Acquisitions – Broadcast

On March 14, 2017, we closed on the acquisition of an FM translator construction permit in Quartz Site, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KPRZ-AM radio station.

 

On March 1, 2017, we closed on the acquisition of an FM translator construction permit in Roseburg, Oregon for $45,000 in cash. The FM translator will be relocated to the Portland, Oregon market for use by our KPDQ-AM radio station.

 

On January 16, 2017, we closed on the acquisition of an FM translator in Astoria, Oregon for $33,000 in cash. The FM translator will be relocated to the Seattle, Washington market for use by our KGNW-AM radio station.

 

On January 6, 2017, we closed on the acquisition of an FM translator construction permit in Mohave Valley, Arizona for $20,000 in cash. The FM translator will be relocated to the San Diego, California market for use by our KCBQ-AM radio.

 

Acquisitions –  Digital Media

 

On March 15, 2017, we acquired the website prayers-for-special-help.com and related assets for $0.2 million in cash. We recorded goodwill of approximately $15,000 with the expected synergies to be realized from combining these applications into our existing digital media platform. The accompanying Condensed Consolidated statement of operations reflects the operating results as of the closing date within our digital media operating segment.

 

A summary of our business acquisitions and asset purchases during the three month period ended March 31, 2017, none of which were individually or in the aggregate material to our Condensed Consolidated financial position as of the respective date of acquisition, is as follows:

 

Acquisition Date		Description		Total Cost
				(Dollars in thousands)
March 15, 2017		Prayers for Special Help (business acquisition)		$	245
March 14, 2017		FM Translator construction permit, Quartz Site, Arizona (asset purchase)			20
March 1, 2017		FM Translator construction permit, Roseburg, Oregon (asset purchase)			45
January 16, 2017		FM Translator, Astoria, Oregon (asset purchase)			33
January 1, 2017		FM Translator construction permit, Mohave Valley, Arizona (asset purchase)			20
				$	363

The operating results of our business acquisitions and asset purchases are included in our consolidated results of operations from their respective closing date or the date that we began operating them under an LMA or TBA. Under the acquisition method of accounting as specified in FASB ASC Topic 805, “Business Combinations,” the total acquisition consideration is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the date of the transaction.

 

Estimates of the fair value include discounted estimated cash flows to be generated by the assets and their expected useful lives based on historical experience, market trends and any synergies believed to be achieved from the acquisition. Acquisitions may include contingent consideration, the fair value of which is estimated as of the acquisition date as the present value of the expected contingent payments as determined using weighted probabilities of the payment amounts. We may retain a third-party appraiser to estimate the fair value of the acquired net assets as of the acquisition date. As part of the valuation and appraisal process, the third-party appraiser prepares a report assigning estimated fair values to the various asset categories in our financial statements. These fair value estimates are subjective in nature and require careful consideration and judgment. Management reviews the third party reports for reasonableness of the assigned values.

 

 

Property and equipment are recorded at the estimated fair value and depreciated on a straight-line basis over their estimated useful lives. Finite-lived intangible assets are recorded at their estimated fair value and amortized on a straight-line basis over their estimated useful lives. Goodwill, which represents the organizational systems and procedures in place to ensure the effective operation of the entity, may also be recorded and tested for impairment. Costs associated with acquisitions, such as consulting and legal fees, are expensed as incurred in corporate operating expenses. We recognized costs associated with acquisitions of $24,000 during the three month period ended March 31, 2017 compared to $0.1 million during the same period of the prior year, which are included in unallocated corporate expenses in the accompanying Condensed Consolidated statements of operations.

 

The total acquisition consideration is equal to the sum of all cash payments, the fair value of any deferred payments and promissory notes, and the present value of any estimated contingent earn-out consideration. We estimate the fair value of contingent earn-out consideration using a probability-weighted discounted cash flow model. The fair value measurement is based on significant inputs that are not observable in the market and thus represent a Level 3 measurement as defined in Note 16 - Fair Value Measurements.

 

The following table summarizes the total acquisition consideration for the three month period ended March 31, 2017:

 

Description		Total Consideration
		(Dollars in thousands)
Cash payments made upon closing		$	343
Escrow deposits paid in prior years			20
Total purchase price consideration		$	363

 

The fair value of the net assets acquired was allocated as follows:

 

					Net Digital Media Assets
		Net Broadcast Assets Acquired			Acquired			Net Total Assets Acquired
		(Dollars in thousands)
Assets
Property and equipment		$	—		$	148		$	148
Broadcast licenses			118			—			118
Goodwill			—			15			15
Domain and brand names			—			56			56
Customer lists and contracts			—			26			26
		$	118		$	245		$	363

 

Pending Transactions

 

We are programming radio station KHTE-FM, Little Rock, Arkansas, under a 36 month TBA that began on April 1, 2015. The TBA is extendable for up to 48 months. We have the option to acquire the station for $1.2 million in cash during the TBA period. The accompanying Condensed Consolidated statements of operations included in this quarterly report on Form 10-Q reflect the operating results of this entity as of the TBA date.

 

FM translators or FM translator construction permits purchase agreements pending as of period ending March 31, 2017 include the following:

 

Date APA Entered

Permit or ID

Authorized Site - Current

Purchase Price

Escrow Deposits

Date Closed

Market

(Dollars in thousands)

7/25/2016

K283CA

Festus, Missouri *

40

8

-

St. Louis, Missouri

7/26/2016

K276FZ

Eaglemount, Washington *

40

8

-

Portland, Oregon

* Indicates that the purchase is for an FM translator construction permit.