Fair Value Measurements (Tables)
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12 Months Ended |
Dec. 31, 2019 |
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| Fair Value Disclosures [Abstract] |
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| Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis |
The following tables summarize the Company’s assets and liabilities measured at fair value on a recurring basis as of December 31, 2019, and 2018, respectively (in thousands, except as presented in footnotes to the tables):
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December 31, 2019 |
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Quotes Prices in Active Markets
(Level 1)
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Significant Other Observable Inputs
(Level 2)
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Significant Other Unobservable Inputs
(Level 3)
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Liabilities: |
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Contingently issuable shares(2)
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$ |
305 |
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$ |
— |
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$ |
— |
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$ |
305 |
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Phantom stock options(3)
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464 |
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— |
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— |
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464 |
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Total |
$ |
769 |
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$ |
— |
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$ |
— |
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$ |
769 |
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December 31, 2018 |
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Quotes Prices in Active Markets
(Level 1)
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Significant Other Observable Inputs
(Level 2)
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Significant Other Unobservable Inputs
(Level 3)
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Liabilities: |
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Earn-out liability(1)
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$ |
114 |
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$ |
— |
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$ |
— |
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$ |
114 |
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Contingently issuable shares(2)
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1,371 |
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— |
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— |
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1,371 |
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Phantom stock options(3)
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1,564 |
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— |
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— |
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1,564 |
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Total |
$ |
3,049 |
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$ |
— |
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$ |
— |
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$ |
3,049 |
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(1) |
Represents aggregate earn-out liabilities for the Company’s acquisitions of WOI, RMG, navAero and masFlight assumed in business combinations for the year ended December 31, 2015. |
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(2) |
In connection with the Sound Recording Settlements (as described below in Note 11. Commitments and Contingencies), the Company is obligated to issue to UMG (as defined in that Note) 20,000 shares of its common stock when and if the closing price of the Company's common stock exceeds $250.00 per share and an additional 16,000 shares of common stock when and if the closing price of the Company’s common stock exceeds $300.00 per share. Such contingently issuable shares are classified as liabilities and are re-measured to fair value each reporting period.
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(3) |
The Company’s cash-settled phantom stock options, granted during 2018, are accounted for as liability awards and are re-measured at fair value each reporting period with compensation expense being recognized over the requisite service period. As of December 31, 2019, the aggregate estimated fair value of the Company’s cash-settled phantom stock options was $0.8 million, for which the vested portion recognized as a liability in its Consolidated Balance Sheets was $0.5 million. The cash-settled phantom stock options are described in more detail in Note 13. Equity Transactions.
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| Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation |
The following tables present the fair value roll-forward reconciliation of Level 3 assets and liabilities measured at fair value for the years ended December 31, 2019 and 2018, respectively (in thousands):
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Phantom stock Options (Level 3) |
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Liability Warrants (Level 3) |
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Contingently Issuable Shares
(Level 3)
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Earn-Out Liabilities (Level 3) |
Balance, December 31, 2017 |
$ |
— |
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$ |
20 |
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$ |
1,448 |
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$ |
114 |
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Fair value of cash-settled phantom stock options |
1,564 |
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— |
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— |
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— |
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Change in value |
— |
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(20 |
) |
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(77 |
) |
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— |
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Balance, December 31, 2018 |
1,564 |
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— |
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1,371 |
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114 |
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Change in value |
(1,100 |
) |
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— |
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(1,066 |
) |
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(114 |
) |
Balance, December 31, 2019 |
$ |
464 |
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$ |
— |
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$ |
305 |
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$ |
— |
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The following table presents information about significant unobservable inputs related to Level 3 financial liabilities as of December 31, 2019:
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Phantom Stock Options |
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Contingently Issuable Shares |
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Tranche 1 |
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Tranche 2 |
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Tranche 1 |
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Tranche 2 |
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Assumed liquidation company share price |
N/A |
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N/A |
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$ |
250.00 |
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$ |
300.00 |
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Common stock price at December 31, 2019 |
$ |
12.50 |
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$ |
12.50 |
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$ |
12.50 |
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$ |
12.50 |
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Exercise price |
$ |
100.00 |
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$ |
200.00 |
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N/A |
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N/A |
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Estimated term (in years) |
3.5 - 6.6 |
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3.5 - 5.5 |
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23.32 |
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24.74 |
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Expected stock volatility |
75.6% - 98.7% |
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79.6% - 98.7% |
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86.0 |
% |
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86.0 |
% |
Risk free rate |
1.60% - 1.83% |
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1.60% - 1.70% |
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N/A |
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N/A |
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Dividend yield |
— |
% |
— |
% |
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— |
% |
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— |
% |
Implied discount for lack of marketability (1)
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N/A |
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N/A |
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32.3 |
% |
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32.3 |
% |
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(1) |
A discount for lack of marketability was applied to the resulting values as the shares, when issued, may not initially be registered with the SEC. |
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| Fair Value, by Balance Sheet Grouping |
The following table shows the carrying amounts of the Company’s long-term debt in the consolidated financial statements (in thousands):
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December 31, 2019 |
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December 31, 2018 |
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Carrying Amount (7)
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Fair Value |
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Carrying Amount |
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Fair Value |
Senior secured term loan facility, due January 2023 (+)(1)
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$ |
485,166 |
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$ |
454,168 |
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$ |
455,292 |
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$ |
473,344 |
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Senior secured revolving credit facility, due January 2022 (+)(2)
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43,315 |
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43,315 |
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54,015 |
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54,015 |
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2.75% convertible senior notes due 2035 (1) (3)
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71,126 |
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37,125 |
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70,419 |
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49,064 |
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Second lien notes, due 2023 (4) (5)
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149,772 |
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99,922 |
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128,178 |
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112,230 |
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Other debt (6)
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23,683 |
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23,685 |
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1,707 |
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1,707 |
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$ |
773,062 |
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$ |
658,215 |
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$ |
709,611 |
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$ |
690,360 |
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(+) This facility is a component of the 2017 Credit Agreement
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(1) |
The estimated fair value is classified as Level 2 financial instrument and was determined based on the quoted prices of the instrument in an over-the-counter market. |
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(2) |
The estimated fair value is considered to approximate carrying value given the short-term maturity and is classified as Level 3 financial instruments. The Company expect to draw on the 2017 Revolving Loans from time to time to fund its working capital needs and for other general corporate purposes. |
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(3) |
The fair value of the 2.75% Convertible Notes is exclusive of the conversion feature therein, which was originally allocated for reporting purposes at $13.0 million, and is included in the Consolidated Balance Sheets within “Additional paid-in capital” (see Note 13. Equity Transactions). The principal amount outstanding of the Convertible Notes was $82.5 million as of December 31, 2019, and the carrying amounts in the above table reflect this outstanding principal amount net of debt issuance costs and discount associated with the equity component.
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(4) |
The principal amount outstanding of the Second Lien Notes, due June 2023 as set forth in the above table was $178.0 million as of December 31, 2019, and includes approximately $28.0 million of payment-in-kind (“PIK”) interest converted to principal since debt issuance. The value allocated to the attached penny warrants and market warrants for financial reporting purposes was $14.9 million and $9.3 million, respectively. These qualify for classification in stockholders’ equity and are included in the Consolidated Balance Sheets within “Additional paid-in capital” (see Note 10. Financing Arrangements).
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(5) |
The fair value of the Second Lien Notes was determined based on a Black-Derman-Toy interest rate Lattice model. The key inputs of the valuation model contain certain Level 3 inputs. |
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(6) |
The estimated fair value is considered to approximate carrying value and is classified as Level 3 financial instruments. As of December 31, 2019, Other debts primarily consisted of: (i) $3.4 million financing for transponder purchases and (ii) $19.0 million of finance lease liability relating to an assessed right-of-use over a satellite bandwidth capacity (refer to Note 4. Leases for details).
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(7) |
The carrying amounts at December 31, 2019 and 2018 are presented net of $60.5 million and $65.2 million of unamortized bond discounts and issuance costs, respectively.
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