5. Intangible Assets and Goodwill

Intangible assets subject to amortization consisted of the following, as of December 31 (in thousands):

	Estimated	2017							2016
	useful life,			Accumulated							Accumulated
	in years	Gross		Amortization			Net		Gross		Amortization			Net
Network affiliation agreements	15	$	1,971,170	$	(461,345	)	$	1,509,825	$	659,054	$	(357,704	)	$	301,350
Other definite-lived intangible assets	1-20		193,089		(121,288	)		71,801		89,404		(66,017	)		23,387
Other intangible assets		$	2,164,259	$	(582,633	)	$	1,581,626	$	748,458	$	(423,721	)	$	324,737

The increases in network affiliation agreements and other definite-lived intangible assets relate to Nexstar’s acquisitions, net of dispositions, as discussed in Note 3.

In the fourth quarter of 2017, management reviewed the recoverability of other definite-lived intangible assets attributable to Nexstar’s digital businesses in consideration of reorganizations discussed under goodwill and intangible assets below. Based on the analysis of estimated undiscounted future pre-tax cash flows expected to result from the use of these assets, management determined that a portion of the carrying values were not recoverable. The assets’ fair values were then estimated which resulted in an impairment charge of $8.5 million. No other events or circumstances were noted in 2017 that would indicate impairment.

The following table presents the Company’s estimate of amortization expense for each of the five succeeding fiscal years and thereafter for definite-lived intangible assets as of December 31, 2017 (in thousands):

2018	$	128,827
2019		125,303
2020		117,015
2021		114,286
2022		112,657
Thereafter		983,538
	$	1,581,626

The changes in the carrying amounts of goodwill and FCC licenses for the years ended December 31, 2017 and 2016 are as follows (in thousands):

	Goodwill									FCC Licenses
				Accumulated									Accumulated
	Gross			Impairment			Net			Gross			Impairment			Net
Balances as of December 31, 2015	$	497,653		$	(45,991	)	$	451,662		$	538,756		$	(49,421	)	$	489,335
Acquisitions and consolidation of VIEs (See Notes 2 and 3)		36,904			-			36,904			53,189			-			53,189
Impairment		-			(15,262	)		(15,262	)		-			-			-
Balances as of December 31, 2016		534,557			(61,253	)		473,304			591,945			(49,421	)		542,524
Acquisitions and consolidations of VIEs (See Notes 2 and 3)		1,701,719			-			1,701,719			1,244,386			-			1,244,386
Nexstar Divestitures (See Note 3)		(22,823	)		2,861			(19,962	)		(19,744	)		2,011			(17,733	)
Deconsolidation of a VIE		(698	)		-			(698	)		(1,539	)					(1,539	)
Impairment		-			(11,517	)		(11,517	)		-			-			-
Balances as of December 31, 2017	$	2,212,755		$	(69,909	)	$	2,142,846		$	1,815,048		$	(47,410	)	$	1,767,638

As discussed in Note 2—Intangible Assets, Net, the Company early adopted (during the year 2017) ASU No. 2017-04 which simplified the measurement of goodwill impairment tests. Under ASU 2017-04, the annual, or interim, goodwill impairment test is now performed by comparing the fair value of a reporting unit with its carrying amount. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired, and no further testing is required. If the fair value of the reporting unit is less than the carrying value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Following Nexstar’s merger with Media General in January 2017, the Company’s broadcast operations increased from 60 television station markets to 100 television station markets. Also, the Company’s digital businesses increased from two reporting units to four reporting units. Historically, the Company considered each television station market as a reporting unit for purposes of goodwill and FCC license impairment testing because management views, manages and evaluates its stations on a market basis. During the first quarter of 2017 (in connection with the merger), the Company reorganized its organizational structure to focus on the overall broadcast business and the overall digital business. This change allowed the aggregation of television station markets into one broadcast business reporting unit. The reporting units within the Company’s digital business are not economically similar, and therefore, not aggregated.

Because of the change in the broadcast business’ organizational structure, the Company evaluated the goodwill immediately prior to the reorganization, using the one-step qualitative analysis approach, and concluded that there was no impairment on its broadcast business. The aggregate goodwill of each television station market was then assigned to the single broadcast business reporting unit. The Company’s impairment tests for FCC license remained at the television station market level. In the fourth quarter of 2017, the Company performed its annual impairment tests on goodwill and legacy FCC licenses attributable to its broadcast business, using the one-step quantitative approach, resulting in no impairment charge. With respect to FCC licenses that were newly acquired and consolidated through merger with Media General, the Company performed its annual impairment tests using the qualitative analysis approach and concluded that it was more likely than not that their fair values would sufficiently exceed the carrying amounts.

In 2016, management elected to perform its annual impairment tests on goodwill and FCC licenses attributable to its broadcast business using the qualitative analysis approach by market and concluded that it was more likely than not that the fair value of the reporting units and the fair value of FCC licenses would sufficiently exceed their respective carrying amounts.

In the fourth quarter of 2017, the Company reorganized its digital businesses which reduced the reporting units from four to three. Because of this change, and as a result of shortfalls from operating forecasts and increased levels of competition, the Company evaluated the goodwill of the reporting units immediately prior to the reorganization and after the reorganization, using the one-step quantitative analysis approach. The Company’s analyses resulted in total impairment charges of $11.5 million. The goodwill of digital businesses, after the impairment charge, was allocated to the new reporting units using the relative fair value method. As of December 31, 2017, the total remaining goodwill of digital businesses was $19.9 million.

The one-step quantitative analyses was performed using a combination of a discounted cash flows analysis and other valuation techniques, including the following key assumptions: (i) compound annual growth rate ranging from 5.0% to 11.3% based on management projections and industry trends, (ii) operating profit margins in the initial year ranging from (2.0)% to 10% driven by planned development activities, increasing to 4.7% to 20.0% reflecting a mature operating model, (iii) discount rate of 15.5% based on an analysis of digital media companies, (iv) income tax rate of 21.0% to 28.7% based on statutory federal and blended state tax rates, and (v) terminal growth rate of 2.5% based on a mature company in the digital media industry.

In 2016, management elected to perform the two-step quantitative impairment tests on its two digital reporting units due to operating losses, industry-wide margin compression and lower short-term future earnings expectations. As a result of these reviews, the Company recognized total impairment charges of $15.3 million. As of December 31, 2016, the total remaining goodwill of the Company’s digital businesses was $23.6 million.