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ACQUISITIONS AND OTHER (Block) | 9 Months Ended
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Sep. 30, 2015
Business Combinations [Abstract] |
Mergers Acquisitions And Dispositions Disclosures Text Block | 9. BUSINESS COMBINATIONS 2015 Acquisition On July 16, 2015, the Company acquired under a Stock Purchase Agreement (“SPA”) with The Lincoln National Life Insurance Company the stock of one of its subsidiaries, Lincoln Financial Media Company (“Lincoln”), which indirectly holds the assets and liabilities of radio stations serving the Atlanta, Denver, Miami and San Diego markets. The purchase price was $105.0 million of which: (1) $77.5 million was paid in cash using $42.0 million in borrowing under the C ompany’s Revolver together with cash on hand; and (2) $27.5 million was paid with the Company’s issuance of new perpetual cumulative convertible preferred stock (“Preferred”). The SPA, originally dated December 7, 2014 and subsequently amended on July 10, 2015, provided for a working capital reimbursement to Lincoln that is estimated to be in the amount of $11.1 million before a working capital credit to the Company of $2.7 million. The SPA provides for a s tep-up in basis for tax purposes. In order to comply with the Federal Communications Commission’s rules and the requirements of the Department Of Justice, the Company agreed to divest three radio stations in Denver. The divestiture of the Denver rad io stations will be provided as consideration by the Company in exchange with another broadcaster for a radio station in Los Angeles. The Company commenced operations of the Los Angeles radio station under a time brokerage agreement (“TBA”) effective July 17, 2015 and the other broadcaster commenced operations of the Denver radio stations on the same date under a TBA with the Company. The Company is including the operating results of the Los Angeles radio station in its statement of operations under net re venue and station operating expenses during the period of the TBA and the Company is not including the results of the Denver radio stations subject to divestiture during the period of the TBA. Once the Company closes on this exchange of radio stations and the TBA period ends, the Company will record both the disposition and the acquisition in its balance sheet. For further discussion, see Note 11. The Company recorded goodwill on its books, which is fully deductible for income tax purposes. Managemen t believes that this acquisition provides the Company with an opportunity to increase its national footprint to compete more effectively for national business and to benefit from certain operational synergies. In addition, as a pure-play radio operator, t his acquisition allows for certain operational synergies in programming, sales and administration that were not available to Lincoln. The following table reflects the aggregate fair value purchase price allocation of these assets and liabilities and is management’s estimate. The following preliminary purchase price allocations are based upon a preliminary valuation of assets and liabilities and the estimates and assumptions are subject to change as the Company obtains additional information during the measurement period, which may be up to one year from the acquisition date. The assets and liabilities pending finalization include the valuation of acquired intangible assets and working capital. Differences between the preliminary and final valuation coul d be substantially different from the initial estimates.
|  |  |  |  | Useful Lives In Years
Description |  | Amount |  | From |  | To
|  | (in thousands) |  |  |  |
Cash |  | $ | 2,246 |  |
Accounts receivable, net of an allowance for bad debt |  |  | 11,908 |  | less than 1 year
Prepaid expenses, deposits and other |  |  | 953 |  | less than 1 year
Total current assets |  |  | 15,107 |  |  |  |
Land |  |  | 7,368 |  | non-depreciating
Land improvements |  |  | 87 |  | 15 |  | 15
Building |  |  | 1,067 |  | 15 |  | 25
Leasehold improvements |  |  | 973 |  | 2 |  | 11
Equipment and towers |  |  | 8,651 |  | 3 |  | 40
Furniture and fixtures |  |  | 29 |  | 5 |  | 5
Total tangible property |  |  | 18,175 |  |  |  |
Assets held for sale |  |  | 1,885 |  |  |  |
Favorable leases |  |  | 24 |  | over remaining lease life
Advertiser lists and customer relationships |  |  | 151 |  | 3 |  | 3
Acquired advertising contracts |  |  | 297 |  | less than 1 year
Trademarks and trade names |  |  | 15 |  | 5 |  | 5
Broadcasting licenses |  |  | 79,209 |  | non-amortizing
Goodwill |  |  | 5,866 |  | non-amortizing
Total intangible assets |  |  | 87,447 |  |  |  |
Total assets |  | $ | 120,729 |  |  |  |
Accounts payable |  | $ | 723 |  | less than 1 year
Accrued expenses |  |  | 3,232 |  | less than 1 year
Other current liabilities |  |  | 12 |  | less than 1 year
Total current liabilities |  |  | 3,967 |  |  |  |
Unfavorable lease liabilities |  |  | 799 |  | over remaining lease life
Unfavorable contract liabilities |  |  | 2,458 |  | over remaining lease life
Asset retirement liabilities |  |  | 15 |  | over remaining lease life
Other long-term liabilities |  |  | 3,272 |  |  |  |
Total liabilities acquired |  | $ | 7,239 |  |  |  |
Net assets acquired |  | $ | 113,490 |  |  |  |
The allocations presented in the table are based upon management’s estimate of the fair values using valuation techniques including income, cost and market approaches. In estimating the fair value of the acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenue and cash flows that assume expected future growth rates of 1.0% to 1.5%; and an estimated discount rate of 9.6%. The gros s profit margins are similar to the ranges used in the Company’s second quarter 2015 annual license impairment testing. The fair value for accounts receivable is net of an estimate for bad debts. The Company determines the fair value of the broadcasting li censes in each of these markets by relying on a discounted cash flow approach assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. The Company’s fair value analysis contains assumptions based upon past experi ence, reflects expectations of industry observers and includes judgments about future performance using industry normalized information for an average station within a certain market. Any excess of the purchase price over the net assets acquired was report ed as goodwill. Merger And Acquisition Costs And Restructuring Charges Merger and acquisition costs and restructuring charges were expensed as a separate line item in the statement of operations. These costs consist primarily of legal, professional, advisory services and restructuring costs (as identified below) related to its acquisition of Lincoln and the Company’s exchange agreement with Bonneville International Corporation (“Bonneville”). During the third quarter of 2015, the Company initiated a restructuring plan as a result of the integration of the Lincoln radio stations acquired in July 2015. The restructuring plan includes: (1) $0.6 million in costs associ ated with exiting contractual vendor obligations as these obligations were duplicative; and (2) a workforce reduction and realignment charge of $1.1 million that included one-time termination benefits and related costs. As of September 30, 2015, restructuring charges of $1.1 million were included in accrued expenses as most expenses are expected to be paid within one year and $0.6 million was paid during the third quarter of 2015.
| Nine Months Ended |  | Three Months Ended
| September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
| (amounts in thousands)
Merger & Acquisition Costs | $ | 3,978 |  | $ | - |  | $ | 224 |  | $ | -
Restructuring Charges | $ | 1,754 |  | $ | - |  | $ | 1,754 |  | $ | -
Under purchase price accounting for the Lincoln acquisition, the Company recorded unfavorable lease and contract liabilities for studio and transmitter site property leases and vendor contracts as these contracts contained terms that were considered to be above market rates. The unfavorable liabilities are reflected in other long-term liabilities in the consolidated balance sheets and are amortized as a reduction to station operating expenses on a straight-line basis over the lives of the leases and contracts. The future amortization of unfavorable leases and contracts is as follows:
| As Of
| September 30,
| 2015
| (amounts in
| thousands)
Years ending December 31, |  |
2015 | $ | 638
2016 |  | 756
2017 |  | 594
2018 |  | 138
2019 |  | 133
Thereafter |  | 466
| $ | 2,725
Unaudited Pro Forma Summary Of Financial Information The following pro forma information presents the consolidated results of operations as if the Lincoln acquisition had occurred as of the beginning of the prior period presented, after giving effect to certain adjustments, including: (1) depreciation and amortization of assets; (2) amortization of unfavorable contracts related to the fair value adjustments of the assets acquired; (3) change in the effective tax rate; (4) interest expense on any debt incurred; and (5) accrued dividends on the issuance of preferred stock. For purposes of this presentation: (a) the pro forma data excludes certain Lincoln radio stations operated by Bonneville under a TBA as the Company never operated these stations and do es not expect to operate these stations at a future time (KYGO FM; KKFN FM and KEPN AM); and (b) the pro forma data does not in clude a radio station operated by Bonneville under a TBA (KOSI FM) and includes the same radio station operated by the Company pr ior to the TBA. 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.
| Nine Months Ended |  | Three Months Ended
| September 30, |  | September 30,
| 2015 |  | 2014 |  | 2015 |  | 2014
| (amounts in thousands, except per share data)
| Pro Forma |  | Pro Forma |  | Pro Forma |  | Pro Forma
Net revenues | $ | 322,083 |  | $ | 320,600 |  | $ | 117,102 |  | $ | 114,463
Net income (loss) available to the Company | $ | 15,253 |  | $ | 18,032 |  | $ | 8,533 |  | $ | 7,148
Net income (loss) available to common shareholders | $ | 13,603 |  | $ | 16,794 |  | $ | 7,983 |  | $ | 6,736
Net income (loss) available to common shareholders |  |  |  |  |  |  |  |  |  |  |
per common share - basic | $ | 0.36 |  | $ | 0.45 |  | $ | 0.21 |  | $ | 0.18
Net income (loss) available to common shareholders |  |  |  |  |  |  |  |  |  |  |
per common share - diluted | $ | 0.35 |  | $ | 0.44 |  | $ | 0.21 |  | $ | 0.18

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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