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Acquisitions and Dispositions | 12 Months Ended
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Dec. 31, 2019
Business Combinations [Abstract] |
Acquisitions and Dispositions |
(3) | Acquisitions and Dispositions
On December 23, 2019, the Company completed the sale of certain land in Las Vegas, NV to a third party for $13.5 million. As a result of the sale, the Company recorded a gain of $7.9 million in the fourth quarter of 2019. On December 2, 2019, the Company completed the sale of certain land in Boca Raton, FL to a third party for $7.1 million. As a result of the sale, the Company recorded a gain of $6.5 million in the fourth quarter of 2019. On November 13, 2019, the Company created a new entity called OutlawsXP, Inc. (“Outlaws”) and holds 80% of the equity of Outlaws. The remaining equity was acquired by Renegades Holdings, Inc. in which the Company holds 45% of the outstanding shares (see Note 8). On November 14, 2019, Outlaws acquired an esports team, the Houston Outlaws, from Immortals, LLC that competes in the Overwatch League and domestic and international tournaments. The acquisition was accounted for as a business combination a n d included franchise rights and other intangibles ( See Note 7 ) . The acquisition also included goodwill ( See Note 6 ) . The acquisition of the team was financed with cash from operations and a promissory note to the seller (see Note 10). Outlaws also assumed a $10.0 million franchise fee payable that will be paid to the esports league over time. Outlaws has agreed to a contingent payment of $3.6 million if consideration in excess of a certain amount is paid for a new team to enter the Overwatch League between December 1, 2024 and December 1, 2029. The Company incurred transaction costs of $0.4 million. The acquisition broadened and diversified the Company’s revenue base. The current portion of the franchise fee payable is reported in other current liabilities and the noncurrent portion is reported in other long-term liabilities in the accompanying consolidated balance sheet as of December 31, 2019. The results of operations are consolidated in the accompanying consolidated statement of comprehensive income from the acquisition date through December 31, 2019. The fair value of the franchise rights was estimated using an income approach. The income approach measures the expected economic benefits the franchise rights will provide and discounts these future benefits using a discounted cash flow model. The discounted cash flow model incorporates variables such as revenue, revenue growth rates, operating expense projections, and a discount rate. The discounted cash flow projection period of ten years was determined to be an appropriate time horizon for the analyses. If different assumptions or estimates had been used in the income approach, the fair value of the franchise rights could have been materially different. If actual results are different from assumptions or estimates used in the discounted cash flow analyses, we may incur impairment losses in the future and they may be material. Goodwill was equal to the amount the purchase price exceeded the values allocated to the identifiable intangible assets. The amount allocated to goodwill is deductible for tax purposes. The fair value of the promissory note and the assumed franchise fee payable approximate the carrying value of each item as of the acquisition date. The fair value of the contingent consideration was not considered material as of the acquisition date. On October 25, 2019, the Company completed the sale of a radio tower in Tampa, FL and a radio tower in New Jersey to a third party for $2.4 million. As a result of the sale s , the Company recorded a gain of $2.0 million in the fourth quarter of 2019. On August 31, 2019, the Company completed the acquisition of substantially all of the assets used to operate WDMK-FM in Detroit from Urban One, Inc. for $13.5 million in cash. The purchase price was partially financed with $10.0 million in borrowings under the Company’s revolving credit facility and partially funded with $3.5 million of cash from operations. The acquisition broadened and diversified the Company’s local radio broadcasting platform and revenue base in the Detroit radio market. The acquisition was accounted for as an asset acquisition. The Company incurred transaction costs of $0.3 million which were capitalized as a component of the assets acquired.
The assets acquired are summarized as follows:
Property and equipment |  | $ | 432,588 |
FCC licenses |  |  | 12,891,117 |
Other intangibles |  |  | 176,295 |
|  | $ | 13,500,000 |
On March 28, 2019, the Company completed the sale of certain land and improvements in Augusta, GA to a third party for $0.5 million. As a result of the sale, the Company recorded a gain of $0.4 million in the first quarter of 2019. On March 15, 2019, the Company agreed to cancel a broadband radio service license in Chattanooga, TN in exchange for a fee of $3.3 million received from Clearwire Spectrum Holdings LLC (“Clearwire”). The Company had previously leased the channels under the broadband radio service license to Clearwire under an agreement that ended on March 15, 2019. As a result of the license cancelation, the Company recorded a gain of $3.1 million in the first quarter of 2019. On September 27, 2018, the Company completed the acquisition of WXTU-FM in Philadelphia from Entercom Communications Corp. for $38.0 million in cash. The purchase price was partially financed with $35.0 million in borrowings from the Company’s term loan credit facility and partially funded with $3.0 million of cash from operations. On July 19, 2018, the Company also entered into a local marketing agreement (“LMA”) with Entercom Communications Corp. and began operating WXTU-FM on July 23, 2018. During the term of the LMA, the Company included net revenues and operating expenses, including the associated LMA fee from operating WXTU-FM, in its consolidated financial statements. The LMA ended on September 27, 2018. The acquisition broadened and diversified the Company’s local radio broadcasting platform and revenue base in the Philadelphia radio market. The acquisition was accounted for as a business combination. The Company incurred transaction costs of $0.1 million. The purchase price allocation is summarized as follows:
Property and equipment |  | $ | 357,734 |
FCC license |  |  | 27,346,200 |
Goodwill |  |  | 10,102,183 |
Other intangibles |  |  | 193,883 |
|  | $ | 38,000,000 |
The fair value of the property and equipment was estimated using cost and market approaches. Property and equipment for which there are comparable current replacements available were valued on the basis of a cost approach. The cost approach allowed for factors such as physical depreciation as well as functional and economic obsolescence. Property and equipment for which an active used market exists, including property for which there is no longer comparable current replacements available but for which there remains an active used market, were valued using a market approach. The market approach is based on the selling prices of similar assets on the used market. As few sales reflect identical assets, the selling prices of similar assets was utilized with adjustments made for any differences such as age, condition, and options. If different assumptions or estimates had been used in the cost or market approaches, the fair value of the property and equipment could have been materially different. The fair value of the FCC license was estimated using an income approach. The income approach measures the expected economic benefits the licenses provide and discounts these future benefits using discounted cash flow analyses. The discounted cash flow analyses assume that each license is held by a hypothetical start-up radio station, and the value yielded by the discounted cash flow analyses represents the portion of the radio station’s value attributable solely to its license. The discounted cash flow model incorporates variables such as radio market revenues; the projected growth rate for radio market revenues; projected radio market revenue share; projected radio station operating income margins; and a discount rate appropriate for the radio broadcasting industry. The variables used in the analyses reflect historical radio station and market growth trends, as well as anticipated radio station performance, industry standards, and market conditions. The discounted cash flow projection period of ten years was determined to be an appropriate time horizon for the analyses. Stable market revenue share and operating margins are expected at the end of year three (maturity). If different assumptions or estimates had been used in the income approach, the fair value of the FCC licenses could have been materially different. If actual results are different from assumptions or estimates used in the discounted cash flow analyses, we may incur impairment losses in the future and they may be material. The key assumptions used in the valuation of the FCC licenses are as follows:
Revenue growth rates |  | 0.6% - 1.3%
Market revenue shares at maturity |  | 5.4%
Operating income margins at maturity |  | 30.5%
Discount rate |  | 9.0%
Goodwill was equal to the amount the purchase price exceeded the values allocated to the tangible and identifiable intangible assets. The $10.1 million allocated to goodwill is deductible for tax purposes. The following unaudited pro forma information for the year ended December 31, 2018 assumes that the acquisition of WXTU-FM in Philadelphia had occurred on January 1, 2018. This unaudited pro forma information has been prepared based on estimates and assumptions, which management believes are reasonable, and are not necessarily indicative of what would have occurred had the acquisition been completed on January 1, 2018 or of results that may occur in the future.
Net revenue |  | $ | 262,769,627 |
Operating income |  |  | 42,439,544 |
Net income |  |  | 16,120,586 |
Basic and diluted net income per share |  |  | 0.59 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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