2018 WXTU Transaction

On July 18, 2018, the Company entered into an agreement with Beasley Broadcast Group, Inc. (“Beasley”) to sell certain assets of WXTU-FM, serving the Philadelphia, Pennsylvania radio market for $38.0 million in cash (the “WXTU Transaction”). The Company also simultaneously entered into a time brokerage agreement (“TBA”) with Beasley where Beasley commenced operations of WXTU-FM on July 23, 2018. During the period of the TBA, the Company excluded net revenues and station operating expenses associated with operating WXTU-FM in the Company’s consolidated financial statements. The Company completed this disposition, which was subject to customary regulatory approvals, during the third quarter of 2018.

2018 Jerry Lee Transaction

On September 27, 2018, the Company completed a transaction to acquire the assets of WBEB-FM, serving the Philadelphia, Pennsylvania radio market from Jerry Lee Radio, LLC (“Jerry Lee”) for a purchase price of $57.5 million in cash, less certain working capital and other credits (the “Jerry Lee Transaction”). The Company used proceeds from the WXTU Transaction and cash on hand to fund this acquisition. Upon the completion of the WTXU Transaction and the Jerry Lee Transaction, the Company will continue to operate six radio stations in the Philadelphia, Pennsylvania market.

On August 7, 2018, the Company entered into a TBA with Jerry Lee. During the period of the TBA, the Company included in net revenues, station operating expenses and monthly TBA fees associated with operating WBEB-FM in the Company’s consolidated financial statements.

The allocations presented in the table below 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 FCC broadcasting licenses, the fair value estimates are based on, but not limited to, expected future revenue and cash flows that assume an expected future growth rate of 1.0% and an estimated discount rate of 9.0%. The gross profit margins utilized were considered appropriate based on management’s expectations and experience in equivalent sized markets. The Company determines the fair value of the broadcasting licenses 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 experience, 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 assets acquired was reported as goodwill. The Company recorded goodwill on its books, which is fully deductible for income tax purposes. Management believes that this acquisition provides the Company with an opportunity to benefit from operational efficiencies from combining operations of the acquired station with the Company’s existing stations within the Philadelphia market.

The following preliminary purchase price allocations are based upon the valuation of assets and these 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. These assets pending finalization include intangible assets. Differences between the preliminary and final valuation could be substantially different from the initial estimates.

2018 Emmis Acquisition

On April 30, 2018, the Company completed a transaction to acquire two radio stations in St. Louis, Missouri from Emmis Communications Corporation (“Emmis”) for a purchase price of $15.0 million in cash (the “Emmis Acquisition”). The Company borrowed under its revolving credit facility (the “Revolver”) to fund the acquisition. With this acquisition, the Company increased its presence in St. Louis, Missouri, to five radio stations.

On March 1, 2018, the Company entered into an asset purchase agreement and a TBA with Emmis to operate two radio stations. During the period of the TBA, the Company included in net revenues, station operating expenses and monthly TBA fees associated with operating these stations in the Company’s consolidated financial statements.

2017 CBS Radio Business Acquisition

On November 17, 2017, the Company acquired the CBS Radio business from CBS to further strengthen its scale and capabilities to compete more effectively with other media for a larger share of advertising dollars. The purchase price was $2.56 billion and consisted of $1.17 billion of total equity consideration and $1.39 billion of assumed debt.

The CBS Radio business acquisition was completed pursuant to the CBS Radio Merger Agreement, dated February 2, 2017, by and among the Company, CBS, CBS Radio, and Merger Sub. On November 17, 2017, (i) Merger Sub was merged with and into CBS Radio, with CBS Radio continuing as the surviving corporation and a direct, wholly-owned subsidiary of the Company and (ii) each share of CBS Radio common stock was converted into one share of the Company’s common stock.

The Company issued 101,407,494 shares of its Class A common Stock to the former holders of CBS Radio common stock. At the time of the Merger, each outstanding restricted stock unit (“RSU”) and stock option with respect to CBS Class B common stock held by employees of CBS Radio was canceled and converted into equity awards for the Company’s Class A common stock. The conversion was based on the ratio of the volume-weighted average per share closing prices of CBS stock on the five trading days prior to the date of acquisition and the Company’s stock on the five trading days following the date of acquisition. Entercom Communications Corp. is considered to be the acquiring company for accounting purposes.

To complete the Merger, certain divestitures were required by the FCC in order to comply with the FCC’s ownership rules and policies. These divestitures consisted of: (i) the exchange transaction with iHeartMedia, Inc. (“iHeart”); (ii) a station exchange with Beasley; (iii) a cash sale to Bonneville International Corporation (“Bonneville”); and (iv) a cash sale to Educational Media Foundation (“EMF”).

Due to the structure of the transaction, there is no step-up in tax basis for the assets acquired as the Company will assume the existing tax basis in the assets of CBS Radio. The absence of a step-up in tax basis will limit the Company’s tax deductions in future years and impacts the amount of deferred tax liabilities recorded as part of purchase price accounting. If any of the Internal Distributions or the Final Distribution, each as defined in the CBS Radio Merger Agreement, does not qualify as a transaction that is tax-free for U.S. federal income tax purposes under Section 355 of the Internal Revenue Code (“Code”) or the Merger does not qualify as a tax-free “reorganization” under Section 368(a) of the Code, including as a result of actions taken in connection with the distributions made by CBS to facilitate the Merger or as a result of subsequent acquisitions of shares of CBS, Entercom, or CBS Radio, then CBS and/or holders of CBS Common Stock that received Radio Common Stock in the Final Distribution may be required to pay substantial U.S. federal income taxes, and, in certain circumstances, CBS Radio and Entercom may be required to indemnify CBS for any such tax liability.

The allocations presented in the table below 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 FCC broadcasting licenses, the fair value estimates are based on, but not limited to, hypothetical expected future revenue and cash flows that assume an expected future growth rate of 1.0% and an estimated discount rate of 9.0%. The gross profit margins utilized were considered appropriate based on management’s expectations and experience in equivalent sized markets. The Company determines the fair value of the broadcasting licenses 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 experience, 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 reported as goodwill. The goodwill recorded reflects management’s expectations of its ability to gain access to and penetrate CBS Radio’s customer base and the benefits of being able to leverage operational efficiencies with favorable growth opportunities as a results of a large national presence. A portion of the goodwill carryover basis is tax deductible.

The Company’s preliminary allocation of the purchase price to the assets acquired and liabilities assumed as of the acquisition date, including measurement period adjustments, is outlined below.

	Preliminary Value
	as of acquisition date
	(as previously		Measurement
	reported as of		period
Description	December 31, 2017)		Adjustment		As Adjusted
	(amounts in thousands)

Assets
Accounts receivable	$	241,548	$	-	$	241,548
Prepaid sports rights and favorable sports contracts		4,160		-		4,160
Prepaid expenses, deposits and other		20,625		476		21,101
Other current assets		7,350		1,741		9,091
Total current assets		273,683		2,217		275,900
Land		112,880		-		112,880
Land improvements		3,988		(2,640)		1,348
Leasehold improvements		26,255		9,774		36,029
Buildings		19,246		(5,206)		14,040
Furniture and fixtures		10,929		(6,849)		4,080
Equipment and towers		76,486		4,921		81,407
Construction in process		14,598		-		14,598
Total tangible property		264,382		-		264,382
Advertiser relationships		27,453		-		27,453
Radio broadcasting licenses		1,880,400		-		1,880,400
Goodwill		820,961		(6,651)		814,310
Assets held for sale		255,650		-		255,650
Favorable leases		16,580		-		16,580
Other noncurrent assets		1,050		4,176		5,226
Total intangible and other assets		3,002,094		(2,475)		2,999,619
Total assets	$	3,540,159	$	(258)	$	3,539,901
Liabilities
Accounts payable	$	36,137	$	421	$	36,558
Accrued expenses		35,154		344		35,498
Accrued salaries and benefits		26,324		-		26,324
Current portion of long-term debt		10,600		-		10,600
Unfavorable sports liability - current portion		4,803		-		4,803
Accrued interest		4,529		-		4,529
Unearned revenues - current portion		14,971		-		14,971
Total current liabilities		132,518		765		133,283
Unearned revenues - non-current portion		13,859		-		13,859
Unfavorable lease liability		12,770		-		12,770
Unfavorable sports liability - non-current portion		22,597		-		22,597
Non-current portion of long-term debt		1,376,900		-		1,376,900
Deferred tax liability		780,832		(2,949)		777,883
Other long-term liabilities		31,835		1,926		33,761
Total liabilities	$	2,371,311	$	(258)	$	2,371,053
Preliminary fair value of net assets acquired	$	1,168,848	$	-	$	1,168,848

The aggregate fair value purchase price allocation of the assets and liabilities acquired in the CBS Radio Merger as reported on the Company’s Form 10-K filed with the SEC on March 16, 2018, were revised during the nine months ended September 30, 2018 primarily due to: (i) a change to the deferred tax liabilities associated with certain stations acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $2.9 million; (ii) a change to other current assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $1.3 million; (iii) a change to prepaid assets acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $0.5 million; (iv) a change to accrued expenses acquired in the CBS Radio Merger which resulted in an increase to goodwill of $0.3 million; (v) the recording of current and noncurrent lease abandonment liabilities and a corresponding receivable for reimbursement from CBS Corporation; (vi) a change to tenant improvement allowances acquired in the CBS Radio Merger which resulted in a decrease to goodwill of $2.3 million; and (vii) reclassification between the categories of acquired tangible property.

The preliminary purchase price allocations are based upon the valuation of assets and liabilities and these 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 Company is in the process of finalizing estimates and assumptions related to certain net working capital accounts acquired in the Merger. Any adjustments to the preliminary purchase price allocation of assets acquired and liabilities assumed will be reflected as an adjustment to goodwill in the reporting period in which the adjustment is identified. These assets and liabilities pending finalization include intangible assets and liabilities. Differences between the preliminary and final valuation could be substantially different from the initial estimates. Any adjustments to the preliminary purchase price allocation required after the one year measurement period, which may be material, will be recorded in the consolidated statements of operations as operating expenses or income.

2017 Local Marketing Agreement: The Bonneville Transaction

On November 1, 2017, the Company assigned assets to a trust and the trust subsequently entered into two local marketing agreements (“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, California and Sacramento, California markets. Of the eight radio stations operated by Bonneville, three were originally owned by the Company and the remaining five were originally owned by CBS Radio. The Company conducted an analysis and determined the assets of the eight stations satisfied the criteria to be presented as assets held for sale. The stations which were acquired from CBS Radio and were never operated by the Company are included within discontinued operations. On August 2, 2018, the Company entered into an asset purchase agreement with Bonneville to dispose of the eight radio stations in the San Francisco, California and Sacramento, California markets for $141.0 million in cash. During the three months ended September 30, 2018, the Company closed on this sale, which resulted in a loss of approximately $0.4 million to the Company. Refer to Note 11, Assets Held for Sale and Discontinued Operations, for additional information.

Unaudited Pro Forma Summary Of Financial Information

The following unaudited pro forma information for the three and nine months ended September 30, 2018 and 2017 assumes that: (i) the acquisitions in 2018 had occurred as of January 1, 2017; and (ii) the acquisitions and certain dispositions in 2017 had occurred as of January 1, 2016. Refer to information within this Note 2, Business Combinations, and to the financial statements and related notes included in the Company’s audited financial statements as of and for the year ended December 31, 2017, and filed with the SEC on March 16, 2018, for a description of the Company’s acquisition and disposition activities. The unaudited pro forma information presented gives effect to certain adjustments, including: (i) depreciation and amortization of assets; (ii) change in the effective tax rate; (iii) merger and acquisition costs; and (iv) interest expense on any debt incurred to fund the acquisitions which would have been incurred had such acquisitions had been consummated at an earlier time.

For purposes of this presentation, the pro forma data: (i) excludes the revenue and earnings of stations divested to iHeart and Beasley during 2017 as these stations were exchanged for the radio stations acquired in the Chattanooga, Richmond and Boston markets; (ii) includes revenue and earnings of stations divested to EMF during 2017; (iii) includes revenue and earnings of stations divested to Bonneville during 2018; and (iv) includes revenue and earnings of the station divested to Beasley during 2018.

This unaudited pro forma information has been prepared based on estimates and assumptions, which management believes are reasonable. 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.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
	(amounts in thousands except share and per share data)
	(amounts in thousands except share and per share data)
	Pro Forma		Pro Forma		Pro Forma		Pro Forma

Net revenues	$	379,933	$	418,902	$	1,061,891	$	1,195,338
Income (loss) from continuing operations	$	38,579	$	36,659	$	29,898	$	85,270
Income (loss) from discontinued operations	$	358	$	-	$	1,530	$	-
Net income (loss) available to the Company	$	38,937	$	36,659	$	31,428	$	85,270
Net income (loss) available to common shareholders	$	38,937	$	35,996	$	31,428	$	83,507
Income (loss) from continuing operations
per common share - basic	$	0.28	$	0.26	$	0.22	$	0.61
Income (loss) from discontinued operations
per common share - basic	$	-	$	-	$	0.01	$	-
Net income (loss) available to common shareholders
per common share - basic	$	0.28	$	0.26	$	0.23	$	0.59
Income (loss) from continuing operations
per common share - diluted	$	0.28	$	0.26	$	0.22	$	0.61
Income (loss) from discontinued operations
per common share - diluted	$	-	$	-	$	0.01	$	-
Net income (loss) available to common shareholders
per common share - diluted	$	0.28	$	0.26	$	0.23	$	0.59

Weighted shares outstanding basic		138,740,243		140,362,282		138,901,037		140,355,027
Weighted shares outstanding diluted		139,102,560		141,135,470		139,684,890		140,362,282
Conversion of preferred stock for dilutive purposes
under the as if method	Not applicable		anti-dilutive		Not applicable		anti-dilutive