GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill And Intangible Assets Disclosure [Text Block]

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

Impairment Testing

In the past, we have 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 or on an interim basis when events or changes in circumstances or other conditions suggest impairment may have occurred. 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, 2011, 2010 and 2009, we recorded impairment charges against radio broadcasting licenses and goodwill of approximately $14.5 million, $36.1 million and $65.6 million, respectively.

2011 Interim Impairment Testing

During the second quarter of 2011, the total market revenue growth for certain markets was below that used in our 2010 annual impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of certain of our radio broadcasting licenses, which we performed as of May 31, 2011. During the third quarter, there was further deterioration of revenue growth in certain markets, and as such, we deemed that to be an impairment indicator that warranted interim testing of certain radio broadcasting licenses as of September 30, 2011. The Company concluded that our radio broadcasting licenses were not impaired during the second or third quarters of 2011. During the second and third quarters of 2011, the operating performance and current projections for the remainder of the year for specific radio markets were below that used in our 2010 annual impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of goodwill associated with specific radio markets, which we performed as of May 31, 2011 and as of September 30, 2011. The Company concluded that goodwill had not been impaired during the second and third quarters of 2011.

In addition, Reach Media’s actual operating results did not meet budgeted results during 2011 and as such, interim impairment testing for goodwill attributable to Reach Media was performed in March, June and September of 2011. There were no impairment charges recorded as part of our interim impairment testing.

2011 Annual Impairment Testing

We completed our annual impairment assessment as of October 1, 2011. As a result of our testing, we recorded an impairment charge of approximately $14.5 million against goodwill in our Columbus market. Our October 1, 2011 annual impairment testing indicated the carrying values for our radio broadcasting licenses and goodwill attributable to Interactive One were not impaired.

2011 Year End Impairment Testing

We completed an impairment assessment as of December 31, 2011 for Reach Media. Due to amendments of existing Reach Media affiliate agreements with Radio One, Reach Media’s expected future cash flows will be reduced. There were no goodwill impairment charges recorded as part of our year end impairment testing. However, the Company recognized a non-cash impairment charge of approximately $7.8 million related to the long-lived assets of Reach Media.

Valuation of Broadcasting Licenses

We utilize the services of a third-party valuation firm to provide independent analysis when evaluating the fair value of our radio broadcasting licenses. 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 we believe 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 clustering of radio stations into one of our 15 geographical markets.  Broadcasting license fair values are based on the estimated after-tax 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) probable 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 broadcasting licenses fair values for all annual and interim impairments assessments performed since January 2009.

	February 28,			August 31,			October 1,			October 1,			May 31,			September 30,			October 1,
Radio Broadcasting Licenses	2009			2009 (a)			2009			2010			2011 (a)			2011 (a)			2011
Pre-tax impairment charge (in millions)	$	49		$	–		$	16.1		$	19.9		$	—		$	—		$	—
Discount Rate		10.5	%		–			10.5	%		10.0	%		10.0	%		9.5	%		10.0	%
Year 1 Market Revenue Growth or Decline Rate or Range		(13.1)% - (17.7	)%		(22.3	)%		1.0	%		1.0% - 3.0	%		1.3% - 2.8	%		1.5% - 2.0	%		1.5% - 2.5	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.5% - 2.5	%		–			1.0% - 2.5	%		1.0% - 2.5	%		1.5% - 2.0	%		1.5% - 2.0	%		1.0% - 2.0	%
Mature Market Share Range		1.2% - 27.0	%		–			0.8% - 28.1	%		0.8% - 28.3	%		9.0% - 22.5	%		9.3% - 22.4	%		0.7% - 28.9	%
Operating Profit Margin Range		17.7% - 50.7	%		–			18.5% - 50.7	%		19.0% - 47.3	%		32.7% - 40.8	%		32.7% - 33.0	%		19.1% - 47.4	%

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

Broadcasting Licenses Valuation Results

The Company’s total broadcasting licenses carrying value is approximately $677.4 million as of December 31, 2011. There were no changes to the carrying values of the Company’s radio broadcasting licenses for the year ended December 31, 2011 for each unit of accounting, as noted in the table below. As noted above, each unit of accounting is a clustering of radio stations into one geographical market. The units of accounting 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				As of
Unit of Accounting	December 31, 2010		Impairment		December 31, 2011
	(In thousands )
Unit of Accounting 2		3,086		-		3,086
Unit of Accounting 4		9,482		-		9,482
Unit of Accounting 5		18,657		-		18,657
Unit of Accounting 7		19,265		-		19,265
Unit of Accounting 14		20,434		-		20,434
Unit of Accounting 15		20,886		-		20,886
Unit of Accounting 11		21,135		-		21,135
Unit of Accounting 9		34,270		-		34,270
Unit of Accounting 6		26,242		-		26,242
Unit of Accounting 16		52,965		-		52,965
Unit of Accounting 13		52,556		-		52,556
Unit of Accounting 8		66,715		-		66,715
Unit of Accounting 12		58,779		-		58,779
Unit of Accounting 1		93,394		-		93,394
Unit of Accounting 10		179,541		-		179,541
Total	$	677,407	$	-	$	677,407

Valuation of Goodwill

The impairment testing of goodwill is performed at the reporting unit level. We had 19 reporting units as of our October 2010 annual impairment assessments. Due to the consolidation of TV One and with the treatment of our Boston station as a discontinued operation during the quarter ended June 30, 2011, the Company continues to have 19 reporting units; however, they now consist of the 15 radio markets and four 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 follow a two-step process to evaluate if a potential impairment exists for goodwill. The first step of the process involves estimating the fair value of each reporting unit. If the reporting unit’s fair value is less than its carrying value, a second step is performed to allocate the fair value of the reporting unit to the individual assets and liabilities of the reporting unit in order to determine the implied fair value of the reporting unit’s goodwill as of the impairment assessment date. Any excess of the carrying value of the goodwill over the implied fair value of the goodwill is written off as a charge to operations.

While our internal projections considered the recent revenue and cash flow declines experienced by the Company, those results may not be necessarily indicative of our future results. Given the recent gradual improvement in the economy, we have included modest improvement estimates and projections compared to our 2010 annual assessment. We have not made any changes to the methodology for valuing or allocating goodwill when determining the carrying values of the radio markets.

Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for all interim and annual impairment assessments performed since January 2009.

Goodwill (Radio Market Reporting Units)	February 28, 2009			August 31, 2009 (a)			October 1, 2009 (b)			October 1, 2010 (c)			May 31, 2011 (d)			September 30, 2011 (d)			October 1, 2011
Pre-tax impairment charge (in millions)	$	–		$	–		$	0.6		$	–		$	–		$	–		$	14.5
Discount Rate		10.5	%		–			10.5	%		10.0	%		10.0	%		9.5	%		10.0	%
Year 1 Market Revenue Decline or Growth Rate or Range		(13.1)% - (17.7)	%		(19.9	)%		1.0	%		1.5% - 3.0	%		1.5% - 3.0	%		1.5	%		2.0% - 2.5	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.5% - 2.5	%		–			1.5% - 2.5	%		1.5% - 2.5	%		1.5% - 2.0	%		1.5	%		1.5% - 2.0	%
Mature Market Share Range		2.8% - 22.0	%		–			7.0% - 16.5	%		7.0% - 23.0	%		7.0% - 23.0	%		13.8	%		7.4% - 20.8	%
Operating Profit Margin Range		15.0% - 61.5	%		–			30.0% - 57.5	%		27.5% - 58.0	%		30.0% - 56.0	%		36.0	%		29.5% - 54.0	%

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

(b) Reflects some of the key assumptions for testing only those radio markets with remaining goodwill for October 2009.

(c) Reflects some of the key assumptions for testing only those radio markets with remaining goodwill for October 2010.

(d) Reflects changes only to the key assumptions used in the second and third quarter 2011 interim testing for certain reporting units.

Due to the September 2009 amendment of Reach Media’s Sales Representation Agreement with Citadel, Reach Media began to sell advertising inventory within the Tom Joyner Morning Show through an internal sales force. This shift from a guaranteed revenue arrangement with Citadel resulted in reduced revenues and operating cash flow in 2010 compared to the original budget and interim forecasts. As a result, we performed a number of interim impairment tests in 2010. Given the continued decline in revenues and cash flows during 2010, we reduced the revenue and operating cash flow projections for Reach Media at each interim impairment assessment and at our year end assessment. In addition, we performed a number of interim impairment tests in 2011 because actual operating results did not meet budgeted results. Based on this, we reduced our operating cash flow projections and assumptions for our interim testing as well as our year end testing. Since our annual assessment in October 2009, we have not made any changes to the methodology for valuing or allocating goodwill when determining the carrying value for Reach Media.

Below are some of the key assumptions used in the income approach model for estimating the fair value for Reach Media for all interim, annual and year end assessments since October 2009. 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 related intangible assets that are highly dependent on the on-air personality Tom Joyner. As a result of the October 2009 annual assessment and the February, May and August 2010 interim assessments, the Company concluded no impairment to the carrying value of Reach Media had occurred. During the fourth quarter of 2010, Reach Media’s operating performance continued to decline, but at a decreasing rate. We believe this represented an impairment indicator and as a result, we performed a year end impairment assessment at December 31, 2010. We recorded an impairment charge of $16.1 million during the quarter ended December 31, 2010 in connection with this assessment. As a result of our 2011 interim and year end assessments, the Company concluded no impairment for the goodwill value had occurred during the year ended December 31, 2011.

	October			February			May			August			December			March			June			September			December
	1,			28,			31,			31,			31,			31,			30,			30,			31,
Reach Media Goodwill	2009			2010			2010			2010			2010			2011			2011			2011			2011
Pre-tax impairment charge (in millions)	$	–		$	–		$	–		$	–		$	16.1		$	–		$	–		$	–		$	–
Discount Rate		14.0	%		13.5	%		13.5	%		13.0	%		13.5	%		13.5	%		13.0	%		12.0	%		12.5	%
Year 1 Revenue Growth Rate		16.5	%(a)		8.5	%		2.5	%		2.5	%		2.5	%		2.5	%		2.5	%		2.5	%		2.5	%
Long-term Revenue Growth Rate Range		2.5% - 3.0	%		2.5% - 3.0	%		2.5% - 2.9	%		2.5% - 3.3	%		(2.6)% - 4.4	%		(1.3)% - 4.9	%		(0.2)% - 3.9	%		(2.0)% - 3.5	%		3.0% - 12.7	%
Operating Profit Margin Range		27.2% - 35.3	%		22.7% - 31.4	%		23.3% - 31.5	%		25.5% - 31.2	%		15.5% - 25.9	%		16.2% - 27.4	%		17.6% - 22.6	%		18.8% - 21.7	%		(2.0)% - 16.8	%

In August 2009, with the weak economy and its negative impact on online advertising, the Company lowered its internal projections for its Interactive One reporting unit, and performed its first interim impairment testing. Below are some of the key assumptions used in the income approach model for determining the fair value as of August 2009, as of October 1, 2009, as of October 1, 2010 and finally as of October 1, 2011. 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. As a result of the testing performed, the Company concluded no impairment to the carrying value of goodwill had occurred. We did not make any changes to the methodology for valuing or allocating goodwill when determining the carrying value.

Goodwill (Internet Segment)	August 31, 2009			October 1, 2009			October 1, 2010			October 1, 2011
Pre-tax impairment charge (in millions)	$	-		$	-		$	-		$	-
Discount Rate		17.0	%		16.5	%		15.0	%		14.5	%
Year 1 Revenue Growth Rate		13.7	%		13.7	%		24.5	%		20.3	%
Long-term Revenue Growth Rate (Year 10)		3.5	%		3.5	%		3.0	%		2.5	%
Operating Profit Margin Range		8.8% - 42.9	%		10.8% - 42.2	%		(0.6)% - 32.7	%		0.0% - 28.8	%

The Company performed its first impairment testing in the Cable Television segment in December 2011. Below are some of the key assumptions used in the income approach model for determining the fair value as of December 2011. As a result of the testing performed, the Company concluded no impairment to the carrying value of goodwill had occurred.

Cable Television Goodwill	December 31, 2011
Pre-tax impairment charge (in millions)	$	–
Discount Rate		11.5	%
Year 1 Revenue Growth Rate		13.9	%
Long-term Revenue Growth Rate Range		2.7% - 13.9	%
Operating Profit Margin Range		29.9% - 42.2	%

The above four goodwill tables reflect some of the key valuation assumptions used for 12 of our 19 reporting units. As a result of our testing in 2011, goodwill of $14.5 million was impaired in one of our reporting units. There are seven remaining reporting units that had no goodwill carrying value balances as of December 31, 2011.

Goodwill Valuation Results

The table below presents the changes in the Company’s goodwill carrying values for its four reportable segments. The Company’s goodwill balance increased from approximately $121.5 million at December 31, 2010 to $272.0 million at December 31, 2011. The increase of approximately $165.0 million was due to the consolidation of TV One, which was offset by a decrease due to the impairment of approximately $14.5 million of remaining goodwill in one of our reporting units. As noted above, the 19 reporting units consist of the 15 radio markets plus four other business divisions. The actual reporting units are not disclosed so as to not make sensitive information publicly available that could potentially be competitively harmful to the Company.

	Goodwill Carrying Balances
	As of					As of
Reporting Unit	December 31, 2010		Increase (Decrease)			December 31, 2011
			(In millions)
Radio Broadcasting Segment	$	85.3	$	(14.5	)	$	70.8
Reach Media Segment		14.4		-			14.4
Internet Segment		21.8		-			21.8
Cable Television Segment		-		165.0			165.0
Total	$	121.5	$	150.5		$	272.0

In arriving at the estimated fair values for radio broadcasting licenses and goodwill, we also performed a reasonableness test 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 2011 were reasonable.

Intangible Assets Excluding Goodwill and Radio Broadcasting Licenses

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

	As of December 31,
	2011			2010			Period of Amortization
	(In thousands)
Trade names	$	17,133		$	17,138		2-5 Years
Talent agreement		19,549			19,549		10 Years
Debt financing and modification costs		16,115			19,374		Term of debt
Intellectual property		14,151			14,151		4-10 Years
Affiliate agreements		186,755			7,769		1-10 Years
Acquired income leases		1,282			1,282		3-9 Years
Non-compete agreements		1,260			1,260		1-3 Years
Advertiser agreements		47,688			6,613		2-7 Years
Favorable office and transmitter leases		3,358			3,358		2-60 Years
Brand names		2,539			2,539		2.5 Years
Brand names - unamortized		39,688			—		2.5 Years
Other intangibles		3,662			1,258		1-5 Years
		353,180			94,291
Less: Accumulated amortization		(90,200	)		(54,255	)
Other intangible assets, net	$	262,980		$	40,036

Amortization expense of intangible assets for the years ended December 31, 2011, 2010 and 2009 was approximately $26.2 million, $7.0 million and $8.4 million, respectively. The amortization of deferred financing costs was charged to interest expense for all periods presented. The amount of deferred financing costs included in interest expense for the years ended December 31, 2011, 2010 and 2009 was approximately $4.7 million, $3.0 million and $2.4 million, respectively.

The following table presents the Company’s estimate of amortization expense for the years 2012 through 2016 for intangible assets, excluding deferred financing costs:

	(In thousands)
2012	$	28,465
2013	$	27,911
2014	$	27,314
2015	$	26,043
2016	$	25,886

Actual amortization expense may vary as a result of future acquisitions and dispositions.

The gross value and accumulated amortization of the launch assets is as follows:

	December 31, 2011			Weighted Average Period of Amortization
	(In thousands)
Launch assets	$	39,543		3.6 Years
Less: Accumulated amortization		(7,106	)
Launch assets, net	$	32,437

Future estimated launch support amortization expense or revenue reduction related to launch assets for years 2012 through 2015 is as follows:

	(In thousands)
2012	$	9,947
2013	$	9,947
2014	$	9,902
2015	$	2,641