Fresh Start Accounting (Tables)

9 Months Ended

Sep. 30, 2018

The following table reconciles the enterprise value to the estimated reorganization value as of the Effective Date (dollars in thousands):



Enterprise value	$	1,675,000
Less: Cash balance difference (1)	(20,000		)
Less: Effect of deferred tax liability (2)	(30,000		)
Plus: Fair value of non-debt current liabilities	114,573
Plus: Fair value of non-debt long term liabilities	63,921
Reorganization value	$	1,803,494

(1) Difference in the estimated cash balance in the reorganization value versus the actual cash on hand as of June 3, 2018.

(2) Difference in the assumed effect of deferred taxes in the reorganization value versus the actual deferred taxes as of June 3, 2018.

Schedule of Reorganization Adjustments

Liabilities subject to compromise immediately prior to the Effective Date consisted of the following (dollars in thousands):



Accounts payable and accrued expenses	$	66,515
Other liabilities	21,364
Deferred tax liability	237,247
Accounts payable, accrued expenses and other liabilities	325,126
Predecessor Term Loan	1,684,407
7.75% Senior Notes	610,000
Accrued interest	27,577
Long-term debt and accrued interest	2,321,984
Total Liabilities subject to compromise	$	2,647,110

Reflects cash payments and the funding of professional fee escrow account from the implementation of the Plan as follows (dollars in thousands):



Payment of professional fees	$	3,118
Adequate protection payment	1,326
Payment of contract cure claims	20,341
Funding of professional fee escrow amount	32,517
Other fees and expenses	1,132
Net cash payments	$	58,434

Adjustment made to accumulated deficit consisted of the following (dollars in thousands):



Cancellation of Predecessor equity	$	1,397,917
Gain on settlement of Liabilities subject to compromise	726,831
Income tax benefit	184,005
Other items	(2,550		)
Total adjustment to retained earnings	$	2,306,203

The adjustments set forth in the following unaudited Condensed Consolidated Balance Sheet reflect the consummation of the transactions contemplated by the Plan (reflected in the column “Reorganization Adjustments”) as well as fair value adjustments as a result of the adoption of fresh start accounting (reflected in the column “Fresh Start Adjustments”). The explanatory notes highlight methods used to determine fair values or other amounts of the assets and liabilities as well as significant assumptions or inputs (dollars in thousands).



	Predecessor Company As of June 3, 2018			Reorganization Adjustments				Fresh Start Adjustments				Successor Company As of June 4, 2018
Assets
Current assets:
Cash and cash equivalents	$	108,480		$	(58,434	)	(1)	$	—			$	50,046
Restricted cash	13,720			24,585			(2)	—				38,305
Accounts receivable	215,724			—				—				215,724
Trade receivable	5,221			—				—				5,221
Prepaid expenses and other current assets	49,912			(19,990		)	(3)	—				29,922
Total current assets	393,057			(53,839		)		—				339,218
Property and equipment, net	193,574			—				121,732			(12)	315,306
Broadcast licenses	1,203,809			—				(285,309		)	(13)	918,500
Other intangible assets	75,056			—				137,402			(13)	212,458
Goodwill	135,214			—				(135,214		)	(14)	—
Other assets	18,012			—				—				18,012
Total assets	$	2,018,722		$	(53,839	)		$	(161,389	)		$	1,803,494
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses	$	108,448		$	6,253		(4)	$	(128	)	(15)	114,573
Current portion of Term Loan	—			13,000			(5)	—				13,000
Total current liabilities	108,448			19,253				(128		)		127,573
Term Loan	—			1,268,983			(5)	18,017			(16)	1,287,000
Other liabilities	2,801			21,312			(6)	13			(17)	24,126
Deferred income taxes	—			50,437			(7)	(10,642		)	(18)	39,795
Total non-current liabilities	2,801			1,340,732				7,388				1,350,921
Liabilities subject to compromise	2,647,110			(2,647,110		)	(8)	—				—
Total liabilities	2,758,359			(1,287,125		)		7,260				1,478,494
Stockholder's (deficit) equity:
Predecessor Class A common stock	320			(320		)	(9)	—				—
Predecessor Class C common stock	1			(1		)	(9)	—				—
Predecessor treasury stock	(229,310		)	229,310			(9)	—				—
Predecessor additional-paid-in-capital	1,626,906			(1,626,906		)	(9)	—				—
Successor Class A common stock	—			—				—				—
Successor Class B common stock	—			—				—				—
Successor additional-paid-in-capital	—			325,000			(10)	—				325,000
(Accumulated deficit) retained earnings	(2,137,554		)	2,306,203			(11)	(168,649		)	(19)	—
Total stockholders' (deficit) equity	(739,637		)	1,233,286				(168,649		)		325,000
Total liabilities and stockholders’ equity (deficit)	$	2,018,722		$	(53,839	)		$	(161,389	)		$	1,803,494

Reflects the increase in net book value of property and equipment to the estimated fair value as of the Effective Date. The following table summarizes the components of property and equipment, net as of June 4, 2018, and the fair value as of the Effective Date (dollars in thousands):



	Estimated Useful Life	Successor Company		Predecessor Company
Land	N/A	$	159,464	$	86,287
Broadcasting and other equipment	3 to 30 years	58,369		248,607
Computer and capitalized software costs	1 to 3 years	11,791		34,924
Furniture and fixtures	5 years	4,432		15,571
Leasehold improvements	5 years	24,089		46,471
Buildings	9 to 20 years	26,964		51,994
Construction in progress	N/A	30,197		30,197
		315,306		514,051
Less: accumulated depreciation		—		(320,477		)
Property and equipment, net		$	315,306	$	193,574

Liabilities subject to compromise have been, or will be settled as follows in accordance with the Plan (dollars in thousands):



Liabilities subject to compromise			$	2,647,110
Cash payments at the Effective Date			(33,657		)
Liabilities reinstated at the Effective Date:
Accounts payable	(3,215	)
Other liabilities	(21,160	)
Deferred tax liability	(50,437	)
Total liabilities reinstated at the Effective Date			(74,812		)
Adjustment for deferred tax liability impact			(186,810		)
Fair value of common stock issued to Predecessor Term Loan holders, 7.75% Senior Notes holders and unsecured creditors			(264,394		)
Fair value of warrants issued to Predecessor Term Loan holders, 7.75% Senior Notes holders and unsecured creditors			(60,606		)
Fair value of Term Loan provided by Predecessor Term Loan holders			(1,300,000		)
Gain on settlement of Liabilities subject to compromise			$	726,831

Reflects net additions to restricted cash giving effect to the funding of professional fee escrow account for professional fees accrued and the payment of restructuring fees (dollars in thousands):



Funding of professional fee escrow account	$	32,517
Payment of restructuring fees	(7,932		)
Net changes to restricted cash	$	24,585

The Company recorded an adjustment to intangible assets of $147.9 million as follows (dollars in thousands):



	Successor Company		Predecessor Company		Difference
Broadcast licenses	$	918,500	$	1,203,809	$	(285,309	)
Other intangible assets	212,458		75,056		137,402
	$	1,130,958	$	1,278,865	$	(147,907	)

Reflects the cumulative impact of the fresh start accounting adjustments discussed above on accumulated deficit as follows (dollars in thousands):



Property and equipment fair value adjustment	$	121,732
Intangible assets fair value adjustment	(147,907		)
Goodwill adjustment	(135,214		)
Term Loan fair value adjustment	(18,017		)
Other assets and liabilities fair value adjustments	115
Net loss on fresh start adjustments	$	(179,291	)
Tax impact on fresh start adjustments	10,642
Net impact on retained earnings	$	(168,649	)

Schedule of Reorganization Items Incurred

Reorganization items incurred as a result of the Chapter 11 Cases are presented separately in the accompanying Condensed Consolidated Statement of Operations as follows (dollars in thousands):



	Predecessor Company
	Period from April 1, 2018 through June 3, 2018			Period from January 1, 2018 through June 3, 2018
Gain on settlement of Liabilities subject to compromise (a)	$	726,831		$	726,831
Fresh start adjustments (b)	(179,291		)	(179,291		)
Professional fees (c)	(29,560		)	(54,386		)
Non-cash claims adjustments (d)	(15,364		)	(15,364		)
Rejected executory contracts (e)	(2,936		)	(5,976		)
Other (f)	(3,312		)	(5,613		)
Reorganization items, net	$	496,368		$	466,201

(a) Liabilities subject to compromise have been, or will be settled in accordance with the Plan.

(b) Revaluation of certain assets and liabilities upon the adoption of fresh start accounting.

(d) The carrying value of certain claims were adjusted to the estimated value of the claim that will be allowed by the Bankruptcy Court.

(e) Non-cash expenses to record estimated allowed claim amounts related to rejected executory contracts.

(f) Federal Communications Commission filing and United States Trustee fees directly associated with the reorganization process and the write-off of Predecessor director and officer insurance policies.