GOODWILL, RADIO BROADCASTING LICENSES AND OTHER INTANGIBLE ASSETS:

12 Months Ended

Dec. 31, 2012

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 or on an interim basis when events or changes in circumstances or other conditions suggest impairment may have occurred. 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, 2012, 2011 and 2010, we recorded impairment charges against radio broadcasting licenses and goodwill of $313,000, approximately $14.5 million and $36.1 million, respectively.

2012 Interim Impairment Testing

During the second quarter of 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 declines, 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.

2011 Interim Impairment Testing

During the second quarter of 2011, the total market revenue growth for certain markets was below that used in our 2010 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 May 31, 2011. During the third quarter, there was further deterioration of revenue growth in certain markets, and as such, we deemed that to be an impairment indicator that warranted interim testing of certain radio broadcasting licenses as of September 30, 2011. The Company concluded that our radio broadcasting licenses were not impaired during the second or third quarters of 2011. During the second and third quarters of 2011, the operating performance and current projections for the remainder of the year for specific radio markets were below that used in our 2010 annual impairment testing. We deemed that to be an impairment indicator that warranted interim impairment testing of goodwill associated with specific radio markets, which we performed as of May 31, 2011 and as of September 30, 2011. The Company concluded that goodwill had not been impaired during the second and third quarters of 2011.

In addition, Reach Media’s actual operating results did not meet budgeted results during 2011, which was considered an impairment indicator, and as such, interim impairment testing for goodwill attributable to Reach Media was performed in March, June and September of 2011. There were no impairment charges recorded as part of our interim impairment testing.

2011 Annual Impairment Testing

We completed our annual impairment assessment as of October 1, 2011. As a result of our testing, we recorded an impairment charge of approximately $14.5 million against goodwill in our Columbus market. Our October 1, 2011 annual impairment testing indicated the carrying values for our radio broadcasting licenses and goodwill attributable to Interactive One were not impaired.

2011 Year End Impairment Testing

We completed an impairment assessment as of December 31, 2011 for Reach Media. Due to amendments of existing Reach Media affiliate agreements with Radio One, Reach Media’s expected future cash flows were reduced and we considered this an impairment indicator. There were no goodwill impairment charges recorded as part of our year end impairment testing. However, the Company recognized a non-cash impairment charge of approximately $7.8 million related to the long-lived assets of Reach Media.

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 we believe 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 estimated after-tax 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 broadcasting licenses fair values for all annual and interim impairments assessments performed since October 2010.

Radio Broadcasting	October 1,			October 1,			June 30,			October 1,
Licenses	2010			2011			2012 (a)			2012
Pre-tax impairment charge (in millions)	$	19.9		$	—		$	0.3		$	—
Discount Rate		10.0	%		10.0	%		10.0	%		10.0	%
Year 1 Market Revenue Growth Rate Range		1.0% -3.0	%		1.5% -2.5	%		1.0% -3.0	%		1.0% -2.0	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.0% - 2.5	%		1.0% - 2.0	%		1.0% - 2.0	%		1.0% -2.0	%
Mature Market Share Range		0.8% - 28.3	%		0.7% - 28.9	%		5.8% - 15.6	%		0.7% - 27.4	%
Operating Profit Margin Range		19.0% - 47.3	%		19.1% - 47.4	%		29.1% - 48.0	%		19.6% - 47.7	%

a)   Reflects changes only to the key assumptions used in the interim testing for certain units of accounting.

Broadcasting Licenses Valuation Results

The Company’s total broadcasting licenses carrying value is approximately $674.0 million as of December 31, 2012. The Company recorded a non-cash impairment charge of $313,000 during the second quarter of 2012 as part of its interim impairment testing. There were no other changes to the carrying values of the Company’s radio broadcasting licenses for the year ended December 31, 2012, for each unit of accounting, as noted in the table below. As noted above, each unit of accounting is a cluster of radio stations in one geographical market. The units of accounting 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
Unit of Accounting	December 31, 2011		Impairment			December 31, 2012
	(In thousands )
Unit of Accounting 2	$	3,086	$	-		$	3,086
Unit of Accounting 4		9,482		(313	)		9,169
Unit of Accounting 5		18,657		-			18,657
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		26,242		-			26,242
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		58,779		-			58,779
Unit of Accounting 1		93,394		-			93,394
Unit of Accounting 10		179,541		-			179,541
Total	$	674,307	$	(313	)	$	673,994

Valuation of Goodwill

The impairment testing of goodwill is performed at the reporting unit level. We had 20 reporting units as of our October 2012 annual impairment assessments, 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. We follow a two-step process to evaluate if a potential impairment exists for goodwill. The first step of the process involves estimating the fair value of each reporting unit. If the reporting unit’s fair value is less than its carrying value, a second step is performed to attribute the fair value of the reporting unit to the individual assets and liabilities of the reporting unit in order to determine the implied fair value of the reporting unit’s goodwill as of the impairment assessment date. Any excess of the carrying value of the goodwill over the implied fair value of the goodwill is written off as a charge to operations.

Given the gradual improvement in the economy, we included modest improvement estimates and projections in our 2012 annual assessment compared to our 2011 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.

Below are some of the key assumptions used in the income approach model for estimating reporting unit fair values for all interim and annual impairment assessments performed since October 2010.  

Goodwill (Radio Market	October 1,			October 1,			October 1,
Reporting Units)	2010 (a)			2011 (a)			2012 (a)
Pre-tax impairment charge (in millions)	$	–		$	14.5		$	–
Discount Rate		10.0	%		10.0	%		10.0	%
Year 1 Market Revenue Growth Rate Range		1.5% -3.0	%		2.0% -2.5	%		1.0% -2.0	%
Long-term Market Revenue Growth Rate Range (Years 6 – 10)		1.5% - 2.5	%		1.5% - 2.0	%		1.5% - 2.0	%
Mature Market Share Range		7.0% - 23.0	%		7.4% - 20.8	%		6.7% - 20.8	%
Operating Profit Margin Range		27.5% - 58.0	%		29.5% - 54.0	%		29.3% - 58.5	%

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

Due to the September 2009 amendment of Reach Media’s Sales Representation Agreement with Citadel, Reach Media began to sell advertising inventory within the Tom Joyner Morning Show through an internal sales force. This shift from a guaranteed revenue arrangement with Citadel resulted in reduced revenues and operating cash flow in 2010 compared to the original budget and interim forecasts. As a result, we performed a number of interim impairment tests in 2010. Given the continued decline in revenues and cash flows during 2010, we reduced the revenue and operating cash flow projections for Reach Media at each interim impairment assessment and at our year end assessment. In addition, we performed a number of interim impairment tests in 2011 because actual operating results did not meet budgeted results. Based on this, we reduced our operating cash flow projections and assumptions for our interim testing as well as our year end testing. Since our annual assessment in October 2010, we have not made any changes to the methodology for valuing or allocating goodwill when determining the carrying value for Reach Media.

Below are some of the key assumptions used in the income approach model for estimating the fair value for Reach Media for the annual and certain year end assessments since October 2010. 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 the February, May and August 2010 interim assessments, the Company concluded no impairment to the carrying value of Reach Media had occurred. During the fourth quarter of 2010, Reach Media’s operating performance continued to decline, but at a decreasing rate. We believed this represented an impairment indicator and as a result, we performed a year end impairment assessment at December 31, 2010. We recorded an impairment charge of approximately $16.1 million during the quarter ended December 31, 2010, in connection with this assessment. As a result of our 2012 and 2011 interim, annual and year end assessments, the Company concluded no impairment for the goodwill value had occurred during 2012 and 2011.

	October			December			October			October
	1,			31,			1,			1,
Reach Media Goodwill	2010			2010			2011			2012
Pre-tax impairment charge (in millions)	$	-		$	16.1		$	-		$	-
Discount Rate		13.0	%		13.5	%		12.0	%		12.0	%
Year 1 Revenue Growth Rate		2.5	%		2.5	%		2.5	%		2.0	%
Long-term Revenue Growth Rate Range		2.5% - 3.3	%		(2.6)% - 4.4	%		(2.0)% - 3.5	%		(4.7)% - 2.8	%
Operating Profit Margin Range		25.5% - 31.2	%		15.5% - 25.9	%		18.8% - 21.7	%		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 segment since October 2010. 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.

Goodwill (Internet	October 1,			October 1,			October 1,
Segment)	2010			2011			2012
Pre-tax impairment charge (in millions)	$	-		$	-		$	-
Discount Rate		15.0	%		14.5	%		13.5	%
Year 1 Revenue Growth Rate		24.5	%		20.3	%		13.8	%
Long-term Revenue Growth Rate (Year 10)		3.0	%		2.5	%		2.5	%
Operating Profit Margin Range		(0.6)% - 32.7	%		0.0% - 28.8	%		(4.8)% - 24.2	%

Given the consolidation of TV One effective April 14, 2011, the Company performed its first impairment testing in the Cable Television segment in December 2011. Below are some of the key assumptions used in the income approach model for determining the fair value since December 2011. As a result of the testing performed in 2011 and 2012, the Company concluded no impairment to the carrying value of goodwill had occurred.

	December 31,			October 1,
Cable Television Goodwill	2011			2012
Pre-tax impairment charge (in millions)	$	–		$	–
Discount Rate		11.5	%		10.75	%
Year 1 Revenue Growth Rate		13.9	%		11.2	%
Long-term Revenue Growth Rate Range		2.7% - 13.9	%		2.5% - 12.2	%
Operating Profit Margin Range		29.9% - 42.2	%		33.3% - 36.2	%

The above four goodwill tables reflect some of the key valuation assumptions used for 12 of our 20 reporting units. As a result of our testing in 2011, goodwill of approximately $14.5 million was impaired in one of our reporting units. As a result of our testing in 2012, there were no goodwill impairment charges recorded during the year ended December 31, 2012. The other eight remaining reporting units had no goodwill carrying value balances as of December 31, 2012.

Goodwill Valuation Results

The table below presents the Company’s goodwill carrying values for its four reportable segments. There were no changes to the goodwill carrying balances during the year ended December 31, 2012. As noted above, the 20 reporting units consist of the 16 radio markets plus four other business divisions. The actual reporting units are not disclosed so as to not make sensitive information publicly available that could potentially be competitively harmful to the Company.

	Goodwill Carrying Balances
	As of				As of
Reporting Unit	December 31, 2011		Increase (Decrease)		December 31, 2012
			(In millions)
Radio Broadcasting Segment	$	70.8	$	-	$	70.8
Reach Media Segment		14.4		-		14.4
Internet Segment		21.8		-		21.8
Cable Television Segment		165.0		-		165.0
Total	$	272.0	$	-	$	272.0

In arriving at the estimated fair values for radio broadcasting licenses and goodwill, we also performed a reasonableness test 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 2012 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,
	2012			2011			Period of Amortization
	(In thousands)
Trade names	$	17,133		$	17,133		2-5 Years
Talent agreement		19,549			19,549		10 Years
Debt financing and modification costs		18,674			16,115		Term of debt
Intellectual property		14,151			14,151		4-10 Years
Affiliate agreements		186,755			186,755		1-10 Years
Acquired income leases		1,282			1,282		3-9 Years
Non-compete agreements		1,260			1,260		1-3 Years
Advertiser agreements		47,688			47,688		2-7 Years
Favorable office and transmitter leases		3,358			3,358		2-60 Years
Brand names		2,539			2,539		2.5 Years
Brand names - unamortized		39,688			39,688
Other intangibles		3,662			3,662		1-5 Years
		355,739			353,180
Less: Accumulated amortization		(121,738	)		(90,200	)
Other intangible assets, net	$	234,001		$	262,980

Amortization expense of intangible assets for the years ended December 31, 2012, 2011 and 2010 was approximately $28.4 million, $26.2 million and $7.0 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, 2012, 2011 and 2010 was approximately $4.5 million, $4.7 million and $3.0 million, respectively.

The following table presents the Company’s estimate of amortization expense for the years 2013 through 2017 for intangible assets, excluding deferred financing costs:

	(In thousands)
2013	$	27,912
2014	$	27,314
2015	$	26,043
2016	$	25,886
2017	$	25,880

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