INTANGIBLE ASSETS AND GOODWILL

6 Months Ended

Jun. 30, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

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 the reporting unit, then a charge is recorded to the results of operations.

The following table presents the changes in the carrying value of broadcasting licenses. Refer to Note 2, Business Combinations, and Note 14, Assets Held For Sale, for additional information.


	Broadcasting Licenses Carrying Amount
	June 30, 2020		December 31, 2019
	(amounts in thousands)
Broadcasting licenses balance as of January 1,	$	2,508,121	$	2,516,625
Disposition of radio stations (See Note 2)	—		(17,940)
Acquisitions (See Note 2)	—		19,576
Loss on impairment	(4,143)		—
Assets held for sale (See Note 14)	(432)		(10,140)
Ending period balance	$	2,503,546	$	2,508,121

The following table presents the changes in goodwill. Refer to Note 2, Business Combinations, for additional information.


	Goodwill Carrying Amount
	June 30, 2020		December 31, 2019
	(amounts in thousands)
Goodwill balance before cumulative loss on impairment as of January 1,	$	1,024,467	$	982,663
Accumulated loss on impairment as of January 1,	(980,547)		(443,194)
Goodwill beginning balance after cumulative loss on impairment as of January 1,	43,920		539,469
Loss on impairment during year	—		(537,353)
Dispositions (See Note 2)	—		(4,862)
Acquisitions (See Note 2)	—		46,666
Measurement period adjustments to acquired goodwill (See Note 2)	(28)		—
Ending period balance	$	43,892	$	43,920

Interim Impairment Assessment

In evaluating whether events or changes in circumstances indicate that an interim impairment assessment is required, management considers several factors in determining whether it is more likely than not that the carrying value of the Company’s broadcasting licenses or goodwill exceeds the fair value of the Company’s broadcasting licenses or goodwill. The analysis considers: (i) macroeconomic conditions such as deterioration in general economic conditions, limitations on accessing capital, or other developments in equity and credit markets; (ii) industry and market considerations such as deterioration in the environment in which the Company operates, an increased competitive environment, a change in the market for the Company’s products or services, or a regulatory or political development; (iii) cost factors such as increases in labor or other costs that have a negative effect on earnings and cash flows; (iv) overall financial performance such as negative or declining cash flows or a decline in actual or planned revenue or earnings compared with actual and projected results of relevant prior periods; (v) other relevant entity-specific events such as changes in management, key personnel, strategy, or customers, bankruptcy, or litigation; (vi) events affecting a reporting unit such as a change in the composition or carrying amount of the Company’s net assets; and (vii) a sustained decrease in the Company’s share price.

The Company evaluates the significance of identified events and circumstances on the basis of the weight of evidence along with how they could affect the relationship between the carrying value of the Company’s broadcasting licenses and goodwill and their respective fair value amounts, including positive mitigating events and circumstances.

Subsequent to the annual impairment test conducted during the fourth quarter of 2019, the Company continued to monitor these factors listed above. Due to the current economic and market conditions related to the COVID-19 pandemic, and a contraction in the expected future economic and market conditions utilized in the annual impairment test conducted in the fourth quarter of 2019, the Company determined that the changes in circumstances warranted an interim impairment assessment on its broadcasting licenses during the second quarter of the current year. Due to changes in facts and circumstances, the Company revised its estimates with respect to projected operating performance and discount rates used in the interim impairment assessment.

In connection with the interim impairment assessment conducted during the second quarter of 2020, the Company determined the carrying value of its broadcasting licenses was impaired and recorded an impairment loss of $4.1 million ($3.0 million net of tax).

After assessing the totality of events and circumstances listed above, the Company determined that it was more likely than not that the fair value of the Company's goodwill, which is solely attributable to the podcasting reporting unit, was greater than its carrying amount. Accordingly, the Company did not conduct an impairment test on its goodwill during the second quarter of the current year.

Broadcasting Licenses Impairment Test

During the fourth quarter of 2019, 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 condensed consolidated balance sheet for each of the Company's markets and, accordingly, no impairment was recorded.

During the second quarter of the current year, the Company completed an interim impairment test for its broadcasting licenses at the market level using the Greenfield method. As a result of this interim impairment assessment, the Company determined that the fair value of its broadcasting licenses was less than the amount reflected in the balance sheet for certain of the Company’s markets and, accordingly, recorded an impairment loss of $4.1 million, ($3.0 million, net of tax).

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: (i) the discount rate; (ii) the market share and profit margin of an average station within a market, based upon market size and station type; (iii) the forecast growth rate of each radio market; (iv) the estimated capital start-up costs and losses incurred during the early years; (v) the likely media competition within the market area; (vi) the tax rate; and (vii) 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 (i) through (iii) above are the most important and sensitive in the determination of fair value.

Assumptions and Results - Broadcasting Licenses

The following table reflects the estimates and assumptions used in the interim and annual broadcasting licenses impairment assessments for each respective period.

Estimates And Assumptions

Second Quarter 2020

Fourth Quarter 2019

Fourth Quarter 2018

Second Quarter 2018

Second Quarter 2017

Discount rate

8.00

8.50

9.00

9.25

Operating profit margin ranges expected for average stations in the markets where the Company operates

22% to 36%

18% to 36%

22% to 37%

19% to 40%

Forecasted growth rate (including long-term growth rate) range of the Company's markets

0.0% to 0.8%

0.0% to 0.9%

0.5% to 1.0%

1.0% to 2.0%

The Company believes it has made reasonable estimates and assumptions to calculate the fair value of its broadcasting licenses. These estimates and assumptions could be materially different from actual results.

impairment charges, which may be material, in future periods. The COVID-19 pandemic increases the uncertainty with respect to such market and economic conditions and, as such, increases the risk of future impairment.

Goodwill Impairment Test

During the fourth quarter of 2019, the Company completed its annual impairment test for goodwill and determined that the fair value of the Company's goodwill attributable to the broadcast reporting unit was less than its carrying value. Accordingly, the Company recorded a $537.4 million impairment charge ($519.6 million, net of tax) on its goodwill during the fourth quarter of 2019. As a result of this impairment charge recorded in the fourth quarter of 2019, the Company has no goodwill attributable to the broadcast reporting unit. The remaining goodwill is entirely attributable to the podcasting reporting unit.

The Company determined that it was more likely than not that the fair value of the podcasting reporting unit's goodwill exceeded its carrying value as of June 30, 2020. Accordingly, the Company did not proceed with conducting an impairment assessment.

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 condensed consolidated balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges, which could be material, in future periods. The COVID-19 pandemic increases the uncertainty with respect to such market and economic conditions and, as such, increases the risk of future impairment.