GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

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, 2017 and 2016, we recorded impairment charges against radio broadcasting licenses and goodwill collectively, of approximately $29.1 million and $1.3 million, respectively.

2017 Interim Impairment Testing

For the second and third quarters in 2017, the total market revenue growth for certain markets in which we operate was below that used in our prior year annual impairment testing. In each quarter, we deemed that to be an impairment indicator that warranted interim impairment testing of certain markets’ radio broadcasting licenses, which we performed as of June 30, 2017 and September 30, 2017. During the second and third quarters of 2017, the Company recognized impairment of approximately $12.7 million and $16.4 million, respectively, related to its Columbus and Houston radio broadcasting licenses. During the second and third quarters of 2017, we identified an impairment indicator at certain of our radio markets, and as such, we performed an interim impairment analysis for certain radio market goodwill as of June 30, 2017 and September 30, 2017. There was no impairment identified as part of this testing. During the second and third quarters of 2017, the Company performed interim impairment testing on the valuation of goodwill associated with Reach Media. Our interim impairment testing indicated that the carrying value for Reach Media’s goodwill was not impaired.

2017 Annual Impairment Testing

We completed our 2017 annual impairment assessment as of October 1, 2017. Our 2017 annual impairment testing indicated the carrying values for our goodwill attributable to Reach Media, TV One, digital and our radio broadcasting segments were not impaired.

2016 Interim Impairment Testing

For the second and third quarters in 2016, the total market revenue growth for certain markets in which we operate was below that used in our prior year annual impairment testing. In each quarter, we deemed that to be an impairment indicator that warranted interim impairment testing of certain markets’ radio broadcasting licenses, which we performed as of June 30, 2016 and September 30, 2016. During the third quarter of 2016, we identified an impairment indicator at one of our radio markets, and as such, we performed an interim impairment analysis for that radio market’s goodwill as of September 30, 2016. There was no impairment identified as part of this testing.

2016 Annual Impairment Testing

We completed our 2016 annual impairment assessment as of October 1, 2016. Our 2016 annual impairment testing indicated the carrying values for our goodwill attributable to Reach Media, TV One, digital and our radio broadcasting segments were not impaired. The Company recorded an impairment charge of approximately $1.3 million related to our Columbus radio broadcasting licenses.

Valuation of Broadcasting Licenses

We utilize the services of a third-party valuation firm to assist us with estimating 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 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 15 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 October 2016. The Company recorded an impairment charge of approximately $29.1 million related to our Columbus and Houston radio broadcasting licenses during the year ended December 31, 2017. The Company recorded an impairment charge of approximately $1.3 million related to our Columbus radio broadcasting licenses during the year ended December 31, 2016.

Radio Broadcasting	October 1,			September 30,			June 30,			October 1,
Licenses	2017			2017 (a)			2017 (a)			2016
Impairment charge (in millions)	$	–		$	16.4		$	12.7		$	1.3

Discount Rate		9.0	%		9.0	%		9.0	%		9.0	%
Year 1 Market Revenue Growth Rate Range		(5.0)% – 1.4	%		(5.0)% – 2.0	%		1.0% – 2.0	%		1.0% – 2.4	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		0.5% – 1.5	%		0.5% – 1.5	%		0.5% – 1.5	%		0.5% – 1.5	%
Mature Market Share Range		6.8% – 25.4	%		6.9% – 25.8	%		6.9% – 15.3	%		6.9% – 25.8	%
Mature Operating Profit Margin Range		30.9% – 46.9	%		31.0% – 47.0	%		31.6% – 47.0	%		30.5% – 51.8	%

(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 $614.5 million as of December 31, 2017. 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
Unit of Accounting	December 31, 2016		Increase (Decrease)			December 31, 2017
	(In thousands )
Unit of Accounting 2	$	3,086	$	–		$	3,086
Unit of Accounting 7		16,081		(1,333)			14,748
Unit of Accounting 5		16,100		–			16,100
Unit of Accounting 4		16,142		–			16,142
Unit of Accounting 15		20,736		–			20,736
Unit of Accounting 14		20,434		336			20,770
Unit of Accounting 11		21,135		–			21,135
Unit of Accounting 6		22,642		–			22,642
Unit of Accounting 9		34,270		(1,395)			32,875
Unit of Accounting 13		47,846		–			47,846
Unit of Accounting 12		49,663		–			49,663
Unit of Accounting 16		52,965		1,293			54,258
Unit of Accounting 8		62,015		–			62,015
Unit of Accounting 1		93,394		–			93,394
Unit of Accounting 10		166,940		(27,815)			139,125
Total	$	643,449	$	(28,914)	*	$	614,535

* The amount listed is net of additions, dispositions and impairment charges.

Our licenses expire at various dates through August 1, 2022.

Valuation of Goodwill

The impairment testing of goodwill is performed at the reporting unit level. We had 18 reporting units as of our October 2017 annual impairment assessment, consisting of each of the 15 radio markets within the radio division 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 have not made any changes to the methodology for valuing or allocating goodwill when determining the fair values of the reporting units. We did not identify any goodwill impairment during the years ended December 31, 2017 and 2016.

Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for all annual impairment assessments performed since October 2016.

Goodwill (Radio Market	October 1,			October 1,
Reporting Units)	2017 (a)			2016 (a)

Impairment charge (in millions)	$	—		$	—

Discount Rate		9.0	%		9.0	%
Year 1 Market Revenue Growth Rate Range		(8.4)% – 46.6	%		(9.4)% – 29.4	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		0.5% – 1.5	%		0.5% – 1.5	%
Mature Market Share Range		8.0% – 18.2	%		8.1% - 18.4	%
Mature Operating Profit Margin Range		25.1% – 50.1	%		26.3% - 53.8	%

(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 assessments performed and interim impairment testing where an impairment charge was recorded since October 2016. 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 the on-air personality Tom Joyner. As a result of our impairment assessments, the Company concluded that goodwill was not impaired.

	October 1,			October 1,
Reach Media Segment Goodwill	2017			2016

Impairment charge (in millions)	$	—		$	—

Discount Rate		10.5	%		10.5	%
Year 1 Revenue Growth Rate		(11.3)	%		(0.3)	%
Long-term Revenue Growth Rate (Year 5)		1.0	%		1.0	%
Operating Profit Margin Range		13.5% - 15.9	%		15.1% – 17.5	%

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 2016. 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 net revenue, cash flow projections and internal projections have been revised for the October 1, 2016 annual testing due to a new, more centralized management of its digital segment. Effective January 1, 2017, the Company changed its reportable segment disclosures to better reflect our operating strategy. The Company concluded no impairment to the carrying value of goodwill had occurred as a result of the annual testing performed in 2017 and 2016.

	October 1,			October 1,
Digital Segment Goodwill	2017			2016

Impairment charge (in millions)	$	—		$	—

Discount Rate		13.0	%		12.5	%
Year 1 Revenue Growth Rate		24.1	%		9.8	%
Long-term Revenue Growth Rate (Years 6 – 10)		2.4% - 4.3	%		3.0% - 8.4	%
Operating Profit Margin Range		(1.5)% - 17.0	%		(9.8)% - 20.3	%

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 2016. As a result of the testing performed in 2017 and 2016, the Company concluded no impairment to the carrying value of goodwill had occurred.

	October 1,			October 1,
Cable Television Segment Goodwill	2017			2016

Impairment charge (in millions)	$	—		$	—

Discount Rate		11.0	%		11.0	%
Year 1 Revenue Growth Rate		4.8	%		7.4	%
Long-term Revenue Growth Rate Range (Years 6 – 10)		2.3% - 2.7	%		2.3% - 2.9	%
Operating Profit Margin Range		42.2% - 45.9	%		40.2% - 44.3	%

The above four goodwill tables reflect some of the key valuation assumptions used for 12 of our 18 reporting units. The other six remaining reporting units had no goodwill carrying value balances as of December 31, 2017.

Goodwill Valuation Results

The table below presents the changes in Company’s goodwill carrying values for its four reportable segments during 2017 and 2016:

	Radio Broadcasting Segment		Reach Media Segment		Digital Segment		Cable Television Segment		Total
	(In thousands)
Gross goodwill	$	154,863	$	30,468	$	23,004	$	165,044	$	373,379
Accumulated impairment losses		(84,436)		(16,114)		(14,545)		—		(115,095)
Additions		—		—		—		—		—
Impairments		—		—		—		—		—
Net goodwill at December 31, 2016	$	70,427	$	14,354	$	8,459	$	165,044	$	258,284
Gross goodwill	$	154,863	$	30,468	$	23,004	$	165,044	$	373,379
Accumulated impairment losses		(84,436)		(16,114)		(14,545)		—		(115,095)
Additions		47		—		4,563		—		4,610
Impairments		—		—		—		—		—
Net goodwill at December 31, 2017	$	70,474	$	14,354	$	13,022	$	165,044	$	262,894

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 2017 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
	2017		2016		Amortization	Amortization
	(In thousands)
Trade names	$	17,378	$	17,344	2-5 Years		3.0 Years
Intellectual property		9,531		9,531	4-10 Years		0.0 Years
Affiliate agreements		178,986		178,986	8 Years		1.3 Years
Acquired income leases		127		127	3-15 Years		12.1 Years
Advertiser agreements		46,583		44,871	2-12 Years		5.1 Years
Favorable office and transmitter leases		2,097		2,097	2-60 Years		40.0 Years
Brand names		4,013		2,853	10 Years		7.7 Years
Brand names - unamortized		39,690		39,690	Indefinite		—
ABL facility debt costs		421		421	Debt term		3.3 Years
Launch assets		3,632		1,784	Contract length		7.1 Years
Other intangibles		675		609	1-5 Years		3.1 Years
		303,133		298,313
Less: Accumulated amortization		(209,078)		(181,713)
Other intangible assets, net	$	94,055	$	116,600			4.8 Years

Amortization expense of intangible assets for the years ended December 31, 2017 and 2016 was approximately $26.9 million and $26.2 million, respectively.

The Company’s affiliation agreements have expiration dates ranging from September 2020 to June 2026.

The following table presents the Company’s estimate of amortization expense for the years 2018 through 2022 for intangible assets:

	(In thousands)
2018	$	26,641
2019	$	10,722
2020	$	3,856
2021	$	3,620
2022	$	3,605

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.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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