4. GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS:

Impairment Testing

We have historically made acquisitions whereby a significant amount of the purchase price was allocated to radio broadcasting licenses, goodwill and other intangible assets. In accordance with ASC 350, “Intangibles - Goodwill and Other,” we do not amortize our radio broadcasting licenses and goodwill. Instead, we perform a test for impairment annually across all reporting units, or on an interim basis when events or changes in circumstances or other conditions suggest impairment may have occurred in any given reporting unit. Other intangible assets continue to be amortized on a straight-line basis over their useful lives. We perform our annual impairment test as of October 1 of each year. For the years ended December 31, 2020 and 2019, we recorded impairment charges against radio broadcasting licenses and goodwill collectively, of approximately $84.4 million and $10.6 million, respectively.

Beginning in March 2020, the Company noted that the COVID-19 pandemic and the resulting government stay at home orders were dramatically impacting certain of the Company's revenues. Most notably, a number of advertisers across significant advertising categories have reduced or ceased advertising spend due to the outbreak and stay at home orders which effectively shut many businesses down in the markets in which we operate. This was particularly true within our radio segment which derives substantial revenue from local advertisers who have been particularly hard hit due to social distancing and government interventions. As a result of COVID-19, the total market revenue growth for certain markets in which we operate was below that assumed in our annual impairment testing.

2020 Interim Impairment Testing

During the first quarter of 2020, the Company recorded a non-cash impairment charge of approximately $5.9 million to reduce the carrying value of our Atlanta market and Indianapolis market goodwill balances and the Company recorded a non-cash impairment charge of approximately $47.7 million associated with our Atlanta, Cincinnati, Dallas, Houston, Indianapolis, Philadelphia, Raleigh, Richmond and St. Louis radio market broadcasting licenses. We did not identify any impairment indicators for the three months ended June 30, 2020. Based on the latest market data obtained by the Company in the third quarter of 2020, the total anticipated market revenue growth for certain markets in which we operate continues to be below that assumed in our first quarter impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of certain markets’ radio broadcasting licenses, which we performed as of September 30, 2020. As a result of that testing, the Company recorded a non-cash impairment charge of approximately $10.0 million related to its Atlanta market and Indianapolis market goodwill balances and the Company recorded a non-cash impairment charge of approximately $19.1 million for the three months ended September 30, 2020 associated with our Atlanta, Cincinnati, Dallas, Houston, Indianapolis, Philadelphia and Raleigh market radio broadcasting licenses.

2020 Annual Impairment Testing

We completed our 2020 annual impairment assessment as of October 1, 2020. Our 2020 annual impairment testing indicated the carrying values for our radio broadcasting licenses and goodwill attributable to Reach Media, TV One, digital and our radio broadcasting reporting units were not impaired. However we recorded an impairment charge of approximately $1.7 million associated with the estimated asset sale consideration for one of our St. Louis radio broadcasting licenses.

2019 Interim Impairment Testing

During the second quarter of 2019, the Company recorded a non-cash impairment charge of approximately $3.8 million associated with the sale of our Detroit market radio broadcasting licenses.

2019 Annual Impairment Testing

We completed our 2019 annual impairment assessment as of October 1, 2019. During the fourth quarter of 2019, the Company recorded a non-cash impairment charge of approximately $1.0 million associated with our Indianapolis market radio broadcasting licenses and approximately $5.8 million to reduce the carrying value of our Interactive One goodwill balance. Our 2019 annual impairment testing indicated the carrying values for our goodwill attributable to Reach Media, TV One, and our other radio broadcasting reporting units were not impaired.

Valuation of Broadcasting Licenses

We utilize the services of a third-party valuation firm to assist us in estimating the fair value of our radio broadcasting licenses and reporting units. Fair value is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the income approach to test for impairment of radio broadcasting licenses. A projection period of 10 years is used, as that is the time horizon in which operators and investors generally expect to recover their investments. When evaluating our radio broadcasting licenses for impairment, the testing is done at the unit of accounting level as determined by ASC 350, “Intangibles - Goodwill and Other.” In our case, each unit of accounting is a cluster of radio stations into one of our geographical markets. Broadcasting license fair values are based on the discounted future cash flows of the applicable unit of accounting assuming an initial hypothetical start-up operation which possesses FCC licenses as the only asset. Over time, it is assumed the operation acquires other tangible assets such as advertising and programming contracts, employment agreements and going concern value, and matures into an average performing operation in a specific radio market. The income approach model incorporates several variables, including, but not limited to: (i) radio market revenue estimates and growth projections; (ii) estimated market share and revenue for the hypothetical participant; (iii) likely media competition within the market; (iv) estimated start-up costs and losses incurred in the early years; (v) estimated profit margins and cash flows based on market size and station type; (vi) anticipated capital expenditures; (vii) estimated future terminal values; (viii) an effective tax rate assumption; and (ix) a discount rate based on the weighted-average cost of capital for the radio broadcast industry. In calculating the discount rate, we considered: (i) the cost of equity, which includes estimates of the risk-free return, the long-term market return, small stock risk premiums and industry beta; (ii) the cost of debt, which includes estimates for corporate borrowing rates and tax rates; and (iii) estimated average percentages of equity and debt in capital structures.

Our methodology for valuing broadcasting licenses has been consistent for all periods presented. Below are some of the key assumptions used in the income approach model for estimating the broadcasting license and goodwill fair values for the annual impairment testing performed and interim impairment testing where an impairment charge was recorded since January 1, 2019. During the year ended December 31, 2020, the Company recorded a non-cash impairment charge of approximately $68.5 million associated with our Atlanta, Cincinnati, Dallas, Houston, Indianapolis, Philadelphia, Raleigh, Richmond and St. Louis radio market broadcasting licenses. During the year ended December 31, 2019, the Company recorded a non-cash impairment charge of approximately $4.8 million associated with our Indianapolis and Detroit market radio broadcasting licenses.


Radio Broadcasting	October 1,			September 30,			March 31,			October 1,		June 30,
Licenses	2020			2020 (a)			2020 (a)			2019		2019 (*)

Impairment charge (in millions)	$	1.7*		$	19.1		$	47.7		1.0		$	3.8
Discount Rate		9.0	%		9.0	%		9.5	%	9.0	%		*
Year 1 Market Revenue Growth Rate Range		(10.7)% – (16.0)	%		(10.7)% – (16.8)	%		(13.3)		0.9% – 1.8	%		*
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		0.7% – 1.1	%		0.7% – 1.1	%		0.7% – 1.1		0.7% – 1.1	%		*
Mature Market Share Range		6.7% – 23.9	%		6.7% – 23.9	%		6.9% – 25.0		6.9% – 25.0	%		*
Mature Operating Profit Margin Range		27.7% –37.1	%		27.7% –37.1	%		27.6% –39.7		27.6% – 39.7	%		*

(a) Reflects changes only to the key assumptions used in the interim testing for certain units of accounting.

(*) License fair value based on estimated asset sale consideration.

Broadcasting Licenses Valuation Results

The Company’s total broadcasting licenses carrying value is approximately $484.1 million as of December 31, 2020. The units of accounting reflected in the table below are not disclosed on a specific market basis so as to not make sensitive information publicly available that could be competitively harmful to the Company.


	Radio Broadcasting Licenses
	Carrying Balances
	As of		Net			As of
	December 31,		Increase			December 31,
Unit of Accounting	2019		(Decrease)			2020
	(In thousands)
Unit of Accounting 2	$	3,086	$	–		$	3,086
Unit of Accounting 5		16,100		(2,575)			13,525
Unit of Accounting 7		14,748		475			15,223
Unit of Accounting 11		20,135		(4,575)			15,560
Unit of Accounting 4		16,142		–			16,142
Unit of Accounting 15		20,736		(20,736)			—
Unit of Accounting 14		20,770		(1,700)			19,070
Unit of Accounting 6		22,642		–			22,642
Unit of Accounting 13		47,846		(8,200)			39,646
Unit of Accounting 12		49,663		(16,695)			32,968
Unit of Accounting 8		62,015		(9,500)			52,515
Unit of Accounting 16		56,295		(1,625)			54,670
Unit of Accounting 1		93,394		(9,025)			84,369
Unit of Accounting 10		139,125		(24,475)			114,650
Total	$	582,697	$	(98,631)	*	$	484,066

* The amount listed is net of additions, dispositions, impairment charges, and reclassifications into assets held for sale.

Our licenses expire at various dates through February 1, 2029.

Valuation of Goodwill

The impairment testing of goodwill is performed at the reporting unit level. We had 17 reporting units as of our October 2020 annual impairment assessment, consisting of each of the 14 radio markets within the radio division (we retained ownership of our St. Louis market assets as of December 31, 2020) and each of the other three business divisions. In testing for the impairment of goodwill, we primarily rely on the income approach. The approach involves a 10-year model with similar variables as described above for broadcasting licenses, except that the discounted cash flows are based on the Company’s estimated and projected market revenue, market share and operating performance for its reporting units, instead of those for a hypothetical participant. We use a 5-year model for our Reach Media reporting unit. We evaluate all events and circumstances on an interim basis to determine if an impairment indicator is present and also perform annual testing by comparing the fair value of the reporting unit with its carrying amount. We recognize an impairment charge to operations in the amount that the reporting unit’s carrying value exceeds its fair value. The impairment charge recognized cannot exceed the total amount of goodwill allocated to the reporting unit.

We have not made any changes to the methodology for valuing or allocating goodwill when determining the fair values of the reporting units. As noted above, during the first and third quarters of 2020 due to the COVID-19 pandemic, we identified impairment indicators at certain of our radio markets, and, as such, we performed an interim analysis for certain radio market goodwill. During the three months ended March 31, 2020, the Company recorded a non-cash impairment charge of approximately $5.9 million to reduce the carrying value of our Atlanta and Indianapolis market goodwill balances. We did not identify any impairment indicators at any of our other reportable segments for the three months ended June 30, 2020. During the three months ended September 30, 2020, the Company recorded a non-cash impairment charge of approximately $10.0 million related to its Atlanta market and Indianapolis market goodwill balances. During the fourth quarter of 2019, the Company performed its annual impairment testing on the valuation of goodwill associated with our digital segment. Our digital segment’s net revenues and cash flow internal projections were revised downward and as a result of our annual assessment, the Company recorded a goodwill impairment charge of approximately $5.8 million.

Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for the annual impairment assessments performed and interim impairment testing where an impairment charge was recorded since January 1, 2019.


Goodwill (Radio Market	October 1,			September 30,			March 31,			October 1,
Reporting Units)	2020(a)			2020(a)			2020(a)			2019(a)

Impairment charge (in millions)	$	—		$	10.0		$	5.9		$	—

Discount Rate		9.0	%		9.0	%		9.5	%		9.0
Year 1 Market Revenue Growth Rate Range		(12.9)% – 25.9	%		(26.6)% – 34.7	%		(14.5)% – (12.9)	%		(7.6)% – 49.3
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		0.7% – 1.1	%		0.9% – 1.1	%		0.9% – 1.1	%		0.7% – 1.1
Mature Market Share Range		6.8% – 16.8	%		8.4% – 12.7	%		11.1% – 13.0	%		7.1% - 17.0
Mature Operating Profit Margin Range		27.7% –49.1	%		27.7% – 48.1	%		29.4% – 39.0	%		26.8% - 47.6

(a) Reflects the key assumptions for testing only those radio markets with remaining goodwill.

Below are some of the key assumptions used in the income approach model for estimating the fair value for Reach Media for the annual and interim impairment assessments performed since October 2019. When compared to the discount rates used for assessing radio market reporting units, the higher discount rates used in these assessments reflect a premium for a riskier and broader media business, with a heavier concentration and significantly higher amount of programming content assets that are highly dependent on a single on-air personality. As a result of our impairment assessments, the Company concluded that the goodwill was not impaired.


		October 1,			October 1,
Reach Media Segment Goodwill		2020			2019

Impairment charge (in millions)	$	—		$	—

Discount Rate		11.0	%		10.5	%
Year 1 Revenue Growth Rate		22.1	%		(9.7)	%
Long-term Revenue Growth Rate (Year 5)		1.0	%		1.0	%
Operating Profit Margin Range		18.0 - 19.1	%		13.3% - 14.3	%

During the fourth quarter of 2019, the Company performed its annual impairment testing on the valuation of goodwill associated with our digital segment. Our digital segment's net revenues and cash flow internal projections were revised downward and as a result of our annual assessment, the Company recorded a goodwill impairment charge of approximately $5.8 million. Below are some of the key assumptions used in the income approach model for determining the fair value of our digital reporting unit since October 2019. When compared to discount rates for the radio reporting units, the higher discount rate used to value the reporting unit is reflective of discount rates applicable to internet media businesses. The Company concluded no impairment to the carrying value of goodwill had occurred as a result of the annual testing performed in October 2020.


	October 1,			October 1,
Digital Segment Goodwill	2020			2019

Impairment charge (in millions)	$	—		$	5.8

Discount Rate		14.0	%		12.0	%
Year 1 Revenue Growth Rate		(5.4)	%		12.2	%
Long-term Revenue Growth Rate (Years 6 – 10)		3.4% - 6.0	%		2.8% - 7.7	%
Operating Profit Margin Range		(12.5)% - 13.1	%		(4.7)% - 11.	%

Below are some of the key assumptions used in the income approach model for determining the fair value of our cable television segment since October 2019. As a result of the testing performed in 2020 and 2019, the Company concluded no impairment to the carrying value of goodwill had occurred.


	October 1,			October 1,
Cable Television Segment Goodwill	2020			2019

Impairment charge (in millions)	$	—		$	—

Discount Rate		10.5	%		10.0	%
Year 1 Revenue Growth Rate		4.5	%		1.0	%
Long-term Revenue Growth Rate Range (Years 6 – 10)		0.6% - 1.5	%		1.9% - 2.3	%
Operating Profit Margin Range		37.2% - 46.1	%		33.0% - 45.5	%

The above goodwill tables reflect some of the key valuation assumptions used for 11 of our 17 reporting units. The other six remaining reporting units had no goodwill carrying value balances as of December 31, 2020.

Goodwill Valuation Results

The table below presents the changes in Company’s goodwill carrying values for its four reportable segments during 2020 and 2019:


	Radio						Cable
	Broadcasting		Reach Media		Digital		Television
	Segment		Segment		Segment		Segment		Total
	(In thousands)
Gross goodwill	$	155,000	$	30,468	$	27,567	$	165,044	$	378,079
Accumulated impairment losses		(101,848)		(16,114)		(14,545)		—		(132,507)
Additions		—		—		—		—		—
Impairments		—		—		(5,800)		—		(5,800)
Net goodwill at December 31, 2019	$	53,152	$	14,354	$	7,222	$	165,044	$	239,772
Gross goodwill	$	155,000	$	30,468	$	27,567	$	165,044	$	378,079
Accumulated impairment losses		(101,848)		(16,114)		(20,345)		—		(138,307)
Additions		—		—		—		—		—
Impairments		(15,900)		—		—		—		(15,900)
Assets held for sale		(470)		—		—		—		(470)
Net goodwill at December 31, 2020	$	36,782	$	14,354	$	7,222	$	165,044	$	223,402

In arriving at the estimated fair values for radio broadcasting licenses and goodwill, we also performed an analysis by comparing our overall average implied multiple based on our cash flow projections and fair values to recently completed sales transactions, and by comparing our estimated fair values to the market capitalization of the Company. The results of these comparisons confirmed that the fair value estimates resulting from our annual assessments in 2020 were reasonable.

Intangible Assets Excluding Goodwill and Radio Broadcasting Licenses

Other intangible assets, excluding goodwill, radio broadcasting licenses and the unamortized brand name, are being amortized on a straight-line basis over various periods. Other intangible assets consist of the following:


						Remaining
						Weighted-
						Average
	As of December 31,				Period of	Period of
	2020		2019		Amortization	Amortization
	(In thousands)
Trade names	$	17,425	$	17,413	1-5 Years	1.1 Years
Intellectual property		9,531		9,531	4-10 Years	0.0 Years
Acquired income leases		127		127	3-15 Years	10.2 Years
Advertiser agreements		46,789		46,789	1-12 Years	2.4 Years
Favorable office and transmitter leases		2,097		2,097	2-60 Years	38.7 Years
Brand names		4,413		4,413	10 Years	6.9 Years
Brand names - unamortized		39,690		39,690	Indefinite	—
Debt costs		2,053		510	Debt term	0.0 Years
Launch assets		9,021		6,284	Contract length	4.5 Years
Other intangibles		675		675	1-5 Years	0.8 Years
		131,821		127,529
Less: Accumulated amortization		(75,768)		(69,317)
Other intangible assets, net	$	56,053	$	58,212		4.8 Years

Amortization expense of intangible assets for the years ended December 31, 2020 and 2019 was approximately $3.9 million and $10.9 million, respectively.

The following table presents the Company’s estimate of amortization expense for the years 2021 through 2025 for intangible assets:


	(In thousands)
2021	$	4,663
2022	$	4,637
2023	$	2,212
2024	$	1,208
2025	$	230

The table above excludes launch asset amortization as it is recorded as a reduction to revenue. Actual amortization expense may vary as a result of future acquisitions and dispositions.