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Acquisition | 6 Months Ended
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Jun. 30, 2011
Business Combinations Abstract |
Mergers Acquisitions And Dispositions Disclosures Text Block | 18. ACQUISITIONS, DIVESTITURES AND PRO FORMA SUMMARY Acquisitio n During The Current Period San Jose, California On February 28, 2011, the Company acquired the assets of KUFX-FM, a radio station serving the San Jose, California radio market, for $9.0 million in cash, of which $1.4 million was paid as a deposit in December 2010. The source of the funds used to complete this transaction was as follows: (1) $7.6 million from funds borrowed under the Company's senior bank facility; and (2) $1.4 million from the deposit. In December 2010, the Company entered into an asset purchase agreement and a time brokerage agreement ("TBA") under which the Company commenced operations on January 19, 2011. With the commencement of the TBA, the Company began simulcasting the format of KUFX-FM on KUZX-FM (call letters were formerly KDFC-FM) (one of three radio stations owned and operated by the Company in the San Francisco market), thereby providing a complement to the signal coverage of the KUFX-FM format in the San Francisco metropolitan market. During the period of the TBA, the Company include d net revenues and station operating expenses associated with operating the San Jose station in the Company's consolidated financial statements. As a result of simulcasting the format of KUFX-FM on KUZX-FM, the Company cannot separately identify the net revenues and station operating expenses of KUFX-FM. During the period of the TBA, the Company incurred TBA expense of $0.2 million. Management considered the accounting guidelines for variable interest entities, which require that the primary beneficiary consolidate the entity into its financial statements during the period prior to acquisition. As a result of this review, the Company determined that since the Company was not the primary beneficiary of this entity, the Company did not meet the requirements to include the entity in its consolidated financial statements for the period prior to acquisition. The Company recorded goodwill of $0.7 million on its book s, of which the majority of the amount is fully deductible for income tax purposes. Management believes that this acquisition provides the Company with an opportunity to increase the market share of its San Francisco radio stations. In addition, the proximity of the San Jose radio market to the San Francisco market allows for certain synergies in programming, sales and administration. The Company does not currently own or operate any other radio stations in the San Jose market. For this acquisition, the aggregate purchase price, excluding transaction costs estimated to be less than $0.1 million, was allocated as follows:
Description |  | Amount |  | Useful Lives
|  | (in thousands) |  |
Leasehold improvements | $ | 113 |  | 3.8 to 7.5 years
Furniture and equipment |  | 69 |  | less than 1 year to 3 years
Equipment |  | 463 |  | 3 to 5 years
Total tangible assets |  | 645 |  |
Income agreements |  | 200 |  | 3.8 to 4.6 years
Advertiser lists and customer relationships |  | 161 |  | 3 years
Acquired advertising contracts |  | 59 |  | less than 1 year
Broadcasting licenses |  | 8,050 |  | non-amortizing
Goodwill |  | 723 |  | non-amortizing
Total intangible assets |  | 9,193 |  |
Total assets |  | 9,838 |  |
Unfavorable lease liability |  | (765) |  | 7.5 years
Asset retirement liabilities |  | (73) |  | 3.8 to 7.5 years
Net assets acquired | $ | 9,000 |  |
Acquired Unfavorable Lease Liability In connection with the acquisition of KUFX-FM, the Company acquired an unfavorable lease for studio space in San Jose, California, as the lease terms were significantly above market. The unfavorable lease liability is recorded in other liabilities and has a remaining life of approximately 7.5 years as of the acquisition date. The unfavorable lease liability is amortized on a straight-line basis over the li fe of the lease. Other Merger and Acquisition Costs During the first quarter of 2011, the Company incurred legal and advisory expenses associated with its unsuccessful proposal to acquire a large radio group operator. In connection with the Company's acquisition on February 28, 2011 of KUFX-FM, San Jose, California, the Company assumed a lease for studio space. Upon completion of this transaction, the Company ceased use of the studio space and, as a result, the Company recorded a lease abandonment expense during the first quarter of 2011. Lease abandonment costs include lease liabilities offset by estimated sublease income. As a result of soft rental conditions in the n orthern California real estate market, including a higher than normal vacancy rate 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 during the third quarter of 2018. The lease abandonment liability is discounted using a credit risk adjusted basis using the estimated rental cash flows over the remaining term of the agreement. The following presents the expense recognized in the consolidated statement of income as merger and acquisition costs:
| Six Months Ended
| June 30,
| 2011
| (amounts in thousands)
Merger expenses (legal and advisory expenses) | $ | 767
Lease abandonment expense |  | 775
Merger and acquisition costs | $ | 1,542
Unaudited Pro Forma Summary Of Financial Information The following pro forma information presents the consolidated results of operations as if any acquisition which occurred had occurred as of the beginning of each period presented, after giving effect to certain adjustments, including depreciation and amortization of assets and interest expense on any debt incurred to fund the acquisition, which would have been incurred had such acquisition occurred as of the beginning of the periods presented. 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.
| Six Months Ended
| June 30,
| 2011 |  | 2010
| (amounts in thousands, except per share data)
| Pro Forma |  | Pro Forma
Net revenues | $ | 187,343 |  | $ | 189,043
Net income | $ | 50,052 |  | $ | 19,390
Net income per common share - basic | $ | 1.38 |  | $ | 0.54
Net income per common share - diluted | $ | 1.32 |  | $ | 0.51
| Three Months Ended
| June 30,
| 2011 |  | 2010
| (amounts in thousands, except per share data)
| Pro Forma |  | Pro Forma
Net revenues | $ | 104,650 |  | $ | 107,092
Net income | $ | 49,238 |  | $ | 15,077
Net income per common share - basic | $ | 1.35 |  | $ | 0.42
Net income per common share - diluted | $ | 1.30 |  | $ | 0.40

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