UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
[ ]
For the fiscal year ended December 31, 2018
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
(State or other jurisdiction of incorporation or organization)
23-1701044
(I.R.S. Employer Identification No.)
401 E. City Avenue, Suite 809
Bala Cynwyd, Pennsylvania 19004
(Address of principal executive offices and zip code)
(610) 660-5610
(Registrant’s telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of each class
Class A Common Stock, par value $.01 per share
Name of exchange on which registered
New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [√ ] No [ ]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [√]
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 [√] 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 [√] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [√]
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 [√]
Non-accelerated filer [ ]
Accelerated filer [ ]
Smaller reporting company [ ]
Emerging growth 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 [√]
The aggregate market value of the Class A common stock held by non-affiliates of the registrant as of the last business
day of the Registrant’s most recently completed second fiscal quarter, which was June 30, 2018, was $924,006,999 based on the
closing price of $7.55 on the New York Stock Exchange on such date.
Class A common stock, $0.01 par value 137,731,485 shares outstanding as of February 15, 2019
(Class A shares outstanding includes 3,545,802 unvested and vested but deferred restricted stock units).
Class B common stock, $0.01 par value 4,045,199 shares outstanding as February 15, 2019.
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DOCUMENTS INCORPORATED BY REFERENCE
Certain information in the registrant’s Definitive Proxy Statement for its 2019 Annual Meeting of
Shareholders, pursuant to Regulation 14A, is incorporated by reference in Part III of this report, which will be filed
with the Securities and Exchange Commission no later than 120 days after the end of the fiscal year.
TABLE OF CONTENTS
Page
1
Business ..............................................................................................................................................................
Risk Factors ........................................................................................................................................................
6
Unresolved Staff Comments ............................................................................................................................... 20
Properties ........................................................................................................................................................... 20
Legal Proceedings ............................................................................................................................................... 20
Mine Safety Disclosure ....................................................................................................................................... 21
Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity
Securities ............................................................................................................................................................. 21
Selected Financial Data ....................................................................................................................................... 25
Management’s Discussion and Analysis of Financial Condition and Results of Operations .............................. 29
Quantitative and Qualitative Disclosures about Market Risk ............................................................................. 54
Financial Statements and Supplementary Data ................................................................................................... 54
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .............................. 54
Controls and Procedures ..................................................................................................................................... 54
Other Information ............................................................................................................................................... 55
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance .................................................................................. 56
Executive Compensation ..................................................................................................................................... 56
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters ............ 56
Certain Relationships and Related Transactions and Director Independence ..................................................... 56
Principal Accounting Fees and Services ............................................................................................................. 56
PART IV
Item 15.
Item 16.
Exhibits, Financial Statement Schedules ........................................................................................................... 57
Form 10-K Summary .......................................................................................................................................... 134
Signatures
..................................................................................................................................................................... 139
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CERTAIN DEFINITIONS
Unless the context requires otherwise, all references in this report to “Entercom,” “we,” the “Company,”
“us,” “our” and similar terms refer to Entercom Communications Corp. and its consolidated subsidiaries, which
would include any variable interest entities that are required to be consolidated under accounting guidance.
With respect to annual fluctuations within “Management’s Discussion And Analysis Of Financial Condition
and Results Of Operations”, the designation of “nmf” represents “no meaningful figure.” This designation is
reserved for financial statement line items with such an insignificant change in annual activity, that the fluctuation
expressed as a percentage would not provide the users of the financial statements with any additional useful
information.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains, in addition to historical information, 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, as amended (the
“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Forward-looking statements, including certain pro forma information, 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.
We report our financial information on a calendar-year basis. Any reference to activity during the year is
for the year ended December 31.
Any reference to the number of radio markets covered by us in top 15, 25 and 50 markets is sourced to the
Fall 2018 publication of Nielsen’s Radio Markets; Population, Rankings and Information.
In the practice of measuring the size of U.S. commercial broadcasting audiences, cume, short for
“cumulative audience”, is a measure of the total number of consumers over a specified period.
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. These risks, uncertainties and factors include, but are
not limited to, the factors described in Part I, Item 1A, “Risk Factors.”
Any pro forma information that may be included reflects adjustments and is presented for comparative
purposes only and does not purport to be indicative of what has occurred or indicative of future operating results or
financial position.
You should not place undue reliance on these forward-looking statements, which reflect our view only as of
the date of this report. We do not intend, and we do not undertake any 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.
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ITEM 1. BUSINESS
PART I
We are a leading American media and entertainment company, with a cume of 170 million people each
month, with coverage of close to 90% of persons 12+ in the top 50 U.S. markets through our premier collection of
highly-rated, award-winning radio stations, digital platforms and live events. We are the number one creator of live,
original, local audio content and the nation’s unrivaled leader in news and sports radio. We are home to seven of the
eight most listened to all-news stations in the U.S., as well as more than 40 professional sports teams and dozens of
top college programs. As one of the country’s two largest radio broadcasters, we offer local and national advertisers
integrated marketing solutions across audio, digital and event platforms to deliver the power of local connection on a
national scale. We have a nationwide footprint of radio stations including positions in all of the top 16 markets and
22 of the top 25 markets. We were organized in 1968 as a Pennsylvania corporation.
On February 2, 2017, we and our 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 our wholly-owned subsidiary (the “Merger”). 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.
In connection with the Reverse Morris Trust transaction, CBS commenced an exchange offer for the
separation of its radio business to allow for the combination of CBS Radio and Entercom. CBS, certain of its
subsidiaries and CBS Radio completed the following distributions and stock split (together referred to as the “Radio
Reorganization”). At the time of the signing of the CBS Radio Merger Agreement on February 2, 2017, CBS Radio
had two classes of common stock, the Radio Series 1 Common Stock, par value $0.01 per share (the “Radio Series 1
Common Stock”), and the Radio Series 2 Common Stock, par value $0.01 per share (the “Radio Series 2 Common
Stock” and, together with the Radio Series 1 Common Stock, the “Radio Existing Common Stock”). As of February
2, 2017, CBS directly owned 100% of the equity of Westinghouse CBS Holding Company, Inc., a Delaware
corporation (“Westinghouse”), Westinghouse directly owned 100% of the equity of CBS Broadcasting Inc., a New
York corporation (“CBS Broadcasting”), and CBS Broadcasting directly owned 100% of the Radio Existing
Common Stock. Prior to the consummation of the Final Distribution (defined below), CBS Broadcasting distributed
all of the outstanding equity of CBS Radio to Westinghouse, and Westinghouse distributed all of the outstanding
equity of CBS Radio to CBS. These distributions are referred to as the “Internal Distributions.”
Following completion of the Internal Distributions, CBS Radio: (i) took all necessary actions to ensure that
Radio Series 1 Common Stock and the Radio Series 2 Common Stock were combined into a single class of common
stock, par value $0.01 per share (the “Radio New Common Stock”); (ii) authorized the issuance of at least
101,407,494 shares of Radio New Common Stock; and (iii) effected a stock split of the outstanding shares of Radio
New Common Stock, as a result of which, as of immediately prior to the effective time of the Final Distribution,
101,407,494 shares of Radio New Common Stock were issued and outstanding, all of which were owned directly by
CBS (collectively, (i) through (iii), the “Stock Split”).
Prior to the effective time of the Merger, pursuant to a Master Separation Agreement entered into between
CBS and CBS Radio (the “Separation Agreement” and, together with the Side Letter Agreement made as of
February 2, 2017 by and among Entercom, Joseph M. Field, Marie Field, and David J. Field (the “Side Letter”) and
the CBS Radio Merger Agreement, (the “Agreements”):
Certain subsidiaries of CBS consummated the Internal Distributions of all of the outstanding
equity of CBS Radio that resulted in CBS Radio being a directly wholly owned subsidiary of CBS,
and CBS Radio effected the Radio Reorganization, in each case on the terms and subject to the
conditions set forth in the CBS Radio Merger Agreement and the Separation Agreement;
CBS consummated an offer to exchange (the “Exchange Offer”) all of the outstanding shares of
Radio Common Stock for shares of Class B Common Stock of CBS, par value $0.001 per share
(the “CBS Class B Common Stock”), then outstanding on the terms and subject to the conditions
set forth in the CBS Radio Merger Agreement and the Separation Agreement; and
In the event that holders of CBS Class B Common Stock subscribed for less than all of the shares
of Radio Common Stock in the Exchange Offer, CBS would distribute the remaining outstanding
shares of Radio Common Stock on a pro rata basis to holders of CBS Class B Common Stock and
Class A Common Stock of CBS, par value $0.001 per share (the “CBS Class A Common Stock”
and, together with the CBS Class B Common Stock, the “CBS Common Stock”), whose shares of
CBS Common Stock remain outstanding after consummation of the Exchange Offer, so that CBS
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would be treated for U.S. federal income tax purposes as having distributed all of the Radio
Common Stock to its stockholders (the “Clean-Up Spin-Off”), considering for the purpose of
calculating the pro rata distribution of Radio Common Stock pursuant to any Clean-Up Spin-Off,
the CBS Class A Common Stock and CBS Class B Common Stock as a single class (collectively,
the “Final Distribution”, and, together with the Internal Distributions, the “Distributions”), in each
case on the terms and subject to the conditions set forth in the CBS Radio Merger Agreement and
the Separation Agreement.
In the exchange offer, CBS shareholders had the opportunity to exchange their shares of CBS Class B
common stock for shares of CBS Radio common stock, which were immediately converted into the right to receive
an equal number of shares of Entercom Class A common stock upon completion of the Merger. Under the terms of
the exchange offer, 5.6796 shares of CBS Radio common stock were exchanged for each share of CBS Class B
common stock accepted in the offer. CBS accepted 17,854,689 of the tendered shares in exchange for 101,407,494
shares of CBS Radio common stock, which upon closing of the Merger were immediately converted into an equal
number of whole shares of Entercom Class A common stock.
On November 1, 2017, we entered into a settlement with the Antitrust Division of the U.S. Department of
Justice (“DOJ”). The settlement with the DOJ together with several required station divestiture transactions with
third parties, allowed us to move forward with the Merger. On November 9, 2017, we obtained approval from the
Federal Communications Commission (the “FCC”) to consummate the Merger. The transactions contemplated by
the CBS Radio Merger Agreement were approved by our shareholders on November 15, 2017. Upon the expiration
of the exchange offer period on November 16, 2017, the Merger closed on November 17, 2017.
Our Digital and Live Events Platforms
Radio.com delivers scale by unifying the listening experience of our broad portfolio of stations, leading
podcasts, shows and talent. Harnessing the power of our cume of 170 million people, this robust platform is
delivering fast growth and deep engagement twenty-four hours a day, seven days a week.
Through our 45% investment in Cadence13, we are the number three podcaster in the U.S. market creating,
distributing and monetizing premium, personality-based podcasts to our audiences with approximately 101 million
monthly downloads.
We are a leading creator of live, original events, including large-scale concerts, intimate live performances
with big artists on small stages, and crafted food and beverage events, all supported by Eventful, our digital local
event discovery business with 27 million registered users and 3.5 million monthly unique visitors.
Our Strategy
Our strategy focuses on accelerating growth by capitalizing on scale, efficiencies and operating expertise to
consistently deliver the best local radio content, events and experiences in the communities we serve and, in turn,
offer advertisers access to a highly effective marketing platform to reach large and targeted local audiences. The
principal components of our strategy are to: (i) continue to be America’s number one creator of live, original, local
audio content by building strongly branded radio stations with highly compelling content; (ii) focus on delivering
effective integrated marketing solutions for our customers that incorporate audio, digital and experiential assets and
leverage our national scale and digital and live events platforms; (iii) assemble and develop the strongest market
leading station clusters; (iv) drive a positive perception of radio as the nation’s number one reach and ROI medium;
and (v) offer a great place to work, where the most talented high achievers can grow and thrive.
Source Of Revenue
The primary source of revenue for our radio stations is the sale of advertising time to local, regional and
national advertisers and national network advertisers who purchase commercials in varying lengths. A growing
source of revenue is from station-related digital product suites, which allow for enhanced audience interaction and
participation, and integrated digital advertising solutions. A station’s local sales staff generates the majority of its
local and regional advertising sales through direct solicitations of local advertising agencies and businesses. We
retain a national representation firm to sell to advertisers outside of our local markets.
Our stations are typically classified by their format, such as news, sports, talk, classic rock, urban, adult
contemporary, alternative and country, among others. A station’s format enables it to target specific segments of
listeners sharing certain demographics. Advertisers and stations use data published by audience measuring services
to estimate how many people within particular geographical markets and demographics listen to specific stations.
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Our geographically and demographically diverse portfolio of radio stations allows us to deliver targeted messages to
specific audiences for advertisers on a local, regional and national basis.
Competition
The radio broadcasting industry is highly competitive. Our stations compete for listeners and advertising
revenue with other radio stations within their respective markets. In addition, our stations compete for audiences and
advertising revenues with other media including: digital audio streaming, satellite radio, broadcast television, digital,
satellite and cable television, newspapers and magazines, outdoor advertising, direct mail, yellow pages, wireless
media alternatives, cellular phones and other forms of audio entertainment and advertisement.
Federal Regulation of Radio Broadcasting
Overview. The radio broadcasting industry is subject to extensive and changing government regulation of, among
other things, ownership limitations, program content, advertising content, technical operations and business and
employment practices. The ownership, operation and sale of radio stations are subject to the jurisdiction of the FCC
pursuant to the Communications Act of 1934, as amended (the “Communications Act”).
The following is a brief summary of certain provisions of the Communications Act and of certain specific
FCC regulations and policies. This summary is not a comprehensive listing of all of the regulations and policies
affecting radio stations. For further information concerning the nature and extent of federal regulation of radio
stations, you should refer to the Communications Act, FCC rules and FCC public notices and rulings.
FCC Licenses. The operation of a radio broadcast station requires a license from the FCC. Certain of our
subsidiaries hold the FCC licenses for our stations. The total number of radio stations that can simultaneously
operate in any given area or market is limited by the amount of spectrum allotted by the FCC within the AM and FM
radio bands, and by station-to-station interference within those bands. While there are no national radio station
ownership caps, FCC rules do limit the number of stations within the same market that a single individual or entity
may own or control.
Ownership Rules. The FCC sets limits on the number of radio broadcast stations an entity may permissibly own
within a market. Same-market FCC numeric ownership limitations are based: (i) on markets as defined and rated by
Nielsen Audio; and (ii) in areas outside of Nielsen Audio markets, on markets as determined by overlap of specified
signal contours.
The total number of stations authorized to operate in a local market may fluctuate from time to time, and
the number of stations that can be owned by a single individual or entity in a given market can therefore vary over
time. Once the FCC approves the ownership of a cluster of stations in a market, that owner may continue to hold
those stations under “grandfathering” policies, despite a decrease in the number of stations in the market.
Ownership Attribution. In applying its ownership limitations, the FCC generally considers only “attributable”
ownership interests. Attributable interests generally include: (i) equity and debt interests which when combined
exceed 33% of a licensee’s or other media entity’s total asset value, if the interest holder supplies more than 15% of
a station’s total weekly programming or has an attributable interest in any same-market media (television, radio,
cable or newspaper), with a higher threshold in the case of investments in certain “eligible entities” acquiring
broadcast stations; (ii) a 5% or greater direct or indirect voting stock interest, including certain interests held in trust,
unless the holder is a qualified passive investor, in which case the threshold is a 20% or greater voting stock interest;
(iii) any equity interest in a limited liability company or a partnership, including a limited partnership, unless
properly “insulated” from management activities; and (iv) any position as an officer or director of a licensee or of its
direct or indirect parent.
Alien Ownership Rules. The Communications Act prohibits the issuance to, or holding of broadcast licenses by,
foreign governments or aliens, non-U.S. citizens, whether individuals or entities, including any interest in a
corporation which holds a broadcast license if more than 20% of the licensee’s capital stock is owned or voted by
aliens. In addition, the FCC may prohibit any corporation from holding a broadcast license if the corporation is
directly or indirectly controlled by any other corporation of which more than 25% of the capital stock is owned of
record or voted by aliens if the FCC finds that the prohibition is in the public interest. The Communications Act
gives the FCC discretion to allow greater amounts of alien ownership. The FCC considers investment proposals
from international companies or individuals on a case-by-case basis. In September 2016, the FCC announced that it
was streamlining foreign ownership rules and procedures to provide for a standardized filing and review process.
The streamlined rules permit a broadcast licensee to file a petition with the FCC seeking approval for a proposed
controlling investor to own up to 100% foreign ownership of the controlling parent entity and for a non-controlling
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foreign investor identified in the petition to increase its equity and/or voting interest in a parent entity at a future
time up to 49.99%. This change will make it easier for broadcast licensees to seek foreign investors. The FCC also
adopted a methodology for determining the citizenship of beneficial owners of publicly held shares that companies
may use to ascertain compliance with the foreign ownership rules.
License Renewal. Radio station licenses issued by the FCC are ordinarily renewable for an eight-year term. A
station may continue to operate beyond the expiration date of its license if a timely filed license renewal application
is pending. All of our licenses have been renewed and are current.
The FCC is required to renew a broadcast station’s license if the FCC finds that the station has served the
public interest, convenience and necessity; there have been no serious violations by the licensee of the
Communications Act or the FCC’s rules and regulations; and there have been no other violations by the licensee of
the Communications Act or the FCC’s rules and regulations that, taken together, constitute a pattern of abuse. If a
challenge is filed against a renewal application, and, as a result of an evidentiary hearing, the FCC determines that
the licensee has failed to meet certain fundamental requirements and that no mitigating factors justify the imposition
of a lesser sanction, the FCC may deny a license renewal application. In certain instances, the FCC may renew a
license application for less than a full eight-year term. Historically, our FCC licenses have generally been renewed
for the full term.
The FCC initiated an investigation in January 2007, related to a contest at one of our stations. In October
2016, the FCC designated for a hearing whether we operated this station in the public interest and whether such
station’s license should be renewed. In February 2017, in order to facilitate the Merger, we permanently
discontinued operation of our only station subject to a petition to deny, in order to cancel the license, dismiss its
renewal application and terminate the renewal hearing.
Transfer or Assignment of Licenses. The Communications Act prohibits the assignment of broadcast licenses or
the transfer of control of a broadcast licensee without the prior approval of the FCC. In determining whether to grant
such approval, the FCC considers a number of factors pertaining to the existing licensee and the proposed licensee,
including:
compliance with the various rules limiting common ownership of media properties in a given market;
the “character” of the proposed licensee; and
compliance with the Communications Act’s limitations on alien ownership as well as general
compliance with FCC regulations and policies.
To obtain FCC consent for the assignment or transfer of control of a broadcast license, appropriate
applications must be filed with the FCC. Interested parties may file objections or petitions to deny such applications.
Programming and Operation. The Communications Act requires broadcasters to serve the “public interest.” A
licensee is required to present programming that is responsive to issues in the station’s community of license and to
maintain records demonstrating this responsiveness. The FCC regulates, among other things, political advertising;
sponsorship identification; the advertisement of contests and lotteries; the conduct of station-run contests; obscene,
indecent and profane broadcasts; certain employment practices; and certain technical operation requirements,
including limits on human exposure to radio-frequency radiation. The FCC considers complaints from listeners
concerning a station’s public-service programming, employment practices, or other operational issues when
processing a renewal application filed by a station, but the FCC may consider complaints at any time and may
impose fines or take other action for violations of the FCC’s rules separate from its action on a renewal application.
FCC regulations prohibit the broadcast of obscene material at any time as well as the broadcast, between
the hours of 6:00 a.m. and 10:00 p.m., of material it considers “indecent” or “profane”. The FCC has historically
enforced licensee compliance in this area through the assessment of monetary forfeitures. Such forfeitures may
include: (i) imposition of the maximum authorized fine for egregious cases ($407,270 for a single violation, up to a
maximum of $3,759,410 for a continuing violation); and (ii) imposition of fines on a per utterance basis instead of a
single fine for an entire program. There may be indecency complaints which have been submitted to the FCC of
which we have not yet been notified.
Certain FCC rules regulate the conduct of on-air station contests, requiring in general that the material rules
and terms of the contest be broadcast periodically or posted online and that the contest be conducted substantially as
announced.
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Enforcement Authority. The FCC has the power to impose penalties for violations of its rules under the
Communications Act, including the imposition of monetary fines, the issuance of short-term licenses, the imposition
of a condition on the renewal of a license, the denial of authority to acquire new stations, and the revocation of
operating authority. The maximum fine for a single violation of the FCC’s rules (other than the rules regarding
indecency and profanity) is $50,334.
Proposed and Recent Changes. Congress, the FCC and other federal agencies are considering or may in the future
consider and adopt new laws, regulations and policies regarding a wide variety of matters that could: (i) affect,
directly or indirectly, the operation, ownership and profitability of our radio stations; (ii) result in the loss of
audience share and advertising revenues for our radio stations; and (iii) affect our ability to acquire additional radio
stations or to finance those acquisitions.
Federal Antitrust Laws. The federal agencies responsible for enforcing the federal antitrust laws, the Federal Trade
Commission (“FTC”) and the DOJ, may investigate certain acquisitions. For an acquisition meeting certain size
thresholds, the Hart-Scott-Rodino Antitrust Improvements Act of 1976 requires the parties to file Notification and
Report Forms with the FTC and the DOJ and to observe specified waiting-period requirements before
consummating the acquisition. The Merger was subject to review by the FTC and the DOJ. On November 1, 2017,
we entered into a consent decree with the DOJ that resolved the DOJ’s investigation into the Merger.
HD Radio
AM and FM radio stations may use the FCC selected In-Band On-Channel (“IBOC”) as the exclusive
technology for terrestrial digital operations. IBOC, developed by iBiquity Digital Corporation, is also known as “HD
Radio.”
HD Radio technology permits a station to transmit radio programming in digital format. We currently use
HD Radio digital technology on most of our FM stations. The advantages of digital audio broadcasting over
traditional analog broadcasting technology include improved sound quality, the availability of additional channels
and the ability to offer a greater variety of auxiliary services.
Employees
As of February 5, 2019, we had 4,428 full-time employees and 3,198 part-time employees. With respect to
certain of our stations in our Boston, Chicago, Detroit, Hartford, Kansas City, Los Angeles, Minneapolis, New York
City, Philadelphia, Pittsburgh, San Francisco and St. Louis markets, we are a party to collective bargaining
agreements with the Screen Actors Guild - American Federation of Television and Radio Artists (known as SAG-
AFTRA). With respect to certain of our stations in our Chicago, Los Angeles, and New York City markets, we are a
party to collective bargaining agreements with the Writers Guild of America East (known as WGAE) and Writers
Guild of America West (known as WGAW). With respect to certain of our stations in our Chicago, New York City,
and Philadelphia markets, we are a party to collective bargaining agreements with the International Brotherhood of
Electrical Workers (known as IBEW). We believe that our relations with our employees are good.
Corporate Governance
Code Of Business Conduct And Ethics. We have a Code of Business Conduct and Ethics that applies to
each of our employees, including our principal executive officers and senior members of our finance department.
Our Code of Business Conduct and Ethics can be found on the “Investors” sub-page of our website located at
www.entercom.com/investors.
Board Committee Charters.
Each of our Audit Committee, Compensation Committee and
Nominating/Corporate Governance Committee has a committee charter as required by the rules of the New York
Stock Exchange (the “NYSE”). These committee charters can be found on the “Investors” sub-page of our website
located at www.entercom.com/investors.
Corporate Governance Guidelines. NYSE rules require our Board of Directors (the “Board”) to establish
certain Corporate Governance Guidelines. These guidelines can be found on the “Investors” sub-page of our
website located at www.entercom.com/investors.
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Environmental Compliance
As the owner, lessee or operator of various real properties and facilities, we are subject to various federal,
state and local environmental laws and regulations. Historically, compliance with these laws and regulations has not
had a material adverse effect on our business.
Seasonality
Seasonal revenue fluctuations are common in the radio broadcasting industry and are due primarily to
fluctuations in advertising expenditures. Typically, revenues are lowest in the first calendar quarter of the year.
Internet Address and Internet Access to Periodic and Current Reports
You can find more information about us that includes a list of our stations in each of our markets at our
Internet website located at www.entercom.com. Our Annual Report on Form 10-K, our Quarterly Reports on Form
10-Q, our Current Reports on Form 8-K and any amendments to those reports are available free of charge through
our Internet website as soon as reasonably practicable after we electronically file such material with the Securities
and Exchange Commission (the “SEC”). The contents of our websites are not incorporated by reference into this
Annual Report on Form 10-K or in any other report or document we file with the SEC, and any references to our
websites are intended to be inactive textual references only. We will also provide a copy of our annual report on
Form 10-K upon any written request.
ITEM 1A. RISK FACTORS
Many statements contained in this report are forward-looking in nature. See “Note Regarding Forward-
Looking Statements.” These statements are based on current plans, intentions or expectations, and actual results
could differ materially as we cannot guarantee that we will achieve these plans, intentions or expectations. Among
the factors that could cause actual results to differ are the following:
BUSINESS RISKS
Our results may be impacted by economic trends.
Our net revenues increased in 2018 as compared to the prior year primarily as a result of acquisitions made
during 2017. Excluding the net revenues from those radio stations divested, exchanged or operated by third-parties
as part of the Merger, net revenues were up in the low-single digits for the year ended December 31, 2018.
Our results of operations could be negatively impacted by economic fluctuations or by future economic
downturns. Also, expenditures by advertisers tend to be cyclical, reflecting overall economic conditions. The risks
associated with our business could be more acute in periods of a slowing economy or recession, which may be
accompanied by a decrease in advertising. A decrease in advertising expenditures could adversely impact our
business, financial condition and result of operations.
There can be no assurance that we will not experience an adverse impact on our ability to access capital,
which could adversely impact our business, financial condition and results of operations. In addition, our ability to
access the capital markets may be severely restricted at a time when we would like or need to do so, which could
have an adverse impact on our capacity to react to changing economic and business conditions.
Our radio stations may be adversely affected by changes in programming and competition for advertising
revenues.
We operate in a highly competitive business. Our radio stations compete for audiences with advertising
revenue as our principal source of income. We compete directly with other radio stations, as well as with other
media, such as broadcast, cable and satellite television, satellite radio and pure-play digital audio, newspapers and
magazines, national and local digital services, outdoor advertising and direct mail. We also compete for advertising
dollars with other large companies such as Facebook, Google and Amazon. Audience ratings and market shares are
subject to change, and any decrease in our listenership ratings or market share in a particular market could have a
material adverse effect on the revenue of our stations located in that market. Audience ratings and market shares
could be affected by a variety of factors, including changes in the format or content of programming (some of which
may be outside of our control), personnel changes, demographic shifts and general broadcast listening trends.
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Adverse changes in any of these areas or trends could adversely impact our business, financial condition, results of
operations and cash flows.
While we already compete in some of our markets with stations with similarly programmed formats, if
another radio station in a market were to convert its programming format to a format similar to one of our stations or
if an existing competitor were to garner additional market share, our stations could suffer a reduction in ratings
and/or advertising revenue and could incur increased promotional and other expenses. Competing companies may be
larger and/or have more financial resources than we do. There can be no assurance that any of our stations will be
able to maintain or increase their current audience ratings and advertising revenues.
We may be unable to effectively integrate our acquisitions, including the Merger with the CBS Radio business.
The integration of acquisitions involves numerous risks.
In particular, we now have significantly more sales, assets and employees than we did prior to the Merger.
The integration process requires us to expend significant capital and expand the scope of our operations and
financial systems. We have been required to devote a significant amount of time and attention to the process of
integrating the operations of the CBS Radio business. There is a great degree of difficulty and management
involvement inherent in that process, which is not yet complete. These difficulties include:
Continuing the integration process of the CBS Radio business while carrying on the ongoing
operations of our business;
managing a significantly larger company than before consummation of the Merger;
the possibility of faulty assumptions underlying our expectations regarding the integration process;
coordinating a greater number of diverse businesses and businesses located in a greater number of
geographic locations;
CBS Radio’s performance in the past was well below others in the industry and we may not be
able to improve their results;
retaining existing customers and attracting new customers;
the potential diversion of management’s focus and resources from other strategic opportunities and
from operational matters;
managing tax costs or inefficiencies associated with integrating the operations of the combined
company;
unforeseen expenses or delays associated with the Merger;
integrating two separate employee cultures;
attracting and retaining the necessary personnel for the combined company;
creating uniform standards, controls, procedures, policies and information systems and controlling
the costs associated with such matters; and
integrating accounting, finance, sales, billing, payroll, purchasing and regulatory compliance
systems.
There is no assurance that the CBS Radio business will be successfully or cost-effectively integrated into
our business. The process of integrating the CBS Radio business into our operations may cause an interruption of, or
loss of momentum in, the activities of our business. If we are not able to effectively manage the integration process,
or if any significant business activities are interrupted as a result of the integration process, our business could suffer
and our liquidity, results of operations and financial condition could be adversely impacted.
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If any of the Internal Distributions or the Final Distribution does not qualify as a transaction that is tax-free for
U.S. federal income tax purposes under Section 355 of the Internal Revenue Code (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 Internal Distributions, the Final Distribution or 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 (now known as “Entercom Media Corp.”) and
Entercom may be required to indemnify CBS for any such tax liability.
Stockholders of CBS generally will not recognize any gain or loss for U.S. federal income tax purposes as a
result of the exchange offer or the Merger, except for any gain or loss attributable to the receipt of cash in lieu of
fractional shares of Entercom Class A Common Stock received in the Merger. CBS received an opinion from
Wachtell, Lipton, Rosen & Katz, counsel to CBS, that each of the Internal Distributions and the Final Distributions
qualified as a tax-free transaction under Section 355 of the Code (the “Distribution Tax Opinion”).
It was intended that the Merger qualify as a “reorganization” within the meaning of Section 368(a) of the
Code. It was a condition to Entercom’s obligation to complete the Merger that Entercom receive an opinion from
Latham & Watkins LLP, counsel to Entercom, to the effect that the Merger be treated as a “reorganization” within
the meaning of Section 368(a) of the Code, and it was a condition to CBS and CBS Radio’s obligations to complete
the Merger that CBS receive an opinion from Wachtell, Lipton, Rosen & Katz, counsel to CBS, to the effect that the
Merger be treated as a “reorganization” within the meaning of Section 368(a) of the Code (each such opinion, a
“Merger Tax Opinion”).
The Separation Agreement provided that if the condition that the Distribution Tax Opinion be delivered is
waived by CBS, then unless such condition cannot be met solely as a result of one or more events, facts or
circumstances that are not within the control of CBS, CBS shall pay to Entercom the Tax Opinion Waiver Penalty.
The “Tax Opinion Waiver Penalty” means a dollar amount equal to the product of (a) the sum of (i) the number of
shares of CBS Common Stock subject to CBS options held by CBS Radio employees immediately prior to the
effective time of the Merger and (ii) the number of CBS Restricted Stock Unit (“RSU”) awards held by a CBS
Radio employee outstanding as of immediately prior to the effective time of the Merger, multiplied by (b) the Tax
Opinion Waiver Ratio Impact, multiplied by (c) the volume-weighted average per share closing price of Entercom
Class A Common Stock for the five consecutive trading days beginning 15 trading days prior to the date CBS
publicly discloses that it has waived the condition regarding the Distribution Tax Opinion (the “Tax Opinion Waiver
Date”), as listed on the NYSE (the “Entercom Unaffected Stock Value”). The “Tax Opinion Waiver Ratio Impact”
means an amount equal to the greater of (a) (i) the quotient obtained by dividing the (A) volume-weighted average
per-share closing price of CBS Class B Common Stock on the five trading days immediately prior to the date of the
consummation of the Merger, as listed on the NYSE, by (B) volume-weighted average per-share closing price of
Entercom Class A common Stock on the five trading days immediately following the date of the consummation of
the Merger, as listed on the NYSE, minus (ii) (A) the volume-weighted average per-share closing price of CBS
Class B Common Stock for the five consecutive trading days beginning 15 trading days prior to the Tax Opinion
Waiver Date, as listed on the NYSE, divided by (B) the Entercom Unaffected Stock Value, or (b) zero.
The consummation of the separation of the radio business from the other businesses of CBS pursuant to the
terms of the Separation Agreement (the “Separation” and, together with the other transactions contemplated in the
Separation Agreement and the CBS Radio Merger Agreement, the “Transactions”) was conditioned on the receipt
by CBS of the Distribution Tax Opinion and a Merger Tax Opinion and by Entercom of a Merger Tax Opinion and a
copy of the Distribution Tax Opinion.
Entercom, CBS, CBS Radio and Merger Sub or their respective subsidiaries, in each case as applicable, have
entered into certain other agreements relating to the Transactions and various interim and ongoing relationships
between CBS, CBS Radio and Entercom.
To enable Entercom to manage an orderly transition in its operation of CBS Radio, CBS and Entercom
entered into an agreement, pursuant to which CBS will provide certain services to Entercom in support of CBS
Radio and Entercom will provide certain limited services to CBS for a period not to exceed twenty-four months
following the consummation of the Transactions (the “Transition Service Agreement”).
CBS Local Digital Media operates CBS local websites, which combine local radio and television content
within markets where both CBS Radio and CBS television stations operate. CBS and Entercom entered into an
agreement, pursuant to which CBS Local Digital Media will continue to operate the digital presences for CBS
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Radio’s Sports and news Stations and CBS television stations (the “Joint Digital Sales Agreement”). The Joint
Digital Sales Agreement represents a collaborative agreement between CBS and Entercom, providing for the sharing
of revenues, costs and content, in connection with the operation of the CBS local websites.
Pursuant to an agreement executed by and between CBS Broadcasting, CBS Mass Media Corporation and
other subsidiaries of CBS (together, the “Licensors”), Entercom Media Corp. and certain subsidiaries of Entercom
Media Corp., as the licensees, Entercom Media Corp. will have the right to continue to use certain licensed
trademarks and related property to operate various Entercom Media Corp. stations, subject to the terms and
conditions of this license agreement (the “Trademark License Agreement (TV Station Brands)”). Pursuant to an
agreement executed by and between CBS Broadcasting as licensor, CSTV Networks, Inc. d/b/a CBS Sports
Network, on the one hand, and CBS Sports Radio Network Inc. and Entercom Media Corp., on the other hand as the
licensees, the licensees will have the right to continue to use the CBS SPORTS RADIO trademark in connection
with the CBS Sports Radio network and certain marketing and promotional uses (the “Trademark License
Agreement (CBS SPORTS RADIO Brand)” and, together with the Trademark License Agreement (TV Station
Brands), the “Trademark License Agreements”).
Concurrently with the execution of the CBS Radio Merger Agreement, Entercom and Joseph M. Field, who
held a controlling voting interest in Entercom, entered into a Voting Agreement dated as of February 2, 2017 (the
“Voting Agreement”). Pursuant to the Voting Agreement, Mr. Field committed to vote in favor of the issuance of
shares of Entercom Class A Common Stock in the Merger, an amendment to Entercom’s Amended and Restated
Articles of Incorporation (“Entercom Articles”) to provide that the Entercom board of directors will be classified
after the Merger and not to tender into or vote for any alternative proposal for one year after the termination of the
CBS Radio Merger Agreement (but only through the termination provisions as identified in the Voting Agreement).
Together, the Tax Matters Agreement (defined below), the Transition Service Agreement, the Joint Digital
Services Agreement and the Trademark License Agreements are referred to as the “Ancillary Agreements.” The
Ancillary Agreements together with the Voting Agreement, the Side Letter, CBS Radio Merger Agreement and the
Separation Agreement, are referred to as the “Transaction Agreements”.
The opinions of counsel were based upon and relied on, among other things, current law, certain facts and
assumptions, as well as certain representations, statements, and undertakings of CBS, CBS Radio (now Entercom
Media Corp.), Entercom, and Merger Sub, including those relating to the past and future conduct of CBS, CBS
Radio, Entercom, and Merger Sub. If any of these representations, statements or undertakings are, or become,
inaccurate or incomplete, or if CBS, Entercom Media Corp., Entercom, or Merger Sub breaches any of its covenants
in the Transaction Agreements, the opinions of counsel may be invalid and the conclusions reached therein could be
jeopardized. Notwithstanding the opinions of counsel, the Internal Revenue Service (the “IRS”) could determine
that the Final Distribution and/or the Merger should be treated as a taxable transaction if it determines that any of the
facts, assumptions, representations, statements or undertakings upon which the opinions of counsel were based are
false or have been violated, or if it disagrees with the conclusions in the opinions of counsel. The opinions of
counsel are not binding on the IRS and there can be no assurance that the IRS will not assert a contrary position.
If the Final Distribution fails to qualify as a transaction that is tax-free, for U.S. federal income tax purposes,
under Section 355 of the Code, in general, CBS would recognize taxable gain as if it had sold the Radio Common
Stock in a taxable sale for its fair market value, and holders of CBS Common Stock who received shares of Radio
Common Stock in the Final Distribution would be subject to tax as if they had received a taxable distribution equal
to the fair market value of such shares.
Even if the Final Distribution were to otherwise qualify as a tax-free transaction under Section 355 of the
Code, the Final Distribution or either Internal Distribution would be taxable to CBS (but not to CBS stockholders)
pursuant to Section 355(e) of the Code if there is a 50% or greater change in ownership of either CBS or CBS Radio
(including stock of Entercom after the Merger), directly or indirectly, as part of a plan or series of related
transactions that include the Final Distribution or such Internal Distribution, as applicable. For this purpose, any
acquisitions of CBS or CBS Radio stock (including stock of Entercom after the Merger) within the period beginning
two years before the Final Distribution or such Internal Distribution, as applicable, and ending two years after the
Final Distribution or such Internal Distribution, as applicable, are presumed to be part of such a plan, although CBS
may be able to rebut that presumption. Further, for purposes of this test, the Merger will be treated as part of such a
plan, but the Merger standing alone should not cause the Final Distribution or either Internal Distribution to be
taxable to CBS under Section 355(e) of the Code because pre-Merger holders of Radio Common Stock will hold at
least 50.25% of the aggregate value of Entercom Common Stock and at least 50.25% of the aggregate voting power
of Entercom Common Stock, in each case, immediately following the Merger. However, if the IRS were to
9
determine that other acquisitions of CBS or CBS Radio stock (including stock of Entercom after the Merger), either
before or after the Final Distribution or either Internal Distribution, were part of a plan or series of related
transactions that included the Final Distribution or such Internal Distribution, as applicable, such determination
could result in significant tax to CBS.
Under the agreement entered into by CBS, CBS Radio, and Entercom in connection with the Transactions,
CBS Radio (and Entercom, if applicable) will be required to indemnify CBS against all or a portion of any taxes on
the Internal Distributions and Final Distribution that arise as a result of certain actions or failures to act by Entercom
or CBS Radio, certain events (or series of events) after the Transactions involving the stock or assets of CBS Radio
or Entercom, or any breach by Entercom or, after the Transactions, CBS Radio of any representation or covenant
made by them in the agreement (the “Tax Matters Agreement”) (a “disqualifying action”). If CBS were to recognize
gain on either Internal Distribution or the Final Distribution for reasons not related to a disqualifying action by CBS
Radio or Entercom, CBS would generally not be entitled to be indemnified under the Tax Matters Agreement and
the resulting tax to CBS could have a material adverse effect on CBS. In addition, in certain circumstances, under
the Tax Matters Agreement, CBS Radio (and Entercom) will be required to indemnify CBS against taxes on the
Merger that arise as a result of a disqualifying action by CBS Radio or Entercom. If CBS were to recognize gain on
the Merger for reasons not related to a disqualifying action by CBS Radio or Entercom, CBS would generally not be
entitled to indemnification by CBS Radio (or Entercom) under the Tax Matters Agreement. If CBS Radio (or
Entercom, if applicable) is required to indemnify CBS if the Final Distribution or the Merger is taxable, this
indemnification obligation could be substantial and could have a material adverse effect on Entercom, including
with respect to its financial condition and results of operations. In addition, even if Entercom and CBS Radio are not
responsible for tax liabilities of CBS under the Tax Matters Agreement, CBS Radio nonetheless could be liable
under applicable tax law for such liabilities if CBS were to fail to pay such taxes.
Entercom Media Corp. and Entercom may be affected by significant restrictions following the Transactions in
order to avoid significant tax-related liabilities.
The Tax Matters Agreement generally prohibits Entercom Media Corp., Entercom and their affiliates from
taking certain actions that could cause the Internal Distributions, the Final Distribution and the Merger to fail to
qualify as tax-free transactions. In particular, for a two-year period following the date of the Final Distribution (the
“Final Distribution Date”), except as described below, neither Entercom Media Corp. nor Entercom may:
enter into any transaction or series of transactions (or any agreement, understanding or arrangement) as
a result of which one or more persons would acquire (directly or indirectly) stock comprising 50% or
more of the vote or value of Entercom Media Corp. or Entercom (taking into account the stock of CBS
Radio acquired pursuant to the Merger);
redeem or repurchase any stock or stock rights, other than in certain open-market transactions;
amend its certificate of incorporation or take any other action affecting the relative voting rights of its
capital stock;
merge or consolidate with any other person (other than pursuant to the Merger or mergers or
consolidations that do not result in Entercom Media Corp. ceasing to exist as a corporation for U.S.
federal income tax purposes);
take any other actions that would, when combined with any other direct or indirect changes in
ownership of Entercom Media Corp. and Entercom capital stock (including pursuant to the Merger),
have the effect of causing one or more persons to acquire stock comprising 50% or more of the vote or
value of Entercom Media Corp. or Entercom, or would reasonably be expected to result in a failure to
preserve the tax-free status of the Transactions;
cause Entercom Media Corp. to liquidate;
cause Entercom Media Corp. to discontinue the active conduct of certain of its businesses; or
sell, transfer or otherwise dispose of assets (including stock of subsidiaries) of certain of Entercom
Media Corp.’s business beyond certain thresholds (subject to exceptions for, among other things,
ordinary course dispositions and repayments or prepayments of Entercom Media corp. debt).
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If Entercom Media Corp. (or Entercom, if applicable) intends to take any such restricted action, Entercom
Media Corp. (or Entercom, if applicable) will be required to cooperate with CBS in obtaining an IRS ruling or an
unqualified tax opinion satisfactory to CBS in its reasonable discretion to the effect that such action will not affect
the status of any of the Internal Distributions, the Final Distribution or the Merger as tax-free transactions, unless
CBS waives such requirement. However, if Entercom Media Corp. (or Entercom, if applicable) takes any of the
actions above and such actions result in tax-related losses to CBS, then Entercom Media Corp. (or Entercom, if
applicable) generally will be required to indemnify CBS for such losses, without regard to whether CBS has given
Entercom Media Corp. and/or Entercom prior consent. In the event CBS does not receive a tax opinion from
Wachtell, Lipton, Rosen & Katz concluding at a comfort level of “should” or higher that each of the Internal
Distributions and the Final Distribution qualifies as a tax-free transaction under Section 355 of the Code or takes or
fails to take, or permits any of its affiliates to take or fail to take, any action solely as a result of which (together with
other actions or failures to act by CBS and its affiliates) either of the Internal Distributions and/or the Final
Distribution would reasonably be expected to fail to qualify as tax-free transactions, then the restrictions set forth
above shall not apply.
Due to these restrictions and indemnification obligations under the Tax Matters Agreement, Entercom may be
limited in its ability to pursue strategic transactions, equity or convertible debt financings or other transactions that
may otherwise be in Entercom’s best interests. Also, Entercom’s potential indemnity obligation to CBS might
discourage, delay or prevent a change of control during this two-year period that Entercom shareholders may
consider favorable and its ability to pursue strategic transactions, equity or convertible debt financings, or other
transactions that may otherwise be in Entercom’s best interests.
The loss of key personnel could have a material adverse effect on our business.
Our business depends upon the continued efforts, abilities and expertise of our executive officers and other
key personnel. We believe that the loss of one or more of these individuals could adversely impact our business,
financial condition, results of operations and cash flows.
Our radio stations compete for creative and on-air talent with other radio stations and other media, such as
broadcast, cable and satellite television, digital media and satellite radio. Our on-air talent are subject to change, due
to competition and for other reasons. Changes in on-air talent could materially and negatively affect our ratings and
our ability to attract local and national advertisers, which could in turn adversely affect our revenues.
The Merger with CBS Radio may not achieve its intended benefits.
Even if we are able to successfully combine the two business operations, it may not be possible to realize
the full benefits of the increased sales volume and other benefits, including the expected synergies, which we
anticipate will result from the Merger, or realize these benefits within the time frame that is expected. For example,
the elimination of duplicative costs may not be possible or may take longer than anticipated, or the benefits from the
Merger may be offset by costs incurred or delays in integrating the companies. If we fail to realize the benefits we
anticipate from the acquisition, our liquidity, results of operations or financial condition could be adversely
impacted.
We have incurred transaction- and merger-related costs in connection with the Merger.
We have incurred and expect to incur a number of non-recurring direct and indirect costs associated with the
Merger. These costs and expenses include fees paid to financial, legal and accounting advisors, severance and other
potential employment-related costs, including payments that may be made to certain Entercom and former CBS
Radio executives, filing fees, printing expenses and other related charges. There are also processes, policies,
procedures, operations, technologies and systems that must be integrated in connection with the Merger and the
integration of the two companies’ businesses. While we have assumed that a certain level of expenses would be
incurred in connection with the Merger and the other operations contemplated by the CBS Radio Merger Agreement
and continue to assess the magnitude of these costs, there are many factors beyond our control that could affect the
total amount or the timing of the integration and implementation expenses.
There may also be additional unanticipated costs in connection with the Merger that we may not recoup.
These costs and expenses could reduce the realization of efficiencies and strategic benefits we can expect to achieve
from the Merger. Although we expect that these benefits will offset the transaction expenses and implementation
costs over time, this net benefit may not be achieved in the near term or at all.
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Increases in or new royalties, including through legislation, could adversely impact our business, financial
condition and results of operations.
We pay royalties to song composers and publishers through performance rights organizations (“PROs”),
currently American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), SESAC,
Inc. and Global Music Rights (“GMR”) for the performance of music on our radio stations and websites. The
emergence of new PROs could increase the royalties that we pay. Although we pay royalties to record labels and
recording artists for distributing music content online, we do not pay royalties to record labels or recording artists for
terrestrial broadcasts of music on our radio stations. From time to time, Congress considers legislation that could
require that radio broadcasters pay performance royalties on terrestrial broadcasts of music to record labels and
recording artists. The proposed legislation has been the subject of considerable debate and activity by the radio
broadcast industry and other parties that could be affected. We cannot predict whether any proposed legislation will
become law. In addition, royalty rates are subject to adjustment and it is possible that our royalty rates associated
with obtaining rights to use musical compositions and sound recordings in our programming content could increase
as a result of private negotiations, regulatory rate-setting processes, or administrative and court decisions. Various
independent record companies that claim to own the rights to several hundred sound recordings created prior to
February 15, 1972 (the “Pre-1972 Recordings”) have sued several radio broadcasters (including CBS Radio) for
allegedly infringing their exclusive right of public performance in certain states. In August 2015, CBS Radio was
named as a defendant in two separate putative class action lawsuits in a federal court in each of California and New
York for common law copyright infringement as well as related state law claims. In May 2016, the California court
dismissed the California case against CBS Radio. In June 2016, the plaintiff record companies appealed this
judgment to the U.S. Court of Appeals for the Ninth Circuit. In March 2017, the New York federal court dismissed
the New York suit with prejudice. In the California case, the plaintiffs sought to certify a class action related to other
pre-1972 recordings. The California trial court: (a) struck the class certification claims; and (b) granted summary
judgment in CBS’ favor on the basis that CBS had publicly performed post-1972 digitally remastered recordings;
those remastered recordings were derivative works sufficiently original to be copyrightable; and thus those works
were governed exclusively by federal law, rather than California state law which governs the public performance of
the original recordings. In August 2018, the Ninth Circuit reversed the District Court opinion. The Company filed a
petition for rehearing en banc on September 18, 2018. That petition was denied, however, the original decision was
amended in part. Following remand, the trial court entered a stay, pending the outcome of a separate case, Flo &
Eddie, Inc. v. Pandora Media, Inc., in which the California Supreme Court will decide whether California law
recognizes a public performance right for pre-1972 works. An adverse decision in the California case against the
Company could impede our ability to broadcast or stream the Pre-1972 Recordings and/or increase our royalty
payments, as well as expose the Company to liability for past broadcasts. New or increased royalty payments could
increase our expenses, which could adversely impact our businesses, financial condition, results of operations and
cash flows.
The failure to protect our intellectual property could adversely impact our business, financial condition and
results of operations.
We have limited rights to use the trademark,” “CBS Sports Radio” and certain other trademarks owned by
CBS, subject in each case to certain license agreements entered into upon consummation of the Merger. Certain
trademarks may be limited to a period of no more than twelve months after the Merger. Any substantial failure to
protect and enforce our intellectual property rights prior to the expiration of these rights to use Trademarks owned
by CBS and its subsidiaries could adversely impact our business, financial condition and results of operations. In
addition, early termination of the trademark licenses could result in our rebranding such trademarks before we are
prepared to do so and could require that we spend significant unanticipated resources.
Our ability to protect and enforce our intellectual property rights is important to the success of our business.
We endeavor to protect our intellectual property under trade secret, trademark, copyright and patent law, and
through a combination of employee and third-party non-disclosure agreements, other contractual restrictions, and
other methods. We have registered trademarks in state and federal trademark offices in the United States and enforce
our rights through, among other things, filing oppositions with the U.S. Patent and Trademark Offices. There is a
risk that unauthorized digital distribution of our content could occur, and competitors may adopt names similar to
ours or use confusingly similar terms as keywords in internet search engine advertising programs, thereby impeding
our ability to build brand identity and leading to confusion among our audience or advertisers. Moreover,
maintaining and policing our intellectual property rights may require us to spend significant resources as litigation or
proceedings before the U.S. Patent and Trademark Office, courts or other administrative bodies, is unpredictable and
may not always be cost-effective. There can be no assurance that we will have sufficient resources to adequately
protect and enforce our intellectual property. The failure to protect and enforce our intellectual property could
adversely impact our business, financial condition, results of operations and cash flows.
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We may be subject to claims and litigation from third parties claiming that our operations infringe on their
intellectual property. Any intellectual property litigation could be costly and could divert the efforts and attention of
our management and technical personnel, which could have a material adverse effect on our business, financial
condition and results of operations. If any such actions are successful, in addition to any potential liability for
damages, we could be required to obtain a license in order to continue to operate our business.
We cannot predict the competitive effect on the radio broadcasting industry of changes in audio content
distribution, changes in technology or changes in regulations.
The radio broadcasting industry is subject to rapid technological change, evolving industry standards and
the emergence of new media technologies and services. We may lack the resources to acquire new technologies or
introduce new services to allow us to compete with these new offerings. Competing technologies and services, some
of which are commercial-free, include: personal audio devices; national and local digital audio services; satellite-
delivered digital radio services; smart speaker driven services; content available over the Internet; HD Radio, which
provides multi-channel, multi-format digital radio services in the same bandwidth currently occupied by traditional
AM and FM radio services; and low-power FM radio, which could result in additional FM radio broadcast outlets,
including additional low-power FM radio signals authorized under the Local Community Radio Act of 2010.
We cannot predict the effect, if any, that competition arising from new technologies or regulatory changes
may have on the radio broadcasting industry or on our financial condition, results of operations and cash flows.
We are subject to extensive regulations and are dependent on federally-issued licenses to operate our radio
stations. Failure to comply with such regulations could damage our business.
The radio broadcasting industry is subject to extensive regulation by the FCC under the Communications
Act. See Federal Regulation of Radio Broadcasting under Part I, Item 1, “Business.” We are required to obtain
licenses from the FCC to operate our radio stations. Licenses are normally granted for a term of eight years and are
renewable. Although the vast majority of FCC radio station licenses are routinely renewed, there can be no
assurance that the FCC will approve our future renewal applications or that the renewals will not include conditions
or qualifications. During the periods when a renewal application is pending, informal objections and petitions to
deny the renewal application can be filed by interested parties, including members of the public, on a variety of
grounds. The non-renewal, or renewal with substantial conditions or modifications, of one or more of our licenses
could adversely impact our business, financial condition, results of operations and cash flows.
We must comply with extensive FCC regulations and policies in the ownership and operation of our radio
stations. FCC regulations limit the number of radio stations that a licensee can own in a market, which could restrict
our ability to consummate future transactions and in certain circumstances could require us to divest some radio
stations. The FCC’s rules governing our radio station operations impose costs on our operations, and changes in
those rules could have an adverse effect on our business. The FCC also requires radio stations to comply with
certain technical requirements to limit interference between two or more radio stations. If the FCC relaxes these
technical requirements, it could impair the signals transmitted by our radio stations and could adversely impact our
business, financial condition and results of operation. Moreover, these FCC regulations may change over time, and
there can be no assurance that changes would not adversely impact our business, financial condition and results of
operations. We are currently the subject of several pending investigations by the FCC.
Congress or federal agencies that regulate us could impose new regulations or fees on our operations that could
have a material adverse effect on us.
There has been in the past and there could be again in the future proposed legislation that requires radio
broadcasters to pay additional fees such as a spectrum fee for the use of the spectrum. In addition, there has been
proposed legislation which would impose a new royalty fee that would be paid to record labels and performing
artists for use of their recorded music. It is currently unknown what impact any potential required royalty payments
or fees would have on our business, financial condition, results of operations and cash flows.
We depend on selected market clusters of radio stations for a material portion of our revenues.
For 2018, we generated over 50% of our as reported net revenues in 10 of our 48 markets, which were
Boston, Chicago, Dallas, Detroit, Los Angeles, Miami, New York City, Philadelphia, San Francisco and
Washington, D.C. Accordingly, we have greater exposure to adverse events or conditions in any of these markets,
13
such as changes in the economy, shifts in population or demographics, or changes in audience tastes, which could
adversely impact our business, financial condition, results of operations and cash flows.
We may have difficulty attracting, motivating and retaining key employees as a result of the merger with CBS
Radio.
As a result of the Merger, our employees may experience uncertainty about their future roles with us, which
may adversely affect our ability to attract and retain key personnel. Key employees may depart because of the
uncertainty or potential difficulty of integration or a desire not to remain with the combined company.
Impairments to our broadcasting licenses and goodwill have reduced our earnings.
We have incurred impairment charges that resulted in non-cash write-downs of our broadcasting licenses
and goodwill. A significant amount of these impairment losses were recorded in 2008 during the recession, and the
most recent impairment loss to goodwill and broadcasting licenses was recorded in the fourth quarter of 2018 as a
result of an interim impairment assessment. As of December 31, 2018, our broadcasting licenses and goodwill
comprised approximately 76% of our total assets. Subsequent to the annual impairment test conducted during the
second quarter of 2018, we determined that a sustained decrease in our share price required us to conduct an interim
impairment assessment on our broadcasting licenses and goodwill. Due to changes in facts and circumstances, we
revised our estimates with respect to our estimated operating profit margins and long-term revenue growth rates
used in the interim impairment assessment. The interim impairment conducted during the fourth quarter of the
current year indicated that the carrying value of our goodwill and broadcasting licenses exceeded their respective
carrying amount. Accordingly, we recorded a $147.9 million impairment charge ($108.8 million, net of tax) on our
broadcasting licenses and a $317.1 million impairment charge ($314.4 million, net of tax) on our goodwill in the
fourth quarter of 2018. The valuation of our broadcasting licenses and goodwill is subjective and based on our
estimates and assumptions rather than precise calculations. The fair value measurements for both our broadcast
licenses and goodwill use significant unobservable inputs and reflect our own assumptions, including market share
and profit margin for an average station, growth within a radio market, estimates of costs and losses during early
years, potential competition within a radio market and the appropriate discount rate used in determining fair value.
If events occur or circumstances change that would reduce the fair value of the broadcasting licenses and goodwill
below the amount reflected on the balance sheet, we may be required to recognize impairment charges, which may
be material, in future periods. Current accounting guidance does not permit a valuation increase.
We have significant obligations relating to our current operating leases.
As of December 31, 2018, we had future operating lease commitments of approximately $394.3 million
that are disclosed in Note 20, Contingencies And Commitments, in the accompanying notes to our audited
consolidated financial statements. We are required to make certain estimates at the inception of a lease in order to
determine whether the lease is operating or capital. 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 most notable change in the standard is the recognition of ROU
assets and lease liabilities by lessees for those leases classified as operating leases with a term of more than one year.
This change will apply to our leased assets such as real estate and broadcasting towers. While we are currently
reviewing the effects of this guidance, we believe that this standard will have a material impact on our consolidated
balance sheets but will not have a material impact on our consolidated statements of operations. We believe that this
modification to operating leases would result in: (i) an increase in the ROU assets and lease liabilities reflected on
our consolidated balance sheets to reflect the rights and obligations created by operating leases with a term of
greater than one year; and (ii) no material change to the expense associated with the ROU assets. This guidance is
effective for us as of January 1, 2019.
Our business is dependent upon the proper functioning of our internal business processes and information
systems, and modification or interruption of such systems may disrupt our business, processes and internal
controls.
The proper functioning of our internal business processes and information systems is critical to the efficient
operation and management of our business. If these information technology systems fail or are interrupted, our
operations and operating results may be adversely affected. Our business processes and information systems need to
be sufficiently scalable to support the future growth of our business and may require modifications or upgrades that
expose us to a number of operational risks. Our information technology systems, and those of third-party providers,
may also be vulnerable to damage or disruption caused by circumstances beyond our control. These include
14
catastrophic events, power anomalies or outages, computer system or network failures and natural disasters. Any
material disruption, malfunction or similar challenges with our business processes or information systems, or
disruptions or challenges relating to the transition to new processes, systems or providers, could adversely impact
our business, financial position, results of operations and cash flow.
The FCC has engaged in vigorous enforcement of its indecency rules against the broadcast industry, which could
have a material adverse effect on our business.
FCC regulations prohibit the broadcast of obscene material at any time and indecent or profane material
between the hours of 6:00 a.m. and 10:00 p.m. Over the last decade, the FCC has increased its enforcement efforts
relating to the regulation of indecency and has threatened on more than one occasion to initiate license revocation
proceedings against a broadcast licensee who commits a “serious” indecency violation. Congress has dramatically
increased the penalties for broadcasting obscene, indecent or profane programming, and these penalties may
potentially subject broadcasters to license revocation, renewal or qualification proceedings in the event that they
broadcast such material. In addition, the FCC’s heightened focus on the indecency regulatory scheme, against the
broadcast industry generally, may encourage third parties to oppose our license renewal applications or applications
for consent to acquire broadcast stations. We may in the future become subject to inquiries or proceedings related to
our stations’ broadcast of obscene, indecent or profane material. To the extent that these inquiries or other
proceedings result in the imposition of fines, a settlement with the FCC, revocation of any of our station licenses or
denials of license renewal applications, our business, financial condition, results of operations and cash flow could
be adversely impacted.
Cybersecurity threats could have a material adverse effect on our business
The use of our computers and digital technology in substantially all aspects of our business operations give
rise to cybersecurity risks, including viruses or malware, physical or electronic intrusions and unauthorized access to
our data. A cybersecurity attack could compromise confidential information. There can be no assurance that we, or
the security systems we implement, will protect against all of these rapidly changing risks. A cybersecurity incident
could increase our operating costs, disrupt our operations, harm our reputation, or subject us to liability under laws
and regulations that protect personal data. We maintain insurance coverage against certain of such risks, but cannot
guarantee that such coverage will be applicable or sufficient with respect to any given incident or on-going incidents
that go undetected.
Cybersecurity breaches may increase our costs and cause losses.
Our security systems and processes, which are designed to protect information and prevent data loss and
other security breaches, cannot provide absolute security. Cybersecurity breaches could result in an increase in costs
related to redeveloping our systems, defending against litigation, responding to regulatory investigation, and other
remediation costs associated with cybersecurity incidents.
We are exposed to credit risk on our accounts receivable. This risk is heightened during periods of uncertain
economic conditions.
Our outstanding accounts receivable are not covered by collateral or credit insurance. While we have
procedures to monitor and limit exposure to credit risk on our receivables, which risk is heightened during periods of
uncertain economic conditions, there can be no assurance such procedures will effectively limit our credit risk and
enable us to avoid losses, which could have a material adverse effect on our financial condition, results of operations
and cash flow.
rely on key
We
if our business partners or
contracting counterparties fail to perform, or terminate, any of their contractual arrangements with us for any
reason or cease operations, our business could be disrupted and our revenues could be adversely affected.
contracts and business
relationships, and
We
rely on key contracts and business
if our business partners or
contracting counterparties fail to perform, or terminate, any of their contractual arrangements with us for any reason
or cease operations, our business could be disrupted and our revenues could be adversely affected. For instance, if
one of our business partners or counterparties is unable (including as a result of any bankruptcy or liquidation
proceeding) or unwilling to continue operating in the line of business that is the subject of our contract, we may not
be able to obtain similar relationships and agreements on terms acceptable to us or at all. The failure to perform or
termination of any of the agreements by a partner or a counterparty, the discontinuation of operations of a partner
or counterparty, the loss of good relations with a partner or counterparty or our inability to obtain similar
relationships, and
15
relationships or agreements, may have an adverse effect on our financial condition, results of operations and cash
flow.
RISKS RELATED TO OUR INDEBTEDNESS
We have substantial indebtedness, which could adversely impact our business, financial condition and results of
operations.
We have substantial indebtedness. As of December 31, 2018, we had a senior secured credit agreement
(the “Credit Facility”) of $1.5 billion outstanding that is comprised of: (a) a $1,291.7 million term B-1 loan (the
“Term B-1 Loan”) and (b) a $250.0 million senior secured revolving credit facility (the “Revolver”), of which
$180.0 million was outstanding at December 31, 2018. In addition to the Credit Facility, we also have outstanding
$400.0 million aggregate principal amount of 7.250% senior notes due October 2024 (the “Senior Notes”).
This significant amount of indebtedness could have an adverse impact on us. For example, these
obligations:
make it more difficult for us to satisfy our financial obligations with respect to our indebtedness;
require us to dedicate a substantial portion of our cash flow from operations to payments on
indebtedness, thereby reducing the availability of cash flow to fund working capital, capital
expenditures and other corporate purposes;
increase our vulnerability to and limit the flexibility in planning for, or reacting to, changes in our
business, the industry in which we operate, the economy and government regulations;
restrict us from making strategic acquisitions or cause us to make non-strategic divestitures;
limit or prohibit our ability to pay dividends and make other distributions including share repurchases
place us at a competitive disadvantage compared to our competitors that have less indebtedness;
expose us to the risk of increased interest rates as borrowing under the Term B-1 Loan and Revolver
are subject to variable rates of interest; and
limit or prohibit our ability to borrow additional funds.
The undrawn amount of the Revolver was $64.1 million as of December 31, 2018. The amount of the
Revolver available to us is a function of covenant compliance at the time of borrowing. Based on our financial
covenant analysis as of December 31, 2018, we would not be limited in these borrowings.
We may from time to time seek to amend our existing indebtedness agreements or obtain funding or
additional debt financing, which may result in higher interest rates.
The terms of the Credit Facility and the Senior Notes may restrict our current and future operations.
The Credit Facility and the Indenture governing the Senior Notes (the “Senior Notes Indenture”) contain a
number of restrictive covenants that impose significant operating and financial restrictions on us and limit our ability
to engage in actions that may be in our long-term best interests, including restrictions on our ability to:
incur additional indebtedness;
pay dividends on, repurchase or make distributions in respect of our stock;
make investments or acquisitions;
sell, transfer or otherwise convey certain assets;
incur liens;
enter into Sale and Lease-Back Transactions (as defined in the Senior Notes Indenture);
16
enter into agreements restricting our ability to pay dividends or make other intercompany transfers
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
enter into transactions with affiliates;
prepay certain kinds of indebtedness;
issue or sell stock; and
change the nature of our business.
As a result of our substantial indebtedness, we may be:
limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business
downturns; or
unable to compete effectively or to take advantage of new business opportunities.
These restrictions could hinder our ability to pursue our business strategy or inhibit our ability to adhere to
our intended dividend policies.
We may still be able to incur substantial additional amounts of indebtedness, including secured indebtedness,
which could further exacerbate the risks associated with our indebtedness and adversely impact our business,
financial condition and results of operations.
We may incur substantial additional amounts of indebtedness, which could further exacerbate the risks
associated with the indebtedness described above. Although the terms of the agreements governing our existing
indebtedness contain restrictions on the incurrence of additional indebtedness and additional liens, these restrictions
are subject to a number of qualifications and exceptions, and the additional indebtedness incurred in compliance
with these restrictions could be substantial. These restrictions also will not prevent us from incurring obligations that
do not constitute indebtedness. If new indebtedness is added to our existing indebtedness levels, the related risks that
we face would intensify, and we may not be able to meet all of our respective indebtedness obligations. The
incurrence of additional indebtedness may adversely impact our business, financial condition and results of
operations.
We must comply with the covenants in our debt agreements, which restrict our operational flexibility.
The Credit Facility contains provisions which, under certain circumstances: limit our ability to borrow
money; make acquisitions, investments or restricted payments, including without limitation dividends and the
repurchase of stock; swap or sell assets; or merge or consolidate with another company. To secure the indebtedness
under our Credit Facility, we have pledged substantially all of our assets, including the stock or equity interests of
our subsidiaries.
The Credit Facility requires us to maintain compliance with a financial covenant, including a maximum
Consolidated Net Secured Leverage Ratio (as defined in the Credit Facility) that cannot exceed 4.0 times as of
December 31, 2018. Under certain circumstances, the Consolidated Net Secured Leverage Ratio can increase to 4.5
times for a limited period of time.
Our ability to comply with these financial covenants may be affected by operating performance or other
events beyond our control, and there can be no assurance that we will comply with these covenants. A default under
the Credit Facility could have a material adverse effect on our business.
Failure to comply with our financial covenants or other terms of these financial instruments and the failure
to negotiate and obtain any required relief from our lenders could result in the acceleration of the maturity of our
outstanding indebtedness and our lenders could proceed against our assets, including the equity interests of our
subsidiaries. Under these circumstances, the acceleration of our indebtedness could have a material adverse effect
on our business.
17
A breach of the covenants under the Senior Notes Indenture or under the Credit Facility could result in an
event of default under the applicable agreement. Such a default would allow the lenders under the Credit Facility
and/or the holders of the Senior Notes to accelerate the repayment of such indebtedness and may result in the
acceleration of the repayment of any other indebtedness to which a cross-acceleration or cross-default provision
applies. In addition, an uncured event of default under the Credit Facility would also permit the lenders under the
Credit Facility to terminate all other commitments to extend additional credit under the Credit Facility.
Furthermore, if we are unable to repay the amounts due and payable under the Credit Facility, those lenders
could seek to foreclose on the collateral that secures such indebtedness. In the event that creditors accelerate the
repayment of our borrowings, we may not have sufficient assets to repay that indebtedness.
Because of our holding company structure, we depend on our subsidiaries for cash flow, and our access to this
cash flow is restricted.
We operate as a holding company. All of our radio stations are currently owned and operated by our
subsidiaries. Entercom Media Corp., our 100% owned subsidiary, is the borrower under the Credit Facility. All of
our station operating subsidiaries and FCC license subsidiaries are subsidiaries of Entercom Media Corp. Entercom
Media Corp.’s subsidiaries are all full and unconditional joint and several guarantors under the Credit Facility.
As a holding company, our only source of cash to pay our obligations, including corporate overhead and
other expenses, is cash distributed from our subsidiaries. We currently expect that the majority of the net earnings
and cash flow of our subsidiaries will be retained and used by them in their operations, including servicing Entercom
Media Corp.’s indebtedness obligations. Even if our subsidiaries elect to make distributions to us, there can be no
assurance that applicable state law and contractual restrictions, including the restricted payments covenants
contained in our Credit Facility, would permit such dividends or distributions.
Our variable-rate indebtedness gives rise to interest rate risk, which could cause our debt service obligations to
increase significantly. Any increase in our debt service obligations could adversely impact our business,
financial condition and results of operations.
Borrowings under the Term B-1 Loan and the Revolver are at variable rates of interest and expose us to
interest rate risk. If interest rates increase, our debt service obligations under the Credit Facility could increase even
though the amount borrowed remains the same, and our net income and cash flows, including cash available for
servicing our indebtedness, could correspondingly decrease.
As of December 31, 2018, if the borrowing rates under London Interbank Offered Rate (“LIBOR”) were to
increase 100 basis points above the current rates, our interest expense on: (i) the Term B-1 Loan would increase
$12.9 million on an annual basis; and (ii) the Revolver would increase by $2.5 million, assuming our entire Revolver
was outstanding as of December 31, 2018.
In the future, we may enter into interest rate swaps that involve the exchange of floating for fixed rate
interest payments in order to reduce interest rate risk. We may, however, not maintain interest rate swaps with
respect to all of our variable-rate indebtedness, and any swaps we enter into may not fully mitigate our interest rate
risk. An increase in our debt service obligations could adversely impact our business, financial condition and results
of operations.
To service our indebtedness and other cash needs, we require a significant amount of cash. Our ability to
generate cash depends on many factors beyond our control.
Our ability to satisfy our indebtedness obligations and to fund any planned capital expenditures, dividends
and other cash needs will depend in part upon our future financial and operating performance, and upon our ability
renew or refinance borrowings. There can be no assurance that we will generate cash flow from operations, or that
we will be able to draw under the Revolver or otherwise, in an amount sufficient to fund our liquidity needs,
including the payment of principal and interest on our indebtedness.
Prevailing economic conditions and financial, business, competitive, legislative, regulatory and other
factors, many of which are beyond our control, will affect our ability to make these payments.
If we are unable to make payments or refinance our indebtedness or obtain new financing under these
circumstances, we may consider other options, including:
18
sales of assets;
sales of equity;
reduction or delay of capital expenditures, strategic acquisitions, investments and alliances; or
negotiations with lenders to restructure the applicable indebtedness.
These alternative measures may not be successful and may not enable us to meet scheduled indebtedness
service obligations. Our ability to restructure or refinance our indebtedness will depend on the condition of the
capital markets and our financial conditions at such time. Any refinancing of our indebtedness could be at higher
interest rates and may require us to comply with more onerous covenants, which could further restrict our business
operations. In addition, the terms of existing or future indebtedness agreements may restrict us from adopting some
of these alternatives. In the absence of sufficient cash flow from operating results and other resources, we could
face substantial liquidity problems and could be required to dispose of material assets or operations to meet our debt
service and other obligations. We may not be able to consummate those dispositions for fair market value, or at all.
Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt
service obligations then due. Our inability to generate sufficient cash flow to satisfy our indebtedness obligations, or
to refinance such indebtedness on commercially reasonable terms or at all, could adversely impact our business,
financial condition and results of operations.
A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our
future borrowing costs and reduce our access to capital.
Any decline in the ratings of our corporate credit or any indications from the rating agencies that their
ratings on our corporate credit are under surveillance or review with possible negative implications could adversely
impact our ability to access capital, which could adversely impact our business, financial condition and results of
operations.
RISKS ASSOCIATED WITH OUR STOCK
Our Chairman Emeritus and our Chairman, President and Chief Executive Officer own a large minority equity
interest in us and have substantial influence over our Company. Their interests may conflict with your interest.
As of February 15, 2019, Joseph M. Field, our Chairman Emeritus, beneficially owned 10,444,334 shares
of our Class A common stock; and 3,295,949 shares of our Class B common stock, representing approximately
24.9% of the total voting power of all of our outstanding common stock. As of February 15, 2019, David J. Field,
our Chairman, President and Chief Executive Officer, one of our directors and the son of Joseph M. Field,
beneficially owned 3,485,135 shares of our Class A common stock and 749,250 shares of our Class B common
stock, representing approximately 6.3% of the total voting power of all of our outstanding common stock. Joseph M.
Field and David J. Field, beneficially own all outstanding shares of our Class B common stock. Other members of
the Field family and trusts for their benefit also own shares of Class A common stock.
Shares of our Class B common stock are transferable only to Joseph M. Field, David J. Field, certain of
their family members or trusts for any of their benefit. Upon any other transfer, shares of our Class B common stock
automatically convert into shares of our Class A common stock on a one-for-one basis. Shares of our Class B
common stock are entitled to ten votes only when Joseph M. Field or David J. Field vote them, subject to certain
exceptions when they are restricted to one vote. Joseph M. Field is able to significantly influence the vote on all
matters submitted to a vote of shareholders.
Our Class A common stock price and trading volume could be volatile.
Our Class A common stock has been publicly traded on the NYSE since January 29, 1999. The market
price of our Class A common stock and our trading volume have been subject to fluctuations since the date of our
initial public offering. As a result, the market price of our Class A common stock could experience volatility,
regardless of our operating performance.
19
The difficulties associated with any attempt to gain control of our Company could adversely affect the price of
our Class A common stock.
There are certain provisions contained in our articles of incorporation, by-laws and Pennsylvania law that
could make it more difficult for a third party to acquire control of our Company. In addition, FCC approval for
transfers of control of FCC licenses and assignments of FCC licenses is required. These restrictions and limitations
could adversely affect the trading price of our Class A common stock.
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
The types of properties required to support each of our radio stations include offices, studios and
transmitter/antenna sites. We lease most of these sites. A station’s studios are generally housed with its offices in
business districts. Our studio and office space leases typically contain lease terms with expiration dates of five to 15
years, which may contain options to renew. Our transmitter/antenna sites, which may include an auxiliary
transmitter/antenna as a back-up to the main site, contain lease terms that generally range from five to 30 years,
which may include options to renew.
The transmitter/antenna site for each station is generally located so as to provide maximum market
coverage. In general, we do not anticipate difficulties in renewing facility or transmitter/antenna site leases or in
leasing additional space or sites if required.
As of December 31, 2018, we had approximately $394.3 million in future minimum rental commitments
under these leases. Many of these leases contain clauses such as defined contractual increases or cost of living
adjustments.
Our principal executive office is located at 401 E. City Avenue, Suite 809, Bala Cynwyd, Pennsylvania
19004, in 14,061 square feet of leased office space. This lease is due to expire on October 31, 2021. We have the
ability, however, to vacate at any time, upon short notice. We expect to vacate the premises in the second half of
2019 as we are consolidating all of our operations in the Philadelphia radio market to operate more efficiently. Our
future principal executive offices will be located at 2400 Market Street, Suite 400, Philadelphia, Pennsylvania
19103, in 67,031 square feet of leased office space, of which approximately half of the space is dedicated to
principal executive offices. The new lease will expire 15 years from the date the leasehold is delivered, and includes
several optional renewal periods.
ITEM 3.
LEGAL PROCEEDINGS
We currently and from time to time are involved in litigation incidental to the conduct of our business.
Management anticipates that any potential liability of ours that may arise out of or with respect to these matters will
not materially adversely affect our business, financial position, results of operations or cash flows.
Broadcast Licenses
We could face increased costs in the form of fines and a greater risk that we could lose any one or more of
our broadcasting licenses if the FCC concludes that programming broadcast by our stations is obscene, indecent or
profane and such conduct warrants license revocation. The FCC’s authority to impose a fine for the broadcast of
such material is $407,270 for a single incident, with a maximum fine of up to $3,759,410 for a continuing violation.
Performance Fees
We incur fees from PROs to license our public performance of the musical works contained in each PRO’s
repertoire. The Radio Music Licensing Committee (the “RMLC”), of which we are a represented participant: (i)
entered into an industry-wide settlement with ASCAP that became effective January 1, 2017 for a five-year term;
(ii) is currently seeking reasonable industry-wide fees from BMI through rate court proceedings; (iii) is currently
subject to arbitration proceedings with SESAC, Inc. to determine fair and reasonable fees that would be effective
January 1, 2019; and (iv) filed in November 2016 a motion in the U.S. District Court for the Eastern District of
Pennsylvania against Global Music Rights (“GMR”) arguing that GMR is a monopoly demanding monopoly prices
and asking the Court to subject GMR to an antitrust consent decree. GMR filed a counterclaim in the U.S. District
20
Court for the Central District of California and a motion to dismiss the RMLC’s claim in the U.S. District Court for
the Eastern District of Pennsylvania. There have been subsequent claims and counterclaims to establish jurisdiction.
In January 2017, we obtained an interim license from GMR for fees effective January 1, 2017 to avoid any
infringement claims by GMR for using GMR’s repertory without a license. This license, including several
extensions, is expected to expire March 31, 2019.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information for Our Common Stock
Our Class A common stock, $0.01 par value, is listed on the New York Stock Exchange under the symbol
“ETM.”
There is no established trading market for our Class B common stock, $0.01 par value.
Holders
As of February 15, 2019, there were approximately 568 shareholders of record of our Class A common
stock. Based upon available information, we believe we have approximately 33,500 beneficial owners of our Class
A common stock. There are two shareholders of record of our Class B common stock, $0.01 par value, and no
shareholders of record of our Class C common stock, $0.01 par value. In connection with the Merger, we
refinanced our then-outstanding indebtedness in the fourth quarter of 2017 and in the process we fully redeemed our
outstanding perpetual cumulative convertible preferred stock (“Preferred”). As a result, there were no holders of our
Preferred as of December 31, 2018 or December 31, 2017.
Dividends
Effective as of the second quarter of 2016 and continuing through the period prior to the Merger, our Board
commenced an annual common stock dividend program of $0.30 per share, with payments that approximated $2.9
million per quarter. In addition to the quarterly dividend, we paid a special one-time cash dividend of $0.20 per
share of common stock on August 30, 2017, which approximated $7.8 million.
On November 2, 2017, our Board approved an increase to the annual dividend program to $0.36 per share,
with payments that approximated $12.4 million per quarter. Any future dividends will be at the discretion of the
Board based upon the relevant factors at the time of such consideration, including, without limitation, compliance
with the restrictions set forth in the Credit Facility and the Senior Notes.
In connection with the refinancing of our then-outstanding credit facility during the fourth quarter of 2017,
the following funds were paid in November 2017 in order to fully redeem our Preferred: (i) $27.5 million to fully
redeem the amount of Preferred previously outstanding; and (ii) $0.2 million in unpaid dividends through the
redemption date. Quarterly dividends on our Preferred were paid in each of the quarters beginning in October 2015
at an annual rate of 6% that increased over time to 10% at the time of redemption. No further dividends on our
Preferred were paid during 2018.
For a summary of restrictions on our ability to pay dividends, see Liquidity under Part II, Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Note 10, Long-
Term Debt, in the accompanying notes to our audited consolidated financial statements.
Sales of Unregistered Securities
We did not sell any equity securities during 2018 that were not registered under the Securities Act.
Repurchases of Our Stock
21
The following table provides information on our repurchases of stock during the quarter ended December
31, 2018:
Period (1)
October 1, 2018 - October 31, 2018
November 1, 2018 - November 30, 2018 (1)(2)
December 1, 2018 - December 31, 2018 (1)
Total
Total
Number
of
Shares
Purchased
- $
1,393,999 $
239 $
1,394,238
Average
Price
Paid per
Share
-
7.20
6.53
Maximum
Approximate
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Plans or
Dollar
Value of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs
-
$
Programs
69,946,034
1,393,100
$
59,918,176
-
$
59,918,176
1,393,100
(1)
(2)
We withheld shares upon the vesting of RSUs in order to satisfy employees’ tax obligations. As a result,
we are deemed to have purchased: (i) 899 shares at an average price of $6.49 in November 2018; and (ii)
239 shares at an average price of $6.53 per share in December 2018.
On November 2, 2017, our Board announced a share repurchase program (the “2017 Share Repurchase
Program”) to permit us to purchase up to $100.0 million of our issued and outstanding shares of common
stock through open market purchases. In connection with the 2017 Share Repurchase Program, we
purchased: (i) 1,393,100 shares at an average price of $7.20 in November 2018.
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2018, the number of securities outstanding upon the
exercise of outstanding options under our equity compensation plan, the weighted average exercise price of such
securities and the number of securities available for grant under these plans:
Equity Compensation Plan Information as of December 31, 2018
(b)
(a)
Number Of
Shares To Be
Issued Upon
Exercise Of
Outstanding
Options,
Warrants
And Rights
Weighted
Average
Exercise
Price Of
Outstanding
Options,
Warrants
And Rights
(c )
Number Of
Securities
Remaining
Available For
Future Issuance
Under Equity
Compensation
Plans (Excluding
Column (a))
755,210 $
9.42
1,718,841
755,210
1,718,841
Plan Category
Equity Compensation Plans Approved by Shareholders:
Entercom Equity Compensation Plan (1)
Total
(1)
On January 1 of each year, the number of shares of Class A common stock authorized under the Entercom
Equity Compensation Plan (the “Plan”) is automatically increased by 1.5 million, or a lesser number as
may be determined by our Board. The Board elected to forgo the January 1, 2016 increase in the shares
available for grant. On November 30, 2017, we filed a registration statement on Form S-8 to register an
22
additional 2,941,525 shares under the Plan. These additional shares were registered in order to address
CBS equity compensation awards which were being converted to our awards in connection with the
Merger. The amount of shares available for grant automatically increased by 1.5 million on January 1, 2018
and January 1, 2017. As of December 31, 2018: (i) the maximum number of shares authorized under the
Plan was 14.8 million shares; and (ii) 1.7 million shares remain available for future grant under the Plan.
The amount of shares available for grant automatically increased by 1.5 million on January 1, 2019 to 3.2
million shares.
For a description of the Plan, refer to Note 14, Share-Based Compensation, in the accompanying notes to
our audited consolidated financial statements.
23
Performance Graph
The following Comparative Stock Performance Graph shall not be deemed incorporated by reference by
any general statement incorporating by reference this Form 10-K into any filing under the Securities Act or the
Exchange Act, except to the extent that we specifically incorporate this information by reference. This Comparative
Stock Performance Graph is being furnished with this Form 10-K and shall not otherwise be deemed filed under
such acts.
The following line graph compares the cumulative five-year total return provided to shareholders of our
Class A common stock relative to the cumulative total returns of: (i) the S&P 500 index; (ii) a peer group index
consisting of Urban One, Inc., Beasley Broadcast Group, Inc., and Saga Communications, Inc. (the “2018 Peer
Group”); and (iii) a peer group index consisting of Emmis Communications Corp., Urban One, Inc., Beasley
Broadcast Group, Inc. (“Beasley”), and Saga Communications, Inc. (the “2017 Peer Group”). An investment of
$100 (with reinvestment of all dividends) is assumed to have been made on December 31, 2013. The change in peer
group resulted from the removal of Emmis Communications Corp. due to its radio station sales activities which
significantly reduced the number of stations it operates and reduced the number of markets in which it maintains a
presence.
Cumulative Five-Year Return Index Of A $100 Investment
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Entercom Communications Corp., the S&P 500 Index,
2017 Peer Group and 2018 Peer Group
$180
$160
$140
$120
$100
$80
$60
$40
$20
$0
12/13
12/14
12/15
12/16
12/17
12/18
Entercom Communications Corp.
S&P 500
2017 Peer Group
2018 Peer Group
*$100 invested on 12/31/13 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.
Copyright© 2019 Standard & Poor's, a division of S&P Global. All rights reserved.
12/13
12/14
12/15
12/16
12/17
12/18
Entercom Communications Corp.
S&P 500
2018 Peer Group
2017 Peer Group
100.00
100.00
100.00
100.00
115.70
113.69
83.49
80.10
106.85
115.26
74.12
61.39
148.01
129.05
103.92
85.56
109.41
157.22
119.13
97.13
60.61
150.33
72.35
61.88
24
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data below, as of and for the year ended 2018 and the four prior years, were derived
from our audited consolidated financial statements. The selected financial data for 2018, 2017 and 2016 and balance
sheets as of December 31, 2018 and 2017 are qualified by reference to, and should be read in conjunction with, the
corresponding audited consolidated financial statements, the notes thereto and Management’s Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in this annual report. The selected
financial data for 2015 and 2014 and the balance sheets as of December 31, 2016, 2015 and 2014 are derived from
financial statements not included herein.
Our financial results are not comparable from year to year due to acquisitions and dispositions of radio
stations, impairments of broadcasting licenses and goodwill, adoption of new accounting standards, and other
significant events.
Merger, Acquisition and Disposition Activities
In the third quarter of 2018, we sold eight radio stations in Sacramento, California, and San Francisco,
California to Bonneville International Corporation (“Bonneville”) for $141.0 million in cash (the
“Bonneville Transaction”), which resulted in a loss of approximately $0.2 million.
In the third quarter of 2018, we sold a radio station in Philadelphia, Pennsylvania for $38.0 million in
cash (the “WXTU Transaction”) that resulted in a decrease in our net revenues and station operating
expenses and a $4.4 million gain on the sale of assets.
In the third quarter of 2018, we acquired a radio station in Philadelphia, Pennsylvania for a purchase
price of $57.5 million, less certain working capital and other credits (the “Jerry Lee Transaction”),
which resulted in an increase in our net revenues and station operating expenses. We used proceeds
from the WXTU Transaction and cash on hand to fund this acquisition.
In the second quarter of 2018, we acquired two radio stations in St. Louis, Missouri for a purchase
price of $15.0 million in cash, which resulted in an increase in our net revenues and station operating
expenses. We borrowed under our Revolver to fund this acquisition.
During the fourth quarter of 2017, we assigned assets to a trust, which subsequently entered into a time
brokerage agreement (“TBA”) that allowed a third party to operate eight of our radio stations, which
decreased our net revenues and station operating expenses and increased our TBA income.
We sold three radio stations in the fourth quarter of 2017 for $57.8 million that resulted in a decrease
in net revenues and station operating expenses and a $2.6 million gain on the sale of assets.
In connection with the Merger with CBS Radio which closed in November 2017,
o we acquired multiple radio stations, net of certain dispositions and radio station exchanges with
other third parties, which significantly increased in 2018 and 2017 our net revenues, station
operating expenses, depreciation and amortization expenses and interest expense. In addition, we
issued 101,407,494 shares of our Class A Common Stock.
o we incurred: (i) merger and acquisition costs, including legal, advisory services and professional
fees of $3.0 million in 2018, $41.3 million in 2017 and $0.7 million in 2016; (ii) restructuring
charges of $5.8 million in 2018 and $16.9 million in 2017; and (iii) integration costs of $25.4
million in 2018.
o we refinanced our then-outstanding credit facility and retired our Preferred. As a result of this
refinancing, we recognized a loss on extinguishment of indebtedness of approximately $4.1
million during 2017.
o we consolidated our indebtedness and CBS Radio’s indebtedness under the Credit Facility, which
increased our outstanding indebtedness significantly.
25
In January 2017, we acquired four radio stations in Charlotte, North Carolina (the “Charlotte
Acquisition”) for $24.0 million in cash, using cash on hand to fund the acquisition. We commenced
operations under a TBA for three of the stations on November 1, 2016 and the fourth upon acquisition
on January 6, 2017, which increased in 2017 our net revenues, station operating expenses and
depreciation and amortization expenses.
In 2015, we acquired multiple radio stations, net of certain dispositions. Related to these transactions,
we incurred: (i) merger and acquisition costs of $4.0 million in 2015 and $1.0 million in 2014; and (ii)
a restructuring charge of $2.9 million in 2015.
Impairment Loss
In the fourth quarter of 2018, we conducted an interim impairment assessment on our broadcasting
licenses and goodwill. As a result of this assessment, we determined the carrying value of our
broadcasting licenses and goodwill were impaired and recorded an impairment loss during the fourth
quarter of 2018 in the amount of $465.0 million ($423.2 million net of tax). Of this amount, $147.9
million ($108.8 million, net of tax) of the impairment charge was attributed to the broadcasting
licenses and $317.1 million ($314.4 million, net of tax) of the impairment charge was attributed to
goodwill.
In the second quarter of 2018, we determined the carrying value of certain assets to be disposed to
Bonneville exceeded their fair value. Based upon the agreed-upon price in the asset purchase
agreement, we recorded a non-cash impairment charge of $25.6 million.
Other Activities
During 2018, we disposed of various non-core assets and recorded a gain of $7.4 million.
Due to the tax legislation enacted during the fourth quarter of 2017, we recognized a $291.5 million
income tax benefit from continuing operations due to the reduction to our effective tax rate and its
impact on our deferred income taxes.
We recorded a $13.5 million loss in the first quarter of 2017 as a result of permanently discontinuing
the operation of one of our stations and returning the station’s license to the FCC for cancellation, in
order to facilitate the Merger. This loss is included within net (gain) loss on sale or disposal of assets.
In November 2016, we refinanced our outstanding former senior credit facility and retired our former
senior notes. As a result of the refinancing, we recognized a loss on extinguishment of indebtedness of
approximately $10.9 million in 2016.
During 2016, we settled a legal claim with British Petroleum and recovered $2.3 million on a net basis
after deducting certain related expenses. This amount was included in other income and expense.
26
SELECTED FINANCIAL DATA
(amounts in thousands, except per share data)
2018
Years Ended December 31,
2016
2017
2015
2014
Operating Data:
Net revenues
Operating (income) expenses:
Station operating expenses, including non-cash compensation expense
Depreciation and amortization
Corporate general and administrative expenses
Integration costs
Restructuring charges
Impairment loss
Merger and acquisition costs
Other expenses related to financing
Net time brokerage agreement fees (income)
Net (gain) loss on sale or disposal of assets
Total operating expenses
Operating income (loss)
Other (income) expense:
Net interest expense
Other income
(Gain) loss on early extinguishment of debt
Net loss on investments
Total other expense
Income (loss) before income taxes (benefit)
Income taxes (benefit)
Net income available to the Company - continuing operations
Preferred stock dividend
Net income available to common shareholders - continuing operations
Income (loss) from discontinued operations, net of taxes (benefit)
Net income (loss) attributable to common shareholders
$
1,462,567 $
592,884 $
464,771 $
414,481 $
380,376
1,099,278
44,288
69,492
25,372
5,830
493,988
3,014
-
(918)
(12,158)
1,728,186
(265,619)
443,512
15,546
47,859
-
16,922
952
41,313
2,213
130
11,853
580,300
12,584
323,270
9,793
33,328
-
-
254
708
565
417
(1,621)
366,714
98,057
290,814
8,419
26,479
-
2,858
-
3,978
-
(1,285)
(2,364)
328,899
85,582
101,121
-
-
-
101,121
(366,740)
(4,153)
(362,587)
-
(362,587)
1,152
(361,435) $
32,521
-
4,135
-
36,656
(24,072)
(257,085)
233,013
(2,015)
230,998
836
231,834 $
36,639
(2,299)
10,858
-
45,198
52,859
14,794
38,065
(1,901)
36,164
-
36,164 $
37,961
-
-
-
37,961
47,621
18,437
29,184
(752)
28,432
-
28,432 $
$
27
259,771
7,794
26,572
-
-
-
1,042
-
-
(379)
294,800
85,576
38,821
-
-
21
38,842
46,734
19,911
26,823
-
26,823
-
26,823
SELECTED FINANCIAL DATA
(amounts in thousands, except per share data)
Operating Data (continued):
Net Income (Loss) Per Common Share - Basic:
Income (loss) from continuing operations
Income (loss from discontinued operations, net of taxes (benefit)
Net income (loss) per common share - basic
Net Income (Loss) Per Common Share - Diluted:
Income (loss) from continuing operations
Income (loss from discontinued operations, net of taxes (benefit)
Net income (loss) per common share - diluted
Weighted average shares - basic
Weighted average shares - diluted
Cash Flows Data:
Cash flows related to:
Operating activities
Investing activities
Financing activities
Other Data:
Common stock dividends declared and paid
Cash dividends declared per common share
Perpetual cumulative convertible preferred stock dividends declared and
paid
$
$
$
$
$
$
$
$
$
$
2018
Years Ended December 31,
2016
2017
2015
2014
(2.63) $
0.01
(2.62)
$
(2.63) $
0.01
(2.62)
138,070
138,070
$
4.49 $
0.02
4.51
$
4.37 $
0.02
4.38
51,393
52,885
$
0.94 $
-
0.94
$
0.91 $
-
0.91
38,500
39,568
$
0.75 $
-
0.75
$
0.73 $
-
0.73
38,084
39,038
$
0.71
-
0.71
0.69
-
0.69
37,763
38,664
102,249 $
$
141,478
$
(85,636)
29,112 $
$
17,310
$
(59,098)
72,030 $
$
495
$
(34,851)
64,790 $
$
(91,744)
$
4,583
65,296
(7,055)
(38,932)
49,770 $
$
0.360
29,296 $
$
0.515
8,666 $
$
0.225
- $
$
-
- $
2,574 $
1,788 $
413 $
-
-
-
2018
2017
December 31,
2016
2015
2014
Balance Sheet Data:
Cash, cash equivalents and restricted cash
Total assets
Senior secured debt and other, including current portion
Senior unsecured notes, senior subordinated notes and other
Deferred tax liabilities and other long-term liabilities
Perpetual cumulative convertible preferred stock (mezzanine)
Total shareholders' equity
$
192,258 $
34,167 $
46,843 $
9,169 $
4,020,358
1,475,082
414,158
635,150
-
1,334,260
4,539,201
1,475,974
416,584
717,356
-
1,764,360
1,076,233
480,087
-
119,759
27,732
393,374
1,022,108
268,750
218,269
109,251
27,619
361,450
31,540
926,615
262,000
217,929
89,904
-
329,021
28
ITEM 7.
RESULTS OF OPERATIONS
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
Overview
We are a leading American media and entertainment company, with a cume of 170 million people each
month, with coverage close to 90% of persons 12+ in the top 50 U.S. markets through our premier collection of
highly-rated, award-winning radio stations, digital platforms and live events. We are the number one creator of live,
original, local audio content and the nation’s unrivaled leader in news and sports radio. We are home to seven of the
eight most listened to all-news stations in the U.S., as well as more than 40 professional sports teams and dozens of
top college programs. As one of the country’s two largest radio broadcasters, we offer local and national advertisers
integrated marketing solutions across audio, digital and event platforms to deliver the power of local connection on a
national scale. We have a nationwide footprint of radio stations including positions in all of the top 16 markets and 22
of the top 25 markets. We were organized in 1968 as a Pennsylvania corporation.
On February 2, 2017, we and Merger Sub entered into the CBS Radio Merger Agreement with CBS and CBS
Radio, pursuant to which Merger Sub merged with and into CBS Radio with CBS Radio surviving as our wholly-
owned subsidiary. In 2018, we changed the name of CBS Radio 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.
In connection with the Reverse Morris Trust transaction, CBS commenced an exchange offer for the separation
of its radio business to allow for the combination of CBS Radio and Entercom. In the exchange offer, CBS
shareholders had the opportunity to exchange their shares of CBS Class B common stock for shares of CBS Radio
common stock, which were immediately converted into the right to receive an equal number shares of Entercom Class
A common stock upon completion of the Merger. Under the terms of the exchange offer, 5.6796 shares of CBS
Radio common stock were exchanged for each share of CBS Class B common stock accepted in the offer. CBS
accepted 17,854,689 of the tendered shares in exchange for 101,407,494 shares of CBS Radio common stock, which
upon closing of the Merger were immediately converted into an equal number of whole shares of Entercom Class A
common stock.
On November 1, 2017, we entered into a settlement with the Antitrust Division of the DOJ. The settlement with
the DOJ together with several required station divestiture transactions with third parties, allowed us to move forward
with the Merger. On November 9, 2017, we obtained approval from the FCC to consummate the Merger. The
transactions contemplated by the CBS Radio Merger Agreement were approved by our shareholders on November 15,
2017. Upon the expiration of the exchange offer period on November 16, 2017, the Merger closed on November 17,
2017.
Our results are based upon the aggregate performance of our radio stations. The following are some of the
factors that impact a radio station’s performance at any given time: (i) audience ratings; (ii) program content; (iii)
management talent and expertise; (iv) sales talent and expertise; (v) audience characteristics; (vi) signal strength; and
(vii) the number and characteristics of other radio stations and other advertising media in the market area.
As opportunities arise, we may, on a selective basis, change or modify a station’s format due to changes in
listeners’ tastes or changes in a competitor’s format. This could have an initial negative impact on a station’s ratings
and/or revenues, and there are no guarantees that the modification or change will be beneficial at some future time.
Our management is continually focused on these opportunities as well as the associated risks and uncertainties. We
strive to develop compelling content and strong brand images to maximize audience ratings that are crucial to our
stations’ financial success.
A radio broadcasting company derives its revenues primarily from the sale of broadcasting time to local,
regional and national advertisers and national network advertisers who purchase spot commercials in varying lengths.
A growing source of revenue is from station-related digital platforms, which allow for enhanced audience interaction
and participation, integrated local digital marketing solutions and station events. A station’s local sales staff generates
the majority of its local and regional advertising sales through direct solicitations of local advertising agencies and
businesses. We retain a national representation firm to sell to advertisers outside of our local markets.
In the radio broadcasting industry, seasonal revenue fluctuations are common and are due primarily to variations
in advertising expenditures by local and national advertisers. Typically, revenues are lowest in the first calendar
quarter of the year.
29
In 2018, we generated the majority of our net revenues from local advertising, which is sold primarily by each
individual local radio station’s sales staff, and the next largest amount from national advertising, which is sold by an
independent national representation firm. This includes, but is not limited to, the sale of advertising during audio
streaming of our radio stations over the Internet and the sale of advertising on our stations’ websites. We generated the
balance of our 2018 revenues principally from network compensation, non-spot revenue, event marketing, e-
commerce and our suite of digital products.
The majority of our revenue is recorded on a net basis, which is gross revenue less advertising agency
commissions. Revenues from digital marketing solutions and e-commerce are reflected on a net basis when
appropriate. Revenues from event marketing are reflected on a net basis when we are not the primary party hosting
the event. The revenues are determined by the advertising rates charged and the number of advertisements broadcast.
We maximize our revenues by managing the inventory of advertising spots available for broadcast, which can vary
throughout the day but is fairly consistent over time.
Our most significant station operating expenses are employee compensation, programming and promotional
expenses, and audience measurement services. Other significant expenses that impact our profitability are interest and
depreciation and amortization expense.
You should read the following discussion and analysis of our financial condition and results in conjunction with
our consolidated financial statements and related notes included elsewhere in this report. The following results of
operations include a discussion of 2018 as compared to the prior year and a discussion of 2017 as compared to the
prior year.
Results Of Operations
The year 2018 as compared to the year 2017
The following significant factors affected our results of operations for 2018 as compared to the prior year:
Merger with CBS Radio
On February 2, 2017, we and Merger Sub entered into the CBS Radio Merger Agreement with CBS and CBS
Radio, pursuant to which Merger Sub merged with and into CBS Radio with CBS Radio surviving as our wholly-
owned subsidiary. 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.
In connection with the Merger with CBS Radio, which closed on November 17, 2017, we acquired multiple
radio stations, net of certain dispositions and acquisitions of radio stations through exchanges with third parties, which
significantly increased in 2018 our net revenues, station operating expenses, depreciation and amortization expenses
and interest expense.
Debt Assumed in Merger Increased our Interest Expense
In connection with the Merger, we refinanced our then-outstanding credit facility and redeemed our
Preferred, which resulted in a decrease in our interest expense. These reductions in our interest expense were offset
by the interest expense incurred on the indebtedness assumed from the Merger. Our outstanding indebtedness upon
which interest is computed increased significantly on November 17, 2017 as a result of the Merger and our
assumption of CBS Radio’s outstanding indebtedness.
Merger and Acquisition Costs
During the year ended December 31, 2018 and 2017, transaction costs were $3.0 million and $41.3 million,
respectively, and were expensed as incurred.
Impairment Loss
The significant increase in impairment loss was primarily attributable to: (i) a $465.0 million impairment
($423.2 million net of tax) on our broadcasting licenses and goodwill recorded in the fourth quarter of 2018; and (ii) a
non-cash impairment charge on assets which had previously been classified as held for sale.
30
Our annual goodwill impairment test conducted during the second quarter of 2017 indicated that the goodwill
allocated to one of our markets was impaired. As a result, we wrote off approximately $0.4 million of goodwill
during the second quarter of 2017.
Integration Costs and Restructuring Charges
Integration costs incurred, including transition services, consulting services and professional fees of $25.4
million were expensed as incurred during the year ended December 31, 2018 and are included in integration costs.
During the year ended December 31, 2018 and 2017, restructuring charges, including costs to exit duplicative
contracts, lease abandonment costs, workforce reductions and other restructuring costs were $5.8 million and $16.9
million, respectively. Amounts were expensed as incurred and are included in restructuring charges.
Other Operating (Income) Expenses
During the year ended December 31, 2018, we disposed of various non-core assets and certain radio stations
and recorded a gain of $10.8 million in net gain/loss on sale or disposal of assets.
We recorded a $13.5 million loss in 2017 in net gain/loss on sale or disposal of assets as a result of
permanently discontinuing the operation of one of our stations and returning the station’s license to the FCC for
cancellation, in order to facilitate the Merger. This activity was nonrecurring in nature.
Other
Due to the tax legislation enacted during the fourth quarter of 2017, we recognized an income tax benefit
from continuing operations of $291.5 million during the year ended December 31, 2017 due to the reduction to our
effective tax rate and its impact on our deferred income taxes. Our income tax expense for 2018 was calculated using
the reduced U.S. federal corporate tax rate of 21%.
In connection with the Merger, which closed on November 17, 2017, we refinanced our then-outstanding
credit facility and redeemed our Preferred. As a result of the refinancing, we recognized a loss on extinguishment of
indebtedness of approximately $4.1 million during the year ended December 31, 2017.
31
NET REVENUES
$
1,462.6
$
592.9
147%
YEARS ENDED DECEMBER 31,
2018
2017
% Change
(dollars in millions)
OPERATING EXPENSE:
Station operating expenses
Depreciation and amortization expense
Corporate general and administrative expenses
Integration costs
Restructuring charges
Impairment loss
Merger and acquisition costs
Other expenses related to financing
Other operating (income) expenses
Total operating expense
OPERATING INCOME (LOSS)
NET INTEREST EXPENSE
OTHER (INCOME) EXPENSE
1,099.3
44.3
69.5
25.4
5.8
494.0
3.0
-
(13.1)
1,728.2
(265.6)
101.1
-
443.5
15.5
47.9
-
16.9
1.0
41.3
2.2
12.0
580.3
12.6
32.5
4.1
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
(366.7)
(24.0)
148%
186%
45%
100%
(66%)
nmf
(93%)
(100%)
(209%)
198%
nmf
211%
(100%)
nmf
98%
INCOME TAXES (BENEFIT)
NET INCOME (LOSS) AVAILABLE TO THE COMPANY
- CONTINUING OPERATIONS
Preferred stock dividend
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS - CONTINUING OPERATIONS
Income from discontinued operations, net of income taxes
(benefit)
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS
Net Revenues
(4.1)
(257.1)
(362.6)
-
(362.6)
1.2
233.1
(2.0)
(256%)
100%
231.1
(257%)
0.8
50%
$
(361.4)
$
231.9
(256%)
The increase in net revenues was primarily attributable to the Merger, net of certain divestitures and
acquisitions through exchanges with third parties. Net revenues from the new stations together with our existing
stations contributed to overall 147% growth over prior year results. Excluding the net revenues from these
acquisitions and dispositions, net revenues were up in the low-single digits for the year.
Excluding new markets and overlap markets, net revenues increased the most for our stations located in the
Austin and Greenville markets.
Excluding new markets and overlap markets, net revenues decreased the most for our stations located in the
Denver and Indianapolis markets.
Station Operating Expenses
The increase in station operating expenses was primarily attributable to the acquisition of new stations, net of
certain divestitures and radio stations acquired through exchanges with third parties. Station operating expenses
increased 148% over prior year results, primarily due to an increase in the variable expenses associated with the
increase in net revenues.
Station operating expenses included non-cash compensation expense of $6.9 million and $1.7 million for the
years ended December 31, 2018 and December 31, 2017, respectively.
32
Depreciation and Amortization Expense
Depreciation and amortization expense increased in 2018 primarily due to the acquisition of assets included
in the Merger and an increase in capital expenditures. The increase in capital expenditures in 2018 was primarily due
to the consolidation and relocation of several studio facilities in larger markets, an increase in our size and capital
needs associated with the integration of common systems across the new markets.
Corporate General and Administrative Expenses
Corporate general and administrative expenses increased primarily due to: (i) an increase in compensation
expense and benefits of $13.8 million due to an expanded workforce together with the hiring of additional corporate
employees as a result of the Merger; and (ii) an increase in legal expense of $2.8 million due to the increased level of
professional services required of a larger company after the Merger.
Corporate, general and administrative expenses included non-cash compensation expense of $8.3 million and
$7.9 million for the years ended December 31, 2018 and December 31, 2017, respectively.
Integration Costs
Integration costs were incurred in 2018 as a result of the Merger. These costs primarily consisted of
expenses related to effectively combining and incorporating the CBS Radio business into our operations.
Restructuring Charges
We incurred restructuring charges in 2018 and 2017 primarily as a result of the restructuring of operations for
the Merger. These costs primarily included workforce reduction charges, the abandonment of excess studio space in
certain markets, costs to exit duplicative contracts and other charges and were expensed as incurred.
Impairment Loss
Our annual goodwill impairment test conducted during the second quarter of 2018 indicated that the fair
value of our goodwill and broadcasting licenses exceeded their carrying value and there was no need for an
impairment charge. Due to a sustained decline in our share price which occurred subsequent to the annual impairment
test conducted in the second quarter of 2018, we determined that the changes in circumstances warranted an interim
impairment assessment on our broadcasting licenses and goodwill during the fourth quarter of 2018.
In connection with an interim impairment assessment conducted in the fourth quarter of 2018, we determined
our broadcasting licenses and goodwill were impaired. Accordingly, we recorded a $147.9 million impairment
($108.8 million, net of tax) on our broadcasting licenses and a $317.1 million impairment ($314.4 million, net of tax)
on our goodwill.
In connection with the Merger, we entered into two local marketing agreements (“LMAs”) with Bonneville
and assigned the assets of eight radio stations in the San Francisco, California and Sacramento, California markets into
a trust. Based upon the agreed-upon price in the asset purchase agreement, we determined that the carrying value of
these assets was greater than the fair value and recorded a non-cash impairment charge of $25.6 million.
Merger and Acquisition Costs
There was a significant reduction in the amount of legal, professional, and other advisory services incurred as
the Merger closed in the fourth quarter of 2017.
Other Operating (Income) Expenses
During the year ended December 31, 2017, we incurred a $13.5 million loss from permanently discontinuing
the operation of one of our stations and returning the station’s license to the FCC for cancellation, in order to facilitate
the Merger. This activity was nonrecurring in nature.
During the year ended December 31, 2018, we disposed of: (i) several radio stations in Sacramento,
California and San Francisco, California; (ii) land and land improvements in Chicago, Illinois; (iii) a radio station in
Philadelphia, Pennsylvania; (iv) land and land improvements and buildings in Los Angeles, California; (v) land and
land improvements and buildings in San Diego, California; (vi) land and land improvements and a building in Dallas,
33
Texas; (vii) land and land improvements and a building in Sacramento, California; and (viii) land and land
improvements in Austin, Texas. As a result of these disposal activities, we recorded a net gain in net gain/loss on sale
or disposal of assets of $10.0 million. Additionally, in connection with the purchase and sale of radio stations, we
generated TBA income of $0.9 million during the year ended December 31, 2018. The change in other operating
(income) expense is primarily attributable to the change in these activities between periods.
Operating Income
Operating income this year decreased primarily due to: (i) an increase in impairment loss of $493.0 million;
(ii) an increase in depreciation and amortization expense of $28.7 million; (iii) an increase in integration costs of
$25.4 million; and (iv) an increase in corporate, general and administrative expenses of $21.6 million.
These decreases in operating income were partially offset by: (i) an increase in net revenues, net of station
operating expenses, of $213.9 million; (ii) a decrease in merger and acquisition costs of $38.3 million; (iii) a net
increase in other operating income of $25.1 million; and (iv) a decrease in restructuring charges of $11.1 million.
Interest Expense
In connection with the Merger, we assumed CBS Radio’s (now Entercom Media Corp.’s) indebtedness on
November 17, 2017. We incurred an additional $68.6 million of interest expense due to a significant increase in our
net outstanding indebtedness upon which interest is computed. Assuming that LIBOR is flat, we expect interest
expense to decrease in future periods as a result of the decrease in future outstanding indebtedness upon which interest
is computed. We expect to use cash on hand and expected cash available from operations to reduce outstanding debt
in future periods.
The weighted average variable interest rate for our credit facilities as of December 31, 2018 and 2017 was
5.2% and 4.2%, respectively.
Other (Income) Expense
In connection with the Merger, we refinanced our then outstanding pre-merger indebtedness in the fourth
quarter of 2017 and recorded a loss on extinguishment of indebtedness of $4.1 million.
Income (Loss) Before Income Taxes (Benefit)
The generation of loss before income tax benefit was primarily attributable to increases in: (i) impairment
losses; (ii) net interest expense; (iii) depreciation and amortization expenses; (iv) integration costs; and (v) corporate,
general and administrative expenses. This activity was partially offset by: (i) an increase in net revenues, net of
station operating expenses; (ii) a net increase in other operating (income) expenses; (iii) a decrease in merger and
acquisition costs; and (iv) a decrease in restructuring charges.
Income Taxes (Benefit)
The effective income tax rate was 1.1% for 2018. This rate was lower than the federal statutory rate of 21%
primarily due to an impairment on the Company’s goodwill during the fourth quarter of 2018 which is not deductible
for income tax purposes. The income tax rate is lower than in previous years primarily due to an income tax benefit
resulting from the Tax Cuts and Jobs Act (“TCJA”) that was enacted on December 22, 2017, which reduced the U.S.
federal corporate tax rate from the previous rate of 35% to 21%.
The effective income tax rate from continuing operations for 2017 was significantly impacted by a $291.5
million income tax benefit that reduced our income tax expense. The TCJA was enacted on December 22, 2017,
which contained significant changes to the U.S. Federal tax law, including a reduction in the U.S. federal corporate tax
rate from the previous rate of 35% to 21%. The Company recorded an estimated benefit from continuing operations
of $291.5 million to adjust our deferred income tax balances as a result of the reduced corporate income tax rate. The
estimated amounts are included as components of income tax expense from continuing operations.
Estimated Income Tax Rate For 2019
We estimate that our 2019 annual tax rate before discrete items, which may fluctuate from quarter to quarter,
will be between 30% and 32%. We anticipate that we will be able to utilize certain net operating loss carryovers to
reduce future payments of federal and state income taxes. We anticipate that our rate in 2019 could be affected
34
primarily by: (i) changes in the level of income in any of our taxing jurisdictions; (ii) adding facilities through mergers
or acquisition in states that on average have different income tax rates from states in which we currently operate and
the resulting effect on previously reported temporary differences between the tax and financial reporting bases of our
assets and liabilities; (iii) the effect of recording changes in our liabilities for uncertain tax positions; (iv) taxes in
certain states that are dependent on factors other than taxable income; (v) the limitations on the deduction of cash and
certain non-cash compensation expense for certain key employees; and (vi) any tax benefit shortfall associated with
share-based awards. Our annual effective tax rate may also be materially impacted by: (a) tax expense associated with
non-amortizable assets such as broadcasting licenses and goodwill; (b) regulatory changes in certain states in which
we operate; (c) changes in the expected outcome of tax audits; (d) changes in the estimate of expenses that are not
deductible for tax purposes; and (e) changes in the deferred tax valuation allowance.
In the event we determine at a future time that it is more likely than not that we will not realize our net
deferred tax assets, we will increase our deferred tax asset valuation allowance and increase income tax expense in the
period when we make such a determination.
Net Deferred Tax Liabilities
As of December 31, 2018 and 2017, our total net deferred tax liabilities were $546.0 million and $609.8
million, respectively. The decrease in deferred tax liabilities was primarily the result of: (i) the recording of an
impairment charge of $465.0 million on our broadcasting licenses and goodwill during the fourth quarter of 2018; and
(ii) various sales of radio stations during 2018. Our net deferred tax liabilities primarily relate to differences between
book and tax bases of certain of our indefinite-lived intangibles (broadcasting licenses and goodwill). The
amortization of our indefinite-lived assets for tax purposes but not for book purposes creates deferred tax liabilities. A
reversal of deferred tax liabilities may occur when indefinite-lived intangibles: (i) become impaired; or (ii) are sold,
which would typically only occur in connection with the sale of the assets of a station or groups of stations or the
entire company in a taxable transaction. Due to the amortization for tax purposes and not book purposes of our
indefinite-lived intangible assets, we expect to continue to generate deferred tax liabilities in future periods.
Income (Loss) From Discontinued Operations, Net of Income Taxes (Benefit)
Several stations acquired from CBS Radio, which were operated under a LMA, immediately met the criteria
to be classified as held for sale. In addition, the results of operations for these stations were presented as discontinued
operations as these stations were never expected to be operated by us. Amounts of net revenues, station operating
expenses, depreciation and amortization and LMA income earned from these stations was not included in our income
from continuing operations. The income generated from these stations during the period of the LMA, for the period
from November 17, 2017 through September 21, 2018, is separately presented net of income taxes (benefit). The
LMA terminated on September 21, 2018, upon the consummation of a final agreement to divest the stations as
required under a DOJ consent order agreed to by us, as a condition to complete the Merger.
Net Income (Loss) Available To The Company
The change in net income (loss) available to the Company was primarily attributable to the reasons described
above under Income (Loss) Before Income Taxes (Benefit) and Income Taxes (Benefit).
Results Of Operations
The year 2017 as compared to the year 2016
The following significant factors affected our results of operations for 2017 as compared to the prior year:
Business Combinations
In connection with the Merger with CBS Radio, which closed on November 17, 2017, we acquired multiple
radio stations, net of certain dispositions and acquisitions of radio stations through exchanges with third parties, which
significantly increased in 2017 our net revenues, station operating expenses and depreciation and amortization
expenses.
Related to the Merger, we incurred: (i) merger and acquisition costs, including legal, advisory services and
professional fees of $41.3 million in 2017 and $0.7 million in 2016; and (ii) restructuring charges and transition
services costs of $16.9 million in 2017.
35
On January 6, 2017, we acquired four radio stations in Charlotte, North Carolina for $24.0 million in cash,
using cash on hand to fund the acquisitions. We commenced operations under a TBA for three of the stations on
November 1, 2016, and the fourth upon acquisition on January 6, 2017, which increased our net revenues, station
operating expenses and depreciation and amortization expense.
During the fourth quarter of 2017, we assigned assets to a trust, which subsequently entered into a TBA that
allowed a third party to operate eight of our radio stations, which decreased our net revenues and station operating
expenses and increased our TBA income.
We sold three radio stations in the fourth quarter of 2017, which resulted in a decrease to net revenues and
station operating expenses and a $2.6 million gain on the sale of assets.
We recorded a $13.5 million loss in the first quarter of 2017 as a result of permanently discontinuing the
operation of one of our stations and returning the station’s license to the FCC for cancellation, in order to facilitate the
Merger. The loss is included within net (gain) loss on sale or disposal of assets.
Other
Due to the tax legislation enacted during the fourth quarter of 2017, we recognized an income tax benefit
from continuing operations of $291.5 million due to the reduction to our effective tax rate and its impact on our
deferred income taxes.
In connection with the Merger, which closed on November 17, 2017, we refinanced our then-outstanding
credit facility and redeemed our Preferred. As a result of the refinancing, we recognized a loss on extinguishment of
indebtedness of approximately $4.1 million.
Our outstanding indebtedness upon which interest is computed increased significantly on November 17, 2017
as a result of the Merger and our assumption of CBS Radio’s (now Entercom Media Corp.’s) outstanding
indebtedness.
In November 2016, we refinancing our outstanding former senior credit facility and retired our formerly
outstanding Senior Notes. As a result of the refinancing, we recognized a loss on extinguishment of debt of
approximately $10.9 million in 2016.
During the third quarter of 2016, we settled a legal claim with British Petroleum as a result of their
Deepwater Horizon oil spill in the Gulf of Mexico that occurred in 2010 and recovered $2.3 million on a net basis
after deducting certain related expenses. The claim was a result of lost business due to the oil spill. This amount was
included in other income and expense.
36
NET REVENUES
$
592.9
$
464.8
28%
YEARS ENDED DECEMBER 31,
2017
2016
% Change
(dollars in millions)
OPERATING EXPENSE:
Station operating expenses
Depreciation and amortization expense
Corporate general and administrative expenses
Restructuring charges
Impairment loss
Merger and acquisition costs
Other expenses related to financing
Other operating (income) expenses
Total operating expense
OPERATING INCOME (LOSS)
NET INTEREST EXPENSE
OTHER (INCOME) EXPENSE
443.5
15.5
47.9
16.9
1.0
41.3
2.2
12.0
580.3
12.6
32.5
4.1
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
(24.0)
INCOME TAXES (BENEFIT)
NET INCOME (LOSS) AVAILABLE TO THE COMPANY
- CONTINUING OPERATIONS
Preferred stock dividend
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS - CONTINUING OPERATIONS
Income from discontinued operations, net of income taxes
(benefit)
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS
Net Revenues
(257.1)
233.1
(2.0)
231.1
0.8
323.3
9.8
33.3
-
0.2
0.7
0.6
(1.2)
366.7
98.1
36.6
8.6
52.9
14.8
38.1
(1.9)
37%
58%
44%
100%
400%
nmf
267%
nmf
58%
(87%)
(11%)
(52%)
(145%)
nmf
512%
(5%)
36.2
538%
-
100%
$
231.9
$
36.2
541%
The increase in net revenues was primarily attributable to the Merger, net of certain divestitures and
acquisitions through exchanges with third parties. Net revenues from the new stations together with our existing
stations contributed to overall 28% growth over prior year results. Excluding the net revenues from these acquisitions
and dispositions, net revenues were flat for the year.
Excluding new markets and overlap markets, net revenues increased the most for our stations located in the
Greensboro and Indianapolis markets.
Excluding new markets and overlap markets, net revenues decreased the most for our stations located in the
Denver and Sacramento markets.
Station Operating Expenses
The increase in station operating expenses was primarily attributable to the acquisition of new stations, net of
certain divestitures and radio stations acquired through exchanges with third parties. Station operating expenses from
the new stations together with our existing stations contributed to the reported 37% increase over prior year results,
primarily due to an increase in the variable expenses associated with the increase in net revenues.
Depreciation and Amortization Expense
Depreciation and amortization expense increased in 2017 primarily due to the acquisition of assets included
in the Merger and in the Charlotte Acquisition and an increase in capital expenditures. The increase in capital
37
expenditures in 2017 was primarily due to the consolidation and relocation of several studio facilities in larger markets
together with an increase in the size of our Company.
Corporate General and Administrative Expenses
Corporate general and administrative expenses increased primarily due to: (i) an increase in non-cash equity
compensation expense of $2.7 million, which includes the non-cash compensation expenses associated with the
conversion of equity awards assumed in the Merger; (ii) an increase in compensation expense of $2.4 million due to
an expanded workforce in anticipation of the Merger together with additional corporate employees added as a result of
the Merger; (iii) an increase in consulting expenses of $2.2 million in connection with additional services provided
related to the Merger; (iv) an increase in deferred compensation expense of $1.7 million as our deferred compensation
liability generally tracks the movements in the stock market; and (v) certain contractual obligations of $1.3 million to
a senior executive as a result of the non-renewal of an employment agreement.
Merger and Acquisition Costs
Merger and acquisition costs increased due to transaction costs relating to the Merger. These costs primarily
consisted of legal, professional, and other advisory services.
Restructuring Charges
We incurred restructuring charges and transition services costs of $16.9 million in 2017 primarily as a result
of the restructuring of operations for the Merger. These costs primarily included workforce reduction charges and the
abandonment of excess studio space in certain markets.
Other Operating Income and Expenses
Other operating expenses increased primarily as a result of incurring a $13.5 million loss from permanently
discontinuing the operation of one of our stations and returning the station’s license to the FCC for cancellation, in
order to facilitate the Merger. Offsetting this loss, in the fourth quarter of 2017, we sold three radio stations in order
to facilitate the Merger and recognized a gain of $2.6 million.
Operating Income
Operating income in 2017 decreased primarily due to: (i) an increase in merger and acquisition costs of $41.3
million in connection with the Merger; (ii) the recognition of a $13.5 million loss from permanently discontinuing the
operation of one of our stations and returning the license to the FCC for cancellation, in order to facilitate the Merger;
(iii) an increase in restructuring charges as described above; (iv) an increase in station operating expenses for the
reasons described above; and (v) an increase in corporate, general and administrative expenses for the reasons
described above.
Interest Expense
Net interest expense decreased $4.1 million for the year. This decrease was primarily due to the decrease for
the 2017 period prior to the Merger in our average outstanding interest rate on our average outstanding indebtedness
upon which interest is computed as compared to 2016. The decrease in interest expense was due to the refinancing in
the fourth quarter of 2016 of our senior secured credit facility with lower interest rates that replaced our former Senior
Notes with higher interest rates.
The interest expense decrease was offset by the interest expense incurred on the indebtedness assumed from
the Merger for the period of November 17, 2017 through the end of the year. As a result of the Merger and
subsequent refinancing of our then-outstanding credit facility, we incurred interest expense on additional net
outstanding indebtedness upon which interest is computed. Assuming that LIBOR is flat, we expect interest expense
to increase in future periods as a result of the significant increase in outstanding indebtedness upon which interest is
computed.
The weighted average variable interest rate as of December 31, 2017 and 2016 was 4.2% and 4.5%,
respectively.
Other (Income) Expense
38
In connection with the Merger, we refinanced our then outstanding pre-Merger indebtedness in the fourth
quarter of 2017 and recorded a loss on extinguishment of indebtedness of $4.1 million.
We also refinanced our outstanding indebtedness in the fourth quarter of 2016 and recorded a loss on
extinguishment of indebtedness of approximately $10.9 million. This loss was partially offset by the recovery of $2.3
million on a net basis from the settlement of a legal claim with British Petroleum as a result of their Deepwater
Horizon oil spill in the Gulf of Mexico that occurred in 2010. The claim was a result of lost business due to the oil
spill.
The decrease in the amount of loss on extinguishment of indebtedness is primarily attributable to the
inclusion of a $5.8 million call premium on the early retirement of our indebtedness in 2016, which was non-recurring
in nature.
Income (Loss) Before Income Taxes (Benefit)
The generation of income (loss) before income taxes (benefit) was largely attributable to: (i) the merger and
acquisition costs and restructuring charges and transition services costs incurred in connection with the Merger; and
(ii) the $13.5 million loss from permanently discontinuing the operation of one of our stations and returning the
station’s license to the FCC for cancellation, in order to facilitate the Merger.
Income Taxes (Benefit)
The effective income tax rate from continuing operations for 2017 was significantly impacted by a $291.5
million income tax benefit that reduced our income tax expense. The TCJA, enacted on December 22, 2017,
contained significant changes to U.S. federal tax law, including a reduction in the U.S. federal corporate tax rate from
the previous rate of 35% to 21%. The Company recorded an estimated benefit from continuing operations of $291.5
million to adjust our deferred income tax balances as a result of the reduced corporate income tax rate. The estimated
amounts are included as components of income tax expense from continuing operations.
The effective income tax rate was 28.0% for 2016, which was impacted by: (i) discrete income tax benefits
from the reversal of valuation allowances against net operating losses for certain single member states due to changes
in future estimated income; (ii) the reversal of partial valuation allowances in certain single member states as a result
of internal restructuring; and (iii) a retroactive decrease in deferred tax liabilities associated with non-amortizable
assets such as broadcasting licenses and goodwill. Our income tax rate has been trending down as expenses for tax
purposes have decreased due to the issuance to senior management of a higher percentage of awards that were fully
deductible for tax purposes.
Income (Loss) From Discontinued Operations, Net of Income Taxes (Benefit)
Several stations acquired from CBS Radio, which were operated under an LMA, immediately met the criteria
to be classified as held for sale. In addition, the results of operations for these stations are presented as discontinued
operations as these stations are never expected to be operated by us. Amounts of net revenues, station operating
expenses, depreciation and amortization and LMA income earned from these stations is not included in our income
from continuing operations. The income generated from these stations during the period of the LMA through
December 31, 2017, is separately presented net of income taxes (benefit).
Net Income (Loss) Available to the Company
The change in net income (loss) available to us was primarily attributable to the reasons described above
under Income (Loss) Before Income Taxes and Income Taxes (Benefit).
_____________________________________________________________________________________________
Future Impairments
We may determine that it will be necessary to take impairment charges in future periods if we determine the
carrying value of our intangible assets is more than the fair value. Our annual impairment test of our broadcasting
licenses and goodwill conducted in the second quarter of 2018 indicated that the fair value of our goodwill and
broadcasting licenses exceeded their carrying value and there was no need to record an impairment charge.
39
Due to a sustained decline in our share price from the time of the annual impairment test conducted in the
second quarter of 2018, we determined this triggering event warranted an interim impairment assessment on our
broadcasting licenses and goodwill during the fourth quarter of 2018. Due to changes in facts and circumstances, we
revised our estimates with respect to our estimated operating profit margins and long-term revenue growth rates used
in the impairment assessment. As a result of this interim impairment tests conducted in the fourth quarter of 2018, we
determined our broadcasting licenses and goodwill were impaired. Accordingly, we recorded a $147.9 million
impairment ($108.8 million, net of tax) on our broadcasting licenses and a $317.1 million impairment ($314.4 million,
net of tax) on our goodwill.
We may be required to retest prior to our next annual evaluation, which could result in an impairment.
Liquidity and Capital Resources
Refinancing – CBS Radio (Now Entercom Media Corp.) Indebtedness
In connection with the Merger, we assumed CBS Radio’s (now Entercom Media Corp.’s) indebtedness
outstanding under: (i) a credit agreement (the “Credit Facility”) among CBS Radio (now Entercom Media Corp.), the
guarantors named therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent; and
(ii) the senior notes (described below).
On March 3, 2017, CBS Radio entered into an amendment to the Credit Facility, to, among other things,
create a tranche of Term B-1 Loans (the “Term B-1 Tranche”) in an aggregate principal amount not to exceed $500
million. The Term B-1 Tranche is governed by the Credit Facility and will mature on November 17, 2024.
Immediately prior to the Merger, the Credit Facility was comprised of a revolving credit facility and a term B
loan. On the closing date of the Merger and the refinancing, the term B loan was converted into the Term B-1 Tranche
and both were simultaneously refinanced (the “Term B-1 Loan”).
As a result of the refinancing activities described above, in the fourth quarter of 2017, we wrote off $3.1
million of unamortized deferred financing costs and recorded a loss on the extinguishment of indebtedness of $4.1
million. The loss included the write off of deferred financing expense, a loss on the early retirement of the Preferred,
and certain fees paid to lenders in connection with the refinancing activities.
Liquidity
Immediately following the refinancing activities described above, the Credit Facility, as amended, was
comprised of a $250.0 million Revolver and a $1,330.0 million Term B-1 Loan.
As of December 31, 2018, we had $1,291.7 million outstanding under the Term B-1 Loan and $180.0 million
outstanding under the Revolver. In addition, we had $5.9 million in outstanding letters of credit. As of December 31,
2018, we had $122.9 million in cash and cash equivalents, exclusive of restricted cash. In connection with our
outstanding indebtedness, we have restrictions in the ability of our subsidiaries to distribute cash to our Parent, as
more fully described in the accompanying notes to our audited consolidated financial statements. We do not anticipate
that these restrictions will limit our ability to meet our future obligations over the next 12 months.
Over the past several years, we have used a significant portion of our cash flow to reduce our indebtedness.
Generally, our cash requirements are funded from one or a combination of internally generated cash flow, cash on
hand and borrowings under our Revolver.
We may also use our capital resources to repurchase shares of our Class A common stock, to pay dividends
to our shareholders, and to make acquisitions. We may from time to time seek to repurchase and retire our outstanding
indebtedness through open market purchases, privately negotiated transactions or otherwise.
The Credit Facility
The $250.0 million Revolver has a maturity date of November 17, 2022 and provides for interest based upon
the prime rate or LIBOR plus a margin. The margin may increase or decrease based upon our Consolidated Net
Secured Leverage Ratio as defined in the agreement. The initial margin is at LIBOR plus 2.25% or the prime rate plus
1.25%. In addition, the Revolver requires the payment of a commitment fee of 0.5% per annum on the unused
amount. The amount available under the Revolver, which includes the impact of outstanding letters of credit, was
$64.1 million as of December 31, 2018.
40
The Term B-1 Loan has a maturity date of November 17, 2024 and provides for interest based upon the Base
Rate or LIBOR, plus a margin. The initial rate is at LIBOR plus 2.75%, or the Base Rate plus 1.75%. The Base Rate
is the highest of: (a) the administrative agent’s prime rate; (b) the Federal Reserve Bank of New York’s Rate plus
0.5%; or (c) the LIBOR Rate plus 1.0%.
The Term B-1 Loan amortizes: (i) with equal quarterly installments of principal in annual amounts equal to
1.0% of the original principal amount of the Term B-1 Loan; and (ii) mandatory yearly prepayments based upon a
percentage of Excess Cash Flow as defined in the agreement.
The Term B-1 Loan requires mandatory prepayments equal to a percentage of Excess Cash Flow, subject to
incremental step-downs, depending on the Consolidated Net Secured Leverage Ratio. The first Excess Cash Flow
payment will be due in the first quarter of 2019 and then each subsequent year, and is based on the Excess Cash Flow
and Leverage Ratio for the prior year.
We expect to use the Revolver to provide for: (i) working capital; and (ii) general corporate purposes,
including capital expenditures and any or all of the following (subject to certain restrictions): repurchase of Class A
common stock, dividends, investments and acquisitions. All of our wholly-owned subsidiaries, jointly and severally
guaranteed the Credit Facility. The Credit Facility is secured by a pledge of 66% of our outstanding voting stock and
other equity interests in all of our wholly owned subsidiaries. In addition, the Credit Facility is secured by a lien on
substantially all of our assets, with limited exclusions (including our real property). The assets securing the Credit
Facility are subject to customary release provisions which would enable us to sell such assets free and clear of
encumbrance, subject to certain conditions and exceptions.
The Credit Facility has usual and customary covenants including, but not limited to, a senior secured
leverage ratio, limitations on restricted payments and the incurrence of additional borrowings. Specifically, the Credit
Facility requires us to comply with a maximum Consolidated Net Secured Leverage Ratio that cannot exceed 4.0
times. In the event that we consummate additional acquisition activity permitted under the terms of the Credit
Facility, the Consolidated Net Secured Leverage Ratio will be increased to 4.5 times for a one year period following
the consummation of such permitted acquisition. As of December 31, 2018, our Consolidated Net Secured Leverage
Ratio was 3.6 times.
As of December 31, 2018, we were in compliance with the financial covenant then applicable and all other
terms of the Credit Facility in all material respects. Our ability to maintain compliance with our covenants under the
Credit Facility is highly dependent on our results of operations. Management believes that over the next 12 months
we can continue to maintain compliance. Our operating cash flow remains positive, and we believe that it is adequate
to fund our operating needs. We believe that cash on hand and cash from operating activities will be sufficient to
permit us to meet our liquidity requirements over the next 12 months, including our debt repayments.
Failure to comply with our financial covenants or other terms of its Credit Facility and any subsequent failure
to negotiate and obtain any required relief from its lenders could result in a default under the Credit Facility. Any
event of default could have a material adverse effect on our business and financial condition.
The Former Credit Facility
On November 1, 2016, Entercom Communications Corp. and its wholly-owned subsidiary, Entercom Radio,
LLC (“Radio”), entered into the Former Credit Facility with a syndicate of lenders for a $540 million Former Credit
Facility, which was initially comprised of: (i) the $60 million Former Revolver that was set to mature on November 1,
2021; and (ii) the $480 million Former Term B Loan that was set to mature on November 1, 2023.
The Former Term B Loan amortized with: (i) equal quarterly installments of principal in annual amounts
equal to 1.0% of the original principal amount of the Former Term B Loan; and (ii) mandatory yearly prepayments
based upon a percentage of Excess Cash Flow as defined within the agreement and was subject to incremental step-
downs depending on the consolidated Leverage Ratio.
Senior Notes
Simultaneously with entering into the Merger and assuming the Credit Facility on November 17, 2017, we
also assumed the Senior Notes that mature on October 17, 2024 in the amount of $400.0 million. The Senior Notes,
which were originally issued by CBS Radio (now Entercom Media Corp.) on October 17, 2016, were valued at a
premium as part of the fair value measurement on the date of the Merger. The premium on the Senior Notes will be
41
amortized over the term under the effective interest rate method. As of any reporting period, the unamortized
premium on the Senior Notes is reflected on the balance sheet as an addition to the $400.0 million liability.
Interest on the Senior Notes accrues at the rate of 7.250% per annum and is payable semi-annually in arrears
on May 1 and November 1 of each year.
The Senior Notes may be redeemed at any time on or after November 1, 2019 at a redemption price of
105.438% of their principal amount plus accrued interest. The redemption price decreases to 103.625% of their
principal amount plus accrued interest on or after November 1, 2020, 101.813% of their principal amount plus accrued
interest on or after November 1, 2021, and 100% of their principal amount plus accrued interest on or after November
1, 2022.
The Senior Notes are unsecured and ranked: (i) senior in right of payment to our future subordinated
indebtedness; (ii) equally in right of payment with all of our existing and future senior indebtedness; (iii) effectively
subordinated to our existing and future secured indebtedness (including the indebtedness under our Credit Facility), to
the extent of the value of the collateral securing such indebtedness; and (iv) structurally subordinated to all of the
liabilities of our subsidiaries that do not guarantee the Senior Notes, to the extent of the assets of those subsidiaries.
All of our existing subsidiaries, other than Entercom Media Corp., jointly and severally guaranteed the
Senior Notes.
A default under our Senior Notes could cause a default under our Credit Facility. Any event of default,
therefore, could have a material adverse effect on our business and financial condition.
We may from time to time seek to repurchase or retire our outstanding indebtedness through open market
purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market
conditions, our liquidity requirements, contractual restrictions and other factors.
The Senior Notes are not a registered security and there are no plans to register our Senior Notes as a security
in the future. As a result, Rule 3-10 of Regulation S-X promulgated by the SEC is not applicable and no separate
financial statements are required for the guarantor subsidiaries as of December 31, 2018 and 2017 and for the years
ended December 31, 2018, 2017 and 2016.
The Former Senior Notes
In 2016, we issued a call notice to redeem our $220.0 million 10.5% unsecured Senior Notes due December
1, 2019 (the “Former Senior Notes”) in full with an effective date of December 1, 2016, that was funded by the
proceeds of the Former Credit Facility. As a result of the full redemption of the Former Senior Notes with replacement
indebtedness at a lower interest rate, the net interest expense incurred in 2017 through the date of the Merger was
reduced and does not include amortization of original issue discount of Former Senior Notes. This reduction in net
interest expense was partially offset by the increase in net interest expense incurred from the closing date of the
Merger through December 31, 2018 due to the significant increase in the amount of indebtedness outstanding.
In addition to the parent, Entercom Communications Corp., all of our existing subsidiaries (other than Radio,
which is a finance subsidiary and was the issuer of the Senior Notes), jointly and severally guaranteed the Senior
Notes.
Perpetual Cumulative Convertible Preferred Stock
As discussed above, a portion of the proceeds from the debt refinancing that occurred on November 17, 2017
was used to fully redeem the Preferred. As a result of this redemption, we: (i) removed the net carrying value of the
Preferred of $27.5 million from our books, which included accrued dividends through the date of redemption of $0.2
million; and (ii) recognized a loss on extinguishment of the Preferred of $0.2 million.
In connection with an acquisition on July 16, 2015, we issued $27.5 million of Preferred that in the event of a
liquidation, ranked senior to liquidation payments to our common shareholders. We incurred issuance costs, which
were recorded as a reduction of the Preferred.
The Preferred was convertible by Lincoln Financial Media Company (“Lincoln”) into a fixed number of
shares after a three-year waiting period, subject to customary anti-dilution provisions. At certain times (including the
42
first three years after issuance), we could redeem the Preferred in cash at a price of 100%. The initial dividend rate on
the Preferred was 6% and increased over time to 12%.
Operating Activities
Net cash flows provided by operating activities were $102.2 million and $29.1 million for 2018 and 2017,
respectively. The cash flows from operating activities increased primarily due to an increase in net income available to
the Company, as adjusted for non-cash charges and income tax benefits, of $99.5 million. This increase was partially
offset by an increase in net investment in working capital of $36.1 million. The increase in net investment in working
capital was primarily due to: (i) the timing of settlements of other long term liabilities; and (ii) the timing of
settlements of accrued expenses.
Net cash flows provided by operating activities were $29.1 million and $72.0 million for 2017 and 2016,
respectively. The cash flows from operating activities decreased primarily due to the increases in our merger and
acquisition costs, restructuring costs and other costs and corporate, general and administrative expenses of $40.6
million, $16.9 million and $14.5 million, respectively.
This net decrease was partially offset by a $18.9 million decrease in net investment in working capital in
2017 as compared to 2016.
Investing Activities
For 2018, net cash flows provided by investing activities were $141.5 million, which primarily reflected the
proceeds received from dispositions of assets and radio stations in the amount of $255.9 million, less: (i) cash paid to
acquire a radio station in Philadelphia, Pennsylvania from Jerry Lee Radio, LLC (“Jerry Lee”) for $56.4 million in
cash (the “Jerry Lee Transaction”); (ii) additions to property and equipment of $41.8 million; and (iii) cash paid to
complete the acquisition of two radio stations in St. Louis, Missouri from Emmis Communications Corporation
(“Emmis”) for a purchase price of $15.0 million (the “Emmis Acquisition”).
For 2017, net cash flows provided by investing activities were $17.3 million, which primarily reflected the
proceeds of: (i) $57.8 million from the sales of three FM radio stations in Los Angeles, San Diego, and Wilkes Barre,
(ii) $12.0 million in cash as partial consideration for an exchange of a radio station; and (iii) $3.0 million from the sale
of a parcel of land in Atlanta. These proceeds were partially offset by: (i) cash paid to complete an acquisition in
Charlotte, North Carolina of $24.0 million; (ii) additions to property, plant and equipment of $21.2 million; and (iii)
$9.7 million of cash paid to acquire a preferred stock interest in a privately held company.
Financing Activities
For 2018, net cash flows used in financing activities were $85.6 million, which primarily reflect: (i) the
payment of dividends on common stock of $49.8 million; and (ii) the payment for repurchases of common stock of
$30.0 million.
For 2017, net cash flows used in financing activities were $59.1 million, which primarily reflect: (i) the
payment of common stock dividends of $29.3 million; (ii) the retirement of our Preferred of $27.7 million; (iii) the
payment of debt issuance costs related to our Credit Facility of $16.3 million; and (iv) the repurchase of $10.7 million
in outstanding common stock, of which $10.0 million was paid in cash as of December 31, 2017. This activity was
partially offset by an increase in our net borrowings of $30.8 million.
Income Taxes
During 2018, we paid approximately $54.2 million in estimated federal and state income taxes.
For federal income tax purposes, the acquisition of CBS Radio was treated as a reverse acquisition which
caused us to undergo an ownership change under Section 382 of the Code. This ownership change will limit the
utilization of our net operating losses (“NOLs”) for post-acquisition tax years. As a result, we commenced the
payment of estimated federal, state and local taxes of approximately $2.0 million during the fourth quarter of 2017.
During 2016, we paid a nominal amount in income taxes (state income taxes) as we have benefited from the
tax deductions available on acquired assets, which were primarily intangible assets such as broadcasting licenses and
goodwill.
43
Dividends
On November 2, 2017, our Board approved an increase to the annual common stock dividend program to
$0.36 per share from $0.30 per share, beginning with the dividend paid in the fourth quarter of 2017. We estimate
quarterly dividend payments to approximate $12.4 million per quarter (after considering the reduction in shares from
our stock buyback program in the fourth quarter of 2018). Any future dividends will be at the discretion of the Board
based upon the relevant factors at the time of such consideration, including, without limitation, compliance with the
restrictions set forth in our Credit Facility and the Senior Notes.
Quarterly dividends on our Preferred were paid in each of the quarters beginning in October 2015 at an
annual rate of 6% that increased over time to 10%. On November 17, 2017, our Preferred was retired in full.
During the second quarter of 2016, we commenced an annual $0.30 per share common stock dividend
program, with payments that approximated $2.9 million per quarter. In addition to a quarterly dividend, we paid a
special one-time cash dividend of $0.20 per share of common stock on August 30, 2017, which was approximately
$7.8 million.
See Liquidity under Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” Note 10, Long-Term Debt, and Note 11, Perpetual Cumulative Convertible Preferred Stock, in
the accompanying notes to our audited consolidated financial statements.
Share Repurchase Programs
On November 2, 2017, our Board announced a share repurchase program (the “2017 Share Repurchase
Program”) to permit us to purchase up to $100.0 million of our issued and outstanding shares of Class A common
stock through open market purchases. Shares repurchased by us under the 2017 Share Repurchase Program will be at
our discretion based upon the relevant factors at the time of such consideration, including, without limitation,
compliance with the restrictions set forth in our Credit Facility and the Senior Notes.
During the year ended December 31, 2018, we repurchased 3,226,300 shares of our Class A common stock at
an aggregate average price of $9.11 per share for a total of $29.4 million. As of December 31, 2018, $59.9 million is
available for future share repurchase under the 2017 Share Repurchase Program.
Capital Expenditures
Capital expenditures for 2018, 2017 and 2016 were $41.8 million, $21.2 million and $7.6 million,
respectively.
Credit Rating Agencies
On a continuing basis, Standard and Poor’s, Moody’s Investor Services and other rating agencies may
evaluate our indebtedness in order to assign a credit rating. Any significant downgrade in our credit rating could
adversely impact our future liquidity by limiting or eliminating our ability to obtain debt financing.
Contractual Obligations
The following table reflects a summary of our contractual obligations as of December 31, 2018:
Contractual Obligations:
Total
Payments Due By Period
Less than
1 Year
1 to 3
Years
3 to 5
Years
5
Years
More Than
Long-term debt obligations (1)
Operating lease obligations (2)
Purchase obligations (3)
Other long-term liabilities (4)
$2,353,893
$91,169
$181,258
$359,873
$1,721,593
394,318
549,917
635,150
51,375
97,351
79,687
221,180
207,414
103,756
12,409
18,449
13,166
165,905
17,567
591,126
Total
$3,933,278
$376,133
$504,472
$556,482
$2,496,191
44
(1)
(2)
(3)
(4)
The total amount reflected in the above table includes principal and interest.
a. Our Credit Facility had outstanding indebtedness in the amount of $1,291.7 million under our
Term B-1 Loan and $180.0 million outstanding under our Revolver as of December 31, 2018.
The maturity under our Credit Facility could be accelerated if we do not maintain compliance
with certain covenants. The principal maturities reflected exclude any impact from required
principal payments based upon our future operating performance. The above table includes
projected interest expense under the remaining term of our Credit Facility.
b. Under our Senior Notes, the maturity could be accelerated under an event of default or could be
repaid in cash by us at our option prior to maturity. The above table includes projected interest
expense under the remaining term of the agreement.
The operating lease obligations represent scheduled future minimum operating lease payments
under non-cancellable operating leases, including rent obligations under escalation clauses. The
minimum lease payments do not include common area maintenance, variable real estate taxes
insurance and other costs for which the Company may be obligated as most of these payments are
primarily variable rather than fixed.
We have purchase obligations that include contracts primarily for on-air personalities and other key
personnel, ratings services, sports programming rights, software and equipment maintenance and
certain other operating contracts.
Included within total other long-term liabilities of $635.2 million are deferred income tax liabilities
of $546.0 million. It is impractical to determine whether there will be a cash impact to an individual
year. Therefore, deferred income tax liabilities, together with liabilities for deferred compensation
and uncertain tax positions (other than the amount of unrecognized tax benefits that are subject to
the expiration of various statutes of limitation over the next 12 months) are reflected in the above
table in the column labeled as “More Than 5 Years.” See Note 15, Income Taxes, in the
accompanying notes to our audited consolidated financial statements for a discussion of deferred tax
liabilities.
Off-Balance Sheet Arrangements
As of December 31, 2018 and as of the date this report was filed (other than as described below), we did not
have any material off-balance sheet transactions, arrangements, or obligations, including contingent obligations.
During 2018, we disposed of certain property that we considered as surplus to our operations and that
resulted in significant gains reportable for tax purposes. In order to minimize the tax impact on a certain portion of
these taxable gains, we created an entity that serves as a qualified intermediary (“QI”) for tax purposes and that held
the net sales proceeds of $70.2 million from these transactions. As of December 31, 2018, the balances in the account
of the QI is $69.4 million and these amounts are reflected as restricted cash on our balance sheet. We plan to use a
portion of these funds in a tax-free exchange by using the net sales proceeds from relinquished property for the
purchase of replacement property. This entity was treated as a variable interest entity (“VIE”) and is included in our
consolidated financial statements as we are considered the primary beneficiary.
The use of a QI in a like-kind exchange enables us to effectively minimize our tax liability in connection with
certain asset dispositions. As discussed in Note 19, Assets Held For Sale And Discontinued Operations, we sold: (i) a
parcel of land in Chicago, Illinois during the third quarter of the current year for net proceeds of $45.5 million; and (ii)
a former studio building in Los Angeles, California for net proceeds of $24.7 million. These net sales proceeds were
deposited into the account of the QI to comply with requirements under Section 1031 of the Code to execute a like-
kind exchange and are reflected as restricted cash on our consolidated balance sheet as of December 31, 2018.
Restrictions on these deposits will lapse prior to the end of the first quarter of 2019.
We do not have any other relationships with unconsolidated entities or financial partnerships, such as entities
often referred to as structured finance or special purpose entities, which would have been established for the purpose
of facilitating off-balance sheet financial arrangements or other contractually narrow or limited purposes as of
December 31, 2018. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that
could arise if we had engaged in such relationships.
45
Market Capitalization
As of December 31, 2018 and 2017, our total equity market capitalization was $813.8 million and $1,535
million, respectively, which was $520.5 million lower and $229.4 million lower, respectively, than our book equity
value on those dates. As of December 31, 2018 and 2017, our stock price was $5.71 per share and $10.80 per share,
respectively. Due to a sustained decrease in our share price, we conducted an interim impairment test on our
broadcasting licenses and goodwill during the fourth quarter of 2018. Refer to the sections below for additional
information.
Intangibles
As of December 31, 2018, approximately 76% of our total assets consisted of radio broadcast licenses and
goodwill, the value of which depends significantly upon the operational results of our business. We could not operate
our radio stations without the related FCC license for each station. FCC licenses are subject to renewal every eight
years. Consequently, we continually monitor the activities of our stations to ensure they comply with all regulatory
requirements. See Part I, Item 1A, “Risk Factors”, for a discussion of the risks associated with the renewal of licenses.
Impact On Future Revenues And Advertising Network Services
We had a relationship with United States Traffic Network (“USTN”), a vendor that provided short duration
advertising network services (e.g., sponsored traffic reports) and guaranteed revenue to the Company. On April 27,
2018, we executed a series of agreements (the “April 27, 2018 agreements”) with USTN which replaced outstanding
accounts receivable from USTN with a senior secured note and an equity interest in USTN. On June 30, 2018, we
entered into an agreement to acquire USTN by the end of July 2018, subject to certain closing conditions. The closing
conditions were not met by USTN and we did not complete this transaction. On July 30, 2018, USTN filed a lawsuit
against the Company seeking damages. On July 31, 2018, USTN failed to make required payments due under the
April 27, 2018 agreements. On August 6, 2018, we notified USTN of its default and accelerated all amounts due. On
September 6, 2018, USTN filed a motion to dismiss its own lawsuit, with prejudice.
Inflation
Inflation has affected our performance by increasing our radio station operating expenses in terms of higher
costs for wages and multi-year vendor contracts with assumed inflationary built-in escalator clauses. The exact effects
of inflation, however, cannot be reasonably determined. There can be no assurance that a high rate of inflation in the
future would not have an adverse effect on our profits, especially since our Credit Facility is variable rate.
Recent Accounting Pronouncements
For a discussion of recently issued accounting standards, see Note 2, Significant Accounting Policies, in the
accompanying consolidated financial statements.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities
as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting
period. We base our estimates on historical experience and various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily available from other sources. Actual results may differ from these estimates under
different circumstances or by using different assumptions.
We consider the following policies to be important in understanding the judgments involved in preparing our
consolidated financial statements and the uncertainties that could affect our financial position, results of operations or
cash flows:
Revenue Recognition
In May 2014, the accounting guidance for revenue recognition was modified and subsequently updated
several times with amendments. We adopted the amended accounting guidance for revenue recognition on January 1,
46
2018 using the modified retrospective transition method. As a result, we changed our accounting policy for revenue
recognition. Refer to Note 4, Revenue, included elsewhere in this report for additional information. Except for this
change, we consistently applied our accounting policies to all periods presented in these consolidated financial
statements.
We generate revenue from the sale to advertisers of various services and products, including but not limited
to: (i) commercial broadcast time; (ii) digital advertising; (iii) local events; (iv) e-commerce where an advertiser’s
goods and services are sold through our websites; and (v) integrated digital advertising solutions.
Revenue from services and products is recognized when delivered.
Advertiser payments received in advance of when the products or services are delivered are recorded on our
balance sheet as unearned revenue.
Revenues presented in the consolidated financial statements are reflected on a net basis, after the deduction
of advertising agency fees by the advertising agencies. We also evaluate when it is appropriate to recognize revenue
based on the gross amount invoiced to the customer or the net amount retained by us if a third party is involved.
Allowance for Doubtful Accounts
We evaluate our allowance for doubtful accounts on an ongoing basis. We establish our allowance for
doubtful accounts based upon our collection experience and the assessment of the collectability of specific amounts.
Our historical estimates have been a reliable method to estimate future allowances.
Contingencies and Litigation
On an ongoing basis, we evaluate our exposure related to contingencies and litigation and record a liability
when available information indicates that a liability is probable and estimable. We also disclose significant matters
that may reasonably result in a loss or are probable but not estimable.
Estimation of Our Tax Rates
We must make certain estimates and judgments in determining income tax expense for financial statement
purposes. These estimates and judgments must be used in the calculation of certain tax assets and liabilities because of
differences in the timing of recognition of revenue and expense for tax and financial statement purposes. As changes
occur in our assessments regarding our ability to recover our deferred tax assets, our tax provision is increased in any
period in which we determine that the recovery is not probable.
We expect our effective tax rate, before discrete items, changes in the valuation allowance, the tax expense
associated with non-amortizable assets and impairment losses, to be between 30% and 32%. We also have certain
NOLs to utilize that will be available to reduce the amount of cash taxes payable in future years. This rate reflects a
reduction in the federal corporate income tax rate to 21% beginning in 2018 as a result of the enactment of the TCJA.
In 2018, our tax rate was 1.1%. This rate was lower than the federal statutory rate of 21% primarily due to an
impairment on our goodwill during the fourth quarter of 2018 which is not deductible for income tax purposes. The
income tax rate is lower than in previous years primarily due to an income tax benefit resulting from the TCJA that
was enacted on December 22, 2017, which reduced the federal corporate tax rate from the previous rate of 35% to
21%.
The income tax rate in 2017 of (1068.0%) was significantly impacted by an income tax benefit related to
TCJA legislation enacted in December 2017, which resulted in a re-measurement of our deferred tax assets and
liabilities at the new federal corporate income tax rate of 21%.
The income tax rate in 2016 of 28.0% was lower due to certain discrete income tax benefits.
The calculation of our tax liabilities requires us to account for uncertainties in the application of complex tax
regulations. We recognize liabilities for uncertain tax positions based on the two-step process prescribed within the
interpretation of accounting for uncertain tax positions. The first step is to evaluate the tax position for recognition of
a tax benefit by determining if the weight of available evidence indicates that it is more likely than not that the
position will be sustained on audit based upon its technical merits, including resolution of related appeals or litigation
processes, if any. The second step requires us to estimate and measure the tax benefit as the largest amount that has
47
greater than a 50% likelihood of being realized upon ultimate settlement. It is inherently difficult and subjective to
estimate such amounts, as this requires us to determine the probability of various possible outcomes. We evaluate
these uncertain tax positions, and review whether any new uncertain tax positions have arisen, on a quarterly basis.
This evaluation is based on factors including, but not limited to, changes in facts or circumstances, changes in tax law,
effectively settled issues under audit, historical experience with similar tax matters, guidance from our tax advisors,
and new audit activity. A change in recognition or measurement would result in the recognition of a tax benefit or an
additional charge to the tax provision in the period in which the change occurs.
We believe our estimates of the value of our tax contingencies and valuation allowances are critical
accounting estimates, as they contain assumptions based on past experiences and judgments about potential actions by
taxing jurisdictions. It is reasonably likely that the ultimate resolution of these matters may be greater or less than the
amount that we have currently accrued. The effect of a 1% change in our estimated tax rate as of December 31, 2018
would be a change in income tax benefit, and a change in net income available to common shareholders of $3.7
million. This change in income tax benefit would result in a change of $0.03 to net income available to common
shareholders per basic and diluted share for 2018.
Radio Broadcasting Licenses and Goodwill
We have made acquisitions in the past for which a significant amount of the purchase price was allocated to
broadcasting licenses and goodwill assets. As of December 31, 2018, we recorded approximately $3,056 million in
radio broadcasting licenses and goodwill, which represented approximately 76% of our total assets as of that date. We
must conduct impairment testing at least annually, or more frequently if events or changes in circumstances indicate
that the assets might be impaired, and charge to operations an impairment expense in the periods in which the
recorded value of these assets is more than their fair value. Any such impairment could be material. After an
impairment expense is recognized, the recorded value of these assets will be reduced by the amount of the impairment
expense and that result will be the assets’ new accounting basis.
Prior to 2018, our most recent impairment loss to our broadcasting licenses was in 2012 and our most recent
impairment loss to our goodwill was in 2017. As a result of our annual impairment test during the second quarter of
2018, we did not recognize an impairment loss on our broadcasting licenses or goodwill.
The annual impairment test in 2018 did not include the broadcasting licenses or goodwill acquired in the
Jerry Lee Transaction during the third quarter of 2018. For the station acquired in the Jerry Lee Transaction, similar
valuation techniques that were used in the annual impairment testing process were applied to the valuation of the
broadcasting licenses and goodwill under purchase price accounting. The valuation of the acquired broadcasting
licenses and goodwill approximates the fair value.
In evaluating whether events or changes in circumstances indicate that an interim impairment assessment is
required, we consider several factors in determining whether it is more likely than not that the carrying value of our
broadcasting licenses or goodwill exceeds the fair value of our broadcasting licenses or goodwill. Our qualitative
analysis considers: (i) macroeconomic conditions such as deterioration in general economic conditions, limitations on
accessing capital, or other developments in equity and credit markets; (ii) industry and market considerations such as
deterioration in the environment in which we operate, an increased competitive environment, a change in the market
for our products or services, or a regulatory or political development; (iii) cost factors such as increases in labor or
other costs that have a negative effect on earnings and cash flows; (iv) overall financial performance such as negative
or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected
results of relevant prior periods; (v) other relevant entity-specific events such as changes in management, key
personnel, strategy, or customers, bankruptcy, or litigation; (vi) events affecting a reporting unit such as a change in
the composition or carrying amount of our net assets; and (vii) a sustained decrease in our share price.
We evaluate the significance of identified events and circumstances on the basis of the weight of evidence
along with how they could affect the relationship between our broadcasting licenses and goodwill’s fair value and
carrying amount, including positive mitigating events and circumstances.
Subsequent to the annual impairment test conducted during the second quarter of 2018, we continued to
monitor these factors listed above and determined that a sustained decrease in our share price required us to conduct
an interim impairment assessment on our broadcasting licenses and goodwill. Due to changes in facts and
circumstances, we revised our estimates with respect to our estimated operating profit margins and long-term revenue
growth rates used in the impairment assessment. As a result of our interim impairment assessment conducted in the
fourth quarter of 2018, we recorded a $147.9 million impairment ($108.8 million, net of tax) on our broadcasting
licenses and a $317.1 million impairment ($314.4 million, net of tax) on our goodwill. The interim impairment
48
assessment conducted on our broadcasting licenses and goodwill in the fourth quarter of 2018 followed the same
methodology used in the annual impairment assessment conducted in the second quarter of 2018.
We believe our estimate of the value of our radio broadcasting licenses and goodwill assets is an important
accounting estimate as the value is significant in relation to our total assets, and our estimate of the value uses
assumptions that incorporate variables based on past experiences and judgments about future performance of our
stations.
Broadcasting Licenses Impairment Test
We perform our annual broadcasting license impairment test by evaluating our broadcasting licenses for
impairment at the market level using the Greenfield method.
During the second quarter of the current year and each of the past several years, we completed our annual
impairment test for broadcasting licenses and determined that the fair value of our broadcasting licenses was greater
than the amount reflected in the balance sheet for each of our markets and, accordingly, no impairment was recorded.
We perform our broadcasting license impairment test by using the Greenfield method at the market level.
Each market’s broadcasting licenses are combined into a single unit of accounting for purposes of testing impairment,
as the broadcasting licenses in each market are operated as a single asset. We determine the fair value of the
broadcasting licenses in each of our markets by relying on a discounted cash flow approach (a 10-year income model)
assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. Our 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. These assumptions include, but are not limited to: (i) the discount rate; (ii) the market share and profit margin
of an average station within a market based upon market size and station type; (iii) the forecast growth rate of each
radio market; (iv) the estimated capital start-up costs and losses incurred during the early years; (v) the likely media
competition within the market area; (vi) the tax rate; and (vii) future terminal values. Changes in our estimates of the
fair value of these assets could result in material future period write-downs of the carrying value of our broadcasting
licenses and goodwill assets.
The methodology used by us in determining our key estimates and assumptions was applied consistently to
each market. Of the seven variables identified above, we believe that the assumptions in items (i) through (iii) above
are the most important and sensitive in the determination of fair value.
Assumptions and Results – Broadcasting Licenses
The following table reflects the estimates and assumptions used in the interim impairment test conducted in
the fourth quarter of the 2018 and the annual impairment test conducted in the second quarter of 2018 as compared to
the second quarter of 2017, the date of the most recent prior impairment test:
Discount rate
Operating profit margin ranges expected
for average stations in the markets
where the Company operates
Long-term revenue growth rate range
of the Company's markets
Estimates And Assumptions
Fourth
Quarter
2018
9.00%
Second
Quarter
2018
9.00%
Second
Quarter
2017
9.25%
22% to 37%
22% to 37%
19% to 40%
0.0% to 0.9%
0.5% to 1.0%
1.0% to 2.0%
We believe we have made reasonable estimates and assumptions to calculate the fair value of our
broadcasting licenses; however, these estimates and assumptions could be materially different from actual results.
If actual market conditions are less favorable than those projected by the industry or by us, or if events occur
or circumstances change that would reduce the fair value of our broadcasting licenses below the amount reflected on
49
the balance sheet, we may be required to conduct an interim test and possibly recognize impairment charges, which
could be material, in future periods.
The table below: (i) includes the station acquired in the Jerry Lee Transaction; (ii) excludes the station
divested in the WXTU Transaction; and (iii) reflects the $147.9 million impairment ($108.8 million, net of tax)
recorded on the broadcasting licenses in the fourth quarter of 2018. This table presents the percentage within a range
by which the fair value exceeded the carrying value of our radio broadcasting licenses as of December 31, 2018 for 44
units of accounting (44 geographical markets) where the carrying value of the licenses is considered material to our
financial statements. Four of our 48 markets that were subject to testing are considered immaterial.
Rather than presenting the percentage separately for each unit of accounting, management’s opinion is that
this table in summary form is more meaningful to the reader in assessing the recoverability of the broadcasting
licenses. In addition, the units of accounting are not disclosed with the specific market name as such disclosure could
be competitively harmful to us.
Units of Accounting as of December 31, 2018
Based Upon the Valuation as of December 31, 2018
Percentage Range by Which Fair Value Exceeds the Carrying Value
0% To
5%
Greater
Than 5%
To 10%
Greater
Than 10%
To 15%
Greater
Than
15%
Number of units of accounting
Carrying value (in thousands)
22
$
1,458,968 $
4
388,281 $
2
142,308 $
16
525,158
Broadcasting Licenses Valuation at Risk
After the interim impairment test conducted on our broadcasting licenses in the fourth quarter of 2018, the
results indicated that there were 26 units of accounting where the fair value exceeded their carrying value by 10% or
less. As stated above, this figure includes the impact of: (i) the addition of broadcasting licenses in the Jerry Lee
Transaction; (ii) the disposition of broadcasting licenses in the WXTU Transaction; and (iii) the impairment charge
recorded in the fourth quarter of 2018. In aggregate, these 26 units of accounting have a carrying value of $1,847.2
million. As a result of the $147.9 million impairment ($108.8 million, net of tax) booked in the fourth quarter of
2018, we wrote down the carrying value of our broadcasting licenses in 22 markets. As a result, the percentage by
which fair value of our broadcasting licenses exceeds carrying value is 0% in 22 of our 48 markets. If overall market
conditions or the performance of the economy deteriorates, advertising expenditures and radio industry results could
be negatively impacted, including expectations for future growth. This could result in future impairment charges for
these or other of our units of accounting, which could be material.
Goodwill Impairment Test
We perform our annual goodwill impairment test during the second quarter of each year.
The amended accounting guidance for accounting for goodwill impairment eliminated the second step of the
goodwill impairment test, which reduced the cost and complexity of evaluating goodwill for impairment. We adopted
this amended accounting guidance in the second quarter of 2017. Under the former accounting guidance, the second
step of the impairment test required us to compute the implied fair value of goodwill by assigning the fair value of a
reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination.
Under the amended guidance, if the carrying amount of goodwill of a reporting unit exceeds its fair value, we will
consider the goodwill to be impaired.
In prior years, we determined that each individual radio market was a reporting unit and we assessed
goodwill in each of our markets. Under the amended guidance, if the fair value of any reporting unit was less than the
amount reflected on the balance sheet, we would recognize an impairment charge for the amount by which the
carrying amount exceeded the reporting unit’s fair value. The loss recognized would not exceed the total amount of
goodwill allocated to the reporting unit.
Following our Merger with CBS Radio in November 2017, our radio broadcasting operations increased from
28 radio markets to 48 radio markets. In response to the realignment in our operating segments and reporting units,
we considered whether the event represented a triggering event for the interim goodwill impairment testing. During
50
the three months ended June 30, 2018, and prior to conducting the current year annual impairment testing described
below, we made an evaluation, based on factors such as each reporting unit’s total market share and changes in
operating cash flow margins, and concluded that it was more likely than not that the fair value of each of our reporting
units exceeded their carrying values at the time of the realignment.
Current Year Methodology
In connection with our current year annual and interim goodwill impairment assessment, we used an income
approach in computing the fair value of the Company. This approach utilized a discounted cash flow method by
projecting our income over a specified time and capitalizing at an appropriate market rate to arrive at an indication of
the most probable selling price. We believe that this approach is commonly used and is an appropriate methodology
for valuing the Company. Factors contributing to the determination of our operating performance were historical
performance and/or our estimates of future performance.
Prior Year Methodology
In connection with our prior year annual goodwill impairment assessment, we first assessed qualitative
factors to determine whether it was necessary to perform a quantitative assessment for each reporting unit. These
qualitative factors included, but were not limited to: (i) macroeconomic conditions; (ii) radio broadcasting industry
considerations; (iii) financial performance of reporting units; (iv) Company-specific events; and (v) a sustained
decrease in our share price. If the quantitative assessment was necessary, we determined the fair value of the goodwill
allocated to each reporting unit.
To determine the fair value, we used a market approach and, when appropriate, an income approach in
computing the fair value of each reporting unit. The market approach calculated the fair value of each market’s radio
stations by analyzing recent sales and offering prices of similar properties expressed as a multiple of cash flow. The
income approach utilized a discounted cash flow method by projecting the subject property’s income over a specified
time and capitalizing at an appropriate market rate to arrive at an indication of the most probable selling price. We
believe that these approaches are commonly used and appropriate methodologies for valuing broadcast radio stations.
Factors contributing to the determination of the reporting unit’s operating performance were historical performance
and/or our estimates of future performance.
Assumptions and Results - Goodwill
The following table reflects certain key estimates and assumptions used in the interim impairment test
conducted in the fourth quarter of 2018 and the annual impairment test conducted in the second quarter of 2018 as
compared to the second quarter of 2017, the date of the most recent prior annual impairment test:
Discount rate
Market multiple used in the market
valuation approach
Fourth
Quarter
2018
9.00%
Estimates And Assumptions
Second
Quarter
2018
9.00%
Second
Quarter
2017
9.25%
not applicable
not applicable
7.5x to 8.0x
We believe we have made reasonable estimates and assumptions to calculate the fair value of our goodwill;
however, these estimates and assumptions could be materially different from actual results.
During the second quarter of the current year, our quantitative assessment indicated that the fair value of
goodwill exceeded the carrying amount of goodwill allocated to the Company. Accordingly, we did not recognize an
impairment charge during the second quarter of 2018.
All of our goodwill, with the exception of the goodwill acquired in the Jerry Lee Transaction during the third
quarter of the current year, was subject to the annual impairment test conducted in the second quarter of the current
year. For the station acquired in the Jerry Lee Transaction, similar valuation techniques that were used in the annual
impairment testing process were applied to the valuation of the goodwill under purchase price accounting. The
valuation of the acquired goodwill approximates fair value.
51
If actual market conditions are less favorable than those projected by the industry or us, or if events occur or
circumstances change that would reduce the fair value of our goodwill below the amount reflected in the balance
sheet, we may be required to conduct an interim test and possibly recognize impairment charges, which could be
material, in future periods.
Goodwill Valuation At Risk
The second quarter 2018 impairment test of our goodwill indicated that the fair value exceeded the carrying
value. After the interim impairment test conducted on our goodwill in the fourth quarter of 2018, the results indicated
that the carrying value of goodwill exceeded the fair value. As a result of the $317.1 million goodwill impairment
($314.4 million, net of tax) booked in the fourth quarter of 2018, the percentage by which fair value of our goodwill
exceeds carrying value is 0%.
Future impairment charges may be required on our goodwill, as the discounted cash flow model is subject to
change based upon our performance, our stock price, peer company performance and their stock prices, overall market
conditions, and the state of the credit markets. We continue to monitor these relevant factors to determine if an
interim impairment assessment is warranted. If there is a continued and sustained decline in the share price of our
common stock, we may need to conduct an interim impairment test, which could result in an impairment charge in
future periods.
Sensitivity of Key Broadcasting Licenses and Goodwill Assumptions
If we were to assume a 100 basis point change in certain of our key assumptions (a reduction in the long-term
revenue growth rate, a reduction in the operating performance cash flow margin and an increase in the weighted
average cost of capital) used to determine the fair value of our broadcasting licenses and goodwill using the income
approach during the fourth quarter of 2018, the following would be the incremental impact:
Sensitivity Analysis (1)
Results of
Long-Term
Revenue
Growth
Rate
Decrease
Results of
Operating
Profit
Margin
Decrease
(amounts in thousands)
Results of
Weighted
Average
Cost of
Capital
Increase
287,284 $
206,186 $
384,763
227,374
not applicable
$
303,096
Broadcasting Licenses
Incremental broadcasting licenses impairment
Goodwill (2)
Incremental goodwill impairment
$
$
(1)
(2)
Each assumption used in the sensitivity analysis is independent of the other assumptions.
The sensitivity goodwill analysis is computed using data from testing goodwill using the income approach
under step 1. The goodwill valuation is based on discrete projections of revenue and expenses. As such, the
operating performance cash flow margin is a derived result rather than an input. Accordingly, computation
of a change in this figure is not applicable.
To determine the radio broadcasting industry’s future revenue growth rate, management uses publicly
available information on industry expectations rather than management’s own estimates, which could be different. In
addition, these long-term market growth rate estimates could vary in each of our markets. Using the publicly available
information on industry expectations, each market’s revenues were forecasted over a ten-year projection period to
reflect the expected long-term growth rate for the radio broadcast industry, which was further adjusted for each of our
markets. If the industry’s growth is less than forecasted, then the fair value of our broadcasting licenses could be
negatively impacted.
Operating profit is defined as profit before interest, depreciation and amortization, income tax and corporate
allocation charges. Operating profit is then divided by broadcast revenues, net of agency and national representative
52
commissions, to compute the operating profit margin. For the broadcast license fair value analysis, the projections of
operating profit margin that are used are based upon industry operating profit norms, which reflect market size and
station type. These margin projections are not specific to the performance of our radio stations in a market, but are
predicated on the expectation that a new entrant into the market could reasonably be expected to perform at a level
similar to a typical competitor. For the goodwill fair value analysis, the projections of operating margin are based on
our actual historical performance. If the outlook for the radio industry’s growth declines, then operating profit margins
in both the broadcasting license and goodwill fair value analyses would be negatively impacted, which would decrease
the value of those assets.
The discount rate to be used by a typical market participant reflects the risk inherent in future cash flows for
the broadcast industry. The same discount rate was used for each of our markets. The discount rate is calculated by
weighting the required returns on interest-bearing indebtedness and common equity capital in proportion to their
estimated percentages in an expected capital structure. The capital structure was estimated based upon data available
for publicly traded companies in the broadcast industry.
See Note 6, Intangible Assets and Goodwill, in the accompanying notes to our audited consolidated financial
statements, for a discussion of intangible assets and goodwill.
For a more comprehensive list of our accounting policies, see Note 2, Significant Accounting Policies,
accompanying the consolidated financial statements included within this annual report. Note 2 to our audited
consolidated financial statements contains several other policies, including policies governing the timing of revenue
and expense recognition, that are important to the preparation of our consolidated financial statements, but do not
meet the SEC’s definition of critical accounting policies because they do not involve subjective or complex
judgments. In addition, for further discussion of new accounting policies that were effective for us on January 1,
2018, see the new accounting standards under Note 2, Significant Accounting Policies, to the accompanying notes to
our audited consolidated financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to market risk from changes in interest rates on our variable rate senior indebtedness (the
Term B-1 Loan and Revolver).
If the borrowing rates under LIBOR were to increase 1% above the current rates as of December 31, 2018,
our interest expense on: (i) our Term B-1 Loan would increase $12.9 million on an annual basis; and (ii) our Revolver
would increase by $2.5 million, assuming our entire Revolver was outstanding as of December 31, 2018. From time
to time, we may seek to limit our exposure to interest rate volatility through the use of interest rate hedging
instruments.
Assuming LIBOR remains flat, interest expense in 2019 versus 2018 is expected to be lower as we anticipate
reducing our outstanding debt upon which interest is computed. We may seek from time to time to amend our Credit
Facility or obtain additional funding, which may result in higher interest rates on our indebtedness and could increase
our exposure to variable rate indebtedness.
As of December 31, 2018, there were no interest rate hedging transactions outstanding.
Our credit exposure under hedging agreements similar to the agreements that we have entered into in the
past, or similar agreements that we may enter into in the future, is the cost of replacing such agreements in the event
of nonperformance by our counterparty. To minimize this risk, we select high credit quality counterparties. We do not
anticipate nonperformance by such counterparties who we may enter into agreements with in the future, but we could
recognize a loss in the event of nonperformance.
From time to time, we may invest all or a portion of our cash in cash equivalents, which are money market
instruments consisting of short-term government securities and repurchase agreements that are fully collateralized by
government securities. As of December 31, 2018, we have investments in money market instruments of
approximately $69.4 million, which are reflected on our balance sheet as restricted cash. We deposited proceeds from
the sale of a parcel of land in Chicago, Illinois and proceeds from the sale of land and buildings in Los Angeles,
California into accounts of a QI. We deposited the proceeds into an account of a QI to comply with requirements
under Section 1031 of the Code to execute a like-kind exchange. This process will allow us to effectively minimize
our tax liability in connection with the gains recognized on these asset sales. The cash proceeds in the accounts of the
QIs are invested in money market accounts. We do not believe that we have any material credit exposure with respect
to these assets.
53
Our credit exposure related to our accounts receivable does not represent a significant concentration of credit
risk due to the quantity of advertisers, the minimal reliance on any one advertiser, the multiple markets in which we
operate and the wide variety of advertising business sectors.
See also additional disclosures regarding liquidity and capital resources made under Part II, Item 7, above.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our consolidated financial statements, together with related notes and the report of PricewaterhouseCoopers
LLP, our independent registered public accounting firm, are set forth on the pages indicated in Part IV, Item 15.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Controls and Procedures
We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act that are designed to ensure that: (i) information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii)
such information is accumulated and communicated to our management, including our Chief Executive Officer and
our Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing
and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, and our management is required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures.
Changes in Internal Control over Financial Reporting
On November 17, 2017, we completed the Merger with CBS Radio as described elsewhere in this report.
The completion of this Merger had a material impact on our financial position, results of operations and cash flows
from the date of acquisition through December 31, 2018. The Merger also resulted in significant changes to our
internal control environment over financial reporting.
During our most recent fiscal quarter ended December 31, 2018, we completed the process of integrating
CBS Radio’s systems of internal control over financial reporting into our internal control over financial reporting
structure. We included these newly incorporated controls in our evaluation of internal control over financial reporting
and related disclosure controls and procedures.
Other than incorporating CBS Radio as mentioned above, there has been no change in the Company’s
internal controls over financial reporting during the Company’s most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the Company’s internal controls over financial reporting.
Management's Report on Internal Control over Financial Reporting
Internal control over financial reporting refers to the process designed by, or under the supervision of, our
Chief Executive Officer and Chief Financial Officer, and effected by our Board, management and other personnel, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles, and includes those policies and
procedures that:
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted accounting principles, and that receipts and
54
expenditures of the Company are being made only in accordance with authorizations of management and
directors of the Company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use
or disposition of the Company's assets that could have a material effect on the consolidated financial
statements.
Management has used the criteria established in Internal Control – Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission to evaluate the effectiveness of the
Company's internal control over financial reporting. Based on this evaluation, management has concluded that the
Company's internal control over financial reporting was effective as of December 31, 2018. The effectiveness of the
internal control over financial reporting as of December 31, 2018 has been audited by
Company’s
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which
appears under Item 15.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting
objectives because of its inherent limitations. Internal control over financial reporting is a process that involves human
diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal
control over financial reporting also can be circumvented by collusion or improper management override. Because of
such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis by
internal control over financial reporting. However, these inherent limitations are known features of the financial
reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this
risk. Management is responsible for establishing and maintaining adequate internal control over financial reporting for
the Company.
David J. Field, Chairman, Chief Executive Officer and President
Richard J. Schmaeling, Executive Vice President & Chief Financial Officer
ITEM 9B. OTHER INFORMATION
None.
55
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item 10 is incorporated in this report by reference to the applicable
information set forth in our proxy statement for the 2019 Annual Meeting of Shareholders, which we expect to file
with the SEC prior to 120 days after the end of the fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 is incorporated in this report by reference to the applicable
information set forth in our proxy statement for the 2019 Annual Meeting of Shareholders, which we expect to file
with the SEC prior to 120 days after the end of the fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
The information required by this Item 12 is incorporated in this report by reference to the applicable
information set forth in our proxy statement for the 2019 Annual Meeting of Shareholders, which we expect to file
with the SEC prior to 120 days after the end of the fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR
INDEPENDENCE
The information required by this Item 13 is incorporated in this report by reference to the applicable
information set forth in our proxy statement for the 2019 Annual Meeting of Shareholders, which we expect to file
with the SEC prior to 120 days after the end of the fiscal year.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item 14 is incorporated in this report by reference to the applicable
information set forth in our proxy statement for the 2019 Annual Meeting of Shareholders, which we expect to file
with the SEC prior to 120 days after the end of the fiscal year.
56
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a)
The following documents are filed as part of this Report:
PART IV
Document
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm ................................................................................. 59
Consolidated Financial Statements
Balance Sheets as of December 31, 2018 and December 31, 2017 ....................................................................... 61
Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016 ............................................ 62
Statements of Shareholders’ Equity for the Years Ended
December 31, 2018, 2017 and 2016 ........................................................................................................... 65
Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016 .......................................... 68
Notes to Consolidated Financial Statements ......................................................................................................... 70
Index to Exhibits ................................................................................................................................................................. 136
Form 10-K Summary Page .................................................................................................................................................. 138
57
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Entercom Communications Corp.:
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Entercom Communications Corp. and its
subsidiaries (the “Company”) as of December 31, 2018 and 2017, and the related consolidated statements of
operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2018,
including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited
the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2018 in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the COSO.
Change in Accounting Principles
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it
accounts for revenue from contracts with customers in 2018 and the manner in which it accounts for stock-based
compensation in 2017.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial
reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A.
Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's
internal control over financial reporting based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of
the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of
material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles
used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated
financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating
the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that
58
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance
with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 27, 2019
We have served as the Company’s auditor since 2002.
59
CONSOLIDATED FINANCIAL STATEMENTS OF ENTERCOM COMMUNICATIONS CORP.
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
DECEMBER 31,
2018
DECEMBER 31,
2017
ASSETS:
Cash
Restricted cash
Accounts receivable, net of allowance for doubtful accounts
Prepaid expenses, deposits and other
$
Total current assets
Investments
Net property and equipment
Radio broadcasting licenses
Goodwill
Assets held for sale
Other assets, net of accumulated amortization
$
122,893
69,365
342,766
25,205
560,229
11,205
317,030
2,516,625
539,469
19,603
56,197
34,167
-
341,989
24,347
400,503
9,955
346,507
2,649,959
862,000
212,320
57,957
TOTAL ASSETS
$
4,020,358
$
4,539,201
LIABILITIES:
Accounts payable
Accrued expenses
Other current liabilities
Long-term debt, current portion
Total current liabilities
Long-term debt, net of current portion
Deferred tax liabilities
Other long-term liabilities
Total long-term liabilities
Total liabilities
$
CONTINGENCIES AND COMMITMENTS
SHAREHOLDERS' EQUITY:
Class A common stock $0.01 par value; voting; authorized 200,000,000 shares;
issued and outstanding 137,180,213 in 2018 and 139,675,781 in 2017
Class B common stock $0.01 par value; voting; authorized 75,000,000 shares;
issued and outstanding 4,045,199 in 2018 and 2017
Class C common stock $0.01 par value; nonvoting; authorized 50,000,000
shares; no shares issued and outstanding
Additional paid-in capital
Retained earnings (accumulated deficit)
Total shareholders' equity
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
See notes to consolidated financial statements.
$
1,858
58,449
118,438
-
178,745
1,872,203
545,982
89,168
2,507,353
2,686,098
1,372
-
40
-
-
-
1,693,512
(360,664)
1,334,260
4,020,358
$
598
76,565
107,561
13,319
198,043
1,859,442
609,789
107,567
2,576,798
2,774,841
1,397
40
-
1,737,132
25,791
1,764,360
4,539,201
60
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share and per share data)
NET REVENUES
OPERATING EXPENSE:
Station operating expenses
Depreciation and amortization expense
Corporate general and administrative expenses
Integration costs
Restructuring charges
Impairment loss
Merger and acquisition costs
Other expenses related to financing
Net time brokerage agreement (income) fees
Net (gain) loss on sale or disposal of assets
Total operating expense
OPERATING INCOME (LOSS)
NET INTEREST EXPENSE
Net (gain) loss on extinguishment of debt
Net recovery of a claim
OTHER (INCOME) EXPENSE
INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)
INCOME TAXES (BENEFIT)
NET INCOME (LOSS) AVAILABLE TO THE COMPANY -
CONTINUING OPERATIONS
Preferred stock dividend
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS - CONTINUING OPERATIONS
Income from discontinued operations, net of income taxes (benefit)
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS PER SHARE - BASIC AND DILUTED
YEARS ENDED DECEMBER 31,
2016
2017
2018
$ 1,462,567 $
592,884 $
464,771
1,099,278
44,288
69,492
25,372
5,830
493,988
3,014
-
(918)
(12,158)
1,728,186
(265,619)
101,121
-
-
-
443,512
15,546
47,859
-
16,922
952
41,313
2,213
130
11,853
580,300
12,584
32,521
4,135
-
4,135
(366,740)
(24,072)
(4,153)
(257,085)
(362,587)
-
(362,587)
1,152
233,013
(2,015)
230,998
836
323,270
9,793
33,328
-
-
254
708
565
417
(1,621)
366,714
98,057
36,639
10,858
(2,299)
8,559
52,859
14,794
38,065
(1,901)
36,164
-
$
(361,435) $
231,834 $
36,164
Net income (loss) from continuing operations per share available to common
shareholders - Basic and Diluted
$
(2.63) $
4.49 $
0.94
Net income (loss) from discontinued operations per share available to
common shareholders - Basic and Diluted
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS PER SHARE - BASIC AND DILUTED
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS PER SHARE - DILUTED
Net income (loss) from continuing operations per share available to common
shareholders - Diluted
Net income (loss) from discontinued operations per share available to
common shareholders - Diluted
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS PER SHARE - DILUTED
WEIGHTED AVERAGE SHARES:
$
$
$
$
$
61
0.01 $
0.02 $
-
(2.62) $
4.51 $
0.94
(2.63) $
4.37 $
0.91
0.01 $
0.02 $
-
(2.62) $
4.38 $
0.91
Basic
Diluted
138,069,608
51,392,899
38,500,495
138,069,608
52,885,156
39,568,062
See notes to consolidated financial statements.
62
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
(amounts in thousands, except share data)
Common Stock
Class A
Class B
Shares
32,480,551 $
Amount
Shares
7,197,532 $
Amount
-
325
-
1,095,759
11
31,933
134,238
(232,297)
-
-
-
33,510,184
-
-
1
(2)
-
-
-
335
-
-
-
-
-
-
-
-
-
7,197,532
-
3,152,333
101,407,494
618,325
-
32
1,014
6
-
(3,152,333)
-
-
-
2,066,241
21
14,833
8,250
(932,600)
(169,279)
-
-
-
-
-
(9)
(2)
-
-
-
-
-
-
-
-
-
-
-
Additional
Paid-in
Capital
Retained
Earnings
(Accumulated
Deficit)
72 $
-
611,754 $
-
(250,701) $
38,065
-
-
-
-
-
-
-
72
-
(32)
-
-
-
-
-
-
-
-
-
-
-
6,528
379
264
(2,266)
(8,666)
(1,788)
(602)
605,603
-
-
1,160,102
6,771
1,007
9,546
182
42
(10,666)
(2,563)
(29,296)
(1,556)
(2,574)
-
-
-
-
-
-
-
(212,636)
233,849
-
-
-
-
-
-
-
-
-
-
-
-
Total
361,450
38,065
6,539
379
265
(2,268)
(8,666)
(1,788)
(602)
393,374
233,849
-
1,161,116
6,777
1,007
9,567
182
42
(10,675)
(2,565)
(29,296)
(1,556)
(2,574)
-
139,675,781
-
-
1,397
-
-
4,045,199
-
-
40
-
534
1,737,132
-
4,578
25,791
(361,435)
5,112
1,764,360
(361,435)
63
Balance, December 31, 2015
Net income (loss) available to the Company
Compensation expense related to granting
of stock awards
Issuance of common stock related to the Employee
Stock Purchase Plan ("ESPP")
Exercise of stock options
Purchase of vested employee restricted
stock units
Payment of dividends on common stock
Payment of dividends on preferred stock
Dividend equivalents, net of forfeitures
Balance, December 31, 2016
Net income (loss) available to the Company
Conversion of Class B common stock
to Class A common stock in the Merger
Issuance of Class A common stock in the Merger
Equity awards assumed in the Merger
Stock options assumed in the Merger
Compensation expense related to granting
of stock awards
Issuance of common stock related to the Employee
Stock Purchase Plan ("ESPP")
Exercise of stock options
Common stock repurchase
Purchase of vested employee restricted
stock units
Payment of dividends on common stock
Dividend equivalents, net of forfeitures
Payment of dividends on preferred stock
Modified retrospective application of
stock-based compensation guidance
Balance, December 31, 2017
Net income (loss) available to the Company
Compensation expense related to granting
of stock awards
Issuance of common stock related to the Employee
Stock Purchase Plan ("ESPP")
Exercise of stock options
Common stock repurchase
Purchase of vested employee restricted
stock units
Payment of dividends on common stock
Dividend equivalents, net of forfeitures
Balance, December 31, 2018
895,834
228,227
113,137
(3,226,300)
(506,466)
-
-
137,180,213 $
9
2
1
(32)
(5)
-
-
1,372
-
-
-
-
-
-
-
4,045,199 $
-
-
-
-
-
-
-
40 $
15,140
1,426
152
(29,375)
(5,181)
(25,782)
-
1,693,512 $
-
-
-
-
15,149
1,428
153
(29,407)
-
(24,861)
(159)
(360,664) $
(5,186)
(50,643)
(159)
1,334,260
See notes to consolidated financial statements.
64
ENTERCOM COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
OPERATING ACTIVITIES:
Net income (loss) available to the Company
YEARS ENDED DECEMBER 31,
2018
2017
2016
$
(361,435)
$
233,849
$
38,065
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization
Net amortization of deferred financing costs
(net of original issue discount and debt premium)
Net deferred taxes (benefit) and other
Provision for bad debts
Net (gain) loss on sale or disposal of assets
Non-cash stock-based compensation expense
Deferred rent
Net loss on extinguishment of debt
Deferred compensation
Impairment loss
Accretion expense (income), net of asset retirement obligation adjustments
Changes in assets and liabilities (net of effects of acquisitions, dispositions,
consolidation, and deconsolidation of Variable Interest Entities (VIEs)):
Accounts receivable
Prepaid expenses, deposits and other
Accounts payable, accrued expenses and other current liabilities
Accrued interest expense
Accrued liabilities - long-term
Prepaid expenses - long-term
Net cash provided by (used in) operating activities
INVESTING ACTIVITIES:
Additions to property and equipment
Proceeds from sale of property, equipment,
intangibles and other assets
Purchases of radio station assets
Additions to amortizable intangible assets
Purchases of investments
Proceeds from sale of property reflected as restricted cash
(Deconsolidation) consolidation of a VIE
Additions to non-amortizable intangible assets
Proceeds from disposition of radio stations
Net cash provided by (used in) investing activities
44,288
15,546
9,793
327
(61,798)
8,909
(12,158)
15,149
5,345
-
(1,357)
493,988
60
1,777
1,431
1,217
(6,278)
(27,216)
-
102,249
1,371
(263,551)
3,715
11,853
9,567
324
4,135
4,247
952
37
(14,127)
14,267
8,370
4,169
(2,738)
(2,874)
29,112
2,897
14,688
1,330
(1,621)
6,539
138
10,858
1,683
254
27
(4,202)
(1,368)
(739)
40
(1,894)
(4,458)
72,030
(29,837)
(20,530)
(7,336)
185,761
(71,434)
(11,949)
(1,250)
70,187
-
-
-
141,478
60,505
(24,000)
(663)
(9,700)
-
(302)
-
12,000
17,310
7,974
(92)
(241)
-
-
302
(112)
-
495
ENTERCOM COMMUNICATIONS CORP.
65
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
YEARS ENDED DECEMBER 31,
2017
2018
2016
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt
Borrowing under the revolving senior debt
Proceeds from capital lease obligations and other
Payments of long-term debt
Payment of call premium and other fees
Retirement of senior subordinated notes
Payment for debt issuance costs
Proceeds from issuance of employee stock plan
Retirement of perpetual cumulative convertible preferred stock
Proceeds from the exercise of stock options
Purchase of vested employee restricted stock units
Payment of dividends on common stock
Payment of dividend equivalents on vested restricted stock units
Repurchase of common stock
Payment of dividends on preferred stock
Net cash provided by (used in) financing activities
-
80,000
-
(81,348)
-
-
-
1,428
-
153
(5,186)
(49,770)
(873)
(30,040)
-
(85,636)
500,000
200,500
-
(669,750)
-
-
(16,302)
182
(27,737)
42
(2,565)
(29,296)
(1,556)
(10,042)
(2,574)
(59,098)
480,000
24,500
102
(293,266)
(5,977)
(220,000)
(8,038)
379
-
265
(2,268)
(8,666)
(94)
-
(1,788)
(34,851)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS
AND RESTRICTED CASH
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF
YEAR
158,091
34,167
(12,676)
46,843
37,674
9,169
$
192,258
$
34,167
$
46,843
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest
Income taxes
Dividends on common stock
Dividends on preferred stock
$
$
$
$
96,843
54,217
49,770
-
$
$
$
$
24,813
2,030
29,296
2,574
$
$
$
$
34,568
381
8,666
1,788
See notes to consolidated financial statements.
66
ENTERCOM COMMUNICATIONS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016
1.
BASIS OF PRESENTATION AND SIGNIFICANT POLICIES
Nature of Business – Entercom Communications Corp. (the “Company”) is the second-largest radio broadcasting
company in the United States. The Company is also a leading local media and entertainment company with a
nationwide footprint of stations including positions in all of the top 16 markets and 22 of the top 25 markets.
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 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.
The Merger was subject to approval by the Company’s shareholders and customary regulatory approvals. As
a result of the Merger, the Company would have owned radio stations in seven markets in excess of the limits set
forth in the Federal Communications Commission’s (the “FCC”) local radio ownership rule. In order to comply
with this FCC rule, and to obtain clearance for the Merger from the Antitrust Division of the U.S. Department of
Justice (“DOJ”), the Company agreed to divest a total of nineteen stations in such markets, consisting of eight
stations owned by the Company and eleven stations owned by CBS Radio. Refer to additional information on
divestitures in Note 3, Business Combinations.
On November 1, 2017, the Company entered into a settlement with the DOJ. On November 9, 2017, the FCC
released an order, pursuant to the Communications Act of 1934, as amended, and the rules and regulations
promulgated thereunder, approving the applications filed by CBS Radio and the Company requesting FCC consent
to the CBS Radio Merger Agreement. Obtaining the FCC Consent, and its effectiveness in accordance with
applicable law and the rules and regulations of the FCC, was a condition to the obligation of CBS, CBS Radio, the
Company, and Merger Sub to the consummation of the Merger. On November 15, 2017, the Company’s
shareholders voted to approve the Merger.
Upon obtaining all required approvals, the Merger closed on November 17, 2017. The results of CBS Radio
have been included in the Company’s consolidated financial statements since the date of acquisition. Refer to Note
3, Business Combinations, for additional information.
The Company’s strategy focuses on providing compelling content in the communities it serves to enable the
Company to offer its advertisers an effective marketing platform to reach a large targeted local audience. The
principal components of the Company’s strategy are to: (i) focus on creating effective integrated marketing solutions
for its customers that incorporate its audio, digital and experiential assets; (ii) build strongly-branded radio stations
with highly compelling content; (iii) develop market leading station clusters; and (iv) recruit, develop, motivate and
retain superior employees.
Changes in Operating Segment
Following the Company’s Merger with CBS Radio in November 2017, the Company’s radio broadcasting
operations increased from 28 radio markets to 48 markets. In connection with the Merger, management further
considered its operating segment and reportable segment conclusions.
Management considered factors including, but not limited to: (i) the favorable impact of the significant
synergies generated through more centralized operating activities; and (ii) how the value of the portfolio of radio
markets is greater than the sum of the value of the individual radio markets in that portfolio. These factors impacted
how the Chief Operating Decision Maker (“CODM”) evaluates the results of a significantly larger company and
how operating decisions are made, which are now performed at the Company level.
This approach is consistent with how operating and capital investment decisions are made as needed, at the
Company level, irrespective of any given market’s size or location. Furthermore, technological enhancements and
systems integration decisions are reached at the Company level and applied to all markets rather than to specific or
individual markets to ensure that each market has the same tools and opportunities as every other market.
67
Management also considered its organizational structure in assessing its operating segments and reportable
segments. Managers at the market level are often responsible for the operational oversight of multiple markets, the
assignment of which is neither dependent upon geographical region nor size. Managers at the market level do not
report to the CODM and instead report to other senior management, who are responsible for the operational
oversight of all 48 radio markets and for communication of results to the CODM.
After consideration of the above, the Company changed its operating segment conclusions during the
second quarter of 2018. The Company now has one operating segment and continues to have one reportable
segment.
Changes in Accounting Policies – Revenue Recognition
The Company adopted the amended accounting guidance for revenue recognition on January 1, 2018 using
the modified retrospective transition method, without a need to make a cumulative-effect adjustment to retained
earnings as of the effective date. As a result, the Company has changed its accounting policy for revenue
recognition as described below. Except for the changes below, the Company has consistently applied its accounting
policies to all periods presented in these consolidated financial statements. Refer to Note 4, Revenue, for additional
information.
Under certain practical expedients elected, the Company did not disclose the amount of consideration
allocated to the remaining performance obligations or an explanation of when the Company expects to recognize
that amount as revenue for all reporting periods presented before January 1, 2018.
Results for reporting periods beginning after January 1, 2018 are presented under the amended accounting
guidance, while prior period amounts are not adjusted and continue to be reported in accordance with the
Company’s historical accounting guidance. Based upon the Company’s assessment, the impact of this guidance is
not material to the Company’s financial position, results of operations or cash flows through December 31, 2018.
The Company recognizes revenue when it satisfies a performance obligation by transferring control over a
product or service to a customer, in an amount that reflects the consideration it expects to be entitled to in exchange
for those products or services.
Revenues presented in the consolidated financial statements are reflected on a net basis, after the deduction
of advertising agency fees by the advertising agencies. The Company also evaluates when it is appropriate to
recognize revenue based on the gross amount invoiced to the customer or the net amount retained by the Company if
a third party is involved.
Reclassifications
Certain reclassifications have been made to the prior years’ statements of cash flow and 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.
SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation – The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries, all of which are 100% owned by the Company. All intercompany transactions and
balances have been eliminated in consolidation. The Company also considers the applicability of any variable
interest entities (“VIEs”) that are required to be consolidated by the primary beneficiary. From time to time, the
Company may enter into a time brokerage agreement (“TBA”) or local marketing agreement (“LMA”) in connection
with a pending acquisition or disposition of radio stations and the requirement to consolidate or deconsolidate a VIE
or separately present activity as discontinued operations may apply, depending on the facts and circumstances
related to each transaction.
As of December 31, 2018, there was one VIE that required consolidation in these consolidated financial
statements. During 2018, the Company entered into an agreement with a third party qualified intermediary (“QI”),
under which the Company is primarily responsible for the oversight and completion of certain construction projects.
This agreement relates to the creation of leasehold improvement assets on property that has already been made
available for tenant use. The Company also believes it is the primary beneficiary of the VIE as the Company has the
power to direct the activities that are most significant to the VIE and the Company has the obligation to absorb
losses or the right to receive returns that would be significant to the VIE during the period of the agreement.
68
Total results of operations of the VIE for the year ended December 31, 2018 were not significant. The
consolidated VIE has a material amount of cash as of December 31, 2018, which was reflected as restricted cash on
the consolidated balance sheet. As restricted cash balances of the QI are used to pay for project costs, restricted cash
balances are released and leasehold improvements are established. The VIE has no other assets or liabilities aside
from the restricted cash balances and capitalized leasehold improvements as of December 31, 2018. The assets of
the Company’s consolidated VIE can only be used to settle the obligations of the VIE. There is a lack of recourse
by the creditors of the VIE against the Company’s general creditors.
As of December 31, 2017, there were no outstanding VIEs. As of December 31, 2016, there was one VIE
requiring consolidation in these financial statements. Refer to Note 20, Contingencies And Commitments, for
further discussion of VIEs requiring consolidation. See Note 19, Assets Held For Sale And Discontinued
Operations, for further discussion on discontinued operations.
Reportable Segment – The Company operates under one reportable business segment, radio broadcasting, for
which segment disclosure is consistent with the management decision-making process that determines the allocation
of resources and the measuring of performance. As discussed above, the Company has one operating segment.
Management’s Use of Estimates – The preparation of consolidated financial statements, in conformity with
accounting principles generally accepted in the United States of America, requires the Company to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and
liabilities, as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses
during the reporting period. Significant estimates and assumptions are used for, but not limited to: (i) asset
impairments, including broadcasting licenses and goodwill; (ii) income tax valuation allowances for deferred tax
assets; (iii) allowance for doubtful accounts and allowance for sales reserves; (iv) self-insurance reserves; (v) fair
value of equity awards; (vi) estimated lives for tangible and intangible assets; (vii) contingency and litigation
reserves; (viii) fair value measurements; (ix) acquisition purchase price asset and liability allocations; and (x)
uncertain tax positions. The Company’s accounting estimates require the use of judgment as future events and the
effect of these events cannot be predicted with certainty. The accounting estimates may change as new events occur,
as more experience is acquired and as more information is obtained. The Company evaluates and updates
assumptions and estimates on an ongoing basis and may use outside experts to assist in the Company’s evaluation,
as considered necessary. Actual results could differ from those estimates.
Income Taxes – The Company applies the asset and liability method to the accounting for deferred income taxes.
Deferred income taxes are recognized for all temporary differences between the tax and financial reporting bases of
the Company’s assets and liabilities based on enacted tax laws and statutory tax rates applicable to the periods in
which the differences are expected to affect taxable income. A valuation allowance is recorded for a net deferred tax
asset balance when it is more likely than not that the benefits of the tax asset will not be realized. The Company
reviews on a continuing basis the need for a deferred tax asset valuation allowance in the jurisdictions in which it
operates. Any adjustment to the deferred tax asset valuation allowance is recorded in the consolidated statements of
operations in the period that such an adjustment is required.
The Company applies the guidance for income taxes and intra-period allocation to the recognition of
uncertain tax positions. This guidance clarifies the recognition, de-recognition and measurement in financial
statements of income tax positions taken in previously filed tax returns or tax positions expected to be taken in tax
returns, including a decision whether to file or not to file in a particular jurisdiction. The guidance requires that any
liability created for unrecognized tax benefits is disclosed. The application of this guidance may also affect the tax
bases of assets and liabilities and therefore may change or create deferred tax liabilities or assets. This guidance also
clarifies the method to allocate income taxes (benefit) to the different components of income (loss), such as: (i)
income (loss) from continuing operations; (ii) income (loss) from discontinued operations; (iii) other comprehensive
income (loss); (iv) the cumulative effects of accounting changes; and (v) other charges or credits recorded directly to
shareholders’ equity. See Note 15, Income Taxes, for a further discussion of income taxes.
Property and Equipment – Property and equipment are carried at cost. Major additions or improvements are
capitalized, including interest expense when material, while repairs and maintenance are charged to expense when
incurred. Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts, and
any gain or loss is recognized in the statement of operations. Depreciation expense on property and equipment is
determined on a straight-line basis.
Depreciation expense for property and equipment, which includes amounts from the VIE in 2016, is
reflected in the following table:
69
Property And Equipment
Years Ended December 31,
2017
(amounts in thousands)
2018
2016
Depreciation expense
$
28,709 $
13,215 $
8,689
As of December 31, 2018, the Company had capital expenditure commitments outstanding of $45.9
million.
The following is a summary of the categories of property and equipment along with the range of estimated
useful lives used for depreciation purposes:
Depreciation Period
In Years
Property And Equipment
December 31,
From
To
2018
2017
Land, land easements and land improvements
Buildings
Equipment
Furniture and fixtures
Capital leases
Leasehold improvements
-
20
3
5
*
*
*
*
Accumulated depreciation
Capital improvements in progress
Net property and equipment
* Shorter of economic life or lease term
15 $
40
40
10
$
110,570
36,038
222,847
18,426
44
71,688
459,613
(158,341)
301,272
15,758
317,030
$ 137,160
46,195
199,044
23,859
44
54,829
461,131
(132,209)
328,922
17,585
$ 346,507
Long-Lived Assets - The Company evaluates the recoverability of its long-lived assets, which include property and
equipment, broadcasting licenses (subject to an eight-year renewal cycle), goodwill, deferred charges, and other
assets. See Note 6, Intangible Assets And Goodwill, for further discussion. Certain of the Company’s equipment,
such as broadcast towers, can provide economic benefit over a longer period of time resulting in the use of longer
lives of up to 40 years.
If events or changes in circumstances were to indicate that an asset’s carrying value is not recoverable, a
write-down of the asset would be recorded through a charge to operations. The determination and measurement of
the fair value of long-lived assets requires the use of significant judgments and estimates. Future events may impact
these judgments and estimates.
Revenue Recognition – The Company generates revenue from the sale to advertisers of various services and
products, including but not limited to: (i) commercial broadcast time; (ii) digital advertising; (iii) local events; (iv) e-
commerce where an advertiser’s goods and services are sold through the Company’s websites; and (v) a suite of
digital products.
Revenue from services and products is recognized when delivered. Advertiser payments received in
advance of when the products or services are delivered are recorded on the Company’s balance sheet as unearned
revenue.
Revenues presented in the consolidated financial statements are reflected on a net basis, after the deduction
of advertising agency fees by the advertising agencies. The Company also evaluates when it is appropriate to
recognize revenue based on the gross amount invoiced to the customer or the net amount retained by the Company if
a third party is involved.
70
Refer to the recent accounting pronouncements section within this note for additional information on
recently issued accounting guidance on revenue recognition. Refer to Note 4, Revenue, for additional information
on the Company’s revenue.
The Company acquired certain contracts in the Merger, which resulted in a significant increase in the
amount of unearned revenue recorded in the consolidated financial statements. Additionally, the Company may also
receive customer advances and deposits. Refer to Note 4, Revenue, Note 8, Other Current Liabilities, and Note 9,
Other Long-Term Liabilities, for additional information.
The following table presents the amounts of unearned revenues as of the periods indicated:
Unearned Revenues
December 31,
Balance Sheet Location
2018
2017
(amounts in thousands)
Current
Long-term
Other current liabilities
$
Other long-term liabilities $
22,692 $
1,138 $
17,519
13,000
Concentration of Credit Risk – The Company’s revenues and accounts receivable relate primarily to the sale of
advertising within its radio stations’ broadcast areas. Credit is extended based on an evaluation of the customers’
financial condition and, generally, collateral is not required. Credit losses are provided for in the financial statements
and consistently have been within management’s expectations. Accounts receivable are recorded at the invoiced
amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount
of probable credit losses in the Company’s existing accounts receivable. The balance in the Company’s allowance
for doubtful accounts is based on the Company’s historical collections, the age of the receivables, specific customer
information, and current economic conditions. Delinquent accounts are written off if collections efforts have been
unsuccessful and the likelihood of recovery is considered remote.
Debt Issuance Costs and Original Issue Discount – The costs related to the issuance of debt are capitalized and
amortized over the lives of the related debt and such amortization is accounted for as interest expense. See Note 10,
Long-Term Debt, for further discussion for the amount of deferred financing expense that was included in interest
expense in the accompanying consolidated statements of operations.
In 2017, the Company refinanced its outstanding debt in conjunction with the Merger. In connection with this
refinancing activity, a portion of the unamortized deferred financing costs associated with the Company’s former
revolving credit facility and a portion of the unamortized deferred financing costs associated with the Company’s
former term loan was written off and included in the statement of operations under loss on extinguishment of debt.
Lender fees and third party fees incurred during the refinancing were capitalized or expensed as appropriate based
on accounting guidance for debt modifications and extinguishments.
During the year ended December 31, 2016, the Company refinanced its previously outstanding debt that included
retiring its $220.0 million 10.5% Senior Notes due December 1, 2019 (the “Former Senior Notes”). In connection
with this refinancing, the unamortized original issue discount associated with the Former Senior Notes was written
off and included in the statement of operations under loss on extinguishment of debt. Refer to Note 10, Long-Term
Debt, for further discussion of the 2017 and 2016 refinancing activity.
Extinguishment of Debt –The Company may amend, append or replace, in part or in full, its outstanding debt. The
Company reviews its unamortized financing costs associated with its outstanding debt to determine the amount
subject to extinguishment under the accounting provisions for an exchange of debt instruments with substantially
different terms or changes in a line-of-credit or revolving-debt arrangement.
On November 17, 2017 and November 1, 2016, the Company refinanced certain of its outstanding debt. In each
refinancing event, a portion of the Company’s outstanding debt was accounted for as an extinguishment. See Note
10, Long-Term Debt for a discussion of the Company’s long-term debt.
Corporate General and Administrative Expense – Corporate general and administrative expense consists of
corporate overhead costs and non-cash compensation expense. Included in corporate general and administrative
expenses are those costs not specifically allocable to any of the Company’s individual business properties.
71
Time Brokerage Agreement (Income) Fees – TBA fees or income consist of fees paid or received under
agreements which permit an acquirer to program and market stations prior to an acquisition. The Company
sometimes enters into a TBA prior to the consummation of station acquisitions and dispositions. The Company may
also enter into a Joint Sales Agreement to market, but not to program, a station for a defined period of time. A
portion of the Company’s TBA income earned is presented in income (loss) from discontinued operations, net of
income taxes (benefit) in the Company’s consolidated statement of operations. TBA fees or income earned from
continuing operations are recorded as a separate line item in the Company’s consolidated statement of operations.
Trade and Barter Transactions – The Company provides advertising broadcast time in exchange for certain
products, supplies and services. The terms of the exchanges generally permit the Company to preempt such
broadcast time in favor of advertisers who purchase time on regular terms. The Company includes the value of such
exchanges in both broadcasting net revenues and station operating expenses. Trade and Barter valuation is based
upon management’s estimate of the fair value of the products, supplies and services received. See Note 16,
Supplemental Cash Flow Disclosures On Non-Cash Activities, for a summary of the Company’s barter transactions.
Business Combinations – Accounting guidance for business combinations provides the criteria to recognize
intangible assets apart from goodwill. Other than goodwill, the Company uses an income or cost method to
determine the fair value of all intangible assets required to be recognized for business combinations. For a
discussion of impairment testing of those assets acquired in a business combination, including goodwill, see Note 6,
Intangible Assets And Goodwill.
Asset Retirement Obligations – The Company reasonably estimates the fair value of an asset retirement obligation.
For an asset retirement obligation that is conditional (uncertainty about the timing and/or method of settlement), the
Company factors into its fair value measurement a probability factor as the obligation depends upon a future event
that may or may not be within the control of the Company.
The following table presents the changes in asset retirement obligations:
Beginning Balance
Additions
Settlements
Revision of estimate
Accretions
Ending Balance
Asset retirement obligations - short term
Asset retirement obligations - long term
Total asset retirement obligations
Asset Retirement Obligations
December 31,
2018
2017
(amounts in thousands)
$
$
$
$
1,714 $
456
(204)
4
60
2,030 $
342 $
1,688
2,030 $
1,044
1,006
(525)
152
37
1,714
457
1,257
1,714
Accrued Compensation – Certain types of employee compensation are paid in subsequent periods. See Note 8,
Other Current Liabilities, for amounts reflected in the balance sheets.
Cash, Cash Equivalents and Restricted Cash – Cash consists primarily of amounts held on deposit with financial
institutions. The Company’s cash deposits with banks are insured by the Federal Deposit Insurance Corporation up
to $250,000 per account. At times, the cash balances held by the Company in financial institutions may exceed
these insured limits. The risk of loss attributable to these uninsured balances is mitigated by depositing funds in
high credit quality financial institutions. The Company has not experienced any losses in such accounts. From time
to time, the Company may invest in cash equivalents, which consists of investments in immediately available money
market accounts and all highly liquid debt instruments with initial maturities of three months or less. The Company
considers all highly liquid investments with a maturity of three months or less to be cash equivalents. Restricted
cash balances consist of amounts that the Company may be restricted in its ability to access or amounts that are
reserved for a specific purpose and therefore not available for immediate or general business use.
72
As of December 31, 2018, the Company has investments in money market instruments of approximately
$69.4 million, which are reflected on the consolidated balance sheet as restricted cash as the Company is temporarily
restricted in its ability to access these funds. The Company deposited proceeds from the sale of a parcel of land in
Chicago, Illinois and proceeds from the sale of land and buildings in Los Angeles, California into accounts of a QI.
Refer to Note 19, Assets Held For Sale And Discontinued Operations, and Note 20, Contingencies and
Commitments, for additional information on these transactions. The Company deposited these proceeds into a QI
account to comply with requirements under Section 1031 of the Internal Revenue Code (the “Code”) to execute a
like-kind exchange. This process will allow the Company to effectively minimize its current tax liability in
connection with the gains recognized on these asset sales. The cash proceeds in the accounts of the QIs are invested
in money market accounts. The Company does not believe it has any material credit exposure with respect to these
assets. Restrictions on these restricted cash deposits will lapse prior to the end of the first quarter of 2019. As of
December 31, 2018, the Company had no other cash equivalents on hand.
Derivative Financial Instruments – The Company follows accounting guidance for its derivative financial
instruments that it enters into from time to time, including certain derivative instruments embedded in other
contracts, and hedging activities.
Leases – The Company follows accounting guidance for its leases, which includes the recognition of escalated rents
on a straight-line basis over the term of the lease agreement, as described further in Note 9, Other Long-Term
Liabilities.
The operating lease obligations represent scheduled future minimum operating lease payments under non-
cancellable operating leases, including rent obligations under escalation clauses that are defined increases and not
escalations that depend on variable indices. The minimum lease payments do not include common area maintenance,
variable real estate taxes, insurance and other costs for which the Company may be obligated as most of these
payments are primarily variable rather than fixed.
See Note 20, Contingencies and Commitments, for a discussion of the Company’s leases. In addition, refer
to the recent accounting pronouncements section of this note, Leasing Transactions, for a change in the Company’s
reporting requirements as of January 1, 2019.
Share-Based Compensation – The Company records compensation expense for all share-based payment awards
made to employees and directors, at estimated fair value. The Company also uses the simplified method in
developing an estimate of the expected term of certain stock options. For further discussion of share-based
compensation, see Note 14, Share-Based Compensation.
Investments – For those investments in which the Company has the ability to exercise significant influence over the
operating and financial policies of the investee, the investment is accounted for under the equity method. At
December 31, 2018 and 2017, the Company held no equity method investments. For those investments in which the
Company does not have such significant influence, the Company applies the accounting guidance for certain
investments in debt and equity securities. An investment is classified into one of three categories: held-to-maturity,
available-for-sale, or trading securities, and, depending upon the classification, is carried at fair value based upon
quoted market prices or historical cost when quoted market prices are unavailable.
The Company has minority equity investments in privately held companies that are separately presented in
the Investments line item. The Company monitors these investments for impairment and makes appropriate
reductions to the carrying value when events and circumstances indicated that the carrying value of the investments
may not be recoverable. In determining whether a decline in fair value exists, the Company considers various
factors, including market price (when available), investment ratings, the financial condition and near-term prospects
of the investee, the length of time and the extent to which the fair value has been less than the Company’s cost basis,
and the Company’s intent and ability to hold the investment for a period of time sufficient to allow for any
anticipated recovery in market value. The Company also provides certain quantitative and qualitative disclosures
for those investments that are impaired at the balance sheet date and for those investments for which an impairment
has not been recognized. Refer to Note 18, Fair Value Of Financial Instruments, for additional information on the
Company’s investments valued under the measurement alternative.
73
Advertising and Promotion Costs – Costs of media advertising and associated production costs are expensed when
incurred. For the years ended December 31, 2018, 2017, and 2016, the costs incurred were $3.6 million, $0.7
million, and $0.3 million.
Insurance and Self-Insurance Liabilities – The Company uses a combination of insurance and self-insurance
mechanisms to provide for the potential liabilities for workers’ compensation, general liability, property, director
and officers’ liability, vehicle liability and employee health care benefits. Liabilities associated with the risks that
are retained by the Company are estimated, in part, by considering claims experience, demographic factors, severity
factors, outside expertise and other actuarial assumptions. For any legal costs expected to be incurred in connection
with a loss contingency, the Company recognizes the expense as incurred.
Recognition of Insurance Claims and Other Recoveries – The Company recognizes insurance recoveries and
other claims when all contingencies have been satisfied. During 2016, the Company recovered $2.3 million related
to a legal claim. This amount was recorded on a net basis after deducting certain related expenses. For further
discussion, see Note 20, Contingencies And Commitments.
Sports Programming Costs and Unfavorable/Favorable Sports Liabilities/Assets – Sports programming costs
which are for a specified number of events are amortized on an event-by-event basis, and programming costs which
are for a specified season are amortized over the season on a straight-line basis. Prepaid expenses which are not
directly allocable to any one particular season are amortized on a straight-line basis over the life of the agreement.
In connection with certain acquisitions, the Company assumed contracts at above or below market rates. These
liabilities and assets are being amortized over the life of the contracts and are reflected within current and long-term
assets and liabilities.
Accrued Litigation - The Company evaluates the likelihood of an unfavorable outcome in legal or regulatory
proceedings to which it is a party and records a loss contingency when it is probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. These judgments are subjective, based on the status of such
legal or regulatory proceedings, the merits of the Company’s defenses and consultation with corporate and external
legal counsel. Actual outcomes of these legal and regulatory proceedings may materially differ from the Company’s
estimates. The Company expenses legal costs as incurred in professional fees. See Note 20, Contingencies and
Commitments.
Software Costs – The Company capitalizes direct internal and external costs incurred to develop internal-use
software during the application development stage. Internal-use software includes website development activities
such as the planning and design of additional functionality and features for existing sites and/or the planning and
design of new sites. Costs related to the maintenance, content development and training of internal-use software are
expensed as incurred. Capitalized costs are amortized over the estimated useful life of three years using the straight-
line method.
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 those listed below, that might have a material impact on the Company’s financial
position or results of operations.
Definition of a Business
In January 2017, the accounting guidance was amended to clarify the definition of a business to assist
entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or
businesses. The guidance was effective for the Company as of January 1, 2018 under a prospective application
method. Based upon the Company’s assessment, the impact of this guidance was not material to the Company’s
financial position, results of operations or cash flows. The guidance could have an impact in a future period if the
Company acquires or disposes of radio stations that do not meet the definition of a business under the amended
guidance.
Restricted Cash
In November 2016, the accounting guidance on the classification and presentation of restricted cash in the
statement of cash flows was enhanced and clarified to reduce diversity in practice. Restricted cash and cash
equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-
74
period total amounts presented on the statement of cash flows. This guidance was effective for the Company as of
January 1, 2018, under a retrospective application method. As the Company did not have any restricted cash or cash
equivalents as of December 31, 2017, the impact of this guidance was not material to the Company’s presentation of
historical financial information. As a result of the Company’s consolidation of a VIE described above, the guidance
had an impact on the Company’s presentation of the current period statements of financial position, cash flows and
notes to the financial statements. The guidance could have an impact in a future period if the Company engages in
transactions which result in restrictions on its cash or cash equivalents.
Cash Flow Classification
In August 2016, the accounting guidance for classifying elements of cash flow was modified. The
guidance was effective for the Company as of January 1, 2018 under a retrospective application method. Based upon
the Company’s assessment, the impact of this guidance was not material to the Company’s financial position, results
of operations or cash flows.
Stock-Based Compensation
In June 2018, the accounting guidance was amended to address several aspects of accounting for
nonemployee share-based payment transactions to include share-based payment transactions for acquiring goods and
services from nonemployees. The guidance is effective for the Company as of January 1, 2019. The Company will
adopt the new guidance using a modified retrospective approach through a cumulative-effect adjustment to retained
earnings, if applicable, as of the effective date. While the Company is currently reviewing the effects of this
guidance, the Company believes that this amendment to the accounting guidance will not have a material impact on
the Company’s financial position, results of operations or cash flows.
In May 2017, the accounting guidance was amended to clarify modification accounting for stock-based
compensation. The guidance was effective for the Company as of January 1, 2018, on a prospective basis. Under
the amended guidance, the Company will only apply modification accounting for stock-based compensation if there
are: (i) changes in the fair value or intrinsic value of share-based compensation; (ii) changes in the vesting
conditions of awards; and (iii) changes in the classification of awards as equity instruments or liability instruments.
Based upon the Company’s assessment, the impact of this guidance was not material to the Company’s financial
position, results of operations or cash flows.
In March 2016, the accounting guidance for stock-based compensation was modified primarily to: (i)
record excess tax benefits or deficiencies on stock-based compensation in the statement of operations, regardless of
whether the tax benefits reduce taxes payable in the period; (ii) allow an employee’s use of shares to satisfy the
employer’s statutory income tax withholding obligation up to the maximum statutory tax rates in the applicable
jurisdictions; and (iii) allow entities to make an accounting policy election to either estimate the number of award
forfeitures or to account for forfeitures when they occur. The guidance was effective for the Company on January 1,
2017.
As of January 1, 2017, the Company recorded a cumulative-effect adjustment to its accumulated deficit of
$5.1 million on a modified retrospective transition basis. This adjustment was comprised of previously
unrecognized excess tax benefits of $4.6 million as adjusted for the Company’s effective income tax rate, and a
change to recognize stock-based compensation forfeitures when they occur of $0.5 million, net of tax.
Financial Instruments
In January 2016, the accounting guidance was modified with respect to recognition, measurement,
presentation and disclosure of financial instruments. The most notable impact of the amended accounting guidance
for the Company is that this modification effectively supersedes and eliminates current accounting guidance for
cost-method investments. Refer to Note 18, Fair Value Of Financial Instruments, for additional information on the
Company’s investments valued under the measurement alternative.
The guidance was effective for the Company as of January 1, 2018. The Company adopted the new
guidance using a modified retrospective approach, without a need to make a cumulative-effect adjustment to
retained earnings as of the effective date.
The Company’s investments continue to be carried at their original cost. There have been no impairments
in the investments valued under the measurement alternative, returns of capital, or any adjustments resulting from
observable price changes in orderly transactions for the investments. Based upon the Company’s assessment, the
75
adoption of this modified accounting guidance did not have a material impact on the Company’s financial position,
results of operations, or cash flows.
Revenue Recognition
In May 2014, the accounting guidance for revenue recognition was modified and subsequently updated
with several amendments. Along with these modifications, most industry-specific revenue guidance was eliminated,
including a current broadcasting exemption for reporting revenue from network barter programming. The new
guidance provides companies with a revenue recognition model for recognizing revenue from contracts with
customers. The core principle of the new standard is to recognize revenue when promised goods or services are
transferred to customers, in an amount that reflects the consideration that the Company expects to be entitled to in
exchange for such goods or services. The new guidance also requires additional disclosure about the nature,
amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant
judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.
The Company has identified changes to its revenue recognition policies related to contracts that contain
performance bonuses. The impact of this guidance was not material to the Company’s financial position, results of
operations or cash flows. The Company enhanced its disclosures to allow users of the financial statements to
comprehend information about the nature, amount, timing and uncertainty of revenue and cash flows arising from
the Company’s contracts with its customers. Refer to Note 4, Revenue, for additional information.
Leasing Transactions
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 most notable change in the standard is the recognition of ROU assets and lease liabilities by lessees for
those leases classified as operating leases with a term of more than one year. This change will primarily apply to the
Company’s leased assets such as real estate and broadcasting towers. Additionally, the Company will be required to
provide additional disclosures to meet the objective of enabling users of the financial statements to assess the
amount, timing, and uncertainty of cash flows arising from leases.
While the Company is currently reviewing the effects of this guidance, the Company believes the standard
will have a material impact on its consolidated balance sheets but will not have a material impact on its consolidated
statements of operations. The Company believes that this modification to operating leases will result in: (i) an
increase in the ROU assets and lease liabilities reflected on the Company’s consolidated balance sheets to reflect the
rights and obligations created by operating leases with a term of greater than one year; and (ii) no material change to
the expense associated with the ROU assets.
This guidance is effective for the Company as of January 1, 2019, and must be implemented using a
modified retrospective approach, with certain practical expedients available. The Company will elect the package of
practical expedients which will allow the Company to waive reassessing: (i) whether any expired or existing
contracts are or contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct
costs for any existing leases. As a practical expedient, the Company may choose not to separate nonlease
components from lease components as an accounting policy election by class of underlying asset. The Company
will elect this practical expedient by all classes of underlying assets in instances where leases contain common area
maintenance. Under certain available practical expedients, the Company will exclude short term leases from the
amended leasing guidance. Lease payments associated with short term leases with terms of 12 months or less will
be recognized on a straight-line basis over the lease term without recognizing a ROU asset or lease liability on the
balance sheet.
The Company plans to adopt this new accounting guidance effective January 1, 2019 and intends to elect
the available practical expedients upon adoption. The Company’s implementation of the amended accounting
guidance depends upon system readiness, including software, completion of analysis of the Company’s lease
portfolio, and the ability to prepare financial information upon adoption. The Company believes it is on schedule to
implement the amended accounting guidance in the first quarter of 2019.
In July 2018, the accounting guidance was further modified to provide for an additional transition method
which allows entities to: (i) apply the new lease requirements at the effective date and recognize a cumulative effect
adjustment to the opening balance of retained earnings in the period of adoption; (ii) continue to report comparative
periods presented in the financial statements in the period of adoption under current U.S. GAAP; and (iii) provide
the required disclosures under current U.S. GAAP for all periods presented under current U.S. GAAP. The
76
Company plans to adopt the amended accounting guidance using this transition method which facilitates
comparative reporting upon adoption.
3.
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.
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 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.
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
WTXU 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.
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.
77
Preliminary Value
(amounts in thousands)
Useful Lives in Years
From
To
Assets
Equipment
Total tangible property
Advertising contracts
Radio broadcasting licenses
Goodwill
Net working capital
Total intangible and other assets
Total assets
$
$
Preliminary fair value of net assets acquired $
2018 Emmis Acquisition
3
1
7
1
non-amortizing
non-amortizing
not applicable
981
981
477
27,346
24,396
3,234
55,453
56,434
56,434
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.
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 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.
78
Preliminary Value
(amounts in thousands)
Useful Lives in Years
From
To
3
5
1
7
15
1
non-amortizing
non-amortizing
2
2
1,558
1,558
207
114
12,785
332
4
13,442
15,000
15,000
$
Assets
Equipment
Total tangible property
Advertiser relationships
Advertising contracts
Radio broadcasting licenses
Goodwill
Other noncurrent assets
Total intangible and other assets
Total assets
$
Preliminary fair value of assets acquired $
2017 CBS Radio Business Acquisition
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.
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, hypothetical 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
79
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 net assets
acquired was reported as goodwill. The goodwill recorded reflects management’s expectations of its ability to gain
access to and penetrate CBS Radio’s customer base and the benefits of being able to leverage operational
efficiencies with favorable growth opportunities as a results of a large national presence. A portion of the goodwill
carryover basis is tax deductible.
The following table reflects: (i) the Company’s preliminary allocation of the purchase price to the assets
acquired and liabilities assumed as of the acquisition date; (ii) measurement period adjustments made to the
preliminary allocation during the measurement period; and (iii) the final allocation of the purchase price to the assets
acquired and liabilities assumed.
80
Description
December 31, 2017)
As Adjusted
Preliminary Value
as of acquisition date
(as previously
reported as of
Measurement
Period
Adjustment
(amounts in thousands)
$
Assets
Accounts receivable
Prepaid sports rights and favorable
sports contracts
Prepaid expenses, deposits and other
Other current assets
Total current assets
Land
Land improvements
Leasehold improvements
Buildings
Furniture and fixtures
Equipment and towers
Construction in process
Total tangible property
Advertiser relationships
Radio broadcasting licenses
Goodwill
Assets held for sale
Favorable leases
Other noncurrent assets
Total intangible and other assets
Total assets
Liabilities
Accounts payable
Accrued expenses
Accrued salaries and benefits
Current portion of long-term debt
Unfavorable sports liability - current
portion
Accrued interest
Unearned revenues - current portion
Total current liabilities
Unearned revenues - non-current
portion
Unfavorable lease liability
Unfavorable sports liability - non-
current portion
Non-current portion of long-term debt
Deferred tax liability
Other long-term liabilities
Total liabilities
$
$
$
241,548 $
- $
241,548
4,160
20,625
7,350
273,683
112,880
3,988
26,255
19,246
10,929
76,486
14,598
264,382
27,453
1,880,400
820,961
255,650
16,580
1,050
3,002,094
3,540,159 $
36,137 $
35,154
26,324
10,600
4,803
4,529
14,971
132,518
13,859
12,770
22,597
1,376,900
780,832
31,835
2,371,311 $
-
476
1,741
2,217
-
(2,640)
9,774
(5,206)
(6,849)
21,346
-
16,425
-
-
(21,498)
-
-
4,176
(17,322)
1,320 $
421 $
2,309
-
-
-
-
-
2,730
4,160
21,101
9,091
275,900
112,880
1,348
36,029
14,040
4,080
97,832
14,598
280,807
27,453
1,880,400
799,463
255,650
16,580
5,226
2,984,772
3,541,479
36,558
37,463
26,324
10,600
4,803
4,529
14,971
135,248
-
-
13,859
12,770
-
-
(3,336)
1,926
1,320 $
22,597
1,376,900
777,496
33,761
2,372,631
Preliminary fair value of net assets
acquired
$
1,168,848 $
- $
1,168,848
The aggregate fair value purchase price allocation of the assets and liabilities acquired in the CBS Radio
Merger as reported on the Company’s Form 10-K filed with the SEC on March 16, 2018, were revised during the
year ended December 31, 2018 primarily due to: (i) a change to the deferred tax liabilities associated with certain
81
stations acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $3.3 million; (ii) a change to
other current assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $1.3 million; (iii)
a change to prepaid assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $0.5
million; (iv) a change to accrued expenses acquired in the CBS Radio Merger which resulted in an increase to
goodwill of $2.3 million; (v) the recording of current and noncurrent lease abandonment liabilities assumed and a
corresponding receivable for reimbursement from CBS Corporation; (vi) a change to tenant improvement
allowances outstanding that were acquired in the CBS Radio Merger which resulted in a decrease to goodwill of
$2.3 million; (vii) a change to the purchase price allocated to acquired tangible property which resulted in a decrease
to goodwill of $16.4 million; and (viii) reclassification between the categories of acquired tangible property.
As the measurement period ended on November 17, 2018, the adjusted purchase price allocation amounts
included in the table above are no longer subject to change. The Company is in the process of finalizing estimates
and assumptions related to certain net working capital accounts acquired in the Merger. Any adjustments to the
purchase price allocation required after the one year measurement period, which may be material, are expected to be
recorded in the consolidated statements of operations as operating expenses or income.
Under purchase price accounting for the CBS Radio Merger, the Company recorded favorable and
unfavorable leases for studio and transmitter site property leases and unfavorable sports programming contracts as
these leases and contracts contain terms that were considered to be below or above market rates. These leases and
contracts are reflected net in other current and long-term assets and liabilities in the consolidated balance sheets and
are amortized on a straight-line basis over the life of the lease or contract. A favorable or unfavorable lease or
contract will result in an increase or decrease, respectively, to station operating expenses. The future amortization to
unfavorable leases and contracts is as follows:
Years ending December 31,
2019
2020
2021
2022
2023
Thereafter
As Of
December 31,
2018
(amounts in
thousands)
$
$
7,318
6,909
6,606
5,725
6,099
1,011
33,668
2017 Exchange Transaction: The iHeartMedia Transaction
On November 1, 2017, the Company entered into an agreement (the “iHeartMedia Transaction”) with
iHeartMedia, Inc. (“iHeart”) to exchange three CBS Radio stations in Seattle, Washington, and two CBS Radio and
two Company radio stations in Boston, Massachusetts, for four iHeart radio stations in Chattanooga, Tennessee, and
six iHeart radio stations in Richmond, Virginia, respectively. Upon consummation of the CBS Merger, the Company
contributed the stations to be divested to iHeart into an FCC Disposition trust. Concurrently with the Company
entering into an asset exchange agreement, the FCC Disposition Trust and iHeart entered into TBAs which provided
for iHeart and the Company, respectively, to operate certain radio stations pending closing. Operation under each
TBA commenced at various times and for certain stations after the Merger. During the period of the TBA, the
Company: (i) included net revenues and station operating expenses associated with operating the Richmond and
Chattanooga stations in the Company’s consolidated financial statements; and (ii) excluded net revenues and station
operating expenses associated with iHeart’s operation of the Seattle stations and Boston stations from the
Company’s consolidated financial statements. As a result of this iHeartMedia Transaction, the Company entered
into two new markets in Richmond, Virginia and Chattanooga, Tennessee.
The results of operations of KZOK FM and KJAQ FM from November 17, 2017 to December 18, 2017 are
presented within discontinued operations as these stations were acquired from CBS Radio and were never operated
by the Company and immediately qualified as held for sale. Refer to Note 19, Assets Held For Sale And
Discontinued Operations, for additional information.
82
2017 Exchange Transaction: The Beasley Transaction
On November 1, 2017, the Company entered into an agreement (the “Beasley Transaction”) with Beasley
Broadcast Group (“Beasley”) to exchange a CBS Radio station (WBZ FM) in Boston, Massachusetts for another
station in the same market (WMJX FM) and cash proceeds of $12.0 million.
Concurrently with entering into the asset exchange agreement, the Company entered into a TBA to operate
WMJX FM and included net revenues and station operating expenses in the Company’s consolidated financial
statements for the period from December 4, 2017 through December 19, 2017.
The results of operations of WBZ FM from November 17, 2017 to December 18, 2017 are presented within
discontinued operations as this station was originally owned by CBS Radio and was never a part of the Company’s
continuing operations. Prior to the commencement of operations under the TBA, the Company contributed WBZ
FM to a trust and the trust operated the station for a period of time. Refer to Note 19, Assets Held For Sale And
Discontinued Operations, for additional information.
In valuing the non-monetary assets that were part of the consideration transferred, the Company utilized the
fair value as of the acquisition date, with any excess of the purchase price over the net assets acquired reported as
goodwill. The fair value of the acquired assets and liabilities was measured from the perspective of a market
participant, applying the same methodology and types of assumptions as described above. Applying these
methodologies requires significant judgment.
Summary of iHeart and Beasley Transactions by Radio Station
iHeartMedia Transaction
TBA Commencement
Date
Market
Richmond, VA
Richmond, VA
Richmond, VA
Richmond, VA
Richmond, VA
Richmond, VA
Chattanooga, TN
Chattanooga, TN
Chattanooga, TN
Chattanooga, TN
Boston, MA
Boston, MA
Boston, MA
Boston, MA
Seattle, WA
Seattle, WA
Seattle, WA
Radio Stations
WRVA AM
WRXL FM
WTVR FM
WBTJ FM
WRNL AM
WRVQ FM
WKXJ FM
WUSY FM
WRXR FM
WLND FM
WBZ AM
WZLX FM
WRKO AM
WKAF FM
KZOK FM
KJAQ FM
KFNQ AM
Transactions
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company acquired from iHeart
Company divested to iHeart
Company divested to iHeart
Company divested to iHeart
Company divested to iHeart
Company divested to iHeart
Company divested to iHeart
Company divested to iHeart
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
December 4, 2017
November 18, 2017
November 18, 2017
Not Applicable
November 18, 2017
Not Applicable
Not Applicable
November 18, 2017
Disposition or
Acquisition Date
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
December 19, 2017
Market
Boston, MA
Boston, MA
Radio Stations
WMJX FM
WBZ FM
Beasley Transaction
Transactions
Company acquired from Beasley December 4, 2017
Company divested to Beasley
Not Applicable
TBA Commencement
Date
Disposition or
Acquisition Date
December 19, 2017
December 19, 2017
Valuation of the iHeartMedia Transaction and The Beasley Transaction
As discussed above, the Company completed a partial non-monetary transaction with Beasley and a non-
monetary transaction with iHeart to exchange several radio stations in certain markets. In valuing the non-monetary
assets that were part of the consideration transferred, the Company utilized the fair value as of the date the assets
83
were exchanged. 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. Any excess between the fair values of the net assets
given up over the fair values of the net assets acquired was reported as goodwill.
The following table reflects: (i) the Company’s preliminary allocation of the purchase price to the assets
acquired and liabilities assumed as of the acquisition date; (ii) measurement period adjustments made to the
preliminary allocation during the measurement period; and (iii) the final aggregate fair value purchase price
allocation of these assets and liabilities assumed.
Beasley Transaction
Assets
Total property plant and equipment
Total tangible assets
Sports rights agreement
Radio broadcasting licenses
Goodwill
Total intangible assets
Additional cash consideration
Total value
Assets
Acquired
Assets Disposed
(amounts in thousands)
$
$
667 $
667
-
35,944
289
36,233
12,000
48,900 $
807
807
267
35,944
11,882
48,093
-
48,900
iHeart Transaction
Assets
Acquired
Assets Disposed
(amounts in thousands)
Assets
Total property plant and equipment
Total tangible assets
Acquired advertising contracts
Advertiser relationships
Radio broadcasting licenses
Goodwill
Total intangible assets
Liabilities
Unfavorable lease agreements assumed
Deferred tax liabilities
Total value
$
$
13,725 $
13,725
265
1,041
50,621
11,700
63,627
(1,301)
(4,751)
71,300 $
8,149
8,149
-
-
56,299
6,852
63,151
-
-
71,300
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
local marketing agreements (“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,
84
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 $0.2
million to the Company. Refer to Note 19, Assets Held for Sale and Discontinued Operations, for additional
information.
2017 Charlotte Acquisition
On January 6, 2017, the Company completed a transaction to acquire four radio stations in Charlotte, North
Carolina from Beasley for a purchase price of $24 million in cash. The Company used cash on hand to fund the
acquisition. On October 17, 2016, the Company entered into an asset purchase agreement and a TBA with Beasley
to operate three of the four radio stations that were held in a trust (the “Charlotte Trust”). On November 1, 2016, the
Company commenced operations of the radio stations held in the Charlotte Trust and began operating the fourth
station upon closing on the acquisition with Beasley in January 2017.
During the period of the TBA, the Company included net revenues, station operating expenses and monthly
TBA fees associated with operating these stations in the Company’s consolidated financial statements.
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 net assets acquired was reported
as goodwill.
The purchase price allocations are based upon the valuation of assets and liabilities, which include the
valuation of intangible assets, and are final.
The following table reflects the final aggregate fair value purchase price allocation of these assets and
liabilities.
Assets
Land
Buildings
Equipment
Total property plant and equipment
Deferred tax asset
Radio broadcasting licenses and goodwill
Total assets
Liabilities
Unfavorable lease liabilities
Deferred tax liability
Total liabilities
Fair value of net assets acquired
$
$
2017 Dispositions
Useful Lives in Years
From
To
Final Value
(amounts in
thousands)
non-depreciating
25
40
15
3
life of underlying asset
non-amortizing
over remaining lease life
life of underlying liability
2,539
217
4,569
7,325
287
17,384
24,996
735
261
996
24,000
85
In October 2017, the Company divested three radio stations to EMF in order to facilitate the Merger. The
Company disposed of equipment, radio broadcasting licenses, goodwill, and other assets across three of its markets
for $57.8 million in cash. The Company reported a gain, net of expenses, of $2.5 million on the disposition of these
assets.
2016 Disposition
In March 2016, the Company sold certain assets of KRWZ AM in Denver, Colorado, for $3.8 million in
cash. The Company believes that the sale of this station, with a marginal market share, did not alter the Company’s
competitive position in the market. The Company reported a gain, net of expenses, of $0.3 million on the disposition
of these assets.
Merger and Acquisition Costs
Merger and acquisition costs were expensed as a separate line item in the statement of operations. The
Company records merger and acquisition costs whether or not an acquisition occurs. Merger and acquisition costs
incurred in 2018 consist primarily of legal, professional and advisory services related to: (i) the Company’s Merger
with CBS Radio; (ii) the Jerry Lee Transaction; and (iii) the Emmis Acquisition. These costs incurred in 2017 and
2016 consist primarily of legal, professional and advisory services related to the Company’s Merger with CBS
Radio.
Restructuring Charges
Restructuring charges were expensed as a separate line item in the statement of operations. The following
table presents the components of restructuring charges.
Years Ended
December 31,
2018
2017
2016
(amounts in thousands)
$
$
229 $
3,599
1,315
687
-
5,830 $
500 $
10,441
2,874
147
2,960
16,922 $
-
-
-
-
-
-
Costs to exit duplicative contracts
Workforce reduction
Lease abandonment costs
Other restructuring costs
Transition services costs
Total restructuring charges
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
as described below; 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 December 31, 2018 were included in
accrued expenses as these expenses are expected to be paid in less than one year. The Company expects to incur
additional restructuring costs in 2019 under this plan.
In connection with the sale of a radio station and the consolidation of studio facilities in a few markets, the
Company abandoned certain leases. The Company computed the present value of the remaining lease payments of
the lease and recorded lease abandonment costs. These lease abandonment costs include future lease liabilities
offset by estimated sublease income. Due to the timing of the lease expirations, the Company assumed there is
minimal sublease income. The Company will continue to evaluate the opportunities to sublease this space and
revise its sublease estimates accordingly. Any increase in the estimate of sublease income will be reflected through
the income statement and such amount will also reduce the lease abandonment liability. The leases expire in 2021.
During 2015, the Company initiated a restructuring plan primarily as a result of the integration of radio
stations acquired in July 2015. The restructuring plan included: (i) costs associated with exiting contractual vendor
obligations as these obligations were duplicative; (ii) a workforce reduction and realignment charges that included
86
one-time termination benefits and related costs; and (iii) lease abandonment costs as described below. A portion of
unpaid restructuring charges as of December 31, 2018 were included in accrued expenses as these expenses are
expected to be paid in less than one year.
In connection with this acquisition, the Company assumed a studio lease in one of its markets that included
excess space. During 2015, the Company ceased using a portion of the space after analyzing its future needs as well
as comparing its space utilization in other of the Company’s markets. As a result, the Company recorded a lease
abandonment expense during the fourth quarter of 2015. Lease abandonment costs include future lease liabilities
offset by estimated sublease income. Due to the location of the space in an area of the city that is not considered
prime, including a very high vacancy rate in the existing and neighboring building in a soft rental market that is
expected to continue throughout the remaining term of the lease, the Company did not include an estimate to
sublease any of the space. The Company will continue to evaluate the opportunities to sublease this space and revise
its sublease estimates accordingly. Any increase in the estimate of sublease income will be reflected through the
income statement and such amount will also reduce the lease abandonment liability. The lease expires in the year
2026. The lease liability is discounted using a credit risk adjusted basis utilizing the estimated rental cash flows
over the remaining term of the agreement.
Years Ended
December 31,
2018
2017
(amounts in thousands)
Restructuring charges and lease abandonment costs, beginning balance
Additions resulting from the integration of CBS Radio
Restructuring charges assumed from the Merger
Payments
Restructuring charges and lease abandonment costs unpaid and
outstanding
Restructuring charges and lease abandonment costs - noncurrent portion
Restructuring charges and lease abandonment costs - current portion
$
$
16,086 $
5,830
-
(14,839)
7,077
(988)
6,089 $
650
15,005
1,095
(664)
16,086
(4,413)
11,673
Integration Costs
The Company incurred integration costs of $25.4 million during the year ended December 31, 2018.
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 years ended December 31, 2018, December 31,
2017, and December 31, 2016 assumes that: (i) the acquisitions in 2018 had occurred as of January 1, 2017; and (ii)
the acquisitions and certain dispositions in 2017 had occurred as of January 1, 2016. Refer to information within
this Note 3, Business Combinations, 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.
For purposes of this presentation, the pro forma data: (i) excludes the revenue and earnings of stations
divested to iHeart and Beasley during 2017 as these stations were exchanged for the radio stations acquired in the
Chattanooga, Richmond, and Boston markets; (ii) includes revenue and earnings of stations divested to EMF during
2017; (iii) includes revenue and earnings of stations divested to Bonneville during 2018; and (iv) includes revenue
and earnings of the station divested to Beasley during 2018.
This unaudited pro forma information has been prepared based on estimates and assumption, 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.
87
Years Ended December 31,
2018
2017
2016
(amounts in thousands, except per share data)
Pro Forma
Pro Forma
Pro Forma
1,473,266 $
(357,608) $
1,152 $
(356,456) $
$
(356,456)
1,607,777 $ 1,656,123
(587,393)
-
(587,393)
(589,294)
374,135 $
836 $
374,971 $
372,956 $
(2.59) $
2.67 $
(4.20)
0.01 $
0.01 $
-
(2.58) $
2.66 $
(4.21)
(2.59) $
2.64 $
(4.20)
0.01 $
0.01 $
-
(2.58) $
2.63 $
(4.21)
$
$
$
$
$
$
$
$
$
$
$
138,070
138,070
140,298
141,790
139,908
139,908
Not applicable Not applicable
anti-dilutive
Net revenues
Income (loss) from continuing operations
Income (loss) from discontinued operations
Net income (loss) available to the Company
Net income (loss) available to common shareholders
Income (loss) from continuing operations
per common share - basic
Income (loss) from discontinued operations
per common share - basic
Net income (loss) available to common shareholders
per common share - basic
Income (loss) from continuing operations
per common share - diluted
Income (loss) from discontinued operations
per common share - diluted
Net income (loss) available to common shareholders
per common share - diluted
Weighted shares outstanding basic
Weighted shares outstanding diluted
Conversion of preferred stock for dilutive purposes
under the as if method
4.
REVENUE
Nature Of Goods And Services
The following is a description of principal activities from which the Company generates its revenue.
The Company generates revenue from the sale to advertisers of various services and products, including but
not limited to: (i) commercial broadcast time; (ii) digital advertising; (iii) promotional and sponsorship event
revenue; (iv) e-commerce revenue; and (v) trade and barter revenue. Services and products may be sold separately
or in bundled packages. The typical length of a contract for service is less than 12 months.
Revenue is recognized when or as performance obligations under the terms of a contract with customers are
satisfied. This typically occurs at the point in time that advertisements are broadcast, marketing services are
provided, or as an event occurs. For commercial broadcast time and digital advertising, the Company recognizes
revenue at the point in time when the advertisement is broadcast. For e-commerce revenue transactions, revenue is
recognized as each third party sale is made and the advertisers’ good or service is transferred to the end customer.
For trade and barter transactions, revenue is recognized at the point in time when the promotional advertising is
aired.
For bundled packages, the Company accounts for each product or performance obligation separately if they
are distinct. A product or service is distinct if it is separately identifiable from other items in the bundled package
and if a customer can benefit from it on its own or with other resources that are readily available to the customer.
The consideration is allocated between separate products and services in a bundle based on their stand-alone selling
prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the
commercial broadcast time, digital advertising, or digital product and marketing solutions.
88
Broadcast Revenues
Commercial broadcast time - The Company sells air-time to advertisers and broadcasts commercials at agreed upon
dates and times. The Company’s performance obligations are broadcasting advertisements for advertisers at
specifically identifiable days and dayparts. The amount of consideration the Company receives and revenue it
recognizes is fixed based upon contractually agreed upon rates. The Company recognizes revenue at a point in time
when the advertisements are broadcast and the performance obligations are satisfied. Revenues are recorded on a net
basis, after the deduction of advertising agency fees by the advertising agencies.
Digital advertising - The Company sells digital marketing services to advertisers. The Company’s performance
obligations are providing broadcasting advertisements and integrated marketing services for advertisers. The
Company recognizes revenue at a point in time when the advertisements are broadcast, the marketing services are
provided and the performance obligations are satisfied. Revenues are recorded on a gross basis as the Company acts
as a principal in these transactions.
Event And Other Revenues
Promotional and Sponsorship Event revenue - The Company provides promotional advertising to advertisers in
exchange for cash proceeds from ticket sales. Performance obligations are broadcasting advertisements for
advertisers’ events at specifically identifiable days and dayparts. The Company also sells sponsorships to advertisers
at various local events. Performance obligations include providing advertising space at the Company’s event. The
Company recognizes revenue at a point in time, as the event occurs. Revenues are recorded on a net basis when the
Company is not the primary party hosting the event and acts as an agent in these transactions.
E-Commerce revenue - The Company sells discount certificates to listeners on its websites. Listeners purchase
goods and services from the advertiser at a discount to the fair value of the merchandise or service. Performance
obligations include the promotion of advertisers’ discount offers on the Company’s website as well as revenue share
payments to the advertiser. The Company records revenue on a net basis as it acts as an agent in these transactions.
Trade And Barter Revenues
Trade and barter – The Company provides advertising broadcast time in exchange for certain products, supplies,
and services. The term of the exchanges generally permit the Company to preempt such broadcast time in favor of
advertisers who purchase time on regular terms. Other than network barter programming, which is reflected on a net
basis, the Company includes the value of such exchanges in both broadcasting net revenues and station operating
expenses. Trade and barter value is based upon management’s estimate of the fair value of the products, supplies
and services received.
Contract Balances
Refer to the table below for information about receivables, contract assets and contract liabilities from
contracts with customers. Accounts receivable balances in the table below exclude other receivables that are not
generated from contracts with customers. These amounts are $11.8 million and $10.2 million as of December 31,
2018 and December 31, 2017, respectively.
Description
December 31,
2017
2018
(amounts in thousands)
Receivables, included in "Accounts receivable
net of allowance for doubtful accounts"
Contract assets
Unearned revenue - current
Unearned revenue - noncurrent
$
330,983 $
-
22,692
1,138
331,799
-
17,519
13,000
89
Changes in Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled
receivables, and customer advances and deposits (unearned revenue) on the Company’s consolidated balance sheet. At
times, however, the Company receives advance payments or deposits from its customers before revenue is recognized,
resulting in contract liabilities. The contract liabilities primarily relate to the advance consideration received from
customers on certain contracts. For these contracts, revenue is recognized in a manner that is consistent with the
satisfaction of the underlying performance obligations. The contract liabilities are reported on the consolidated
balance sheet on a contract-by-contract basis at the end of each respective reporting period within the other current
liabilities and other long-term liabilities line items.
Significant changes in the contract liabilities balances during the period are as follows:
Year Ended
December 31,
2018
Description
Unearned Revenue
(amounts in thousands)
Beginning balance on January 1, 2018
$
30,519
Revenue recognized during the period that was
included in the beginning balance of contract
liabilities
Additional amounts recognized during period
Ending balance
$
Disaggregation of revenue
(14,986)
8,297
23,830
The following table presents the Company’s revenues disaggregated by revenue source:
Revenue by Source
Years Ended
December 31,
2017
(amounts in thousands)
2016
2018
Broadcast revenues
Event and other revenues
Trade and barter revenues
$ 1,327,803 $
115,399
19,365
530,553 $
51,434
10,897
428,266
31,805
4,700
Net revenues
$ 1,462,567 $
592,884 $
464,771
Performance obligations
A performance obligation is a promise in a contract with a customer to transfer a good or service to the
customer, and is the unit of account under this guidance. A contract’s transaction price is allocated to each distinct
performance obligation and is recognized as revenue when the performance obligation is satisfied. Some of the
Company’s contracts have one performance obligation which requires no allocation. For other contracts with multiple
performance obligations, the Company allocates the contract’s transaction price to each performance obligation using
its best estimate of the standalone selling price of each distinct good or service in the contract.
The Company’s performance obligations are either satisfied at a point in time or are satisfied over a period of
time. As the Company’s inputs are expended evenly throughout the performance period, the Company recognizes
revenue on a straight-line basis over the life of a contract. For performance obligations that are satisfied at a point in
90
time, the Company recognizes revenue when an advertisement is aired and the customer has received the benefits of
advertising.
Performance obligations for all products and services, with the exception of event revenues, are satisfied
over the term of the contracts, which are typically less than 12 months.
Practical expedients
As a practical expedient, when the period of time between when the Company transfers a promised good or
service to a customer and when the customer pays for that good or service will be one year or less, the Company will
not adjust the promised amount of consideration for the effects of a significant financing component.
The Company elected to apply the practical expedient which allows it to not disclose information about
remaining performance obligations that have original expected durations of one year or less. The Company has
contracts with customers which will result in the recognition of revenue beyond one year. From these contracts, the
Company expects to recognize $1.1 million of revenue in excess of one year.
The Company also elected to apply the practical expedient which allows it to not disclose the amount of the
transaction price allocated to the remaining performance obligations and an explanation of when the Company
expects to recognize that amount as revenue for all reporting periods presented before January 1, 2018.
The Company elected to apply the practical expedient which allows the Company to recognize the
incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the
Company otherwise would have recognized is one year or less. These costs are included in station operating
expenses on the consolidated statements of operations.
Significant judgments
For performance obligations satisfied at a point in time, the Company does not estimate when a customer
obtains control of the promised goods or services. Rather, the Company recognizes revenues at the point in time in
which performance obligations are satisfied.
The Company records a provision against revenues for estimated sales adjustments when information
indicates allowances are required. Refer to Note 5, Accounts Receivable And Related Allowance For Doubtful
Accounts And Sales Reserves, for additional information.
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to
each performance obligation using its best estimate of the standalone selling price of each distinct good or service in the
contract.
For all revenue streams with the exception of barter revenues, the transaction price is contractually
determined. Accordingly, no estimates are required and there is no variable consideration. For trade and barter
revenues, the Company estimates the consideration by estimating the fair value of the goods and services received.
Net revenues from network barter programming have historically been recorded on a net basis. This
treatment will continue to be the Company’s policy under the amended accounting guidance for revenue
recognition. The adoption of the amended accounting guidance for revenue recognition had no impact on the
Company’s consolidated statements of operations, balance sheets, statements of shareholders’ equity, or statements
of cash flows for the year ended December 31, 2018.
5.
AND SALES RESERVES
ACCOUNTS RECEIVABLE AND RELATED ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are primarily attributable to advertising which has been provided and for which
payment has not been received from the advertiser. Accounts receivable are net of agency commissions and an
estimated allowance for doubtful accounts and sales reserves. Estimates of the allowance for doubtful accounts and
sales reserves are recorded based on management’s judgment of the collectability of the accounts receivable based
on historical information, relative improvements or deteriorations in the age of the accounts receivable and changes
in current economic conditions.
The accounts receivable balances, and the allowance for doubtful accounts and sales reserves, are presented
in the following table:
91
Net Accounts Receivable
December 31,
2018
2017
(amounts in thousands)
Accounts receivable
Allowance for doubtful accounts and sales reserve
$
359,456 $
(16,690)
346,264
(4,275)
Accounts receivable, net of allowance for doubtful accounts and
sales reserves
$
342,766 $
341,989
See the table in Note 8, Other Current Liabilities, for accounts receivable credits outstanding as of the
periods indicated.
The following table presents the changes in the allowance for doubtful accounts:
Changes In Allowance For Doubtful Accounts
Additions
Balance At Charged To Deductions Balance At
Beginning Costs And
From
Reserves
End Of
Year
Year Ended
Of Year
Expenses
December 31, 2018 $
December 31, 2017
December 31, 2016
3,885 $
2,137
2,134
8,909 $
3,715
1,330
(3,375) $
(1,967)
(1,327)
9,419
3,885
2,137
(amounts in thousands)
In the course of arriving at practical business solutions to various claims arising from the sale to advertisers
of various services and products, the Company estimates sales allowances. The Company records a provision
against revenue for estimated sales adjustments in the same period the related revenues are recorded or when current
information indicates additional allowances are required. These estimates are based on the Company’s historical
experience, specific customer information and current economic conditions. If the historical data utilized does not
reflect management’s expected future performance, a change in the allowance is recorded in the period such
determination is made. The balance of sales reserves is reflected in the accounts receivable, net of allowance for
doubtful accounts line item on the Consolidated Balance Sheets.
As the estimated sales reserves were individually immaterial to the Company on a standalone basis prior to
2017, amounts were not separately disclosed and were included within the allowance for doubtful accounts. After
the Merger with CBS Radio, the Company determined that the sales reserve figure was material and warranted
separate presentation and disclosure.
The following table presents the changes in the sales reserves:
Changes in Allowance for Sales Reserves
Balance At
Additions
Beginning Charged To
Revenues
Of Year
Deductions
From
Reserves
Balance At
End Of
Year
Year Ended
December 31, 2018 $
December 31, 2017
390 $
-
14,254 $
390
(7,373) $
-
7,271
390
(amounts in thousands)
92
6.
INTANGIBLE ASSETS AND GOODWILL
(A) Indefinite-Lived Intangibles
Goodwill and certain intangible assets are not amortized for book purposes. They may be, however,
amortized for tax purposes. The Company accounts for its acquired broadcasting licenses as indefinite-lived
intangible assets and, similar to goodwill, these assets are reviewed at least annually for impairment. At the time of
each review, if the fair value is less than the carrying value of the reporting unit, then a charge is recorded to the
results of operations.
Subsequent to the Company’s annual impairment test conducted during the second quarter of 2018, the
Company recorded a $0.7 million impairment charge related to a potential disposal of assets in one of its markets.
In evaluating whether events or changes in circumstances indicate that an interim impairment assessment is
required, management considers several factors in determining whether it is more likely than not that the carrying
value of the Company’s broadcasting licenses or goodwill exceeds the fair value of the Company’s broadcasting
licenses or goodwill. The qualitative analysis considers: (i) macroeconomic conditions such as deterioration in
general economic conditions, limitations on accessing capital, or other developments in equity and credit markets;
(ii) industry and market considerations such as deterioration in the environment in which the Company operates, an
increased competitive environment, a change in the market for the Company’s products or services, or a regulatory
or political development; (iii) cost factors such as increases in labor or other costs that have a negative effect on
earnings and cash flows; (iv) overall financial performance such as negative or declining cash flows or a decline in
actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (v) other
relevant entity-specific events such as changes in management, key personnel, strategy, or customers, bankruptcy, or
litigation; (vi) events effective a reporting unit such as a change in the composition or carrying amount of the
Company’s net assets; and (vii) a sustained decrease in the Company’s share price.
The Company evaluates the significance of identified events and circumstances on the basis of the weight
of evidence along with how they could affect the relationship between the carrying value of the Company’s
broadcasting licenses and goodwill and their respective fair value amounts, including positive mitigating events and
circumstances.
Subsequent to the annual impairment test conducted during the second quarter of 2018, the Company
continued to monitor these factors listed above. Due to a sustained decline in the Company’s share price from the
time of the annual impairment test conducted in the second quarter of 2018, the Company determined that the
changes in circumstances warranted an interim impairment assessment on its broadcasting licenses and goodwill.
Due to changes in facts and circumstances, the Company revised its estimates with respect to estimated operating
profit margins and long-term revenue growth rates used in the interim impairment assessment. In connection with
the interim impairment assessment conducted during the fourth quarter of 2018, the Company determined the
carrying value of its broadcasting licenses and goodwill was impaired and recorded an impairment loss of $465.0
million ($423.2 million net of tax). Of this amount, $147.9 million of the impairment charge ($108.8 million, net of
tax) was attributed to the broadcasting licenses and $317.1 million of the impairment charge ($314.4 million, net of
tax) was attributed to goodwill.
There were material changes in the carrying value of broadcasting licenses and goodwill during the year
ended December 31, 2018, primarily as a result of: (i) the impairment recorded in the fourth quarter of 2018; and (ii)
acquisition and disposition activities described further in Note 3, Business Combinations.
During the second quarter of 2017, the Company performed its annual impairment test of its goodwill and
determined that the carrying amount of goodwill exceeded its fair value for one of its markets and recorded an
impairment loss of $0.4 million. A contributing factor to the impairment was a decline in the advertising dollars in
the particular market and its effect on the Company’s operations, coupled with an increase in the carrying value of
its assets.
The Company may only write down the carrying value of its indefinite-lived intangibles. The Company is
not permitted to increase the carrying value if the fair value of these assets subsequently increases.
The following table presents the changes in the carrying value of broadcasting licenses:
93
Broadcasting Licenses
Carrying Amount
December 31,
December 31,
2018
2017
(amounts in thousands)
$
$
2,649,959 $
-
-
-
-
-
-
-
-
-
12,785
27,346
(148,564)
(24,901)
2,516,625 $
823,195
(13,500)
(15,738)
17,174
1,880,400
(54,661)
35,944
50,621
(7,462)
(66,014)
-
-
-
-
2,649,959
Goodwill Carrying Amount
December 31,
December 31,
2017
2018
(amounts in thousands)
$
988,056 $
(126,056)
158,333
(125,615)
862,000
(317,138)
-
-
-
-
-
-
-
(8,623)
(21,498)
332
24,396
539,469 $
32,718
(441)
43
820,961
(266)
289
11,700
(14)
(2,990)
-
-
-
-
862,000
982,663 $
(443,194)
539,469 $
988,056
(126,056)
862,000
$
$
$
Broadcasting licenses balance as of January 1,
Disposition of an FCC broadcasting license to facilitate the CBS Merger
Deconsolidation of a VIE - 2017 Charlotte Acquisition
Acquisition of radio stations - 2017 Charlotte Acquisition
Acquisition of radio stations - CBS Radio Merger
Disposition of FCC broadcasting licenses - EMF Sale
Acquisition of a radio station - Beasley Transaction
Acquisition of radio stations - iHeartMedia Transaction
Disposition of radio stations - iHeartMedia Transaction
Assets held for sale - Bonneville Transaction
Acquisition of radio stations - Emmis Acquisition
Acquisition of a radio station - Jerry Lee Transaction
Loss on impairment
Disposition of a radio station - WXTU Transaction
Ending period balance
The following table presents the changes in goodwill.
Goodwill balance before cumulative loss
on impairment as of January 1,
Accumulated loss on impairment as of January 1,
Goodwill beginning balance after cumulative loss
on impairment as of January 1,
Loss on impairment during year
Acquisition of radio stations - 2017 Charlotte Acquisition
Acquisition of radio stations - CBS Radio Merger
Disposition of goodwill - EMF sale
Acquisition of a radio station - Beasley Transaction
Acquisition of radio stations -iHeartMedia Transaction
Disposition of radio stations - iHeartMedia Transaction
Assets held for sale - Bonneville Transaction
Disposition of a radio station - WXTU Transaction
Measurement period adjustments to acquired goodwill
Acquisition of radio stations - Emmis Acquisition
Acquisition of a radio station - Jerry Lee Transaction
Ending period balance
Goodwill balance before cumulative loss
on impairment as of December 31,
Accumulated loss on impairment as of December 31,
Goodwill ending balance as of December 31,
94
Broadcasting Licenses Impairment Test
The Company performs its annual broadcasting license impairment test during the second quarter of each
year by evaluating its broadcasting licenses for impairment at the market level using the Greenfield method.
During the second quarter of the current year and each of the past several years, the Company completed its
annual impairment test for broadcasting licenses and determined that the fair value of its broadcasting licenses was
greater than the amount reflected in the balance sheet for each of the Company’s markets and, accordingly, no
impairment was recorded.
All of the Company’s broadcasting licenses, with the exception of the broadcasting licenses acquired in the
Jerry Lee Transaction during the third quarter of the current year, were subject to the annual impairment test
conducted in the second quarter of the current year. For the station acquired in the Jerry Lee Transaction, similar
valuation techniques that were used in the annual impairment testing process were applied to the valuation of the
broadcasting licenses under purchase price accounting. The valuation of the acquired broadcasting licenses
approximates fair value.
Each market’s broadcasting licenses are combined into a single unit of accounting for purposes of testing
impairment, as the broadcasting licenses in each market are operated as a single asset. The Company determines the
fair value of the broadcasting licenses in each of its markets by relying on a discounted cash flow approach (a 10-
year income model) 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. These assumptions include, but are not limited to: (i) the discount rate;
(ii) the market share and profit margin of an average station within a market, based upon market size and station
type; (iii) the forecast growth rate of each radio market; (iv) the estimated capital start-up costs and losses incurred
during the early years; (v) the likely media competition within the market area; (vi) the tax rate; and (vii) future
terminal values.
The methodology used by the Company in determining its key estimates and assumptions was applied
consistently to each market. Of the seven variables identified above, the Company believes that the assumptions in
items (i) through (iii) above are the most important and sensitive in the determination of fair value.
Assumptions and Results – Broadcasting Licenses
The following table reflects the estimates and assumptions used in the interim and annual broadcasting
licenses impairment assessments of each year.
Discount rate
Operating profit margin ranges expected
for average stations in the markets
where the Company operates
Long-term revenue growth rate range
of the Company's markets
Fourth
Quarter
2018
9.00%
Estimates And Assumptions
Second
Quarter
2017
9.25%
Second
Quarter
2018
9.00%
Second
Quarter
2016
9.5%
Second
Quarter
2015
9.7%
22% to 37% 22% to 37% 19% to 40%
14% to 40%
25% to 40%
0.0% to 0.9% 0.5% to 1.0% 1.0% to 2.0% 1.0% to 2.0% 1.5% to 2.0%
The Company has made reasonable estimates and assumptions to calculate the fair value of its broadcasting
licenses. These estimates and assumptions could be materially different from actual results.
If actual market conditions are less favorable than those projected by the industry or the Company, or if
events occur or circumstances change that would reduce the fair value of the Company’s broadcasting licenses
below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and
possibly recognize impairment charges, which may be material, in future periods.
Goodwill Impairment Test
95
The Company performs its annual goodwill impairment test during the second quarter of each year.
In prior years, the Company determined that each individual radio market was a reporting unit and the
Company assessed goodwill in each of the Company’s markets. Under the amended guidance, if the fair value of
any reporting unit was less than the amount reflected on the balance sheet, the Company would recognize an
impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value. The loss
recognized would not exceed the total amount of goodwill allocated to the reporting unit.
As a result of the change to a single operating segment, the Company reassessed its reporting unit
determination. Following the Company’s Merger with CBS Radio in November 2017, the Company’s radio
broadcasting operations increased from 28 radio markets to 48 radio markets. Each market is a component one level
beneath the single operating segment. Since each market is economically similar, all 48 markets have been
aggregated into a single reporting unit for the goodwill impairment assessment.
In response to the realignment in the Company’s operating segments and reporting units, the Company
considered whether the event represented a triggering event for interim goodwill impairment testing. During the
three months ended June 30, 2018, and prior to conducting the current year annual impairment testing described
below, the Company made an evaluation, based on factors such as each reporting unit’s total market share and
changes in operating cash flow margins, and concluded that it was more likely than not that the fair value of each of
the Company’s reporting units exceeded their carrying values at the time of the realignment.
Current Year Methodology
In connection with the Company’s current year annual and interim impairment assessment, the Company
used an income approach in computing the fair value of the Company. This approach utilized a discounted cash
flow method by projecting the Company’s income over a specified time and capitalizing at an appropriate market
rate to arrive at an indication of the most probable selling price. Management believes that this approach is
commonly used and is an appropriate methodology for valuing the Company. Factors contributing to the
determination of the Company’s operating performance were historical performance and/or management’s estimates
of future performance.
Prior Year Methodology
In connection with the Company’s prior year annual impairment assessment, the Company first assessed
qualitative factors to determine whether it was necessary to perform a quantitative assessment for each reporting
unit. These qualitative factors included, but were not limited to: (i) macroeconomic conditions; (ii) radio
broadcasting industry considerations; (iii) financial performance of reporting units; (iv) Company-specific events;
and (v) a sustained decrease in the Company’s share price. If the quantitative assessment was necessary, the
Company determined the fair value of the goodwill allocated to each reporting unit.
To determine the fair value, the Company used a market approach and, when appropriate, an income
approach in computing the fair value of each reporting unit. The market approach calculated the fair value of each
market’s radio stations by analyzing recent sales and offering prices of similar properties expressed as a multiple of
cash flow. The income approach utilized a discounted cash flow method by projecting the subject property’s income
over a specified time and capitalizing at an appropriate market rate to arrive at an indication of the most probable
selling price. Management believes that these approaches are commonly used and appropriate methodologies for
valuing broadcast radio stations. Factors contributing to the determination of the reporting unit’s operating
performance were historical performance and/or management’s estimates of future performance.
The Assumptions And Results - Goodwill
The following table reflects the estimates and assumptions used in the interim and annual goodwill
impairment assessments of each year:
96
Discount rate
Market multiple used in the market
valuation approach
Fourth
Quarter
2018
9.00%
Estimates And Assumptions
Second
Quarter
2018
9.00%
Second
Quarter
2017
9.25%
Second
Quarter
2016
9.5%
Second
Quarter
2015
9.7%
not applicable
not applicable
7.5x to 8.0x
7.5x to 8.0x
7.5x to 8.0x
During the second quarter of the current year, the Company’s quantitative assessment indicated that the fair
value of goodwill exceeded the carrying amount of goodwill allocated to the Company. Accordingly, the Company
did not recognize an impairment charge during the second quarter of 2018.
All of the Company’s goodwill, with the exception of the goodwill acquired in the Jerry Lee Transaction
during the third quarter of the current year, was subject to the annual impairment test conducted in the second
quarter of the current year. For the station acquired in the Jerry Lee Transaction, similar valuation techniques that
were used in the annual impairment testing process were applied to the valuation of the goodwill under purchase
price accounting. The valuation of the acquired goodwill approximates fair value.
During the second quarter in each of the years of 2017 and 2016, the Company also performed a
reasonableness test on the fair value results for goodwill on a combined basis by comparing the carrying value of the
Company’s assets to the Company’s enterprise value based upon its stock price. The Company determined that the
results were reasonable.
During the second quarter of 2016, the results of the goodwill impairment assessment indicated that no
impairment charge was required.
If actual market conditions are less favorable than those projected by the industry or the Company, or if
events occur or circumstances change that would reduce the fair value of the Company’s goodwill below the amount
reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize
impairment charges, which could be material, in future periods.
(B) Definite-Lived Intangibles
The Company has definite-lived intangible assets that consist of advertiser lists and customer relationships,
and acquired advertising contracts. These assets are amortized over the period for which the assets are expected to
contribute to the Company’s future cash flows and are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. For 2018, 2017 and 2016, the
Company reviewed the carrying value and the useful lives of these assets and determined they were appropriate.
See Note 7, Deferred Charges And Other Assets, for: (i) a listing of the assets comprising definite-lived
assets, which are included in deferred charges and other assets on the balance sheets; (ii) the amount of amortization
expense for definite-lived assets; and (iii) the Company’s estimate of amortization expense for definite-lived assets
in future periods.
97
7.
OTHER ASSETS
Deferred charges and other assets consist of the following:
2018
Accumulated
Asset Amortization
Other Assets
December 31,
Net
Asset
(amounts in thousands)
2017
Accumulated
Amortization
Net
Period Of
Amortization
1,588 $
17,028
1,390 $
2,440
198 $
14,588
1,588 $
17,028
1,341 $
431
247 Term of contract
16,597 Term of contract
29,332
7,600
55,548
619
4,259
24,589
$ 85,015 $
10,780
6,601
21,211
52
-
7,555
28,818 $
18,552
999
34,337
567
4,259
17,034
56,197 $
29,126
6,916
54,658
2,487
5,239
9,720
72,104 $
27,736 3 to 5 years
1,920 Term of contract
46,500
607 Term of debt
1,390
4,996
8,158
1,880
5,239
-
5,611
4,109
14,147 $ 57,957
$
Deferred contracts
Leasehold premium
Advertiser lists and customer
relationships
Other definite-lived assets
Total definite-lived intangibles
Debt issuance costs
Prepaid assets - long-term
Software costs and other
The following table presents the various categories of amortization expense, including deferred financing
costs which are reflected as interest expense:
Amortization Expense
Other Assets
For The Years Ended December 31,
2018
2017
(amounts in thousands)
2016
Definite-lived assets
Deferred financing expense
Software costs
Total
$
12,132
$
3,189
3,447
18,768 $
$
1,240 $
2,333
1,091
4,664 $
81
2,585
1,023
3,689
The following table presents the Company’s estimate of amortization expense, for each of the five
succeeding years for: (1) deferred charges and other assets; and (2) definite-lived assets:
Future Amortization Expense
Definite-Lived
Total
Other
Assets
Years ending December 31,
2019
2020
2021
2022
2023
Thereafter
Total
$ 18,526 $
16,148
5,136
2,066
1,759
6,023
(amounts in thousands)
6,267 $
5,682
3,168
111
93
-
$ 49,658 $ 15,321 $
12,259
10,466
1,968
1,955
1,666
6,023
34,337
98
8.
OTHER CURRENT LIABILITIES
Other current liabilities consist of the following as of the periods indicated:
Other Current Liabilities
December 31,
2018
(amounts in thousands)
2017
$
$
31,192 $
5,743
4,190
6,007
22,692
2,852
4,634
8,646
6,748
10,558
15,176
118,438 $
36,105
1,876
3,048
12,285
17,519
3,301
4,634
9,470
8,196
5,370
5,757
107,561
Accrued compensation
Accounts receivable credits
Advertiser obligations
Accrued interest payable
Unearned revenue
Unfavorable lease liabilities
Unfavorable sports liabilities
Accrued benefits
Non-income tax liabilities
Income taxes payable
Other
Total other current liabilities
During the third quarter of 2018, the Company disposed of certain property that the Company considered as
surplus to its operations and that resulted in significant gains reportable for tax purposes. The income taxes payable
generated from these gains and losses are included within the current portion of income taxes payable in the
schedule above. Upon the successful completion of a like-kind exchange under Section 1031 of the Code, a portion
of this amount will be reclassified to a deferred tax liability. Refer to Note 20, Contingencies And Commitments,
for additional information.
9.
OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following as of the periods indicated:
Other Long-Term Liabilities
December 31,
2018
2017
(amounts in thousands)
$
Deferred compensation
Unfavorable lease liabilities
Unfavorable sports liabilities
Unearned revenue
Deferred rent liabilities
Other
Total other long-term liabilities $
30,928 $
9,367
17,633
1,138
17,671 $
12,431
89,168 $
40,995
12,215
22,285
13,000
6,599
12,473
107,567
10.
LONG-TERM DEBT
(A) Senior Debt
Refinancing – CBS Radio Indebtedness
In connection with the Merger, the Company assumed CBS Radio’s indebtedness outstanding under: (i) a
credit agreement (the “Credit Facility”) among CBS Radio (now Entercom Media Corp.), the guarantors named
99
therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent; and (ii) the senior
notes (described below).
On March 3, 2017, CBS Radio (now Entercom Media Corp.) entered into an amendment to the Credit
Facility, to, among other things, create a tranche of Term B-1 Loans (the “Term B-1 Tranche”) in an aggregate
principal amount not to exceed $500 million. The Term B-1 Tranche is governed by the Credit Facility and will
mature on November 17, 2024.
Immediately prior to the Merger, the Credit Facility was comprised of a revolving credit facility and a term
B loan. On the closing date of the Merger and the refinancing, the term B loan was converted into the Term B-1
Tranche and both were simultaneously refinanced (“Term B-1 Loan”).
As a result of the refinancing activities described above, in the fourth quarter of 2017, the Company
recorded a loss on the extinguishment of debt of $4.1 million. The loss included the write off of deferred financing
expense, a loss on the early retirement of the Preferred, and certain fees paid to lenders in connection with the
refinancing activities.
The Credit Facility
On November 17, 2017, in connection with the Merger, the Company refinanced its previously outstanding
indebtedness and also assumed CBS Radio’s outstanding indebtedness. As a result of the refinancing activity and
the Merger, the Company’s outstanding Credit Facility is comprised of the Revolver and a term loan component (the
“Term B-1 Loan”).
The $250.0 million Revolver has a maturity date of November 17, 2022. The amount available under the
Revolver, which includes the impact of outstanding letters of credit, was $64.1 million as of December 31, 2018.
The Term B-1 Loan has a maturity date of November 17, 2024.
The Term B-1 Loan amortizes: (i) with equal quarterly installments of principal in annual amounts equal to
1.0% of the original principal amount of the Term B-1 Loan; and (ii) mandatory yearly prepayments based upon a
percentage of Excess Cash Flow as defined in the agreement.
The Term B-1 Loan requires mandatory prepayments equal to a percentage of Excess Cash Flow, as
defined within the agreement, subject to incremental step-downs, depending on the Consolidated Net Secured
Leverage Ratio as defined in the agreement. The Excess Cash Flow payment, if any, will be due in the first quarter
of each year, beginning with 2019, and is based on the Excess Cash Flow and Consolidated Net Secured Leverage
Ratio for the prior year.
The Company expects to use the Revolver to: (i) provide for working capital; and (ii) provide for general
corporate purposes, including capital expenditures and any or all of the following (subject to certain restrictions):
repurchase of Class A common stock, dividends, investments and acquisitions. In addition, the Credit Facility is
secured by a lien on substantially all of the assets (including material real property) of Entercom Media Corp. and its
subsidiaries with limited exclusions. All of the Company’s subsidiaries, jointly and severally guaranteed the Credit
Facility. The assets securing the Credit Facility are subject to customary release provisions which would enable the
Company to sell such assets free and clear of encumbrance, subject to certain conditions and exceptions.
The Credit Facility has usual and customary covenants including, but not limited to, a net secured leverage
ratio, restricted payments and the incurrence of additional debt. Specifically, the Credit Facility requires the
Company to comply with a certain financial covenant which is a defined term within the agreement, including a
maximum Consolidated Net Secured Leverage Ratio that cannot exceed 4.0 times at December 31, 2018. In certain
circumstances, if the Company consummates additional acquisition activity permitted under the terms of the Credit
Facility, the Consolidated Net Secured Leverage Ratio will be increased to 4.5 times for a one year period following
the consummation of such permitted acquisition. As of December 31, 2018, the Company’s Consolidated Net
Secured Leverage Ratio was 3.6 times.
Failure to comply with the Company’s financial covenant or other terms of its Credit Facility and any
subsequent failure to negotiate and obtain any required relief from its lenders could result in a default under the
Company’s Credit Facility. Any event of default could have a material adverse effect on the Company’s business
and financial condition. The acceleration of the Company’s debt repayment could have a material adverse effect on
100
its business. The Company may seek from time to time to amend its Credit Facility or obtain other funding or
additional funding, which may result in higher interest rates.
Management believes that over the next 12 months, the Company can continue to maintain compliance
with its financial covenant. The Company’s operating cash flow is positive, and management believes that it is
adequate to fund the Company’s operating needs and mandatory debt repayments under the Company’s Credit
Facility. As of December 31, 2018, the Company is in compliance with the financial covenant and all other terms of
the Credit Facility in all material respects. The Company’s ability to maintain compliance with its covenant is
highly dependent on its results of operations.
Management believes that cash on hand, borrowing capacity from the Revolver and cash from operating
activities will be sufficient to permit the Company to meet its liquidity requirements over the next 12 months,
including its debt repayments. The cash available from the Revolver is dependent on the Company’s Consolidated
Net Secured Leverage Ratio at the time of such borrowing.
Long-term debt was comprised of the following as of December 31, 2018:
Long-Term Debt
December 31,
2018
(amounts in thousands)
2017
Credit Facility
Revolver, due November 17, 2022
Term B-1 Loan, due November 17, 2024
Plus unamortized premium
Senior Notes
7.250% senior unsecured notes, due October 17, 2024
Plus unamortized premium
Other Debt
Other
Total debt before deferred financing costs
Current amount of long-term debt
Deferred financing costs (excludes the revolving credit)
Total long-term debt, net of current debt
Outstanding standby letters of credit
$
$
$
180,000 $
1,291,700
2,470
1,474,170
400,000
14,158
414,158
912
1,889,240
-
(17,037)
1,872,203 $
5,862 $
143,000
1,330,000
2,904
1,475,904
400,000
16,584
416,584
70
1,892,558
(13,319)
(19,797)
1,859,442
1,856
Entercom Media Corp., which is a wholly-owned subsidiary of the Company, holds the ownership interest
in various subsidiary companies that own the operating assets, including broadcasting licenses, permits,
authorizations and cash royalties. Entercom Media Corp. is the borrower under the Credit Facility. The assets
securing the Credit Facility are subject to customary release provisions which would enable the Company to sell
such assets free and clear of encumbrance, subject to certain conditions and exceptions.
Under certain covenants, the Company’s subsidiary guarantors are restricted from paying dividends or
distributions in excess of amounts defined under the Credit Facility, and the subsidiary guarantors are limited in
their ability to incur additional indebtedness under certain restrictive covenants.
Prior to the closing of the CBS Radio Merger Agreement, CBS Radio entered into a commitment letter
with a syndicate of lenders (the “Commitment Parties”), pursuant to which the Commitment Parties committed to
provide up to $500.0 million of senior secured term loans (the “CBS Radio Financing”) as an additional tranche
under the Credit Facility.
On March 3, 2017, CBS Radio (now Entercom Media Corp.) entered into an amendment to the Credit
Facility, to, among other things, create a tranche of Term B-1 Loans (the “Term B-1 Tranche”) in an aggregate
principal amount not to exceed $500 million. The Term B-1 Tranche, which replaced the commitment under the
CBS Radio Financing, is governed by the Credit Facility and will mature on November 17, 2024.
101
The refinancing occurred on November 17, 2017 shortly after the Merger. The proceeds of the Term B-1
Tranche were used to: (i) refinance the Company’s $540 million credit agreement (the “Former Credit Facility”) that
was comprised of: (a) a term loan component (the “Former Term B Loan”) with $458.0 million outstanding at the
date of the refinancing; and (b) a revolving credit facility (the “Former Revolver”) with $17.5 million outstanding at
the date of the refinancing; (ii) redeem the Company’s $27.5 million of Preferred plus accrued interest through the
date of the Merger; and (iii) pay fees and expenses in connection with the refinancing.
The Former Credit Facility
On November 1, 2016, the Company and its wholly-owned subsidiary, Entercom Radio, LLC, (“Radio”)
entered into a $540 million credit agreement with a syndicate of lenders that was initially comprised of: (a) a $60
million revolving credit facility that was due to mature on November 1, 2021; and (b) a $480 million term B loan
that was due to mature on November 1, 2023. This Former Credit Facility was paid in full on November 17, 2017 in
connection with the refinancing activities described above.
The Former Credit Facility was secured by a pledge of 100% of the capital stock and other equity interest
in all of the Company’s wholly-owned subsidiaries. In addition, the Former Credit Facility was secured by a lien on
substantially all of the Company’s assets, with limited exclusions (including the Company’s real property).
(B) Senior Unsecured Debt
The Senior Notes
Simultaneously with entering into the Merger and assuming the Credit Facility on November 17, 2017, the
Company also assumed the 7.250% unsecured senior notes (the “Senior Notes”) that were subsequently modified
and mature on October 17, 2024 in the amount of $400.0 million. The Senior Notes were originally issued by CBS
Radio (now Entercom Media Corp.) on October 17, 2016. The deferred financing costs and debt premium on the
Senior Notes will be amortized over the term under the effective interest rate method. As of any reporting period,
the amount of any unamortized debt finance costs and debt premium costs are reflected on the balance sheet as a
subtraction and an addition to the $400.0 million liability, respectively.
Interest on the Senior Notes accrues at the rate of 7.250% per annum and is payable semi-annually in
arrears on May 1 and November 1 of each year.
The Senior Notes may be redeemed on or after November 1, 2019 at a redemption price of 105.438% of
their principal amount plus accrued interest. The redemption price decreases to 103.625% of their principal amount
plus accrued interest on or after November 1, 2020, 101.813% of their principal amount plus accrued interest on or
after November 1, 2021, and 100% of their principal amount plus accrued interest on or after November 1, 2022.
The Senior Notes are unsecured and rank: (i) senior in right of payment to the Company’s future
subordinated debt; (ii) equally in right of payment with all of the Company’s existing and future senior debt; (iii)
effectively subordinated to the Company’s existing and future secured debt (including the debt under the Company’s
Credit Facility), to the extent of the value of the collateral securing such debt; and (iv) structurally subordinated to
all of the liabilities of the Company’s subsidiaries that do not guarantee the Senior Notes, to the extent of the assets
of those subsidiaries.
All of the Company’s existing subsidiaries, other than Entercom Media Corp., jointly and severally
guaranteed the Senior Notes.
A default under the Company’s Senior Notes could cause a default under the Company’s Credit Facility.
Any event of default, therefore, could have a material adverse effect on the Company’s business and financial
condition.
The Company may from time to time seek to repurchase or retire its outstanding debt through open market
purchases, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing
market conditions, the Company’s liquidity requirements, contractual restrictions and other factors. The amounts
involved may be material.
The Senior Notes are not a registered security and there are no plans to register the Company’s Senior
Notes as a security in the future. As a result, Rule 3-10 of Regulation S-X promulgated by the SEC is not applicable
102
and no separate financial statements are required for the guarantor subsidiaries as of December 31, 2018 and 2017
and for the years ended December 31, 2018, 2017 and 2016.
The Former Senior Notes
In 2016, the Company issued a call notice to redeem its $220.0 million 10.5% unsecured Senior Notes due
December 1, 2019 (the “Former Senior Notes”) in full with an effective date of December 1, 2016, that was funded
by the proceeds of the Former Credit Facility.
The Former Senior Notes were unsecured and ranked: (i) senior in right of payment to the Company’s
future subordinated debt; (ii) equally in right of payment with all of the Company’s existing and future senior debt;
(iii) effectively subordinated to the Company’s existing and future secured debt (including the debt under the
Company’s Former Credit Facility), to the extent of the value of the collateral securing such debt; and (iv)
structurally subordinated to all of the liabilities of the Company’s subsidiaries that did not guarantee the Former
Senior Notes, to the extent of the assets of those subsidiaries.
(C) Net Interest Expense
The components of net interest expense are as follows:
Interest expense
Amortization of deferred financing costs
Amortization of original issue discount (premium) of senior notes
Interest income and other investment income
Total net interest expense
$
$
Net Interest Expense
Years Ended December 31,
2018
2017
2016
(amounts in thousands)
101,497 $
3,189
(2,862)
(703)
101,121 $
31,266 $
2,333
(962)
(116)
32,521 $
33,799
2,585
312
(57)
36,639
The weighted average interest rate under the Credit Facility (before taking into account the fees on the
unused portion of the Revolver) was: (i) 5.2% as of December 31, 2018; and (ii) 4.2% as of December 31, 2017.
(D) Interest Rate Transactions
As of December 31, 2018 and 2017, there were no derivative interest rate transactions outstanding.
The Company from time to time enters into interest rate transactions with different lenders to diversify its
risk associated with interest rate fluctuations of its variable rate debt. Under these transactions, the Company agrees
with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest
amounts calculated by reference to an agreed notional principal amount against the variable debt.
(E) Aggregate Principal Maturities
The minimum aggregate principal maturities on the Company’s outstanding debt (excluding any impact
from required principal payments based upon the Company’s future operating performance) are as follows:
103
Principal Debt Maturities
Term B-1
Loan
Revolver
Senior Notes
Other
Total
(amounts in thousands)
Years ending December 31:
$
2019
2020
2021
2022
2023
Thereafter
Total
$
- $
1,600
13,300
13,300
13,300
1,250,200
1,291,700 $
(F) Outstanding Letters of Credit
- $
-
-
180,000
-
-
180,000 $
- $
-
-
-
-
400,000
400,000 $
59 $
47
35
30
30
711
912 $
59
1,647
13,335
193,330
13,330
1,650,911
1,872,612
The Company is required to maintain standby letters of credit in connection with insurance coverage as
described in Note 20, Contingencies And Commitments.
(G) Guarantor and Non-Guarantor Financial Information
As of December 31, 2018, each direct and indirect subsidiary of Entercom Media Corp. is a guarantor of
Entercom Media Corp.’s obligations under the Credit Facility and the Senior Notes. Under certain covenants, the
Company’s subsidiary guarantors are restricted from paying dividends or distributions in excess of amounts defined
under the Senior Notes, and the subsidiary guarantors are limited in their ability to incur additional indebtedness
under certain restricted covenants.
The Company’s borrowing agreements contain restrictions on its ability to pay dividends to its parent under
certain facts and circumstances. As of December 31, 2018, these restrictions did not apply.
Under the Credit Facility, Entercom Media Corp. is permitted to make distributions to Entercom
Communications Corp., which are required to pay Entercom Communications Corp.’s reasonable overhead costs,
including income taxes, dividends to shareholders, share repurchases and other costs associated with conducting the
operations of Entercom Media Corp. and its subsidiaries.
11.
PERPETUAL CUMULATIVE CONVERTIBLE PREFERRED STOCK
As discussed in Note 10, Long-Term Debt, a portion of the proceeds from the debt refinancing that
occurred on November 17, 2017 were used to fully redeem the Preferred. As a result of this redemption, during
2017 the Company: (i) removed the net carrying value of Preferred of $27.5 million from its books, which included
accrued dividends through the date of redemption of $0.2 million; and (ii) recognized a loss on extinguishment of
the Preferred of $0.2 million.
As of December 31, 2018 and 2017, the Company has no Preferred shares authorized, issued and
outstanding.
In connection with an acquisition on July 16, 2015, the Company issued Preferred that in the event of a
liquidation, ranked senior to common stock as to liquidation preference.
The payment of the liquidation preference of the Preferred took preference over any liquidation payments
to the Company’s common shareholders. The Preferred was convertible by the holder into a fixed number of 1.9
million shares, subject to customary anti-dilution provisions, after a three-year waiting period. The Preferred was
redeemed in cash at a price of 100%.
The initial dividend rate on the Preferred was 6% and increased over time to 12%. Due to the legal
obligation to pay cumulative dividends as a liquidation preference, the dividends were accrued as they were earned
instead of when they were declared.
104
12.
SHAREHOLDERS’ EQUITY
Class B Common Stock
Shares of Class B common stock are transferable only to Joseph M. Field, David J. Field, certain of their
family members, their estates and trusts for any of their benefit. Upon any other transfer, shares of Class B common
stock automatically convert into shares of Class A common stock on a one-for-one basis.
In connection with the Merger, during 2017, certain members of the Field family caused to be converted an
aggregate of 3,152,333 shares of Class B common stock to Class A common stock in accordance with the provisions
for voluntary conversion of Class B common stock pursuant to Section 10(e)(i) of the Company’s Articles of
Incorporation.
Dividends
On November 2, 2017, the Company’s Board of Directors approved an increase to the Company’s annual
common stock dividend program from $0.30 per share to $0.36 per share, beginning with the dividend paid in the
fourth quarter of 2017. The Company expects quarterly dividend payments to be approximately $12.4 million per
quarter. Any future dividends will be at the discretion of the Board of Directors based upon the relevant factors at
the time of such consideration, including, without limitation, compliance with the restrictions set forth in the
Company’s Credit Facility and the Senior Notes.
During the second quarter of 2016, the Company’s Board of Directors commenced an annual $0.30 per
share common stock dividend program, with payments that approximated $2.9 million per quarter. In addition to
the quarterly dividend, the Company paid a special one-time cash dividend of $0.20 per share of common stock on
August 30, 2017. Pursuant to the Merger Agreement, the Company agreed not to declare or pay any dividends or
make other distributions in respect of any shares of the Company’s capital stock, except for the Company’s regular
quarterly cash dividend. The special one-time cash dividend, which approximated $7.8 million, was permitted under
the Merger Agreement.
Under the Credit Facility and the Senior Notes, the Company may be restricted in the amount available for
dividends, share repurchases, investments, and debt repurchases in the future based upon its Consolidated Net
Secured Leverage Ratio. The amount available can increase over time based upon the Company’s financial
performance and used when its Consolidated Net Secured Leverage Ratio is less than or equal to the maximum
Secured Leverage Ratio permitted at the time. There are certain other limitations that apply to its use.
The following table presents a summary of the Company’s dividend activity during the past two years
ending December 31, 2018:
105
Equity Type
Payment
Date
Common stock March 15, 2017
$
$
June 15, 2017
$
August 30, 2017
September 15, 2017 $
December 15, 2017 $
$
March 28, 2018
$
June 28, 2018
September 14, 2018 $
December 14, 2018 $
Dividends
per Share
0.075
0.075
0.200
0.075
0.090
0.090
0.090
0.090
0.090
Aggregate
Payment
Amount
2,915,952
$
2,920,860
$
7,791,075
$
$
2,921,727
$ 12,633,039
$ 12,440,990
$ 12,475,445
$ 12,486,825
$ 12,366,985
Preferred
January 16, 2017 $
April 16, 2017
$
$
July 16, 2017
October 16, 2017 $
November 17, 2017 $
50,000.00 $
50,000.00 $
50,000.00 $
62,500.00 $
21,527.78 $
550,000
550,000
550,000
687,500
236,806
Dividend Equivalents
The Company’s grants of RSUs include the right, upon vesting, to receive a cash payment equal to the
aggregate amount of dividends, if any, that holders would have received on the shares of common stock underlying
their RSUs if such RSUs had been vested during the period.
The following table presents the amounts accrued and unpaid on unvested RSUs:
Dividend Equivalent Liabilities
Balance Sheet
Location
Short-term Other current liabilities
Long-term Other long-term liabilities
Total
$
$
December 31,
2018
2017
(amounts in thousands)
1,279 $
1,041
2,320 $
830
1,331
2,161
Deemed Stock Repurchase When RSUs Vest
Upon vesting of RSUs, a tax obligation is created for both the employer and the employee. Unless
employees elect to pay their tax withholding obligations in cash, the Company withholds shares of stock in an
amount sufficient to cover their tax withholding obligations. The withholding of these shares by the Company is
deemed to be a repurchase of its stock.
The following table provides summary information on the deemed repurchase of vested RSUs:
Shares of stock deemed repurchased
Amount recorded as financing activity
$
2018
Years Ended December 31,
2017
(amounts in thousands)
506
5,186 $
169
2,565 $
2016
232
2,268
106
Employee Stock Purchase Plan
The Company’s Entercom Employee Stock Purchase Plan (the “ESPP”) allows participants to purchase the
Company’s stock at a price equal to 85% of the market value of such shares on the purchase date. The maximum
number of shares authorized to be issued under the ESPP is 1.0 million. Pursuant to this plan, the Company does not
record compensation expense to the employee as income subject to tax on the difference between the market value
and the purchase price, as this plan was designed to meet the requirements of Section 423(b) of the Code. The
Company recognizes the 15% discount in the Company’s consolidated statements of operations as non-cash
compensation expense.
Pursuant to the CBS Radio Merger Agreement, the Company agreed not to issue or authorize any shares of
its capital stock until the earlier of the termination of the CBS Radio Merger Agreement or the consummation of the
Merger. As a result, the Company effectively suspended the ESPP during the second quarter of 2017. There were
no shares purchased and the Company did not recognize any non-cash compensation expense in connection with the
ESPP during the second, third or fourth quarters of 2017. The Company resumed the ESPP in the first quarter of
2018.
2018
Years Ended
December 31,
2017
(amounts in thousands)
228
252 $
15
32 $
2016
32
67
Number of shares purchased
Non-cash compensation expense recognized
$
Share Repurchase Program
On November 2, 2017, the Company’s Board of Directors announced a share repurchase program (the
“2017 Share Repurchase Program”) to permit the Company to purchase up to $100.0 million of the Company’s
issued and outstanding shares of Class A common stock through open market purchases. Shares repurchased by the
Company under the 2017 Share Repurchase Program will be at the discretion of the Company based upon the
relevant factors at the time of such consideration, including, without limitation, compliance with the restrictions set
forth in the Company’s Credit Facility and the Senior Notes.
During the year ended December 31, 2018, the Company repurchased 3.2 million shares of Class A
common stock at an aggregate average price of $9.11 per share for a total of $29.4 million.
13.
NET INCOME (LOSS) PER COMMON SHARE
Net income per common share is calculated as basic net income per share and diluted net income per share.
Basic net income per share excludes dilution and is computed by dividing net income available to common
shareholders by the weighted average number of common shares outstanding for the period. Diluted net income per
share is computed in the same manner as basic net income after assuming issuance of common stock for all
potentially dilutive equivalent shares, which includes the potential dilution that could occur: (i) if the RSUs with
service conditions were fully vested (using the treasury stock method); (ii) if all of the Company’s outstanding stock
options that are in-the-money were exercised (using the treasury stock method); (iii) if the RSUs with service and
market conditions were considered contingently issuable; (iv) if the RSUs with service and performance conditions
were considered contingently issuable and (v) if the Preferred was converted (using the as if converted method, for
2016 only). The Company considered whether the options to purchase Class A common stock in connection with
the ESPP were potentially dilutive and concluded there were no dilutive shares as all options are automatically
exercised at the balance sheet date.
The Company considered the allocation of undistributed net income for multiple classes of common stock
and determined that it was appropriate to allocate undistributed net income between the Company’s Class A and
Class B common stock on an equal basis. For purposes of making this determination, the Company’s charter
provides that the holders of Class A and Class B common stock have equal rights and privileges except with respect
to voting on most other matters where Class B shares voted by Joseph Field or David Field have a 10 to 1 super
vote.
107
The following tables present the computations of basic and diluted net income (loss) per share from
continuing operations and discontinued operations:
2018
Year Ended December 31,
2017
(amounts in thousands, except share and per share
data)
2016
Basic Income (Loss) Per Share
Numerator
Net income available to the Company - continuing operations
Preferred stock dividends
Net income available to common shareholders from
continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss) available to common shareholders
Denominator
Basic weighted average shares outstanding
Net Income (Loss) Per Common Share - Basic:
Net income (loss) from continuing operations per share
available to common shareholders - Basic
Net income (loss) from discontinued operations per share
available to common shareholders - Basic
Net income (loss) per share available
to common shareholders - Basic
$
(362,587) $
-
233,013 $
2,015
(362,587)
1,152
(361,435) $
230,998
836
231,834 $
$
38,065
1,901
36,164
-
36,164
138,069,608
51,392,899
38,500,495
$
(2.63) $
4.49 $
0.94
0.01
0.02
-
$
(2.62) $
4.51 $
0.94
Diluted Income (Loss) Per Share
Numerator
Net income available to the Company - continuing operations
Preferred stock dividends
Net income available to common shareholders from
continuing operations
Income (loss) from discontinued operations, net of tax
Net income (loss) available to common shareholders
Denominator
Basic weighted average shares outstanding
Effect of RSUs and options under the treasury stock method
Diluted weighted average shares outstanding
Net Income (Loss) Per Common Share - Diluted:
Net income (loss) from continuing operations per share
available to common shareholders - Diluted
Net income (loss) from discontinued operations per share
available to common shareholders - Diluted
Net income (loss) per share available
to common shareholders - Diluted
$
(362,587) $
-
233,013 $
2,015
(362,587)
1,152
(361,435) $
230,998
836
231,834
$
$
38,065
1,901
36,164
-
36,164
138,069,608
-
138,069,608
51,392,899
1,492,257
52,885,156
38,500,495
1,067,567
39,568,062
$
(2.63) $
4.37 $
0.91
0.01
0.02
-
$
(2.62) $
4.38 $
0.91
Disclosure of Anti-Dilutive Shares
The following table presents those shares excluded as they were anti-dilutive:
108
Impact Of Equity Awards
Years Ended December 31,
2017
(amounts in thousands, except per share data)
2016
2018
Dilutive or anti-dilutive for all potentially
dilutive equivalent shares
Excluded shares as anti-dilutive under the treasury
stock method:
Options excluded
Price range of options excluded: from
Price range of options excluded: to
RSUs with service conditions
Excluded RSUs with service and market conditions
as market conditions not met
Excluded RSUs with service and performance
conditions until performance criteria is probable
Excluded preferred stock as anti-dilutive under the as if method
Excluded shares as anti-dilutive when reporting a net loss
14.
SHARE-BASED COMPENSATION
Equity Compensation Plan
anti-dilutive
dilutive
dilutive
$
$
564
6.43
13.98
1,394
$
$
548
11.69 $
13.98 $
163
-
-
-
-
226
336
267
-
-
755
-
-
-
-
1,943
-
Under the Entercom Equity Compensation Plan (the “Plan”), the Company is authorized to issue share-
based compensation awards to key employees, directors and consultants. The RSUs and options that have been
issued generally vest over periods of up to four years. The options expire ten years from the date of grant. The
Company issues new shares of Class A common stock upon the exercise of stock options and the later of vesting or
issuance of RSUs.
On January 1 of each year, the number of shares of Class A common stock authorized under the Plan is
automatically increased by 1.5 million, or a lesser number as may be determined by the Company’s Board of
Directors. The amount of shares available for grant automatically increased by 1.5 million on January 1, 2018 and
January 1, 2017. The Board of Directors elected to forego the January 1, 2016 increase in the shares available for
grant. As of December 31, 2018, the shares available for grant were 1.7 million shares.
The Plan included certain performance criteria for purposes of satisfying expense deduction requirements
for income tax purposes. This expense deduction exemption does not apply under the new tax legislation that was
enacted during the fourth quarter of 2017 and was effective as of January 1, 2018.
Accounting for Share-Based Compensation
The measurement and recognition of compensation expense, for all share-based payment awards made to
employees and directors, is based on estimated fair values. The fair value is determined at the time of grant: (i) using
the Company’s stock price for RSUs; and (ii) using the Black Scholes model for options. The value of the portion
of the award that is ultimately expected to vest is recognized as expense over the requisite service periods in the
Company’s consolidated statements of operations. Forfeitures are recognized as they occur.
RSU Activity
The following is a summary of the changes in RSUs under the Plan during the current period:
109
Number
of
Restricted
Stock
Units
Weighted
Average
Purchase
Price
Weighted
Average
Remaining
Contractual December 31,
Term (Years)
Aggregate
Intrinsic
Value as of
2018
(amounts in thousands)
-
-
-
1.1 $
20,971
1.1 $
20,971
- $
278
RSUs outstanding as of:
RSUs awarded
RSUs released
RSUs forfeited
RSUs outstanding as of:
RSUs vested and expected
to vest as of:
RSUs exercisable (vested and
deferred) as of:
Weighted average remaining
recognition period in years
Unamortized compensation
expense
Period Ended
December 31, 2017
December 31, 2018
4,285
1,292
(1,496)
(396)
3,685 $
December 31, 2018
3,685 $
December 31, 2018
49 $
1.9
$
22,458
The following table presents additional information on RSU activity:
2018
Years Ended December 31,
2017
Shares Amount Shares Amount Shares Amount
(amounts in thousands, except per share)
2016
RSUs issued
RSUs forfeited - service based
Net RSUs issued and increase
(decrease) to paid-in capital
Weighted average grant date
fair value per share
Fair value of shares vested per share
RSUs vested and released
1,292 $ 10,078
(1,228)
(396)
3,064 $ 35,628
(1,117)
(379)
1,123 $ 10,381
(280)
(27)
896 $
8,850
2,685 $ 34,511
1,096 $ 10,101
$
$
9.71
11.07
1,496
$
$
13.42
10.76
474
$
$
9.24
9.30
611
RSUs With Service and Market Conditions
The Company issued RSUs with service and market conditions that are included in the table above. These
shares vest if: (i) the Company’s stock achieves certain shareholder performance targets over a defined measurement
period; and (ii) the employee fulfills a minimum service period. The compensation expense is recognized even if the
market conditions are not satisfied and are only reversed in the event the service period is not met, as all of the
conditions need to be satisfied. These RSUs are amortized over the longest of the explicit, implicit or derived
service periods, which range from approximately one to three years.
The following table presents the changes in outstanding RSUs with market conditions:
110
Years Ended December 31,
2018
2016
(amounts in thousands, except per share
data)
2017
Reconciliation of RSUs with Service And Market Conditions
Beginning of period balance
Number of RSUs granted
Number of RSUs forfeited
Number of RSUs vested
End of period balance
Weighted average fair value of RSUs granted
with market conditions
650
-
(110)
(314)
226
630
70
-
(50)
650
390
470
-
(230)
630
$
- $
9.81 $
7.34
The fair value of RSUs with service conditions is estimated using the Company’s closing stock price on the
date of the grant. To determine the fair value of RSUs with service and market conditions, the Company used the
Monte Carlo simulation lattice model. The Company’s determination of the fair value was based on the number of
shares granted, the Company’s stock price on the date of grant and certain assumptions regarding a number of highly
complex and subjective variables. If other reasonable assumptions were used, the results could differ.
The specific assumptions used for these valuations are as follows:
Years Ended
December 31,
2018
2017
2016
Expected Volatility Structure (1)
Risk Free Interest Rate (2)
Annual Dividend Payment Per Share (Constant) (3)
-
-
-
54%
1.8%
3.3%
35% to 45%
0.4% to 1.1%
7.5%
(1) Expected Volatility Term Structure - The Company estimated the volatility term structure using: (i) the
historical volatility of its stock; and (ii) the implied volatility provided by its traded options from a trailing
month’s average of the closing bid-ask price quotes.
(2) Risk-Free Interest Rate - The Company estimated the risk-free interest rate based upon the implied yield
available on U.S. Treasury issues using the Treasury bond rate as of the date of grant.
(3) Annual Dividend Payment Per Share (Constant) - The Company assumed the historical dividend yield in effect
at the date of the grant.
RSUs with Service and Performance Conditions
In addition to the RSUs included in the table above summarizing the activity in RSUs under the Plan, the
Company issued RSUs with both service and performance conditions. Vesting of performance-based awards, if any,
is dependent upon the achievement of certain performance targets. If the performance standards are not achieved,
all unvested shares will expire and any accrued expense will be reversed. The Company determines the requisite
service period on a case-by-case basis to determine the expense recognition period for non-vested performance
based RSUs. The fair value is determined based upon the closing price of the Company’s common stock on the date
of grant. The Company applies a quarterly probability assessment in computing its non-cash compensation expense
and any change in the estimate is reflected as a cumulative adjustment to expense in the quarter of the change.
The following table reflects the activity of RSUs with service and performance conditions:
111
Years Ended December 31,
2018
2016
(amounts in thousands, except per share
data)
2017
Reconciliation of RSUs with Service and Performance
Conditions
Beginning of period balance
Number of RSUs granted
Number of RSUs that did not meet criteria
Number of RSUs vested
Average fair value of RSUs granted with performance
conditions
-
-
-
-
-
-
-
-
29
-
(29)
-
$
- $
- $
-
As of December 31, 2018, no non-cash compensation expense was recognized for RSUs with performance
conditions.
Option Activity
The following table presents the option activity during the current year ended under the Plan:
Period Ended
Number of
Options
December 31, 2017
883,347 $
Options outstanding as of:
Options granted
Options exercised
Options forfeited
Options expired
Options outstanding as of:
Options vested and expected to
vest as of:
December 31, 2018
December 31, 2018
Options vested and exercisable as of: December 31, 2018
Weighted average remaining
recognition period in years
Unamortized compensation expense
$
-
(113,137)
-
(15,000)
755,210 $
755,210 $
755,210 $
-
-
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual December 31,
Term (Years)
Intrinsic
Value
as of
2018
8.38
-
1.35
-
9.30
9.42
9.42
9.42
1.4 $
789,550
1.4 $
1.4 $
789,550
789,550
The following table summarizes significant ranges of outstanding and exercisable options as of the current
period:
Options Outstanding
Options Exercisable
Range of
Exercise Prices
Number of Weighted
Options
Outstanding Remaining
December 31, Contractual
Average
From
To
2018
Life
Weighted
Average
Exercise
Price
Number of
Options
Exercisable
December 31,
2018
Weighted
Average
Exercise
Price
$
$
$
1.34 $
4.76 $
1.34 $
1.34
13.98
13.98
184,800
570,410
755,210
0.1 $
1.8 $
1.4 $
1.34
12.04
9.42
184,800 $
570,410 $
755,210 $
1.34
12.04
9.42
The following table provides summary information on the granting and vesting of options:
112
Option Issuance and Exercise Data
Exercise price range of options issued
Upon vesting, period to exercise in years
Fair value per share upon grant
Number of options granted
Intrinsic value per share upon exercise
Intrinsic value of options exercised
Tax benefit from options exercised
Cash received from exercise price of
options exercised
$
$
$
$
$
1.34 $
1
-
-
7.33
829
220
2018
Years Ended December 31,
2017
(amounts in thousands except for per share and years)
To
From
From
2016
To
From
To
2.02 $
10
1.34 $ 11.31 $ 1.34 $ 11.69
10
10
1
4.33
686
7.24
60
21
$
$
$
$
$
1
-
-
$ 12.21
$ 1,678
636
$
$
152
$
42
$
265
Valuation Of Options
The Company estimates the fair value of option awards on the date of grant using an option-pricing model.
The Company used the straight-line single option method for recognizing compensation expense, which was
reduced for estimated forfeitures based on awards ultimately expected to vest. The Company’s determination of the
fair value of share-based payment awards on the date of grant using an option-pricing model is affected by the
Company’s stock price, as well as assumptions regarding a number of highly complex and subjective variables.
These variables include, but are not limited to, the Company’s expected stock price volatility over the term of the
awards, and actual and projected employee stock option exercise behaviors. Option-pricing models were developed
for use in estimating the value of traded options that have no vesting or hedging restrictions and are fully
transferable. The Company’s stock options have certain characteristics that are different from traded options, and
changes in the subjective assumptions could affect the estimated value.
For options granted, the Company used the Black-Scholes option-pricing model and determined: (i) the
term by using the simplified plain-vanilla method as the Company’s employee exercise history may not be
indicative for estimating future exercises; (ii) a historical volatility over a period commensurate with the expected
term, with the observation of the volatility on a daily basis; (iii) a risk-free interest rate that was consistent with the
expected term of the stock options and based on the U.S. Treasury yield curve in effect at the time of the grant; and
(iv) an annual dividend yield based upon the Company’s most recent quarterly dividend at the time of grant.
In connection with the Merger, the Company applied the above described valuation methodologies to
determine the fair value for those options assumed as part of the Merger in 2017.
Recognized Non-Cash Stock-Based Compensation Expense
The following non-cash stock-based compensation expense, which is related primarily to RSUs, is included
in each of the respective line items in the Company’s statement of operations:
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Station operating expenses
Corporate general and administrative expenses
Stock-based compensation expense included in operating expenses
Income tax benefit (1)
After-tax stock-based compensation expense
$
$
6,855 $
8,294
15,149
3,160
11,989 $
1,694 $
7,873
9,567
3,328
6,239 $
1,363
5,176
6,539
2,321
4,218
(1) Amounts exclude impact from any compensation expense subject to Section 162(m) of the Code, which is
nondeductible for income tax purposes.
113
15.
INCOME TAXES
Effective Tax Rate - Overview
The Company’s effective income tax rate may be impacted by: (i) changes in the level of income in any of
the Company’s taxing jurisdictions; (ii) changes in the statutes, rules and tax rates applicable to taxable income in
the jurisdictions in which the Company operates; (iii) changes in the expected outcome of income tax audits; (iv)
changes in the estimate of expenses that are not deductible for tax purposes; (v) income taxes in certain states where
the states’ current taxable income is dependent on factors other than the Company’s consolidated net income; and
(vi) adding facilities in states that on average have different income tax rates from states in which the Company
currently operates and the resulting effect on previously reported temporary differences between the tax and
financial reporting bases of the Company’s assets and liabilities. The Company’s annual effective tax rate may also
be materially impacted by tax expense associated with non-amortizable assets such as broadcasting licenses and
goodwill and changes in the deferred tax valuation allowance.
An impairment loss for financial statement purposes will result in an income tax benefit during the period
incurred as the amortization of some portion of the Company’s broadcasting licenses and goodwill is deductible for
income tax purposes.
Expected and Reported Income Taxes (Benefit)
Income tax expense (benefit) from continuing operations computed using the United States federal
statutory rates is reconciled to the reported income tax expense (benefit) from continuing operations as follows:
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Federal statutory income tax rate
21%
35%
35%
Computed tax expense at federal statutory rates on income
before income taxes
State income tax expense, net of federal benefit
Goodwill impairment
Valuation allowance current year activity
Tax impact of share-based awards
Transaction costs
Recognized gain on Exchange Transactions
U.S. federal income tax reform
Tax benefit shortfall associated with share-based awards
Taxable gain on sale of radio stations
Nondeductible expenses and other
Income taxes
$
$
For 2018
(77,016) $
(4,779)
64,465
(2,593)
872
391
-
883
-
5,511
8,113
(4,153) $
(8,425) $
23,045
-
2,395
1,383
8,477
6,435
(291,497)
-
-
1,102
(257,085) $
18,501
(5,202)
-
-
-
-
-
-
286
-
1,209
14,794
The effective income tax rate was 1.1%. This rate was lower than the federal statutory rate of 21%
primarily due to an impairment on the Company’s goodwill during the fourth quarter of 2018 which is not
deductible for income tax purposes. The income tax rate is lower than in previous year primarily due to an income
tax benefit resulting from the Tax Cuts and Jobs Act (“TCJA”) that was enacted on December 22, 2017, which
reduced the U.S. federal corporate tax rate from the previous rate of 35% to 21%.
For 2017
The effective income tax rate was significantly impacted by an income tax benefit resulting from the TCJA
that was enacted on December 22, 2017, which reduced the U.S. federal corporate tax rate from the previous rate of
35% to 21%. The Company’s deferred tax balances were re-measured using the new federal income tax rate.
114
For 2016
The effective income tax rate was 28.0%. This rate was lower than the federal statutory rate of 35%
primarily due to the combination of: (i) tax benefits associated with legislative changes in certain single member
states; (ii) a reduction in the Company’s valuation allowances against net operating losses in certain single member
states as a result of internal restructuring; and (iii) the reliance more on share-based awards issued to senior
management that are fully deductible for tax purposes.
Income Tax Expense
Income tax expense (benefit) for each year is summarized in the table below. The table does not include
income tax expense from discontinued operations of $0.7 million and $0.5 million in 2018 and 2017, respectively.
Years Ended December 31,
2017
2018
2016
Current:
Federal
State
Total current
Deferred:
Federal
State
Total deferred
$
38,481 $
17,836
56,317
5,178 $
1,289
6,467
(33)
139
106
(37,678)
(22,792)
(60,470)
(295,467)
31,915
(263,552)
19,980
(5,292)
14,688
Total income taxes (benefit)
$
(4,153) $ (257,085) $
14,794
Deferred Tax Assets and Deferred Tax Liabilities
The income tax accounting process to determine the Company’s deferred tax assets and liabilities involves
estimating all temporary differences between the tax and financial reporting bases of the Company’s assets and
liabilities based on tax laws and statutory tax rates applicable to the period in which the differences are expected to
affect taxable income. These estimates include assessing the likely future tax consequences of events that have been
recognized in the Company’s financial statements or tax returns. Changes to these estimates could have a future
impact on the Company’s financial position or results of operations.
At December 31, 2017, the Company calculated the accounting for the tax effects of enactment of TCJA as
written, and made a reasonable estimate of the effects on the existing deferred tax balances. The Company recorded
an estimated income tax benefit from continuing operations of $291.5 million to adjust the Company’s deferred
income tax balances as a result of the reduced corporate income tax rate. The estimated amounts are included as
components of income tax expense from continuing operations.
To determine the Company’s estimated amounts, the Company re-measured its deferred tax assets and
liabilities based on the rates at which they are expected to reverse in the future, which is generally a 21% federal tax
rate and its related impact on the state tax rate.
The Company completed its assessment of the impact of the TCJA as of December 22, 2018. In
connection with this final assessment of the impact of the TCJA, the Company recorded an additional $0.9 million
income tax benefit from continuing operations during 2018.
The components of deferred tax assets and liabilities as of December 31, 2018 and 2017, are as detailed
below.
115
Deferred tax assets:
Federal and state income tax loss carryforwards
Share-based compensation
Investments - impairments
Lease rental obligations
Deferred compensation
Deferred gain on tower transaction
Debt fair value adjustment
Reserves
Property, equipment and certain intangibles (other
than broadcasting licenses and goodwill)
Advertiser broadcasting obligations
Employee benefits
Provision for doubtful accounts
Other non-current
Total deferred tax assets before valuation allowance
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Advertiser broadcasting obligations
Deferral of gain recognition on the extinguishment of debt
Property, equipment and certain intangibles
Broadcasting licenses and goodwill
December 31,
2018
2017
(amounts in thousands)
81,368
3,382
347
15,080
9,097
1,732
4,390
-
-
-
2,396
4,406
5,799
127,997
(25,761)
102,236 $
96,334
4,174
348
13,910
11,601
1,897
5,162
7,442
-
-
543
4,383
1,614
147,408
(37,154)
110,254
47 $
-
(49,662)
(598,603)
(7,172)
-
(55,922)
(656,949)
$
$
Total deferred tax liabilities
$
(648,218) $
(720,043)
Total net deferred tax liabilities
$
(545,982) $
(609,789)
Valuation Allowance for Deferred Tax Assets
Judgment is required in estimating valuation allowances for deferred tax assets. Deferred tax assets are
reduced by a valuation allowance if an assessment of their components indicates that it is more likely than not that
all or some portion of these assets will not be realized. The realization of a deferred tax asset ultimately depends on
the existence of sufficient taxable income in the carryforward periods under tax law. The Company periodically
assesses the need for valuation allowances for deferred tax assets based on more-likely-than-not realization
threshold criteria. In the Company’s assessment, appropriate consideration is given to all positive and negative
evidence related to the realization of the deferred tax assets. This assessment considers, among other matters,
forecasts of future profitability, the duration of statutory carryforward periods and any ownership change limitations
under Section 382 of the Code on the Company’s future income that can be used to offset historic losses.
For 2018, the Company’s ability to utilize net operating loss carryforwards (“NOLs”) will be limited under
Section 382 of the Code as a result of the CBS Radio Merger. For federal income tax purposes, the acquisition of
CBS Radio (now Entercom Media Corp.) was treated as a reverse acquisition which caused the Company to undergo
an ownership change under Section 382 of the Code. The utilization of these NOLs in future years will be subject to
an annual limitation. In addition, Entercom Media Corp. has federal NOLs that are subject to a separate IRC
Section 382 annual limitation.
As changes occur in the Company’s assessments regarding its ability to recover its deferred tax assets, the
Company’s tax provision is increased in any period in which the Company determines that the recovery is not
probable.
The following table presents the changes in the deferred tax asset valuation allowance for the periods
indicated:
116
Year Ended
Balance at
Beginning
of Year
Increase
(Decrease)
Charged
(Credited)
to Income
Taxes
(Benefit)
Increase
(Decrease)
Charged
(Credited)
to
Balance
Sheet
(amounts in thousands)
Balance At
Purchase
Accounting
End Of
Year
December 31, 2018 $
December 31, 2017
December 31, 2016
37,154 $
12,861
20,638
(11,393) $
17,785
(7,777)
- $
151
-
- $
6,357
-
25,761
37,154
12,861
Liabilities for Uncertain Tax Positions
The Company recognizes liabilities for uncertain tax positions based on whether evidence indicates that it
is more likely than not that the position will be sustained on audit. It is inherently difficult and subjective to
estimate such amounts, as this requires the Company to estimate the probability of various possible outcomes. The
Company reevaluates these uncertain tax positions on a quarterly basis. Changes in assumptions may result in the
recognition of a tax benefit or an additional charge to the tax provision.
The Company classifies interest and penalties that are related to income tax liabilities as a component of
income tax expense. The income tax liabilities and accrued interest and penalties are presented as non-current
liabilities, as payments are not anticipated within one year of the balance sheet date. These non-current income tax
liabilities are recorded in other long-term liabilities in the consolidated balance sheets.
The Company’s liabilities for uncertain tax positions are reflected in the following table:
December 31,
2018
2017
(amounts in thousands)
Liabilities for uncertain tax positions
Tax
Total
$
$
370 $
370 $
711
711
The amounts for interest and penalties expense reflected in the statements of operations were eliminated in
the statements of cash flows under net deferred taxes (benefit) and other as no cash payments were made during
these periods.
The following table presents the expense (income) for uncertain tax positions, which amounts were
reflected in the consolidated statements of operations as an increase (decrease) to income tax expense:
Tax expense (income)
Interest and penalties (income)
Total income taxes (benefit)
from uncertain tax positions
$
$
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
- $
-
- $
- $
-
- $
(67)
(170)
(237)
The decrease in liabilities for uncertain tax positions for 2018 is related to the lapse of statutes of
limitations.
The following table presents the gross amount of changes in unrecognized tax benefits:
117
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Beginning of year balance
Prior year positions
Gross Increases
Gross Decreases
Current year positions
Gross Increases
Gross Decreases
Settlements with tax authorities
Reductions due to statute lapse
End of year balance
$
(7,820) $
(7,138) $
(7,690)
-
-
(710)
-
-
-
-
535
(7,285) $
-
-
-
28
(7,820) $
$
-
-
-
-
-
552
(7,138)
Ending liability balance included above that was
reflected as an offset to deferred tax assets
$
(6,915) $
(7,110) $
(7,138)
The gross amount of the Company’s unrecognized tax benefits is reflected in the above table which, if
recognized, would impact the Company’s effective income tax rate in the period of recognition. The total amount of
unrecognized tax benefits could increase or decrease within the next 12 months for a number of reasons including
the expiration of statutes of limitations, audit settlements and tax examination activities.
As of December 31, 2018, there were no significant unrecognized net tax benefits (exclusive of interest and
penalties) that over the next 12 months are subject to the expiration of various statutes of limitation. Interest and
penalties accrued on uncertain tax positions are released upon the expiration of statutes of limitations.
Federal and State Income Tax Audits
The Company is subject to federal, state and local income tax audits from time to time that could result in
proposed assessments. Management believes that the Company has made sufficient tax provisions for tax periods
that are within the statutory period of limitations not previously audited and that are potentially open for
examination by the taxing authorities. Potential liabilities associated with these years will be resolved when an event
occurs to warrant closure, primarily through the completion of audits by the taxing jurisdictions, or if the statute of
limitations expires. To the extent audits or other events result in a material adjustment to the accrued estimates, the
effect would be recognized during the period of the event. There can be no assurance, however, that the ultimate
outcome of audits will not have a material adverse impact on the Company’s financial position, results of operations
or cash flows.
The Company cannot predict with certainty how these audits will be resolved and whether the Company
will be required to make additional tax payments, which may include penalties and interest. For most states where
the Company conducts business, the Company is subject to examination for the preceding three to six years. In
certain states, the period could be longer.
Income Tax Payments, Refunds and Credits
For federal taxation purposes, the TCJA repealed the Alternative Minimum Tax (“AMT”) for corporations.
Accordingly, the Company did not make any AMT payments in 2018. The Company is now subject to regular
corporate income tax.
The following table provides the amount of income tax payments and income tax refunds for the periods
indicated:
118
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Federal and state income tax payments
$
54,217 $
2,030 $
381
Net Operating Loss Carryforwards
As a result of the Merger with CBS Radio on November 17, 2017, changes in the cumulative ownership
percentages triggered a significant limitation in its NOL carryforward utilization.
The Company’s ability to use its federal NOL and credit carryforwards is subject to annual limitations as
defined in Section 382 of the IRC. Entercom Media Corp. also had federal NOLs that are subject to a separate IRS
Section 382 limitation. As a result, the Company has recorded a valuation allowance against a portion of its federal
NOLs as it anticipates utilizing $254.5 million of its NOL carryovers.
The Company has recorded a valuation allowance for its state NOLs as the Company does not expect to
obtain a benefit in future periods. In addition, utilization in future years of the NOL carryforwards may be subject to
limitations due to the changes in ownership provisions under Section 382 of the Code and similar state provisions.
The Company will continue to assess the ability of these carryforwards to be realized in subsequent
periods.
The NOLs in the following table reflect an estimate of the NOLs for the 2018 tax filing year as these
returns will not be filed until later in 2019:
Net Operating Losses
December 31, 2018
NOLs
(amounts in
thousands)
NOL Expiration Period
(in years)
Federal NOL carryforwards
State NOL carryforwards
$
$
262,066
518,779
2030
2019
to
to
2033
2034
16.
SUPPLEMENTAL CASH FLOW DISCLOSURES ON NON-CASH ACTIVITIES
The following table provides non-cash disclosures during the periods indicated:
119
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Operating Activities
Barter revenues
Barter expenses
Transition services costs incurred in the integration of CBS Radio
Reduction to the transition services asset
Financing Activities
Increase in paid-in capital from the issuance of RSUs
Decrease in paid-in capital from the forfeiture of RSUs
Net paid-in capital of RSUs issued (forfeited)
Dividend accrued on perpetual cumulative convertible preferred stock
Debt assumed in a business combination or merger
Investing Activities
Cash acquired through consolidation (deconsolidation) of a VIE
Noncash additions to property and equipment and intangibles
Net radio station assets given up in a market
Net radio station assets acquired in a market
$
$
$
$
Fair value of net assets acquired through the issuance of common stock $
$
$
$
$
$
$
$
$
19,365 $
19,324 $
5,456 $
(5,456) $
10,898 $
9,440 $
1,917 $
(1,917) $
4,700
4,789
-
-
35,628 $
10,078 $
(1,117)
(1,228)
34,511 $
8,850 $
- $
- $
- $ 1,387,500 $
10,381
(280)
10,101
452
-
- $
(302) $
2,213 $
818 $
124,500 $
- $
- $
124,500 $
- $ 1,168,848 $
302
833
-
-
-
17.
EMPLOYEE SAVINGS AND BENEFIT PLANS
Deferred Compensation Plans
The Company provides certain of its employees and the Board of Directors with an opportunity to defer a
portion of their compensation on a tax-favored basis. The obligations by the Company to pay these benefits under
the deferred compensation plans represent unsecured general obligations that rank equally with the Company’s other
unsecured indebtedness. Amounts deferred under these plans were included in other long-term liabilities in the
consolidated balance sheets. Any change in the deferred compensation liability for each period is recorded to
corporate general and administrative expenses and to station operating expenses in the statement of operations.
Further contributions under these plans have been frozen beginning with any contribution elections covering the
2018 year.
Benefit Plan Disclosures
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Deferred compensation
Beginning of period balance
Assumption of deferred compensation in Merger
Employee compensation deferrals
Employee compensation payments
Increase (decrease) in plan fair value
End of period balance
$
40,995 $
-
384
(8,709)
(1,742)
30,928 $
$
10,875 $
27,057
840
(1,184)
3,407
40,995 $
10,137
-
963
(945)
720
10,875
401(k) Savings Plan
The Company has a savings plan which is intended to be qualified under Section 401(k) of the Code. The
plan is a defined contribution plan, available to all eligible employees, and allows participants to contribute up to the
legal maximum of their eligible compensation, not to exceed the maximum tax-deferred amount allowed by the
Internal Revenue Service. The Company’s discretionary matching contribution is subject to certain conditions.
The Company’s contributions for 2018, 2017 and 2016 were $6.1 million, $2.9 million and $1.0 million,
respectively.
120
18.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments Subject to Fair Value Measurements
The Company has determined the types of financial assets and liabilities subject to fair value measurement
are: (i) certain tangible and intangible assets subject to impairment testing as described in Note 6, Intangible Assets
And Goodwill; (ii) financial instruments as described in Note 10, Long-Term Debt; (iii) deemed deferred
compensation plans as described in Note 17, Employee Savings And Benefit Plans; (iv) lease abandonment
liabilities as described in Note 3, Business Combinations; and (v) interest rate derivative transactions that are
outstanding from time to time (none currently outstanding).
The fair value is the price that would be received upon the sale of an asset or be paid to transfer a liability
in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes
market data or assumptions that market participants would use in pricing the asset or liability, including assumptions
about risk and the risks inherent to the inputs of the valuation technique. These inputs can be readily observable,
market corroborated, or generally unobservable. The Company utilizes valuation techniques that maximize the use
of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy prioritizes the inputs
used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets
for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3
measurement).
The three levels of the fair value hierarchy are as follows:
Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reporting
date.
Level 2 – Pricing inputs are other than quoted prices in active markets included in Level 1, which are either
directly or indirectly observable as of the reported date.
Level 3 – Pricing inputs include significant inputs that are generally less observable than objective sources.
These inputs may be used with internally developed methodologies that result in management’s best
estimate of fair value. At each balance sheet date, the Company performs an analysis of all instruments and
includes in Level 3 all of those whose fair value is based on significant unobservable inputs.
Recurring Fair Value Measurements
The following table sets forth the Company's financial assets and/or liabilities that were accounted for at
fair value on a recurring basis and are classified in their entirety based on the lowest level of input that is significant
to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value
measurement requires judgment and may affect the valuation of fair value and its placement within the fair value
hierarchy levels. During the periods presented, there were no transfers between fair value hierarchical levels.
121
Fair Value Measurements At Reporting Date
Balance at
December 31,
2018
Quoted prices
in active
markets
Level 1
Significant
Significant
other observable unobservable
inputs
Level 2
(amounts in thousands)
inputs
Level 3
Measured at
Net Asset Value
as a Practical
Expedient (2)
$
30,928 $
23,476 $
- $
- $
7,452
Balance at
December 31,
2017
Quoted prices
in active
markets
Level 1
Significant
Significant
other observable unobservable
inputs
Level 2
(amounts in thousands)
inputs
Level 3
Measured at
Net Asset Value
as a Practical
Expedient (2)
$
40,995 $
23,751 $
- $
- $
17,244
Description
Liabilities
Deferred compensation
plan liabilities (1)
Description
Liabilities
Deferred compensation
plan liabilities (1)
(1)
(2)
The Company’s deferred compensation liability, which is included in other long-term liabilities, is
recorded at fair value on a recurring basis. The unfunded plan allows participants to hypothetically
invest in various specified investment options.
The fair value of underlying investments in collective trust funds is determined using the net asset
value (“NAV”) provided by the administrator of the fund as a practical expedient. The NAV is
determined by each fund’s trustee based upon the fair value of the underlying assets owned by the
fund, less liabilities, divided by outstanding units. In accordance with appropriate accounting
guidance, these investments have not been classified in the fair value hierarchy.
Non-Recurring Fair Value Measurements
The Company has certain assets that are measured at fair value on a non-recurring basis and are adjusted to
fair value only when the carrying values are more than the fair values. The categorization of the framework used to
price the assets is considered Level 3, due to the subjective nature of the unobservable inputs used to determine the
fair value.
During the quarters ended June 30, 2018 and 2017, the Company reviewed the fair value of its broadcasting
licenses and goodwill, and concluded that its broadcasting licenses were not impaired as the fair value of these assets
equaled or exceeded their carrying value. During the second quarter of the current year, the Company concluded
that the fair value of goodwill exceeded the carrying value of goodwill and determined that no goodwill impairment
charge was required. During the second quarter of the prior year, the Company concluded that the carrying value of
goodwill allocated to one of its markets exceeded its fair value. Accordingly, the Company wrote off approximately
$0.4 million of goodwill during the second quarter of 2017.
Subsequent to the annual impairment test conducted during the second quarter of 2018, the Company
determined that a sustained decrease in the Company’s share price required the Company to conduct an interim
impairment assessment on its broadcasting licenses and goodwill. This interim impairment conducted during the
fourth quarter of the current year indicated that the carrying value of the Company’s goodwill and broadcasting
licenses exceeded their respective carrying amount. Accordingly, the Company recorded a $147.9 million
impairment charge ($108.8 million, net of tax) on its broadcasting licenses and a $317.1 million impairment ($314.4
million, net of tax) on its goodwill in the fourth quarter of 2018. Refer to Note 6, Intangible Assets and Goodwill,
for additional information.
There were no events or changes in circumstances which indicated the Company’s investments, property
and equipment, or other intangible assets may not be recoverable, other than as described below.
122
During the second quarter of the current year, the Company recorded a $2.1 million impairment charge
related to assets expected to be disposed of in one of its markets.
During the second quarter of the current year, events or circumstances changed which indicated that a
portion of the Company’s assets which had been classified as held for sale may not be recoverable. Accordingly, the
Company estimated the fair value of these assets and recognized an impairment charge of $26.9 million. Refer to
Note 19, Assets Held For Sale And Discontinued Operations, for additional information.
Fair Value of Financial Instruments Subject to Disclosures
The estimated fair value of financial instruments is determined using the best available market information
and appropriate valuation methodologies. Considerable judgment is necessary, however, in interpreting market data
to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the
amounts that the Company could realize in a current market exchange, or the value that ultimately will be realized
upon maturity or disposition. The use of different market assumptions may have a material effect on the estimated
fair value amounts.
The carrying amount of the following assets and liabilities approximates fair value due to the short maturity
of these instruments: (i) cash and cash equivalents; (ii) accounts receivable; and (iii) accounts payable, including
accrued liabilities.
The following table presents the carrying value of financial instruments and, where practicable, the fair
value as of the periods indicated:
December 31,
2018
December 31,
2017
Carrying
Value
Carrying
Fair
Value
Value
(amounts in thousands)
Fair
Value
$
$
$
$
$
1,291,700 $
180,000 $
400,000 $
912
5,862
1,243,261 $
180,000 $
378,000 $
$
$
1,330,000 $ 1,336,650
143,000
422,876
143,000 $
400,000 $
70
1,856
Term B Loans (1)
Revolver (2)
Senior Notes (3)
Other debt (4)
Letters of credit (4)
The following methods and assumptions were used to estimate the fair value of financial instruments:
(1)
(2)
(3)
(4)
The Company’s determination of the fair value of the Term B-1 Loans was based on quoted prices for these
instruments and is considered a Level 2 measurement as the pricing inputs are other than quoted prices in
active markets.
The fair value of the Revolver was considered to approximate the carrying value as the interest payments
are based on LIBOR rates that reset periodically. The Revolver is considered a Level 2 measurement as the
pricing inputs are other than quoted prices in active markets.
The Company utilizes a Level 2 valuation input based upon the market trading prices of the Senior Notes to
compute the fair value as these Senior Notes are traded in the debt securities market. The Senior Notes are
considered a Level 2 measurement as the pricing inputs are other than quoted prices in active markets.
The Company does not believe it is practicable to estimate the fair value of the other debt or the
outstanding standby letters of credit.
123
Investments Valued Under the Measurement Alternative
The Company holds investments in privately held companies that are not exchange-traded and therefore not
supported with observable market prices. The Company does not have significant influence over the investees. The
amended accounting guidance for financial instruments discussed above in Note 1, Basis Of Presentation And
Significant Policies, provides an alternative to measure equity securities without readily determinable fair values at
cost less impairment (if any), plus or minus observable price changes from an identical or similar investment of the
same issuer (the “measurement alternative”). The Company elected the measurement alternative for its qualifying
equity securities.
The Company’s investments are recognized on the consolidated balance sheet at their cost basis, which
represents the amount the Company paid to acquire the investments.
The Company periodically evaluates the carrying value of its investments, when events and circumstances
indicate that the carrying amount of the assets may not be recoverable. The Company considers investee financial
performance and other information received from the investee companies, as well as any other available estimates of
the fair value of the investee companies in its evaluation.
If certain impairment indicators exist, the Company determines the fair value of its investments. If the
Company determines the carrying value of an investment exceeds its fair value, the Company writes down the value
of the investment to its fair value. The fair value of the investments are not adjusted if there are no identified
adverse events or changes in circumstances that may have a material effect on the fair value of the investment.
Since its initial date of investment, the Company has not identified any events or changes in circumstances
which would require the Company to estimate the fair value of its investments. Accordingly, there has been no
impairment in the Company’s investments measured under the measurement alternative. Additionally, there have
been no returns of capital or changes resulting from observable price changes in orderly transactions. As a result,
the investments measured under the measurement alternative continue to be presented at their original cost basis on
the consolidated balance sheets.
There was no material change in the carrying value of the Company’s cost-method investments since the
year ended December 31, 2017, other than as described below.
During the first quarter of 2018, the Company purchased a minority ownership interest in Drive Time
Metrics, Inc. (“Drive Time”), a provider of an analytics software for the automotive industry for $1.3 million.
The following table presents the Company’s investments valued under the measurement alternative:
Investment balance before cumulative
impairment as of January 1,
Accumulated impairment as of January 1,
Investment beginning balance after cumulative
impairment as of January 1,
Acquisition of interest in a privately held company
Ending period balance
Investments Valued Under the
Measurement Alternative
December 31,
2018
(amounts in thousands)
2017
$
$
9,955 $
-
9,955
1,250
11,205 $
255
-
255
9,700
9,955
19.
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
Assets Held for Sale
Long-lived assets to be sold are classified as held for sale in the period in which they meet all the criteria
for the disposal of long-lived assets. The Company measures assets held for sale at the lower of their carrying
amount or fair value less cost to sell. Additionally, the Company determined that these assets comprise operations
124
and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of
the Company.
On November 17, 2017, in order to facilitate the Merger, the Company assigned assets to a trust and the
trust subsequently entered into two separate LMAs with Bonneville which became effective upon the closing of the
Merger. Under the terms of the LMAs, Bonneville began operating four stations in Sacramento, California and four
stations in San Francisco, California. On August 2, 2018, the Company entered into an asset purchase agreement
with Bonneville to dispose of the eight radio stations for $141.0 million in cash. The LMAs terminated on
September 21, 2018, upon the consummation of a final agreement to divest the stations as required under a DOJ
consent order agreed to by the Company, as a condition to complete the Merger. Of the eight radio stations placed
in the trust, 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 radio stations met the criteria to
be classified as held for sale, pending disposition. The five CBS Radio stations met the criteria to be classified
within discontinued operations, pending disposition.
As of December 31, 2017, the Company entered into an agreement to dispose of a parcel of land along with
the land improvements in Chicago, Illinois for $46.0 million and classified these assets as held for sale. During the
third quarter of 2018, the Company closed on this sale, which resulted in a loss of $0.1 million to the Company.
As of June 30, 2018, the Company entered into agreements with several third parties to dispose of: (i) land
and buildings in Dallas, Texas; (ii) land and buildings in San Diego, California; (iii) land and buildings in
Sacramento, California; (iv) land and buildings in Los Angeles, California; and (v) land in Austin, Texas. The
Company conducted an analysis and determined the assets met the criteria to be classified as held for sale. In
aggregate, these assets had a carrying value of $23.5 million, net of a $1.3 million impairment charge that was
recorded during the three months ended June 30, 2018.
During the third quarter of 2018, the Company closed on the sale of the land and buildings in Los Angeles,
California and the land and buildings in San Diego, California. The Company received proceeds of $27.2 million
from these two sales, which resulted in a gain of approximately $6.4 million to the Company.
During the fourth quarter of 2018, the Company closed on the sales of: (i) the land and buildings in Dallas,
Texas; (ii) the land and buildings in Sacramento, California; and (iii) the land in Austin, Texas. The Company
received proceeds of $3.9 million from these three sales, which resulted in a gain of approximately $0.3 million to
the Company.
As of December 31, 2018, the Company entered into an agreement with a third party to dispose of land and
land improvements, buildings and equipment. The Company conducted an analysis and determined the assets met
the criteria to be classified as held for sale. In aggregate, these assets have a carrying value of approximately $19.6
million. This transaction is expected to close within one year.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The Company determined the fair value of the assets held
for sale related to the Bonneville LMA by utilizing an offer from a third party for the bundle of assets. This is
considered a Level 3 measurement. Based upon the agreed-upon price in the asset purchase agreement, the
Company determined that the carrying value of these assets was greater than the fair value. During the second
quarter of 2018, the Company recorded a non-cash impairment charge of $25.6 million to reflect the change in the
carrying value of these assets held for sale from $165.9 million to $140.3 million and to reduce the carrying value of
these assets to the recoverable value. During the third quarter of 2018, the Company closed on this sale, which
resulted in a loss of approximately $0.2 million to the Company.
The major categories of these assets held for sale are as follows:
125
December 31, 2018
December 31, 2017
Assets Held for Sale
Bonneville Assets Held
Other
Total
LMA
for Sale
(amounts in thousands)
Total
Other
Bonneville Assets Held
LMA
for Sale
Land and land improvements
Building
Leasehold improvements
Equipment
Net property and equipment
Net radio broadcasting licenses
Other intangibles
Goodwill
Total intangibles
Net assets held for sale
Discontinued Operations
$
2,645 $
1,053
-
15,905
19,603
-
-
-
-
$
19,603 $
- $
-
-
-
-
-
-
-
-
- $
2,645
1,053
-
15,905
19,603
-
-
-
-
19,603
$
47,110 $
1,110
1,520
88
2,618
5,336
136,014
1,947
22,573
160,534
$ 212,320 $ 165,870
1,970
88
2,618
51,786
136,014
1,947
22,573
160,534
$
$
46,000
450
-
-
46,450
-
-
-
-
46,450
The results of operations for several radio stations acquired from CBS, which were never a part of the
Company’s continuing operations as these radio stations have been disposed, were classified as discontinued
operations for the period commencing after the Merger.
Refer to Note 3, Business Combinations, and elsewhere within this Note, for additional information on the
iHeartMedia Transaction, the Beasley Transaction, and the Bonneville Transaction.
The following table presents the results of operations of the discontinued operations:
Years Ended
December 31,
2017
(amounts in thousands)
2016
2018
Net broadcast revenues
$
- $ 5,494 $
Station operating expenses
Depreciation and amortization expense
Net time brokerage agreement (income) fees
Total operating expenses
Income before income taxes
Income taxes
Income from discontinued operations,
net of income taxes
-
-
1,765
-
1,765
613
4,749
9
(652)
4,106
1,388
552
$ 1,152 $
836 $
-
-
-
-
-
-
-
-
20.
CONTINGENCIES AND COMMITMENTS
Contingencies
The Company is subject to various outstanding claims which arise in the ordinary course of business and to
other legal proceedings. Management anticipates that any potential liability of the Company, which may arise out of
or with respect to these matters, will not materially affect the Company’s financial position, results of operations or
cash flows.
126
Like-Kind Exchange Proceeds
During the third quarter of 2018, the Company disposed of certain property that the Company considered as
surplus to its operations and that resulted in significant gains reportable for tax purposes. In order to minimize the
tax impact on a certain portion of these taxable gains, the Company created an entity that serves as a QI for tax
purposes and that holds the net sales proceeds of $70.2 million as of December 31, 2018. The Company plans to use
a portion of these funds in a tax-free exchange by using the net sales proceeds from relinquished property for the
purchase of replacement property. This entity was treated as a VIE and is included in the Company’s consolidated
financial statements as the Company is considered the primary beneficiary.
The use of a QI in a like-kind exchange enables the Company to effectively minimize its current tax
liability in connection with certain asset dispositions. As discussed in Note 19, Assets Held For Sale And
Discontinued Operations, the Company sold: (i) a parcel of land in Chicago, Illinois in 2018 for net proceeds of
$45.5 million; and (ii) a former studio building in Los Angeles, California in 2018 for net proceeds of $24.7 million.
These net sales proceeds were deposited into the account of the QI to comply with requirements under Section 1031
of the Code to execute a like-kind exchange and are reflected as restricted cash on the Company’s consolidated
balance sheet as of December 31, 2018. Restrictions on these deposits will lapse prior to the end of the first quarter
of 2019.
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported
within the consolidated balance sheet that aggregate to the total of the same such amounts shown in the consolidated
statement of cash flows:
Cash, Cash Equivalents and
Restricted Cash
December 31,
2018
2017
(amounts in thousands)
Cash and cash equivalents
Restricted cash
Total cash, cash equivalents and restricted cash
shown in the statement of cash flows
$
$
122,893 $
69,365
34,167
-
192,258 $
34,167
Insurance
The Company uses a combination of insurance and self-insurance mechanisms to mitigate the potential
liabilities for workers’ compensation, general liability, property, directors’ and officers’ liability, vehicle liability
and employee health care benefits. Liabilities associated with the risks that are retained by the Company are
estimated, in part, by considering claims experience, demographic factors, severity factors, outside expertise and
other actuarial assumptions. Under these policies, the Company is required to maintain letters of credit.
Broadcast Licenses
The Company could face increased costs in the form of fines and a greater risk that the Company could lose
any one or more of its broadcasting licenses if the FCC concludes that programming broadcast by a Company
station was obscene, indecent or profane and such conduct warrants license revocation. The FCC's authority to
impose a fine for the broadcast of such material is $407,270 for a single incident, with a maximum fine of up to
$3,759,410 for a continuing violation. The Company has determined that, at this time, the amount of potential fines
and penalties, if any, cannot be estimated.
The Company has filed, on a timely basis, renewal applications for those radio stations with radio
broadcasting licenses that are subject to renewal with the FCC. The Company’s costs to renew its licenses with the
FCC are nominal and are expensed as incurred rather than capitalized. From time to time, the renewal of certain
licenses may be delayed. The Company continues to operate these radio stations under their existing licenses until
the licenses are renewed. The FCC may delay the renewal pending the resolution of open inquiries. The affected
stations are, however, authorized to continue operations until the FCC acts upon the renewal applications.
Currently, all of the Company’s licenses have been renewed.
127
The FCC initiated an investigation in January 2007, related to a contest at one of the Company’s stations.
In October 2016, the FCC designated for a hearing whether the Company operated this station in the public interest
and whether such station’s license should be renewed. In February 2017, the Company permanently discontinued
operation of the station and returned the station’s broadcasting license to the FCC for cancellation, in order to
facilitate the Merger. As a result, the Company recorded a $13.5 million loss in the statement of operations in net
gain/loss on sale or disposal of assets in 2017.
Performance Fees
The Company incurs fees from performing rights organizations (“PRO”) to license the Company’s public
performance of the musical works contained in each PRO’s repertoire. The Radio Music Licensing Committee (the
“RMLC”), of which the Company is a represented participant: (i) entered into an industry-wide settlement with
American Society of Composers, Authors and Publishers that became effective January 1, 2017 for a five-year term;
(ii) is currently seeking reasonable industry-wide fees from Broadcast Music, Inc. effective January 1, 2017 through
rate court proceedings; (iii) is currently subject to arbitration proceedings with SESAC, Inc. to determine fair and
reasonable fees that would be effective January 1, 2019; and (iv) filed in November 2016 a motion in the U.S.
District Court for the Eastern District of Pennsylvania against Global Music Rights (“GMR”) arguing that GMR is a
monopoly demanding monopoly prices and asking the Court to subject GMR to an antitrust consent decree. GMR
filed a counterclaim in the U.S. District Court for the Central District of California along with a motion to dismiss
the RMLC’s claim in the U.S. District Court for the Eastern District of Pennsylvania. There have been subsequent
claims and counterclaims to establish jurisdiction. In January 2017, the Company obtained an interim license from
GMR for fees effective January 1, 2017 to avoid any infringement claims by GMR for using GMR’s repertory
without a license. This license, including several extensions, is expected to expire March 31, 2019.
Other Matters
During the third quarter of 2016, the Company settled a legal claim with British Petroleum as a result of
their Deepwater Horizon oil spill in the Gulf of Mexico and recovered $2.3 million on a net basis after deducting
certain related expenses. The claim was a result of lost business due to the oil spill.
Leases and Other Contracts
Rental expense is incurred principally for office and broadcasting facilities. Certain of the leases contain
clauses that provide for contingent rental expense based upon defined events such as cost of living adjustments
and/or maintenance costs in excess of pre-defined amounts.
The Company also has rent obligations under a sale and leaseback transaction from 2009 whereby the
Company sold certain of its radio broadcasting towers to a third party for cash in return for long-term leases on these
towers. These sale and leaseback obligations are listed in the future minimum annual commitments table. The
Company sold these towers as operating these towers to maximize tower rental income was not part of the
Company’s core strategy.
The following table provides the Company’s rent expense for the periods indicated:
2018
Years Ended December 31,
2017
(amounts in thousands)
2016
Rent expense
$
53,948 $
23,742 $
17,892
The Company also has various commitments under the following types of contracts:
128
Future Minimum Annual Commitments
Rent Under
Operating
Leases
Sale
Leaseback
Operating
Programming
and Related
Contracts
Leases
(amounts in thousands)
Total
Years ending December 31,
2019
2020
2021
2022
2023
Thereafter
21.
SUBSEQUENT EVENTS
$
$
50,455 $
49,556
45,870
40,451
37,194
159,208
382,734 $
920 $
948
977
1,006
1,036
6,697
11,584 $
169,384 $
121,212
86,202
57,662
46,094
17,567
498,121 $
220,759
171,716
133,049
99,119
84,324
183,472
892,439
Events occurring after December 31, 2018, and through the date that these consolidated financial
statements were issued, were evaluated to ensure that any subsequent events that met the criteria for recognition
have been included and are as follows:
On February 1, 2019, the Company closed on the sale of land, land improvements, buildings and equipment
for total proceeds of $25.0 million. The assets were classified within assets held for sale as of December 31, 2018.
On February 13, 2019, the Company entered into an agreement with Cumulus Media Inc. (“Cumulus”)
under which the Company will exchange 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 Company and Cumulus
will begin programming the respective stations under a LMA on March 1, 2019. The exchange transaction is
expected to close in the second quarter of 2019.
22.
SUMMARIZED QUARTERLY FINANCIAL DATA (Unaudited)
The following table presents unaudited operating results for each quarter within the two most recent years.
The Company believes that all necessary adjustments, consisting only of normal recurring adjustments, have been
included in the amounts stated below to present fairly the following quarterly results when read in conjunction with
the financial statements included elsewhere in this report. Results of operations for any particular quarter are not
necessarily indicative of results of operations for a full year. The Company’s financial results are also not
comparable from quarter to quarter due to the Company’s acquisitions and dispositions of radio stations as described
in Note 3, Business Combinations, and due to the seasonality of revenues, with revenues usually the lowest in the
first quarter of each year.
129
2018
Net revenues
Operating income
Net income (loss) available to the Company from
continuing operations
Preferred stock dividend
Net income available to common shareholders from
continuing operations
Income (loss) from discontinued operations,
net of income taxes
Net income (loss) available to common shareholders
Net income (loss) from continuing operations
per share - basic (1)
Net income (loss) from discontinued operations,
net of tax, per share - basic (1)
Net income (loss) available to common shareholders
per share - basic (1)
Weighted average common shares outstanding - basic
Net income (loss) from continuing operations
per share - diluted (1)
Net income (loss) from discontinued operations,
net of tax, per share - diluted (1)
Net income (loss) available to common shareholders
per share - diluted (1)
Weighted average common shares outstanding - diluted
Preferred stock dividends declared and paid
Common stock dividends declared and paid
2017
Net revenues
Operating income
Income (loss) available to the Company from
continuing operations
Preferred stock dividend
Net income available to common shareholders from
continuing operations
Income (loss) from discontinued operations,
net of income taxes
Net income (loss) available to common shareholders
Net income (loss) from continuing operations
Quarters Ended
December 31
September 30
June 30
March 31
(amounts in thousands, except per share data)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
411,375 $
378,508
372,124 $
300,560
(377,593) $
78,733
27,552 $
5,689
(386,568) $
36,590 $
1,597 $
(14,206)
- $
- $
- $
-
(386,568) $
36,590
1,597 $
(14,206)
(378) $
358 $
844 $
328
(386,946) $
36,948
2,441 $
(13,878)
(2.80) $
0.26 $
0.01 $
(0.10)
- $
- $
0.01 $
-
(2.80) $
0.27
0.02 $
(0.10)
138,033
138,740
138,639
138,939
(2.80) $
0.26 $
0.01 $
(0.10)
- $
- $
0.01 $
-
(2.80) $
0.27 $
0.02 $
(0.10)
138,033
139,103
139,263
138,939
- $
- $
- $
-
12,367 $
12,486 $
12,475 $
12,441
Quarters Ended
December 31
September 30
June 30
March 31
(amounts in thousands, except per share data)
246,614 $
122,299 $
124,970 $
99,001
(2,265) $
13,485 $
16,379 $
(15,016)
231,829 $
252 $
4,100 $
663 $
6,414 $
550 $
(9,331)
550
231,577 $
3,437 $
5,864 $
(9,881)
836 $
- $
- $
-
232,413 $
3,437 $
5,864 $
(9,881)
130
per share - basic (1)
Net income (loss) from discontinued operations,
net of tax, per share - basic (1)
Net income (loss) available to common shareholders
per share - basic (1)
Weighted average common shares outstanding - basic
Net income (loss) from continuing operations
per share - diluted (1)
Net income (loss) from discontinued operations,
net of tax, per share - diluted (1)
Net income (loss) available to common shareholders
per share - diluted (1)
Weighted average common shares outstanding - diluted
Preferred stock dividends declared and paid
Common stock dividends declared and paid
$
$
$
$
$
$
$
$
2.63 $
0.11 $
0.16 $
(0.24)
0.01 $
- $
- $
-
2.63 $
0.09 $
0.15 $
88,309
38,955
38,945
(0.25)
38,910
2.58 $
0.28 $
0.26 $
0.11
0.01 $
- $
- $
-
2.59 $
0.09 $
0.15 $
(0.25)
89,887
39,728
39,656
38,910
924 $
550 $
550 $
12,746 $
10,713 $
2,921 $
550
2,916
(1)
Income (loss) from continuing operations per share, income (loss) from discontinued operations per
share, and net income (loss) per share is computed independently for each quarter and the full year
based upon respective average shares outstanding. Therefore, the sum of the quarterly per share
amounts may not equal the annual per share amounts reported.
131
(b)
Index to Exhibits
Exhibit
Number Description
2.1 #
3.1 #
3.2 #
3.3 #
3.4 #
3.5 #
3.6 #
3.7 #
3.8 #
4.1 #
4.2 #
4.3 #
10.1 #
10.2 #
10.3 #
Master Separation Agreement, dated as of February 2, 2017, by and between CBS Corporation and CBS Radio
Inc. (Incorporated by reference to Exhibit A to Exhibit 2.1 to Entercom’s Current Report on Form 8-K filed on
February 3, 2017)
Amended and Restated Articles of Incorporation of Entercom Communications Corp. (Incorporated by
reference to Exhibit 3.01 to Entercom’s Amendment to Registration Statement on Form S-1, as filed on January
27, 1999 (File No. 333-61381))
Articles of Amendment to the Articles of Incorporation of Entercom Communications Corp. (Incorporated by
reference to Exhibit 3.1 of Entercom’s Current Report on Form 8-K as filed on December 21, 2007)
Articles of Amendment to the Articles of Incorporation of Entercom Communications Corp. (Incorporated by
reference to Exhibit 3.02 to Entercom’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2009, as
filed on August 5, 2009)
Articles of Amendment to the Articles of Incorporation of Entercom Communications Corp. dated November
17, 2017. (Incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K filed on November 17,
2017)
Statement with Respect to Shares, filed with the Pennsylvania Department of State on July 16, 2015.
(Incorporated by reference to an Exhibit 3.1 to our Current Report on Form 8-K filed on July 17, 2015)
Amended and Restated Bylaws of Entercom Communications Corp. (Incorporated by reference to Exhibit 3.1
to Entercom’s Current Report on Form 8-K filed on February 21, 2008)
Amendment No 1 to Amended and Restated Bylaws of Entercom Communications Corp. (Incorporated by
reference to Exhibit 3.1 to our Current Report on Form 8-K filed on February 3, 2017)
Amendment No 2 to Amended and Restated Bylaws of Entercom Communications Corp. (Incorporated by
reference to Exhibit 3.2 to our Current Report on Form 8-K filed on November 17, 2017)
Indenture for Senior Notes, dated as of October 17, 2016, by and among Entercom Media Corp. (formerly CBS
Radio, Inc.), the guarantors named therein, and Deutsche Bank Trust Company Americas, as trustee.
(Incorporated by reference to Exhibit 4.2 of Entercom’s Registration Statement on Form S-4 (File No. 333-
217273))
Supplemental Indenture, dated as of November 17, 2017, by and among Entercom Radio, LLC, the other
guarantor parties named therein, and Deutsche Bank Trust Company Americas, as trustee. (Incorporated by
reference to Exhibit 4.2 to Entercom’s Current Report on Form 8-K filed on November 17, 2017)
Supplemental Indenture, dated December 8, 2017, by and between Entercom Media Corp. (formerly CBS Radio
Inc.), and Deutsche Bank Trust Company Americas, as trustee (Incorporated by reference to Exhibit 4.1 to our
Current Report on Form 8-K filed on December 11, 2017)
Credit Agreement, dated as of October 17, 2016, by and among Entercom Media Corp. (formerly CBS Radio
Inc.), the guarantors named therein, the lenders and L/C issuers named therein, and JPMorgan Chase Bank,
N.A., as administrative agent and collateral agent. (Incorporated by reference to Exhibit 10.9 of Entercom’s
Registration Statement on Form S-4 (File No. 333-217273))
Amendment No. 1, dated as of March 3, 2017, to the Credit Agreement, dated as of October 17, 2016, by and
among Entercom Media Corp. (formerly CBS Radio Inc.), the guarantors named therein, the lenders and L/C
issuers named therein, and JPMorgan Chase Bank, N.A., as administrative agent and collateral agent.
(Incorporated by reference to Exhibit 10.10 of Entercom’s Registration Statement on Form S-4 (File No. 333-
217273))
Transition Services Agreement, by and between CBS Corporation and Entercom Communications Corp., dated
as of November 16, 2017. (Incorporated by reference to Exhibit 2.5 to Entercom’s Current Report on Form 8-
K filed on November 17, 2017)
132
10.4 #
10.5 #
10.6 #
10.7 #
10.8 *
10.9 #
10.10 #
10.11 #
Tax Matters Agreement, by and between CBS Corporation and Entercom Communications Corp., dated as of
November 16, 2017. (Incorporated by reference to Exhibit 2.10 to Entercom’s Current Report on Form 8-
K filed on November 17, 2017)
Employment Agreement, dated April 22, 2017, between Entercom Communications Corp. and David J. Field.
(Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q for the quarter ended June 30,
2016, as filed on August 5, 2016).
First Amendment to Employment Agreement, November 16, 2017, between Entercom Communications Corp.
and David J. Field. (Incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K filed on
November 17, 2017).
Waiver Agreement April 19, 2017, between Entercom Communications Corp. and David J. Field. (Incorporated
by reference to Exhibit 10.3 to our Quarterly Report on Form 10Q for the quarter ended June 30, 2017, filed on
August 4, 2017).
Second Amendment to Employment Agreement, dated October 11, 2018, between Entercom Communications
Corp. and David J. Field Filed herewith.
Employment Agreement, dated March 20, 2017, between Entercom Communications Corp. and Richard J.
Schmaeling. (Incorporated by reference to Exhibit 10.4 to our Quarterly Report on Form 10Q for the quarter
ended March 31, 2017, filed on May 9, 2017).
Employment Agreement, dated July 18, 2017, between Entercom Communications Corp. and Louise C.
“Weezie” Kramer. (Incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10Q for the
quarter ended September 30, 2017, filed on November 6, 2017).
Employment Agreement, dated May 15, 2017, between Entercom Communications Corp. and Andrew P. Sutor.
(Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10Q for the quarter ended June 30,
2017, filed on August 4, 2017).
10.12 *
Employment Agreement, dated October 11, 2018, between Entercom Communications Corp. and Robert
Philips. Filed herewith.
10.13 #
10.14 #
10.15 #
10.16 #
10.17 #
10.18 #
10.19 #
Employment Agreement, July 1, 2007, between Entercom Communications Corp. and Joseph M. Field.
(Incorporated by reference to Exhibit 10.2 to our Quarterly Report on Form 10Q/A for the quarter ended
September 30, 2007, filed on August 5, 2007).
First Amendment to Employment Agreement, December 15, 2008, between Entercom Communications Corp.
and Joseph M. Field. (Incorporated by reference to Exhibit 10.4 to our Annual Report on Form 10-K for the year
ended December 31, 2008, filed on February 26, 2009).
Second Amendment to Employment Agreement, May 10, 2017, between Entercom Communications Corp. and
Joseph M. Field. (Incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10Q for the quarter
ended June 30, 2017, filed on August 4, 2017).
Entercom Non‐Employee Director Compensation Policy adopted May 10, 2017. (Incorporated by reference to
Exhibit 10.1 to our Current Report on Form 8-K filed on May 16, 2017).
Amended and Restated Entercom Equity Compensation Plan. (Incorporated by reference to Exhibit A to our
Proxy Statement on Schedule 14A, filed on March 7, 2014.
Entercom Annual Incentive Plan. (Incorporated by reference to Exhibit A to our Proxy Statement on Schedule
14A, filed on March 17, 2017).
Entercom 2016 Employee Stock Purchase Plan. (Incorporated by reference to Exhibit A to our Proxy Statement
on Schedule 14A, filed on March 18, 2016).
21.1 *
Information Regarding Subsidiaries of Entercom Communications Corp. Filed herewith.
23.1 *
Consent of PricewaterhouseCoopers LLP. Filed herewith.
31.1 *
Certification of President and Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a), as created
by Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
133
31.2 *
Certification of Executive Vice President and Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-
14(a), as created by Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
32.1 *
32.2 *
Certification of President and Chief Executive Officer pursuant to 18 U.S.C. § 1350, as created by Section 906 of
the Sarbanes-Oxley Act of 2002. Furnished herewith. This exhibit is submitted as “accompanying” this Annual
Report on Form 10-K and shall not be deemed to be “filed” as part of this Annual Report on Form 10-K.
Certification of Executive Vice President and Chief Financial Officer pursuant to 18 U.S.C. § 1350, as created
by Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. This exhibit is submitted as
“accompanying” this Annual Report on Form 10-K and shall not be deemed to be “filed” as part of this Annual
Report on Form 10-K.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema
101.CAL XBRL Taxonomy Extension Calculation Linkbase
101.DEF XBRL Taxonomy Extension Definition Linkbase
101.LAB XBRL Taxonomy Extension Label Linkbase
101.PRE XBRL Taxonomy Extension Presentation Linkbase
*
#
Filed Herewith
Incorporated by reference.
ITEM 16. FORM 10-K SUMMARY PAGE
Not Presented.
134
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in
Bala Cynwyd, Pennsylvania, on February 27, 2019.
ENTERCOM COMMUNICATIONS CORP.
By: /s/ DAVID J. FIELD
David J. Field, Chairman, Chief Executive Officer and
President
(principal executive officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed by the
following persons in the capacities and on the dates indicated.
SIGNATURE
CAPACITY
DATE
Principal Executive Officer:
/s/ DAVID J. FIELD
David J. Field
Chairman, Chief Executive Officer,
President and a Director
February 27, 2019
Principal Financial Officer:
/s/ RICHARD J. SCHMAELING
Richard J. Schmaeling
Executive Vice President and
Chief Financial Officer
February 27, 2019
Principal Accounting Officer:
/s/ JAMES N. HAMILL
James N. Hamill
Interim Principal Accounting Officer and
Controller
February 27, 2019
Directors:
/s/ JOSEPH M. FIELD
Joseph M. Field
/s/ DAVID J. BERKMAN
David J. Berkman
/s/ SEAN R. CREAMER
Sean R. Creamer
/s/ JOEL HOLLANDER
Joel Hollander
/s/ MARK R. LANEVE
Mark R. LaNeve
/s/ DAVID LEVY
David Levy
/s/ SUSAN K. NEELY
Susan K. Neely
/s/ STEFAN M. SELIG
Stefan M. Selig
Chairman Emeritus
February 27, 2019
Director
Director
Director
Director
Director
Director
Director
135
February 27, 2019
February 27, 2019
February 27, 2019
February 27, 2019
February 27, 2019
February 27, 2019
February 27, 2019
Entercom Communications Corp.
Corporate Information
Directors
Officers
David J. Field
Chairman of the Board
Joseph M. Field
Chairman Emeritus
David J. Berkman
Sean R. Creamer
Joel Hollander
Mark R. LaNeve
David Levy
Susan K. Neely
Stefan M. Selig
David J. Field
Chairman, President & Chief Executive Officer
Joseph M. Field
Chairman Emeritus
Richard J. Schmaeling
Executive Vice President & Chief Financial Officer
Louise C. Kramer
Chief Operating Officer
Andrew P. Sutor, IV
Executive Vice President, General Counsel & Secretary
Robert Philips
Chief Revenue Officer
Stock Trading
Information Requests
Richard J. Schmaeling
Executive Vice President & Chief Financial Officer
(610) 660-5686
Class A Common Stock of
Entercom Communications Corp. is
traded on the New York Stock
Exchange under the Symbol “ETM”.
Independent Auditors
PricewaterhouseCoopers LLP
Two Commerce Square, Suite 1700
2001 Market Street
Philadelphia, PA 19103-7042
Gina Gin, Partner
(267) 330-3000
Shareholder Records
Shareholders desiring to change the name,
address or ownership of stock, to report
lost certificates or to consolidate accounts,
should contact Entercom Communications
Corp.’s transfer agent.
Transfer Agent
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
(800) 937-5449
www.amstock.com