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Intangibles | 6 Months Ended
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Jun. 30, 2011
Goodwil And Intangible Assets Disclosure Abstract |
Goodwill And Intangible Assets Disclosure Text Block | 4. INTANGIBLE ASSETS AND GOODWILL (A) Indefinite-Lived Intangibles Goodwill and certain intangible assets are not amortized. 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 recorded value of goodwill and certain intangibles (such as broadcasting licenses), then a charge is recorded to the results of operations. T he Company may only write down the carrying value of i ts indefinite-lived intangibles. The Company is not permitted to increase the carrying value if the fair value of these assets subsequently increases. (1) Broadcasting Licenses Impairment Test The Company performs its annual broadcasting license impairment test during the second quarter of each year by evaluating its broadcasting licenses for impairment at the market level using the direct method. F or purposes of testing impairment, i ndefinite-lived intangible assets are combined into a single unit of accounting. Since the broadcasting licenses in each market are operated as a single asset, each market's broadcasting licenses are a single unit of accounting. 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 incorporating variables that are based on past experiences and judgments about future performance using industry normalized information for an average station within a certain market. These variables include, but are not limited to: (1) the discount rate used in the determination of fair value; (2) the market share and profit margin of an average station within a market based upon market size and station type; (3) the forecast growth rate of each radio market, including assumptions regarding each market's population, household income, retail sales and other factors that would influence advertising expenditures; (4) the estimated capital start-up costs and losses incurred during the early years; (5) the likely media competition within the market area; (6) an effective tax rate assumption; and (7) future terminal values. The following table presents the changes in broadcasting licenses for the periods indicated:
|  | Broadcasting Licenses
|  | Carrying Amount
|  | 2011 |  | 2010
|  | (amounts in thousands)
Beginning of period balance as of January 1, |  | $ | 707,852 |  | $ | 707,852
Acquisition (Note 18) |  |  | 8,050 |  |  | -
Ending period balance as of June 30, |  | $ | 715,902 |  | $ | 707,852
Broadcasting License Impairment Testing During The Second Quarter Ended June 30, 2011 During the second quarter of 2011, the Company completed its annual impairment test for broadcasting licenses and determined that the fair value of its broadcasting licenses was in excess of the carrying value for each of the Company's markets and accordingly, no impairment was recorded. 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 first three (in clauses (1) through (3) above) are the most important to the determination of fair value. The following table reflects the estimates and assumptions used in the second quarter of 201 1 as compared to the second quarter of 20 10, the date of the most recent prior impairment test. In general, when comparing the second quarter of 20 1 1 to the second quarter of 20 10: (1) the discount rate, which was estimated using required returns on debt and equity of publicly traded radio companies, did not change; (2) the market specific operating profit margin range remained relatively stable with minor fluctuations in several markets; and (3) the market long-term revenue growth rate did not change.
| Second |  | Second
| Quarter |  | Quarter
| 2011 |  | 2010
Discount rate | 10.0% |  | 10.0%
Operating profit margin range of the Company's markets | 19.5% to 41.5% |  | 21.0% to 42.5%
Long-term revenue growth rate range of the Company's markets | 1.5% to 2.0% |  | 1.5% to 2.0%
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 broadcasting licenses below the amount reflected in the balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges, which may be material, in future periods. Broadcasting License Impairment Testing During The Second Quarter Ended June 30, 2010 The Company completed its annual impairment test for broadcasting licenses during the second quarter of 2010 and determined that the fair value of the broadcasting licenses was more than the amount reflected in the balance sheet for each of the Company's markets and, accordingly, no impairment was recorded. 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 first three (in clauses (1) through (3) above) are the most important to the determination of fair value. The following table reflects the estimates and assumptions used in the second quarter of 201 0 as compared to the second quarter of 20 09, the date of the prior impairment test. In general, when comparing the second quarter of 20 1 0 to the second quarter of 20 09: (1) the discount rate decreased primarily due to a decrease in the estimated required returns on debt and equity of publicly traded radio companies; (2) the market specific operating profit margin range remained relatively flat; and (3) the market long-term revenue growth rate w as marginally higher as the outlook for the industry improved.
| Second |  | Second
| Quarter |  | Quarter
| 2010 |  | 2009
Discount rate | 10.0% |  | 10.6%
Operating profit margin range of the Company's markets | 21.0% to 42.5% |  | 21.0% to 44.0%
Long-term revenue growth rate range of the Company's markets | 1.5% to 2.0% |  | 1.0% to 2.5%
(2) G oodwill The Company performs its annual impairment test on its goodwill during the second quarter of each year by comparing the fair value for each reporting unit with the amount reflected on the balance sheet. The Company has determined that a radio market is a reporting unit and, in total, the Company assesses goodwill at 19 separate reporting units (four of the Company's 2 3 reporting units ha d no goodwill recorded as of the end of the current period). If the fair value of any reporting unit is less than the amount reflected in the balance sheet, an indication exists that the amount of goodwill attributed to a reporting unit may be impaired, and the Company is required to perform a second step of the impairment test. In the second step, the Company compares the amount reflected in the balance sheet to the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets and liabilities in a manner similar to a purchase price allocation. To determine the fair value, the Company uses an income and market approach for each reporting unit. The market approach compares recent sales and offering prices of similar properties. The income approach uses the subject property's income generated over a specified time and capitalized at an appropriate market rate to arrive at an indication of the most probable selling price. The following table presents the changes in goodwill for each of the periods indicated:
|  |  | Goodwill
|  |  | Carrying Amount
|  |  | 2011 |  | 2010
|  |  | (amounts in thousands)
Goodwill before cumulative loss on impairment |  |  |  |  |
as of January 1, | $ | 163,783 |  | $ | 163,783
| Accumulated loss on impairment |  | (125,615) |  |  | (125,615)
Beginning balance after cumulative loss on impairment |  | 38,168 |  |  | 38,168
| Acquisition (Note 18) |  | 723 |  |  | 0
Ending balance as of June 30, | $ | 38,891 |  | $ | 38,168
Goodwill Impairment Testing During The Second Quarter Ended June 30, 2011 In step one of the Company's goodwill analysis during the second quarter, the Company considered the results of the market approach and, when appropriate, the income approach in computing the fair value of the Company's reporting units. In the market approach, the Company applied an estimated market multiple of between seven and a half times and eight times to each reporting unit's operating performance to calculate the fair value. This multiple was consistent with the multiple applied to all markets in the second quarter of 20 10. Management believes that these approaches are an appropriate measurement given the current market valuations of broadcast radio stations together with historical market transactions, including those in recent months. Factors contributing to the determination of the reporting unit's operating performance were historical performance and management's estimate of future performance. In the income approach, the Company utilized the discounted cash flow method to calculate the fair value of the reporting unit (the key estimates and assumptions are included in the table below). The results of step one indicated that it was not necessary to perform the second step analysis in any of the markets tested, as t he fair values for all of the Company's markets were in excess of the carrying value. As a result of the step one test, no impairment loss was recorded during the second quarter of 201 1. The Company performed a reasonableness test by comparing the fair value results for goodwi ll by using the implied multiple based on the Company's cash flow performance and its current stock price and comparing the results to prevailing radio broadcast transaction multiples. The following table reflects certain key estimates and assumptions used in the second quarter of 201 1 and in the second quarter of 20 10, the date of the most recent prior impairment test. The ranges for operating profit margin and revenue growth rates are for the Company's markets. In general, when comparing the second quarter of 201 1 to the second quarter of 20 10: (1) the discount rate, which was estimated using required returns on debt and equity of publicly traded radio companies, did not change; (2) the market specific operating profit margin range was relatively stable; and (3) the market long-term revenue growth rate did not change.
| Second |  | Second
| Quarter |  | Quarter
| 2011 |  | 2010
Discount rate | 10.0% |  | 10.0%
Operating profit margin range of the Company's markets | 25.0% to 46.6% |  | 26.0% to 39.0%
Long-term revenue growth rate range of the Company's markets | 1.5% to 2.0% |  | 1.5% to 2.0%
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 balance sheet, the Company may be required to conduct an interim test and possibly recognize impairment charges, which could be material, in future periods. Goodwill Impairment Testing During The Second Quarter Ended June 30, 2010 In step one of the Company's goodwill analysis during the second quarter, the Company considered the results of the market approach and the income approach in computing the fair value of the Company's reporting units. In the market approach, the Company applied an estimated market multiple of between seven and a half times and eight times to each reporting unit's operating performance to calculate the fair value. This multiple was higher than the six times multiple applied to all markets in the second quarter of 2009. Management believes that these approaches are an appropriate measurement given the current market valuations of broadcast radio stations together with the historical market transactions, including those in recent months. Factors contributing to the determination of the reporting unit's operating performance were historical perfor mance and management's estimate of future performance. In the income approach, the Company utilized the discounted cash flow method to calculate the fair value of the reporting unit (the key estimates and assumptions are included in the table below). The results of step one indicated that it was not necessary to perform the second step analysis in any of the markets tested, as t he fair values for all of the Company's markets were above book value. As a result of the step one test, no impairment loss was recorded during the second quarter of 2010. The Company performed a reasonableness test by comparing the fair value results for goodwi ll by using the implied multiple based on the Company's cash flow performance and its current stock price and comparing the results to prevailing radio broadcast transaction multiples. The following table reflects certain key estimates and assumptions used in the second quarter of 2010 and in the second quarter of 2009, the date of the prior impairment test. The ranges for operating profit margin and revenue growth rates are for the Company's markets. In general, when comparing the second quarter of 2010 to the second quarter of 2009: (1) the discount rate decreased primarily due to a decrease in the estimated required returns of the debt and equity of publicly traded radio companies; (2) the market specific operating profit margin range narrowed; and (3) the market long-term revenue growth rate range narrowed.
| Second |  | Second
| Quarter |  | Quarter
| 2010 |  | 2009
Discount rate | 10.0% |  | 10.6%
Operating profit margin range of the Company's markets | 26.0% to 39.0% |  | 21.0% to 41.0%
Long-term revenue growth rate range of the Company's markets | 1.5% to 2.0% |  | 1.0% to 2.5%

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- Definition Discloses 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 or 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. This element may be used as a single block of text to include the entire intangible asset disclosure including data and tables. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 142 -Paragraph 42, 43, 44, 45, 46, 47 + Details
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