OUTFRONT MEDIA INC.
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") should be read in conjunction with our historical
consolidated financial statements and the notes thereto appearing in our Annual
Report on Form 10-K for the year ended December 31, 2019 , filed with the
Securities and Exchange Commission (the "SEC") on February 26, 2020 , and the
unaudited consolidated financial statements and the notes thereto included in
this Quarterly Report on Form 10-Q. This MD&A contains forward-looking
statements that involve numerous risks and uncertainties. The forward-looking
statements are subject to a number of important factors, including, but not
limited to, those factors discussed in the sections entitled "Risk Factors" in
this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the
year ended December 31, 2019 , filed with the SEC on February 26, 2020 , and the
section entitled "Cautionary Statement Regarding Forward-Looking Statements" in
this Quarterly Report on Form 10-Q, that could cause our actual results to
differ materially from the results described herein or implied by such
forward-looking statements. Except as otherwise indicated or unless the context
otherwise requires, all references in this Quarterly Report on Form 10-Q to (i)
"OUTFRONT Media ," "the Company," "we," "our," "us" and "our company" mean
OUTFRONT Media Inc. , a Maryland corporation, and unless the context requires
otherwise, its consolidated subsidiaries, and (ii) the "25 largest markets in
the U.S. ," "approximately 150 markets in the U.S. and Canada " and "Nielsen
Designated Market Areas" are based, in whole or in part, on Nielsen Media
Research's Designated Market Area rankings as of January 1, 2020 .
Overview
OUTFRONT Media is a real estate investment trust ("REIT"), which provides advertising space ("displays") on out-of-home advertising structures and sites inthe United States (the "U.S.") andCanada . We currently manage our operations through two operating segments-U.S. Billboard and Transit, which is included in ourU.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other (see Note 19. Segment Information to the Consolidated Financial Statements). In the third quarter of 2020, we sold all of our equity interests in certain of our subsidiaries (the "Sports Disposition"), which held all of the assets of our Sports Marketing operating segment, for a purchase price of approximately$34.6 million in cash, subject to closing and post-closing adjustments. The Sports Marketing operating segment was the marketing and multimedia rights holder for a variety of colleges, universities and other educational institutions acrossthe United States . The operating results of our Sports Marketing operating segment throughJune 30, 2020 , are included in our Consolidated Financial Statements and are included in Other in our segment reporting.
Business
We are one of the largest providers of advertising space on out-of-home advertising structures and sites across theU.S. andCanada . 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 theU.S. andCanada . In total, we have displays in all of the 25 largest markets in theU.S. and approximately 150 markets in theU.S. andCanada . Our top market, high profile location focused portfolio includes sites in and around bothGrand Central Station andTimes Square inNew York , various locations alongSunset Boulevard inLos Angeles , and theBay Bridge inSan Francisco . The breadth and depth of our portfolio provides our customers with a range of options to address their marketing objectives, from national, brand-building campaigns to hyper-local campaigns that drive customers to the advertiser's website or retail location "one mile down the road." In addition to providing location-based displays, we also focus on delivering mass and targeted audiences to our customers. Geopath, the out-of-home advertising industry's audience measurement system, enables us to build campaigns based on the size and demographic composition of audiences. As part of our technology platform, we are developing solutions for enhanced demographic and location targeting, and engaging ways to connect with consumers on-the-go. Additionally, our OUTFRONT Mobile Network and social influence add-on products allow our customers to further leverage location targeting with interactive mobile advertising and social sharing amplification. We believe out-of-home continues to be an attractive form of advertising, as our displays are always viewable and cannot be turned off, skipped, blocked or fast-forwarded. Further, out-of-home advertising can be an effective "stand-alone" medium, as well as an integral part of a campaign to reach audiences using multiple forms of media, including television, radio, print, online, mobile and social media advertising platforms. We provide our customers with a differentiated advertising solution at an attractive price point relative to other forms of advertising. In addition to leasing displays, we provide other value-added 29
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U.S. Media. OurU.S. Media segment generated 12% of its revenues in theNew York City metropolitan area in the three months endedSeptember 30, 2020 , 22% in the three months endedSeptember 30, 2019 , 16% in the nine months endedSeptember 30, 2020 and 23% in the nine months endedSeptember 30, 2019 , and generated 15% in theLos Angeles metropolitan area in the three months endedSeptember 30, 2020 , 16% in the three months endedSeptember 30, 2019 , 15% in the nine months endedSeptember 30, 2020 and 16% in the nine months endedSeptember 30, 2019 . In the three months endedSeptember 30, 2020 , ourU.S. Media segment generated$265.8 million of Revenues and$74.2 million of Operating income before Depreciation, Amortization, Net gain on dispositions, Stock-based compensation and Restructuring charges ("Adjusted OIBDA"). In the three months endedSeptember 30, 2019 , ourU.S. Media segment generated$422.7 million of Revenues and$147.3 million of Adjusted OIBDA. In the nine months endedSeptember 30, 2020 , ourU.S. Media segment generated$834.0 million of Revenues and$202.4 million of Adjusted OIBDA. In the nine months endedSeptember 30, 2019 , ourU.S. Media segment generated$1,180.7 million of Revenues and$387.7 million of Adjusted OIBDA. (See the "Segment Results of Operations" section of this MD&A.) Other (includes International and throughJune 30, 2020 , Sports Marketing). In the three months endedSeptember 30, 2020 , Other generated$16.5 million of Revenues and$3.2 million of Adjusted OIBDA. In the three months endedSeptember 30, 2019 , Other generated$39.8 million of Revenues and$4.3 million of Adjusted OIBDA. In the nine months endedSeptember 30, 2020 , Other generated$66.5 million of Revenues and an Adjusted OIBDA loss of$1.7 million . In the nine months endedSeptember 30, 2019 , Other generated$113.4 million of Revenues and$14.3 million of Adjusted OIBDA.
COVID-19 Impact
The novel coronavirus (COVID-19) pandemic and the related preventative measures taken to help curb the spread, including shutdowns and slowdowns of, and restrictions on, businesses, public gatherings, social interactions and travel (including reductions in foot traffic, roadway traffic, transit commuting and overall target audiences) throughout the markets in which we do business have had, and may continue to have, a significant impact on the global economy and our business. Though generally we remain able to continue to sell and service our displays, our business operates billboard and transit franchise agreements in the top DMAs, such asNew York andLos Angeles , where the COVID-19 pandemic has had a particularly significant impact. The COVID-19 pandemic has (i) delayed our ability to build and deploy advertising structures and sites, including digital displays; (ii) reduced or curtailed our customers' advertising expenditures and overall demand for our services through purchase cancellations or otherwise; (iii) increased the volatility of our customers' advertising expenditure patterns from period-to-period through short-notice purchases, purchase deferrals or otherwise; and (iv) extended delays in the collection of earned advertising revenues from our customers, all of which could have a material adverse effect on our business, financial condition and results of operation in 2020. As a result of the impact of the COVID-19 pandemic on our business and results of operations, we expect our key performance indicators, total revenues and total expenses to be materially lower in 2020 than historical levels, particularly in ourU.S. Media segment and with respect to our transit and other business. Additionally, we expect transit franchise expenses, billboard property lease expenses and posting, maintenance and other expenses, such as rental expenses and transit franchise payments, to materially increase as a percentage of revenues more than historical levels, as revenues decline in 2020. We expect the impacts described above to be greatest in the second quarter of 2020, with incremental improvement in the third and fourth quarters of 2020. Accordingly, results for the three and nine months endedSeptember 30, 2020 , are not indicative of the results that may be expected for the fiscal year endingDecember 31, 2020 . In response to the COVID-19 pandemic, we have prioritized the health and safety of our employees and customers by (i) shifting to a secure remote workforce for all personnel other than operations personnel who service our displays and certain other personnel, (ii) implementing deep cleaning, social distancing and other protective policies and practices in accordance with federal, state and local regulations and guidance across all offices and facilities that are open or in the process of reopening, (iii) restricting non-essential business travel, and (iv) communicating frequently with our employees and customers to address any concerns. None of these actions have caused a significant disruption in our ability to manage the continuity of our business or our internal controls. In addition, in order to preserve financial flexibility, increase liquidity and reduce expenses in light of the current uncertainty in the global economy and our business, we have modified our business goals and undertaken the following actions, which should be read in conjunction with the "-Analysis of Results of Operations" and "-Liquidity and Capital Resources" sections of this MD&A: 30 -------------------------------------------------------------------------------- Table of Contents •Repaid in full all borrowings under the Revolving Credit Facility (as defined below) as ofJune 30, 2020 , using the net proceeds from the offering of the Notes (as defined below) and cash on hand;
•Accessed the capital markets and raised
•Amended the Credit Agreement (as defined below) to modify the calculation of the Company's financial maintenance covenant ratio under the Credit Agreement;
•Amended the agreements governing the AR Securitization Facilities (as defined below) to temporarily suspend the AR Facility (as defined below) and extend the Repurchase Facility (as defined below) toJune 2021 with a borrowing capacity of$80.0 million , unless further amended and/or extended;
•Suspended our quarterly dividend payments on our common stock, subject to the minimum annual REIT distribution requirement;
•Suspended or delayed our deployment of digital transit displays to reduce costs that may or may not be recoverable from customer sales or transit franchise partners;
•Reduced maintenance capital expenditures (other than for necessary safety-related projects) and growth capital expenditures for digital billboard display conversions;
•Have taken a highly selective approach to new acquisition activity; and
•Reduced our posting, maintenance and other, and SG&A (as defined below)
expenses through restrictions on discretionary expenses, a hiring freeze,
workforce reductions, employee furloughs and temporary reductions to the base
salaries of certain employees and our executive officers (which ended in
In addition, we have engaged, and will continue to engage, in constructive conversations with our billboard ground lease landlords and transit franchise partners to mitigate increases as a percentage of revenues in billboard property lease expenses, transit franchise expenses and posting, maintenance and other expenses. Though we rely on third parties to manufacture and transport our digital displays, and have not experienced any significant supply chain or logistical disruptions, we may experience delays as a result of the COVID-19 pandemic in receiving digital displays as we continue to reinstate our digital billboard display conversions and deployment of digital transit displays. We continue to monitor the rapidly evolving situation and guidance from federal, state and local public health authorities and may take additional actions based on their recommendations. When the COVID-19 pandemic subsides, there can be no assurances as to the time it may take to generate revenues at historic levels. 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. Economic Environment Our revenues and operating results are sensitive to fluctuations in advertising expenditures, general economic conditions and other external events beyond our control, such as the COVID-19 pandemic as described above.
Business Environment
The outdoor advertising industry is fragmented, consisting of several companies
operating on a national basis, as well as hundreds of smaller regional and local
companies operating a limited number of displays in a single or a few local
geographic markets. We compete with these companies for both customers and
structure and display locations. We also compete with other media, including
online, mobile and social media advertising platforms and traditional
advertising platforms (such as television, radio, print and direct mail
marketers). In addition, we compete with a wide variety of out-of-home media,
including advertising in shopping centers, airports, movie theaters supermarkets
and taxis.
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Increasing the number of digital displays in our prime audience locations is an important element of our organic growth strategy, as digital displays have the potential to attract additional business from both new and existing customers. We believe digital displays are attractive to our customers because they allow for the development of richer and more visually engaging messages, provide our customers with the flexibility both to target audiences by time of day and to quickly launch new advertising campaigns, and eliminate or greatly reduce print production and installation costs. In addition, digital displays enable us to run multiple advertisements on each display. Digital billboard displays generate approximately four times more revenue per display on average than traditional static billboard displays. Digital billboard displays also incur, on average, approximately two to four times more costs, including higher variable costs associated with the increase in revenue than traditional static billboard displays. As a result, digital billboard displays generate higher profits and cash flows than traditional static billboard displays. The majority of our digital billboard displays were converted from traditional static billboard displays. In 2017, we commenced deployment of state-of-the-art digital transit displays in connection with several transit franchises and are planning to increase deployments significantly over the coming years. Once the digital transit displays have been deployed at scale, we expect that revenue generated on digital transit displays will be a multiple of the revenue generated on comparable static transit displays. Subject to the impact of the COVID-19 pandemic, we intend to incur significant equipment deployment costs and capital expenditures in the coming years to continue increasing the number of digital displays in our portfolio. We have built or converted 47 new digital billboard displays inthe United States and 2 inCanada during the nine months endedSeptember 30, 2020 . Additionally, in the nine months endedSeptember 30, 2020 , we entered into marketing arrangements to sell advertising on 20 third-party digital billboard displays in theU.S. and 29 inCanada . In the nine months endedSeptember 30, 2020 , we have built, converted or replaced 1,699 digital transit and other displays inthe United States . As described above, as a result of the COVID-19 pandemic, we reduced our digital billboard display conversions and suspended or delayed our deployment of digital transit displays. The following table sets forth information regarding our digital displays. Digital Revenues (in millions) for the Nine Months Ended Number of Digital Displays as of September 30, 2020(a) September 30, 2020(a) Digital Digital Transit and Digital Transit and Total Digital Digital Billboard Other Location Billboard Other Revenues Displays Displays Total Digital Displays United States$ 130.0 $ 41.8 $ 171.8 1,200 7,766 8,966 Canada 12.9 0.1 13.0 219 93 312 Total$ 142.9 $ 41.9 $ 184.8 1,419 7,859 9,278 (a)Digital display amounts include 2,941 displays reserved for transit agency use. Our number of digital displays is impacted by acquisitions, dispositions, management agreements, the net effect of new and lost billboards, and the net effect of won and lost franchises in the period. Our revenues and profits may fluctuate due to seasonal advertising patterns and influences on advertising markets. Typically, our revenues and profits are highest in the fourth quarter, during the holiday shopping season, and lowest in the first quarter, as advertisers adjust their spending following the holiday shopping season. As described above, our revenues and profits may also fluctuate due to external events beyond our control, such as the COVID-19 pandemic. We have a diversified base of customers across various industries. During the three months endedSeptember 30, 2020 , our largest categories of advertisers were professional services, healthcare/pharmaceuticals and retail, which represented approximately 11%, 9% and 8% of our totalU.S. Media segment revenues, respectively. During the three months endedSeptember 30, 2019 , our largest categories of advertisers were financial services, retail and professional services, each of which represented approximately 8% of our totalU.S. Media segment revenues. During the nine months endedSeptember 30, 2020 , our largest categories of advertisers were professional services, healthcare/pharmaceuticals and retail, each of which represented approximately 10%, 9% and 8% of our totalU.S. Media segment revenues, respectively. During the nine months endedSeptember 30, 2019 , our largest categories of advertisers were retail, professional services and computers/internet, each of which represented approximately 8% of our totalU.S. Media segment revenues. Our large-scale portfolio allows our customers to reach a national audience and also provides the flexibility to tailor campaigns to specific regions or markets. In the three months endedSeptember 30, 2020 , we generated approximately 38% of ourU.S. Media segment revenues from national advertising campaigns compared to approximately 46% in the same prior-year period. In the nine months endedSeptember 30, 2020 , we generated approximately 40% of ourU.S. Media segment revenues from national advertising campaigns compared to approximately 44% in the same prior-year period. 32
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Our transit businesses requires us to periodically obtain and renew contracts with municipalities and other governmental entities. When these contracts expire, we generally must participate in highly competitive bidding processes in order to obtain or renew contracts.
Key Performance Indicators
Our management reviews our performance by focusing on the indicators described below.
Several of our key performance indicators are not prepared in conformity with Generally Accepted Accounting Principles inthe United States of America ("GAAP"). We believe these non-GAAP performance indicators are meaningful supplemental measures of our operating performance and should not be considered in isolation of, or as a substitute for, their most directly comparable GAAP financial measures. Three Months Ended Nine Months Ended September 30, % September 30, % (in millions, except percentages) 2020 2019 Change 2020 2019 Change Revenues$ 282.3 $ 462.5 (39) %$ 900.5 $ 1,294.1 (30) % Organic revenues(a)(b) 282.3 451.1 (37) 874.9 1,252.7 (30) Operating income 25.1 85.5 (71) 33.0 211.1 (84) Adjusted OIBDA(b) 68.5 140.3 (51) 177.0 370.7 (52) Adjusted OIBDA(b) margin 24 % 30 % 20 % 29 % Funds from operations ("FFO")(b) attributable to OUTFRONT Media Inc. 22.6 79.0 (71) 39.4 211.7 (81) Adjusted FFO ("AFFO")(b) attributable to OUTFRONT Media Inc. 27.7 92.6 (70) 46.4 228.1 (80) Net income (loss) attributable to OUTFRONT Media Inc. (13.5) 38.7 * (65.3) 95.1 * •Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates ("non-organic revenues"). We provide organic revenues to understand the underlying growth rate of revenue excluding the impact of non-organic revenue items. Our management believes organic revenues are useful to users of our financial data because it enables them to better understand the level of growth of our business period to period. Since organic revenues are not calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, revenues as an indicator of operating performance. Organic revenues, as we calculate it, may not be comparable to similarly titled measures employed by other companies. (b)See the "Reconciliation of Non-GAAP Financial Measures" and "Revenues" sections of this MD&A for reconciliations of Operating income to Adjusted OIBDA, Net income (loss) attributable toOUTFRONT Media Inc. to FFO attributable toOUTFRONT Media Inc. and AFFO attributable toOUTFRONT Media Inc. and Revenues to organic revenues. Adjusted OIBDA We calculate Adjusted OIBDA as operating income (loss) before depreciation, amortization, net (gain) loss on dispositions, stock-based compensation and restructuring charges. We calculate Adjusted OIBDA margin by dividing Adjusted OIBDA by total revenues. Adjusted OIBDA and Adjusted OIBDA margin are among the primary measures we use for managing our business, evaluating our operating performance and planning and forecasting future periods, as each is an important indicator of our operational strength and business performance. Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of Adjusted OIBDA and Adjusted OIBDA margin, as supplemental measures, are useful in evaluating our business because eliminating certain non-comparable items highlight operational trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management's opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier for users of our financial data to compare our results with other companies that have different financing and capital structures or tax rates. 33 -------------------------------------------------------------------------------- Table of Contents FFO and AFFO When used herein, references to "FFO" and "AFFO" mean "FFO attributable toOUTFRONT Media Inc. " and "AFFO attributable toOUTFRONT Media Inc. ," respectively. We calculate FFO in accordance with the definition established by theNational Association of Real Estate Investment Trusts ("NAREIT"). FFO reflects net income (loss) attributable toOUTFRONT Media Inc. adjusted to exclude gains and losses from the sale of real estate assets, depreciation and amortization of real estate assets, amortization of direct lease acquisition costs and the same adjustments for our equity-based investments and non-controlling interests, as well as the related income tax effect of adjustments, as applicable. We calculate AFFO as FFO adjusted to include cash paid for direct lease acquisition costs as such costs are generally amortized over a period ranging from four weeks to one year and therefore are incurred on a regular basis. AFFO also includes cash paid for maintenance capital expenditures since these are routine uses of cash that are necessary for our operations. In addition, AFFO excludes restructuring charges and losses on extinguishment of debt, as well as certain non-cash items, including non-real estate depreciation and amortization, a gain on disposition of non-real estate assets, stock-based compensation expense, accretion expense, the non-cash effect of straight-line rent, amortization of deferred financing costs and the same adjustments for our non-controlling interests, as well as the non-cash portion of income taxes, and the related income tax effect of adjustments, as applicable. We use FFO and AFFO measures for managing our business and for planning and forecasting future periods, and each is an important indicator of our operational strength and business performance, especially compared to other REITs. Our management believes users of our financial data are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in managing, planning and executing our business strategy. Our management also believes that the presentations of FFO and AFFO, as supplemental measures, are useful in evaluating our business because adjusting results to reflect items that have more bearing on the operating performance of REITs highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures. It is management's opinion that these supplemental measures provide users of our financial data with an important perspective on our operating performance and also make it easier to compare our results to other companies in our industry, as well as to REITs. Since Adjusted OIBDA, Adjusted OIBDA margin, FFO and AFFO are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating income (loss), net income (loss) attributable toOUTFRONT Media Inc. , and revenues, the most directly comparable GAAP financial measures, as indicators of operating performance. These measures, as we calculate them, may not be comparable to similarly titled measures employed by other companies. In addition, these measures do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs. 34 -------------------------------------------------------------------------------- Table of Contents Reconciliation of Non-GAAP Financial Measures
The following table reconciles Operating income to Adjusted OIBDA, and Net
income (loss) attributable to
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per share amounts) 2020 2019 2020 2019
Total revenues $ 282.3 $ 462.5 $ 900.5 $ 1,294.1
Operating income $ 25.1 $ 85.5 $ 33.0 $ 211.1
Restructuring charges(a) 0.6 - 5.3 0.3
Net gain on dispositions (8.0) (1.9) (13.3) (3.0)
Depreciation 21.0 22.4 63.2 64.9
Amortization 24.4 28.7 72.4 81.0
Stock-based compensation 5.4 5.6 16.4 16.4
Adjusted OIBDA $ 68.5 $ 140.3 $ 177.0 $ 370.7
Adjusted OIBDA margin 24 % 30 % 20 % 29 %
Net income (loss) attributable to OUTFRONT
Media Inc. $ (13.5) $ 38.7 $ (65.3) $ 95.1
Depreciation of billboard advertising
structures 15.3 17.0 46.2 49.2
Amortization of real estate-related
intangible assets 12.3 11.6 36.5 33.4
Amortization of direct lease acquisition
costs 9.1 13.6 26.7 36.9
Net gain on disposition of real estate
assets (0.8) (1.9) (6.1) (3.0)
Adjustment related to non-controlling
interests - - (0.2) -
Adjustment related to equity-based
investments - - - 0.1
Income tax effect of adjustments(b) 0.2 - 1.6 -
FFO attributable to OUTFRONT Media Inc. 22.6 79.0 39.4 211.7
Non-cash portion of income taxes (1.1) 0.7 (6.4) 0.6
Cash paid for direct lease acquisition
costs (9.0) (10.5) (32.6) (34.5)
Maintenance capital expenditures (2.9) (6.4) (14.0) (15.0)
Restructuring charges - severance(a) 0.6 - 4.4 0.3
Other depreciation 5.7 5.4 17.0 15.7
Other amortization 3.0 3.5 9.2 10.7
Gain on disposition of non-real estate
assets(c) (7.2) - (7.2) -
Stock-based compensation(a) 5.4 5.6 17.3 16.4
Non-cash effect of straight-line rent 4.7 1.8 9.6 4.4
Accretion expense 0.6 0.6 1.9 1.9
Amortization of deferred financing costs 1.8 1.9 4.8 4.9
Loss on extinguishment of debt - 11.0 - 11.0
Adjustment related to non-controlling
interests - - (0.1) -
Income tax effect of adjustments(d) 3.5 - 3.1 -
AFFO attributable to
(a)In 2020, Restructuring charges relate to severance associated with workforce reductions made in response to the COVID-19 pandemic and includes stock-based compensation expenses of$0.9 million . (b)Income tax effect related to Net gain on disposition of real estate assets. (c)Gain related to the Sports Disposition. (See Note 13. Acquisitions and Dispositions: Dispositions to the Consolidated Financial Statements.) (d)Income tax effect related to Restructuring charges - severance and Gain on disposition of non-real estate assets. 35 -------------------------------------------------------------------------------- Table of Contents FFO in the three months endedSeptember 30, 2020 , of$22.6 million decreased$56.4 million , or 71%, compared to the same prior-year period. AFFO in the three months endedSeptember 30, 2020 , of$27.7 million decreased$64.9 million , or 70%, compared to the same prior-year period. FFO in the nine months endedSeptember 30, 2020 , of$39.4 million decreased$172.3 million , or 81%, compared to the same prior-year period. AFFO in the nine months endedSeptember 30, 2020 , of$46.4 million decreased$181.7 million , or 80%, compared to the same prior-year period. The decreases were primarily due to the impact of the COVID-19 pandemic on revenues, partially offset by cost reduction measures taken in response to the COVID-19 pandemic.
Analysis of Results of Operations
Revenues
We derive Revenues primarily from providing advertising space to customers on
our advertising structures and sites. Our contracts with customers generally
cover periods ranging from four weeks to one year. Revenues from billboard
displays are recognized as rental income on a straight-line basis over the
contract term. Transit and other revenues are recognized over the contract
period. (See Note 11. Revenues to the Consolidated Financial Statements.)
Three Months Ended Nine Months Ended
September 30, % September 30, %
(in millions, except
percentages) 2020 2019 Change 2020 2019 Change
Revenues:
Billboard $ 239.9 $ 312.0 (23) % $ 699.3 $ 868.8 (20) %
Transit and other 42.4 150.5 (72) 201.2 $ 425.3 (53)
Total revenues $ 282.3 $ 462.5 (39) $ 900.5 $ 1,294.1 (30)
Organic revenues(a):
Billboard $ 239.9 $ 311.7 (23) $ 699.3 $ 867.7 (19)
Transit and other 42.4 139.4 (70) 175.6 385.0 (54)
Total organic revenues(a) 282.3 451.1 (37) 874.9 1,252.7 (30)
Non-organic revenues:
Billboard - 0.3 * - 1.1 *
Transit and other - 11.1 * 25.6 40.3 (36)
Total non-organic revenues - 11.4 * 25.6 41.4 (38)
Total revenues $ 282.3 $ 462.5 (39) $ 900.5 $ 1,294.1 (30)
•Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates ("non-organic revenues").
Total revenues decreased$180.2 million , or 39%, and organic revenues decreased$168.8 million , or 37%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. Total revenues decreased by$393.6 million , or 30%, and organic revenues decreased$377.8 million , or 30%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. In the nine months endedSeptember 30, 2020 , non-organic revenues exclude the impact of the Sports Disposition. In the three and nine months endedSeptember 30, 2019 , non-organic revenues exclude the impact of the Sports Disposition and reflect the impact of foreign currency exchange rates. Total billboard revenues decreased$72.1 million , or 23%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period and decreased$169.5 million , or 20%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. The decreases were principally driven by a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise.
Organic billboard revenues in the three months ended
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same prior-year period. The decreases were principally driven by a decline in
average revenue per display (yield) as a result of the impact of the COVID-19
pandemic on customer advertising expenditures and overall demand for our
services through purchase cancellations or otherwise.
Total transit and other revenues decreased $108.1 million , or 72%, in the three
months ended September 30, 2020 , compared to the same prior-year period and
decreased $224.1 million , or 53%, in the nine months ended September 30, 2020 ,
compared to the same prior-year period. The decreases were driven by a decline
in average revenue per display (yield) as a result of the impact of the COVID-19
pandemic on customer advertising expenditures and overall demand for our
services through purchase cancellations or otherwise, the impact of the Sports
Disposition and a decrease in third-party digital equipment sales.
The decrease in organic transit and other revenues in each of the three and nine
months ended September 30, 2020 , compared to the same prior-year period, is due
to a decline in average revenue per display (yield) as a result of the impact of
the COVID-19 pandemic on customer advertising expenditures and overall demand
for our services through purchase cancellations or otherwise and a decrease in
third-party digital equipment sales.
Expenses
Three Months Ended Nine Months Ended
September 30, % September 30, %
(in millions, except
percentages) 2020 2019 Change 2020 2019 Change
Expenses:
Operating $ 155.8 $ 245.5 (37) % $ 534.6 $ 702.7 (24) %
Selling, general and
administrative 63.4 82.3 (23) 205.3 237.1 (13)
Restructuring charges 0.6 - * 5.3 0.3 *
Net gain on dispositions (8.0) (1.9) * (13.3) (3.0) *
Depreciation 21.0 22.4 (6) 63.2 64.9 (3)
Amortization 24.4 28.7 (15) 72.4 81.0 (11)
Total expenses $ 257.2 $ 377.0 (32) $ 867.5 $ 1,083.0 (20)
*Calculation is not meaningful.
Operating Expenses
Three Months Ended Nine Months Ended
September 30, % September 30, %
(in millions, except
percentages) 2020 2019 Change 2020 2019 Change
Operating expenses:
Billboard property lease $ 95.0 $ 104.5 (9) % $ 291.9 $ 302.2 (3) %
Transit franchise 21.3 69.8 (69) 97.6 201.5 (52)
Posting, maintenance and
other 39.5 71.2 (45) 145.1 199.0 (27)
Total operating expenses $ 155.8 $ 245.5 (37) $ 534.6 $ 702.7 (24)
Billboard property lease expenses represented 40% of billboard revenues in the
three months ended September 30, 2020 , 33% in the three months ended September
30, 2019 , 42% in the nine months ended September 30, 2020 , and 35% in the nine
months ended September 30, 2019 .
Transit franchise expenses represented 59% of transit display revenues in the
three months ended September 30, 2020 , 57% in the three months ended September
30, 2019 , 62% in the nine months ended September 30, 2020 and 59% in the nine
months ended September 30, 2019 . The increase in transit franchise expense as a
percentage of revenues is primarily driven by an amendment to our agreement with
the New York Metropolitan Transportation Authority ("the MTA"), which resulted
in the payment of an increased revenue share percentage instead of guaranteed
minimum annual payments for second and third quarters of 2020.
Billboard property lease and transit franchise expenses decreased $58.0 million
in the three months ended September 30, 2020 , compared to the same prior-year
period. Billboard property lease and transit franchise expenses decreased $114.2
million in the
37
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nine months ended September 30, 2020 , compared to the same prior-year period.
The decreases were due primarily to lower billboard and transit revenues
resulting from the impact of the COVID-19 pandemic and the impact of agreements
with landlords and transit franchise partners to modify our existing minimum
lease payments and guaranteed minimum annual payments to revenue share
percentages in the second and third quarters of 2020.
Posting, maintenance and other expenses decreased $31.7 million , or 45%, in the
three months ended September 30, 2020 , compared to the same prior-year period
and decreased $53.9 million , or 27%, in the nine months ended September 30,
2020 , compared to the same prior-year period. The decreases were primarily due
to the impact of the COVID-19 pandemic and the related restrictions in the top
DMAs reducing or curtailing customer advertising expenditures and overall demand
for our services through purchase cancellations or otherwise, the impact of the
Sports Disposition and lower costs related to third-party digital equipment
sales.
Selling, General and Administrative Expenses ("SG&A")
SG&A expenses represented 22% of Revenues in the three months endedSeptember 30, 2020 , and 18% in the same prior-year period. SG&A expenses decreased$18.9 million , or 23%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. SG&A expenses represented 23% of Revenues in the nine months endedSeptember 30, 2020 and 18% in the same prior-year period. SG&A expenses decreased$31.8 million , or 13%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. The decreases were primarily driven by lower compensation-related costs and lower professional fees, primarily as a result of cost reduction measures taken in response to the COVID-19 pandemic, and lower expenses resulting from the Sports Disposition, partially offset by a higher provision for doubtful allowances.
Net gain on dispositions was$8.0 million for the three months endedSeptember 30, 2020 , compared to$1.9 million for the same prior-year period. Net gain on dispositions was$13.3 million for the nine months endedSeptember 30, 2020 , compared to$3.0 million for the same prior-year period. The gain for the three and nine months endedSeptember 30, 2020 , was primarily related to a gain of$7.2 million related to the Sports Disposition. For the nine months endedSeptember 30, 2020 , the gain also included the sale of an office location inCanada in the second quarter of 2020. The gains for the nine months endedSeptember 30, 2019 , primarily related to the sales of office locations in theU.S. Depreciation Depreciation decreased$1.4 million , or 6% in the three months endedSeptember 30, 2020 , compared to the same prior-year period and decreased$1.7 million , or 3%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. Amortization Amortization decreased$4.3 million , or 15%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period, principally driven by lower direct lease acquisition costs, partially offset by higher amortization of intangible assets. Amortization of direct lease acquisition costs was$9.1 million in the three months endedSeptember 30, 2020 and$13.6 million in the same prior-year period. Amortization decreased$8.6 million , or 11%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period, principally driven by lower direct lease acquisition costs, partially offset by higher amortization of intangible assets. Amortization of direct lease acquisition costs was$26.7 million in the nine months endedSeptember 30, 2020 and$36.9 million in the same prior-year period.
Interest Expense, Net
Interest expense, net, was$34.2 million (including$1.8 million of deferred financing costs) in the three months endedSeptember 30, 2020 , and$33.9 million (including$1.9 million of deferred financing costs) in the same prior-year period. The increase in Interest expense, net, in the three months endedSeptember 30, 2020 , compared to the same prior-year period was due primarily to a higher outstanding average debt balance, partially offset by lower interest rates. Interest expense, net, was$97.3 million (including$4.8 million of deferred financing costs) in the nine months endedSeptember 30, 2020 , and$100.5 million (including$4.9 million of deferred financing costs) in the same prior-year period. The decrease in Interest expense, net, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period was primarily due to lower interest rates, partially offset by a higher outstanding average debt balance. 38 -------------------------------------------------------------------------------- Table of Contents Provision for Income Taxes Provision for income taxes of$3.5 million in the three months endedSeptember 30, 2020 , increased$0.2 million , or 6%, compared to the same prior-year period, due primarily to a gain related to the Sports Disposition. Provision for income taxes of$0.3 million in the nine months endedSeptember 30, 2020 , decreased$8.2 million , or 96%, compared to the same prior-year period, due primarily to a taxable REIT subsidiary loss in the nine months endedSeptember 30, 2020 , partially offset by the gain related to the Sports Disposition.
Net Income (Loss)
Net loss before allocation to non-controlling interests was$13.3 million in the three months endedSeptember 30, 2020 , compared to Net income before allocation to non-controlling interests of$38.7 million in the same prior-year period, due primarily to a the impact of the COVID-19 pandemic, partially offset by the impact of cost reduction measures taken in response to the COVID-19 pandemic and the gain related to the Sports Disposition. Net loss before allocation to non-controlling interests was$65.0 million in the nine months endedSeptember 30, 2020 , compared Net income before allocation to non-controlling interests of$95.1 million in the same prior-year period, due primarily to the impact of the COVID-19 pandemic, partially offset by the impact of cost reduction measures taken in response, the gain related to the Sports Disposition and lower interest expense. Segment Results of Operations
We present Adjusted OIBDA as the primary measure of profit and loss for our reportable segments. (See the "Key Performance Indicators" section of this MD&A and Note 19. Segment Information to the Consolidated Financial Statements.)
We currently manage our operations through two operating segments-U.S. Billboard and Transit, which is included in ourU.S. Media reportable segment, and International. International does not meet the criteria to be a reportable segment and accordingly, is included in Other. Our segment reporting therefore includesU.S. Media and Other. The following table presents our Revenues, Adjusted OIBDA and Operating income (loss) by segment in the three and nine months endedSeptember 30, 2020 and 2019. In the third quarter of 2020, we completed the Sports Disposition. Historical operating results for our Sports Marketing operating segment throughJune 30, 2020 , are included in Other. 39
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Three Months Ended Nine Months Ended
September 30, September 30,
(in millions) 2020 2019 2020 2019
Revenues:
U.S. Media $ 265.8 $ 422.7 $ 834.0 $ 1,180.7
Other 16.5 39.8 66.5 113.4
Total revenues $ 282.3 $ 462.5 $ 900.5 $ 1,294.1
Operating income $ 25.1 $ 85.5 $ 33.0 $ 211.1
Restructuring charges 0.6 - 5.3 0.3
Net gain on dispositions (8.0) (1.9) (13.3) (3.0)
Depreciation 21.0 22.4 63.2 64.9
Amortization 24.4 28.7 72.4 81.0
Stock-based compensation 5.4 5.6 16.4 16.4
Total Adjusted OIBDA $ 68.5 $ 140.3 $ 177.0 $ 370.7
Adjusted OIBDA:
U.S. Media $ 74.2 $ 147.3 $ 202.4 $ 387.7
Other 3.2 4.3 (1.7) 14.3
Corporate (8.9) (11.3) (23.7) (31.3)
Total Adjusted OIBDA $ 68.5 $ 140.3 $ 177.0 $ 370.7
Operating income (loss):
U.S. Media $ 31.9 $ 103.1 $ 75.4 $ 260.5
Other 7.5 (0.7) (1.3) (1.4)
Corporate (14.3) (16.9) (41.1) (48.0)
Total operating income $ 25.1 $ 85.5 $ 33.0 $ 211.1
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Table of ContentsU.S. Media Three Months Ended Nine Months Ended September 30, % September 30, % (in millions, except percentages) 2020 2019 Change 2020 2019 Change Revenues: Billboard$ 226.0 $ 292.8 (23) %$ 663.9 $ 814.1 (18) % Transit and other 39.8 129.9 (69) 170.1 366.6 (54) Total revenues 265.8 422.7 (37) 834.0 1,180.7 (29) Operating expenses (145.9) (218.1) (33) (483.6) (628.8) (23) SG&A expenses (45.7) (57.3) (20) (148.0) (164.2) (10) Adjusted OIBDA$ 74.2 $ 147.3 (50)$ 202.4 $ 387.7 (48) Adjusted OIBDA margin 28 % 35 % 24 % 33 % Operating income$ 31.9 $ 103.1 (69)$ 75.4 $ 260.5 (71) Restructuring charges 0.4 - * 3.4 - * Net gain on dispositions - (1.9) * (1.2) (3.2) (63) Depreciation and amortization 41.9 46.1 (9) 124.8 130.4 (4) Adjusted OIBDA$ 74.2 $ 147.3 (50)$ 202.4 $ 387.7 (48) * Calculation is not meaningful. TotalU.S. Media segment revenues decreased$156.9 million , or 37%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. In the three months endedSeptember 30, 2020 , we generated approximately 38% of ourU.S. Media segment revenues from national advertising campaigns and 46% in the same prior-year period. TotalU.S. Media segment revenues decreased$346.7 million , or 29%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. In the nine months endedSeptember 30, 2020 , we generated approximately 40% of ourU.S. Media segment revenues from national advertising campaigns and 44% in the same prior-year period. The decreases inU.S. Media segment revenues were due primarily to a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise. Revenues fromU.S. Media segment billboards decreased$66.8 million , or 23%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. Revenues fromU.S. Media segment billboards decreased$150.2 million , or 18%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. The decreases reflect a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise. Transit and other revenues in theU.S. Media segment decreased$90.1 million , or 69%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period and decreased$196.5 million , or 54%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. The decreases were driven by a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise.U.S. Media segment operating expenses decreased$72.2 million , or 33%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period.U.S. Media segment SG&A expenses decreased$11.6 million , or 20%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period.U.S. Media segment operating expenses decreased$145.2 million , or 23%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period.U.S. Media segment SG&A expenses decreased$16.2 million , or 10%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. The decreases inU.S. Media segment operating expenses were primarily driven by lower billboard and transit revenues resulting from the impact of the COVID-19 pandemic and the impact of agreements with landlords and transit franchise partners to modify our existing minimum lease payments and guaranteed minimum annual payments to revenue share percentages in the second and third quarters of 2020. The decreases inU.S. Media segment SG&A expenses were primarily 41
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Table of Contents driven by lower compensation-related costs and lower professional fees, primarily resulting from cost reduction measures taken in response to the COVID-19 pandemic, partially offset by a higher provision for doubtful allowances.
U.S. Media segment Adjusted OIBDA decreased$73.1 million , or 50%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. Adjusted OIBDA margin was 28% in the three months endedSeptember 30, 2020 , and 35% in the same prior-year period.U.S. Media segment Adjusted OIBDA decreased$185.3 million , or 48%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. Adjusted OIBDA margin was 24% in the nine months endedSeptember 30, 2020 , and 33% in the same prior-year period. Other Three Months Ended Nine Months Ended September 30, % September 30, % (in millions, except percentages) 2020 2019 Change 2020 2019 Change Revenues: Billboard$ 13.9 $ 19.2 (28) %$ 35.4 $ 54.7 (35) % Transit and other 2.6 20.6 (87) 31.1 58.7 (47) Total revenues$ 16.5 $ 39.8 (59)$ 66.5 $ 113.4 (41) Organic revenues(a): Billboard$ 13.9 $ 18.9 (26)$ 35.4 $ 53.6 (34) Transit and other 2.6 9.5 (73) 5.5 18.4 (70) Total organic revenues(a) 16.5 28.4 (42) 40.9 72.0 (43) Non-organic revenues: Billboard - 0.3 * - 1.1 * Transit and other - 11.1 * 25.6 40.3 (36) Total non-organic revenues - 11.4 * 25.6 41.4 (38) Total revenues 16.5 39.8 (59) 66.5 113.4 (41) Operating expenses (9.9) (27.4) (64) (51.0) (73.9) (31) SG&A expenses (3.4) (8.1) (58) (17.2) (25.2) (32) Adjusted OIBDA$ 3.2 $ 4.3 (26)$ (1.7) $ 14.3 * Adjusted OIBDA margin 19 % 11 % (3) % 13 % Operating loss$ 7.5 $ (0.7) *$ (1.3) $ (1.4) (7) Restructuring charges 0.2 - * 0.9 - * Net (gain) loss on dispositions (8.0) - * (12.1) 0.2 * Depreciation and amortization 3.5 5.0 (30) 10.8 15.5 (30) Adjusted OIBDA$ 3.2 $ 4.3 (26)$ (1.7) $ 14.3 *
* Calculation is not meaningful. (a)Organic revenues exclude revenues associated with a disposition and the impact of foreign currency exchange rates ("non-organic revenues").
In the third quarter of 2020, we completed the Sports Disposition. The operating results of our Sports Marketing operating segment throughJune 30, 2020 , are included in our Consolidated Financial Statements. Total Other revenues decreased$23.3 million , or 59%, in the three months endedSeptember 30, 2020 , and decreased$46.9 million , or 41%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year periods, reflecting the Sports Disposition, a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise, as well as the cancellation of spring sports at colleges and universities and a decrease in third-party digital equipment sales. 42 -------------------------------------------------------------------------------- Table of Contents In the nine months endedSeptember 30, 2020 , non-organic revenues exclude the impact of the Sports Disposition. In the three and nine months endedSeptember 30, 2019 , non-organic revenues exclude the impact of the Sports Disposition and reflect the impact of foreign currency exchange rates. Organic Other revenues decreased$11.9 million , or 42%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period, reflecting a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise, and a decrease in third-party digital equipment sales. Organic Other revenues decreased$31.1 million , or 43%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period, reflecting a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise, and a decrease in third-party digital equipment sales. Other operating expenses decreased$17.5 , or 64%, in the three months endedSeptember 30, 2020 , compared to the same prior-year period. Other SG&A expenses decreased$4.7 million , or 58%, in the three months endedSeptember 30, 2020 , compared to the prior-year period. Other operating expenses decreased$22.9 million , or 31%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period. Other SG&A expenses decreased$8.0 million , or 32%, in the nine months endedSeptember 30, 2020 , compared to the prior-year period. The decreases in Other operating expenses were primarily driven by the impact of the Sports Disposition and lower expenses related to our Sports Marketing operating segment prior to the disposition, lower costs related to third-party digital equipment sales and lower billboard and transit revenues. The decreases in Other SG&A expenses were primarily driven by the impact of the Sports Disposition and cost reduction measures taken in response to the COVID-19 pandemic. Other incurred Adjusted OIBDA of$3.2 million in the three months endedSeptember 30, 2020 , compared to$4.3 million in the same prior-year period and incurred an Adjusted OIBDA loss of$1.7 million in the nine months endedSeptember 30, 2020 , compared to Adjusted OIBDA of$14.3 million in the same prior-year period. The decreases were due primarily to the Sports Disposition, a decline in average revenue per display (yield) as a result of the impact of the COVID-19 pandemic on customer advertising expenditures and overall demand for our services through purchase cancellations or otherwise, the impact of the Sports Disposition, as well as the cancellation of spring sports at colleges and universities, partially offset by cost reduction measures taken in response to the COVID-19 pandemic. Corporate Corporate expenses primarily include expenses associated with employees who provide centralized services. Corporate expenses, excluding stock-based compensation, were$8.9 million in the three months endedSeptember 30, 2020 , compared to$11.3 million in the same prior-year period. Corporate expenses, excluding stock-based compensation, were$23.7 million in the nine months endedSeptember 30, 2020 , compared to$31.3 million in the same prior-year period. The decreases were primarily due to lower compensation-related expenses, including lower costs resulting from cost reduction measures taken in response to the COVID-19 pandemic and the impact of market fluctuations on an equity-linked retirement plan offered by the Company to certain employees. 43 -------------------------------------------------------------------------------- Table of Contents Liquidity and Capital Resources
As of
September 30, December 31,
(in millions, except percentages) 2020 2019 % Change
Assets:
Cash and cash equivalents $ 690.6 $ 59.1 *%
Restricted cash 1.6 1.8 (11)
Receivables, less allowance (
191.4 290.0 (34)
Prepaid lease and transit franchise costs 4.7 8.6 (45)
Prepaid MTA equipment deployment costs - 55.4 (100)
Other prepaid expenses 18.4 15.8 16
Other current assets 31.5 5.1 518
Total current assets 938.2 435.8 115
Liabilities:
Accounts payable 51.9 67.9 (24)
Accrued compensation 25.9 56.1 (54)
Accrued interest 26.4 26.4 -
Accrued lease and transit franchise costs 54.0 55.3 (2)
Other accrued expenses 40.4 34.2 18
Deferred revenues 40.6 29.0 40
Short-term debt 80.0 195.0 (59)
Short-term operating lease liabilities 182.8 168.3 9
Other current liabilities 25.0 17.8 40
Total current liabilities 527.0 650.0 (19)
Working capital (deficit) $ 411.2 $ (214.2) *
•Calculation is not meaningful.
We continually project anticipated cash requirements for our operating,
investing and financing needs as well as cash flows generated from operating
activities available to meet these needs. Due to seasonal advertising patterns
and influences on advertising markets, our revenues and operating income are
typically highest in the fourth quarter, during the holiday shopping season, and
lowest in the first quarter, as advertisers adjust their spending following the
holiday shopping season. Further, certain of our municipal transit contracts
require guaranteed minimum annual payments to be paid on a monthly or quarterly
basis, as applicable.
Our short-term cash requirements primarily include payments for operating
leases, guaranteed minimum annual payments, interest, capital expenditures,
equipment deployment costs and dividends. Funding for short-term cash needs will
come primarily from our cash on hand, operating cash flows, our ability to issue
debt and equity securities, and borrowings under the Revolving Credit Facility
(as defined below), the AR Securitization Facilities (as defined below) or other
credit facilities that we may establish, to the extent available.
In addition, as part of our growth strategy, we frequently evaluate strategic
opportunities to acquire new businesses, assets or digital technology.
Consistent with this strategy, we regularly evaluate potential acquisitions,
ranging from small transactions to larger acquisitions, which transactions could
be funded through cash on hand, additional borrowings, equity or other
securities, or some combination thereof. In response to the COVID-19 pandemic,
we have taken a highly selective approach to new acquisition activity.
Our long-term cash needs include principal payments on outstanding indebtedness
and commitments related to operating leases and franchise and other agreements,
including any related guaranteed minimum annual payments, and equipment
deployment costs. Funding for long-term cash needs will come from our cash on
hand, operating cash flows, our ability to issue debt and equity securities, and
borrowings under the Revolving Credit Facility or other credit facilities that
we may establish, to the extent available.
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We expect our short-term and long-term cash needs and related funding capability
to be adversely affected by the impact of the COVID-19 pandemic as cash on hand
and operating cash flows decrease in 2020, and our ability to issue debt and
equity securities and/borrow under our existing or new credit facilities on
reasonable pricing terms, or at all, may become uncertain. 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
repaid in full all borrowings under the Revolving Credit Facility as of June 30,
2020 , using the net proceeds from the offering of the Notes and cash on hand,
raised $400.0 million in the Private Placement (as defined below), before
expenses, issued $400.0 million aggregate principal amount of the Notes and
amended the Credit Agreement to modify the calculation of the Company's
financial maintenance covenant ratio under the Credit Agreement, among other
things. (See the "Overview-COVID-19 Impact" section of this MD&A.)
The increase in working capital as of September 30, 2020 , compared to a working
capital deficit as of December 31, 2019 , is primarily driven by the increase in
cash as a result of the Private Placement. The increase in cash is partially
offset by a decline in Prepaid MTA deployment costs. As a result of the impact
of the COVID-19 pandemic on our business and our expectations with respect to
future revenues under the MTA agreement into the future, we reclassified Prepaid
MTA deployment costs to long-term assets.
Under the MTA agreement, we are obligated to deploy, over a number of years, (i)
8,565 digital advertising screens on subway and train platforms and entrances,
(ii) 37,716 smaller-format digital advertising screens on rolling stock, and
(iii) 7,829 MTA communications displays, with such deployment amounts being
subject to modification as agreed-upon by us and the MTA. In addition, we are
obligated to pay to the MTA the greater of a percentage of revenues or a
guaranteed minimum annual payment. Incremental revenues that exceed an annual
base revenue amount will be retained by us for the cost of deploying advertising
and communications displays throughout the transit system. As presented in the
table below, recoupable MTA equipment deployment costs are being recorded as
Prepaid MTA equipment deployment costs and Intangible assets on our Consolidated
Statement of Financial Position, and as these costs are recouped from
incremental revenues that the MTA would otherwise be entitled to receive,
Prepaid MTA equipment deployment costs will be reduced. If incremental revenues
generated over the term of the agreement are not sufficient to cover all or a
portion of the equipment deployment costs, the costs will not be recouped, which
could have an adverse effect on our business, financial condition and results of
operation. We did not recoup any equipment deployment costs in the nine months
ended September 30, 2020 , and it's unlikely we will recoup equipment deployment
costs in 2020. In June 2020 , we entered into an amendment to the MTA agreement,
pursuant to which (i) for up to $143.0 million of MTA equipment deployment costs
to be incurred under the MTA agreement after June 2020 , the MTA and the Company
will directly pay 70% and 30% of the costs, respectively, instead of the costs
being recoupable from incremental revenues generated under the agreement, and
(ii) any guaranteed minimum annual payment amounts that would have been paid for
the period from April 1, 2020 through December 31, 2020 (less any revenue share
amounts actually paid during this period using an increased revenue share
percentage of 65%) will instead be added in equal increments to the guaranteed
minimum annual payment amounts owed for the period from January 1, 2022 , through
December 31, 2026 . In connection with the amendment to the MTA Agreement and in
coordination with the MTA, after suspending our deployment of advertising and
communications displays throughout the transit system in March 2020 as a result
of the impact of the COVID-19 pandemic, we recommenced deployment in the third
quarter of 2020. Accordingly, for the full year of 2020, we currently expect our
MTA equipment deployment costs to be significantly lower than our previously
disclosed amount of approximately $175.0 million as we recommence deployment in
2020. We may utilize cash on hand and/or incremental third-party financing to
fund equipment deployment costs over the next couple of years. However, given
the uncertainty in the market around the severity and duration of the COVID-19
pandemic, we cannot reasonably estimate the aggregate financing amount, if any,
at this time. As of September 30, 2020 , we have issued surety bonds (in place of
letters of credit) in favor of the MTA totaling approximately $136.0 million ,
which amount is subject to change as equipment installations are completed and
revenues are generated. In addition, in the first quarter of 2020, we identified
the COVID-19 pandemic as a trigger for impairment review of our Prepaid MTA
equipment deployment costs and related intangible assets, and after performing
an analysis, no impairment was identified. In the second and third quarters of
2020, we updated our projections in connection with the amendment to the MTA
agreement and did not identify a triggering event for an impairment review of
our Prepaid MTA equipment deployment costs. (See the "Critical Accounting
Polices-MTA Agreement" section of this MD&A.) Further, we expect transit
franchise expenses to materially increase as a percentage of revenues more than
historical levels, as revenues decline in 2020 as a result of the impact of the
COVID-19 pandemic. (See the "Overview-COVID-19 Impact" section of this MD&A.) As
indicated in the table below, we incurred $66.7 million related to MTA equipment
deployment costs in the nine months ended September 30, 2020 (which includes
equipment deployment costs related to future deployments), for a total of $314.3
million to date, of which $33.9 million had been recouped from incremental
revenues to date and as of September 30, 2020 , $21.7 million is to be funded by
the MTA. As of September 30, 2020 , 6,177 digital displays had been installed, of
which 827 installations occurred in the three months ended September 30, 2020 ,
for a total of 1,600 installations in the nine months ended September 30, 2020 .
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Beginning Deployment Costs
(in millions) Balance Incurred Recoupment Amortization Ending Balance
Nine months ended September 30,
2020:
Prepaid MTA equipment deployment
costs $ 171.5 $ 29.4 $ - $ - $ 200.9
Other current assets - 21.7 - - 21.7
Intangible assets (franchise
agreements) 38.3 15.6 - (4.1) 49.8
Total $ 209.8 $ 66.7 $ - $ (4.1) $ 272.4
Year ended December 31, 2019 :
Prepaid MTA equipment deployment
costs $ 79.5 $ 124.2 $ (32.2) $ - $ 171.5
Intangible assets (franchise
agreements) 14.8 26.6 - (3.1) 38.3
Total $ 94.3 $ 150.8 $ (32.2) $ (3.1) $ 209.8 As of
Debt
Debt, net, consists of the following:
As of
September 30 ,
(in millions, except percentages) 2020 2019
Short-term debt:
AR Facility $ - $ 105.0
Repurchase Facility 80.0 90.0
Total short-term debt 80.0 195.0
Long-term debt:
Term loan, due 2026 597.7 597.5
Senior unsecured notes:
5.625% senior unsecured notes, due 2024 501.4 501.7
6.250% senior unsecured notes, due 2025 400.0 -
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 2,051.4 1,651.7
Debt issuance costs (29.5) (27.1)
Total long-term debt, net 2,619.6 2,222.1
Total debt, net $ 2,699.6 $ 2,417.1
Weighted average cost of debt 4.5 % 4.5 %
Payments Due by Period
(in millions) Total 2020 2021-2022 2023-2024 2025 and thereafter
Long-term debt $ 2,650.0 $ - $ - $ 500.0 $ 2,150.0
Interest 848.8 124.4 246.0 219.5 258.9
Total $ 3,498.8 $ 124.4 $ 246.0 $ 719.5 $ 2,408.9
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Term Loan
The interest rate on the term loan due in 2026 (the "Term Loan") was 1.9% per annum as ofSeptember 30, 2020 . As ofSeptember 30, 2020 , a discount of$2.3 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
As of
The commitment fee based on the amount of unused commitments under the Revolving Credit Facility was$0.6 million in the three months endedSeptember 30, 2020 ,$0.4 million in the three months endedSeptember 30, 2019 ,$1.2 million in the nine months endedSeptember 30, 2020 , and$1.1 million in the nine months endedSeptember 30, 2019 . As ofSeptember 30, 2020 , we had issued letters of credit totaling approximately$1.6 million against the letter of credit facility sublimit under the Revolving Credit Facility.
Standalone Letter of Credit Facilities
As ofSeptember 30, 2020 , we had issued letters of credit totaling approximately$72.0 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 and nine months endedSeptember 30, 2020 and 2019.
Accounts Receivable Securitization Facilities
As ofSeptember 30, 2020 , we have a revolving accounts receivable securitization facility (the "AR Facility"), which terminates inJune 2022 , unless further extended, and a 364-day uncommitted structured repurchase facility (the "Repurchase Facility" and together with the AR Facility, the "AR Securitization Facilities"), which terminates inJune 2021 , as described below, unless further extended. OnJune 18, 2020 , the Company, certain subsidiaries of the Company andMUFG Bank, Ltd. ("MUFG") entered into amendments to certain of the agreements governing the Repurchase Facility, pursuant to which the Company, among other things, (i) decreased the maximum borrowing capacity under the Repurchase Facility from$90.0 million to$80.0 million ; and (ii) extended the term of the Repurchase Facility so that it will terminate onJune 29, 2021 , unless further extended. In connection with the AR Securitization Facilities,Outfront Media LLC andOutfront 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 eitherOutfront 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") orOutfront Media Receivables TRS, LLC a special purpose vehicle and wholly-owned subsidiary of the Company relating to the Company's TRS accounts receivable assets (the "TRS SPV" and together with the QRS SPV, the "SPVs"). The SPVs may transfer undivided interests in their respective accounts receivable assets to certain purchasers from time to time (the "Purchasers"). The SPVs are separate legal entities with their own separate creditors who will be entitled to access the SPVs' assets before the assets become available to the Company. Accordingly, the SPVs' assets are not available to pay creditors of the Company or any of its subsidiaries, although collections from the receivables in excess of amounts required to repay the Purchasers and other creditors of the SPVs may be remitted to the Company.Outfront Media LLC will service the accounts receivables on behalf of the SPVs for a fee. The Company has agreed to guarantee the performance of theOriginators andOutfront 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 47 -------------------------------------------------------------------------------- Table of Contents will be transferred to 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 ofSeptember 30, 2020 , there were no outstanding borrowings under the AR Facility and$80.0 million of outstanding borrowings under the Repurchase Facility, at a borrowing rate of approximately 1.9%. As ofSeptember 30, 2020 , there was no borrowing capacity remaining under the AR Facility based on approximately$231.9 million of accounts receivable used as collateral for the AR Securitization Facilities and a related voluntary temporary suspension of the AR Facility, 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 and nine months endedSeptember 30, 2020 and 2019.
Senior Unsecured Notes
OnMay 15, 2020 , two of our wholly-owned subsidiaries,Outfront Media Capital LLC ("Finance LLC ") andOutfront Media Capital Corporation ("Finance Corp " and, together withFinance LLC , the "Borrowers"), issued the Notes in a private placement. The Notes are fully and unconditionally guaranteed on a senior unsecured basis by the Company and each of its direct and indirect domestic subsidiaries that guarantee the Senior Credit Facilities. Interest on the Notes is payable onJune 15 andDecember 15 of each year, beginning onDecember 15, 2020 . On or afterJune 15, 2022 , the Borrowers may redeem at any time, or from time to time, some or all of the Notes. Prior to such date, the Borrowers may redeem up to 40% of the aggregate principal amount of the aggregate principal amount with the net proceeds of certain equity offerings, provided that at least 50% of the aggregate principal amount of the Notes remain outstanding after the redemption.
In
As ofSeptember 30, 2020 , a premium of$1.4 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 ofJanuary 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 restrict the Company's and its subsidiaries' abilities to (i) pay dividends on, repurchase or make distributions in respect to the Company's or its wholly-owned subsidiary,Outfront Media Capital LLC's ("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, (ii) enter into agreements restricting certain subsidiaries' ability to pay dividends or make other intercompany or third-party transfers, and (iii) incur additional indebtedness. One of the exceptions to the restriction on our ability to incur additional indebtedness is satisfaction of a Consolidated Total Leverage Ratio, which is the ratio of our consolidated total debt to our Consolidated EBITDA (as defined in the Credit Agreement) for the trailing four consecutive quarters, of no greater than 6.0 to 1.0. As ofSeptember 30, 2020 , our Consolidated Total Leverage Ratio was 8.2 to 1.0 in accordance with the Credit Agreement. 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 ofSeptember 30, 2020 , our Consolidated Net Secured Leverage Ratio was 1.0 to 1.0 in accordance with the Credit Agreement. As ofSeptember 30, 2020 , we are in compliance with our debt covenants. OnApril 15, 2020 , the Company, along with 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 fromApril 15, 2020 throughSeptember 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 endedJune 30, 2020 andSeptember 30, 2020 , included in any last twelve month compliance testing period, with the Company's historical Consolidated EBITDA for each of the quarterly 48 -------------------------------------------------------------------------------- Table of Contents periods endedJune 30, 2019 andSeptember 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 ofSeptember 30, 2020 , we had deferred$34.4 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$6.9 million as ofSeptember 30, 2020 , and$4.6 million as ofDecember 31, 2019 , and is included in Other liabilities on our Consolidated Statement of Financial Position. As ofSeptember 30, 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 untilJune 30, 2022 . The one-month LIBOR rate was approximately 0.1% as ofSeptember 30, 2020 .
Equity
At-the-Market Equity Offering Program
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 and nine months endedSeptember 30, 2020 . As ofSeptember 30, 2020 , we had approximately$232.5 million of capacity remaining under the ATM Program.
Series A Preferred Stock Issuance
OnApril 20 2020 (the "Closing Date"), the Company issued and sold an aggregate of 400,000 shares of Series A Preferred Stock, par value$0.01 per share, at a purchase price of$1,000 per share, for an aggregate purchase price of$400.0 million (the "Private Placement") to certain affiliates ofProvidence Equity Partners LLC (collectively, the "Providence Purchasers") andASOF Holdings L.L.P. and Ares Capital Corporation (collectively, the "Ares Purchasers" and, together with the Providence Purchasers, the "Purchasers"). The Series A Preferred Stock ranks senior to the shares of the Company's common stock, par value$0.01 per share, with respect to dividend and distribution rights. Holders of the Series A Preferred Stock are entitled to a cumulative dividend accruing at the initial rate of 7.0% per year, payable quarterly in arrears. The dividend rate will increase by an additional 0.75% annually following the eighth anniversary of the Closing Date and is subject to increases under certain other circumstances as set forth in the Articles Supplementary, effective as ofApril 20, 2020 (the "Articles"). Dividends may, at the option of the Company, be paid in cash, in-kind, through the issuance of additional shares of Series A Preferred Stock or a combination of cash and in-kind, until the eighth anniversary of the Closing Date, after which time dividends will be payable solely in cash. So long as any shares of Series A Preferred Stock remain outstanding, the Company may not declare a dividend on, or make any distributions relating to, capital stock that ranks junior to, or on a parity basis with, the Series A Preferred Stock, subject to certain exceptions, including but not limited to (i) any dividend or distribution in cash or capital stock of the Company on or in respect of the capital stock of the Company to the extent that such dividend or distribution is necessary to maintain the Company's status as a REIT; and (ii) any dividend or distribution in cash in respect of our common stock that, together with the dividends or distributions during the 12-month period immediately preceding such dividend or distribution, is not in excess of 5% of the aggregate dividends or distributions paid by the Company necessary to maintain its REIT status during such 12- 49 -------------------------------------------------------------------------------- Table of Contents month period. Following the one-year anniversary of the Closing Date, if all or any portion of the dividends or distributions is paid in respect of the shares of our common stock in cash, the shares of Series A Preferred Stock will participate in such dividends or distributions on an as-converted basis up to the amount of their accrued dividend on the Series A Preferred Stock for such quarter, which amounts will reduce the dividends payable on the shares of Series A Preferred Stock dollar-for-dollar for such quarter. The Series A Preferred Stock is convertible at the option of any holder at any time into shares of our common stock at an initial conversion price of$16.00 per share and an initial conversion rate of 62.50 shares of our common stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments. The issuance of shares of our common stock upon the conversion of Series A Preferred Stock is subject to a cap equal to 28,856,239 shares of our common stock (the "Share Cap"), unless and until the Company obtains stockholder approval to the extent required for the issuance of additional shares. Any amounts owed above the Share Cap must be paid in cash. 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. Subject to certain conditions, each holder of the Series A Preferred Stock, after a Change of Control (as defined in the Articles) may (i) require the Company to purchase any or all of their shares of Series A Preferred Stock at a redemption price payable in cash equal to 105% of the liquidation preference of the Series A Preferred Stock, plus any accrued and unpaid dividends, or (ii) convert any or all of their shares of Series A Preferred Stock into the number of shares of our common stock equal to the liquidation preference (including accrued and unpaid dividends) divided by the then-applicable conversion price. During the three months endedSeptember 30, 2020 , we paid cash dividends of$7.0 million on the Series A Preferred Stock. As ofSeptember 30, 2020 , the maximum number of shares of common stock that could be required to be issued on conversion of the outstanding shares of Series A Preferred Stock was 25.0 million shares.
Cash Flows
The following table presents our cash flows in the nine months endedSeptember 30, 2020 and 2019. Nine Months Ended September 30, % (in millions, except percentages) 2020 2019 Change Cash provided by operating activities$ 86.0 $ 162.1 (47) % Cash used for investing activities (35.1) (138.1) (75) Cash provided by (used for) financing activities 581.0 (14.7) * Effect of exchange rate changes on cash, cash equivalents and restricted cash (0.6) 0.3 * Net increase in cash, cash equivalents and restricted cash$ 631.3 $ 9.6 *
*Calculation is not meaningful.
Cash provided by operating activities decreased$76.1 million , or 47%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period, driven by the impact of the COVID-19 pandemic, partially offset by the impact of cost reduction measures taken in response to the COVID-19 pandemic. In the nine months endedSeptember 30, 2020 , we paid$51.1 million related to MTA equipment deployment costs and installed 1,600 digital displays. In the nine months endedSeptember 30, 2019 , we paid$83.3 million related to MTA equipment deployment costs. Cash used for investing activities decreased$103.0 million , or 75%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period, due primarily to higher proceeds from dispositions, including proceeds from the Sports Disposition, lower cash paid for acquisitions, capital expenditures and MTA franchise rights. 50 -------------------------------------------------------------------------------- Table of Contents The following table presents our capital expenditures in the nine months endedSeptember 30, 2020 and 2019. Nine Months Ended September 30, % (in millions, except percentages) 2020 2019 Change Growth$ 28.0 $ 50.4 (44) % Maintenance 14.0 15.0 (7) Total capital expenditures$ 42.0 $ 65.4 (36) Capital expenditures decreased$23.4 million , or 36%, in the nine months endedSeptember 30, 2020 , compared to the same prior-year period, primarily due to lower spending on digital billboard and transit display projects and lower spending on installation of the most current LED lighting technology. In response to the impact of the COVID-19 pandemic, we reduced maintenance capital expenditures (other than for necessary safety-related projects) and growth capital expenditures for digital billboard display conversions. For the full year of 2020, we expect our capital expenditures to be approximately$55.0 million , which will be used primarily for necessary safety-related maintenance projects and growth in digital displays. Cash provided by financing activities was$581.0 million in the nine months endedSeptember 30, 2020 , compared to Cash used by financing activities of$14.7 million in the same prior-year period. In the nine months endedSeptember 30, 2020 , we received net proceeds of$400.0 million related to the Notes offering and received net proceeds of$383.8 million related to the issuance of the Series A Preferred Stock to enhance our liquidity position in response to the COVID-19 pandemic and made net repayments under the AR Securitization Facilities of$115.0 million and paid total cash dividends on the Series A Preferred Stock and on our common stock of$68.1 million . In the nine months endedSeptember 30, 2019 , we paid cash dividends on our common stock of$156.0 million and made a discretionary payment of$50.0 million on the Term Loan. In addition, we received net proceeds of$100.0 million related to our 2027 senior unsecured notes offering and repayment of our 2022 senior unsecured notes, received net proceeds of$50.9 million related to the sale of our common stock under the ATM Program, drew net borrowings of$50.0 million on the AR Securitization Facilities and drew$15.0 million on the Revolving Credit Facility.
Cash paid for income taxes was
Off-Balance Sheet Arrangements
Our off-balance sheet commitments primarily consist of guaranteed minimum annual payments. (See Note 18. Commitments and Contingencies to the Consolidated Financial Statements for information about our off-balance sheet commitments.)
Critical Accounting Policies
The preparation of our financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. On an ongoing basis, we evaluate these estimates, which are based on historical experience and on various assumptions that we believe are reasonable under the circumstances, including the impact of extraordinary events such as the COVID-19 pandemic. The result of these evaluations forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenues and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions, including the severity and duration of the COVID-19 pandemic. We consider the following accounting policy to be the most critical as it is significant to our financial condition and results of operations, and requires significant judgment and estimates on the part of management in its application. For a summary of our significant accounting policies, see Item 8., Note 2. Summary of Significant Accounting Policies to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onFebruary 26, 2020 . 51 -------------------------------------------------------------------------------- Table of Contents MTA Agreement Under the MTA agreement, we are obligated to deploy, over a number of years, (i) 8,565 digital advertising screens onsubway and train platforms and entrances, (ii) 37,716 smaller-format digital advertising screens on rolling stock, and (iii) 7,829 MTA communications displays, with such deployment amounts being subject to modification as agreed-upon by us and the MTA. In addition, we are entitled to generate revenue through the sale of advertising on transit advertising displays and incur transit franchise expenses, which are calculated based on contractually stipulated percentages of revenue generated under the contract, subject to a minimum guarantee. Title of the various digital displays transfers to the MTA on installation, therefore the cost of deploying these screens throughout the transit system does not represent our property and equipment. The portion of recoupable MTA equipment deployment costs expected to be reimbursed from transit franchise fees that would otherwise be payable to the MTA are recorded as Prepaid MTA equipment deployment costs on the Consolidated Statement of Financial Position and charged to operating expenses as advertising revenue is generated. The short-term portion of Prepaid MTA equipment deployment costs represents the costs that we expect to recover from the MTA in the next twelve months. The portion of deployment costs expected to be reimbursed from advertising revenues that would otherwise be retained by us under the contract are recorded as Intangible assets on the Consolidated Statement of Financial Position and charged to amortization expense on a straight line basis over the contract period. If we do not generate sufficient advertising revenues from the MTA contract, there is a risk that the related Prepaid MTA equipment deployment costs and Intangible assets may not be recoverable. Management assesses the prepaid MTA equipment deployment costs for recoverability on a quarterly basis. This assessment requires evaluating qualitative and quantitative factors to determine if there is an indication that the carrying amount may not be recoverable. Management applies significant judgment in assessing these factors, including evaluating macroeconomic conditions, industry trends, and events specific to the Company, including monitoring the Company's actual installation of digital displays against the initial deployment schedule. Additionally, management assesses quantitative factors by comparing revenue projections of the deployed digital displays to actual financial results. In the first quarter of 2020, we 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. In the second and third quarters of 2020, we updated our projections in connection with the amendment to the MTA agreement and did not identify a triggering event for an impairment review of our Prepaid MTA equipment deployment costs. The assumptions and estimates included in our analysis 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 measures taken, or may be taken, in response to the COVID-19 pandemic, actual results may differ from our assumptions and estimates, which may result in impairment charges in the future.
Accounting Standards
See Note 2. New Accounting Standards to the Consolidated Financial Statements for information about the adoption of new accounting standards and recent accounting pronouncements.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made statements in this Annual Report on Form 10-K that are
forward-looking statements within the meaning of the federal securities laws,
including the Private Securities Litigation Reform Act of 1995. You can identify
forward-looking statements by the use of forward-looking terminology such as
"believes," "expects," "could," "would," "may," "might," "will," "should,"
"seeks," "likely," "intends," "plans," "projects," "predicts," "estimates,"
"forecast" or "anticipates" or the negative of these words and phrases or
similar words or phrases that are predictions of or indicate future events or
trends and that do not relate solely to historical matters. You can also
identify forward-looking statements by discussions of strategy, plans or
intentions related to our capital resources, portfolio performance and results
of operations, including but not limited to the impact of the COVID-19 pandemic
on our capital resources, portfolio performance and results of operations.
Forward-looking statements involve numerous risks and uncertainties and you
should not rely on them as predictions of future events. Forward-looking
statements depend on assumptions, data or methods that may be incorrect or
imprecise and may not be able to be realized. We do not guarantee that the
transactions and events described will happen as described (or that they will
happen at all). The following factors, among others, could cause actual results
and future events to differ materially from those set forth or contemplated in
the forward-looking statements:
52--------------------------------------------------------------------------------
Table of Contents •The severity and duration of the novel coronavirus (COVID-19) and any other pandemics, and the impact on our business, financial condition and results of operations; •Declines in advertising and general economic conditions, including declines caused by the COVID-19 pandemic; •Competition; •Government regulation; •Our ability to implement our digital display platform and deploy digital advertising displays to our transit franchise partners, including the impact of the COVID-19 pandemic; •Taxes, fees and registration requirements; •Our ability to obtain and renew key municipal contracts on favorable terms; •Decreased government compensation for the removal of lawful billboards; •Content-based restrictions on outdoor advertising; •Environmental, health and safety laws and regulations; •Seasonal variations; •Acquisitions and other strategic transactions that we may pursue could have a negative effect on our results of operations; •Dependence on our management team and other key employees; •The ability of our board of directors to cause us to issue additional shares of stock without stockholder approval; •Certain provisions ofMaryland law may limit the ability of a third party to acquire control of us; •Our rights and the rights of our stockholders to take action against our directors and officers are limited; •Our substantial indebtedness; •Restrictions in the agreements governing our indebtedness; •Incurrence of additional debt; •Interest rate risk exposure from our variable-rate indebtedness; •Our ability to generate cash to service our indebtedness; •Cash available for distributions; •Hedging transactions; •Diverse risks in our Canadian business; •Experiencing a cybersecurity incident; •Changes in regulations and consumer concerns regarding privacy, information security and data, or any failure or perceived failure to comply with these regulations or our internal policies; •Asset impairment charges for our long-lived assets and goodwill; •Our failure to remain qualified to be taxed as a real estate investment trust ("REIT"); •REIT distribution requirements; •Availability of external sources of capital; •We may face other tax liabilities even if we remain qualified to be taxed as a REIT; •Complying with REIT requirements may cause us to liquidate investments or forgo otherwise attractive opportunities; •Our ability to contribute certain contracts to a taxable REIT subsidiary ("TRS"); •Our planned use of TRSs may cause us to fail to remain qualified to be taxed as a REIT; •REIT ownership limits; •Complying with REIT requirements may limit our ability to hedge effectively; •Failure to meet the REIT income tests as a result of receiving non-qualifying income; •The Internal Revenue Service (the "IRS") may deem the gains from sales of our outdoor advertising assets to be subject to a 100% prohibited transaction tax; and •Establishing operating partnerships as part of our REIT structure. While forward-looking statements reflect our good-faith beliefs, they are not guarantees of future performance. All forward-looking statements in this Quarterly Report on Form 10-Q apply as of the date of this report or as of the date they were made and, except as required by applicable law, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. For a further discussion of these and other factors that could impact our future results, performance or transactions, see the section entitled "Risk Factors" in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC onFebruary 26, 2020 . You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.
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