0001579877-20-000058.txt : 20200508 0001579877-20-000058.hdr.sgml : 20200508 20200508160452 ACCESSION NUMBER: 0001579877-20-000058 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 95 CONFORMED PERIOD OF REPORT: 20200331 FILED AS OF DATE: 20200508 DATE AS OF CHANGE: 20200508 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: 20860507 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 a20200331-10xqxoutfront.htm 10-Q Document
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Subject to certain conditions, at the Company’s option, (i) after the third anniversary of the Closing Date, all of the Series A Preferred Stock may be converted into shares of our common stock, and (ii) after the seventh anniversary of the Closing Date, all of the Series A Preferred Stock may be redeemed for cash at a redemption price equal to 100% of the liquidation preference of the Series A Preferred Stock, plus any accrued and unpaid dividends. 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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 March 31, 2020
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)
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

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

As of May 7, 2020, the number of shares outstanding of the registrant’s common stock was 144,353,509.




OUTFRONT MEDIA INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2020
TABLE OF CONTENTS



PART 1

Item 1.    Financial Statements.

OUTFRONT Media Inc.
Consolidated Statements of Financial Position
(Unaudited)
 
 
As of
(in millions)
 
March 31,
2020
 
December 31,
2019
Assets:
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
487.8

 
$
59.1

Restricted cash
 
1.8

 
1.8

Receivables, less allowance ($19.9 in 2020 and $12.1 in 2019)
 
260.8

 
290.0

Prepaid lease and franchise costs
 
8.5

 
8.6

Prepaid MTA equipment deployment costs (Notes 5 and 18)
 
0.9

 
55.4

Other prepaid expenses
 
15.3

 
15.8

Other current assets
 
7.6

 
5.1

Total current assets
 
782.7

 
435.8

Property and equipment, net (Note 4)
 
665.8

 
666.2

Goodwill
 
2,081.3

 
2,083.1

Intangible assets (Note 5)
 
562.7

 
550.9

Operating lease assets (Note 6)
 
1,470.9

 
1,457.0

Prepaid MTA equipment deployment costs (Notes 5 and 18)
 
188.8

 
116.1

Other assets
 
52.1

 
73.2

Total assets
 
$
5,804.3

 
$
5,382.3

 
 
 
 
 
Liabilities:
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
70.8

 
$
67.9

Accrued compensation
 
25.5

 
56.1

Accrued interest
 
17.7

 
26.4

Accrued lease and franchise costs
 
49.2

 
55.3

Other accrued expenses
 
33.2

 
34.2

Deferred revenues
 
40.0

 
29.0

Short-term debt (Note 9)
 
210.0

 
195.0

Short-term operating lease liabilities (Note 6)
 
180.8

 
168.3

Other current liabilities
 
15.4

 
17.8

Total current liabilities
 
642.6

 
650.0

Long-term debt, net (Note 9)
 
2,718.0

 
2,222.1

Deferred income tax liabilities, net
 
15.5

 
18.0

Asset retirement obligation (Note 7)
 
34.8

 
35.1

Operating lease liabilities (Note 6)
 
1,287.4

 
1,285.1

Other liabilities
 
49.0

 
45.6

Total liabilities
 
4,747.3

 
4,255.9

 
 
 
 
 
Commitments and contingencies (Note 18)
 


 


 
 
 
 
 
Stockholders’ equity (Note 10):
 
 
 
 
Common stock (2020 - 450.0 shares authorized, and 144.4 shares issued
 
 
 
 
 and outstanding; 2019 - 450.0 shares authorized, and 143.6 issued and outstanding)
 
1.4

 
1.4

Additional paid-in capital
 
2,072.8

 
2,074.7

Distribution in excess of earnings
 
(1,013.8
)
 
(964.6
)
Accumulated other comprehensive loss
 
(31.8
)
 
(17.7
)
Total stockholders’ equity
 
1,028.6

 
1,093.8

Non-controlling interests
 
28.4

 
32.6

Total equity
 
1,057.0

 
1,126.4

Total liabilities and equity
 
$
5,804.3

 
$
5,382.3

See accompanying notes to unaudited consolidated financial statements.

3


OUTFRONT Media Inc.
Consolidated Statements of Operations
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
(in millions, except per share amounts)
 
2020
 
2019
Revenues:
 
 
 
 
Billboard
 
$
270.9

 
$
251.0

Transit and other
 
114.4

 
120.7

Total revenues
 
385.3

 
371.7

Expenses:
 
 
 
 
Operating
 
224.8

 
216.9

Selling, general and administrative
 
79.5

 
73.3

Restructuring charges
 

 
0.3

Net gain on dispositions
 
(0.1
)
 
(1.5
)
Depreciation
 
21.0

 
21.1

Amortization
 
26.3

 
24.7

Total expenses
 
351.5

 
334.8

Operating income
 
33.8

 
36.9

Interest expense, net
 
(29.8
)
 
(32.7
)
Other income, net
 
0.2

 
0.1

Income before benefit for income taxes and equity in earnings of investee companies
 
4.2

 
4.3

Benefit for income taxes
 
1.7

 
1.0

Equity in earnings of investee companies, net of tax
 
0.4

 
0.8

Net income before allocation to non-controlling interests
 
6.3

 
6.1

Net income attributable to non-controlling interests
 
0.2

 

Net income attributable to OUTFRONT Media Inc.
 
$
6.1

 
$
6.1

 
 
 
 
 
Net income per common share:
 
 
 
 
Basic
 
$
0.04

 
$
0.04

Diluted
 
$
0.04

 
$
0.04

 
 
 
 
 
Weighted average shares outstanding:
 
 
 
 
Basic
 
143.9

 
140.7

Diluted
 
144.7

 
141.1

See accompanying notes to unaudited consolidated financial statements.

4


OUTFRONT Media Inc.
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
Net income before allocation to non-controlling interests
 
$
6.3

 
$
6.1

Net income attributable to non-controlling interests
 
0.2

 

Net income attributable to OUTFRONT Media Inc.
 
6.1

 
6.1

Other comprehensive income (loss), net of tax:
 
 
 
 
Cumulative translation adjustments
 
(10.5
)
 
2.6

Net actuarial gain
 
0.7

 

Change in fair value of interest rate swap agreements
 
(4.3
)
 
(0.8
)
Total other comprehensive income (loss), net of tax
 
(14.1
)
 
1.8

Total comprehensive income (loss)
 
$
(8.0
)
 
$
7.9

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
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
 

 

 

 
(24.8
)
 

 
(24.8
)
 

 
(24.8
)
Net income
 

 

 

 
6.1

 

 
6.1

 

 
6.1

Other comprehensive loss
 

 

 

 

 
1.8

 
1.8

 

 
1.8

Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested
 
0.9

 

 

 

 

 

 

 

Amortization
 

 

 
5.3

 

 

 
5.3

 

 
5.3

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

 
(7.7
)
 

 

 
(7.7
)
 

 
(7.7
)
Class A equity interest redemptions
 
0.1

 

 
2.8

 

 

 
2.8

 
(2.8
)
 

Shares issued under the ATM Program
 
0.8

 

 
16.5

 

 

 
16.5

 

 
16.5

Dividends ($0.36 per share)
 

 

 

 
(51.6
)
 

 
(51.6
)
 

 
(51.6
)
Other
 

 

 
0.1

 

 

 
0.1

 
0.9

 
1.0

Balance as of
March 31, 2019
 
141.6

 
$
1.4

 
$
2,012.0

 
$
(941.9
)
 
$
(20.2
)
 
$
1,051.3

 
$
40.6

 
$
1,091.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of
December 31, 2019
 
143.6

 
$
1.4

 
$
2,074.7

 
$
(964.6
)
 
$
(17.7
)
 
$
1,093.8

 
$
32.6

 
$
1,126.4

Net income
 

 

 

 
6.1

 

 
6.1

 
0.2

 
6.3

Other comprehensive income
 

 

 

 

 
(14.1
)
 
(14.1
)
 

 
(14.1
)
Stock-based payments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested
 
1.0

 

 

 

 

 

 

 

Amortization
 

 

 
5.8

 

 

 
5.8

 

 
5.8

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

 
(12.1
)
 

 

 
(12.1
)
 

 
(12.1
)
Class A equity interest redemptions
 
0.2

 

 
4.4

 

 

 
4.4

 
(4.4
)
 

Dividends ($0.38 per share)
 

 

 

 
(55.3
)
 

 
(55.3
)
 

 
(55.3
)
Balance as of
March 31, 2020
 
144.4

 
$
1.4

 
$
2,072.8

 
$
(1,013.8
)
 
$
(31.8
)
 
$
1,028.6

 
$
28.4

 
$
1,057.0

See accompanying notes to unaudited consolidated financial statements.

6


OUTFRONT Media Inc.
Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
Operating activities:
 
 
 
 
Net income attributable to OUTFRONT Media Inc.
 
$
6.1

 
$
6.1

Adjustments to reconcile net income to net cash flow provided by operating activities:
 
 
 
 
Net income attributable to non-controlling interests
 
0.2

 

Depreciation and amortization
 
47.3

 
45.8

Deferred tax benefit
 
(1.8
)
 
(0.1
)
Stock-based compensation
 
5.8

 
5.3

Provision for doubtful accounts
 
8.1

 
1.0

Accretion expense
 
0.6

 
0.6

Net gain on dispositions
 
(0.1
)
 
(1.5
)
Equity in earnings of investee companies, net of tax
 
(0.4
)
 
(0.8
)
Distributions from investee companies
 
1.2

 
0.7

Amortization of deferred financing costs and debt discount and premium
 
1.3

 
1.4

Cash paid for direct lease acquisition costs
 
(14.9
)
 
(14.0
)
Change in assets and liabilities, net of investing and financing activities:
 
 
 
 
Decrease in receivables
 
19.7

 
35.1

Increase in prepaid MTA equipment deployment costs
 
(18.2
)
 
(22.7
)
Increase in prepaid expenses and other current assets
 
(2.8
)
 
(3.2
)
Decrease in accounts payable and accrued expenses
 
(42.4
)
 
(24.3
)
Increase in operating lease assets and liabilities
 
1.3

 
6.3

Increase in deferred revenues
 
11.1

 
7.5

Decrease in income taxes
 
(0.7
)
 
(1.7
)
Other, net
 
(6.5
)
 
(0.1
)
Net cash flow provided by operating activities
 
14.9

 
41.4

 
 
 
 
 
Investing activities:
 
 
 
 
Capital expenditures
 
(18.2
)
 
(18.1
)
Acquisitions
 
(6.6
)
 
(7.5
)
MTA franchise rights
 
(2.8
)
 
(5.4
)
Net proceeds from dispositions
 
0.3

 
2.2

Return of investment in investee companies
 
0.6

 
0.1

Net cash flow used for investing activities
 
(26.7
)
 
(28.7
)
 
 
 
 
 
Financing activities:
 
 
 
 
Proceeds from long-term debt borrowings
 
495.0

 
35.0

Proceeds from borrowings under short-term debt facilities
 
15.0

 
15.0

Repayments of borrowings under short-term debt facilities
 

 
(20.0
)
Payments of deferred financing costs
 
(0.4
)
 

Proceeds from shares issued under the ATM Program
 

 
16.6

Taxes withheld for stock-based compensation
 
(11.8
)
 
(7.6
)
Dividends
 
(55.6
)
 
(51.8
)
Net cash flow provided by (used for) financing activities
 
442.2

 
(12.8
)

7



OUTFRONT Media Inc.
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
Effect of exchange rate changes on cash, cash equivalents and restricted cash
 
(1.7
)
 
0.1

Net increase in cash, cash equivalents and restricted cash
 
428.7

 

Cash, cash equivalents and restricted cash at beginning of period
 
60.9

 
54.1

Cash, cash equivalents and restricted cash at end of period
 
$
489.6

 
$
54.1

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
Cash paid for income taxes
 
$
0.8

 
$
0.8

Cash paid for interest
 
37.5

 
24.5

 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
Accrued purchases of property and equipment
 
$
9.7

 
$
9.4

Accrued MTA franchise rights
 
5.0

 
1.8

Taxes withheld for stock-based compensation
 
0.2

 
0.1

See accompanying notes to unaudited consolidated financial statements.

8

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 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, 2019, filed with the SEC on February 26, 2020.

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, including the impact of extraordinary events such as the novel coronavirus (COVID-19) pandemic, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions, including the severity and duration of the COVID-19 pandemic.

The COVID-19 pandemic and the related preventative measures taken to help curb the spread, have had, and may continue to have, a significant impact on the global economy and our business. In order to preserve financial flexibility and increase liquidity in light of the current uncertainty in the global economy and our business resulting from the COVID-19 pandemic, we undertook the following actions, among others: borrowed nearly all of the remaining available amount under the Revolving Credit Facility (as defined below) and amended the Credit Agreement (as defined below) to modify the calculation of the Company’s financial maintenance covenant ratio (see Note 9. Debt to the Consolidated Financial Statements), completed the Private Placement (as defined below) (see Note 20. Subsequent Event to the Consolidated Financial Statements) and reduced or deferred capital expenditures and expenses through cost savings initiatives. Given the uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, in response to the COVID-19 pandemic, the Company cannot reasonably estimate the full impact of the COVID-19 pandemic on our business, financial condition and results of operations at this time, which may be material.

Note 2. New Accounting Standards

Adoption of New Accounting Standards

In the first quarter of 2020, we adopted the Financial Accounting Standards Board’s (the “FASB’s”) guidance for evaluating and determining when a cloud computing arrangement (hosting arrangement) includes a software license. The adoption of this guidance did not have a material effect on our consolidated financial statements.


9

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

In the first quarter of 2020, we adopted the FASB’s guidance which requires a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available-for-sale debt securities at the amount expected to be collected. The application of this guidance was limited to our receivables that are not related to rental income, which is accounted for under the lease accounting standard. The provision for doubtful accounts is estimated based on historical bad debt experience, the aging of accounts receivable, industry trends and economic indicators, recent payment history for specific customers and expected future trends.

We have recorded a Provision for doubtful accounts of $8.1 million for all receivables during the first quarter of 2020, which includes an impact from the COVID-19 pandemic on future collections.

Recent Pronouncements

In December 2019, the FASB issued guidance simplifying the accounting for income taxes by removing certain exceptions to the general principles of Accounting Standards Codification Topic 740, Income Taxes. The new guidance is effective for annual and interim periods beginning after December 15, 2020. We do not expect this guidance to have a material effect on our consolidated financial statements.

Note 3. Restricted Cash

We have an escrow agreement in connection with one of our transit franchise contracts, which requires us to deposit funds into an escrow account to fund capital expenditures over the term of the transit franchise contract. As of March 31, 2020, we have $1.8 million of restricted cash deposited in the escrow account.
 
 
As of
(in millions)
 
March 31, 2020
 
March 31, 2019
 
December 31, 2019
Cash and cash equivalents
 
$
487.8

 
$
52.7

 
$
59.1

Restricted cash
 
1.8

 
1.4

 
1.8

Cash, cash equivalents and restricted cash
 
$
489.6

 
$
54.1

 
$
60.9



Note 4. 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
 
March 31,
2020
 
December 31,
2019
Land
 
 
 
$
98.6

 
$
98.8

Buildings
 
20 to 40 years
 
48.7

 
50.4

Advertising structures
 
5 to 20 years
 
1,852.4

 
1,866.1

Furniture, equipment and other
 
3 to 10 years
 
157.9

 
153.1

Construction in progress
 
 
 
30.2

 
25.4

 
 
 
 
2,187.8

 
2,193.8

Less: Accumulated depreciation
 
 
 
1,522.0

 
1,527.6

Property and equipment, net
 
 
 
$
665.8

 
$
666.2



Depreciation expense was $21.0 million in the three months ended March 31, 2020, and $21.1 million in the three months ended March 31, 2019.

Note 5. Long-Lived Assets

The assumptions and estimates used in our analyses below require significant judgment about future events, market conditions and financial performance. Given the uncertainty around the severity and duration of the COVID-19 pandemic and the

10

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

measures taken, or may be taken, in response to the COVID-19 pandemic, actual results may differ materially from these assumptions and estimates, which may result in impairment charges of our long-lived assets in the future. 

Goodwill

In the first quarter of 2020, we performed a qualitative assessment to determine if there has been a triggering event and impairment of goodwill as a result of the COVID-19 pandemic. As a result of the analysis performed, we determined that it was not “more likely than not” that the carrying value of any of our reporting units exceeded their fair value and no further evaluation of goodwill was necessary.

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 March 31, 2020:
 
 
 
 
 
 
Permits and leasehold agreements
 
$
1,175.1

 
$
(744.8
)
 
$
430.3

Franchise agreements
 
501.5

 
(375.1
)
 
126.4

Other intangible assets
 
46.9

 
(40.9
)
 
6.0

Total intangible assets
 
$
1,723.5

 
$
(1,160.8
)
 
$
562.7

 
 
 
 
 
 
 
As of December 31, 2019:
 
 
 
 
 
 
Permits and leasehold agreements
 
$
1,153.3

 
$
(735.7
)
 
$
417.6

Franchise agreements
 
497.4

 
(371.1
)
 
126.3

Other intangible assets
 
47.1

 
(40.1
)
 
7.0

Total intangible assets
 
$
1,697.8

 
$
(1,146.9
)
 
$
550.9



All of our intangible assets, except goodwill, are subject to amortization. Amortization expense was $26.3 million in the three months ended March 31, 2020, and $24.7 million in the three months ended March 31, 2019, which includes the amortization of direct lease acquisition costs of $11.3 million in the three months ended March 31, 2020, and $10.3 million in the three months ended March 31, 2019. Direct lease acquisition costs are amortized on a straight-line basis over the related customer lease term, which generally ranges from four weeks to one year.

New York Metropolitan Transportation Authority (the “MTA”) Agreement

We have identified the COVID-19 pandemic as a trigger for an impairment review of our Prepaid MTA equipment deployment costs and related intangible assets. After updating our projections to reflect related declines in revenues in 2020 and delays in our anticipated deployment schedule as a result of the impact of the COVID-19 pandemic, among other things, no impairment was identified. However, since we may not recoup any costs in 2020, we have reclassified amounts previously included in current Prepaid MTA equipment deployment costs to non-current Prepaid MTA equipment deployment costs on the Consolidated Statement of Financial Position.

Note 6. Leases

Lessee

As of March 31, 2020, we have operating lease assets of $1.5 billion, short-term operating lease liabilities of $180.8 million and non-current operating lease liabilities of $1.3 billion. As of December 31, 2019, we had operating lease assets of $1.5 billion,

11

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

short-term operating lease liabilities of $168.3 million and non-current operating lease liabilities of $1.3 billion. As of March 31, 2020, the weighted-average remaining lease term was 10.3 years and the weighted-average discount rate was 5.7%.

For the three months ended March 31, 2020, we recorded operating lease costs of $102.5 million in Operating expenses and $2.2 million in Selling, general and administrative expenses. For the three months ended March 31, 2020, these costs include $22.1 million of variable operating lease costs. For the three months ended March 31, 2019, we recorded operating lease costs of $94.4 million in Operating expenses and $2.1 million in Selling, general and administrative expenses. For the three months ended March 31, 2019, these costs include $19.5 million of variable operating lease costs. For both the three months ended March 31, 2020 and 2019, sublease income was immaterial.

For the three months ended March 31, 2020, cash paid for operating leases was $108.6 million and leased assets obtained in exchange for new operating lease liabilities was $77.2 million. For the three months ended March 31, 2019, cash paid for operating leases was $94.2 million and leased assets obtained in exchange for new operating lease liabilities was $147.6 million.

Lessor

We recorded rental income of $262.3 million for the three months ended March 31, 2020, and $242.0 million for the three months ended March 31, 2019, in Revenues on our Consolidated Statement of Operations.

Note 7. 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, 2019
 
$
35.1

Accretion expense
 
0.6

Liabilities settled
 
(0.6
)
Foreign currency translation adjustments
 
(0.3
)
As of March 31, 2020
 
$
34.8



Note 8. Related Party Transactions

We have a 50% ownership interest in two joint ventures that operate transit shelters in the greater Los Angeles area and Vancouver, and five joint ventures which currently operate a total of 11 billboard displays in New York and Boston. All of these joint ventures are accounted for as equity investments. These investments totaled $13.8 million as of March 31, 2020, and $15.4 million as of December 31, 2019, 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 $1.5 million in the three months ended March 31, 2020 and $1.7 million in the three months ended March 31, 2019.


12

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

Note 9. Debt

Debt, net, consists of the following:
 
 
As of
(in millions, except percentages)
 
March 31,
2020
 
December 31,
2019
Short-term debt:
 
 
 
 
AR Facility
 
$
120.0

 
$
105.0

Repurchase Facility
 
90.0

 
90.0

Total short-term debt
 
210.0

 
195.0

 
 
 
 
 
Long-term debt:
 
 
 
 
Revolving credit facility
 
495.0

 

Term loan, due 2026
 
597.5

 
597.5

 
 
 
 
 
Senior unsecured notes:
 
 
 
 
5.625% senior unsecured notes, due 2024
 
501.6

 
501.7

5.000% senior unsecured notes, due 2027
 
650.0

 
650.0

4.625% senior unsecured notes, due 2030
 
500.0

 
500.0

Total senior unsecured notes
 
1,651.6

 
1,651.7

 
 
 
 
 
Debt issuance costs
 
(26.1
)
 
(27.1
)
Total long-term debt, net
 
2,718.0

 
2,222.1

 
 
 
 
 
Total debt, net
 
$
2,928.0

 
$
2,417.1

 
 
 
 
 
Weighted average cost of debt
 
4.0
%
 
4.5
%


Term Loan

The interest rate on the term loan due in 2026 (the “Term Loan”) was 2.5% per annum as of March 31, 2020. As of March 31, 2020, a discount of $2.5 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 2024 (the “Revolving Credit Facility,” together with the Term Loan, the “Senior Credit Facilities”).

On March 25, 2020, we borrowed $470.0 million on our revolving credit facility, which represents nearly all of the remaining available amount under the Revolving Credit Facility. As of March 31, 2020, there were $495.0 million of outstanding borrowings under the Revolving Credit Facility, at a borrowing rate of approximately 2.7%.

The commitment fee based on the amount of unused commitments under the Revolving Credit Facility was $0.3 million in the three months ended March 31, 2020, and $0.4 million in the three months ended March 31, 2019. As of March 31, 2020, we had issued letters of credit totaling approximately $1.5 million against the letter of credit facility sublimit under the Revolving Credit Facility.


13

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

Standalone Letter of Credit Facilities

As of March 31, 2020, we had issued letters of credit totaling approximately $71.0 million under our aggregate $78.0 million standalone letter of credit facilities. The total fees under the letter of credit facilities were immaterial in each of the three months ended March 31, 2020 and 2019.

Accounts Receivable Securitization Facilities

As of March 31, 2020, we have a $125.0 million revolving accounts receivable securitization facility (the “AR Facility”), which terminates in June 2022, unless further extended, and a 364-day uncommitted $90.0 million structured repurchase facility (the “Repurchase Facility” and together with the AR Facility, the “AR Securitization Facilities”), which terminates in June 2020, unless further extended.

In connection with the AR Securitization Facilities, 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 will 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.

In connection with the Repurchase Facility, the Originators may borrow funds collateralized by subordinated notes (the “Subordinated Notes”) issued by the SPVs in favor of their respective Originators and representing a portion of the outstanding balance of the accounts receivable assets sold by the Originators to the SPVs under the AR Facility. The Subordinated Notes will be transferred to MUFG Bank, Ltd. (“MUFG”), as repurchase buyer, on an uncommitted basis, and subject to repurchase by the applicable Originators on termination of the Repurchase Facility. The Originators have granted MUFG a security interest in the Subordinated Notes to secure their obligations under the agreements governing the Repurchase Facility, and the Company has agreed to guarantee the Originators’ obligations under the agreements governing the Repurchase Facility.

As of March 31, 2020, there were $120.0 million of outstanding borrowings under the AR Facility, at a borrowing rate of approximately 2.5%, and $90.0 million of outstanding borrowings under the Repurchase Facility, at a borrowing rate of approximately 2.0%. As of March 31, 2020, there was no borrowing capacity remaining under the AR Facility based on approximately $304.5 million of accounts receivable used as collateral for the AR Securitization Facilities, and there was no borrowing capacity remaining under the Repurchase Facility, in accordance with the agreements governing the AR Securitization Facilities. The commitment fee based on the amount of unused commitments under the AR Facility was immaterial for each of the three months ended March 31, 2020 and 2019.

On April 17, 2020, MUFG required us to reduce our borrowing capacity under the Repurchase Facility to $80.0 million and repay $10.0 million of borrowings under the Repurchase Facility as a result of MUFG reducing its uncommitted repurchase facility credit exposure to companies with a similar issuer credit rating as the Company. As of May 7, 2020, there were $118.0 million of outstanding borrowings under the AR Facility, at a borrowing rate of approximately 2.0%, and $80.0 million of outstanding borrowings under the Repurchase Facility, at a borrowing rate of approximately 2.5%.


14

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

Senior Unsecured Notes

As of March 31, 2020, a premium of $1.6 million on $100.0 million aggregate principal amount of the 5.625% Senior Unsecured Notes due 2024, remains unamortized. The premium is being amortized through Interest expense, net, on the Consolidated Statement of Operations.

Debt Covenants

Our credit agreement, dated as of January 31, 2014 (as amended, supplemented or otherwise modified, the “Credit Agreement”), governing the Senior Credit Facilities, the agreements governing the AR Securitization Facilities, 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 limit the Company’s and our 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 (“Finance 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, and (ii) enter into agreements restricting certain subsidiaries’ ability to pay dividends or make other intercompany or third-party transfers.

The terms of the Credit Agreement (and under certain circumstances, the agreements governing the AR Securitization Facilities) 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 March 31, 2020, our Consolidated Net Secured Leverage Ratio was 2.0 to 1.0 in accordance with the Credit Agreement. The Credit Agreement also requires that, in connection with the incurrence of certain indebtedness, we maintain a Consolidated Total Leverage Ratio, which is the ratio of our consolidated total debt to our Consolidated EBITDA for the trailing four consecutive quarters, of no greater than 6.0 to 1.0. As of March 31, 2020, our Consolidated Total Leverage Ratio was 5.4 to 1.0 in accordance with the Credit Agreement. As of March 31, 2020, we are in compliance with our debt covenants. 

On April 15, 2020, the Company, along with its wholly-owned subsidiaries, Finance LLC and Outfront Media Capital Corporation (together with Finance LLC, the “Borrowers”), and other guarantor subsidiaries party thereto, entered into an amendment (the “Amendment”) to the Credit Agreement. The Amendment provides that for the period from April 15, 2020 through September 30, 2021 (i) the Company’s Consolidated Net Secured Leverage Ratio shall be calculated by substituting the Company’s Consolidated EBITDA for each of the quarterly periods ended June 30, 2020 and September 30, 2020 included in any last twelve month compliance testing period, with the Company’s historical Consolidated EBITDA for each of the quarterly periods ended June 30, 2019 and September 30, 2019, respectively; and (ii) the Company will not make any Restricted Payments (as defined in the Credit Agreement) without the consent of the applicable lenders under the Credit Agreement, subject to certain exceptions such as payments necessary to maintain the Company’s REIT status, including any payments on any class of the Company’s capital stock that is required to be made prior to the payment of a dividend or distribution on the Company’s common stock and the Company’s existing payment obligations to holders of the Class A equity interests in Outfront Canada (as defined in Note 10. Equity to the Consolidated Financial Statements.

Deferred Financing Costs

As of March 31, 2020, we had deferred $30.7 million in fees and expenses associated with the Term Loan, Revolving Credit Facility, AR Securitization Facilities 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 Securitization Facilities and our senior unsecured notes.

Interest Rate Swap Agreements

We have several interest rate cash flow swap agreements to effectively convert a portion of our LIBOR-based variable rate debt to a fixed rate and hedge our interest rate risk related to such variable rate debt. The fair value of these swap positions was a net liability of approximately $8.9 million as of March 31, 2020, and $4.6 million as of December 31, 2019, and is included in Other liabilities on our Consolidated Statement of Financial Position.


15

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

As of March 31, 2020, under the terms of the agreements, we will pay interest based on an aggregate notional amount of $200.0 million, under a weighted-average fixed interest rate of 2.7%, with a receive rate of one-month LIBOR and which mature at various dates until June 30, 2022. The one-month LIBOR rate was approximately 1.0% as of March 31, 2020.

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 $2.8 billion as of March 31, 2020, and $2.5 billion as of December 31, 2019. The fair value of our debt as of both March 31, 2020, and December 31, 2019, is classified as Level 2. The aggregate fair value loss associated with our interest rate cash flow swap agreements was approximately $8.9 million as of March 31, 2020, and $4.6 million as of December 31, 2019. The aggregate fair value of our interest rate cash flow swap agreements as of both March 31, 2020 and December 31, 2019, is classified as Level 2.

Note 10. Equity

As of March 31, 2020, 450,000,000 shares of our common stock, par value $0.01 per share, were authorized; 144,353,374 shares were issued and outstanding; and 50,000,000 shares of our preferred stock, par value $0.01 per share, were authorized with no shares issued and outstanding.

In connection with the acquisition of outdoor advertising assets in Canada in June 2017, the Company issued 1,953,407 shares of Class A equity interests of a subsidiary of the Company that controls its Canadian business (“Outfront Canada”). The Class A equity interests are entitled to receive priority cash distributions from Outfront Canada at the same time and in the same per share amount as the dividends paid on shares of the Company’s common stock. The Class A equity interests may be redeemed by the holders in exchange for shares of the Company’s common stock on a one-for-one basis (subject to anti-dilution adjustments) or, at the Company’s option, cash equal to the then fair market value of the shares of the Company’s common stock. The Company is also subject to limitations on its ability to sell or otherwise dispose of the assets acquired in Canada until June 2022, unless it pays holders of the Class A equity interests in Outfront Canada an amount intended to approximate their resulting tax liability, plus a tax gross-up.

During the three months ended March 31, 2020, we made distributions of $0.4 million to holders of the Class A equity interests, which are recorded in Dividends on our Consolidated Statements of Equity and Consolidated Statements of Cash Flows. As of March 31, 2020, 1,026,727 Class A equity interests have been redeemed for shares of the Company’s common stock.

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 three months ended March 31, 2020. As of March 31, 2020, we had approximately $232.5 million of capacity remaining under the ATM Program.


16

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

Note 11. Revenues

The following table summarizes revenues by source:
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
Billboard:
 
 
 
 
Static displays
 
$
201.1

 
$
194.3

Digital displays
 
60.4

 
47.0

Other
 
9.4

 
9.7

Billboard revenues
 
270.9

 
251.0

Transit:
 
 
 
 
Static displays
 
65.1

 
79.0

Digital displays
 
27.7

 
16.6

Other
 
7.4

 
8.8

Total transit revenues
 
100.2

 
104.4

Sports marketing and other
 
14.2

 
16.3

Transit and other revenues
 
114.4

 
120.7

Total revenues
 
$
385.3

 
$
371.7


Rental income was $262.3 million in the three months ended March 31, 2020, and $242.0 million in the three months ended March 31, 2019, and is recorded in Billboard revenues on the Consolidated Statement of Operations.

The following table summarizes revenues by geography:
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
United States:
 
 
 
 
Billboard
 
$
256.5

 
$
236.2

Transit and other
 
98.2

 
102.2

Sports marketing and other
 
14.2

 
16.3

Total United States revenues
 
368.9

 
354.7

Canada
 
16.4

 
17.0

Total revenues
 
$
385.3

 
$
371.7


We recognized substantially all of the Deferred revenues on the Consolidated Statement of Financial Position as of December 31, 2019, during the three months ended March 31, 2020.

Note 12. Restructuring Charges

As of March 31, 2020, $0.4 million in restructuring reserves remain outstanding and is included in Other current liabilities on the Consolidated Statement of Financial Position. For the three months ended March 31, 2019, we recorded restructuring charges of $0.3 million associated with the elimination of a corporate management position.

In order to preserve financial flexibility, increase liquidity and reduce expenses in light of the current uncertainty in the global economy and our business as a result of the COVID-19 pandemic, on May 5, 2020, we announced a workforce reduction and notified approximately 70 employees of their termination and furloughed approximately 150 employees. We currently

17

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

anticipate incurring severance-based restructuring charges of approximately $4.2 million, which will be recognized in the second quarter of 2020.

Note 13. Acquisitions

We completed several asset acquisitions for a total purchase price of approximately $6.6 million in the three months ended March 31, 2020, and $2.5 million in the three months ended March 31, 2019.

In the second quarter of 2018, we entered into an agreement to acquire 14 digital and seven static billboard displays in California for a total estimated purchase price of $35.4 million. As of March 31, 2020, we have completed this acquisition except with respect to four digital displays, which we expect to acquire in 2021 for an estimated purchase price of $9.2 million, subject to customary closing conditions and the timing of site development.

In the first quarter of 2019, we entered into an agreement to acquire eight digital billboard displays in Atlanta, Georgia, for an aggregate purchase price of $24.0 million. During 2019, we paid deposits totaling $19.0 million into an escrow account related to this transaction, which were included in Other assets on our Consolidated Statement of Financial Position as of December 31, 2019. We completed this transaction in the first quarter of 2020.

Note 14. Stock-Based Compensation

The following table summarizes our stock-based compensation expense for the three months ended March 31, 2020 and 2019.
 
 
Three Months Ended
 
 
March 31,
(in millions)
 
2020
 
2019
Stock-based compensation expenses (restricted share units (“RSUs”) and performance-based RSUs (“PRSUs”)), before income taxes
 
$
5.8

 
$
5.3

Tax benefit
 
(0.4
)
 
(0.3
)
Stock-based compensation expense, net of tax
 
$
5.4

 
$
5.0



As of March 31, 2020, total unrecognized compensation cost related to non-vested RSUs and PRSUs was $47.8 million, which is expected to be recognized over a weighted average period of 2.4 years.

RSUs and PRSUs

The following table summarizes activity for the three months ended March 31, 2020, of RSUs and PRSUs issued to our employees.
 
 
Activity
 
Weighted Average Per Share Grant Date Fair Market Value
Non-vested as of December 31, 2019
 
2,024,768

 
$
22.09

Granted:
 
 
 
 
RSUs
 
702,351

 
30.63

PRSUs
 
323,771

 
29.60

Vested:
 
 
 
 
RSUs
 
(594,541
)
 
22.64

PRSUs
 
(293,852
)
 
22.49

Forfeitures:
 
 
 
 
RSUs
 
(5,259
)
 
23.18

Non-vested as of March 31, 2020
 
2,157,238

 
25.79




18

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

Stock Options

The following table summarizes activity for the three months ended March 31, 2020, of stock options issued to our employees.
 
 
Activity
 
Weighted Average Exercise Price
Outstanding as of December 31, 2019
 
126,528

 
$
24.57

Exercised
 
(23,115
)
 
16.43

Outstanding as of March 31, 2020
 
103,413

 
26.39

 
 
 
 
 
Exercisable as of March 31, 2020
 
103,413

 
26.39



As of March 31, 2020, all exercisable stock options issued to our employees were out-of-the-money based on the closing stock price of our common stock of $13.48