Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies

Cumulus Media Inc. (and its consolidated subsidiaries, except as the context may otherwise require, “CUMULUS MEDIA,” “we,” “us,” “our,” or the “Company”) is a Delaware corporation, organized in 2018, and successor to a Delaware corporation with the same name that was organized in 2002.

Nature of Business

A leader in the radio broadcasting industry, CUMULUS MEDIA combines high-quality local programming with iconic, nationally syndicated media, sports and entertainment brands to deliver premium content choices to the 245 million people reached each week through its 433 owned-and-operated stations broadcasting in 88 U.S. media markets (including eight of the top 10), approximately 8,000 broadcast radio stations affiliated with its Westwood One network and numerous digital channels. Together, the Cumulus Radio Station Group and Westwood One platforms make CUMULUS MEDIA one of the few media companies that can provide advertisers with national reach and local impact. The Cumulus Radio Station Group and Westwood One are the exclusive radio broadcast partners to some of the largest brands in sports, entertainment, news, and talk, including the NFL, the NCAA, the Masters, the Olympics, the GRAMMYs, the Academy of Country Music Awards, the American Music Awards, the Billboard Music Awards, and more. Additionally, the Company is the nation's leading provider of country music and lifestyle content through its NASH brand, which serves country fans nationwide through radio programming, exclusive digital content, and live events.

Basis of Presentation

As previously disclosed, on November 29, 2017 (the “Petition Date”), CM Wind Down Topco Inc. (formerly known as

Cumulus Media Inc.), a Delaware corporation (“Old Cumulus”) and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for relief (the “Bankruptcy Petitions”) under Chapter 11 of Title 11 of the United States Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”). The Debtors’ chapter 11 cases (the "Chapter 11 Cases") were jointly administered under the caption In re Cumulus Media Inc., et al, Case No. 17-13381. On May 10, 2018, the Bankruptcy Court entered the Findings of Fact, Conclusions of Law and Order Confirming the Debtors’ First Amended Joint Chapter 11 Plan of Reorganization [Docket No. 769] (the “Confirmation Order”), which confirmed the First Amended Joint Plan of Reorganization of Cumulus Media Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code [Docket No. 446] (the “Plan”), as modified by the Confirmation Order. On June 4, 2018 (the “Effective Date”), Old Cumulus satisfied the conditions to effectiveness set forth in the Confirmation Order and in the Plan, the Plan was substantially consummated, and Old Cumulus and the other Debtors emerged from Chapter 11. On June 29, 2018, the Bankruptcy Court entered an order closing the Chapter 11 Cases of all of the Debtors other than Old Cumulus, whose case will remain open until its estate has been fully administered including resolving outstanding claims and the Bankruptcy Court enters an order closing its case.

In connection with its emergence, Old Cumulus implemented a series of internal reorganization transactions authorized by the Plan pursuant to which it transferred substantially all of its remaining assets to an indirectly wholly owned subsidiary of reorganized Cumulus Media Inc. (formerly known as CM Emergence Newco Inc.), a Delaware corporation (“CUMULUS MEDIA” or the “Company”), prior to winding down its business. References to “Successor” or “Successor Company” relate to the balance sheet and results of operations of CUMULUS MEDIA on and subsequent to June 4, 2018. References to “Predecessor”, “Predecessor Company” or “Old Cumulus” refer to the balance sheet and results of operations of Old Cumulus prior to June 4, 2018.

Upon filing for bankruptcy and up through and including the emergence from Chapter 11 on the Effective Date, the Company applied Accounting Standards Codification (“ASC”) 852 - Reorganizations (“ASC 852”) in preparing its consolidated financial statements (see Note 2, “Emergence from Chapter 11” and Note 3 “Fresh Start Accounting”). As a result of the application of fresh start accounting and the effects of the implementation of the Plan, a new entity for financial reporting purposes was created, and consequently the consolidated financial statements on and after June 4, 2018 are not comparable to the consolidated financial statements prior to that date. Refer to Note 3, “Fresh Start Accounting” for additional information.

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Revision of Previously Issued Financial Statements

During the third quarter of 2018, the Company determined that it had an error in the classification of certain content related costs in the Condensed Consolidated Statements of Operations in previous periods. The Company should have presented the amounts within content costs rather than within selling, general and administrative costs. In the accompanying Consolidated Statements of Operations, the previous periods have been revised to correct this misclassification. This reclassification resulted in an increase in Content costs of $4.2 million for the Predecessor Company Period from January 1, 2018 through June 3, 2018. For the Predecessor Company years ended December 31, 2017 and 2016, the reclassification was $6.2 million and $4.3 million, respectively. The correction was not material to the Predecessor or Successor results.

Reverse Stock Split

On October 12, 2016, the Predecessor Company effected a one-for-eight (1:8) reverse stock split (the "Reverse Stock Split"). As a result of the Reverse Stock Split, every eight shares of each class of the Predecessor Company's outstanding common stock were combined into one share of the same class of common stock and the authorized shares of each class of the Predecessor Company's common stock were reduced by the same ratio. No fractional shares were issued in connection with the Reverse Stock Split. The number and exercise price of the Predecessor Company's outstanding stock options and warrants were adjusted proportionally, as appropriate. The par value of the Predecessor Company's common stock was not adjusted as a result of the Reverse Stock Split. All authorized, issued and outstanding stock and per share amounts for the Predecessor Company contained within the accompanying consolidated financial statements and these footnotes have been adjusted to reflect this Reverse Stock Split for all periods presented.

Reportable Segments

The Company operates in two reportable segments, for which there is discrete financial information available and whose operating results are reviewed by the chief operating decision maker, the Cumulus Radio Station Group and Westwood One.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates, including significant estimates related to revenue recognition, bad debts, intangible assets, income taxes, stock-based compensation, contingencies, litigation, valuation assumptions for impairment analysis, certain expense accruals and, if applicable, purchase price allocation. The Company bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances, and which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts and results may differ materially from these estimates.

Comprehensive Income (Loss)

Comprehensive income (loss) includes net income (loss) and certain items that are excluded from net income (loss) and recorded as a separate component of stockholders' equity (deficit). During the years ended December 31, 2018 and 2017, the Company had no items of other comprehensive income (loss) and, therefore, comprehensive income (loss) does not differ from reported net income (loss).

Going Concern Considerations

In accordance with the requirements of Accounting Standards Update (“ASU”), 2014-15, Presentation of Financial Statements Going Concern (Subtopic 205-40), or Accounting Standards Codification ("ASC") 205-40, the Company has the responsibility to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about the Company's ability to meet its future financial obligations. In its evaluation for this report, management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due for 12 months following the date of issuance of this Annual Report on Form 10-K.

During the pendency of the Chapter 11 Cases, the Company’s ability to continue as a going concern was contingent upon a variety of factors, including the Bankruptcy Court’s approval of the Plan and the Company’s ability to successfully implement the Plan. As a result of the effectiveness of the Plan and the expectation that it will continue to generate positive cash flows from operating activities, the Company believes it has the ability to meet its obligations for at least one year from the date of issuance of this Form 10-K.

Cash and Cash Equivalents

The Company considered all highly liquid investments with original maturities of three months or less to be cash equivalents.

Accounts Receivable, Allowance for Doubtful Accounts and Concentration of Credit Risk

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 Company determined the allowance based on several factors, including the length of time receivables are past due, trends and current economic factors. All balances are reviewed and evaluated quarterly on a consolidated basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

In the opinion of management, credit risk with respect to accounts receivable is limited as a result of the large number of customers and the geographic diversification of the Company’s customer base. The Company performs credit evaluations of its customers as needed and believes that adequate allowances for any uncollectible accounts receivable are maintained.

Assets Held for Sale

During the year ended December 31, 2015, the Company entered into an agreement to sell certain land in the Company's Washington, DC market to a third party. The asset was classified as held for sale in the Consolidated Balance Sheet at December 31, 2016. At December 31, 2017, the sale of this asset was subject to Bankruptcy Court approval, and consequently, the asset no longer met the definition of held for sale and was classified on the Consolidated Balance Sheet as Property and Equipment, net. As a result of the Company's emergence from Chapter 11 and as of December 31, 2018, the asset again met the criteria to be classified as held for sale at fair value less estimated selling costs in the Consolidated Balance Sheet. The closing of the transaction is subject to various conditions and approvals which remain pending.

Dispositions

On August 30, 2016, the Company completed the sale of certain land and buildings in Los Angeles for $110.6 million in cash. In conjunction with this sale, the Company recorded a net gain of $94.0 million, which is included in (gain) loss on sale of assets or stations in the accompanying Consolidated Statements of Operations for the year ended December 31, 2016.

Property and Equipment

Property and equipment are stated at cost. Property and equipment acquired in business combinations accounted for under the purchase method of accounting are recorded at their estimated fair values on the date of acquisition. Equipment held under capital leases is stated at the present value of minimum future lease payments.

Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Equipment held under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful life of the asset or the remaining term of the lease. Depreciation of construction in progress is not recorded until the assets are placed into service.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Intangible Assets

As of December 31, 2018, the Company’s intangible assets are comprised of broadcast licenses and certain other intangible assets. Intangible assets acquired in a business combination which are determined to have an indefinite useful life, including the Company’s broadcast licenses, are not amortized, but instead tested for impairment at least annually, or if a triggering event occurs. Intangible assets with definite useful lives are amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

In determining that the Company’s broadcast licenses qualified as indefinite lived intangibles, management considered a variety of factors including the Federal Communications Commission’s (“FCC”) historical record of renewing broadcast licenses, the cost to the Company of renewing such licenses, the relative stability and predictability of the radio industry and the relatively low level of capital investment required to maintain the physical plant of a radio station. The Company's evaluation of the recoverability of its indefinite-lived assets, which include FCC licenses and goodwill, is based on certain judgments and estimates. Future events may impact these judgments and estimates. 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.

Debt Issuance Costs

The costs related to the issuance of debt are capitalized and amortized to interest expense over the life of the related debt using the effective interest method. In April 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03. The amendments in ASU 2015-03 require that debt issuance costs be presented in the Consolidated Balance Sheet as a direct deduction from the carrying amount of long-term debt, consistent with debt discounts or premiums. As a result of the Company’s chapter 11 cases, the Company expensed the entire balance of $25.9 million of deferred financing costs and debt discount during the fourth quarter of 2017 to reorganization items, net, in the Consolidated Statements of Operations.

Revenue Recognition

Revenue is derived primarily from the sale of commercial airtime to local and national advertisers. On January 1, 2018 the Company adopted Accounting Standards Update No. 2014-09, Revenue From Contracts with Customers ("ASC 606") using the modified retrospective method. Results for reporting periods beginning after January 1, 2018 are presented in accordance with ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with the Company's historic accounting under ASC 605 - Revenue Recognition ("ASC 605"). Under current and prior revenue guidance, revenues are recognized when control of the promised goods or services are transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those good or services.

Broadcast advertising revenue is recognized as commercials are broadcast. In those instances in which the Company functions as the principal in the transaction, the revenue and associated operating costs are presented on a gross basis. In those instances where the Company functions as an agent or sales representative, the effective commission is presented as revenue with no corresponding operating expenses.

Local Marketing Agreements

A number of radio stations, including certain of our stations, have entered into Local Marketing Agreements (“LMAs”). In a typical LMA, the licensee of a station makes available, for a fee and reimbursement of its expenses, airtime on its station to a party which supplies programming to be broadcast during that airtime, and collects revenues from advertising aired during such programming. LMAs are subject to compliance with the antitrust laws and the Communications Laws, including the requirement that the licensee must maintain independent control over the station and, in particular, its personnel, programming, and finances.

As of December 31, 2018 and 2017, the Company operated two and four radio stations under LMAs, respectively. The stations operated under LMAs contributed $3.5 million, $2.6 million, $23.9 million, and $23.2 million for the Successor Company period June 4, 2018 through December 31, 2018, the Predecessor Company period January 1, 2018 through June 3, 2018, the Predecessor Company year ended December 31, 2017 and the Predecessor Company year ended December 31, 2016, respectively, to the consolidated net revenue of the Company.

Stock-based Compensation Expense

Stock-based compensation expense recognized for the Successor Company period June 4, 2018 through December 31, 2018, the Predecessor Company period January 1, 2018 through June 3, 2018, the Predecessor Company year ended December 31, 2017 and the Predecessor Company year ended December 31, 2016, was $3.4 million, $0.2 million, $1.6 million, and $2.9 million, respectively. For awards with service conditions, stock-based compensation expense is recognized on a straight-line basis over the requisite service period for the entire award. In addition, the Successor Company made an accounting policy election to recognize forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. For stock options with service conditions only, the Company utilizes the Black-Scholes option pricing model to estimate the fair value of options issued. The fair value of stock options is determined by the Company’s stock price, historical stock price volatility, the expected term of the award, risk-free interest rates and expected dividends. If other assumptions are used, the results could differ. For restricted stock awards with service conditions only, the Company utilizes the intrinsic value method. For restricted stock awards with performance conditions, the Company evaluates the probability of vesting of the awards in each reporting period and calculates stock-based compensation expense based on this assessment.

Trade Transactions

The Company provides commercial airtime in exchange for goods and services used principally for promotional, sales, programming and other business activities. An asset and liability is recorded at the fair value of the goods or services received. Trade revenue is recorded and the liability is relieved when commercials are broadcast and trade expense is recorded and the asset relieved when goods or services are consumed. Trade valuation is based upon management’s estimate of the fair value of the products, supplies and services received. For the Successor Company period June 4, 2018 through December 31, 2018, the Predecessor Company period January 1, 2018 through June 3, 2018, the Predecessor Company year ended December 31, 2017 and the Predecessor Company year ended December 31, 2016, amounts reflected under trade transactions were: (1) trade revenues of $26.5 million, $19.0 million, $40.1 million and $37.7 million, respectively; and (2) trade expenses of $27.1 million, $18.0 million, $38.6 million and $36.2 million, respectively.

Income Taxes

The Company uses the liability method of accounting for deferred income taxes. Except for goodwill, deferred income taxes are recognized for all temporary differences between the tax and financial reporting bases of our 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. The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act, among other changes, reduced the US federal corporate tax rate from 35% to 21% effective January 1, 2018. During the fourth quarter of 2018, the Company completed its accounting for the tax effects of enactment of the Act and recorded an adjustment to deferred tax benefit of approximately $0.9 million during 2018 related to the remeasurement of deferred tax assets and liabilities. See Note 13, “Income Taxes” for further discussion. A valuation allowance is recorded against a deferred tax asset to measure its net realizable value when it is not more likely than not that the benefits of its recovery will be recognized. The Company continually reviews the adequacy of our valuation allowance, if any, on our deferred tax assets and recognizes the benefits of deferred tax assets only as the reassessment indicates that it is more likely than not that the deferred tax assets will be recognized in accordance with ASC Topic 740, Income Taxes ("ASC 740"). See Note 13, “Income Taxes” for further discussion.

Earnings Per Share

Basic income (loss) per share is computed on the basis of the weighted average number of common shares outstanding. The Company allocates undistributed net income (loss) from continuing operations between each class of common stock on an equal basis after any allocations for preferred stock dividends in accordance with the terms of the Company’s third amended and restated certificate of incorporation, as amended (the “amended and restated certificate of incorporation (the "Charter”)).

Non-vested restricted shares of Class A common stock and Company Warrants (defined below) are considered participating securities for purposes of calculating basic weighted average common shares outstanding in periods in which the Company recorded net income. Diluted earnings per share is computed in the same manner as basic earnings per share after assuming the issuance of common stock for all potentially dilutive equivalent shares, which includes stock options and certain other outstanding warrants to purchase common stock. Antidilutive instruments are not considered in this calculation. Under the two-class method, net income is allocated to common stock and participating securities to the extent that each security may share in earnings, as if all of the earnings for the period had been distributed. Earnings are allocated to each participating security and common share equally, after deducting dividends declared or accreted on preferred stock.

Fair Values of Financial Instruments

The carrying values of cash equivalents, restricted cash, accounts receivables, accounts payable, trade payables and receivables and accrued expenses approximate fair value because of the short term to maturity of these instruments (See Note 10, "Fair Value Measurements").

Accounting for National Advertising Agency Contract

The Company has engaged Katz Media Group, Inc. (“Katz”) as its national advertising sales agent. The Company’s contract with Katz has several economic elements that principally reduce the overall expected commission rate below the stated base rate. The Company estimates the overall expected commission rate over the entire contract period and applies that rate to commissionable revenue throughout the contract period with the goal of estimating and recording a stable commission rate over the life of the contract.

The potential commission adjustments are estimated and combined in the Consolidated Balance Sheets with the contractual termination liability. That liability is accreted to commission expense to effectuate the stable commission rate over the term of the contract. Over the term of the contract with Katz, management updates its assessment of the effective commission expense attributable to national sales in an effort to record a consistent commission rate in each period.

The Company’s accounting for and calculation of commission expense to be realized over the life of the Katz contract requires management to make estimates and judgments that affect reported amounts of commission expense in each period. Actual results may differ from management’s estimates.

Variable Interest Entities

The Company accounted for entities qualifying as variable interest entities (“VIEs”) in accordance with ASC Topic 810, Consolidation (“ASC 810”). VIEs are required to be consolidated by the primary beneficiary. The primary beneficiary is the entity that holds the majority of the beneficial interests in the VIE. A VIE is an entity for which the primary beneficiary’s interest in the entity can change with changes in factors other than the amount of investment in the entity. From time to time, the Company enters into an LMA in connection with pending acquisitions or dispositions of radio stations and the requirements of ASC 810 may apply, depending on the facts and circumstances related to each transaction.

Supplemental Cash Flow Information

The following summarizes supplemental cash flow information to be read in conjunction with the Consolidated Statements of Cash Flows for the Successor Company period from June 4, 2018 through December 31, 2018, the Predecessor Company period from January 1, 2018 through June 3, 2018, the Predecessor Company year ended December 31, 2017 and the Predecessor Company year ended December 31, 2016:



	Successor Company		Predecessor Company
	Period from June 4, 2018 through December 31,		Period from January 1, 2018 through June 3,			Year Ended December 31,		Year Ended December 31,
	2018		2018			2017		2016
Supplemental disclosures of cash flow information:
Interest paid	$	49,785	$	—		$	96,225	$	126,515
Income taxes paid	7,266		1,992			3,781		4,451

Supplemental disclosures of non-cash flow information:
Trade revenue	$	26,516	$	18,973		$	40,080	$	37,691
Trade expense	27,098		17,964			38,633		36,158
Transfer of deposit from escrow - WKQX acquisition	4,750		—			—		—
Transfer of deposit from escrow - Los Angeles land and building sale	—		—			—		6,000
Transfer of property and equipment from assets held for sale	—		—			30,150		—

Supplemental disclosures of non-cash reorganization items impact on changes in assets and liabilities:
Accounts receivable	$	—	$	(11	)	$	—	$	—
Prepaid expenses and other current assets	—		21,077			—		—
Property and equipment	—		(121,732		)	—		—
Other intangible assets, goodwill and other assets	—		283,217			—		—
Accounts payable, accrued expenses and other liabilities	—		(36,415		)	—		—
Cancellation of 7.75% Senior Notes	—		(610,000		)	—		—
Cancellation of Predecessor Company Term Loan	—		(1,684,407		)	—		—
Issuance of Successor Company Term Loan	—		1,300,000			—		—
Cancellation of Predecessor Company stockholders' equity	—		649,620			—		—
Issuance of Successor Company stockholders' equity	—		(325,000		)	—		—

Reconciliation of cash and cash equivalents and restricted cash to the Consolidated Balance Sheet:
Cash and cash equivalents	$	27,584	$	50,046		$	102,891	$	131,259
Restricted cash	2,454		38,305			8,999		8,025
Total cash and cash equivalents and restricted cash	$	30,038	$	88,351		$	111,890	$	139,284

Adoption of New Accounting Standards

ASU 2014-09 and related updates - Revenue from Contracts with Customers (“ASU 2014-09”) or (“ASC 606”). On January 1, 2018, the Company adopted ASC 606, which is a comprehensive new revenue recognition model that requires revenue to be recognized in a manner to depict the transfer of goods or services and satisfaction of performance obligations to a customer at an amount that reflects the consideration expected to be received in exchange for those goods or services. The Company applied the modified retrospective method to contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018, are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported under the previous accounting standards. There was not a material impact to revenues as a result of the recognition of revenue in accordance with ASC 606 for the year ended December 31, 2018, and there have not been significant changes to the Company's business processes, systems, or internal controls as a result of implementing the standard. As of December 31, 2018, the Company recorded an asset of approximately $6.5 million related to the unamortized portion of commission expense on new local direct revenue. See Note 4, “Revenues” for further details.

ASU 2016-01 - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). In January 2016, the FASB issued ASU 2016-01 which enhances the reporting model for financial instruments including aspects of recognition, measurement, presentation and disclosure. This ASU revises the accounting requirements related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. This ASU also changes certain disclosure requirements associated with the fair value of financial instruments. These changes require an entity to measure, at fair value, investments in equity securities and other ownership interests in an entity - including investments in partnerships, unincorporated joint ventures and limited liability companies that do not result in consolidation and are not accounted for under the equity method - and recognize the changes in fair value within net income. ASU 2016-01 is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. In February 2018, the FASB issued ASU 2018-03 - Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2018-03”) which provides an option for a company to “un-elect” the measurement alternative and elect to account for the changes in the fair value of investments through current earnings for certain equity investments that do not have readily determinable fair values as well. However, once a company makes this election for a particular investment, it must apply the fair value through current earnings model to all identical investments and/or similar investments from the same issuer. Further, a company cannot elect the measurement alternative for future purchases of identical or similar investments of the same issuer. However, the Company had no financial assets and/or liabilities that fell within the requirements of this update during the 2018 fiscal year, therefore there was no impact to the Consolidated Financial Statements. The Company will adopt ASU 2018-03 on a prospective basis and un-elect the measurement alternative if applicable.

ASU 2016-15 - Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). In August 2016, the FASB issued ASU 2016-15 which provides guidance for several new and/or revised disclosures pertaining to the classification of certain cash receipts and cash payments on the statement of cash flows, including contingent consideration payments made after a business acquisition. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. The Company adopted ASU 2016-15 as of January 1, 2018 and there was no impact to the Consolidated Financial Statements.

ASU 2016-18 - Restricted Cash (“ASU 2016-18”). In November 2016, the FASB issued ASU 2016-18 which provides guidance for the accounting for the disclosure of restricted cash on the statement of cash flows. ASU 2016-18 is effective for fiscal years beginning after December 15, 2017, and interim periods thereafter. The Company adopted ASU 2016-18 as of January 1, 2018. Upon adoption of ASU 2016-18 on January 1, 2018, the Company included restricted cash balances along with cash and cash equivalents as of the end of the period and beginning of the period, respectively, in its Consolidated Cash Flows for all periods presented. Additionally, separate line items showing changes in restricted cash balances have been eliminated from the Consolidated Statement of Cash Flows. The Predecessor Company held $9 million and $8 million in restricted cash as of December 31, 2017 and December 31, 2016, respectively.

ASU 2017-01 - Clarifying the Definition of a Business (“ASU 2017-01”). In January 2017, the FASB issued guidance that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The new standard is effective for fiscal years, and interim periods within fiscal years, beginning after December 15, 2017. The Company adopted ASU 2017-01 as of January 1, 2018 on a prospective basis and there was no material impact to the Consolidated Financial Statements.

ASU 2017-09 - Scope of Modification Accounting (“ASU 2017-09”). In May 2017, the FASB issued an update to guidance on Topic 718, Compensation—Stock Compensation that clarifies when changes to the terms or conditions of a share-based award must be accounted for as a modification. Under the new guidance, modification accounting is required only if the fair value, the vesting conditions, or the classification of the award, as equity or liability, changes as a result of the change in terms or conditions. ASU 2017- 09 is effective for annual periods, and interim periods within annual periods, beginning after December 15, 2017. The Company adopted ASU 2017-09 as of January 1, 2018 on a prospective basis and there was no material impact to the Consolidated Financial Statements.

ASU 2018-02 - Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other

Comprehensive Income (“ASU 2018-02”). In February 2018, the FASB issued ASU 2018-02 which provides the option to reclassify stranded tax effects related to the U.S. Tax Cuts and Jobs Act of 2017 (“Tax Act”) in accumulated other comprehensive income to retained earnings. The adjustment relates to the change in the U.S. corporate income tax rate. The adoption of this ASU did not impact the Company's Consolidated Financial Statements.

Recent Accounting Standards Updates

ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”). In June 2016, the FASB issued ASU 2016-13 which requires entities to estimate loss of financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The standard is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its Consolidated Financial Statements.

ASU 2016-02 - Leases (“ASU 2016-02”). In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-02, which provides updated guidance for the accounting for leases. This update requires lessees to recognize assets and liabilities for the rights and obligations created by leases with a term longer than one year. Leases will be classified as either financing or operating, thereby impacting the pattern of expense recognition in the statement of operations. In July 2018, the FASB issued ASU 2018-10 - Codification Improvements to Topic 842, Leases (“ASU 2018-10”) and ASU 2018-11 - Targeted Improvements (“ASU 2018-11”), which provides technical corrections and clarification to ASU 2016-02. ASU 2016-02 and amendments ASU 2018-10 and ASU 2018-11 will be effective for fiscal years beginning after December 15, 2018, and interim periods thereafter. Early adoption is permitted. The standard permits two approaches, one requiring retrospective application of the new guidance with restatement of prior years, and one requiring prospective application of the new guidance. The Company anticipates adopting this standard on January 1, 2019 using a modified retrospective approach and electing the practical expedients allowed under the standard. The Company is in the process of aggregating and evaluating lease arrangements, implementing new controls and processes, and implementing a lease accounting system. Based on a preliminary assessment, the Company expects most of its operating lease commitments will be subject to the new guidance and recognized as operating lease liabilities and right-of-use assets upon adoption. The impact to the Company’s balance sheet is estimated to result in a 7% to 11% and 9% to 13% increase in assets and liabilities respectively. The impact on the Company's results of operations and cash flows is not expected to be material.

ASU 2018-07 - Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting (“ASU 2018-07”). The standard aligns the accounting for share-based payment awards issued to employees and non- employees. Changes to the accounting for non-employee awards include: (1) equity-classified share-based payment awards issued to non-employees will now be measured on the grant date, instead of the previous requirement to re-measure the awards through the performance completion date; (2) for performance conditions, compensation cost associated with the award will be recognized when achievement of the performance condition is probable, rather than upon achievement of the performance condition; and (3) the current requirement to reassess the classification (equity or liability) for nonemployee awards upon vesting will be eliminated, except for awards in the form of convertible instruments. The guidance should be applied to all new awards granted after the date of adoption. In addition, the modified retrospective approach should be used on all liability-classified awards that have not been settled and equity- classified awards for which a measurement date has not been established by the adoption date by re-measurement at fair value as of the adoption date with a cumulative effect adjustment to opening retained earnings in the fiscal year of adoption. The standard is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than an entity’s adoption of ASC 606. The Company is currently evaluating the impact of adopting ASU 2018-07 on its Consolidated Financial Statements.

ASU 2018-13 - Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). In August 2018, the FASB issued ASU 2018-13, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. The update eliminates the following disclosure requirements for all entities: the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the entity’s policy for the timing of transfers between levels of the fair value hierarchy, and the entity’s valuation processes for Level 3 fair value measurements. ASU 2018-13 adds the following disclosure requirements: the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements of instruments held at the end of the reporting period and for recurring and nonrecurring Level 3 fair value measurements, the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated. ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019, and interim periods thereafter. Early adoption is permitted for any removed or modified disclosures. The Company is currently evaluating the impact of adopting ASU 2016-13 on its Consolidated Financial Statements.