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BUSINESS COMBINATIONS | 6 Months Ended
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Jun. 30, 2020
Business Combinations [Abstract] |
BUSINESS COMBINATIONS | BUSINESS COMBINATIONS The Company records acquisitions under the acquisition method of accounting, and allocates the purchase price to the assets and liabilities based upon their respective fair values as determined as of the acquisition date. Merger and acquisition costs are excluded from the purchase price as these costs are expensed for book purposes and amortized for tax purposes. 2019 Cadence13 Acquisition On October 16, 2019, the Company completed its acquisition of Cadence13, Inc. ("Cadence13") by purchasing the remaining shares in Cadence13 that it did not already own. The Company initially acquired a 45% interest in Cadence13 in July 2017. The Company acquired the remaining interest in Cadence13 for a purchase price of $24.3 million in cash plus working capital (the "Cadence13 Acquisition"). In connection with this step acquisition of Cadence13, the Company remeasured its previously held equity interest to fair value and recognized a gain of $5.3 million and removed the investment in Cadence13 from its records. Upon completion of the Cadence13 Acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. Based on the timing of the Cadence13 Acquisition, the Company's condensed consolidated financial statements for the six and three months ended June 30, 2020, reflect the results of Cadence13's operations. The Company's condensed consolidated financial statements for the six and three months ended June 30, 2019, do not reflect the results of Cadence13's operations. The allocations presented in the table below are based upon management's estimates of the fair values using valuation techniques including income, cost and market approaches. The Company's fair value analysis contains assumptions based on past experience, reflects expectations of industry observers and includes judgments about future performance using industry normalized information. Using a residual method, any excess between the fair values of the net assets acquired and the total fair value of assets acquired was recorded 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 customer relationships, technical knowledge and trade secrets. 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 estimate.
|  |  | Measurement |  |
| Preliminary Value |  | Period Adjustment |  | As Adjusted
| (amounts in thousands) |  |  |  |
Assets |  |  |  |  |
Property, plant and equipment | $ | 654 |  |  | $ | — |  |  | $ | 654 |
Total tangible property | 654 |  |  | — |  |  | 654 |
Operating lease right-of-use asset | 62 |  |  | — |  |  | 62 |
Deferred tax asset | 2,900 |  |  | 28 |  |  | 2,928 |
Cadence13 brand | 5,977 |  |  | — |  |  | 5,977 |
Goodwill | 31,392 |  |  | (28) |  |  | 31,364 |
Total tangible and other assets | 40,331 |  |  | — |  |  | 40,331 |
Operating lease liabilities | (985) |  |  | — |  |  | (985) |
Net working capital | (757) |  |  | — |  |  | (757) |
Preliminary fair value of net assets acquired | $ | 39,243 |  |  | $ | — |  |  | $ | 39,243 |
The aggregate fair value purchase price allocation for the assets acquired in the Cadence13 Acquisition as reported on the Company's Form 10-K filed with the SEC on March 2, 2020, was revised during six months ended June 30, 2020 due to a change to the deferred tax assets associated with the acquired company which resulted in a decrease to acquired goodwill. 2019 Pineapple Street Media Acquisition On July 19, 2019, the Company completed a transaction to acquire the assets of Pineapple Street Media (“Pineapple”) for a purchase price of $14.0 million in cash plus working capital (the “Pineapple Acquisition”). Upon completion of the Pineapple Acquisition, the Company recorded the assets acquired and liabilities assumed at fair value. Based on this timing, the Company’s condensed consolidated financial statements for the six and three months ended June 30, 2020 reflect the results of Pineapple’s operations. The Company’s condensed consolidated financial statements for the six and three months ended June 30, 2019 do not reflect the results of Pineapple’s operations. 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. The Company’s fair value analysis contains assumptions based on past experience, reflects expectations of industry observers and includes judgments about future performance using industry normalized information. Using a residual method, any excess between the fair values of the net assets acquired and the total fair value of assets acquired was recorded 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 customer relationships, technical knowledge and trade secrets. The following table reflects the final allocation of the purchase price to the assets acquired and liabilities assumed.
| Final Value |  |  |  |
| (amounts in thousands) |  |  |  |
Assets |  |  |  |  |
Accounts receivable | $ | 997 |  |  |  |  |
Pineapple Street Media brand | 1,793 |  |  |  |  |
Goodwill | 12,445 |  |  |  |  |
Total assets | $ | 15,235 |  |  |  |  |
Unearned revenue | 238 |  |  |  |  |
Accounts payable | 30 |  |  |  |  |
Total liabilities | $ | 268 |  |  |  |  |
Final fair value of net assets acquired | $ | 14,967 |  |  |  |  |
2019 Cumulus Exchange On February 13, 2019, the Company entered into an agreement with Cumulus Media Inc. (“Cumulus”) under which the Company exchanged three of its stations in Indianapolis, Indiana for two Cumulus stations in Springfield, Massachusetts, and one Cumulus station in New York City, New York (the “Cumulus Exchange”). The Company and Cumulus began programming the respective stations under local marketing agreements (“LMAs”) on March 1, 2019. Upon completion of the Cumulus Exchange on May 9, 2019, the Company: (i) removed from its records the assets of the divested stations, which were previously classified as assets held for sale; (ii) recorded the assets of the acquired stations at fair value; and (iii) recognized a loss on the exchange transaction of approximately $1.8 million. Based on the timing of the Cumulus Exchange, the Company’s condensed consolidated financial statements for the six and three months ended June 30, 2020: (i) reflect the results of the acquired stations; and (ii) do not reflect the results of the divested stations. The Company’s condensed consolidated financial statements for the six and three months ended June 30, 2019: (i) reflect the results of the acquired stations for a portion of the period in which the LMAs were in effect and after the completion of the Cumulus Exchange; and (ii) reflect the results of the divested stations for a portion of the period until the commencement date of the LMAs. 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 on 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. Using a residual method, any excess between the fair values of the net assets acquired and the total fair value of stations acquired was recorded as goodwill. The Company recorded goodwill on its books, which is fully deductible for income tax purposes. Management believes that this exchange provides the Company with an opportunity to benefit from operational efficiencies from combining the operation of the acquired stations with the Company’s existing stations within the Springfield, Massachusetts, and New York City, New York markets. The following table reflects the final allocation of the purchase price to the assets acquired.
| Final Value |  |  |  |
| (amounts in thousands) |  |  |  |
Assets |  |  |  |  |
Equipment | $ | 844 |  |  |  |  |
Total tangible property | 844 |  |  |  |  |
Radio broadcasting licenses | 19,576 |  |  |  |  |
Goodwill | 2,080 |  |  |  |  |
Total intangible and other assets | 21,656 |  |  |  |  |
Total assets | $ | 22,500 |  |  |  |  |
Final fair value of net assets acquired | $ | 22,500 |  |  |  |  |
Integration Costs The Company incurred integration costs of $0.5 million and $2.6 million during the six months ended June 30, 2020 and June 30, 2019, respectively. Integration costs were expensed as a separate line item in the condensed consolidated statements of operations. These costs primarily relate to change management consultants and technology-related costs incurred subsequent to the CBS Radio business acquisition in November 2017 (the "Merger"). Unaudited Pro Forma Summary of Financial Information The following unaudited pro forma information for the six and three months ended June 30, 2020 and June 30, 2019 assumes that the acquisitions in 2019 had occurred as of January 1, 2019. Refer to information within this Note 2, Business Combinations, and to the consolidated financial statements and related notes included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2019, and filed with the SEC on March 2, 2020, 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 been consummated at an earlier time. 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 June 30, |  |  |  | Six Months Ended June 30, |  |
| 2020 |  | 2019 |  | 2020 |  | 2019
| (amounts in thousands except share and per share data) |  |  |  |  |  |
| Actual |  | Pro Forma |  | Actual |  | Pro Forma
Net revenues | $ | 175,868 |  |  | $ | 394,006 |  |  | $ | 472,898 |  |  | $ | 714,019 |
Net income (loss) | $ | (53,811) |  |  | $ | 24,285 |  |  | $ | (62,949) |  |  | $ | 25,861 |
Net income (loss) per common share - basic | $ | (0.40) |  |  | $ | 0.18 |  |  | $ | (0.47) |  |  | $ | 0.19 |
Net income (loss) per common share - diluted | $ | (0.40) |  |  | $ | 0.17 |  |  | $ | (0.47) |  |  | $ | 0.19 |
Weighted shares outstanding basic | 134,804,963 |  |  | 138,760,483 |  |  | 134,785,749 |  |  | 138,684,845 |
Weighted shares outstanding diluted | 134,804,963 |  |  | 139,074,229 |  |  | 134,785,749 |  |  | 139,221,904 |

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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 Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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