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SHARE-BASED COMPENSATION (Block)
 12 Months Ended
Dec. 31, 2012
Disclosure Of Compensation Related Costs Sharebased Payments Abstract  
Disclosure Of Compensation Related Costs Share Based Payments Text Block

11.       SHARE-BASED COMPENSATION

Equity Compensation Plan

 

       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. On January 1, 2012, the shares available for grant automatically increased by 1.5 million to 4.2 million shares. The Board of Directors elected to forego an increase on January 1, 2013.

 

       The Plan includes certain performance criteria for purposes of satisfying expense deduction requirements for income tax purposes. A sub-limit for RSUs was removed by shareholder vote at the Company's May 2011 shareholders' meeting.

 

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 Company estimates the fair value of option awards on the date of grant using an option-pricing model. 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.

 

       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. Estimated forfeitures are revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

 

RSU Activity

       

The following table presents for the periods indicated: (1) RSUs issued, net of forfeitures; (2) the increase (decrease) to paid-in capital over the vesting period of the RSUs; (3) the number of RSUs that were both vested and released; and (4) the unamortized compensation expense, net of forfeitures, related to unvested RSUs:        

  Years Ended December 31,
  2012 2011 2010
  Shares Amount Shares Amount Shares Amount
  (amounts in thousands)
                   
RSUs issued   307 $ 2,133   445 $ 4,721   1,024 $ 11,361
RSUs forfeited   (26)   (235)   (28)   (474)   (85)   (1,242)
Net RSUs issued and increase                  
(decrease) to paid-in capital   281 $ 1,898   417 $ 4,247   939 $ 10,119
                   
RSUs vested and released   659      886      527   

The following is a summary of the changes in RSUs under the Plan during the current period:

 

    Number    Weighted Aggregate
    Of Weighted Average Intrinsic
    Restricted  Average Remaining Value As Of
    Stock Purchase Contractual December 31,
 Period Ended  Units Price Term (Years) 2012
             
RSUs outstanding as of: December 31, 2011   1,860,577        
RSUs awarded    306,556        
RSUs released    (659,381)        
RSUs forfeited    (26,484)        
RSUs outstanding as of: December 31, 2012   1,481,268 $ - 1.1 $ 10,339,251
RSUs vested and expected            
to vest as of:December 31, 2012   1,388,230 $ - 1.1 $ 9,082,613
RSUs exercisable (vested and             
deferred) as of:December 31, 2012   86,996 $ - 0.0 $ 607,232
Weighted average remaining             
recognition period in years   1.9        
Unamortized compensation             
expense, net of estimated           
forfeitures  $ 5,714,641        

RSUs With Service And Market Conditions

 

During the fourth quarter of 2010, the Company issued RSUs with service and market conditions where these shares vest upon the performance of the Company's stock over a defined measurement period. The market condition allows for vesting of portions of the award if certain shareholder performance targets are met. 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 fulfilled.

The following table presents certain information for RSUs with market conditions for the periods indicated:

   Years Ended December 31,
   2012 2011 2010
   (amounts in thousands, except years)
    
RSUs Granted With Market Conditions          
 Number of RSUs issued    -    -   300
 Fair value of RSUs issued  $ -  $ - $ 3,219
 Amortization period of grant in years    -    -  1.6 to 2.0
            
Reconciliation Of RSUs With Market Conditions          
 Beginning of period balance   300    300   113
 Number of RSUs granted   -    -   300
 Number of RSUs forfeited    -    -   (57)
 Number of RSUs vested   (100)    -   (56)
 End of period balance   200    300   300

Valuation Of RSUs

 

The fair value of RSUs with service conditions is estimated based on the market value 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 Company made assumptions with respect to the following when applying the Monte Carlo simulation model:

 

Expected Volatility Term Structure - The Company estimated the volatility term structure using: (1) the historical volatility of its stock; and (2) the implied volatility provided by its traded options from a trailing month's average of the closing bid-ask price quotes.

 

Risk-Free Interest Rate - The Company estimated the risk-free interest rate based upon the implied yield available on U.S. Treasury issues using Treasury bond rate as of the date of grant.

 

Expected Dividend Yield - The Company calculated the expected dividend yield at the time of grant based upon the Company's most recent history and the Company's stock price on the date of grant.

 

The specific assumptions used for this valuation are as follows:

 

 Year Ended
 December 31,
 2010
  
Expected Volatility Structure59% to 78%
Risk Free Interest Rate0.1% to 1.1%
Expected Dividend Yield0.0%

Options

 

Option Activity

 

       The following table

  Years Ended December 31,
Other Option Disclosures 2012 2011 2010
   
  From To From To From To
Exercise price range of options issued $ - $ - $ - $ - $ 12.08 $ 12.08
Upon vesting, period to exercise   -   -   -   -   1   10
Fair value per option issued $ -    $ -    $ 7.84   
                   
  (amounts in thousands)
                   
Intrinsic value of options exercised $ 508    $ 528    $ 899   
Tax benefit from options exercised, before                   
impact of valuation allowance $ 192    $ 209    $ 355   
Cash received from exercise price of                  
options exercised $ 135    $ 71    $ 130   
Number of options issued   -      -      3   

The following table presents the option activity during the current year ended under the Plan:

         Weighted Intrinsic
      Weighted Average Value
      Average Remaining As Of
   Number Of Exercise Contractual December 31,
 Period Ended Options Price Term (Years) 2012
             
Options outstanding as of:December 31, 2011   876,025 $ 2.84     
Options granted    -        
Options exercised    (101,350)   1.34     
Options forfeited    (12,500)   2.41     
Options expired    (22,375)   25.23     
Options outstanding as of:December 31, 2012   739,800 $ 2.38 6.0 $ 3,868,897
             
Options vested and expected to vest as of:December 31, 2012   737,780 $ 2.38 6.0 $ 3,858,687
Options vested and exercisable as of:December 31, 2012   516,239 $ 2.79 6.0 $ 2,628,917
Weighted average remaining            
recognition period in years   0.1        
Unamortized compensation expense,            
net of estimated forfeitures  $ 32,617        

       The following table summarizes significant ranges of outstanding and exercisable options as of the current period:

      Options Outstanding Options Exercisable
      Number Of  Weighted     Number Of    
      Options Average Weighted  Options Weighted
      Outstanding Remaining  Average Exercisable  Average
      December 31, Contractual Exercise December 31, Exercise
Exercise Prices 2012 Life Price 2012 Price
$ 1.34 $ 1.34  680,800  6.1 $ 1.34  462,239 $ 1.34
$ 2.02 $ 6.62  20,000  6.8 $ 5.52  15,000 $ 5.52
$ 10.90 $ 11.69  20,500  5.0 $ 11.46  20,500 $ 11.46
$ 11.78 $ 48.21  18,500  3.1 $ 27.24  18,500 $ 27.24
$ 1.34 $ 48.21  739,800  6.0 $ 2.38  516,239 $ 2.79

 Option Valuation Estimates
 Years Ended December 31,
 2012 2011 2010
Expected life (years) no options issued  no options issued 6.3
Expected volatility factor (%)  69.2%
Risk-free interest rate (%)  3.0%
Expected dividend yield (%)  0.0%

        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: (1) the term by using the simplified plain-vanilla method as the Company's employee exercise history may not be indicative for estimating future exercises ; (2) a historical volatility over a period commensurate with the expected term, with the observation of the volatility on a daily basis; (3) 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 (4) an annual dividend yield based upon the Company's most recent quarterly dividend at the time of grant.

 

Recognized Non-Cash Compensation Expense

 

       Stock-based compensation expense consisted primarily of RSU awards. The following summarizes recognized stock-based compensation expense included in the Company's line item expense for awards:

 Years Ended December 31,
 2012 2011 2010
  (amounts in thousands)
         
Station operating expenses$ 584 $ 776 $ 1,357
Corporate general and administrative expenses  5,170   6,895   4,171
Stock-based compensation expense included in operating expenses  5,754   7,671   5,528
Income tax benefit before an valuation allowance  1,540   2,107   1,762
Net stock-based compensation expense$ 4,214 $ 5,564 $ 3,766