Note 3 - Variable Interest Entities

12 Months Ended

Dec. 31, 2013

Equity Method Investments and Joint Ventures [Abstract]

Equity Method Investments and Joint Ventures Disclosure [Text Block]

Note 3: Variable Interest Entities

Shield Media Entities

Shield Media LLC and Shield Media Lansing LLC, through their respective subsidiaries, WXXA-TV LLC (“WXXA” and WLAJ-TV LLC (“WLAJ”), have Joint Sales Agreements (“JSA”) and Shared Service Agreements (“SSA”) in place with the Company. Under these agreements the Company provides a variety of operational services for WXXA-TV and WLAJ-TV (the “Shield Stations”) as is described in more detail below.

The Company has options to acquire the Shield Stations at any time, subject to FCC consent, until the expiration of the applicable JSA. The FCC requires that the station licensee maintain independent control over the programming and operations of the station until an assignment of the station license has been approved by the FCC and consummated. In addition, the Company has entered into agreements with the Shield Stations to provide a variety of services, including: the sale of advertising time, marketing and promotion, news production, assistance with monitoring, maintenance, repair and replacement of the licensee’s technical equipment and facilities, providing traffic, accounting, bookkeeping and related administrative functions, access to the Company’s local towers, equipment, and facilities and the maintenance and operation of websites for the Shield Stations. Although the licensee retains exclusive management and control over the stations’ programming, personnel and finances, including the total responsibility for all programming to be broadcast over the station, the Company believes that the services provided pursuant to the sales and shared service agreements provide the Company with the power to direct those activities of WXXA and WLAJ that most significantly impact the economic performance of each entity. In both the Albany and Lansing markets, the Company owns and operates another station. The agreements provide the Company’s local stations, along with WXXA and WLAJ, the ability to achieve operational efficiencies and economies of scale which improve cash flow.

Based on the accounting guidance related to consolidation of variable interest entities (VIEs), the Company is the primary beneficiary of these agreements and therefore consolidates the Shield Stations. Under the terms of the agreements, the Company sells the stations’ inventory, collects all cash receipts and also incurs operating costs associated with the operations of the Shield Stations. In return, the Company is paid a 30% JSA fee from the ad sales collected and is also paid an SSA fee for providing the operation services. In addition, in a given period, if expenses incurred by WXXA and WLAJ exceed their revenue share and the Shield Stations are not in a position to pay the Company the JSA and/or SSA fees, the Company would be at a loss for their services. Finally, if at any time either WXXA or WLAJ is in default of its loan, the Company, as the guarantor of the Shield Station loans, would be the responsible party.

WLAJ-TV

In March of 2013, WLAJ, a wholly owned subsidiary of an unrelated party, Shield Media Lansing LLC, entered into an asset purchase agreement to purchase the assets (including the FCC license) of the WLAJ-TV television station in Lansing, MI, from Sinclair Broadcast Group (“SBG”). Concurrent with this agreement, the Company entered into the JSA and SSA with WLAJ referred to above to provide sales, operational and administrative services to WLAJ. The initial terms of the JSA and SSA are eight years, and the agreements can be automatically renewed for successive two year renewal terms. WLAJ paid $14.3 million in cash to purchase the station assets which was partially financed through a $10 million term loan which was jointly guaranteed by the Company and Shield Media Lansing LLC. The acquisition was also funded from the proceeds from an asset purchase agreement in which the Company purchased certain non-license assets of WLAJ-TV for $5.4 million. The balance of the proceeds from the term loan and the asset purchase agreement between WLAJ and the Company, after SBG was paid, went toward transaction fees and working capital.

The financial results of WLAJ since March 1, 2013, have been consolidated by the Company in accordance with the VIE accounting guidance, and the purchase price of $14.3 million was allocated to the acquired assets and assumed liabilities based on estimated fair values upon the effective date of the transaction. The allocated fair value of acquired assets and assumed liabilities was determined using techniques similar to those described in Note 2 and is summarized as follows:

(In thousands)
Property and equipment	$	2,468
Broadcast licenses		7,700
Definite-lived intangible assets		2,100
Goodwill		2,366
Other liabilities		(310	)
Total	$	14,324

The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $1.7 million and advertiser relationships of $0.4 million.

The results of operations for the year ended December 31, 2013, include the results of WLAJ since March 1, 2013. Net operating revenues and operating income of WLAJ included in the consolidated statements of comprehensive income, were $4 million and $0.4 million for the year ended December 31, 2013, respectively.

WXXA-TV LLC

In December of 2012, WXXA, a wholly owned subsidiary of an unrelated party, Shield Media LLC, entered into an asset purchase agreement to purchase the assets (including the FCC license) of the WXXA-TV television station in Albany, NY, from Newport Television License LLC (“Newport”). Concurrent with this agreement, the Company entered into the JSA and SSA referred to above to provide certain sales, operational and administrative services to WXXA. The initial terms of the JSA and SSA are eight years, and the agreements may be automatically renewed for successive two year renewal terms. WXXA paid $19.5 million in cash to purchase the station assets which was financed through third-party financing which was jointly guaranteed by the Company and Shield Media.

The financial results of WXXA since December 13, 2012, have been consolidated by the Company in accordance with the VIE accounting guidance, and the purchase price of $19.5 million was allocated to the acquired assets and assumed liabilities based on estimated fair values upon the effective date of the transaction.

The allocated fair value of acquired assets and assumed liabilities was determined using techniques similar to those described in Note 2 and is summarized as follows:

(In thousands)
Programming asset	$	820
Programming liability		(1,182	)
Property and equipment		2,738
Broadcast licenses		14,700
Definite-lived intangible assets		2,000
Goodwill		364
Other assets		60
Total	$	19,500

The amount allocated to definite-lived intangible assets represents the estimated fair values of network affiliations of $1.2 million and advertiser relationships of $0.8 million.

Net operating revenues and operating income of WXXA included in the consolidated statements of comprehensive income, were $10.9 million and $0.7 million for the year ended December 31, 2013, respectively. The results of operations for the year ended December 31, 2012, included the results of WXXA station for the period December 13 through December 31. Net operating revenues and operating income of WXXA included in the consolidated statements of comprehensive income, were $0.5 million and less than $0.1 million for the year ended December 31, 2012, respectively.

The carrying amounts and classification of the assets and liabilities of the Shield Stations which have been included in the consolidated balance sheets as of December 31, 2013, and 2012 were as follows:

(In thousands)	2013		2012
Assets
Current assets
Cash and cash equivalents	$	4,110	$	1,589
Trade accounts receivable (less allowance for doubtful accounts 2013 - $105; 2012 - $0)		3,831		493
Prepaid expenses and other current assets		671		2,540
Total current assets		8,612		4,622
Property and equipment, net		2,996		2,726
Other assets, net		697		531
Definite lived intangible assets, net		3,400		1,991
Broadcast licenses		22,400		14,700
Goodwill		2,730		364
Total assets	$	40,835	$	24,934
Liabilities
Current liabilities
Trade accounts payable	$	-	$	278
Other accrued expenses and other current liabilities		2,180		2,775
Current installments of long-term debt		2,400		-
Total current liabilities		4,580		3,053
Long-term debt		29,600		21,427
Other liabilities		8,399		410
Total liabilities	$	42,579	$	24,890