GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS

9 Months Ended

Sep. 30, 2022

GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS

GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS

3.    GOODWILL AND RADIO BROADCASTING LICENSES:

Impairment Testing

In accordance with ASC 350, “Intangibles - Goodwill and Other,” we do not amortize our indefinite-lived 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. We evaluate all events and circumstances on an interim basis to determine if an interim indicator is present.

Valuation of Broadcasting Licenses

During the second quarter of 2022, there continued to be slowing in certain general economic conditions and a rising interest rate environment, which we deemed to be an impairment indicator that warranted interim impairment testing of certain markets’ radio broadcasting licenses. As a result of its impairment testing, the Company recorded a non-cash impairment charge of approximately $10.7 million during the three months ended June 30, 2022, associated with our Atlanta, Dallas, Houston, and Raleigh radio market broadcasting licenses. Included in this amount is approximately $3.7 million which relates to periods ending prior to January 1, 2022. Accordingly, the Company recorded an out-of-period non-cash impairment charge of approximately $3.7 million during the three months ended June 30, 2022. The fair value of the radio broadcasting licenses were overstated by approximately $1.1 million, $2.8 million, and $2.1 million as of December 31, 2019, March 31, 2020, and December 31, 2021, respectively, and understated by approximately $2.3 million as of September 30, 2020. The Company determined that the errors were not material to any previous period and that correcting the error in the three-month and six-month periods ended June 30, 2022 would not materially misstate estimated net revenue or pre-tax income for the full year, as of and for the period ended December 31, 2022, or the earnings trend and therefore could be corrected in the period ending June 30, 2022. In addition, we recorded an impairment charge of approximately $1.9 million in the three months ended June 30, 2022, associated with the estimated asset sale consideration for one of our Indianapolis radio broadcasting licenses.

During the three months ended September 30, 2022, economic conditions continued to slow and interest rates continued to rise. The Company performed additional impairment tests, and recorded a non-cash impairment charge of approximately $14.5 million associated with our Atlanta, Charlotte, Dallas, Houston, Philadelphia, Raleigh and Richmond radio market broadcasting licenses. We did not identify any impairment indicators for the three and nine months ended September 30, 2021, and, therefore, no interim impairment testing was performed.

Below are some of the key assumptions used in the income approach model for estimating broadcasting licenses fair values for the interim impairment assessments for 2022. 

Radio Broadcasting	September 30,			June 30,
Licenses	2022 (a)			2022 (a)
Impairment charge (in millions)	$	14.5		$	12.6	(*)
Discount Rate		9.5	%		9.5	%
Year 1 Market Revenue Growth Rate Range		0.5	%		1.4% – 1.8	%
Long-term Market Revenue Growth Rate Range		0.6% – 1.0	%		0.7% – 1.0	%
Mature Market Share Range		6.2% – 23.2	%		6.2% – 23.2	%
Mature Operating Profit Margin Range		28.3% – 36.1	%		28.3% – 36.1	%

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

(*)Includes an impairment charge whereby the license fair value is based on estimated asset sale consideration.

Valuation of Goodwill

As noted above, during the quarters ended September 30, 2022 and June 30, 2022, 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 June 30, 2022, the Company recorded a non-cash impairment charge of approximately $4.3 million to reduce the carrying value of our Atlanta market goodwill balance. No impairment was identified for the three months ended September 30, 2022. We did not identify any impairment indicators at any of our other reporting units for the nine months ended September 30, 2022. We did not identify any impairment indicators at any of our reporting units for the nine months ended September 30, 2021, and therefore, no further interim impairment testing was performed. Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for the interim impairment assessments for 2022.

Goodwill (Radio Market	September 30,			June 30,
Reporting Units)	2022 (a)			2022 (a)
Impairment charge (in millions)	$	—		$	4.3
Discount Rate		9.5	%		9.5	%
Year 1 Market Revenue Growth Rate Range		(0.3)	%		(2.5)% - 1.5	%
Long-term Market Revenue Growth Rate Range		1.0	%		0.7% – 1.0	%
Mature Operating Profit Margin Range		33.4	%		19.5% – 32.9	%

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

Goodwill Valuation Results

The table below presents the changes in the Company’s goodwill carrying values for its four reportable segments.

	Radio		Reach				Cable
	Broadcasting		Media		Digital		Television
	Segment		Segment		Segment		Segment		Total
	(In thousands)
Gross goodwill	$	155,000	$	30,468	$	27,567	$	165,044	$	378,079
Additions		437		—		—		—		437
Impairments		(4,325)		—		—		—		(4,325)
Accumulated impairment losses		(117,748)		(16,114)		(20,345)		—		(154,207)
Audacy asset exchange		(470)		—		—		—		(470)
Net goodwill at September 30, 2022	$	32,894	$	14,354	$	7,222	$	165,044	$	219,514