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xbrli:shares
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)
|
| |