NOTE 5: GOODWILL, OTHER INTANGIBLE ASSETS AND INTANGIBLE LIABILITIES

Goodwill and other intangible assets consisted of the following (in thousands):



	December 31, 2018							December 31, 2017
	Gross Amount		Accumulated Amortization			Net Amount		Gross Amount		Accumulated Amortization			Net Amount
Other intangible assets subject to amortization
Affiliate relationships (useful life of 16 years)	$	212,000	$	(79,500	)	$	132,500	$	212,000	$	(66,250	)	$	145,750
Advertiser relationships (useful life of 8 years)	168,000		(126,000		)	42,000		168,000		(105,000		)	63,000
Network affiliation agreements (useful life of 11 to 16 years)	228,700		(83,649		)	145,051		362,000		(175,337		)	186,663
Retransmission consent agreements (useful life of 7 to 12 years)	830,100		(467,073		)	363,027		830,100		(377,033		)	453,067
Other (useful life of 5 to 15 years)	16,015		(8,137		)	7,878		16,650		(6,565		)	10,085
Total	$	1,454,815	$	(764,359	)	690,456		$	1,588,750	$	(730,185	)	858,565
Other intangible assets not subject to amortization
FCC licenses						737,200							740,300
Trade name						14,800							14,800
Total other intangible assets, net						1,442,456							1,613,665
Goodwill						3,228,601							3,228,988
Total goodwill and other intangible assets						$	4,671,057						$	4,842,653

The changes in the carrying amounts of intangible assets, which are in the Company’s Television and Entertainment segment, during the years ended December 31, 2018 and December 31, 2017 were as follows (in thousands):



Other intangible assets subject to amortization
Balance as of December 31, 2016	$	1,025,134
Amortization (1)	(167,560		)
Balance sheet reclassifications (2)	86
Foreign currency translation adjustment	905
Balance as of December 31, 2017	$	858,565
Amortization (1)	(167,596		)
Balance sheet reclassifications (2)	(226		)
Foreign currency translation adjustment	(287		)
Balance as of December 31, 2018	$	690,456

Other intangible assets not subject to amortization
Balance as of December 31, 2016	$	794,000
Reclassification to assets held for sale (3)	(38,900		)
Balance as of December 31, 2017	$	755,100
Impairment charge	(3,100		)
Balance as of December 31, 2018	$	752,000

Goodwill
Gross balance as of December 31, 2016	$	3,608,930
Accumulated impairment losses as of December 31, 2016	(381,000		)
Balance as of December 31, 2016	3,227,930
Foreign currency translation adjustment	1,058
Balance as of December 31, 2017	$	3,228,988
Foreign currency translation adjustment	(387		)
Balance as of December 31, 2018	$	3,228,601
Total goodwill and other intangible assets as of December 31, 2018	$	4,671,057


(1)	Amortization of intangible assets includes $1 million related to lease contract intangible assets and is recorded in cost of sales or SG&A expense, if applicable, in the Consolidated Statements of Operations.


(2)	Represents net reclassifications which are reflected as a decrease (increase) to broadcast rights assets in the Consolidated Balance Sheets at December 31, 2017 and December 31, 2018, respectively.


(3)	See Note 4 for additional information regarding FCC licenses reclassified to assets held for sale.

The Company recorded contract intangible liabilities totaling $227 million in connection with the adoption of fresh-start reporting on the Effective Date. Of this amount, approximately $226 million was related to contracts for broadcast rights programming not yet available for broadcast. In addition, the Company recorded $9 million of intangible liabilities related to contracts for broadcast rights programming in connection with the acquisition of all of the issued and outstanding equity interests in Local TV on December 27, 2013 (the “Local TV Acquisition”). These intangible liabilities were reclassified as a reduction of broadcast rights assets in the Consolidated Balance Sheet as the programming becomes available for broadcast and subsequently amortized as a reduction of programming expenses in the Consolidated Statements of Operations in accordance with the Company’s methodology for amortizing the related broadcast rights. As of December 31, 2016, the remaining contract intangible liabilities for broadcast rights programming not yet available for broadcast have been reclassified as a reduction of broadcast rights assets or amortized as a reduction of programming expense and the balance was reduced to zero.

During the year ended December 31, 2016, the net changes in the carrying amounts of intangible liabilities, which are in the Company’s Television and Entertainment segment, included $12 million of amortization expense and $2 million of balance sheet reclassifications reflected as a reduction in broadcast rights assets in the Company’s Consolidated Balance Sheet. During the year ended December 31, 2017, the net changes in the carrying amounts of intangible liabilities were immaterial and the balance was reduced to zero.

The Company amortizes its intangible assets subject to amortization on a straight-line basis over their respective useful lives. The remaining intangible assets subject to amortization as of December 31, 2018, excluding lease contract intangible assets, have a weighted-average remaining useful life of approximately seven years. Amortization expense relating to these amortizable intangible assets is expected to be approximately $140 million in 2019, $134 million in 2020, $103 million in 2021, $84 million in 2022 and $57 million in 2023.

Impairment of Goodwill and Other Indefinite-lived Intangible Assets—As disclosed in Note 1, the Company reviews goodwill and other indefinite-lived intangible assets for impairment annually, or more frequently if events or changes in circumstances indicate that an asset may be impaired, in accordance with ASC Topic 350.

There were no goodwill impairment charges recorded in 2018, 2017 or 2016. In 2018 and 2017, the Company performed qualitative assessments of the television and cable reporting units (reporting units within the Television and Entertainment reportable segment). At December 31, 2018, the television and cable reporting units had goodwill balances of $2.505 billion and $723 million, respectively. At December 31, 2017, the television and cable reporting units had goodwill balances of $2.506 billion and $723 million, respectively. Based on the qualitative assessments in both years, the Company concluded that there were no impairments for either reporting unit. The conclusions were supported by the overall and budgeted financial performance, the carrying values after considering the headroom from the last quantitative analysis in 2016 (16% and 23% for television and cable, respectively), the overall stability of the Company’s enterprise value and other industry and macroeconomic factors.

In the fourth quarter of 2018 and 2016, the Company recorded non-cash pretax impairment charges of $3 million each within the Television and Entertainment segment related to the Company’s FCC licenses; these charges are included in SG&A in the Company’s Consolidated Statements of Operations. The estimated fair value of each of the Company’s FCC licenses was based on discounted future cash flows for a hypothetical start-up television station in the respective market that achieves and maintains an average revenue share for four years and has an average cost structure. For the Company’s FCC licenses, significant assumptions also include start-up operating costs for an independent station, initial capital investments and market revenue forecasts. The Company utilized a 9.0% discount rate and terminal growth rate of 2.0% to estimate the fair values of its FCC licenses in the fourth quarter of 2018. Fair value estimates for each of the Company’s indefinite-lived intangible assets are inherently sensitive to changes in these estimates, particularly with respect to the FCC licenses. The Company’s fourth quarter 2018 and 2016 impairment reviews determined that the FCC licenses in one and two markets, respectively, were impaired. The impairments were primarily due to declines in estimated future market revenues available to a hypothetical start-up television station in these markets. No impairment charges were recorded in 2017 for FCC licenses.

The Company’s FCC licenses and trade name constitute nonfinancial assets measured at fair value on a nonrecurring basis in the Company’s Consolidated Balance Sheets. These nonfinancial assets are classified as Level 3 assets in the fair value hierarchy established under ASC Topic 820. See Note 8 for a description of the hierarchy’s three levels.

In 2017, the Company participated in the FCC spectrum auction and received $172 million in gross proceeds. As of December 31, 2017, certain FCC licenses that were part of the FCC spectrum auction were included in assets held for sale. The Company recognized a net pretax gain of $133 million in the first quarter of 2018 related to the surrender of the spectrum of these television stations in January 2018. See Note 10 for additional information regarding the Company’s participation in the FCC spectrum auction.

The determination of estimated fair values of goodwill and other indefinite-lived intangible assets requires many judgments, assumptions and estimates of several critical factors, including projected revenues and related growth rates, projected operating margins and cash flows, estimated income tax rates, capital expenditures, market multiples and discount rates, as well as specific economic factors such as market share for broadcasting and royalty rates for the trade name intangible. Adverse changes in expected operating results and/or unfavorable changes in other economic factors could result in additional non-cash impairment charges in the future under ASC Topic 350.