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Entercom cuts
- Thread starter raccoonradio
- Start date
If I had to take a guess, their APD/MD Mike Mullaney. He was an interim host when they transitioned away from Dan O'Brien.
David Field is a dirtbag.
Are we supposed to be impressed by his 30 percent pay cut?
By the way, David Eduardo, it is extremely unlikely that Mr. Field's effective tax rate between state, federal and local income taxes is anywhere near 60 percent. Most wealthy guys (top 1% of earners) pay an effective federal tax rate of about 25 percent. Most states' highest marginal rate is no greater than 8%. The social security tax of 6.2% only applies to the first $137,700 of earnings from wages & salary for 2020; the 1.45% Medicare tax is not subject to a ceiling. City income tax rates are usually 2% or less.
A more reasonable estimate would probably be 35 percent.
Some activist shareholders should coalesce to demand his resignation!!! Even before the current health (and economic) crisis, he was running Entercom straight into the ground! Tremendous shareholder value has been lost. What is truly disturbing is how quickly he's dismantled some of the Country stations from the CBS Radio portfolio. WYCD in Detroit, for example, has never sounded worse. I learned two great air personalities were part of this past week's terminations. So, an already ailing station is about to sound much worse.
I do give Bob Pittman credit for completely giving up his salary for 2020.
Average effective federal income tax rates paid by income tranche:
https://www.fool.com/retirement/2016/10/31/heres-what-the-average-american-pays-in-taxes.aspx
(For top earners, effective rates are now a bit less than what the above article shows, but the article is still good for providing some general flavor. The above article was published prior to the most recent income tax reform law taking effect.)
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No. He didn't do it to impress you, and he doesn't care what you think.
Activist shareholders want him to fire more people. He thought he was done a couple months ago, and then this hit.
BTW Pittman's deal with the lenders is up at the end of the year. It'll be interesting to see if he gets extended another year.
You are looking at the top 1% who have most income from investments, not earned income. Investment income is taxed differently than the earned portion.
And the "Top 1%" is way above the level of most broadcast management income levels.
But we are talking about salaries here because the CEOs of several radio groups have only taken cuts in salary, not other benefits. Of course, the other benefits are generally stock incentives and performance bonuses, none of which will go into effect this year.
So when we talk about salaries in the over-$500,000 a year range we have the highest federal rate, highest state rate and, in some cities, the highest city rate.
Some states, like CA, go up to 12% by the way. And the Trump tax legislation punished higher earners in high state tax jurisdictions as it severely limited the deductability of state taxes and home loan interest, so that federal taxes are being paid on money the worker never even got!
So my estimate on the earned income of Field is correct: nearly 60% of his salary will sent to the various tax and Social Security authorities before he ever sees it.
Of course, Field has other income from non-Entercom investments and the like. But that is not what the subject here involves.
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Only the first $137.7 K is FICA taxed,
last year his salary was 1.2M with a total compensation of 3.5M
Interesting analysis of his compensation based on company performance here: https://www.rbr.com/entercom-stock-dips-again-as-fields-pay-is-examined/
ETM has exhausted their credit lines, the stock is at a 12 year low and tanking fast.... will they be the first media company to go under?
I would not feel bad if the creditors ended up with the company and the Fields family was left destitute.
Depends. They might qualify for the gov't interest free loans to cover for the virus.
The Redstones might get involved, since they're stockholders in ETM under the reverse morris trust.
The Fields might already be looking at some kind of merger with someone stronger.
We might see more asset sales, although this would be a terrible time for that.
I'd recommend an asset partnership, whereby the companies remain independent, but certain assets could be shared to save money.
If the creditors get involved, you'll see a lot more bloodletting. Creditors have no emotional attachment.
Lots of options, but the clock is ticking.
It was the last merger that saddled them with all this debt
The Redstones were the reason CBS got out of Radio, they are not going to want back in, the loss is worth more to them as a tax write off than as an asset
The Redstones were the reason CBS got out of Radio, they are not going to want back in, the loss is worth more to them as a tax write off than as an asset
Under the deal, they own a big chunk of ETM shares. I'm not saying they would buy it back. ViacomCBS shares are also way down right now.
But the potential is there for creative deal making. I've seen it happen.
A merger only consolidates the debt of two independent companies in one corporation. Neither company bought the other... they merged. CBS shareholders (not CBS corporate) got new shares in Entercom.
And this was not a straight merger... it was a rather uncommon Reverse Morris Trust.
https://en.wikipedia.org/wiki/Reverse_Morris_Trust
The most important part:
A Reverse Morris Trust is used when a parent company has a subsidiary (sub-company) that it wants to sell in a tax-efficient manner. The parent company completes a spin-off of a subsidiary to the parent company's shareholders. Under Internal Revenue Code section 355, this could be tax-free if certain criteria are met. The former subsidiary (now owned by the parent company's shareholders, but separate from the parent company) then merges with a target company to create a merged company. Under Internal Revenue Code section 368(a)(1)(A), this transaction could be largely tax-free if the former subsidiary is considered the "buyer" of the target company. The former subsidiary is the "buyer" if its shareholders (also the original parent company's shareholders) own more than 50% of the merged company.
There are tax advantages in the RMT and the article above does a fair job of explaining the operation in theory.
There is no loss to CBS itself. The "ownership" of CBS radio was transferred to the shareholders of CBS in the form of shares in Entercom.
And there is no tax write off until current owners sell the shares. If they keep holding them, the loss is only theoretical.
But this year, there will be no additional beyond-the-salary compensation, and the salary will be dropped to $600 k. That pays taxes at the highest rates, for Federal, state and city income. There are very limited deductions from Federal for the state and city taxes.
On his income, he will pay over 50% in the combined income taxes, plus Social Security and other deductions. If it does not hit 60% it will come close.
My point was that even if a higher paid (by large company standards, Field was not very highly paid) executive gets a big pay cut, half or more of the money still goes to the government. But that pay cut ends up costing the government a lot more in tax revenue.
As I said, this was based only on earned income. If he has investment income or losses, those can increase or reduce the total tax bill. But I was not talking about that.
Which is what Disney did when it sold its radio division to Citadel.
And in both cases the heritage company had stations that had been obtained or put on the air many decades before the merger, and would have been subject to huge capital gains taxes. The Reverse Morris device does the deal with no taxable capital gains.
I see now you are mentioning "other deductions." I am not sure why. Deductions reduce your tax bill, not increase it.
I laid out the math earlier. I tried to make it easy to follow. You are most likely wrong to suggest his effective income tax rate (w/ FICA taxes) will "come close" to 60%. Multiple academic articles that can be easily found on the internet fully dispute your assertion that the wealthy (on average) pay anywhere near 60% of their income in income taxes.
Yes, some investment income is taxed differently. The top tax rate for long-term capital gains is only 20%. That's much lower than the top marginal tax rate for wages & salary. If Mr. Field has capital loss carryforwards from prior years, he can use those to offset capital gains in the current tax year.
Short-term capital gains are taxed at the ordinary tax rate.
BTW, David, don't try to obfuscate your initial point. Anyone who reports north of ~$425,000 in annual income is in the top 1% of earners across America. We're talking about the top executive of a national company here, not a mid-level manager. Mr. Field falls into that category easily, assuming he doesn't choose to sell a bunch of his stock at a big loss and doesn't have a bunch of Schedule E losses to report. Sure, on a state by state basis, the threshold for achieving top 1% earner status varies widely. I am talking about the USA as a whole.
https://www.cnbc.com/2018/07/27/how...be-in-the-top-1percent-in-every-us-state.html
BigA - you are right; Mr. Field probably doesn't care one iota about what any of us think.
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Of course not. What are you going to do? Vote him off the island? This isn't a reality TV show. He's trying to keep his company afloat.
Ouch, that's harsh! So by your measure, anyone who has been successful in their family business, now in this pandemic, should lose everything and be on the street?
Be careful what you say out loud. Karma is a bi*ch.
4.0x net debt to pro forma Adjusted EBITDA on day 1 of the merged enterprise is too much debt for a company to be carrying in an industry whose revenue base is continually shrinking and is vulnerable to macroeconomic cycles. Take away the purported "expected transaction synergies," and opening leverage at time of the merger was near or north of 5.0x.
I doubt Field cared. He became CEO of a much larger company, which meant a much larger paycheck for himself.
It's his family's company. His father is still the Chairman. This isn't some theoretical situation. This is real life.
The fact is that CBS was going to sell off its radio division. When that happened, circumstances at those stations would change. At the time, Entercom was among the strongest radio companies in the industry. Operationally, they were more likely to leave the bigger, more successful stations operate the way they had been. Consider if an investment company had come in to buy it. Sure they might have had deeper pockets, but they weren't going to allow this division to dig too deep a hole. I don't see much of a difference. It's just a matter of who you want to blame. And in my view, the blame game isn't very useful or productive.
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