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Commitment and Contingencies | 3 Months Ended
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Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies Off-Balance Sheet Arrangements Our off-balance sheet commitments primarily consist of guaranteed minimum annual payments. These arrangements result from our normal course of business and represent obligations that are payable over several years. Contractual Obligations We have agreements with municipalities and transit operators that entitle us to operate advertising displays within their transit systems, including on the interior and exterior of rail and subway cars and buses, as well as on benches, transit shelters, street kiosks, and transit platforms. Under most of these franchise agreements, the franchisor is entitled to receive the greater of a percentage of the relevant revenues, net of agency fees, or a specified guaranteed minimum annual payment. Under the MTA agreement, which was amended in June 2020 and July 2021 (as amended, the “MTA Agreement”): •Deployments. We must deploy, over a number of years, (i) 5,433 digital advertising screens on subway and train platforms and entrances, (ii) 15,896 smaller-format digital advertising screens on rolling stock, and (iii) 9,283 MTA communications displays, subject to modification as agreed-upon by us and the MTA. We are also obligated to deploy certain additional digital advertising screens and MTA communications displays in subway and train stations and rolling stock that the MTA may build or acquire in the future (collectively, the “New Inventory”). •Recoupment of Equipment Deployment Costs. We may retain incremental revenues that exceed an annual base revenue amount 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 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 operations. If we do not recoup all costs of deploying advertising and communications screens with respect to the New Inventory by the end of the term of the MTA Agreement, the MTA will be obligated to reimburse us for these costs. Deployment costs in an amount not to exceed $50.7 million, which are deemed authorized before December 31, 2020, will be paid directly by the MTA. For any deployment costs deemed authorized after December 31, 2020, the MTA and the Company will no longer be obligated to directly pay 70% and 30% of the costs, respectively, and these costs will be subject to recoupment in accordance with the MTA Agreement. We did not recoup any equipment deployment costs in the three months ended March 31, 2022, and it is unlikely we will recoup equipment deployment costs in the remainder of 2022. •Payments. We must pay to the MTA the greater of a percentage of revenues or a guaranteed minimum annual payment. Our payment obligations with respect to guaranteed minimum annual payment amounts owed to the MTA resumed on January 1, 2021, in accordance with the terms of the MTA Agreement, and 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. The MTA Agreement also provides that if prior to April 1, 2028 the balance of unrecovered costs of deploying advertising and communications screens throughout the transit system is equal to or less than zero, then in any year following the year in which such recoupment occurs (the “Recoupment Year”), the MTA is entitled to receive an additional payment equal to 2.5% of the annual base revenue amount for such year calculated in accordance with the MTA Agreement, provided that gross revenues in such year (i) were at least equal to the gross revenues generated in the Recoupment Year, and (ii) did not decline by more than 5% from the prior year. •Term. In July 2021, we extended the initial 10-year term of the MTA Agreement to a 13-year initial term. We have the option to extend this initial 13-year term for an additional five-year period at the end of the 13-year initial term, subject to satisfying certain quantitative and qualitative conditions. During the three months ended March 31, 2022, we had no recoupment from incremental revenues and as of March 31, 2022, $48.5 million has been funded by the MTA. As of March 31, 2022, 12,479 digital displays had been installed, of which 1,387 installations occurred in the three months ended March 31, 2022.
(in millions) |  | Beginning Balance |  | Deployment Costs Incurred |  | Recoupment/MTA Funding |  | Amortization |  | Ending Balance
Three months ended March 31, 2022: |  |  |  |  |  |  |  |  |  |
Prepaid MTA equipment deployment costs |  | $ | 279.8 |  |  | $ | 15.4 |  |  | $ | — |  |  | $ | — |  |  | $ | 295.2 |
Other current assets |  | 5.2 |  |  | 0.1 |  |  | (3.1) |  |  | — |  |  | 2.2 |
Intangible assets (franchise agreements) |  | 63.0 |  |  | 1.4 |  |  | — |  |  | (0.6) |  |  | 63.8 |
Total |  | $ | 348.0 |  |  | $ | 16.9 |  |  | $ | (3.1) |  |  | $ | (0.6) |  |  | $ | 361.2 |
Year ended December 31, 2021: |  |  |  |  |  |  |  |  |  |
Prepaid MTA equipment deployment costs |  | $ | 204.6 |  |  | $ | 75.2 |  |  | $ | — |  |  | $ | — |  |  | $ | 279.8 |
Other current assets |  | 28.0 |  |  | 6.2 |  |  | (29.0) |  |  | — |  |  | 5.2 |
Intangible assets (franchise agreements) |  | 58.4 |  |  | 14.5 |  |  | — |  |  | (9.9) |  |  | 63.0 |
Total |  | $ | 291.0 |  |  | $ | 95.9 |  |  | $ | (29.0) |  |  | $ | (9.9) |  |  | $ | 348.0 |
Letters of Credit We have indemnification obligations with respect to letters of credit and surety bonds primarily used as security against non-performance in the normal course of business. As of March 31, 2022, the outstanding letters of credit were approximately $76.8 million and outstanding surety bonds were approximately $167.1 million, and were not recorded on the Consolidated Statements of Financial Position. Legal Matters On an ongoing basis, we are engaged in lawsuits and governmental proceedings and respond to various investigations, inquiries, notices and claims from national, state and local governmental and other authorities (collectively, “litigation”). Litigation is inherently uncertain and always difficult to predict. Although it is not possible to predict with certainty the eventual outcome of any litigation, in our opinion, none of our current litigation is expected to have a material adverse effect on our results of operations, financial position or cash flows.

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