Quarterly Report (10-q)

Date : 11/12/2019 @ 10:14PM
Source : Edgar (US Regulatory)
Stock : Entercom Communications Corp (ETM)
Quote : 4.78  0.0 (0.00%) @ 12:00AM
Entercom Communications share price Chart

Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 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 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 ]

 

 

 

i


 

 

 

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 – 133,583,583 Shares Outstanding as of October 31, 2019

(Class A Shares Outstanding include 3,698,010 unvested and vested but deferred restricted stock units)

Class B common stock, $0.01 par value – 4,045,199 Shares Outstanding as of October 31, 2019.

ii


 

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

47

Item 3

Quantitative and Qualitative Disclosures About Market Risk

61

Item 4

Controls and Procedures

62

 

 

 

 

Part II – Other Information

 

Item 1

Legal Proceedings

64

Item 1A

Risk Factors

64

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3

Defaults Upon Senior Securities

64

Item 4

Mine Safety Disclosures

64

Item 5

Other Information

64

Item 6

Exhibits

66

 

 

 

 

Signatures

68

 

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.

iii


 

PART I

FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

ENTERCOM COMMUNICATIONS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

SEPTEMBER 30,

 

DECEMBER 31,

 

 

2019

 

2018

 

ASSETS:

 

 

 

 

 

 

Cash

$

45,335

 

$

122,893

 

Restricted cash

 

-

 

 

69,365

 

Accounts receivable, net of allowance for doubtful accounts

 

363,091

 

 

342,766

 

Prepaid expenses, deposits and other

 

29,797

 

 

25,205

 

Total current assets

 

438,223

 

 

560,229

 

Investments

 

12,705

 

 

11,205

 

Net property and equipment

 

355,824

 

 

317,030

 

Operating lease right-of-use assets

 

274,938

 

 

-

 

Radio broadcasting licenses

 

2,518,261

 

 

2,516,625

 

Goodwill

 

549,881

 

 

539,469

 

Assets held for sale

 

1,891

 

 

19,603

 

Other assets, net of accumulated amortization

 

33,725

 

 

56,197

 

 

 

 

 

 

 

 

TOTAL ASSETS

$

4,185,448

 

$

4,020,358

 

 

LIABILITIES:

 

 

 

 

 

 

Accounts payable

$

3,251

 

$

1,858

 

Accrued expenses

 

62,627

 

 

58,449

 

Other current liabilities

 

125,511

 

 

118,438

 

Operating lease liabilities

 

36,543

 

 

-

 

Total current liabilities

 

227,932

 

 

178,745

 

Long-term debt

 

1,723,956

 

 

1,872,203

 

Operating lease liabilities, net of current portion

 

263,084

 

 

-

 

Deferred tax liabilities

 

551,029

 

 

545,982

 

Other long-term liabilities

 

51,577

 

 

89,168

 

Total long-term liabilities

 

2,589,646

 

 

2,507,353

 

Total liabilities

 

2,817,578

 

 

2,686,098

 

 

 

 

 

 

 

 

CONTINGENCIES AND COMMITMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Class A, B and C common stock

 

1,377

 

 

1,412

 

Additional paid-in capital

 

1,655,690

 

 

1,693,512

 

Accumulated deficit

 

(288,620)

 

 

(360,664)

 

Accumulated other comprehensive income (loss)

 

(577)

 

 

-

 

Total shareholders' equity

 

1,367,870

 

 

1,334,260

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

4,185,448

 

$

4,020,358

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

 

2

 


 

ENTERCOM COMMUNICATIONS CORP.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

(amounts in thousands, except share and per share data)

 

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THREE MONTHS ENDED

 

 

NINE MONTHS ENDED

 

 

SEPTEMBER 30,

 

 

2019

 

2018

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET REVENUES

$

386,141

 

$

378,508

 

 

$

1,075,811

 

$

1,051,192

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSE:

 

 

 

 

 

 

 

 

 

 

 

 

 

Station operating expenses

 

273,112

 

 

279,651

 

 

 

801,267

 

 

811,214

 

Depreciation and amortization expense

 

11,183

 

 

10,608

 

 

 

33,252

 

 

29,745

 

Corporate general and administrative expenses

 

19,412

 

 

15,897

 

 

 

57,662

 

 

53,598

 

Integration costs

 

689

 

 

2,761

 

 

 

3,280

 

 

21,984

 

Restructuring charges

 

1,577

 

 

852

 

 

 

5,953

 

 

3,019

 

Impairment loss

 

-

 

 

-

 

 

 

-

 

 

28,988

 

Merger and acquisition costs

 

434

 

 

697

 

 

 

476

 

 

2,768

 

Other expenses related to financing

 

-

 

 

-

 

 

 

1,864

 

 

-

 

Net time brokerage agreement (income) fees

 

13

 

 

(150)

 

 

 

106

 

 

(1,242)

 

Net (gain) loss on sale or disposal of assets

 

231

 

 

(10,541)

 

 

 

(2,683)

 

 

(10,856)

 

Total operating expense

 

306,651

 

 

299,775

 

 

 

901,177

 

 

939,218

 

OPERATING INCOME (LOSS)

 

79,490

 

 

78,733

 

 

 

174,634

 

 

111,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE

 

25,256

 

 

25,923

 

 

 

75,420

 

 

75,033

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

-

 

 

-

 

 

 

1,781

 

 

-

 

OTHER (INCOME) EXPENSE

 

-

 

 

-

 

 

 

1,781

 

 

-

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)

 

54,234

 

 

52,810

 

 

 

97,433

 

 

36,941

 

INCOME TAXES (BENEFIT)

 

16,026

 

 

16,220

 

 

 

30,110

 

 

12,960

 

NET INCOME (LOSS) AVAILABLE TO THE COMPANY - CONTINUING OPERATIONS

 

38,208

 

 

36,590

 

 

 

67,323

 

 

23,981

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS - CONTINUING OPERATIONS

 

38,208

 

 

36,590

 

 

 

67,323

 

 

23,981

 

Income from discontinued operations, net of income taxes (benefit)

 

-

 

 

358

 

 

 

-

 

 

1,530

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$

38,208

 

$

36,948

 

 

$

67,323

 

$

25,511

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE - BASIC

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations per share available to common shareholders - Basic

$

0.28

 

$

0.26

 

 

$

0.49

 

$

0.17

 

Net income (loss) from discontinued operations per share available to common shareholders - Basic

$

-

 

$

-

 

 

$

-

 

$

0.01

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE - BASIC

$

0.28

 

$

0.27

 

 

$

0.49

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 


 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE - DILUTED

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations per share available to common shareholders - Diluted

$

0.28

 

$

0.26

 

 

$

0.49

 

$

0.17

 

Net income (loss) from discontinued operations per share available to common shareholders - Diluted

$

-

 

$

-

 

 

$

-

 

$

0.01

 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHARE - DILUTED

$

0.28

 

$

0.27

 

 

$

0.49

 

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE SHARES:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

136,449,453

 

138,740,243

 

 

137,944,486

 

138,901,037

 

Diluted

136,452,995

 

139,102,560

 

 

138,295,091

 

139,684,890

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

 

4

 


 

ENTERCOM COMMUNICATIONS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

THREE MONTHS ENDED

 

NINE MONTHS ENDED

 

September 30,

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS)

$

38,208

 

$

36,948

 

$

67,323

 

$

25,511

 

 

 

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE INCOME (LOSS),

 

 

 

 

 

 

 

 

 

 

 

NET OF TAXES (BENEFIT):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gain (loss) on derivatives,

 

 

 

 

 

 

 

 

 

 

 

net of taxes (benefit)

 

(353)

 

 

-

 

 

(577)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

COMPREHENSIVE INCOME (LOSS)

$

37,855

 

$

36,948

 

$

66,746

 

$

25,511

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

 

5

 


 

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

Net income (loss) available to the Company

-

 

 

-

 

-

 

 

-

 

 

-

 

 

36,948

 

 

 

-

 

 

36,948

Compensation expense related to granting of stock awards

(96,321)

 

 

(1)

 

-

 

 

-

 

 

3,769

 

 

-

 

 

 

-

 

 

3,768

Issuance of common stock related to the Employee Stock Purchase Plan ("ESPP")

50,785

 

 

1

 

-

 

 

-

 

 

341

 

 

-

 

 

 

-

 

 

342

Exercise of stock options

1,800

 

 

1

 

-

 

 

-

 

 

2

 

 

-

 

 

 

-

 

 

3

Purchase of vested employee restricted stock units

(857)

 

 

-

 

-

 

 

-

 

 

(7)

 

 

-

 

 

 

-

 

 

(7)

Payment of dividends on common stock

-

 

 

-

 

-

 

 

-

 

 

-

 

 

(12,491)

 

 

 

-

 

 

(12,491)

Dividend equivalents, net of forfeitures

-

 

 

-

 

-

 

 

-

 

 

(469)

 

 

(190)

 

 

 

-

 

 

(659)

Balance, September 30, 2018

138,482,653

 

$

1,386

 

4,045,199

 

$

40

 

$

1,699,343

 

$

38,621

 

 

$

-

 

$

1,739,390

6

 


 

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, 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

Net income (loss) available to the Company

-

 

 

-

 

-

 

 

-

 

 

-

 

 

38,208

 

 

 

-

 

 

38,208

Compensation expense related to granting of stock awards

18,232

 

 

-

 

-

 

 

-

 

 

3,165

 

 

-

 

 

 

-

 

 

3,165

Issuance of common stock related to the Employee Stock Purchase Plan ("ESPP")

100,965

 

 

1

 

-

 

 

-

 

 

287

 

 

-

 

 

 

-

 

 

288

Common stock repurchase

(5,000,000)

 

 

(50)

 

-

 

 

-

 

 

(18,290)

 

 

-

 

 

 

-

 

 

(18,340)

Purchase of vested employee restricted stock units

(1,408)

 

 

-

 

-

 

 

-

 

 

(4)

 

 

-

 

 

 

-

 

 

(4)

Payment of dividends on common stock

-

 

 

-

 

-

 

 

-

 

 

(2,684)

 

 

-

 

 

 

-

 

 

(2,684)

Dividend equivalents, net of forfeitures

-

 

 

-

 

-

 

 

-

 

 

(52)

 

 

-

 

 

 

-

 

 

(52)

Net unrealized gain (loss) on derivatives

-

 

 

-

 

-

 

 

-

 

 

-

 

 

-

 

 

 

(353)

 

 

(353)

Balance, September 30, 2019

133,583,672

 

$

1,337

 

4,045,199

 

$

40

 

$

1,655,690

 

$

(288,620)

 

 

$

(577)

 

$

1,367,870

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

 

7

 


 

 

ENTERCOM COMMUNICATIONS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

NINE MONTHS ENDED

 

SEPTEMBER 30,

 

2019

 

2018

OPERATING ACTIVITIES:

 

 

 

 

 

Net income (loss) available to common shareholders

$

67,323

 

$

25,511

 

 

 

 

 

 

Adjustments to reconcile net income (loss) to net cash provided by

 

 

 

 

 

(used in) operating activities:

 

 

 

 

 

Depreciation and amortization

 

33,252

 

 

29,745

Net amortization of deferred financing costs

 

 

 

 

 

(net of original issue discount and debt premium)

 

(21)

 

 

242

Net deferred taxes (benefit) and other

 

1,596

 

 

(42,424)

Provision for bad debts

 

3,354

 

 

8,679

Net (gain) loss on sale or disposal of assets

 

(2,683)

 

 

(10,856)

Non-cash stock-based compensation expense

 

10,131

 

 

11,421

Net loss on extinguishment of debt

 

1,781

 

 

-

Deferred compensation

 

3,956

 

 

2,262

Impairment loss

 

-

 

 

28,988

Accretion expense (income), net of asset retirement obligation adjustments

 

48

 

 

44

 

 

 

 

 

 

Changes in assets and liabilities (net of effects of acquisitions, dispositions,

 

 

 

 

 

consolidation, and deconsolidation of Variable Interest Entities (VIEs)):

 

 

 

 

 

Accounts receivable

 

(22,715)

 

 

26,699

Prepaid expenses and deposits

 

(4,765)

 

 

2,472

Accounts payable and accrued liabilities

 

5,951

 

 

26,475

Accrued interest expense

 

15,729

 

 

1,532

Accrued liabilities - long-term

 

(8,393)

 

 

(17,610)

Net cash provided by (used in) operating activities

 

104,544

 

 

93,180

 

 

 

 

 

 

INVESTING ACTIVITIES:

 

 

 

 

 

Additions to property and equipment

 

(61,572)

 

 

(23,605)

Proceeds from sale of radio stations

 

 

 

 

 

and other assets

 

27,818

 

 

181,875

Purchases of radio stations

 

(15,767)

 

 

(71,434)

Additions to amortizable intangible assets

 

(2,003)

 

 

(2,350)

Purchases of investments

 

(1,500)

 

 

(1,250)

Proceeds from sale of property reflected as restricted cash

 

-

 

 

70,187

Net cash provided by (used in) investing activities

 

(53,024)

 

 

153,423

 

8

 


 

ENTERCOM COMMUNICATIONS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

 

NINE MONTHS ENDED

 

SEPTEMBER 30,

 

2019

 

2018

FINANCING ACTIVITIES:

 

 

 

 

 

Borrowing under the revolving senior debt

 

159,000

 

 

83,325

Net proceeds from the notes

 

325,000

 

 

-

Payments of long-term debt

 

(425,000)

 

 

(10,018)

Payments of revolving senior debt

 

(205,000)

 

 

(21,325)

Payment for debt issuance costs

 

(3,910)

 

 

-

Proceeds from issuance of employee stock plan

 

1,031

 

 

1,051

Proceeds from the exercise of stock options

 

244

 

 

68

Purchase of vested employee restricted stock units

 

(2,730)

 

 

(5,179)

Payment of dividends on common stock

 

(27,594)

 

 

(37,403)

Payment of dividend equivalents on vested restricted stock units

 

(1,144)

 

 

(870)

Repurchase of common stock

 

(18,340)

 

 

(20,012)

Net cash provided by (used in) financing activities

 

(198,443)

 

 

(10,363)

 

 

 

 

 

 

NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH

 

(146,923)

 

 

236,240

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR

 

192,258

 

 

34,167

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

$

45,335

 

$

270,407

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

Interest

$

61,163

 

$

76,042

Income taxes

$

18,481

 

$

18,821

Dividends on common stock

$

27,594

 

$

37,403

Supplemental cash flow information

 

 

 

 

 

Tenant improvement allowance reimbursement

$

5,508

 

$

2,334

 

 

 

 

 

 

See notes to condensed consolidated financial statements.

9

 


 

ENTERCOM COMMUNICATIONS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NINE MONTHS ENDED SEPTEMBER 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 September 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 nine months ended September 30, 2019 and September 30, 2018 were not significant. 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 have restricted cash at September 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.

10

 


 

 

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 Pineapple Acquisition

On July 19, 2019, the Company completed a transaction to acquire the assets of Pineapple Street Media (“Pineapple”) for a purchase price of $14.0 million in cash plus working capital (the “Pineapple Acquisition”). Upon completion of the Pineapple Acquisition on July 19, 2019, the Company recorded the assets acquired and liabilities assumed at fair value.

Based on this timing, the Company’s consolidated financial statements for the nine and three months ended September 30, 2019 reflect the results of Pineapple’s operations for a portion of the period after the completion of the Pineapple Acquisition. The Company’s consolidated financial statements for the nine and three months ended September 30, 2018 do not reflect the results of Pineapple’s operations.

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.

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. Using a residual method, any excess between the fair values of the net assets acquired and the total fair value of assets acquired was recorded 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 customer relationships, technical knowledge and trade secrets.

11

 


 

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

 

 

 

 

 

 

 

Accounts receivable

 

$

997

 

 

 

 

Pineapple Street Media brand

 

 

1,793

 

non-amortizing

Goodwill

 

 

12,445

 

non-amortizing

Total intangible and other assets

 

 

15,235

 

 

 

 

Total assets

 

$

15,235

 

 

 

 

Unearned revenue

 

$

238

 

 

 

 

Accounts payable

 

 

30

 

 

 

 

Total liabilities

 

$

268

 

 

 

 

Preliminary fair value of net assets acquired

 

$

14,967

 

 

 

 

 

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 nine and three months ended September 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 nine and three months ended September 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

12

 


 

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