GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS:

12 Months Ended

Dec. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

5. GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS:

Impairment Testing

In the past, we have made acquisitions whereby a significant amount of the purchase price was allocated to radio broadcasting licenses, goodwill and other intangible assets. In accordance with ASC 350, “Intangibles - Goodwill and Other,” we do not amortize our radio broadcasting licenses and goodwill. Instead, we perform a test for impairment annually across all reporting units, or on an interim basis when events or changes in circumstances or other conditions suggest impairment may have occurred in any given reporting unit. Other intangible assets continue to be amortized on a straight-line basis over their useful lives. We perform our annual impairment test as of October 1 of each year. For the years ended December 31, 2014, 2013 and 2012, we recorded impairment charges against radio broadcasting licenses and goodwill collectively, of approximately $0, $14.9 million and $313,000, respectively.

2014 Interim Impairment Testing

For the first, second and third quarters in 2014, the total market revenue growth for certain markets in which we operate was below that used in our prior year annual impairment testing. In each quarter, we deemed that to be an impairment indicator that warranted interim impairment testing of certain markets’ radio broadcasting licenses, which we performed as of March 31, 2014, June 30, 2014 and September 30, 2014. There was no impairment identified as part of this testing in 2014. During the third quarter of 2014, the Company performed interim impairment testing on the valuation of goodwill associated with Reach Media. Upon review of the results of this testing, the Company concluded that the carrying value of goodwill attributable to Reach Media had not been impaired.

2014 Annual Impairment Testing

We completed our annual impairment assessment as of October 1, 2014. Our 2014 annual impairment testing indicated the carrying values for our radio broadcasting licenses, radio market goodwill and goodwill attributable to Reach Media, TV One and Interactive One were not impaired.

2013 Interim Impairment Testing

During 2013, the total market revenue growth for certain markets in which we operate was below that used in our 2012 annual impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of certain market’s radio broadcasting licenses, which we performed as of March 31, 2013, June 30, 2013 and September 30, 2013. The Company recorded an impairment charge of approximately $1.4 million related to our Cincinnati FCC radio broadcasting licenses during the first quarter of 2013. In addition, the Company recorded an impairment charge of approximately $9.8 million related to our Philadelphia, Cincinnati and Cleveland radio broadcasting licenses during the second quarter of 2013. Finally, the Company recorded an impairment charge of approximately $3.7 million related to our Boston and Cleveland radio broadcasting licenses during the third quarter of 2013. The remaining radio broadcasting licenses that were tested during 2013 were not impaired. Due to the fact that there were impairment charges recognized for certain FCC licenses during 2013, we deemed to that to be a goodwill impairment indicator and, as such, we performed an interim analysis for certain radio markets’ goodwill as of June 30, 2013, and September 30, 2013. There were no interim impairment indicators identified for any of our other reporting units during 2013.

2013 Annual Impairment Testing

We completed our annual impairment assessment as of October 1, 2013. Our 2013 annual impairment testing indicated the carrying values for our radio broadcasting licenses, radio market goodwill and goodwill attributable to Reach Media, TV One and Interactive One were not impaired.

2012 Interim Impairment Testing

During 2012, the total market revenue growth for certain markets was below that used in our 2011 annual impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of certain of our radio broadcasting licenses, which we performed as of June 30, 2012. The Company recorded an impairment charge of $313,000 related to our Charlotte radio broadcasting licenses. The remaining radio broadcasting licenses that were tested during the second quarter of 2012 were not impaired.

In addition, Reach Media did not meet its budgeted operating cash flow for the third and fourth quarters of 2012, and as a result, we performed interim impairment assessments at September 30, 2012 and December 31, 2012. With the assistance of a third-party valuation firm, the Company completed a valuation of the Reach Media reporting unit and concluded that although Reach Media had not met its budget, the carrying value of goodwill attributable to Reach Media had not been impaired.

Finally, for the third and fourth quarters of 2012, the Company performed interim impairment testing on the valuation of goodwill associated with Interactive One. Interactive One net revenues and cash flows declined for the third quarter and year to date 2012 and full year internal projections were revised. As a result of the testing, despite the revised projections, the Company concluded no impairment to the carrying value of goodwill had occurred.

2012 Annual Impairment Testing

We completed our annual impairment assessment as of October 1, 2012. Our October 1, 2012 annual impairment testing indicated the carrying values for our radio broadcasting licenses, radio market goodwill and goodwill attributable to Reach Media, TV One and Interactive One were not impaired.

2012 Year-End Impairment Testing

With the assistance of a third-party valuation firm, the Company assessed the fair value of the redeemable noncontrolling interest in Reach Media at December 31, 2012. Upon review of the results of the year-end impairment tests, the Company concluded that the carrying value of goodwill attributable to Reach Media had not been impaired.

Valuation of Broadcasting Licenses

We utilize the services of a third-party valuation firm to provide independent analysis when evaluating the fair value of our radio broadcasting licenses. Fair value is estimated to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We use the income approach to test for impairment of radio broadcasting licenses. A projection period of 10 years is used, as that is the time horizon in which operators and investors generally expect to recover their investments. When evaluating our radio broadcasting licenses for impairment, the testing is done at the unit of accounting level as determined by ASC 350, “Intangibles - Goodwill and Other.” In our case, each unit of accounting is a cluster of radio stations into one of our 16 geographical markets. Broadcasting license fair values are based on the discounted future cash flows of the applicable unit of accounting assuming an initial hypothetical start-up operation which possesses FCC licenses as the only asset. Over time, it is assumed the operation acquires other tangible assets such as advertising and programming contracts, employment agreements and going concern value, and matures into an average performing operation in a specific radio market. The income approach model incorporates several variables, including, but not limited to: (i) radio market revenue estimates and growth projections; (ii) estimated market share and revenue for the hypothetical participant; (iii) likely media competition within the market; (iv) estimated start-up costs and losses incurred in the early years; (v) estimated profit margins and cash flows based on market size and station type; (vi) anticipated capital expenditures; (vii) probable future terminal values; (viii) an effective tax rate assumption; and (ix) a discount rate based on the weighted-average cost of capital for the radio broadcast industry. In calculating the discount rate, we considered: (i) the cost of equity, which includes estimates of the risk-free return, the long-term market return, small stock risk premiums and industry beta; (ii) the cost of debt, which includes estimates for corporate borrowing rates and tax rates; and (iii) estimated average percentages of equity and debt in capital structures.

Our methodology for valuing broadcasting licenses has been consistent for all periods presented. Below are some of the key assumptions used in the income approach model for estimating the broadcasting license and goodwill fair values for the annual impairment testing performed since October 2012.

Radio Broadcasting	October 1,			October 1,			October 1,
Licenses	2014			2013			2012

Impairment charge (in millions)	$	—		$	—		$	—

Discount Rate		9.5	%		10.0	%		10.0	%
Year 1 Market Revenue Growth Rate Range		0.3% – 1.0	%		0.0% – 2.0	%		1.0% -2.0	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.0% – 2.0	%		1.0% – 2.0	%		1.0% -2.0	%
Mature Market Share Range		6.9% – 25.2	%		6.4% – 26.9	%		0.7% - 27.4	%
Operating Profit Margin Range		30.0% – 48.4	%		30.8% – 47.8	%		19.6% - 47.7	%

Broadcasting Licenses Valuation Results

The Company’s total broadcasting licenses carrying value is approximately $666.8 million as of December 31, 2014. The units of accounting reflected in the table below are not disclosed on a specific market basis so as to not make sensitive information publicly available that could be competitively harmful to the Company.

	Radio Broadcasting Licenses
	Carrying Balances
	As of				As of
	December				December
Unit of Accounting	31, 2013		Additions		31, 2014
	(In thousands )

Unit of Accounting 2	$	3,086	$	–	$	3,086
Unit of Accounting 4		9,169		6,973		16,142
Unit of Accounting 5		16,687		–		16,687
Unit of Accounting 7		16,165		–		16,165
Unit of Accounting 14		20,434		–		20,434
Unit of Accounting 15		20,886		–		20,886
Unit of Accounting 11		21,135		–		21,135
Unit of Accounting 9		34,270		–		34,270
Unit of Accounting 6		22,642		–		22,642
Unit of Accounting 16		52,965		–		52,965
Unit of Accounting 13		52,556		–		52,556
Unit of Accounting 8		66,715		–		66,715
Unit of Accounting 12		50,179		–		50,179
Unit of Accounting 1		93,394		–		93,394
Unit of Accounting 10		179,541		–		179,541
Total	$	659,824	$	6,973	$	666,797

Our licenses expire at various dates through August 1, 2022.

Valuation of Goodwill

The impairment testing of goodwill is performed at the reporting unit level. We had 20 reporting units as of our October 2014 annual impairment assessment, consisting of the 16 radio markets and four business divisions. In testing for the impairment of goodwill, we primarily rely on the income approach. The approach involves a 10-year model with similar variables as described above for broadcasting licenses, except that the discounted cash flows are based on the Company’s estimated and projected market revenue, market share and operating performance for its reporting units, instead of those for a hypothetical participant.

Based on current economic conditions, we included modest improvement estimates and projections in our 2014 annual assessment compared to our 2013 annual assessment. We have not made any changes to the methodology for valuing or allocating goodwill when determining the fair values of the reporting units. Due to the fact that there were impairment charges recognized for certain FCC licenses during 2013, we deemed to that to be an impairment indicator and, as such, we performed an interim analysis for certain radio markets’ goodwill as of June 30, 2013, and September 30, 2013. We did not identify any goodwill impairment during the years ended December 31, 2014, 2013 and 2012.

Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for all annual impairment assessments performed since October 2012.

Goodwill (Radio Market	October 1,			October 1,			October 1,
Reporting Units)	2014 (a)			2013 (a)			2012 (a)

Impairment charge (in millions)	$	–		$	–		$	14.5

Discount Rate		9.5	%		10.0	%		10.0	%
Year 1 Market Revenue Growth Rate Range		0.3% – 1.0	%		0.0% -2.0	%		1.0% -2.0	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.0% - 2.0	%		1.0% - 2.0	%		1.5% - 2.0	%
Mature Market Share Range		7.2% - 19.5	%		7.1% - 19.8	%		6.7% - 20.8	%
Operating Profit Margin Range		26.4% - 52.2	%		28.4% - 56.4	%		29.3% - 58.5	%

(a)	Reflects the key assumptions for testing only those radio markets with remaining goodwill.

Below are some of the key assumptions used in the income approach model for estimating the fair value for Reach Media for the annual assessments since October 2012. When compared to the discount rates used for assessing radio market reporting units, the higher discount rates used in these assessments reflect a premium for a riskier and broader media business, with a heavier concentration and significantly higher amount of programming content related intangible assets that are highly dependent on the on-air personality Tom Joyner. As a result of our impairment assessments, the Company concluded no impairment for the goodwill value had occurred.

	October			October			October
	1,			1,			1,
Reach Media Segment Goodwill	2014			2013			2012

Impairment charge (in millions)	$	-		$	-		$	-

Discount Rate		12.0	%		13.0	%		12.0	%
Year 1 Revenue Growth Rate		1.5	%		1.5	%		2.0	%
Long-term Revenue Growth Rate Range		0.1% - 2.0	%		(4.5)% - 2.6	%		(4.7)% - 2.8	%
Operating Profit Margin Range		10.0% – 14.9	%		11.5% - 21.5	%		4.6% - 19.8	%

Below are some of the key assumptions used in the income approach model for determining the fair value of our internet reporting unit since October 2012. When compared to discount rates for the radio reporting units, the higher discount rate used to value the reporting unit is reflective of discount rates applicable to internet media businesses. As a result of the testing performed, the Company concluded no impairment to the carrying value of goodwill had occurred. We did not make any changes to the methodology for valuing or allocating goodwill when determining the carrying value.

	October 1,			October 1,			October 1,
Internet Segment Goodwill	2014			2013			2012

Impairment charge (in millions)	$	-		$	-		$	-

Discount Rate		13.5	%		14.5	%		13.5	%
Year 1 Revenue Growth Rate		11.8	%		10.0	%		13.8	%
Long-term Revenue Growth Rate (Year 10)		2.5	%		2.5	%		2.5	%
Operating Profit Margin Range		9.1% - 25.6	%		5.4% - 24.8	%		(4.8)% - 24.2	%

Below are some of the key assumptions used in the income approach model for determining the fair value of our cable television reporting unit since October 2012. As a result of the testing performed in 2014, 2013 and 2012, the Company concluded no impairment to the carrying value of goodwill had occurred.

	October 1,			October 1,			October 1,
Cable Television Segment Goodwill	2014			2013			2012

Impairment charge (in millions)	$	–		$	–		$	–

Discount Rate		10.4	%		10.8	%		10.8	%
Year 1 Revenue Growth Rate		11.5	%		12.1	%		11.2	%

Long-term Revenue Growth Rate Range		0.3% – 7.7	%		1.1% - 12.1	%		2.5% - 12.2	%

Operating Profit Margin Range		29.8% - 36.1	%		30.6% - 35.7	%		33.3% - 36.2	%

The above four goodwill tables reflect some of the key valuation assumptions used for 13 of our 20 reporting units. The other seven remaining reporting units had no goodwill carrying value balances as of December 31, 2014 and 2013.

Goodwill Valuation Results

The table below presents the Company’s goodwill carrying values for its four reportable segments.

	Goodwill Carrying Balances
	As of				As of
	December		Increase		December
Reporting Unit	31, 2013		(Decrease)		31, 2014
			(In thousands)

Radio Broadcasting Segment	$	70,823	$	2,712	$	73,535

Reach Media Segment		14,354		—		14,354

Internet Segment		21,816		606		22,422

Cable Television Segment		165,044		—		165,044

Total	$	272,037	$	3,318	$	275,355

In arriving at the estimated fair values for radio broadcasting licenses and goodwill, we also performed an analysis by comparing our overall average implied multiple based on our cash flow projections and fair values to recently completed sales transactions, and by comparing our estimated fair values to the market capitalization of the Company. The results of these comparisons confirmed that the fair value estimates resulting from our annual assessments in 2014 were reasonable.

Intangible Assets Excluding Goodwill and Radio Broadcasting Licenses

Other intangible assets, excluding goodwill and radio broadcasting licenses, are being amortized on a straight-line basis over various periods. Other intangible assets consist of the following:

	As of December 31,
	2014		2013		Period of Amortization

	(In thousands)

Trade names	$	17,344	$	17,133		2-5 Years
Talent agreement		—		19,549		10 Years
Debt financing and modification costs		13,846		19,021		Term of debt
Intellectual property		9,531		14,151		4-10 Years
Affiliate agreements		178,986		186,755		1-10 Years
Acquired income leases		44		1,282		3-9 Years
Non-compete agreements		—		1,260		1-3 Years
Advertiser agreements		44,871		47,688		2-7 Years
Favorable office and transmitter leases		2,097		3,358		2-60 Years
Brand names		2,539		2,539		2.5 Years
Brand names - unamortized		40,134		39,688		Indefinite
Other intangibles		1,053		3,662		1-5 Years
		310,445		356,086
Less: Accumulated amortization		(135,933)		(153,493)
Other intangible assets, net	$	174,512	$	202,593

Amortization expense of intangible assets for the years ended December 31, 2014, 2013 and 2012 was approximately $27.1 million, $27.7 million and $28.4 million, respectively. The amortization of deferred financing costs was charged to interest expense for all periods presented. The amount of deferred financing costs included in interest expense for the years ended December 31, 2014, 2013 and 2012 was approximately $4.6 million, $5.3 million and $4.5 million, respectively.

The following table presents the Company’s estimate of amortization expense for the years 2015 through 2019 for intangible assets, excluding deferred financing costs:

	(In thousands)

2015	$	26,053
2016	$	25,895
2017	$	25,891
2018	$	25,854
2019	$	25,848

Actual amortization expense may vary as a result of future acquisitions and dispositions.

- 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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