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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q
(Mark
One)
[
X ]
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the quarterly period ended June
30, 2019
or
[
]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For
the transition period from __________to ___________
Commission File Number:
001-14461
Entercom Communications Corp.
(Exact
name of registrant as specified in its charter)
|
Pennsylvania
|
23-1701044
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
employer identification no.)
|
2400 Market Street,
4th Floor
Philadelphia,
Pennsylvania
19103
(Address
of principal executive offices and zip code)
(610)
660-5610
(Registrant’s
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes
[ Ö ] No [
]
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T (section 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes
[ Ö ] No [
]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated filer,” “smaller reporting
company,” and “emerging growth company” in Rule 12b-2 of the
Exchange Act.
Large
Accelerated Filer
[ Ö ]
Accelerated filer [ ] Emerging
growth company [ ]
Non-accelerated
filer [ ] Smaller
reporting company [ ]
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 7(a)(2)(B) of the Securities Act and Section
13(a) of the Exchange Act. [ ]
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). Yes [ ] No
[ Ö ]
Securities registered pursuant to Section 12(b) of the
Act:
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
|
Class A Common Stock, par value $.01 per share
|
|
ETM
|
|
New York Stock Exchange
|
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date.
Class
A common stock, $0.01 par value – 138,455,684
Shares Outstanding as of July 31, 2019
(Class
A Shares Outstanding include 3,664,588 unvested and vested but
deferred restricted stock units)
Class
B common stock, $0.01 par value – 4,045,199
Shares Outstanding as of July 31, 2019.
ENTERCOM COMMUNICATIONS CORP.
INDEX
|
Table of Contents
|
Page
|
|
|
Part I – Financial Information
|
|
|
Item
1
|
Financial
Statements
|
2
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
46
|
|
Item
3
|
Quantitative
and Qualitative Disclosures About Market Risk
|
60
|
|
Item
4
|
Controls
and Procedures
|
61
|
|
|
|
|
|
|
Part II – Other Information
|
|
|
Item
1
|
Legal
Proceedings
|
63
|
|
Item
1A
|
Risk
Factors
|
63
|
|
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
63
|
|
Item
3
|
Defaults
Upon Senior Securities
|
63
|
|
Item
4
|
Mine
Safety Disclosures
|
63
|
|
Item
5
|
Other
Information
|
63
|
|
Item
6
|
Exhibits
|
64
|
|
|
|
|
|
|
Signatures
|
66
|
Private Securities Litigation Reform Act Safe Harbor
Statement
In
addition to historical information, this report contains statements
by us with regard to our expectations as to financial results and
other aspects of our business that involve risks and uncertainties
and may constitute forward- looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934.
Forward-looking
statements are presented for illustrative purposes only and reflect
our current expectations concerning future results and events. All
statements other than statements of historical fact are
“forward-looking statements” for purposes of federal and state
securities laws, including, without limitation, any projections of
earnings, revenues or other financial items; any statements of the
plans, strategies and objectives of management for future
operations; any statements concerning proposed new services or
developments; any statements regarding future economic conditions
or performance; any statements of belief; and any statements of
assumptions underlying any of the foregoing.
You
can identify forward-looking statements by our use of words such as
“anticipates,” “believes,” “continues,” “expects,” “intends,”
“likely,” “may,” “opportunity,” “plans,” “potential,” “project,”
“will,” “could,” “would,” “should,” “seeks,” “estimates,”
“predicts” and similar expressions which identify forward-looking
statements, whether in the negative or the affirmative. We cannot
guarantee that we actually will achieve these plans, intentions or
expectations. These forward-looking statements are subject to
risks, uncertainties and other factors, some of which are beyond
our control, which could cause actual results to differ materially
from those forecasted or anticipated in such forward-looking
statements. You should not place undue reliance on these
forward-looking statements, which reflect our view only as of the
date of this report. We undertake no obligation to update these
statements or publicly release the result of any revision(s) to
these statements to reflect events or circumstances after the date
of this report or to reflect the occurrence of unanticipated
events.
Key
risks to our company are described in our Annual Report on Form
10-K filed with the Securities and Exchange Commission (the “SEC”)
on February 27, 2019, and as may be supplemented by the risks
described under Part II, Item 1A, of our quarterly reports on Form
10-Q and in our Current Reports on Form 8-K.
PART I
FINANCIAL INFORMATION
ITEM 1. Financial Statements
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(amounts in thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
JUNE 30,
|
|
DECEMBER 31,
|
|
|
|
2019
|
|
2018
|
|
|
ASSETS:
|
|
|
|
|
|
|
|
Cash
|
$
|
30,331
|
|
$
|
122,893
|
|
|
Restricted
cash
|
|
—
|
|
|
69,365
|
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
|
325,495
|
|
|
342,766
|
|
|
Prepaid
expenses, deposits and other
|
|
32,771
|
|
|
25,205
|
|
|
Total
current assets
|
|
388,597
|
|
|
560,229
|
|
|
Investments
|
|
12,705
|
|
|
11,205
|
|
|
Net
property and equipment
|
|
344,951
|
|
|
317,030
|
|
|
Operating
lease right-of-use assets
|
|
284,400
|
|
|
-
|
|
|
Radio
broadcasting licenses
|
|
2,518,261
|
|
|
2,516,625
|
|
|
Goodwill
|
|
536,687
|
|
|
539,469
|
|
|
Assets
held for sale
|
|
3,307
|
|
|
19,603
|
|
|
Other
assets, net of accumulated amortization
|
|
35,716
|
|
|
56,197
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
$
|
4,124,624
|
|
$
|
4,020,358
|
|
|
LIABILITIES:
|
|
|
|
|
|
|
|
Accounts
payable
|
$
|
8,891
|
|
$
|
1,858
|
|
|
Accrued
expenses
|
|
62,439
|
|
|
58,449
|
|
|
Other
current liabilities
|
|
98,714
|
|
|
118,438
|
|
|
Operating
lease liabilities
|
|
37,979
|
|
|
-
|
|
|
Total
current liabilities
|
|
208,023
|
|
|
178,745
|
|
|
Long-term
debt, net of current portion
|
|
1,698,894
|
|
|
1,872,203
|
|
|
Operating
lease liabilities, net of current portion
|
|
271,263
|
|
|
-
|
|
|
Deferred
tax liabilities
|
|
545,808
|
|
|
545,982
|
|
|
Other
long-term liabilities
|
|
52,994
|
|
|
89,168
|
|
|
Total
long-term liabilities
|
|
2,568,959
|
|
|
2,507,353
|
|
|
Total
liabilities
|
|
2,776,982
|
|
|
2,686,098
|
|
|
|
|
|
|
|
|
|
|
CONTINGENCIES AND COMMITMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY:
|
|
|
|
|
|
|
|
Class A,
B and C common stock
|
|
1,426
|
|
|
1,412
|
|
|
Additional
paid-in capital
|
|
1,673,268
|
|
|
1,693,512
|
|
|
Accumulated
deficit
|
|
(
326,828)
|
|
|
(
360,664)
|
|
|
Accumulated
other comprehensive income (loss)
|
|
(
224)
|
|
|
-
|
|
|
Total
shareholders' equity
|
|
1,347,642
|
|
|
1,334,260
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$
|
4,124,624
|
|
$
|
4,020,358
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
(amounts in thousands, except share and per share data)
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
|
SIX MONTHS ENDED
|
|
|
|
JUNE 30,
|
|
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET REVENUES
|
$
|
380,665
|
|
$
|
372,124
|
|
|
$
|
689,670
|
|
$
|
672,684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSE:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Station
operating expenses
|
|
279,170
|
|
|
275,839
|
|
|
|
528,155
|
|
|
531,563
|
|
|
Depreciation
and amortization expense
|
|
10,964
|
|
|
10,666
|
|
|
|
22,069
|
|
|
19,137
|
|
|
Corporate
general and administrative expenses
|
|
17,315
|
|
|
19,032
|
|
|
|
38,250
|
|
|
37,701
|
|
|
Integration
costs
|
|
1,456
|
|
|
9,494
|
|
|
|
2,591
|
|
|
19,223
|
|
|
Restructuring
charges
|
|
3,362
|
|
|
686
|
|
|
|
4,376
|
|
|
2,167
|
|
|
Impairment
loss
|
|
-
|
|
|
28,988
|
|
|
|
-
|
|
|
28,988
|
|
|
Merger
and acquisition costs
|
|
33
|
|
|
687
|
|
|
|
42
|
|
|
2,071
|
|
|
Other
expenses related to financing
|
|
1,864
|
|
|
-
|
|
|
|
1,864
|
|
|
-
|
|
|
Net time
brokerage agreement (income) fees
|
|
53
|
|
|
(
666)
|
|
|
|
93
|
|
|
(
1,092)
|
|
|
Net
(gain) loss on sale or disposal of assets
|
|
1,686
|
|
|
(
154)
|
|
|
|
(
2,914)
|
|
|
(
315)
|
|
|
Total
operating expense
|
|
315,903
|
|
|
344,572
|
|
|
|
594,526
|
|
|
639,443
|
|
|
OPERATING INCOME (LOSS)
|
|
64,762
|
|
|
27,552
|
|
|
|
95,144
|
|
|
33,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE
|
|
24,944
|
|
|
25,706
|
|
|
|
50,164
|
|
|
49,110
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on
extinguishment of debt
|
|
1,781
|
|
|
-
|
|
|
|
1,781
|
|
|
-
|
|
|
OTHER (INCOME) EXPENSE
|
|
1,781
|
|
|
-
|
|
|
|
1,781
|
|
|
-
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
|
|
38,037
|
|
|
1,846
|
|
|
|
43,199
|
|
|
(
15,869)
|
|
|
INCOME TAXES (BENEFIT)
|
|
12,045
|
|
|
249
|
|
|
|
14,083
|
|
|
(
3,260)
|
|
|
NET INCOME (LOSS) AVAILABLE TO THE COMPANY - CONTINUING
OPERATIONS
|
|
25,992
|
|
|
1,597
|
|
|
|
29,116
|
|
|
(
12,609)
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS - CONTINUING
OPERATIONS
|
|
25,992
|
|
|
1,597
|
|
|
|
29,116
|
|
|
(
12,609)
|
|
|
Income
from discontinued operations, net of income taxes
(benefit)
|
|
-
|
|
|
844
|
|
|
|
-
|
|
|
1,172
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
|
$
|
25,992
|
|
$
|
2,441
|
|
|
$
|
29,116
|
|
$
|
(
11,437)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE -
BASIC
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations per share available to
common shareholders - Basic
|
$
|
0.19
|
|
$
|
0.01
|
|
|
$
|
0.21
|
|
$
|
(
0.09)
|
|
|
Net
income (loss) from discontinued operations per share available to
common shareholders - Basic
|
$
|
-
|
|
$
|
0.01
|
|
|
$
|
-
|
|
$
|
0.01
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE -
BASIC
|
$
|
0.19
|
|
$
|
0.02
|
|
|
$
|
0.21
|
|
$
|
(
0.08)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE -
DILUTED
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) from continuing operations per share available to
common shareholders - Diluted
|
$
|
0.19
|
|
$
|
0.01
|
|
|
$
|
0.21
|
|
$
|
(
0.09)
|
|
|
Net
income (loss) from discontinued operations per share available to
common shareholders - Diluted
|
$
|
-
|
|
$
|
0.01
|
|
|
$
|
-
|
|
$
|
0.01
|
|
|
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE -
DILUTED
|
$
|
0.19
|
|
$
|
0.02
|
|
|
$
|
0.21
|
|
$
|
(
0.08)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
138,760,483
|
|
138,638,554
|
|
|
138,684,845
|
|
138,961,728
|
|
|
Diluted
|
139,074,229
|
|
139,263,363
|
|
|
139,221,904
|
|
138,961,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
|
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(LOSS)
|
|
(amounts in thousands)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED
|
|
SIX MONTHS ENDED
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
$
|
25,992
|
|
$
|
2,441
|
|
$
|
29,116
|
|
$
|
(
11,437)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS),
|
|
|
|
|
|
|
|
|
|
|
|
|
NET OF TAXES (BENEFIT):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
unrealized gain (loss) on derivatives,
|
|
|
|
|
|
|
|
|
|
|
|
|
net of
taxes (benefit)
|
|
(
224)
|
|
|
-
|
|
|
(
224)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE INCOME (LOSS)
|
$
|
25,768
|
|
$
|
2,441
|
|
$
|
28,892
|
|
$
|
(
11,437)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
|
|
(amounts in thousands, except share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
|
Common Stock
|
|
Additional
|
|
Earnings
|
|
|
Other
|
|
|
|
|
|
Class A
|
|
Class B
|
|
Paid-in
|
|
(Accumulated
|
|
Comprehensive
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Deficit)
|
|
|
Income (Loss)
|
|
Total
|
|
Balance, December 31, 2017
|
139,675,781
|
|
$
|
1,397
|
|
4,045,199
|
|
$
|
40
|
|
$
|
1,737,132
|
|
$
|
25,791
|
|
|
$
|
-
|
|
$
|
1,764,360
|
|
Net income (loss) available to the Company
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(
13,878)
|
|
|
|
-
|
|
|
(
13,878)
|
|
Compensation expense related to granting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of stock awards
|
(
157,680)
|
|
|
(
2)
|
|
-
|
|
|
-
|
|
|
3,915
|
|
|
-
|
|
|
|
-
|
|
|
3,913
|
|
Issuance of common stock related to the Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan ("ESPP")
|
39,196
|
|
|
-
|
|
-
|
|
|
-
|
|
|
321
|
|
|
-
|
|
|
|
-
|
|
|
321
|
|
Exercise of stock options
|
10,000
|
|
|
-
|
|
-
|
|
|
-
|
|
|
13
|
|
|
-
|
|
|
|
-
|
|
|
13
|
|
Common stock repurchase
|
(
1,833,200)
|
|
|
(
18)
|
|
-
|
|
|
-
|
|
|
(
19,361)
|
|
|
-
|
|
|
|
-
|
|
|
(
19,379)
|
|
Purchase of vested employee restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock units
|
(
328,196)
|
|
|
(
3)
|
|
-
|
|
|
-
|
|
|
(
3,460)
|
|
|
-
|
|
|
|
-
|
|
|
(
3,463)
|
|
Payment of dividends on common stock
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
(
13,036)
|
|
|
-
|
|
|
|
-
|
|
|
(
13,036)
|
|
Dividend equivalents, net of forfeitures
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
342
|
|
|
-
|
|
|
|
-
|
|
|
342
|
|
Balance, March 31, 2018
|
137,405,901
|
|
$
|
1,374
|
|
4,045,199
|
|
$
|
40
|
|
|
1,705,866
|
|
$
|
11,913
|
|
|
$
|
-
|
|
$
|
1,719,193
|
|
Net income (loss) available to the Company
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,441
|
|
|
|
-
|
|
|
2,441
|
|
Compensation expense related to granting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of stock awards
|
1,198,734
|
|
|
12
|
|
-
|
|
|
-
|
|
|
3,728
|
|
|
-
|
|
|
|
-
|
|
|
3,740
|
|
Issuance of common stock related to the Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan ("ESPP")
|
60,386
|
|
|
1
|
|
-
|
|
|
-
|
|
|
387
|
|
|
-
|
|
|
|
-
|
|
|
388
|
|
Exercise of stock options
|
38,500
|
|
|
-
|
|
-
|
|
|
-
|
|
|
52
|
|
|
-
|
|
|
|
-
|
|
|
52
|
|
Purchase of vested employee restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock units
|
(
176,275)
|
|
|
(
2)
|
|
-
|
|
|
-
|
|
|
(
1,707)
|
|
|
-
|
|
|
|
-
|
|
|
(
1,709)
|
|
Payment of dividends on common stock
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
(
12,746)
|
|
|
-
|
|
|
|
-
|
|
|
(
12,746)
|
|
Dividend equivalents, net of forfeitures
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
127
|
|
|
-
|
|
|
|
-
|
|
|
127
|
|
Balance, June 30, 2018
|
138,527,246
|
|
$
|
1,385
|
|
4,045,199
|
|
$
|
40
|
|
$
|
1,695,707
|
|
$
|
14,354
|
|
|
$
|
-
|
|
$
|
1,711,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS'
EQUITY
|
|
(amounts in thousands, except share data)
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
Accumulated
|
|
|
|
|
Balance, December 31, 2018
|
137,180,213
|
|
|
1,372
|
|
4,045,199
|
|
|
40
|
|
|
1,693,512
|
|
|
(
360,664)
|
|
|
|
-
|
|
|
1,334,260
|
|
Net income (loss) available to the Company
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,125
|
|
|
|
-
|
|
|
3,125
|
|
Compensation expense related to granting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of stock awards
|
1,406,722
|
|
|
14
|
|
-
|
|
|
-
|
|
|
3,559
|
|
|
-
|
|
|
|
-
|
|
|
3,573
|
|
Issuance of common stock related to the Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan ("ESPP")
|
84,958
|
|
|
1
|
|
-
|
|
|
-
|
|
|
378
|
|
|
-
|
|
|
|
-
|
|
|
379
|
|
Exercise of stock options
|
180,300
|
|
|
2
|
|
-
|
|
|
-
|
|
|
242
|
|
|
-
|
|
|
|
-
|
|
|
244
|
|
Purchase of vested employee restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock units
|
(
204,499)
|
|
|
(
2)
|
|
-
|
|
|
-
|
|
|
(
1,424)
|
|
|
-
|
|
|
|
-
|
|
|
(
1,426)
|
|
Payment of dividends on common stock
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
(
12,913)
|
|
|
-
|
|
|
|
-
|
|
|
(
12,913)
|
|
Dividend equivalents, net of forfeitures
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
(
463)
|
|
|
-
|
|
|
|
-
|
|
|
(
463)
|
|
Application of amended leasing guidance
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4,719
|
|
|
|
-
|
|
|
4,719
|
|
Balance, March 31, 2019
|
138,647,694
|
|
$
|
1,387
|
|
4,045,199
|
|
$
|
40
|
|
$
|
1,682,891
|
|
$
|
(
352,820)
|
|
|
$
|
-
|
|
$
|
1,331,498
|
|
Net income (loss) available to the Company
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
25,992
|
|
|
|
-
|
|
|
25,992
|
|
Compensation expense related to granting
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of stock awards
|
(
38,774)
|
|
|
-
|
|
-
|
|
|
-
|
|
|
3,393
|
|
|
-
|
|
|
|
-
|
|
|
3,393
|
|
Issuance of common stock related to the Employee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Purchase Plan ("ESPP")
|
73,791
|
|
|
1
|
|
-
|
|
|
-
|
|
|
363
|
|
|
-
|
|
|
|
-
|
|
|
364
|
|
Purchase of vested employee restricted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
stock units
|
(
216,828)
|
|
|
(
2)
|
|
-
|
|
|
-
|
|
|
(
1,298)
|
|
|
-
|
|
|
|
-
|
|
|
(
1,300)
|
|
Payment of dividends on common stock
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
(
13,140)
|
|
|
-
|
|
|
|
-
|
|
|
(
13,140)
|
|
Dividend equivalents, net of forfeitures
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
1,059
|
|
|
-
|
|
|
|
-
|
|
|
1,059
|
|
Net unrealized gain (loss) on derivatives
|
-
|
|
|
-
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
|
(
224)
|
|
|
(
224)
|
|
Balance, June 30, 2019
|
138,465,883
|
|
$
|
1,386
|
|
4,045,199
|
|
$
|
40
|
|
$
|
1,673,268
|
|
$
|
(
326,828)
|
|
|
$
|
(
224)
|
|
$
|
1,347,642
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(amounts in thousands)
|
|
(unaudited)
|
|
|
SIX MONTHS ENDED
|
|
|
JUNE 30,
|
|
|
2019
|
|
2018
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net
income (loss) available to common shareholders
|
$
|
29,116
|
|
$
|
(
11,437)
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net income (loss) to net cash provided by
|
|
|
|
|
|
|
(used in)
operating activities:
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
22,069
|
|
|
19,137
|
|
Net
amortization of deferred financing costs
|
|
|
|
|
|
|
(net of
original issue discount and debt premium)
|
|
(
97)
|
|
|
159
|
|
Net
deferred taxes (benefit) and other
|
|
(
3,752)
|
|
|
(
2,055)
|
|
Provision
for bad debts
|
|
1,819
|
|
|
5,713
|
|
Net
(gain) loss on sale or disposal of assets
|
|
(
2,914)
|
|
|
(
315)
|
|
Non-cash
stock-based compensation expense
|
|
6,966
|
|
|
7,653
|
|
Net loss
on extinguishment of debt
|
|
1,781
|
|
|
-
|
|
Deferred
compensation
|
|
3,767
|
|
|
972
|
|
Impairment
loss
|
|
-
|
|
|
28,988
|
|
Accretion
expense (income), net of asset retirement obligation
adjustments
|
|
34
|
|
|
31
|
|
|
|
|
|
|
|
|
Changes
in assets and liabilities (net of effects of acquisitions,
dispositions,
|
|
|
|
|
|
|
consolidation,
and deconsolidation of Variable Interest Entities
(VIEs)):
|
|
|
|
|
|
|
Accounts
receivable
|
|
20,232
|
|
|
42,115
|
|
Prepaid
expenses and deposits
|
|
(
7,739)
|
|
|
(
15,930)
|
|
Accounts
payable and accrued liabilities
|
|
(
8,528)
|
|
|
(
20,981)
|
|
Accrued
interest expense
|
|
3,104
|
|
|
(
5,090)
|
|
Accrued
liabilities - long-term
|
|
(
7,561)
|
|
|
(
13,666)
|
|
Prepaid
expenses - long-term
|
|
-
|
|
|
89
|
|
Net cash provided by (used in) operating activities
|
|
58,297
|
|
|
35,383
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Additions
to property and equipment
|
|
(
38,710)
|
|
|
(
17,023)
|
|
Proceeds
from sale of radio stations
|
|
|
|
|
|
|
and other
assets
|
|
24,692
|
|
|
476
|
|
Purchases
of radio stations
|
|
-
|
|
|
(
15,000)
|
|
Additions
to amortizable intangible assets
|
|
(
2,003)
|
|
|
(
1,963)
|
|
Purchases
of investments
|
|
(
1,500)
|
|
|
(
1,250)
|
|
Net cash provided by (used in) investing activities
|
|
(
17,521)
|
|
|
(
34,760)
|
|
ENTERCOM COMMUNICATIONS CORP.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(amounts in thousands)
|
|
(unaudited)
|
|
|
SIX MONTHS ENDED
|
|
|
JUNE 30,
|
|
|
2019
|
|
2018
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Borrowing
under the revolving senior debt
|
|
119,000
|
|
|
83,325
|
|
Net
proceeds from the notes
|
|
325,000
|
|
|
-
|
|
Payments
of long-term debt
|
|
(
615,000)
|
|
|
(
27,997)
|
|
Payment
for debt issuance costs
|
|
(
3,910)
|
|
|
-
|
|
Proceeds
from issuance of employee stock plan
|
|
743
|
|
|
709
|
|
Proceeds
from the exercise of stock options
|
|
242
|
|
|
65
|
|
Purchase
of vested employee restricted stock units
|
|
(
2,726)
|
|
|
(
5,172)
|
|
Payment
of dividends on common stock
|
|
(
24,917)
|
|
|
(
24,916)
|
|
Payment
of dividend equivalents on vested restricted stock units
|
|
(
1,137)
|
|
|
(
866)
|
|
Repurchase
of common stock
|
|
-
|
|
|
(
20,012)
|
|
Net cash provided by (used in) financing activities
|
|
(
202,703)
|
|
|
5,136
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED
CASH
|
|
(
161,927)
|
|
|
5,759
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF
YEAR
|
|
192,258
|
|
|
34,167
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF
PERIOD
|
$
|
30,331
|
|
$
|
39,926
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
Cash paid
during the period for:
|
|
|
|
|
|
|
Interest
|
$
|
47,794
|
|
$
|
37,726
|
|
Income
taxes
|
$
|
14,546
|
|
$
|
18,836
|
|
Dividends
on common stock
|
$
|
24,917
|
|
$
|
24,916
|
|
Supplemental
cash flow information
|
|
|
|
|
|
|
Tenant
improvement allowance receivables
|
$
|
3,304
|
|
$
|
1,045
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
|
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
1.
BASIS OF PRESENTATION AND SIGNIFICANT POLICIES
The
condensed consolidated interim unaudited financial statements
included herein have been prepared by Entercom Communications Corp.
and its subsidiaries (collectively, the “Company”) in accordance
with: (i) generally accepted accounting principles (“U.S. GAAP”)
for interim financial information; and (ii) the instructions of the
Securities and Exchange Commission (the “SEC”) for Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by U.S. GAAP for annual
financial statements. In the opinion of management, the financial
statements reflect all adjustments considered necessary for a fair
statement of the results of operations and financial position for
the interim periods presented. All such adjustments are of a normal
and recurring nature. The Company’s results are subject to seasonal
fluctuations and, therefore, the results shown on an interim basis
are not necessarily indicative of results for a full
year.
This
Form 10-Q should be read in conjunction with the financial
statements and related notes included in the Company’s audited
financial statements as of and for the year ended December 31,
2018, and filed with the SEC on February 27, 2019, as part of the
Company’s Annual Report on Form 10-K. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with U.S. GAAP have been condensed or
omitted pursuant to such rules and regulations.
The
Company considers the applicability of any variable interest
entities (“VIEs”) that are required to be consolidated by the
primary beneficiary. As of June 30, 2019, there were no VIEs
requiring consolidation in these financial statements. As of
December 31, 2018, there was one VIE that required consolidation in
these financial statements. During 2018, the Company entered into
an agreement with a third party qualified intermediary (“QI”),
under which the Company was primarily responsible for the oversight
and completion of certain construction projects. This agreement
related to the creation of leasehold improvement assets on property
that had already been made available for tenant use. The Company
believed it was the primary beneficiary of the VIE as the Company
had the power to direct the activities that were most significant
to the VIE and the Company had the obligation to absorb losses or
the right to receive returns that would be significant to the VIE
during the period of the agreement.
The
use of a QI in a like-kind exchange enabled the Company to reduce
its current tax liability in connection with certain asset
dispositions. Under Section 1031 of the Internal Revenue Code (the
“Code”), the property to be exchanged in the like-kind exchange was
required to be received by the Company within 180 days. This period
of time lapsed during the first quarter of 2019, at which point,
the Company acquired the interests of the QI. This arrangement
effectively transformed the QI from a consolidated VIE to a
consolidated subsidiary of the Company.
Total
results of operations of the VIE for the three and six months ended
June 30, 2019 and the year ended December 31, 2018 were not
significant. The VIE had no impact on the Company’s results of
operations for the three and six months ended June 30, 2018. The
consolidated VIE had a material amount of cash as of December 31,
2018, which was reflected as restricted cash on the consolidated
balance sheet. Restrictions on these deposits lapsed during the
first quarter of 2019. As a result, the Company does not present
restricted cash at June 30, 2019. The VIE had no other assets or
liabilities as of December 31, 2018. The assets of the Company’s
consolidated VIE could only be used to settle the obligations of
the VIE. There was a lack of recourse by the creditors of the VIE
against the Company’s general creditors. Refer to Note 15,
Contingencies And Commitments, for additional
information.
There
have been no material changes from Note 2, Significant Accounting
Policies, as described in the notes to the Company’s financial
statements contained in its Form 10-K for the year ended December
31, 2018, that was filed with the SEC on February 27, 2019, other
than as described below.
Changes in Accounting Policies
In
February 2016, the accounting guidance was modified to increase
transparency and comparability among organizations by requiring the
recognition of right-of-use (“ROU”) assets and lease liabilities on
the balance sheet. The new guidance was effective for the Company
as of January 1, 2019. The Company implemented the new
leasing
guidance
using a modified retrospective approach at the beginning of the
period of adoption with a cumulative-effect adjustment to its
accumulated deficit. Refer to Note 4, Leases, for additional
information.
During
the quarter ended June 30, 2019, the Company voluntarily changed
the date of its annual broadcasting license and goodwill impairment
test dates from April 1 to December 1. This change represents a
change in method of applying an accounting principle. Refer to Note
5, Intangible Assets And Goodwill, for additional
information.
Recent Accounting Pronouncements
All
new accounting pronouncements that are in effect that may impact
the Company’s financial statements have been implemented. The
Company does not believe that there are any other new accounting
pronouncements that have been issued (other than as noted below or
those included in the notes to the Company’s financial statements
contained in its Form 10-K for the year ended December 31, 2018,
that was filed with the SEC on February 27, 2019) that might have a
material impact on the Company’s financial position, results of
operations or cash flows.
Leasing Transactions
As
discussed above, the Company implemented the amended accounting
guidance for leasing transactions on January 1, 2019. There was no
impact to previously reported results of operations for any interim
period. The most significant impact of the adoption of the new
leasing guidance was the recognition of ROU assets and lease
liabilities for operating leases on the balance sheet of $
288.7
million and $ 306.2
million, respectively, on January 1, 2019. The difference between
the ROU assets and lease liabilities recorded upon implementation
is primarily attributable to deferred rent balances and unfavorable
lease liabilities which were combined and presented net within the
ROU assets. Refer to Note 4, Leases, for additional
information.
Reclassifications
Certain
reclassifications have been made to the prior year’s notes to the
consolidated financial statements to conform to the presentation in
the current year, which did not have a material impact on the
Company’s previously reported financial statements.
2.
BUSINESS COMBINATIONS
The
Company records acquisitions under the acquisition method of
accounting, and allocates the purchase price to the assets and
liabilities based upon their respective fair values as determined
as of the acquisition date. Merger and acquisition costs are
excluded from the purchase price as these costs are expensed for
book purposes and amortized for tax purposes.
2019 Cumulus Exchange
On
February 13, 2019, the Company entered into an agreement with
Cumulus Media Inc. (“Cumulus”) under which the Company exchanged
three of its stations in Indianapolis, Indiana for two Cumulus
stations in Springfield, Massachusetts, and one Cumulus station in
New York City, New York (the “Cumulus Exchange”). The Company and
Cumulus began programming the respective stations under local
marketing agreements (“LMAs”) on March 1, 2019. Upon completion of
the Cumulus Exchange on May 9, 2019, the Company: (i) removed from
its records the assets of the divested stations, which were
previously classified as assets held for sale; (ii) recorded the
assets of the acquired stations at fair value; and (iii) recognized
a loss on the exchange transaction of approximately $
1.8
million.
Based
on this timing, the Company’s consolidated financial statements for
the six and three months ended June 30, 2019: (i) reflect the
results of the acquired stations for a portion of the period in
which the LMAs were in effect and after the completion of the
Cumulus Exchange; and (ii) reflect the results of the divested
stations for a portion of the period until the commencement date of
the LMAs. The Company’s consolidated financial statements for the
six and three months ended June 30, 2018: (i) do not reflect the
results of the acquired stations; and (ii) reflect the results of
the divested stations.
The
allocations presented in the table below are based upon
management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the
fair value of the acquired FCC
broadcasting
licenses, the fair value estimates are based on, but not limited
to, expected future revenue and cash flows that assume an expected
future growth rate of 1.0%
and an estimated discount rate of 9.0%.
The gross profit margins utilized were considered appropriate based
on management’s expectations and experience in equivalent sized
markets. The Company determines the fair value of the broadcasting
licenses by relying on a discounted cash flow approach assuming a
start-up scenario in which the only assets held by an investor are
broadcasting licenses. The Company’s fair value analysis contains
assumptions based on past experience, reflects expectations of
industry observers and includes judgments about future performance
using industry normalized information for an average station within
a certain market. Using a residual method, any excess between the
fair values of the net assets acquired and the total fair value of
stations acquired was recorded as goodwill. The Company recorded
goodwill on its books, which is fully deductible for income tax
purposes. Management believes that this exchange provides the
Company with an opportunity to benefit from operational
efficiencies from combining operations of the acquired stations
with the Company’s existing stations within the Springfield,
Massachusetts, and New York City, New York markets.
The
following preliminary purchase price allocations are based upon the
valuation of assets and these estimates and assumptions are subject
to change as the Company obtains additional information during the
measurement period, which may be up to one year from the
acquisition date. These assets pending finalization include
intangible assets. Differences between the preliminary and final
valuation could be substantially different from the initial
estimate.
|
|
|
|
|
Useful Lives in Years
|
|
|
|
Preliminary Value
|
|
From
|
|
To
|
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
844
|
|
3
|
|
7
|
|
Total
tangible property
|
|
|
844
|
|
|
|
|
|
Radio
broadcasting licenses
|
|
|
19,576
|
|
non-amortizing
|
|
Goodwill
|
|
|
2,080
|
|
non-amortizing
|
|
Total
intangible and other assets
|
|
|
21,656
|
|
|
|
|
|
Total
assets
|
|
$
|
22,500
|
|
|
|
|
|
Preliminary
fair value of net assets acquired
|
|
$
|
22,500
|
|
|
|
|
2018 WXTU Transaction
On
July 18, 2018, the Company entered into an agreement with Beasley
Broadcast Group, Inc. (“Beasley”) to sell certain assets of
WXTU-FM, serving the Philadelphia, Pennsylvania radio market for
$ 38.0
million in cash (the “WXTU Transaction”). The Company also
simultaneously entered into a time brokerage agreement (“TBA”) with
Beasley where Beasley commenced operations of WXTU-FM on July 23,
2018. During the period of the TBA, the Company excluded net
revenues and station operating expenses associated with operating
WXTU-FM in the Company’s consolidated financial statements. The
Company completed this disposition, which was subject to customary
regulatory approvals, during the third quarter of 2018 and
recognized a gain of approximately $ 4.4
million.
Based
on this timing, the Company’s consolidated financial statements for
the six and three months ended June 30, 2019 do not reflect the
results of this divested station, whereas the Company’s
consolidated financial statements for the six and three months
ended June 30, 2018 do reflect the results of this divested
station.
2018 Jerry Lee Transaction
On
September 27, 2018, the Company completed a transaction to acquire
the assets of WBEB-FM, serving the Philadelphia, Pennsylvania radio
market from Jerry Lee Radio, LLC (“Jerry Lee”) for a purchase price
of $ 57.5
million in cash, less certain working capital and other credits
(the “Jerry Lee Transaction”). The Company used proceeds from the
WXTU Transaction and cash on hand to fund this acquisition. Upon
the completion of the WXTU
Transaction
and the Jerry Lee Transaction, the Company will continue to operate
six radio stations in the Philadelphia, Pennsylvania
market.
On
August 7, 2018, the Company entered into a TBA with Jerry Lee.
During the period of the TBA, the Company included net revenues,
station operating expenses and monthly TBA fees associated with
operating WBEB-FM in the Company’s consolidated financial
statements.
Based
on this timing, the Company’s consolidated financial statements for
the six and three months ended June 30, 2019 reflect the results of
this acquired station, whereas the Company’s consolidated financial
statements for the six and three months ended June 30, 2018 do not
reflect the results of this acquired station.
The
allocations presented in the table below are based upon
management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the
fair value of the acquired FCC broadcasting licenses, the fair
value estimates are based on, but not limited to, expected future
revenue and cash flows that assume an expected future growth rate
of 1.0%
and an estimated discount rate of 9.0%.
The gross profit margins utilized were considered appropriate based
on management’s expectations and experience in equivalent sized
markets. The Company determines the fair value of the broadcasting
licenses by relying on a discounted cash flow approach assuming a
start-up scenario in which the only assets held by an investor are
broadcasting licenses. The Company’s fair value analysis contains
assumptions based upon past experience, reflects expectations of
industry observers and includes judgments about future performance
using industry normalized information for an average station within
a certain market. Any excess of the purchase price over the assets
acquired was reported as goodwill. The Company recorded goodwill on
its books, which is fully deductible for income tax purposes.
Management believes that this acquisition provides the Company with
an opportunity to benefit from operational efficiencies from
combining operations of the acquired station with the Company’s
existing stations within the Philadelphia market.
The
following preliminary purchase price allocations are based upon the
valuation of assets and these estimates and assumptions are subject
to change as the Company obtains additional information during the
measurement period, which may be up to one year from the
acquisition date. These assets pending finalization include
intangible assets. Differences between the preliminary and final
valuation could be substantially different from the initial
estimates.
|
|
|
|
|
Useful Lives in Years
|
|
|
|
Preliminary Value
|
|
From
|
|
To
|
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Equipment
|
|
$
|
981
|
|
3
|
|
7
|
|
Total
tangible property
|
|
|
981
|
|
|
|
|
|
Advertising
contracts
|
|
|
477
|
|
1
|
|
1
|
|
Radio
broadcasting licenses
|
|
|
27,346
|
|
non-amortizing
|
|
Goodwill
|
|
|
24,396
|
|
non-amortizing
|
|
Net
working capital
|
|
|
3,234
|
|
not
applicable
|
|
Total
intangible and other assets
|
|
|
55,453
|
|
|
|
|
|
Total
assets
|
|
$
|
56,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preliminary
fair value of net assets acquired
|
|
$
|
56,434
|
|
|
|
|
2018 Emmis Acquisition
On
April 30, 2018, the Company completed a transaction to acquire two
radio stations in St. Louis, Missouri from Emmis Communications
Corporation (“Emmis”) for a purchase price of $ 15.0
million in cash (the “Emmis Acquisition”). The Company borrowed
under its revolving credit facility (the “Revolver”) to fund the
acquisition. With this acquisition, the Company increased its
presence in St. Louis, Missouri, to five radio stations.
On
March 1, 2018, the Company entered into an asset purchase agreement
and a TBA with Emmis to operate two radio stations. During the
period of the TBA, the Company included in net revenues, station
operating expenses and monthly TBA fees associated with operating
these stations in the Company’s consolidated financial
statements.
Based
on this timing, the Company’s consolidated financial statements for
the six and three months ended June 30, 2019 reflect the results of
these acquired stations, whereas the Company’s consolidated
financial statements for the six and three months ended June 30,
2018 reflect the results of these acquired stations for the portion
of the period in which the TBA was in effect and after the
completion of the transaction.
The
allocations presented in the table below are based upon
management’s estimate of the fair values using valuation techniques
including income, cost and market approaches. In estimating the
fair value of the acquired FCC broadcasting licenses, the fair
value estimates are based on, but not limited to, expected future
revenue and cash flows that assume an expected future growth rate
of 1.0%
and an estimated discount rate of 9.0%.
The gross profit margins utilized were considered appropriate based
on management’s expectations and experience in equivalent sized
markets. The Company determines the fair value of the broadcasting
licenses by relying on a discounted cash flow approach assuming a
start-up scenario in which the only assets held by an investor are
broadcasting licenses. The Company’s fair value analysis contains
assumptions based upon past experience, reflects expectations of
industry observers and includes judgments about future performance
using industry normalized information for an average station within
a certain market. Any excess of the purchase price over the assets
acquired was reported as goodwill.
The
following table reflects the final allocation of the purchase price
to the assets acquired and liabilities assumed.
|
|
|
|
|
|
|
Final Value
|
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
Assets
|
|
|
|
|
Equipment
|
|
$
|
1,558
|
|
Total
tangible property
|
|
|
1,558
|
|
Advertiser
relationships
|
|
|
207
|
|
Advertising
contracts
|
|
|
114
|
|
Radio
broadcasting licenses
|
|
|
12,785
|
|
Goodwill
|
|
|
332
|
|
Other
noncurrent assets
|
|
|
4
|
|
Total
intangible and other assets
|
|
|
13,442
|
|
Total
assets
|
|
$
|
15,000
|
|
Fair
value of assets acquired
|
|
$
|
15,000
|
2017 CBS Radio Business Acquisition
On
February 2, 2017, the Company and its wholly-owned subsidiary
(“Merger Sub”), entered into an Agreement and Plan of Merger (the
“CBS Radio Merger Agreement”) with CBS Corporation (“CBS”) and its
wholly-owned subsidiary CBS Radio Inc. (“CBS Radio”). Pursuant to
the CBS Radio Merger Agreement, Merger Sub merged with and into CBS
Radio with CBS Radio surviving as the Company’s wholly-owned
subsidiary (the “Merger”). On November 13, 2018, the Company
changed the name of CBS Radio Inc. to Entercom Media Corp. The
parties to the Merger believe that the Merger was tax-free to CBS
and its shareholders. The Merger was effected through a stock for
stock Reverse Morris Trust transaction.
On
November 17, 2017, the Company acquired the CBS Radio business from
CBS to further strengthen its scale and capabilities to compete
more effectively with other media for a larger share of advertising
dollars. The purchase price was $ 2.56
billion and consisted of $ 1.17
billion of total equity consideration and $ 1.39
billion of assumed debt.
The
CBS Radio business acquisition was completed pursuant to the CBS
Radio Merger Agreement, dated February 2, 2017, by and among the
Company, CBS, CBS Radio, and Merger Sub. On November 17, 2017, (i)
Merger Sub was merged with and into CBS Radio, with CBS Radio
continuing as the surviving corporation and a direct, wholly-owned
subsidiary of the Company and (ii) each share of CBS Radio common
stock was converted into one share of the Company’s common
stock.
The
Company issued 101,407,494
shares of its Class A common Stock to the former holders of CBS
Radio common stock. At the time of the Merger, each outstanding
restricted stock unit (“RSU”) and stock option with respect to CBS
Class B common stock held by employees of CBS Radio was canceled
and converted into equity awards for the Company’s Class A common
stock. The conversion was based on the ratio of the volume-weighted
average per share closing prices of CBS stock on the five trading
days prior to the date of acquisition and the Company’s stock on
the five trading days following the date of acquisition. Entercom
Communications Corp. is considered to be the acquiring company for
accounting purposes.
To
complete the Merger, certain divestitures were required by the FCC
in order to comply with the FCC’s ownership rules and policies.
These divestitures consisted of: (i) the exchange transaction with
iHeartMedia, Inc. (“iHeart”); (ii) a station exchange with Beasley;
(iii) a cash sale to Bonneville International Corporation
(“Bonneville”); and (iv) a cash sale to Educational Media
Foundation (“EMF”).
Due
to the structure of the transaction, there was no step-up in tax
basis for the assets acquired as the Company assumed the existing
tax basis in the assets of CBS Radio. The absence of a step-up in
tax basis will limit the Company’s tax deductions in future years
and impacts the amount of deferred tax liabilities recorded as part
of purchase price accounting. If any of the Internal Distributions
or the Final Distribution, each as defined in the CBS Radio Merger
Agreement, does not qualify as a transaction that is tax-free for
U.S. federal income tax purposes under Section 355 of the Code or
the Merger does not qualify as a tax-free “reorganization” under
Section 368(a) of the Code, including as a result of actions taken
in connection with the distributions made by CBS to facilitate the
Merger or as a result of subsequent acquisitions of shares of CBS,
Entercom, or CBS Radio, then CBS and/or holders of CBS Common Stock
that received Radio Common Stock in the Final Distribution may be
required to pay substantial U.S. federal income taxes, and, in
certain circumstances, CBS Radio and Entercom may be required to
indemnify CBS for any such tax liability.
2017 Local Marketing Agreement: The Bonneville Transaction
On
November 1, 2017, the Company assigned assets to a trust and the
trust subsequently entered into two LMAs with Bonneville. The LMAs,
which were effective upon the closing of the Merger, allowed
Bonneville to operate eight radio stations in the San Francisco,
California and Sacramento, California markets. Of the eight radio
stations operated by Bonneville, three were originally owned by the
Company and the remaining five were originally owned by CBS Radio.
The Company conducted an analysis and determined the assets of the
eight stations satisfied the criteria to be presented as assets
held for sale. The stations which were acquired from CBS Radio and
were never operated by the Company are included within discontinued
operations. On August 2, 2018, the Company entered into an asset
purchase agreement with Bonneville to dispose of the eight radio
stations in the San Francisco, California and Sacramento,
California markets for $ 141.0
million in cash. During the year ended December 31, 2018, the
Company closed on this sale, which resulted in a loss of
approximately $ 0.4
million to the Company. Refer to Note 13, Assets Held for Sale and
Discontinued Operations, for additional information.
Restructuring Charges
Restructuring
charges were expensed as a separate line item in the consolidated
statements of operations.
The
components of restructuring charges are as follows:
|
|
Six Months Ended
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
Costs to
exit duplicative contracts
|
$
|
-
|
|
$
|
510
|
|
Workforce
reduction
|
|
3,793
|
|
|
928
|
|
Lease
abandonment costs
|
|
-
|
|
|
257
|
|
Other
restructuring costs
|
|
583
|
|
|
472
|
|
Total
restructuring charges
|
$
|
4,376
|
|
$
|
2,167
|
|
|
Three Months Ended
|
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
Costs to
exit duplicative contracts
|
$
|
-
|
|
$
|
349
|
|
Workforce
reduction
|
|
3,100
|
|
|
337
|
|
Other
restructuring costs
|
|
262
|
|
|
-
|
|
Total
restructuring charges
|
$
|
3,362
|
|
$
|
686
|
Restructuring Plan
During
the fourth quarter of 2017, the Company initiated a restructuring
plan as a result of the integration of the CBS Radio stations
acquired in November 2017. The restructuring plan included: (i) a
workforce reduction and realignment charges that included one-time
termination benefits and related costs; (ii) lease abandonment
costs; and (iii) costs associated with realigning radio stations
within the overlap markets between CBS Radio and the Company. A
portion of unpaid restructuring charges as of June 30, 2019 were
including in accrued expenses as these expenses are expected to be
paid in less than one year.
The
estimated amount of unpaid restructuring charges as of June 30,
2019 includes amounts in accrued expenses that are expected to be
paid in less than one year and long-term restructuring costs for
lease abandonment costs covering the remaining non-cancellable
lease term.
|
|
Six Months
|
|
Twelve Months
|
|
|
Ended
|
|
Ended
|
|
|
June 30,
|
|
December 31,
|
|
|
2019
|
|
2018
|
|
|
(amounts in thousands)
|
|
|
|
|
|
|
|
|
Restructuring
charges and lease abandonment costs, beginning balance
|
$
|
7,077
|
|
$
|
16,086
|
|
Additions
resulting from the integration of CBS Radio
|
|
4,376
|
|
|
5,830
|
|
Payments
|
|
(
3,896)
|
|
|
(
14,839)
|
|
Restructuring
charges and lease abandonment costs unpaid and
outstanding
|
|
7,557
|
|
|
7,077
|
|
Restructuring
charges and lease abandonment costs - noncurrent portion
|
|
(
419)
|
|
|
(
988)
|
|
Restructuring
charges and lease abandonment costs - current portion
|
$
|
7,138
|
|
$
|
6,089
|
Integration Costs
The
Company incurred integration costs of $ 2.6
million and $ 19.2
million during the six months ended June 30, 2019 and June 30,
2018, respectively. Integration costs were expensed as a separate
line item in the consolidated statements of operations. These costs
primarily relate to change management consultants and
technology-related costs incurred subsequent to the
Merger.
Unaudited Pro Forma Summary Of Financial Information
The
following unaudited pro forma information for the six and three
months ended June 30, 2019 and June 30, 2018 assumes that the Jerry
Lee Transaction and Emmis Acquisition in 2018 had occurred as of
January 1, 2017. The effects of the Cumulus Exchange and the WXTU
Transaction are not included in the pro forma information as their
impact was immaterial. Refer to information within this Note 2,
Business Combinations, and to the financial statements and related
notes included in the Company’s audited financial statements as of
and for the year ended December 31, 2018, and filed with the SEC on
February 27, 2019, for a description of the Company’s acquisition
and disposition activities. The unaudited pro forma information
presented gives effect to certain adjustments, including: (i)
depreciation and amortization of assets; (ii) change in the
effective tax rate; (iii) merger and acquisition costs; and (iv)
interest expense on any debt incurred to fund the acquisitions
which would have been incurred had such acquisitions been
consummated at an earlier time.
This
unaudited pro forma information has been prepared based on
estimates and assumptions, which management believes are
reasonable. These unaudited pro forma results have been prepared
for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisitions been made as of
that date or results which may occur in the future.
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
June 30,
|
|
June 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
(amounts in thousands except share and per share data)
|
|
|
|
|
Actual
|
|
Pro Forma
|
|
Actual
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
$
|
380,665
|
|
$
|
376,533
|
|
$
|
689,670
|
|
$
|
681,958
|
|
Income
(loss) from continuing operations
|
$
|
25,992
|
|
$
|
3,272
|
|
$
|
29,116
|
|
$
|
(
10,400)
|
|
Income
(loss) from discontinued operations
|
$
|
-
|
|
$
|
844
|
|
$
|
-
|
|
$
|
1,172
|
|
Net
income (loss) available to the Company
|
$
|
25,992
|
|
$
|
4,116
|
|
$
|
29,116
|
|
$
|
(
9,228)
|
|
Net
income (loss) available to common shareholders
|
$
|
25,992
|
|
$
|
4,116
|
|
$
|
29,116
|
|
$
|
(
9,228)
|
|
Income
(loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
per
common share - basic
|
$
|
0.19
|
|
$
|
0.02
|
|
$
|
0.21
|
|