

 
95.1

 

 
95.1

Other comprehensive income
 

 

 

 

 
3.3

 
3.3

 

 
3.3

Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested
 
0.9

 

 

 

 

 

 

 

Amortization
 

 

 
16.4

 

 

 
16.4

 

 
16.4

Shares paid for tax withholding for stock-based payments
 
(0.4
)
 

 
(7.7
)
 

 

 
(7.7
)
 

 
(7.7
)
Class A equity interest redemptions
 
0.6

 

 
13.0

 

 

 
13.0

 
(13.0
)
 

Shares issued under the ATM Program
 
2.2

 

 
50.8

 

 

 
50.8

 

 
50.8

Dividends ($1.08 per share)
 

 

 

 
(156.0
)
 

 
(156.0
)
 

 
(156.0
)
Other
 

 

 
0.1

 

 

 
0.1

 
3.7

 
3.8

Balance as of
September 30, 2019
 
143.5

 
$
1.4

 
$
2,067.6

 
$
(957.3
)
 
$
(18.7
)
 
$
1,093.0

 
$
33.2

 
$
1,126.2

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)
 
2019
 
2018
Operating activities:
 
 
 
 
Net income
 
$
95.1

 
$
50.7

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Depreciation and amortization
 
145.9

 
136.7

Deferred tax (benefit) provision
 
1.2

 
(1.8
)
Stock-based compensation
 
16.4

 
15.4

Provision for doubtful accounts
 
4.0

 
0.7

Accretion expense
 
1.9

 
1.8

Net gain on dispositions
 
(3.0
)
 
(4.2
)
Impairment charge
 

 
42.9

Loss on extinguishment of debt
 
11.0

 

Equity in earnings of investee companies, net of tax
 
(3.9
)
 
(2.7
)
Distributions from investee companies
 
3.1

 
1.5

Amortization of deferred financing costs and debt discount and premium
 
4.9

 
4.2

Cash paid for direct lease acquisition costs
 
(34.5
)
 
(30.2
)
Change in assets and liabilities, net of investing and financing activities:
 
 
 
 
Increase in receivables
 
(29.2
)
 
(30.9
)
Increase in prepaid MTA equipment deployment costs
 
(64.2
)
 
(48.8
)
(Increase) decrease in prepaid expenses and other current assets
 
(10.4
)
 
1.1

Increase (decrease) in accounts payable and accrued expenses
 
3.0

 
(0.4
)
Increase in deferred revenues
 
9.1

 
8.8

Decrease in income taxes
 
(0.5
)
 
(3.1
)
Other, net
 
12.2

 
(4.3
)
Net cash flow provided by operating activities
 
162.1

 
137.4

 
 
 
 
 
Investing activities:
 
 
 
 
Capital expenditures
 
(65.4
)
 
(62.1
)
Acquisitions
 
(60.7
)
 
(5.6
)
MTA franchise rights
 
(16.9
)
 
(9.4
)
Net proceeds from dispositions
 
4.9

 
6.0

Net cash flow used for investing activities
 
(138.1
)
 
(71.1
)
 
 
 
 
 
Financing activities:
 
 
 
 
Proceeds from long-term debt borrowings
 
760.0

 
89.0

Repayments of long-term debt borrowings
 
(695.0
)
 
(79.0
)
Proceeds from borrowings under short-term debt facilities
 
280.0

 
200.0

Repayments of borrowings under short-term debt facilities
 
(230.0
)
 
(105.0
)
Payments of deferred financing costs
 
(9.5
)
 
(0.2
)
Payment of debt extinguishment charges
 
(7.4
)
 

Proceeds from shares issued under the ATM Program
 
50.9

 

Taxes withheld for stock-based compensation
 
(7.7
)
 
(8.2
)
Dividends
 
(156.0
)
 
(152.9
)
Net cash flow used for financing activities
 
(14.7
)
 
(56.3
)

8



OUTFRONT Media Inc.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
 
 
Nine Months Ended
 
 
September 30,
(in millions)
 
2019
 
2018
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
0.3

 
(0.2
)
Net increase in cash, cash equivalents and restricted cash
 
9.6

 
9.8

Cash, cash equivalents and restricted cash at beginning of period
 
54.1

 
48.3

Cash, cash equivalents and restricted cash at end of period
 
$
63.7

 
$
58.1

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for income taxes
 
$
7.9

 
$
7.2

Cash paid for interest
 
92.3

 
79.2

 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
Accrued purchases of property and equipment
 
$
10.9

 
$
6.1

Accrued MTA franchise rights
 
2.3

 

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 150 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, 2018, filed with the SEC on February 27, 2019.

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

Leases

In the first quarter of 2019, we adopted the Financial Accounting Standards Board’s (the “FASB’s”) guidance addressing the recognition, measurement, presentation and disclosure of leases for both lessees and lessors using the modified retrospective transition method to adopt the new lease standard. The modified retrospective transition method allows entities to apply the new lease standard at the adoption date rather than adjusting each period presented at the date of adoption. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification determines whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases regardless of their classification.

We elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward our historical lease classification. We also elected the practical expedient related to land easements, which allowed us to carry forward our accounting treatment for land easements on existing leases. In addition we elected the hindsight practical expedient which resulted in increasing the length of our lease term for existing leases with cancellation provisions.


10

OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)

At adoption, we had approximately 23,600 lease agreements as lessee, all of which were classified as operating leases. On January 1, 2019, the adoption of this standard resulted in the recognition of an operating lease liability of $1.2 billion and a right-of-use operating lease asset of the same amount. Existing prepaid and accrued lease costs were reclassified to the right-of-use operating lease asset, resulting in a net asset of $1.3 billion on the Consolidated Statement of Financial Position. As a result of the adoption of this standard, we also recorded a cumulative-effect adjustment of $24.8 million to beginning Distribution in excess of earnings on the Consolidated Statement of Equity for lease costs which would have been recognized in prior periods as a result of the change in the lease term.

Under the new guidance, lessors account for leases using an approach that is substantially equivalent to previous guidance for sales-type leases, direct financing leases and operating leases. Our billboard lease revenues will continue to be recognized on a straight-line basis over their respective lease terms. Adoption of this guidance did not have a material effect on our consolidated financial statements.

Recent Pronouncements

In June 2016 (updated in May 2019), the FASB issued guidance which requires a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amount expected to be collected. The new guidance is effective for annual and interim periods beginning after December 15, 2019, and early adoption is permitted. We do not expect this guidance to have a material effect on our consolidated financial statements.

Note 3. Restricted Cash

In the third quarter of 2018, we entered into an escrow agreement in connection with one of our transit franchise contracts, which requires us to deposit funds into an escrow account to fund capital expenditures over the term of the transit franchise contract. As of September 30, 2019, we have $5.4 million of restricted cash deposited in the escrow account.
 
 
As of
(in millions)
 
September 30, 2019
 
September 30, 2018
 
December 31, 2018
Cash and cash equivalents
 
$
58.3

 
$
56.7

 
$
52.7

Restricted cash
 
5.4

 
1.4

 
1.4

Cash, cash equivalents and restricted cash
 
$
63.7

 
$
58.1

 
$
54.1



Note 4. Leases

Effective January 1, 2019, we adopted the FASB’s guidance addressing the recognition, measurement, presentation and disclosure of leases for both lessees and lessors using the transition method to adopt the new lease standard. See Note 2. New Accounting Standards: Adoption of New Accounting Standards.

Lessee

We generally lease the underlying sites upon which the physical billboard structures on which we display advertising copy for our customers are located. We also have leases for office and warehouse spaces. All leases are recorded on the Consolidated Statement of Financial Position and we recognize lease expense on a straight-line basis over the lease term. We do not separate lease and non-lease components from contracts.

Many of our leases include one or more options to renew, with renewal terms that can extend the lease term for varying lengths of time. These renewal provisions typically require consent of both parties. Many of our leases also contain termination provisions at our option, based on a variety of factors, including termination due to changing economic conditions of the related billboard location.

Certain of our lease agreements include rental payments based on a percentage of revenue over contractual levels and others include rental payments adjusted periodically for inflation. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

11

OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)


When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement or amendment.

We rent or sublease certain real estate to third parties.

As of September 30, 2019, we have operating lease assets of $1.4 billion, short-term operating lease liabilities of $169.4 million and non-current operating lease liabilities of $1.2 billion.

For the three months ended September 30, 2019, we recorded operating lease costs of $103.5 million in Operating expenses and $2.5 million in Selling, general and administrative expenses. For the three months ended September 30, 2019, these costs include $26.3 million of variable operating lease costs. For the nine months ended September 30, 2019, we recorded operating lease costs of $300.5 million in Operating expenses and $6.9 million in Selling, general and administrative expenses. For the nine months ended September 30, 2019, these costs include $66.2 million of variable operating lease costs. For the three and nine months ended September 30, 2019, sublease income was immaterial.

As of September 30, 2019, minimum rental payments under operating leases are as follows:
(in millions)
 
Operating
 Leases
2019
 
$
49.5

2020
 
257.4

2021
 
239.2

2022
 
221.4

2023
 
198.8

2024 and thereafter
 
999.9

Total operating lease payments
 
1,966.2

Less: Interest
 
559.1

Present value of lease liabilities
 
$
1,407.1



As of December 31, 2018, minimum rental payments under non-cancellable operating leases with original terms in excess of one year are as follows:
(in millions)
 
Non-Cancellable Operating
Leases
2019
 
$
154.8

2020
 
151.8

2021
 
139.1

2022
 
126.2

2023
 
109.8

2024 and thereafter
 
574.6

Total minimum payments
 
$
1,256.3



As of September 30, 2019, the weighted-average remaining lease term was 10.2 years and the weighted-average discount rate was 6.1%.

For the nine months ended September 30, 2019, cash paid for operating leases was $296.5 million. Leased assets obtained in exchange for new operating lease liabilities was $321.9 million.


12

OUTFRONT Media Inc.
Notes to Consolidated Financial Statements
(Unaudited)

Lessor

Our agreements with customers to advertise on our billboards are considered operating leases. Substantially all of our advertising structures (see Note 5. Property and Equipment, Net) are utilized to lease advertising space to customers, for which the contracts are accounted for as rental income. Billboard display revenues are recognized as rental income on a straight-line basis over the customer lease term. We exclude from rental income all taxes assessed by a governmental authority that we collect from customers. These operating leases are short-term in duration, typically a term of 4 weeks to one year and do not include any variable lease provisions or options to extend the lease. Certain contracts may include provisions for the early termination of the lease after an agreed upon notice period. We account for non-lease installation services and the lease associated with providing advertising space on our billboards as a combined component under the lease standard.

We recorded rental income of $301.3 million for the three months ended September 30, 2019, and $839.4 million for the nine months ended September 30, 2019, in Revenues on our Consolidated Statement of Operations.

As of September 30, 2019, rental payments to be received under non-cancellable operating leases are as follows:
(in millions)
 
Rental Income
2019
 
$
234.7

2020
 
157.7

2021
 
16.7

2022
 
5.3

2023
 
2.9

2024 and thereafter
 
1.9

Total minimum payments
 
$
419.2



Note 5. 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
 
September 30,
2019
 
December 31,
2018
Land
 
 
 
$
98.5

 
$
97.5

Buildings
 
20 to 40 years
 
49.9

 
48.7

Advertising structures
 
5 to 20 years
 
1,838.2

 
1,789.4

Furniture, equipment and other