UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 26, 2018 (September 21, 2018)
ENTERCOM COMMUNICATIONS CORP.
(Exact Name of Registrant as Specified in Charter)
Pennsylvania | 001-14461 | 23-1701044 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
401 E. City Avenue, Suite 809 Bala Cynwyd, Pennsylvania |
19004 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants Telephone Number, Including Area Code: (610) 660-5610
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 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 13(a) of the Exchange Act. ☐
Item 2.01. | Completion of Acquisition or Disposition of Assets |
On September 21, 2018, Entercom Communications Corp. (the Company) completed the previously announced sale of four radio stations in San Francisco, California and four radio stations in Sacramento, California to Bonneville International Corporation (Bonneville), pursuant to the Asset Purchase Agreement, dated as of August 2, 2018, by and between the Company, TDC Communications, LLC as trustee of The Entercom Divestiture Trust, and Bonneville, for $141 million in cash. The stations sold in the transaction are as follows:
Market | Station | Format | ||
San Francisco | KMVQ-FM | Top 40 | ||
San Francisco | KBLX-FM | Urban Adult Contemporary | ||
San Francisco | KOIT-FM | Adult Contemporary | ||
San Francisco | KUFX-FM | Classic Rock | ||
Sacramento | KHTK-AM | Sports | ||
Sacramento | KNCI-FM | Country | ||
Sacramento | KYMX-FM | Adult Contemporary | ||
Sacramento | KZZO-FM | Hot Adult Contemporary |
These stations have been held in an FCC disposition trust and have been operated by Bonneville under local marketing agreements since the closing of the Companys merger with CBS Radio, Inc.
Item 9.01. | Financial Statements and Exhibits |
(b) Pro forma financial information
The unaudited pro forma condensed consolidated balance sheet as of June 30, 2018, the unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2018 and the year ended December 31, 2017, and the related notes are attached hereto as Exhibit 99.1 and incorporated herein by reference.
(d) Exhibits
Exhibit No. |
Title | |
99.1 | Unaudited Pro Forma Condensed Consolidated Financial Statements of Entercom Communications Corp. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Entercom Communications Corp. | ||||||
By: | /s/ Andrew P. Sutor, IV | |||||
Name: Andrew P. Sutor, IV | ||||||
Title: Executive Vice President and Secretary |
Dated: September 26, 2018
Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On November 17, 2017, Entercom Communications Corp. (the Company or Entercom) completed its previously announced acquisition of the CBS Radio business from CBS pursuant to the Merger Agreement dated February 2, 2017, by and among the Company, CBS Corporation, its wholly-owned subsidiary CBS Radio Inc. (CBS Radio), and Merger Sub, a wholly-owned subsidiary of the Company (the Merger).
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 Commissions (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 radio stations in such markets, consisting of eight radio stations owned by the Company and eleven radio stations owned by CBS Radio by entering into several binding and non-binding transactions with third parties in order to dispose of or exchange multiple radio stations in several markets.
One of the required divestiture arrangements included the entry into the local marketing agreements (LMAs) with Bonneville International Corporation (Bonneville), where on November 1, 2017, the Company assigned assets of eight radio stations to a trust and the trust subsequently entered into two LMAs with Bonneville. The LMAs, which were effective upon the closing of the Merger, allowed Bonneville to operate eight radio stations in the San Francisco and Sacramento, California markets. The LMAs will terminate upon the earlier of: (i) one year after the Merger date; or (ii) consummation of a final agreement to divest the eight radio stations as required under a DOJ consent order agreed to by the Company, as a condition to complete the Merger (the Entercom Divestitures). Of the eight radio stations operated by Bonneville, three were originally owned by the Company (the Entercom Stations) and the remaining five were originally owned by CBS Radio (the CBS Radio Stations).
The eight radio stations were sold on September 21, 2018 for $141.0 million total consideration in cash, net of fees associated with the sale of $1.0 million.
The Company determined that the assets of the eight radio stations under LMA with Bonneville satisfied the criteria to be presented as assets held for sale at June 30, 2018.
Amounts of net revenues, station operating expenses, depreciation and amortization for the periods from November 17, 2017 through December 31, 2017 and from January 1, 2018 to June 30, 2018 (the LMA Periods) are not included in Entercoms consolidated statement of operations. The LMA income earned from Bonnevilles operation of the Entercoms Stations during the LMA Periods is separately presented as part of net time brokerage agreement income in operating income. The LMA income earned from Bonnevilles operation of the CBS Radio Stations during the LMA Periods is presented as part of income from discontinued operations as the CBS Radio stations were never, and were never expected to be, operated by Entercom.
The following unaudited pro forma condensed consolidated financial statements give effect to the planned Entercom Divestitures. The unaudited pro forma condensed consolidated statements of operations are presented as if the Entercom Station divestiture occurred on January 1, 2017 and CBS Radio Station divestiture occurred upon the Merger or November 17, 2017. The unaudited pro forma condensed consolidated balance sheet is presented as if the Entercom Divestitures occurred on June 30, 2018. The unaudited pro forma condensed consolidated financial statements are derived from Entercoms historical consolidated financial statements as of and for the year ended December 31, 2017 and the six months ended June 30, 2018.
The preparation of unaudited pro forma condensed consolidated financial statements requires Entercoms management to make estimates and assumptions, which are described in the accompanying notes and that affect the amounts reported in such financial statements and the notes thereto. These unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not necessarily reflect the operating results or financial position that would have occurred if the Entercom Divestitures had been consummated on the dates indicated, nor is it necessarily indicative of the results of operations or financial condition that may be expected for any future period or date. Accordingly, such information should not be relied upon as an indicator of future performance, financial condition or liquidity.
These unaudited pro forma condensed consolidated financial statements and the notes thereto should be read together with Entercoms audited consolidated financial statements and the notes thereto contained in Entercoms annual report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (SEC) on March 16, 2018 and unaudited condensed consolidated financial statements and the notes thereto contained in Entercoms quarterly report on Form 10-Q for the three and six months ended June 30, 2018 filed with the SEC on August 9, 2018.
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of June 30, 2018
(amounts in thousands)
Divestiture | ||||||||||||||||
Pro Forma | Entercom | |||||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||||||
ASSETS: |
||||||||||||||||
Cash |
$ | 39,926 | $ | 140,987 | (a) | $ | 180,913 | |||||||||
Accounts receivable, net of allowance for doubtful accounts |
303,161 | | 303,161 | |||||||||||||
Prepaid expenses, deposits and other |
42,074 | (1,012 | ) | (b) | 41,062 | |||||||||||
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|
|
|
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Total current assets |
385,161 | 139,975 | 525,136 | |||||||||||||
Investments |
11,205 | | 11,205 | |||||||||||||
Net property and equipment |
324,669 | | 324,669 | |||||||||||||
Radio broadcasting licenses |
2,662,042 | | 2,662,042 | |||||||||||||
Goodwill |
857,931 | | 857,931 | |||||||||||||
Assets held for sale |
209,828 | (140,300 | ) | (c) | 69,528 | |||||||||||
Deferred charges and other assets, net of accumulated amortization |
55,594 | | 55,594 | |||||||||||||
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|
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|
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TOTAL ASSETS |
$ | 4,506,430 | $ | (325 | ) | $ | 4,506,105 | |||||||||
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|
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LIABILITIES: |
||||||||||||||||
Accounts payable |
$ | 2,057 | $ | | $ | 2,057 | ||||||||||
Accrued expenses |
62,755 | 19,713 | (d) | 82,468 | ||||||||||||
Other current liabilities |
102,480 | | 102,480 | |||||||||||||
Long-term debt, current portion |
13,319 | | 13,319 | |||||||||||||
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|
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Total current liabilities |
180,611 | 19,713 | 200,324 | |||||||||||||
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|
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Long-term debt, net of current portion |
1,915,414 | | 1,915,414 | |||||||||||||
Deferred tax liabilities |
604,785 | (19,985 | ) | (e) | 584,800 | |||||||||||
Other long-term liabilities |
94,134 | 700 | (f) | 94,834 | ||||||||||||
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Total long-term liabilities |
2,614,333 | (19,285 | ) | 2,595,048 | ||||||||||||
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Total liabilities |
2,794,944 | 428 | 2,795,372 | |||||||||||||
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CONTINGENCIES AND COMMITMENTS |
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SHAREHOLDERS EQUITY: |
||||||||||||||||
Class A, B and C common stock |
1,425 | | 1,425 | |||||||||||||
Additional paid-in capital |
1,695,707 | | 1,695,707 | |||||||||||||
Retained earnings |
14,354 | (753 | ) | (g) | 13,601 | |||||||||||
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Total shareholders equity |
1,711,486 | (753 | ) | 1,710,733 | ||||||||||||
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TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 4,506,430 | $ | (325 | ) | $ | 4,506,105 | |||||||||
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See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2018
(amounts in thousands, except share and per share data)
Divestiture | ||||||||||||||
Pro Forma | Entercom | |||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||||
NET REVENUES |
$ | 672,684 | $ | | $ | 672,684 | ||||||||
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OPERATING EXPENSE: |
||||||||||||||
Station operating expenses |
531,563 | | 531,563 | |||||||||||
Depreciation and amortization expense |
19,137 | | 19,137 | |||||||||||
Corporate general and administrative expenses |
37,701 | (360 | ) | (h) | 37,341 | |||||||||
Integration costs |
19,223 | | 19,223 | |||||||||||
Restructuring charges |
2,167 | | 2,167 | |||||||||||
Impairment loss |
28,988 | | 28,988 | |||||||||||
Merger and acquisition costs |
2,071 | | 2,071 | |||||||||||
Net time brokerage agreement (income) fees |
(1,092 | ) | 1,092 | (i) | | |||||||||
Net (gain) loss on sale or disposal of assets |
(315 | ) | | (315 | ) | |||||||||
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Total operating expense |
639,443 | 732 | 640,175 | |||||||||||
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OPERATING INCOME |
33,241 | (732 | ) | 32,509 | ||||||||||
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NET INTEREST EXPENSE |
49,110 | 49,110 | ||||||||||||
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LOSS BEFORE INCOME TAX BENEFIT |
(15,869 | ) | (732 | ) | (16,601 | ) | ||||||||
INCOME TAX BENEFIT |
(3,260 | ) | (194 | ) | (j) | (3,454 | ) | |||||||
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERSCONTINUING OPERATIONS |
(12,609 | ) | (538 | ) | (13,147 | ) | ||||||||
Income from discontinued operations, net of income taxes |
1,172 | (1,172 | ) | (k) | | |||||||||
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
$ | (11,437 | ) | $ | (1,710 | ) | $ | (13,147 | ) | |||||
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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHAREBASIC |
||||||||||||||
Net loss from continuing operations per share available to common shareholdersBasic |
$ | (0.09 | ) | $ | (0.09 | ) | ||||||||
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Net income from discontinued operations per share available to common shareholdersBasic |
$ | 0.01 | $ | | ||||||||||
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERS PER SHAREBASIC |
$ | (0.08 | ) | $ | (0.09 | ) | ||||||||
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NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS PER SHAREDILUTED |
||||||||||||||
Net loss from continuing operations per share available to common shareholdersDiluted |
$ | (0.09 | ) | $ | (0.09 | ) | ||||||||
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Net income from discontinued operations per share available to common shareholdersDiluted |
$ | 0.01 | $ | | ||||||||||
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NET LOSS AVAILABLE TO COMMON SHAREHOLDERS PER SHAREDILUTED |
$ | (0.08 | ) | $ | (0.09 | ) | ||||||||
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WEIGHTED AVERAGE SHARES: |
||||||||||||||
Basic |
138,961,728 | 138,961,728 | ||||||||||||
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Diluted |
138,961,728 | 138,961,728 | ||||||||||||
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See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
ENTERCOM COMMUNICATIONS CORP.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2017
(amounts in thousands, except share and per share data)
Divestiture | ||||||||||||||
Pro Forma | Entercom | |||||||||||||
Historical | Adjustments | Pro Forma | ||||||||||||
NET REVENUES |
$ | 592,884 | $ | (16,051 | ) | (l) | $ | 576,833 | ||||||
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OPERATING EXPENSE: |
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Station operating expenses |
443,512 | (12,889 | ) | (l) | 430,623 | |||||||||
Depreciation and amortization expense |
15,546 | (203 | ) | (l) | 15,343 | |||||||||
Corporate general and administrative expenses |
47,859 | (414 | ) | (h) | 47,445 | |||||||||
Restructuring charges and transition services costs |
16,922 | (85 | ) | (l) | 16,837 | |||||||||
Impairment loss |
952 | | 952 | |||||||||||
Merger and acquisition costs |
41,313 | | 41,313 | |||||||||||
Other expenses related to financing |
2,213 | | 2,213 | |||||||||||
Net time brokerage agreement (income) fees |
130 | 391 | (i) | 521 | ||||||||||
Net loss on sale or disposal of assets |
11,853 | | 11,853 | |||||||||||
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Total operating expense |
580,300 | (13,200 | ) | 567,100 | ||||||||||
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OPERATING INCOME |
12,584 | (2,851 | ) | 9,733 | ||||||||||
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NET INTEREST EXPENSE |
32,521 | | 32,521 | |||||||||||
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Net loss on extinguishment of debt |
4,135 | | 4,135 | |||||||||||
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OTHER EXPENSE |
4,135 | | 4,135 | |||||||||||
LOSS BEFORE INCOME TAX BENEFIT |
(24,072 | ) | (2,851 | ) | (26,923 | ) | ||||||||
INCOME TAX BENEFIT |
(257,085 | ) | (1,126 | ) | (j) | (258,211 | ) | |||||||
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NET INCOME AVAILABLE TO THE COMPANYCONTINUING OPERATIONS |
233,013 | (1,725 | ) | 231,288 | ||||||||||
Preferred stock dividend |
(2,015 | ) | | (2,015 | ) | |||||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERSCONTINUING OPERATIONS |
230,998 | (1,725 | ) | 229,273 | ||||||||||
Income from discontinued operations, net of income taxes |
836 | (392 | ) | (k) | 444 | |||||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
$ | 231,834 | $ | (2,117 | ) | $ | 229,717 | |||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS PER SHAREBASIC |
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Net income from continuing operations per share available to common shareholdersBasic |
$ | 4.49 | $ | 4.46 | ||||||||||
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Net income from discontinued operations per share available to common shareholdersBasic |
$ | 0.02 | $ | 0.01 | ||||||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS PER SHAREBASIC |
$ | 4.51 | $ | 4.47 | ||||||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS PER SHAREDILUTED |
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Net income from continuing operations per share available to common shareholdersDiluted |
$ | 4.37 | $ | 4.34 | ||||||||||
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Net income from discontinued operations per share available to common shareholdersDiluted |
$ | 0.02 | $ | 0.01 | ||||||||||
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NET INCOME AVAILABLE TO COMMON SHAREHOLDERS PER SHAREDILUTED |
$ | 4.39 | $ | 4.35 | ||||||||||
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WEIGHTED AVERAGE SHARES: |
||||||||||||||
Basic |
51,392,899 | 51,392,899 | ||||||||||||
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Diluted |
52,885,156 | 52,885,156 | ||||||||||||
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See the accompanying notes to the unaudited pro forma condensed consolidated financial statements.
ENTERCOM COMMUNICATIONS CORP.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated balance sheet and the unaudited pro forma condensed consolidated statements of operations includes the following adjustments:
(a) | Represents the proceeds attributable to the Entercom Divestitures of $141.0 million and $1.0 million cash deposit receivable from the trust, less the fees associated with the sale of the eight radio stations of approximately $1.0 million. |
(b) | Represents the elimination of $1.0 million receivable from the trust. |
(c) | Represents the elimination of Entercom Stations and CBS Radio Stations assets assigned to the trust and classified as held for sale at June 30, 2018. |
(d) | Represents the federal and state income tax payable of $19.7 million resulting from the estimated taxable gain on the Entercom Divestitures of $74.4 million, using an applicable blended statutory tax rate of 26.5%. |
(e) | Represents the elimination of deferred tax liabilities of $20.0 million associated with Entercom Stations and CBS Radio Stations assets held for sale and deferred revenue determined by using applicable blended statutory tax rate of 26.5%. |
(f) | Represents the addition of deferred revenue of $0.7 million associated with the Entercom Divestitures. |
(g) | Represents the elimination of the estimated book loss on the Entercom Divestitures of $1.0 million, net of an estimated income tax benefit on the taxable loss on the Entercom Divestitures of $0.3 million. |
(h) | Represents the elimination of $0.4 million of trust operating expenses for each of the six months ended June 30, 2018 and the year ended December 31, 2017, respectively. |
(i) | Represents the elimination of the historical LMA income from Bonneville for the LMA Periods earned by the Entercom Stations. |
(j) | Reflects the aggregate pro forma income tax effects of the adjustments to the pro forma statement of operations, determined based on the pro forma blended statutory tax rates of 26.5% and 39.5% for the six months ended June 30, 2018 and the year ended December 31, 2017, respectively. |
(k) | Represents the elimination of the historical LMA income from Bonneville for the LMA Periods earned by the CBS Radio Stations, net of applicable income tax. The results of operations for the CBS Radio Stations, which were never expected to be a part of the Companys continuing operations as these radio stations were expected to be disposed, were classified as discontinued operations for the LMA Periods commencing after the Merger. |
(l) | Represents the elimination of historical amounts attributable to the Entercom Stations for the period from January 1, 2017 to November 17, 2017. |