INTANGIBLE ASSETS AND GOODWILL (Block)

9 Months Ended

Sep. 30, 2017

Goodwil And Intangible Assets Disclosure [Abstract]

Goodwill And Intangible Assets Disclosure Text Block

2. INTANGIBLE ASSETS AND GOODWILL

Goodwill and certain intangible assets are not amortized for book purposes. They may be, however, amortized for tax purposes. The Company accounts for its acquired broadcasting licenses as indefinite-lived intangible assets and, similar to goodwill, these assets are reviewed at least annually for impairment. At the time of each review, if the fair value is less than the carrying value of goodwill and certain intangibles (such as broadcasting licenses), then a charge is recorded to the results of operations.

There was no material change in the carrying value of broadcasting licenses or goodwill since the year ended December 31, 2016, other than as described below.

The Company recorded a $13.5 million loss in the first quarter of 2017 in net gain/loss on sale or disposal of assets as a result of the Company permanently discontinuing the operation of one of its stations and returning the station’s broadcasting license to the FCC for cancellation, in order to facilitate the Merger.

Additionally, the carrying value of the broadcasting licenses at December 31, 2016, included the broadcasting licenses of a consolidated Variable Interest Entity (“VIE”) of approximately $15.7 million. These consolidated assets and liabilities of the VIE related to a pending acquisition of four radio stations in Charlotte, North Carolina. On October 17, 2016, the Company entered into an asset purchase agreement and a time brokerage agreement (“TBA”) to operate three of the four radio stations that were held in a trust (“Charlotte Trust”). As such, the amounts of the consolidated VIE at December 31, 2016, represented only the assets and liabilities of the three stations held in the Charlotte Trust.

Upon the completion of this transaction on January 6, 2017, the Company deconsolidated broadcasting licenses attributable to the VIE and recorded broadcasting licenses of all four radio stations based upon the preliminary purchase price allocation. Refer to Note 9, Business Combinations, for additional information.

On September 26, 2017, the Company entered into an agreement to divest three stations to Educational Media Foundation (“EMF”). This transaction is the first divestiture in a series of required divestitures related to the Company’s pending Merger with CBS Radio. The Company conducted an analysis and determined the assets of these three stations met the criteria to be classified as held for sale at September 30, 2017. Accordingly, the Company reclassified the amount of radio broadcasting licenses and goodwill allocable to these three stations to the assets held for sale financial statement line item at September 30, 2017. Refer to Note 10, Assets Held for Sale, for additional information.

During the second quarter of 2017, the Company performed its annual impairment test of its goodwill and determined that the carrying amount of goodwill exceeded its fair value for the Boston, Massachusetts market and recorded an impairment loss of $0.4 million. A contributing factor to the impairment was a decline in the advertising dollars in the Boston, Massachusetts market and its effect on the Company’s operations, coupled with an increase in the carrying value of its assets.

The following table presents the changes in broadcasting licenses as described above:

	Broadcasting Licenses
	Carrying Amount
	September 30,		December 31,
	2017		2016
	(amounts in thousands)

Beginning of period balance as of January 1,	$	823,195	$	807,381
Disposition of FCC broadcasting license		(13,500)		-
Consolidation (deconsolidation) of a VIE		(15,738)		15,738
Acquisition of radio stations		17,174		-
Acquisitions - other		-		112
Assets held for sale		(54,518)		-
Disposition of radio stations previously reflected as held for sale		-		(36)
Ending period balance	$	756,613	$	823,195

The following table presents the changes in goodwill primarily as a result of acquisitions of radio stations, the pending divestiture of three stations, and the Company’s annual impairment test.

	Goodwill Carrying Amount
	September 30,		December 31,
	2017		2016
	(amounts in thousands)
Goodwill balance before cumulative loss
on impairment as of January 1,	$	158,333	$	158,244
Accumulated loss on impairment as of January 1,		(125,615)		(125,615)
Goodwill beginning balance after cumulative loss
on impairment as of January 1,		32,718		32,629
Loss on impairment during year		(441)		-
Acquisition of radio stations		43		-
Assets held for sale		(266)		-
Adjustment to acquired goodwill associated with an assumed fair value liability		-		92
Disposition of radio stations previously reflected as assets held for sale		-		(3)
Ending period balance	$	32,054	$	32,718

Broadcasting Licenses Impairment Test

The Company performs its annual broadcasting license impairment test during the second quarter of each year by evaluating its broadcasting licenses for impairment at the market level using the direct method.

During the second quarter of the current year and each of the past several years, the Company completed its annual impairment test for broadcasting licenses and determined that the fair value of its broadcasting licenses was greater than the amount reflected in the balance sheet for each of the Company’s markets and, accordingly, no impairment was recorded. The annual impairment test in 2017 did not include the new market acquired during the first quarter of 2017. For the new market acquired during the first quarter of 2017, similar valuation techniques that are used in the testing process were applied to the valuation of the broadcasting licenses under purchase price accounting.

Each market’s broadcasting licenses are combined into a single unit of accounting for purposes of testing impairment, as the broadcasting licenses in each market are operated as a single asset. The Company determines the fair value of the broadcasting licenses in each of its markets by relying on a discounted cash flow approach (a 10-year income model) assuming a start-up scenario in which the only assets held by an investor are broadcasting licenses. The Company’s fair value analysis contains assumptions based upon past experience, reflects expectations of industry observers and includes judgments about future performance using industry normalized information for an average station within a certain market. These assumptions include, but are not limited to: (1) the discount rate; (2) the market share and profit margin of an average station within a market, based upon market size and station type; (3) the forecast growth rate of each radio market; (4) the estimated capital start-up costs and losses incurred during the early years; (5) the likely media competition within the market area; (6) the tax rate; and (7) future terminal values.

The methodology used by the Company in determining its key estimates and assumptions was applied consistently to each market. Of the seven variables identified above, the Company believes that the assumptions in items (1) through (3) above are the most important and sensitive in the determination of fair value.

If actual market conditions are less favorable than those projected by the industry or the Company, or if events occur or circumstances change that would reduce the fair value of the Company’s broadcasting licenses below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges, which may be material, in future periods.

There were no events or circumstances since the Company’s second quarter annual license impairment test that indicated an interim review of broadcasting licenses was required, other than as described below.

Goodwill Impairment Test

The Company performs its annual goodwill impairment test during the second quarter of each year by evaluating its goodwill for each reporting unit.

As described above, the Company elected to early adopt the amended accounting guidance which simplifies the test for goodwill impairment. The amended guidance eliminates the second step of the goodwill impairment test, which reduces the cost and complexity of evaluating goodwill for impairment. Under the former accounting guidance, the second step of the impairment test required the Company to compute the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. Under the amended guidance, if the carrying amount of goodwill of a reporting unit exceeds its fair value, the Company will consider the goodwill to be impaired.

The Company has determined that a radio market is a reporting unit and the Company assesses goodwill in each of the Company’s markets. Under the amended guidance, if the fair value of any reporting unit is less than the amount reflected on the balance sheet, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. The loss recognized will not exceed the total amount of goodwill allocated to the reporting unit.

Under the amended guidance, the Company first assesses qualitative factors to determine whether it is necessary to perform a quantitative assessment for each reporting unit. These qualitative factors include, but are not limited to: (1) macroeconomic conditions; (2) radio broadcasting industry considerations; (3) financial performance of reporting units; (4) Company-specific events; and (5) a sustained decrease in the Company’s share price. If the quantitative assessment is necessary, the Company determines the fair value of the goodwill allocated to each reporting unit.

To determine the fair value, the Company uses a market approach and, when appropriate, an income approach in computing the fair value of each reporting unit. The market approach calculates the fair value of each market’s radio stations by analyzing recent sales and offering prices of similar properties expressed as a multiple of cash flow. The income approach utilizes a discounted cash flow method by projecting the subject property’s income over a specified time and capitalizing at an appropriate market rate to arrive at an indication of the most probable selling price. Management believes that these approaches are commonly used and appropriate methodologies for valuing broadcast radio stations. Factors contributing to the determination of the reporting unit’s operating performance were historical performance and/or management’s estimates of future performance.

During the second quarter of the current year, the Company’s quantitative assessment indicated that the goodwill allocated to its Boston, Massachusetts market was impaired. The annual impairment test in 2017 did not include the new market acquired during the first quarter of 2017. For the new market acquired during the first quarter of 2017, similar valuation techniques that are used in the testing process were applied to the valuation of the goodwill under purchase price accounting.

If actual market conditions are less favorable than those projected by the industry or the Company, or if events occur or circumstances change that would reduce the fair value of the Company’s goodwill below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges, which could be material, in future periods.

There were no events or circumstances since the Company’s second quarter annual goodwill test that indicated an interim review of goodwill was required, other than as described below.

Annual Broadcasting Licenses and Goodwill Impairment Test for Newly Acquired Market

As discussed above, the annual impairment test for broadcasting licenses and goodwill, which was performed in the second quarter of 2017, did not include the broadcasting licenses and goodwill of the new market acquired by the Company during the first quarter of 2017. As the new market’s broadcasting licenses and goodwill are required to be tested at least annually for impairment, the Company elected to conduct an annual impairment test during the third quarter of 2017 of the broadcasting licenses and goodwill of the newly acquired market only.

Conducting this interim impairment test on the broadcasting licenses and goodwill of the newly acquired market will allow the Company to align the testing periods of all markets in the annual impairment test performed in the second quarter of 2018 and each annual impairment test thereafter.

The annual impairment test of the newly acquired market’s broadcasting licenses and goodwill applied similar valuation techniques, valuation approaches and assumptions to those used in the annual impairment test conducted in the second quarter of 2017. The Company made reasonable estimates and assumptions to calculate the fair value of the newly acquired market’s broadcasting licenses and goodwill. These estimates and assumptions could be materially different from actual results. As a result of the annual impairment test of the newly acquired market, the Company determined that the fair value of its broadcasting licenses and goodwill was greater than the amount reflected in the balance sheet for the newly acquired market and, accordingly, no impairment was recorded.

- 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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