• Clear Channel organic revenues and cashflow decline.

    Here are the highlights from Clear Channel Outdoor’s 4th quarter earnings call,  press release and earnings presentation.

    • Consolidated revenue increased 1% to $729 million during the fourth quarter of 2017.    Organic revenue, adjusted for asset sales and currency fluctuations declined by 0.3%  Americas revenue (North and Latin America) declined by 1.5% when adjusted for asset sales.  Management said that the company’s airport and local sales were up but national sales were down.  Here’s a summary of Americas results.

    • Consolidated Cashflow (OBIDAN) declined by $25 million (12%) to $186 million.  Americas cashflow declined 3% to $135 million due to asset sales.
    • During the fourth quarter Clear Channel Outdoor took a $10.2 million charge for a misappropriation of $12 million of company’s advertising funds in the company’s China subsidiary.  Some employees set up three fake company accounts and diverted advertising funds into those accounts.  Clear Channel has referred the matter to the police in China and notified the SEC and Department of Justice.
    • Capital expenditures totaled $224 million during the fourth quarter due to 12 new digital billboards and street furniture.  The company expects to spend $200 million in capital expenditures again next year.
    • During the fourth quarter Clear Channel Outdoor wrote down the receivable for funds it has advanced to iHeart Media by 80% from $1 billion at 9/30/17 to $212 million at 12/31/17 to reflect the fact that much of the balance will not be collectible due to iHeart’s bankruptcy.
    • Total debt is $5.3 billion.  Total debt/Cashflow is a high 8.9 times.  The company’s cost of debt is 7%.  There are no substantial maturities until 2020.  Management wouldn’t comment on what is an appropriate level of debt.

    Insider’s take:  Why not sell the international operation.  A sale of the international business would drop leverage in half to a sustainable level.  Fraud in China suggests that management may be having difficulty controlling international operations.  Lamar benefits by a telescopic focus on North American out of home markets.  So would Clear Channel Outdoor.

    Clear Channel Outdoor stock finished the day down 8% to $4.40.

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