SHARE-BASED COMPENSATION (Block)

12 Months Ended

Dec. 31, 2018

Disclosure Of Compensation Related Costs Sharebased Payments Abstract

Disclosure Of Compensation Related Costs Share Based Payments Text Block

14. 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. The amount of shares available for grant automatically increased by 1.5 million on January 1, 2018 and January 1, 2017. The Board of Directors elected to forego the January 1, 2016 increase in the shares available for grant. As of December 31, 2018, the shares available for grant were 1.7 million shares.

The Plan included certain performance criteria for purposes of satisfying expense deduction requirements for income tax purposes. This expense deduction exemption does not apply under the new tax legislation that was enacted during the fourth quarter of 2017 and was effective as of January 1, 2018.

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 fair value is determined at the time of grant: (i) using the Company’s stock price for RSUs; and (ii) using the Black Scholes model for options. 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. Forfeitures are recognized as they occur.

RSU Activity

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)	2018
	(amounts in thousands)

RSUs outstanding as of:	December 31, 2017		4,285
RSUs awarded			1,292
RSUs released			(1,496)
RSUs forfeited			(396)
RSUs outstanding as of:	December 31, 2018		3,685	$	-	1.1	$	20,971
RSUs vested and expected
to vest as of:	December 31, 2018		3,685	$	-	1.1	$	20,971
RSUs exercisable (vested and
deferred) as of:	December 31, 2018		49	$	-	-	$	278
Weighted average remaining
recognition period in years			1.9
Unamortized compensation
expense		$	22,458

The following table presents additional information on RSU activity:

	Years Ended December 31,
	2018				2017				2016
	Shares		Amount		Shares		Amount		Shares		Amount
	(amounts in thousands, except per share)

RSUs issued		1,292	$	10,078		3,064	$	35,628		1,123	$	10,381
RSUs forfeited - service based		(396)		(1,228)		(379)		(1,117)		(27)		(280)
Net RSUs issued and increase
(decrease) to paid-in capital		896	$	8,850		2,685	$	34,511		1,096	$	10,101
Weighted average grant date
fair value per share	$	9.71			$	13.42			$	9.24
Fair value of shares vested per share	$	11.07			$	10.76			$	9.30
RSUs vested and released		1,496				474				611

RSUs With Service and Market Conditions

The Company issued RSUs with service and market conditions that are included in the table above. These shares vest if: (i) the Company’s stock achieves certain shareholder performance targets over a defined measurement period; and (ii) the employee fulfills a minimum service period. 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 met, as all of the conditions need to be satisfied. These RSUs are amortized over the longest of the explicit, implicit or derived service periods, which range from approximately one to three years.

The following table presents the changes in outstanding RSUs with market conditions:

		Years Ended December 31,
		2018		2017		2016
		(amounts in thousands, except per share data)
		(amounts in thousands, except per share data)
Reconciliation of RSUs with Service And Market Conditions
	Beginning of period balance		650		630		390
	Number of RSUs granted		-		70		470
	Number of RSUs forfeited		(110)		-		-
	Number of RSUs vested		(314)		(50)		(230)
	End of period balance		226		650		630
	Weighted average fair value of RSUs granted
	with market conditions	$	-	$	9.81	$	7.34

The fair value of RSUs with service conditions is estimated using the Company’s closing 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 specific assumptions used for these valuations are as follows:

	Years Ended
	December 31,
	2018	2017	2016

Expected Volatility Structure ⁽¹⁾	-	54%	35% to 45%
Risk Free Interest Rate ⁽²⁾	-	1.8%	0.4% to 1.1%
Annual Dividend Payment Per Share (Constant) ⁽³⁾	-	3.3%	7.5%

RSUs with Service and Performance Conditions

In addition to the RSUs included in the table above summarizing the activity in RSUs under the Plan, the Company issued RSUs with both service and performance conditions. Vesting of performance-based awards, if any, is dependent upon the achievement of certain performance targets. If the performance standards are not achieved, all unvested shares will expire and any accrued expense will be reversed. The Company determines the requisite service period on a case-by-case basis to determine the expense recognition period for non-vested performance based RSUs. The fair value is determined based upon the closing price of the Company’s common stock on the date of grant. The Company applies a quarterly probability assessment in computing its non-cash compensation expense and any change in the estimate is reflected as a cumulative adjustment to expense in the quarter of the change.

The following table reflects the activity of RSUs with service and performance conditions:

		Years Ended December 31,
		2018		2017		2016
		(amounts in thousands, except per share data)
		(amounts in thousands, except per share data)
Reconciliation of RSUs with Service and Performance
Conditions
	Beginning of period balance		-		-		29
	Number of RSUs granted		-		-		-
	Number of RSUs that did not meet criteria		-		-		(29)
	Number of RSUs vested		-		-		-
	Average fair value of RSUs granted with performance
	conditions	$	-	$	-	$	-

As of December 31, 2018, no non-cash compensation expense was recognized for RSUs with performance conditions.

Option Activity

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)	2018

Options outstanding as of:	December 31, 2017		883,347	$	8.38
Options granted			-		-
Options exercised			(113,137)		1.35
Options forfeited			-		-
Options expired			(15,000)		9.30
Options outstanding as of:	December 31, 2018		755,210	$	9.42	1.4	$	789,550
Options vested and expected to
vest as of:	December 31, 2018		755,210	$	9.42	1.4	$	789,550
Options vested and exercisable as of:	December 31, 2018		755,210	$	9.42	1.4	$	789,550
Weighted average remaining
recognition period in years			-
Unamortized compensation expense		$	-

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
Range of				Outstanding	Remaining	Average		Exercisable	Average
Exercise Prices				December 31,	Contractual	Exercise		December 31,	Exercise
From		To		2018	Life	Price		2018	Price
$	1.34	$	1.34	184,800	0.1	$	1.34	184,800	$	1.34
$	4.76	$	13.98	570,410	1.8	$	12.04	570,410	$	12.04
$	1.34	$	13.98	755,210	1.4	$	9.42	755,210	$	9.42

The following table provides summary information on the granting and vesting of options:

	Years Ended December 31,
Option Issuance and Exercise Data	2018				2017				2016
	(amounts in thousands except for per share and years)
	From		To		From		To		From		To
Exercise price range of options issued	$	1.34	$	2.02	$	1.34	$	11.31	$	1.34	$	11.69
Upon vesting, period to exercise in years		1		10		1		10		1		10
Fair value per share upon grant	$	-			$	4.33			$	-
Number of options granted		-				686				-
Intrinsic value per share upon exercise	$	7.33			$	7.24			$	12.21
Intrinsic value of options exercised	$	829			$	60			$	1,678
Tax benefit from options exercised	$	220			$	21			$	636
Cash received from exercise price of
options exercised	$	152			$	42			$	265

Valuation Of Options

The Company estimates the fair value of option awards on the date of grant using an option-pricing model. 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. 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: (i) the term by using the simplified plain-vanilla method as the Company’s employee exercise history may not be indicative for estimating future exercises; (ii) a historical volatility over a period commensurate with the expected term, with the observation of the volatility on a daily basis; (iii) 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 (iv) an annual dividend yield based upon the Company’s most recent quarterly dividend at the time of grant.

In connection with the Merger, the Company applied the above described valuation methodologies to determine the fair value for those options assumed as part of the Merger in 2017.

Recognized Non-Cash Stock-Based Compensation Expense

The following non-cash stock-based compensation expense, which is related primarily to RSUs, is included in each of the respective line items in the Company’s statement of operations:

	Years Ended December 31,
	2018		2017		2016
		(amounts in thousands)

Station operating expenses	$	6,855	$	1,694	$	1,363
Corporate general and administrative expenses		8,294		7,873		5,176
Stock-based compensation expense included in operating expenses		15,149		9,567		6,539
Income tax benefit ⁽¹⁾		3,160		3,328		2,321
After-tax stock-based compensation expense	$	11,989	$	6,239	$	4,218