Intangible Assets and Goodwill

The carrying value of goodwill by reportable segments is as follows (dollars in thousands):



	Cumulus Radio Station Group				Westwood One				Consolidated
Balance as of January 1, 2018 (Predecessor Company)
Goodwill		$	1,278,526			$	304,280			$	1,582,806
Accumulated impairment losses	(1,278,526			)	(169,066			)	(1,447,592			)
Balance as of January 1, 2018 (Predecessor Company)		$	—			$	135,214			$	135,214
Balance as of June 3, 2018 (Predecessor Company)
Goodwill		$	1,278,526			$	304,280			$	1,582,806
Accumulated impairment losses	(1,278,526			)	(169,066			)	(1,447,592			)
Balance as of June 3, 2018 (Predecessor Company)		$	—			$	135,214			$	135,214
Impact of fresh start accounting		—			(135,214			)	(135,214			)
Balance as of June 4, 2018 (Successor Company)		$	—			$	—			$	—

Prior to the application of fresh start accounting, goodwill represented the excess of the amount paid to acquire businesses over the fair value of their net assets at the date of the acquisition. The Company eliminated goodwill upon application of fresh start accounting (see Note 3, “Fresh Start Accounting”). The Successor Company had no goodwill as of December 31, 2018.

In performing the Company's 2016 annual impairment testing of goodwill, the Company recorded a non-cash impairment charge of $568.1 million, reducing the goodwill in the Cumulus Radio Station Group to $0.0 million at December 31, 2016. The Company did not incur any impairment charges related to goodwill during the year ended December 31, 2017.

Intangible Assets

In connection with the Company’s adoption of fresh start accounting on the Effective Date, intangible assets and related accumulated amortization of the Predecessor Company were eliminated. Intangible assets of the Successor Company were identified and valued at their fair value, as determined management with the assistance of valuation specialists. The Company’s intangible assets are as follows (dollars in thousands):



Intangible Assets:	Indefinite-Lived				Definite-Lived				Total

Balance as of January 1, 2018 (Predecessor Company)		$	1,203,809			$	82,994			$	1,286,803
Dispositions	—				—				—
Amortization	—				(7,938			)	(7,938			)
Balance as of June 3, 2018 (Predecessor Company)		$	1,203,809			$	75,056			$	1,278,865
Impact of fresh start accounting	(264,109			)	116,202				(147,907			)
Balance as of June 4, 2018 (Successor Company)		$	939,700			$	191,258			$	1,130,958
Disposals	(340			)	(22			)	(362			)
Amortization	—				(18,885			)	(18,885			)
Acquisitions	17,476				—				17,476
Balance as of December 31, 2018 (Successor Company)		$	956,836			$	172,351			$	1,129,187

As part of fresh start accounting, the Company removed existing intangibles and accumulated amortization and recorded an adjustment of $147.9 million to reflect the fair value of intangibles. (See Note 3, “Fresh Start Accounting").

The Company's definite-lived intangible assets primarily consist of broadcast advertising and affiliate relationships, while the Company's indefinite-lived assets consist of broadcasting license and trademarks. Total amortization expense related to the Company’s definite-lived intangible assets was $18.9 million, $7.9 million, $33.5 million and $56.2 million for the Successor Company period June 4, 2018 through December 31, 2018, the Predecessor Company period January 1, 2018 through June 3, 2018, the Predecessor Company year ended December 31, 2017 and the Predecessor Company year ended December 31, 2016, respectively. As of December 31, 2018, future amortization expense related to the Company's definite-lived intangible assets was estimated as follows (dollars in thousands):



2019	$	25,307
2020	20,312
2021	20,211
2022	20,111
2023	16,377
Thereafter	70,033
Total other intangibles, net	$	172,351

The Company performs annual impairment testing of its Federal Communications Commission ("FCC") licenses and goodwill as of December 31 of each year and on an interim basis if events or circumstances indicate that FCC licenses or goodwill may be impaired. The Company reviews the carrying value of its definite-lived intangible assets, primarily broadcast advertising and affiliate relationships, for recoverability prior to its annual impairment test of goodwill and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

Impairment Test - Definite-Lived Intangibles

The Company tests definite-lived intangible assets for recoverability by comparing the net carrying value of an asset group to its undiscounted cash flows. As of December 31, 2018, based on the results of the recoverability test, the Company determined that the future undiscounted cash flows expected to result from the continued use of the assets and their eventual disposition continued to exceed the carrying value of the applicable asset groups and were therefore recoverable. The Company did not recognize any impairment charges for its definite-lived intangible assets in 2018 as a result of this analysis.

During the second quarter of 2016, the Company recorded an impairment charge to its definite-lived intangible assets of $1.8 million at the Westwood One segment for all customer lists and trademark definite-lived intangible assets related to the print publication of NASH Country Weekly as the Company re-positioned the print publication to a digital only medium. There were no similar impairments in 2017 or 2018.

Annual Impairment Test - FCC Licenses

As part of the annual impairment testing of indefinite-lived intangibles the Company tests its FCC licenses for impairment during the fourth quarter of each year and on an interim basis if events or circumstances indicate that the asset may be impaired. As part of the overall planning associated with the test, the Company determined that its geographic markets are the appropriate unit of accounting for FCC license impairment testing and therefore the Company has combined its FCC licenses within each geographic market cluster into a single unit of accounting for impairment testing purposes.

For the impairment test, we utilized the income approach, specifically the Greenfield Method. This approach values a license by calculating the value of a hypothetical start-up company that initially has no assets except the asset to be valued (the license). The value of the asset under consideration (the license) can be considered as equal to the value of this hypothetical start-up company. In completing the appraisals, we considered if there were any other factors that might affect the carrying value of the asset.

The estimated fair values of our FCC licenses represent the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the Company and willing market participants at the measurement date. The estimated fair value also assumes the highest and best use of the asset by market participants, considering a use of the asset that is physically possible, legally permissible and financially feasible.

A basic assumption in our valuation of these FCC licenses was that these radio stations were new radio stations, signing on the air as of the date of the valuation. We assumed the competitive situation that existed in those markets as of that date, except that these stations were just beginning operations.

In estimating the value of the licenses, we began with market revenue projections. Next, we estimated the percentage of the market’s total revenue, or market share, that market participants could reasonably expect an average start-up station to attain, as well as the duration (in years) required to reach the average market share. The estimated average market share was computed based on market share data, by station type (i.e., AM and FM) and signal strength.

After market revenue and market shares were estimated, operating expenses, including depreciation based on assumed investments in fixed assets and future capital expenditures of a start-up station or operation are similarly estimated based on industry-average cost data. Appropriate estimated income taxes were then subtracted, estimated depreciation added back, estimated capital expenditures subtracted, and estimated working capital adjustments were made to calculate estimated free cash flow during the build-up period until a steady state or mature “normalized” operation is achieved.

The analysis included overall future market revenue rates of decline for the residual years after the projection period of (0.75)% and a weighted average cost of capital of 9.0%. The residual year value and cash flow growth rates were estimated based on a perpetual nominal market growth rate, which was based on long-term industry projections obtained from third party sources. The weighted average cost of capital was based on (i) the cost of equity, which included estimates of the risk-free return, stock risk premiums and industry beta; (ii) the cost of debt, which included estimates for corporate borrowing rates; and (iii) estimated average percentages of equity and debt in other radio broadcasters capital structures.

In order to estimate what listening audience share could be expected to be achieved for each station by market, we analyzed the average local commercial share garnered by similar AM and FM stations competing in those radio markets. We may make adjustments to the listening share and revenue share based on a station's signal coverage within the market and the surrounding area population as compared to the other stations in the market. Based on our knowledge of the industry and familiarity with similar markets, we determined that approximately three years would be required for the stations to reach maturity. We also incorporated the following additional assumptions into the discounted cash flow valuation model:


•	projected operating revenues and expenses over a five-year period;


•	the estimation of initial and on-going capital expenditures (based on market size);


•	depreciation on initial and on-going capital expenditures (the Company calculated depreciation using accelerated double declining balance guidelines over five years for the value of the tangible assets necessary for a radio station to go on the air);


•	the estimation of working capital requirements (based on working capital requirements for comparable companies); and


•	amortization of the intangible asset — the FCC license.

As a result of the impairment test, there was no impairment as of December 31, 2018. As of December 31, 2017, the Company recorded a non-cash impairment charge of $335.9 million. As of December 31, 2016 the Company recorded a non-cash impairment charge of $35.0 million.

If the macroeconomic conditions of the radio industry or the underlying material assumptions are less favorable than those projected by the Company or if a triggering event occurs or circumstance change that would more likely than not reduce the fair value of FCC licenses below the amounts reflected in the Consolidated Balance Sheet, the Company may be required to recognize additional impairment charges in future periods.