In preparing the discussion and analysis contained in this Item 2, we presume
that readers have read or have access to the discussion and analysis contained
in our Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the "SEC") on March 2, 2020. In addition, you should read the
following discussion and analysis of our financial condition and results of
operations in conjunction with our consolidated financial statements and related
notes included elsewhere in this report. The following results of operations
include a discussion of the nine and three months ended September 30, 2020 as
compared to the comparable periods in the prior year. Our results of operations
during the relevant periods represent the operations of the radio stations owned
or operated by us.
The following discussion and analysis contains forward-looking statements about
our business, operations and financial performance based on current expectations
that involve risks, uncertainties and assumptions. You should not place undue
reliance on any of these forward-looking statements. In addition, any
forward-looking statement speaks only as of the date on which it is made, and we
undertake no obligation to update any forward-looking statement or statements to
reflect events or circumstances after the date on which the statement is made,
to reflect the occurrence of unanticipated events or otherwise, except as
required by law. New factors emerge from time to time, and it is not possible
for us to predict which will arise or to assess with any precision the impact of
each factor on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Results of Operations for the Year-To-Date
The following significant factors affected our results of operations for the
nine and three months ended September 30, 2020, as compared to the nine and
three months ended September 30, 2019:
COVID-19 Pandemic
In December 2019, a novel strain of coronavirus ("COVID-19") surfaced which
resulted in an outbreak of infections throughout the world. On March 11, 2020,
the World Health Organization declared COVID-19 a pandemic. The COVID-19
pandemic has led to emergency measures to combat its spread, including
government-issued stay-at-home orders, implementation of travel bans,
restrictions and limitations on social gatherings, closures of factories,
schools, public buildings and businesses and has forced the implementation of
alternative work arrangements. These emergency measures have had and are
expected to continue to have an adverse effect on our business and operations.
While the full impact of this outbreak is not yet known, we are closely
monitoring the spread of COVID-19 and continually assessing its effects on our
business, including how it has and will continue to impact advertisers,
professional sports and live events.
We experienced strong revenue growth in January and February. In March 2020, we
began to experience adverse effects due to the pandemic. During the second
quarter of 2020, we experienced significant declines in revenue performance.
April revenues were most significantly impacted and we began to experience
sequential month over month improvement in our revenue performance in May
through September.
We are currently unable to predict the full extent of the impact that the
COVID-19 pandemic will have on our financial condition, results of operations
and cash flows in future periods due to numerous uncertainties, but to date it
has been material and we believe the impact will continue to be material
throughout the remainder of 2020. However, we believe we are well positioned to
fully participate in the recovery and the attractive growth opportunities in the
audio space.
We presently believe that the COVID-19 pandemic and its related economic impact
has and will continue to:
•cause a decline in national and local advertising revenues;
•cause a decline in revenues on our sports stations as a result of the temporary
suspension of the National Hockey League and National Basketball Association
seasons as well as the delay of Major League Baseball and the cancellation of
the National Football League preseason games, which was largely offset by the
pro-rata reduction of our play-by-play sports rights fee obligations under
virtually all of our agreements;
•adversely affect our event revenues due to the cancellation of many of our
events scheduled during the second and third quarters of 2020, mitigated by the
ability to eliminate the associated event costs;
•increase bad debt expense due to an inability of some of our clients to meet
their payment terms; and
•cause elevated employee medical claims costs
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The following proactive actions were taken by management in an effort to
partially offset the above:
•temporary salary reductions implemented across senior management and the
broader organization;
•temporary freezing of contractual salary increases in 2020;
•furlough and termination of select employees;
•suspension of new employee hiring, travel and entertainment, 401(k) matching
program, employee stock purchase program, and quarterly dividend program; and
•reduction of sales and promotions spend as well as consulting and other
discretionary expenses.
The extent to which the COVID-19 pandemic impacts our business, operations and
financial results is inherently uncertain and will depend on numerous evolving
factors that we may not be able to accurately predict. Therefore, the results
for the nine and three months ended September 30, 2020, may not be indicative of
the results for the year ending December 31, 2020.
Impairment Loss
In response to a change in facts and circumstances, we conducted interim
impairment assessments on our broadcasting licenses during the second quarter of
2020 and during the third quarter of 2020, which resulted in a recognition of a
$4.1 million impairment loss ($3.0 million, net of tax) and an $11.8 million
impairment loss ($8.7 million, net of tax), respectively.
Cadence13 Acquisition
In October 2019, we completed an acquisition of leading podcaster Cadence13,
Inc. ("Cadence13") by purchasing the remaining shares in Cadence13 that we did
not already own (the "Cadence13 Acquisition"). We initially acquired a 45%
interest in Cadence13 in July 2017. This initial investment was accounted for as
an investment under the measurement alternative. In connection with this step
acquisition, we removed our investment in Cadence13 and recognized a gain of
approximately $5.3 million during the fourth quarter of 2019.
Based on the timing of this transaction, our consolidated financial statements
for the nine and three months ended September 30, 2020, reflect the results of
Cadence13. Our consolidated financial statements for the nine and three months
ended September 30, 2019, do not reflect the results of Cadence13.
Pineapple Street Media Acquisition
On July 19, 2019, we 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"). Our consolidated financial
statements reflect the operations of Pineapple from the date of acquisition.
Based on the timing of this transaction, our consolidated financial statements
for the nine and three months ended September 30, 2020 reflect the results of
Pineapple. Our consolidated financial statements for the nine and three months
ended September 30, 2019 reflect the results of Pineapple's operations for the
portion of the periods after the completion of the Pineapple Acquisition.
Cumulus Exchange
On February 13, 2019, we entered into an agreement with Cumulus Media Inc.
("Cumulus") under which we exchanged three of our stations in Indianapolis,
Indiana for two Cumulus stations in Springfield, Massachusetts, and one Cumulus
station in New York City, New York (the "Cumulus Exchange"). We began
programming the respective stations under local marketing agreements ("LMAs") on
March 1, 2019. In connection with this exchange, which closed during the second
quarter of 2019, we recognized a loss of approximately $1.8 million.
Based on the timing of this transaction, our consolidated financial statements
for the nine and three months ended September 30, 2020: (i) reflect the results
of the stations acquired in the Cumulus Exchange; and (ii) do not reflect the
results of our divested stations. Our consolidated financial statements for the
nine months ended September 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 the portion of the period until the commencement date of
the LMAs. Our consolidated financial statements for the three months ended
September 30, 2019: (i) reflect the results of the stations acquired in the
Cumulus Exchange; and (ii) do not reflect the results of our divested stations.
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Integration Costs and Restructuring Charges
On February 2, 2017, we and our wholly-owned subsidiary ("Merger Sub") entered
into an Agreement and Plan of Merger (the "CBS Radio Merger Agreement") with CBS
Corporation ("CBS") and its wholly-owned subsidiary CBS Radio Inc. ("CBS
Radio"). Pursuant to the CBS Radio Merger Agreement, Merger Sub merged with and
into CBS Radio with CBS Radio surviving as our wholly-owned subsidiary (the
"Merger"). The Merger closed on November 17, 2017.
In connection with the Merger, we incurred integration costs, including
transition services, consulting services and professional fees of $0.5 million
and $3.3 million during the nine months ended September 30, 2020 and
September 30, 2019, respectively. Amounts were expensed as incurred and are
included in integration costs.
In connection with the COVID-19 pandemic and the Merger, we incurred
restructuring charges, including workforce reductions and other restructuring
costs of $10.3 million and $6.0 million during the nine months ended
September 30, 2020 and September 30, 2019, respectively. In connection with the
COVID-19 pandemic and the Merger, we incurred restructuring charges, including
workforce reductions and other restructuring costs of $1.2 million and $1.6
million during the three months ended September 30, 2020 and September 30, 2019,
respectively. Amounts were expensed as incurred and are included in
restructuring charges.
Note Issuance
During the second quarter of 2019, we issued $325.0 million in aggregate
principal amount of senior secured second-lien notes due 2027 (the "Initial
Notes"). Interest on the Initial Notes accrues at the rate of 6.500% per annum.
We used net proceeds of the offering, along with cash on hand and $89.0 million
borrowed under our $250.0 million revolving credit facility (the "Revolver") to
repay $425.0 million of existing indebtedness under our term loan outstanding at
that time (the "Term B-1 Loan"). Increases in our interest expense due to the
issuance of the Initial Notes, which have a higher interest rate, were partially
offset by reductions in our interest expense due to the partial repayment of our
Term B-1 Loan. In connection with this note issuance: (i) we wrote off $1.6
million of unamortized debt issuance costs and $0.2 million of unamortized
premium to loss on extinguishment of debt; (ii) we incurred third party costs of
$5.8 million, of which approximately $3.9 million was capitalized and
approximately $1.9 million was captured as other expenses related to financing.
On December 13, 2019, we issued $100.0 million of additional 6.500% senior
secured second-lien notes due 2027 (the "Additional Notes"). The Additional
Notes are treated as a single series with the Initial Notes (together with the
Additional Notes, the "Notes") and have substantially the same terms as the
Initial Notes. We used net proceeds of the offering to repay $97.6 million of
existing indebtedness under our Term B-1 Loan. Contemporaneous with this partial
pay-down of the Term B-1 Loan, we replaced the remaining amount outstanding
under the Term B-1 Loan with a Term B-2 loan (the "Term B-2 Loan"). Increases in
our interest expense due to the issuance of the Additional Notes, which have a
higher interest rate, were partially offset by reductions in our interest
expense due to the partial repayment of our Term B-1 Loan and the lower
borrowing rate on the Term B-2 Loan. In connection with this note issuance: (i)
we wrote off $0.3 million of unamortized debt issuance costs to loss on
extinguishment of debt; and (ii) incurred third party costs and lender fees of
approximately $6.3 million, of which approximately $3.8 million was capitalized
and approximately $2.5 million was captured as other expenses related to
financing.








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 Nine Months Ended September 30, 2020 As Compared To The Nine Months Ended September 30,
                                           2019



                                                                     NINE MONTHS ENDED SEPTEMBER 30,
                                                             2020                 2019                % Change
                                                                          (dollars in millions)
NET REVENUES                                           $       741.4          $ 1,075.8                      (31) %

OPERATING EXPENSE:
Station operating expenses                                     668.2              801.3                      (17) %
Depreciation and amortization expense                           37.7               33.3                       13  %
Corporate general and administrative expenses                   42.0               57.6                      (27) %
Integration costs                                                0.5                3.3                      (85) %
Restructuring charges                                           10.3                6.0                       72  %
Impairment loss                                                 17.0                  -                      100  %
Merger and acquisition costs                                       -                0.4                     (100) %
Other expenses related to financing                                -                1.9                     (100) %
Other operating (income) expenses                               (0.2)              (2.6)                      92  %
Total operating expense                                        775.5              901.2                      (14) %
OPERATING INCOME (LOSS)                                        (34.1)             174.6                     (120) %

INTEREST EXPENSE                                                66.1               75.4                      (12) %
OTHER (INCOME) EXPENSE                                             -                1.8                     (100) %

INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                   (100.2)              97.4                     (203) %

INCOME TAXES (BENEFIT)                                         (20.4)              30.1                     (168) %

NET INCOME (LOSS)                                      $       (79.8)         $    67.3                     (219) %


Net Revenues
Revenues decreased compared to prior year primarily due to a decrease in
advertising spending in connection with the economic slowdown triggered by the
COVID-19 pandemic. Specifically, the temporary suspension of the National Hockey
League ("NHL") and National Basketball Association ("NBA") seasons, as well as
the delay of the Major League Baseball ("MLB") season and the cancellation of
the National Football League ("NFL") preseason games contributed to a decline in
revenues from our sports stations. The MLB and the NBA restarted their
abbreviated seasons in late July, the NHL restarted their season in August, and
the NFL started their season in September, which contributed to an improvement
in revenues from our sports stations in the third quarter. Additionally, the
cancellation of events scheduled for the second quarter and third quarter of
2020 contributed to a decline in our event revenues. We experienced strong
revenue growth in January and February. In March 2020, we experienced adverse
effects due to the COVID-19 pandemic. These adverse effects continued throughout
the second quarter and third quarter.
Partially offsetting this decrease, net revenues were positively impacted by:
(i) the operations of Pineapple; (ii) the operations of Cadence13; and (iii)
growth in our political spot revenues and network revenues. Net revenues
decreased the most for our stations located in the Los Angeles and New York City
markets.
Station Operating Expenses
Station operating expenses decreased compared to prior year primarily due to:
(i) a reduction of play-by-play rights fees associated with our sports rights
contracts; (ii) our proactive response to reduce expenses, and offset reductions
in revenue due to COVID-19, including: (a) temporary salary reductions; (b)
temporary freezing of contractual salary increases; (c) furlough and termination
of select employees; (d) suspension of new employee hiring, travel and
entertainment, 401(k) matching
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program, and employee stock purchase plan; (iii) reductions in revenues which
resulted in a corresponding reduction in variable sales-related expenses; and
(iv) reductions in operating costs from operating our stations more efficiently
due to synergies recognized.
Station operating expenses include non-cash compensation expense of $1.6 million
and $3.8 million for the nine months ended September 30, 2020 and September 30,
2019, respectively.
Depreciation and Amortization Expense
Depreciation and amortization expense increased compared to prior year primarily
due to an increase in capital expenditures in 2019 and the amortization of
definite lived intangible assets acquired in 2019. The increase in capital
expenditures in 2019 was primarily due to the build out of our new corporate
headquarters, the consolidation and relocation of several studio facilities in
larger markets, and an increase in our size and capital needs associated with
the integration of common systems across the new markets acquired in the Merger.
Corporate General and Administrative Expenses
Corporate general and administrative expenses decreased primarily as a result
of: (i) our proactive response to reduce expenses, and offset reductions in
revenue due to COVID-19, including: (a) temporary salary reductions; (b)
temporary freezing of contractual salary increases; (c) furlough and termination
of select employees; (d) suspension of new employee hiring, travel and
entertainment, 401(k) matching program, and employee stock purchase plan; and
(ii) our integration related cost synergy actions.
Corporate general and administrative expenses include non-cash compensation
expense of $4.6 million and $6.5 million for the nine months ended September 30,
2020 and September 30, 2019, respectively.
Integration Costs
Integration costs were incurred during the nine months ended September 30, 2020
and September 30, 2019 as a result of the Merger. These costs primarily
consisted of ongoing costs related to effectively combining and incorporating
CBS Radio into our operations. Based on the timing of the Merger, integration
activities primarily occurred in 2017 and 2018 and were reduced significantly in
2019 and 2020.
Restructuring Charges
We incurred restructuring charges in 2020 primarily in response to the COVID-19
pandemic. These costs primarily included workforce reduction charges. We
incurred restructuring charges in 2019 primarily as a result of the
restructuring of operations for the Merger. These costs primarily included
workforce reduction charges and other charges and were expensed as incurred.
Impairment Loss
During the nine months ended September 30, 2020, we conducted interim impairment
assessments on our broadcasting licenses during the second and third quarter of
the current year. As a result of the interim impairment assessments, we
determined that the carrying value of our broadcasting licenses was greater than
their fair value in certain markets and we recorded a cumulative non-cash
impairment charge on our broadcasting licenses of $16.0 million.
Other Expenses Related to Financing
During the nine months ended September 30, 2019, we issued the Initial Notes and
used the proceeds, along with cash on hand and borrowings under the Revolver, to
repay a portion of our existing indebtedness under our Term B-1 Loan. As a
result of this activity, we incurred approximately $5.8 million of third party
fees. Of this amount, approximately $1.9 million of costs were expensed and
approximately $3.9 million were capitalized and will be amortized over the term
of the Notes.
Other Operating (Income) Expenses
During the nine months ended September 30, 2020, we completed the sale of
equipment and a broadcasting license in Boston, Massachusetts and recognized a
gain of $0.2 million.
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During the nine months ended September 30, 2019, we completed: (i) a sale of
land and land improvements, buildings and equipment and recognized a gain of
$4.5 million; and (ii) an exchange transaction which resulted in a loss of $1.8
million.
The change in other operating (income) expense is primarily attributable to the
change in these activities between periods.
Interest Expense
During the nine months ended September 30, 2020, we incurred $9.3 million less
in interest expense as compared to the nine months ended September 30, 2019. As
discussed above, we issued $425.0 million in Notes in 2019 and used proceeds and
cash on hand to partially repay $521.7 million of existing indebtedness under
our Term B-1 Loan. This reduction in interest expense was primarily attributable
to a reduction in outstanding indebtedness upon which interest is computed.
These reductions were partially offset by the replacement of a portion of our
variable-rate debt with fixed-rate debt at a higher interest rate.
Income Taxes (Benefit)
Tax Rate for the Nine Months Ended September 30, 2020
The effective income tax rate was 20.4% for the nine months ended September 30,
2020, which was determined using a forecasted rate based upon projected taxable
income for the full year. The effective income tax rate for the period was
impacted by a discrete income tax expense item related to the shortfall
associated with share-based awards.
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and
Economic Security Act (the "CARES Act"). The CARES Act is an emergency economic
stimulus package that includes spending and tax breaks to strengthen the United
States economy and fund a nationwide effort to curtail the effects of the
COVID-19 pandemic. The CARES Act includes significant business tax provisions
that, among other things, includes the removal of certain limitations on the
utilization of net operating losses, increases the loss carry back period for
certain losses to five years, and increases the ability to deduct interest
expense, as well as amending certain provisions of the previously enacted Tax
Cuts and Jobs Act. We determined the CARES Act will not have a material impact
on our overall income tax expense.
Tax Rate for the Nine Months Ended September 30, 2019
The estimated annual effective income tax rate was 30.9%, which was determined
using a forecasted rate based upon projected taxable income for the full year.
The 2019 annual income tax rate before discrete items, was estimated to be
between 30% and 32%.
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Three Months Ended September 30, 2020 As Compared To The Three Months Ended September 30,
                                           2019



                                                                    THREE MONTHS ENDED SEPTEMBER 30,
                                                             2020               2019               % Change
                                                                          (dollars in millions)
NET REVENUES                                             $    268.5          $  386.1                     (30) %

OPERATING EXPENSE:
Station operating expenses                                    228.7             273.1                     (16) %
Depreciation and amortization expense                          12.6              11.2                      13  %
Corporate general and administrative expenses                  14.5              19.4                     (25) %
Integration costs                                                 -               0.7                    (100) %
Restructuring charges                                           1.2               1.6                     (25) %
Impairment loss                                                11.8                 -                     100  %
Merger and acquisition costs                                      -               0.4                    (100) %
Other operating (income) expense                                  -               0.2                    (100) %
Total operating expense                                       268.8             306.6                     (12) %
OPERATING INCOME (LOSS)                                        (0.3)             79.5                    (100) %
INTEREST EXPENSE                                               20.8              25.3                     (18) %

INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                   (21.1)             54.2                    (139) %

INCOME TAXES (BENEFIT)                                         (4.2)             16.0                    (126) %

NET INCOME (LOSS)                                        $    (16.9)         $   38.2                    (144) %


Net Revenues
Revenues decreased compared to prior year primarily due to a decrease in
advertising spending in connection with the economic slowdown triggered by the
COVID-19 pandemic. Specifically, the temporary suspension of the NHL and NBA
seasons, as well as the delay of the MLB season and the cancellation of the NFL
preseason games contributed to a decline in revenues from our sports stations.
The MLB and the NBA restarted their abbreviated seasons in late July, the NHL
restarted their season in August, and the NFL started their season in September
which contributed to an improvement in revenues from our sports stations in the
third quarter. Additionally, the cancellation of events scheduled for the third
quarter of 2020 contributed to a decline in our event revenues. Net revenues
decreased the most for our stations located in the Los Angeles and New York City
markets.
Station Operating Expenses
Station operating expenses decreased compared to prior year primarily due to:
(i) a reduction of play-by-play rights fees associated with our sports rights
contracts; (ii) our proactive response to reduce expenses, and offset reductions
in revenue due to COVID-19, including: (a) temporary salary reductions; (b)
temporary freezing of contractual salary increases; (c) furlough and termination
of select employees; (d) suspension of new employee hiring, travel and
entertainment, 401(k) matching program, and employee stock purchase plan; (iii)
reductions in revenues which resulted in a corresponding reduction in variable
sales-related expenses; and (iv) reductions in operating costs from operating
our stations more efficiently due to synergies recognized.
Station operating expenses include non-cash compensation expense of $0.5 million
and $1.1 million for the three months ended September 30, 2020 and September 30,
2019, respectively.

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Depreciation and Amortization Expense
Depreciation and amortization expense increased compared to prior year primarily
due to an increase in capital expenditures in 2019 and the amortization of
definite lived intangible assets acquired in 2019. The increase in capital
expenditures in 2019 was primarily due to the build out of our new corporate
headquarters, the consolidation and relocation of several studio facilities in
larger markets, and an increase in our size and capital needs associated with
the integration of common systems across the new markets acquired in the Merger.
Corporate General and Administrative Expenses
Corporate general and administrative expenses decreased primarily as a result of
(i) our proactive response to reduce expenses, and offset reductions in revenue
due to COVID-19, including: (a) temporary salary reductions; (b) temporary
freezing of contractual salary increases; (c) furlough and termination of select
employees; (d) suspension of new employee hiring, travel and entertainment,
401(k) matching program, and employee stock purchase plan; and (ii) our
integration related cost synergy actions.
Corporate general and administrative expenses include non-cash compensation
expense of $1.4 million and $2.2 million for the three months ended
September 30, 2020 and September 30, 2019, respectively.
Integration Costs
Integration costs were incurred during the three months ended September 30, 2019
as a result of the Merger. These costs primarily consisted of ongoing costs
related to effectively combining and incorporating CBS Radio into our
operations. Based on the timing of the Merger, integration activities primarily
occurred in 2017 and 2018 and were reduced significantly in 2019 and 2020.
Restructuring Charges
We incurred restructuring charges in 2020 primarily in response to the COVID-19
pandemic. These costs primarily included workforce reduction charges. We
incurred restructuring charges in 2019 primarily as a result of the
restructuring of operations for the Merger. These costs primarily included
workforce reduction charges and other charges and were expensed as incurred.
Impairment Loss
During the three months ended September 30, 2020, we conducted an interim
impairment assessment on certain of our broadcasting licenses. As a result of
the interim impairment assessment, we determined that the carrying value of our
broadcasting licenses was greater than their fair value in certain markets and
we recorded a non-cash impairment charge on our broadcasting licenses of $11.8
million.
Interest Expense
During the three months ended September 30, 2020 we incurred $4.5 million less
of interest expense as compared to the three months ended September 30, 2019. As
discussed above, we issued $425.0 million in Notes in 2019 and used proceeds and
cash on hand to partially repay $521.7 million of existing indebtedness under
our Term B-1 Loan. This reduction in interest expense was primarily attributable
to a reduction in outstanding indebtedness upon which interest is computed.
These reductions were partially offset by the replacement of a portion of a
variable-rate debt with fixed-rate debt at a higher interest rate.
Income Taxes (Benefit)
For the three months ended September 30, 2020, the effective income tax rate was
20.0%, which was determined using a forecasted rate based upon projected taxable
income for the full year along with the impact of discrete items for the
quarter.
For the three months ended September 30, 2019, the effective income tax rate was
29.5%, which was determined using a forecasted rate based upon projected taxable
income for the full year along with the impact of discrete items for the
quarter.
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Liquidity and Capital Resources
Amendment and Repricing - CBS Radio (Now Entercom Media Corp.) Indebtedness
In connection with the Merger, we assumed CBS Radio's (now Entercom Media
Corp.'s) indebtedness outstanding under: (i) a credit agreement (the "Credit
Facility") among CBS Radio (now Entercom Media Corp.), the guarantors named
therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as
administrative agent; and (ii) the Senior Notes (described below).
On April 30, 2019, Entercom Media Corp. amended the financial covenant in its
Senior Secured Credit Agreement such that the calculation of Consolidated Net
First Lien Leverage Ratio only includes first lien secured debt. Accordingly,
the Notes are not included in the financial covenant calculation.
A default under our Notes could cause a default under our Credit Facility or
Senior Notes. Any event of default, therefore, could have a material adverse
effect on our business and financial condition.
We may from time to time seek to repurchase and retire our outstanding
indebtedness through open market purchases, privately negotiated transactions or
otherwise. Such repurchases, if any, will depend upon prevailing market
conditions, our liquidity requirements, contractual restrictions and other
factors. The amounts involved may be material.
Liquidity
Although we have been, and expect to continue to be, negatively impacted by the
COVID-19 pandemic, we anticipate that our business will continue to generate
sufficient cash flow from operating activities and we believe that these cash
flows, together with our existing cash and cash equivalents and our ability to
obtain future external financing, will be sufficient for us to meet our current
and long-term liquidity and capital requirements. However, our ability to
maintain adequate liquidity is dependent upon a number of factors, including our
revenue, macroeconomic conditions, the length and severity of business
disruptions caused by the COVID-19 pandemic, our ability to contain costs and to
collect accounts receivable, and various other factors, many of which are beyond
our control Moreover, if the COVID-19 pandemic continues to create significant
disruptions in the credit or financial markets, or impacts our credit ratings,
it could adversely affect our ability to access capital on attractive terms, if
at all. We also expect the timing of certain priorities to be impacted, such as
the pace of our debt reduction efforts and the delay of certain capital
projects. During the third quarter, we amended our Credit Facility which
resulted in a covenant holiday for the remainder of 2020.
The Credit Facility as amended, is comprised of the $250.0 million Revolver and
a $770.0 million Term B-2 Loan. During the nine months ended September 30, 2020,
we: (i) borrowed the full amount available under our Revolver as a precautionary
measure to preserve financial flexibility during the COVID-19 pandemic; (ii)
subsequently made elective payments against the outstanding balance of the
Revolver in the amount of $186.0 million; and (iii) made required excess cash
flow payments and quarterly amortization payments due under the Term B-2 Loan in
the amount of $14.6 million.
As of September 30, 2020, we had $755.4 million outstanding under the Term B-2
Loan and $77.7 million outstanding under the Revolver. In addition, we had $6.8
million in outstanding letters of credit.
As of September 30, 2020, total liquidity was $198.0 million which was comprised
of $165.6 million available under the Revolver and $32.4 million in cash and
cash equivalents. For the nine months ended September 30, 2020, we reduced our
outstanding debt by $53.9 million due to the previously discussed draw under our
Revolver and subsequent repayments.
The Credit Facility
The Term B-2 Loan requires mandatory prepayments equal to a percentage of Excess
Cash Flow, subject to incremental step-downs, depending on the Consolidated Net
Secured Leverage Ratio. The Excess Cash Flow payment is based on the Excess Cash
Flow and the Consolidated Net Secured Leverage Ratio for the prior year. We made
our first Excess Cash Flow payment in the first quarter of 2020.
As of September 30, 2020, we were in compliance with the financial covenant then
applicable and all other terms of the Credit Facility in all material respects.
Our ability to maintain compliance with our financial covenant under the Credit
Facility is highly dependent on our results of operations. Currently, given the
impact of COVID-19, the outlook is highly uncertain.
Failure to comply with our financial covenant or other terms of our Credit
Facility and any subsequent failure to negotiate and obtain any required relief
from our lenders could result in a default under the Credit Facility. We will
continue to monitor
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our liquidity position and covenant obligations and assess the impact of the
COVID-19 pandemic on our ability to comply with the covenants under the Credit
Facility.
Any event of default could have a material adverse effect on our business and
financial condition. We may seek from time to time to amend our Credit Facility
or obtain other funding or additional funding, which may result in higher
interest rates on our debt. However, we may not be able to do so on terms that
are acceptable or to the extent necessary to avoid a default, depending upon
conditions in the credit markets, the length and depth of the market reaction to
the COVID-19 pandemic and our ability to compete in this environment.
During the third quarter of the current year, we executed an amendment to the
Credit Facility which amends our financial covenants under the Credit Facility.
On July 20, 2020, Entercom Media Corp, our wholly-owned subsidiary, entered into
an amendment ("Amendment No. 5") to the Credit Agreement, dated October 17, 2016
(as previously amended, the "Existing Credit Agreement" and, as amended by
Amendment No. 5, the "Credit Agreement"), with the guarantors party thereto, the
lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent and
collateral agent.
Amendment No. 5, among other things:
(a) amended our financial covenants under the Credit Agreement by: (i)
suspending the testing of the Consolidated Net First Lien Leverage Ratio (as
defined in the Credit Agreement) through the Test Period (as defined in the
Credit Agreement) ending December 31, 2020; (ii) adding a new minimum liquidity
covenant of $75.0 million until December 31, 2021, or such earlier date as we
may elect (the "Covenant Relief Period"); and (iii) imposing certain
restrictions during the Covenant Relief Period, including among other things,
certain limitations on incurring additional indebtedness and liens, making
restricted payments or investments, redeeming notes and entering into certain
sale and lease-back transactions;
(b) increased the interest rate and/or fees under the Credit Agreement during
the Covenant Relief Period applicable to: (i) 2024 Revolving Credit Loans (as
defined in the Credit Agreement) to (x) in the case of Eurodollar Rate Loans (as
defined in the Credit Agreement), a customary Eurodollar rate formula plus a
margin of 2.50% per annum, and (y) in the case of Base Rate Loans (as defined in
the Credit Agreement), a customary base rate formula plus a margin of 1.50% per
annum, and (ii) Letter of Credit (as defined in the Credit Agreement) fees to
2.50% times the daily maximum amount available to be drawn under any such Letter
of Credit; and
(c) modified the definition of Consolidated EBITDA by setting fixed amounts for
the fiscal quarters ending June 30, 2020, September 30, 2020, and December 31,
2020, for purposes of testing compliance with the Consolidated Net First Lien
Leverage Ratio financial covenant during the Covenant Relief Period, which fixed
amounts correspond to the Borrower's Consolidated EBITDA as reported under the
Existing Credit Agreement for the Test Period ended March 31, 2020, for the
fiscal quarters ending June 30, 2019, September 30, 2019, and December 31, 2019,
respectively.
The Senior Notes
Simultaneously with entering into the Merger and assuming the Credit Facility on
November 17, 2017, we also assumed the Senior Notes that mature on November 1,
2024 in the amount of $400.0 million (the "Senior Notes"). The Senior Notes,
which were originally issued by CBS Radio (now Entercom Media Corp.) on October
17, 2016, were valued at a premium as part of the fair value measurement on the
date of the Merger. The premium on the Senior Notes will be amortized over the
term under the effective interest rate method. As of any reporting period, the
unamortized premium on the Senior Notes is reflected on the balance sheet as an
addition to the $400.0 million liability.
A default under our Senior Notes could cause a default under our Credit
Facility. Any event of default, therefore, could have a material adverse effect
on our business and financial condition.
Operating Activities
Net cash flows provided by operating activities were $82.0 million and $104.5
million for the nine months ended September 30, 2020 and September 30, 2019,
respectively.
The cash flows from operating activities decreased primarily due to the fact
that we reported a net loss of $79.8 million for the nine months ended
September 30, 2020 as compared to a reported net income of $67.3 million for the
nine months ended September 30, 2019.
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This reduction in net income (loss) of $147.2 million was partially offset by:
(i) a reduction in net investment in working capital of $115.0 million; and (ii)
an increase in the adjustments to reconcile net income to net cash provided by
operating activities of $9.6 million.
The reduction in net investment in working capital was primarily due to the
timing of: (i) collections of accounts receivable; (ii) settlements of accounts
payable and accrued liabilities; (iii) settlements of prepaid expenses; (iv)
settlements of other long-term liabilities; and (v) settlements of accrued
interest expense.
The increase in adjustments to reconcile net income to net cash provided by
operating activities was primarily due to: (i) an increase in impairment loss of
$17.0 million; (ii) an increase in provision for bad debts of $9.2 million;
(iii) an increase in depreciation and amortization expense of $4.4 million; and
(iv) a reduction in gains on disposals of assets of $2.5 million.
These increases in adjustments to reconcile net income to net cash provided by
operating activities were partially offset by reductions in: (i) the adjustment
for deferred taxes of $14.9 million; (ii) non-cash stock-based compensation
expense of $4.0 million; (iii) gains in the deferred compensation plan of $3.2
million; and (iv) the loss on extinguishment of debt of $1.8 million.
Investing Activities
Net cash flows used in investing activities were $11.5 million for the nine
months ended September 30, 2020, which primarily reflect the purchase of
property and equipment and intangible assets of $21.9 million, which was
partially offset by proceeds received from dispositions of assets of $10.4
million.
Net cash flows used in investment activities were $53.0 million for the nine
months ended September 30, 2019, which primarily reflect the purchase of
property and equipment and intangible assets of $63.6 million and the purchase
of Pineapple and other assets for $15.8 million, which was partially offset by
proceeds received from dispositions of assets in the amount of $27.8 million.
Financing Activities
Net cash flows used in financing activities were $58.5 million for the nine
months ended September 30, 2020, which primarily reflect: (i) the borrowing
under the Revolver of $146.7 million; (ii) the payments of amounts due under the
Revolver of $186.0 million; (iii) the payments of long term debt of $14.6
million; and (iv) the payment of dividends on common stock of $2.7 million.
Net cash flows used in financing were and $198.4 million for the nine months
ended September 30, 2019, which primarily reflect: (i) the reduction of our net
borrowings by $146.0 million; (ii) the payment of dividends on common stock of
$27.6 million; (iii) the repurchase of our common stock of $18.3 million; and
(iv) the payment of debt issuance costs related to the issuance of our Notes in
the amount of $3.9 million.
Dividends
Following the payment of the quarterly dividend payment for the first quarter of
2020, we suspended our quarterly dividend program.
Any future dividends will be at the discretion of the Board based upon the
relevant factors at the time of such consideration, including, without
limitation, compliance with the restrictions set forth in our Credit Facility,
the Senior Notes and the Notes.
Share Repurchase Program
During the nine months ended September 30, 2020, we did not repurchase any
shares under our share repurchase program (the "2017 Share Repurchase Program").
As of September 30, 2020, $41.6 million is available for future share
repurchases under the 2017 Share Repurchase Program.


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Income Taxes
During the nine months ended September 30, 2020, we paid $4.0 million in state
income taxes. We do not anticipate making any federal income tax payments in
2020 primarily as a result of: (i) the availability of net operating losses
("NOLs") to offset federal tax due; and (ii) our current projected taxable loss
position.
For federal income tax purposes, the acquisition of CBS Radio was treated as a
reverse acquisition which caused us to undergo an ownership change under Section
382 of the Internal Revenue Code ("Code"). This ownership change will limit the
utilization of our NOLs for post-acquisition tax years. We may need to make
additional federal and state estimated tax payments during the remainder of the
year.
Capital Expenditures
Capital expenditures, including amortizable intangibles, for the nine months
ended September 30, 2020 were $21.9 million. We anticipate that total capital
expenditures in 2020 will be between $25 million and $30 million. This figure
includes approximately $2 million that will be reimbursed by landlords for
tenant improvement allowances.
Contractual Obligations
As of September 30, 2020, there have been no material changes in the total
amount from the contractual obligations listed in our Form 10-K for the year
ended December 31, 2019, as filed with the SEC on March 2, 2020, other than as
described below.
As discussed above in the liquidity section, during the nine months ended
September 30, 2020, we borrowed the full amount available under the Revolver. We
subsequently made elective payments against the outstanding balance of the
Revolver in the amount of $186.0 million. Additionally, we made required Excess
Cash Flow payments and quarterly amortization payments due under the Term B-2
Loan in the amount of $14.6 million. As a result of this activity, the amounts
outstanding under our long-term debt obligations decreased by $53.9 million
during the nine months ended September 30, 2020.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any material off-balance sheet
transactions, arrangements or obligations, including contingent obligations.
We do not have any other relationships with unconsolidated entities or financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which would have been established for the purpose of
facilitating off-balance sheet financial arrangements or other contractually
narrow or limited purposes as of September 30, 2020. Accordingly, we are not
materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.
Critical Accounting Policies
There have been no material changes to our critical accounting policies from the
information provided in Part II, Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations - Critical Accounting Policies, in
our Annual Report on Form 10-K for the year ended December 31, 2019 except as
disclosed in Note 1, Basis of Presentation and Significant Policies to our
consolidated financial statements.

Goodwill Valuation at Risk
After the annual impairment test conducted on our goodwill in the fourth quarter
of 2019, the results indicated that the fair value of goodwill was less than the
carrying value. As a result of the $537.4 million goodwill impairment ($519.6
million, net of tax) booked in the fourth quarter of 2019, we no longer have any
goodwill attributable to the broadcast reporting unit. Our remaining goodwill is
limited to the goodwill attributable to the podcast reporting unit.
Future impairment charges may be required on our goodwill attributable to our
podcast reporting unit, as the discounted cash flow model is subject to change
based upon our performance, peer company performance, overall market conditions,
and
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the state of the credit markets. We continue to monitor these relevant factors
to determine if an interim impairment assessment is warranted.
A deterioration in our forecasted financial performance, an increase in discount
rates, a reduction in long-term growth rates, a sustained decline in our stock
price, or a failure to achieve analyst expectations could all be potential
indicators of an impairment charge to the remaining goodwill attributable to the
podcasting reporting unit, which could be material, in future periods. The
COVID-19 pandemic increases the uncertainty with respect to such market and
economic conditions and, as such, increases the risk of future impairment.
As of September 30, 2020, we evaluated whether the facts and circumstances and
available information result in the need for an impairment assessment for any
goodwill, and concluded no assessment was required. We will continue to evaluate
the impacts of the COVID-19 pandemic on our business, including the impacts of
overall economic conditions, which could result in the recognition of an
impairment charge in the future.
Broadcasting Licenses Impairment Test
During the fourth quarter of 2019, we completed our annual impairment test for
broadcasting licenses and determined that the fair value of our broadcasting
licenses was greater than the amount reflected in the condensed consolidated
balance sheet for each of our markets and, accordingly, no impairment was
recorded.
During the second quarter of the current year, we completed an interim
impairment test for our broadcasting licenses at the market level using the
Greenfield method. As a result of this interim impairment assessment, we
determined that the fair value of our broadcasting licenses was less than the
amount reflected in the balance sheet for certain of our markets and,
accordingly, recorded an impairment loss of $4.1 million, ($3.0 million, net of
tax).
During the third quarter of the current year, we completed an interim impairment
test for certain of our broadcasting licenses at the market level using the
Greenfield method. As a result of this interim impairment assessment, we
determined that the fair value of our broadcasting licenses was less than the
amount reflected in the balance sheet for certain of our markets and,
accordingly, recorded an impairment loss of $11.8 million, ($8.7 million, net of
tax).
Each market's broadcasting licenses are combined into a single unit of
accounting for purposes of testing impairment, as the broadcasting licenses in
each market are operated as a single asset. We determine the fair value of the
broadcasting licenses in each of its markets by relying on a discounted cash
flow approach (a 10-year income model) assuming a start-up scenario in which the
only assets held by an investor are broadcasting licenses. Our 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.
These assumptions include, but are not limited to: (i) the discount rate; (ii)
the market share and profit margin of an average station within a market, based
upon market size and station type; (iii) the forecast growth rate of each radio
market; (iv) the estimated capital start-up costs and losses incurred during the
early years; (v) the likely media competition within the market area; (vi) the
tax rate; and (vii) future terminal values.
The methodology used by us in determining our key estimates and assumptions was
applied consistently to each market. Of the seven variables identified above, we
believe that the assumptions in items (i) through (iii) above are the most
important and sensitive in the determination of fair value.
Assumptions and Results - Broadcasting Licenses
The following table reflects the estimates and assumptions used in the interim
and annual broadcasting licenses impairment assessments for each respective
period.


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Estimates And Assumptions


                                             Third Quarter 2020         Second Quarter 2020       Fourth Quarter 2019
Discount rate                                             7.50  %                   8.00  %                   8.50  %
Operating profit margin ranges expected for
average stations in the markets where the
Company operates                                       24% to 36%                22% to 36%                18% to 36%
Forecasted growth rate (including long-term
growth rate) range of the Company's markets          0.0% to 0.7%              0.0% to 0.8%              0.0% to 0.8%


We believe we have made reasonable estimates and assumptions to calculate the
fair value of our broadcasting licenses. These estimates and assumptions could
be materially different from actual results.
If actual market conditions are less favorable than those projected by the
industry or by us, or if events occur or circumstances change that would reduce
the fair value of our broadcasting licenses below the amount reflected in the
condensed consolidated balance sheet, we may be required to conduct an interim
test and possibly recognize impairment charges, which may be material, in future
periods. The COVID-19 pandemic increases the uncertainty with respect to such
market and economic conditions and, as such, increases the risk of future
impairment.
Broadcasting License at Risk
The table below presents the percentage within a range by which the fair value
exceeded the carrying value of certain of our radio broadcasting licenses as of
September 30, 2020, for 22 units of accounting (22 geographical markets of the
48 total markets) where the carrying value of the licenses was assessed for
impairment during the third quarter of the current year.
Rather than presenting the percentage separately for each unit of accounting,
management's opinion is that this table in summary form is more meaningful to
the reader in assessing the recoverability of the broadcasting licenses. In
addition, the units of accounting are not disclosed with the specific market
name as such disclosure could be competitively harmful to us.
After the interim impairment test conducted on our broadcasting licenses in the
third quarter of 2020, the results indicated that there were 21 units of
accounting where the fair value exceeded their carrying value by 10% or less. In
aggregate, these 21 units of accounting have a carrying value of $1,812.3
million at September 30, 2020.
                      Units of Accounting as of September 30, 2020 Based

Upon the Valuation as of September 30, 2020

Percentage Range by Which Fair Value

Exceeds the Carrying Value

Greater than Greater than


                                                            0% to 5%           5% to 10%           10% to 15%           Greater than 15%
Number of units of accounting                                        8                   13                   1                          -
Carrying Value (in thousands)                             $ 960,690          $   851,587          $   16,744          $               -

Holding all of the assumptions used in the interim impairment assessment conducted during the third quarter of 2020 constant, changes in the assumptions below would reduce the fair value of our broadcasting licenses as follows:


                                             Sensitivity Analysis ¹

Percentage Decrease in Broadcasting Licenses


                                                                                    Fair Value
Increase in the discount rate from 7.5% to 8.5%                                                       12  %

Reduction in forecasted growth rate (including long-term growth rate) to 0%

                                                                                            2  %
Reduction in operating profit margin by 10%                                                            8  %

¹ Each assumption used in the sensitivity analysis is independent of the other assumptions


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If overall market conditions or the performance of the economy deteriorates,
advertising expenditures and radio industry results could be negatively
impacted, including expectations for future growth. This could result in future
impairment charges for these or other of our units of accounting, which could be
material. The COVID-19 pandemic increases the uncertainty with respect to such
market and economic conditions and, as such, increases the risk of future
impairment.
ITEM 3.  Quantitative And Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates on our
variable-rate senior indebtedness (the Term B-2 Loan and Revolver). From time to
time, we may seek to limit our exposure to interest rate volatility through the
use of derivative rate hedging instruments.
As of September 30, 2020, if the borrowing rates under LIBOR were to increase 1%
above the current rates, our interest expense on: (i) our Term B-2 Loan would
increase $3.4 million on an annual basis, including any increase or decrease in
interest expense associated with the use of derivative rate hedging instruments
as described below; and (ii) our Revolver would increase by $2.5 million,
assuming our entire Revolver was outstanding as of September 30, 2020.
Assuming LIBOR remains flat, interest expense in 2020 versus 2019 is expected to
be lower as we anticipate reducing our outstanding debt upon which interest is
computed. We may seek from time to time to amend our Credit Facility or obtain
additional funding, which may result in higher interest rates on our
indebtedness and could increase our exposure to variable-rate indebtedness.
During the quarter ended June 30, 2019, we entered into the following derivative
rate hedging transaction in the notional amount of $560.0 million to hedge our
exposure to fluctuations in interest rates on our variable-rate debt. This rate
hedging transaction is tied to the one-month LIBOR interest rate.
    Type                                                                               Fixed                                       Notional                Amount
     Of                Notional              Effective                                 LIBOR              Expiration                Amount                  After
   Hedge                Amount                  Date                Collar              Rate                 Date                 Decreases               Decrease
                       (amounts                                                                                                                           (amounts
                    (in millions)                                                                                                                       (in millions)

                                                                 Cap                2.75%                                      Jun. 28, 2021          $        340.0
Collar                  $460.0            Jun. 25, 2019          Floor              0.402%             Jun. 28, 2024           Jun. 28, 2022          $        220.0
                                                                                                                               Jun. 28, 2023          $         90.0
Total                   $460.0


The fair value (based upon current market rates) of the rate hedging transaction
is included as derivative instruments in long-term liabilities as the maturity
dates on this instrument are greater than one year. The fair value of the
hedging transaction is affected by a combination of several factors, including
the change in the one-month LIBOR rate. Any increase in the one-month LIBOR rate
results in a more favorable valuation, while any decrease in the one-month LIBOR
rate results in a less favorable valuation.
Our credit exposure under our hedging agreement, or similar agreements we may
enter into in the future, is the cost of replacing such agreements in the event
of nonperformance by our counterparty. To minimize this risk, we select high
credit quality counterparties. We do not anticipate nonperformance by such
counterparties, but could recognize a loss in the event of nonperformance. Our
derivative instrument liability as of September 30, 2020 was $3.1 million.
From time to time, we invest all or a portion of our cash in cash equivalents,
which are money market instruments consisting of short-term government
securities and repurchase agreements that are fully collateralized by government
securities. When such investments are made, we do not believe that we have any
material credit exposure with respect to these assets. As of September 30, 2020,
we did not have any investments in money market instruments.
Our credit exposure related to our accounts receivable does not represent a
significant concentration of credit risk due to the quantity of advertisers, the
minimal reliance on any one advertiser, the multiple markets in which we operate
and the wide variety of advertising business sectors.
See also additional disclosures regarding liquidity and capital resources made
under Liquidity and Capital Resources in Part 1, Item 2, above.
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