Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 07, 2019 | Jun. 30, 2018 | |
Entity Registrant Name | HEMISPHERE MEDIA GROUP, INC. | ||
Entity Central Index Key | 0001567345 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Ex Transition Period | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 236,631,647 | ||
Document Fiscal Year Focus | 2018 | ||
Document Fiscal Period Focus | FY | ||
Common Class A | |||
Entity Common Stock, Shares Outstanding | 19,710,855 | ||
Common Class B | |||
Entity Common Stock, Shares Outstanding | 19,720,381 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets | ||
Cash | $ 94,478 | $ 124,299 |
Accounts receivable, net of allowance for doubtful accounts of $2,645 and $2,327, respectively | 30,840 | 20,007 |
Due from related parties | 970 | 2,169 |
Programming rights | 10,735 | 7,723 |
Prepaid taxes and other current assets | 7,801 | 12,517 |
Total current assets | 144,824 | 166,715 |
Programming rights, net of current portion | 15,321 | 11,520 |
Property and equipment, net | 32,209 | 24,433 |
Broadcast license | 41,356 | 41,356 |
Goodwill | 169,994 | 164,887 |
Other intangibles, net | 39,086 | 51,661 |
Equity method investments | 51,658 | 30,907 |
Deferred income taxes | 4,290 | 4,802 |
Other assets | 2,529 | 1,605 |
Total Assets | 501,267 | 497,886 |
Current Liabilities | ||
Accounts payable | 2,515 | 3,465 |
Due to related parties | 626 | 1,885 |
Accrued agency commissions | 5,061 | 4,064 |
Accrued compensation and benefits | 5,855 | 5,540 |
Accrued marketing | 5,619 | 4,997 |
Other accrued expenses | 6,810 | 3,771 |
Income taxes payable | 2,265 | 24 |
Programming rights payable | 4,051 | 2,920 |
Investee losses in excess of investment | 4,982 | 2,806 |
Current portion of long-term debt | 2,134 | 2,133 |
Total current liabilities | 39,918 | 31,605 |
Programming rights payable, net of current portion | 1,133 | 1,101 |
Long-term debt, net of current portion | 203,957 | 205,509 |
Deferred income taxes | 19,520 | 18,763 |
Other long-term liabilities | 1,080 | |
Defined benefit pension obligation | 2,260 | 2,004 |
Total Liabilities | 267,868 | 258,982 |
Stockholders' Equity | ||
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued and outstanding at December 31, 2018 and December 31, 2017 | ||
Additional paid-in capital | 270,345 | 265,329 |
Treasury stock, at cost 5,523,838 and 5,390,107 at December 31, 2018 and 2017, respectively | (59,088) | (57,303) |
Retained earnings | 19,495 | 30,401 |
Accumulated other comprehensive income | 1,155 | 472 |
Total Hemisphere Media Group Stockholders' Equity | 231,911 | 238,904 |
Equity attributable to non-controlling interest | 1,488 | |
Total Stockholders' Equity | 233,399 | 238,904 |
Total Liabilities and Stockholders' Equity | 501,267 | 497,886 |
Common Class A | ||
Stockholders' Equity | ||
Common stock | 2 | 3 |
Common Class B | ||
Stockholders' Equity | ||
Common stock | $ 2 | $ 2 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Accounts receivable, allowance for doubtful accounts | $ 2,645 | $ 2,327 |
Preferred stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Preferred stock, shares authorized | 50,000,000 | 50,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Treasury stock, shares | 5,523,838 | 5,390,107 |
Common Class A | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 24,849,589 | 25,171,433 |
Common Class B | ||
Common stock, par value (in dollars per share) | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 33,000,000 | 33,000,000 |
Common stock, shares issued | 19,720,381 | 20,800,998 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Operations | ||
Net revenues | $ 147,079 | $ 124,464 |
Operating Expenses: | ||
Cost of revenues | 42,174 | 39,965 |
Selling, general and administrative | 44,499 | 39,437 |
Depreciation and amortization | 16,081 | 16,228 |
Other expenses | 1,473 | 3,501 |
(Gain) from FCC spectrum repack and other | (1,880) | (23) |
Total operating expenses | 102,347 | 99,108 |
Operating income | 44,732 | 25,356 |
Other (expense) income: | ||
Interest expense, net | (12,132) | (10,905) |
Loss on equity method investments | (35,206) | (11,885) |
Gain from insurance proceeds | 2,080 | 3,250 |
Loss on impairment of assets | (546) | |
Total other expense | (45,258) | (20,086) |
(Loss) income before income tax expense | (526) | 5,270 |
Income tax expense | (10,271) | (18,706) |
Net loss | (10,797) | (13,436) |
Net income attributable to non-controlling interest | (109) | |
Net loss available to Hemisphere Media Group | $ (10,906) | $ (13,436) |
Loss per share available to Hemisphere Media Group: | ||
Basic (in dollars per share) | $ (0.28) | $ (0.33) |
Diluted (in dollars per share) | $ (0.28) | $ (0.33) |
Weighted average shares outstanding: | ||
Basic (in shares) | 38,986 | 40,164 |
Diluted (in shares) | 38,986 | 40,164 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Consolidated Statements of Comprehensive Loss | ||
Net loss | $ (10,797) | $ (13,436) |
Other comprehensive income: | ||
Change in fair value of interest rate swap, net of income taxes | 656 | 773 |
Adjustment to defined benefit plan, net of income taxes | 27 | 182 |
Total other comprehensive income | 683 | 955 |
Comprehensive loss | (10,114) | (12,481) |
Less: Comprehensive income attributable to non-controlling interest | 109 | |
Comprehensive loss attributable to Hemisphere Media Group | $ (10,223) | $ (12,481) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) shares in Thousands, $ in Thousands | Common StockCommon Class A | Common StockCommon Class B | Additional Paid In CapitalCommon Class A | Additional Paid In CapitalCommon Class B | Additional Paid In Capital | Treasury StockCommon Class A | Retained Earnings | Accumulated Comprehensive Income (Loss) | Non-controlling Interest | Total |
Balance at the beginning of the period at Dec. 31, 2016 | $ 2 | $ 2 | $ 261,051 | $ (35,069) | $ 43,837 | $ (483) | $ 269,340 | |||
Balance at the beginning of the period (in shares) at Dec. 31, 2016 | 24,944 | 20,801 | ||||||||
Consolidated Statements of Changes in Stockholders' Equity | ||||||||||
Net (loss) income | (13,436) | (13,436) | ||||||||
Issuance of restricted stock | $ 1 | 1,155 | (324) | 832 | ||||||
Issuance of restricted stock (in shares) | 204 | |||||||||
Stock-based compensation | 2,912 | 2,912 | ||||||||
Repurchases of Class A common stock | (21,910) | (21,910) | ||||||||
Exercise of warrants | 211 | 211 | ||||||||
Exercise of warrants (in shares) | 23 | |||||||||
Other comprehensive income, net of tax | 955 | 955 | ||||||||
Balance at the end of the period at Dec. 31, 2017 | $ 3 | $ 2 | 265,329 | (57,303) | 30,401 | 472 | 238,904 | |||
Balance at the end of the period (in shares) at Dec. 31, 2017 | 25,171 | 20,801 | ||||||||
Consolidated Statements of Changes in Stockholders' Equity | ||||||||||
Net (loss) income | (10,906) | $ 109 | (10,797) | |||||||
Non-controlling interest from acquisition of Snap Media | 1,379 | 1,379 | ||||||||
Issuance of treasury shares for acquisition of Snap, Inc. | 309 | 1,088 | 1,397 | |||||||
Shares to be issued for acquisition of Snap Media | 753 | 753 | ||||||||
Vesting of restricted stock | $ 0 | 1,298 | (416) | 882 | ||||||
Vesting of restricted stock (in shares) | 218 | |||||||||
Stock-based compensation | 2,635 | 2,635 | ||||||||
Repurchases of Class A common stock | (2,443) | (2,443) | ||||||||
Forfeiture of common stock earnouts | $ (1) | $ 0 | $ 1 | $ 0 | ||||||
Forfeiture of common stock earnouts (in shares) | (544) | (1,081) | ||||||||
Exercise of warrants | $ 0 | 20 | 20 | |||||||
Exercise of warrants (in shares) | 2 | |||||||||
Exercise of options | $ 0 | 0 | (14) | (14) | ||||||
Exercise of options (in shares) | 3 | |||||||||
Other comprehensive income, net of tax | 683 | 683 | ||||||||
Balance at the end of the period at Dec. 31, 2018 | $ 2 | $ 2 | $ 270,345 | $ (59,088) | $ 19,495 | $ 1,155 | $ 1,488 | $ 233,399 | ||
Balance at the end of the period (in shares) at Dec. 31, 2018 | 24,850 | 19,720 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash Flows From Operating Activities: | ||
Net loss | $ (10,797) | $ (13,436) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 16,081 | 16,228 |
Program amortization | 12,509 | 11,806 |
Amortization of deferred financing costs and original issue discount | 591 | 620 |
Stock-based compensation | 3,933 | 4,068 |
Provision for bad debts | 417 | 756 |
Gain on disposition of assets | (38) | (23) |
Deferred tax expense | 1,040 | 14,473 |
Loss on equity investments, net | 35,206 | 11,885 |
Loss on impairment of fixed assets | 546 | |
Gain from insurance proceeds | (2,080) | (3,250) |
Gain from FCC spectrum repack | (1,477) | |
(Increase) decrease in: | ||
Accounts receivable | (9,831) | 4,803 |
Programming rights | (19,322) | (15,149) |
Prepaid expenses and other assets | 4,668 | (7,006) |
Increase (decrease) in: | ||
Accounts payable | (1,209) | (60) |
Due to related parties, net | (60) | 808 |
Other accrued expenses | 3,435 | (2,829) |
Programming rights payable | 1,163 | 621 |
Income taxes payable | 2,240 | (1,595) |
Other liabilities | 321 | 2,445 |
Net cash provided by operating activities | 36,790 | 25,711 |
Cash Flows From Investing Activities: | ||
Investments in joint ventures | (53,782) | (39,986) |
Capital expenditures | (10,628) | (2,496) |
Insurance proceeds | 2,080 | 3,250 |
FCC spectrum repack proceeds | 1,477 | |
Net payment for the acquisition of Snap Media | (772) | |
Net cash used in investing activities | (61,625) | (39,232) |
Cash Flows From Financing Activities: | ||
Repayments of long-term debt | (2,133) | (2,133) |
Repurchases of common stock | (2,873) | (22,234) |
Financing fees | (1,114) | |
Exercise of warrants | 20 | 211 |
Net cash used in financing activities | (4,986) | (25,270) |
Net decrease in cash | (29,821) | (38,791) |
Cash: | ||
Beginning | 124,299 | 163,090 |
Ending | 94,478 | 124,299 |
Cash payments for: | ||
Interest | 10,574 | 10,368 |
Income taxes | 8 | $ 10,139 |
Non-cash investing activity: | ||
Acquisition financed in part by treasury shares | $ 1,397 |
Nature of Business and Signific
Nature of Business and Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Business and Significant Accounting Policies | |
Nature of Business and Significant Accounting Policies | Note 1. Nature of Business and Significant Accounting Policies Nature of business: The accompanying Consolidated Financial Statements include the accounts of Hemisphere Media Group, Inc. (“Hemisphere” or the “Company”), the parent holding company of Cine Latino, Inc. (“Cinelatino”), WAPA Holdings, LLC (formerly known as InterMedia Español Holdings, LLC) (“WAPA Holdings”), HMTV Cable, Inc., the parent company of the entities for the acquired networks consisting of Pasiones, TV Dominicana, and Centroamerica TV (see below), and Snap Global, LLC, a Delaware limited liability company and its wholly owned subsidiaries (“Snap Media”), which we acquired a 75% interest on November 26, 2018. Hemisphere was formed on January 16, 2013 for purposes of effecting the transaction, which was consummated on April 4, 2013. In these notes, the terms “Company,” “we,” “us” or “our” mean Hemisphere and all subsidiaries included in our Consolidated Financial Statements. For more information on our equity method investments, see Note 7, “Equity Method Investments” of Notes to Consolidated Financial Statements. Reclassification: Certain prior year amounts on the presented consolidated balance sheet and consolidated statement of cash flows, respectively, have been reclassified to conform with current year presentation. Principles of consolidation: The Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company has interests in various entities including corporations and limited liability companies. For each such entity, the Company evaluates its ownership interest to determine whether the entity is a Variable Interest Entity (“VIE”) and, if so, whether it is the primary beneficiary of the VIE. An entity is generally a VIE if it meets any of the following criteria: (i) the entity has insufficient equity to finance its activities without additional subordinated financial support from other parties, (ii) the equity investors cannot make significant decisions about the entity’s operations, or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity or receive the expected returns of the entity and substantially all of the entity’s activities involve or are conducted on behalf of the investor with disproportionately few voting rights. The Company would consolidate any entity for which it was the primary beneficiary, regardless of its ownership or voting interests. The primary beneficiary is the party involved with the VIE that (i) has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Upon inception of a variable interest or the occurrence of a reconsideration event, the Company makes judgments in determining whether entities in which it invests are VIEs. If so, the Company makes judgments to determine whether it is the primary beneficiary and is thus required to consolidate the entity. If it is concluded that an entity is not a VIE, then the Company considers its proportional voting interests in the entity. The Company consolidates majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of significant third-party participating rights. Ownership interests in entities for which the Company has significant influence that are not consolidated under the Company’s consolidation policy are accounted for as equity method investments. Related party transactions between the Company and its equity method investees have not been eliminated. Basis of presentation: The accompanying consolidated financial statements for us and our subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Operating segments: The Company determines its operating segments based upon (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer, (ii) internal management and related reporting structure and (iii) the basis upon which the chief operating decision maker makes resource allocation decisions. We have one operating segment, Hemisphere. Net loss per common share: Basic loss per share (“LPS”) are computed by dividing income attributable to Hemisphere Media Group common stockholders by the number of weighted‑average outstanding shares of common stock. Diluted LPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive. The following table sets forth the computation of the common shares outstanding used in determining basic and diluted LPS available to Hemisphere Media Group ( amounts in thousands, except per share amounts ): Years Ended December 31, 2018 2017 Numerator for earnings per common share calculation: Net loss available to Hemisphere Media Group $ (10,906) $ (13,436) Denominator for earnings per common share calculation: Weighted-average common shares, basic 38,986 40,164 Effect of dilutive securities Stock options, restricted stock and warrants — — Weighted-average common shares, diluted 38,986 40,164 Loss per share available to Hemisphere Media Group Basic $ (0.28) $ (0.33) Diluted $ (0.28) $ (0.33) We apply the treasury stock method to measure the dilutive effect of its outstanding warrants, stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Per the Accounting Standards Codification (“ASC”) 260 accounting guidance, under the treasury stock method, the incremental shares (difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted LPS computation (ASC 260-10-45-23). The assumed exercise only occurs when the warrants are “In the Money” (exercise price is lower than the average market price for the period). If the warrants are “Out of the Money” (exercise price is higher than the average market price for the period), the exercise is not assumed since the result would be anti-dilutive. Potentially dilutive securities representing 1.6 million and 2.0 million shares of common stock for the years ended December 31, 2018 and 2017, respectively, were excluded from the computation of diluted loss per common share for this period because their effect would have been anti-dilutive. The net loss per share available to Hemisphere Media Group amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. As a result of the loss from continuing operations for each of the years ended December 31, 2018 and 2017, 0.4 million and 0.3 million outstanding awards, respectively, were not included in the computation of diluted loss per share because their effect was anti-dilutive. In computing loss per share, the Company’s Nonvoting Stock is considered a participating security. Each share of Nonvoting Stock has identical rights, powers, limitations and restrictions in all respects as each share of common of the Company, including the right to receive the same consideration per share payable in respect of each share of common stock, except that holders of Nonvoting Stock shall have no voting rights or powers whatsoever. Revenue recognition: Prior to 2018, revenue was recognized when persuasive evidence of a sales arrangement exists, services are rendered or delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax. However, certain revenues include taxes that customers pay to taxing authorities on the Company’s behalf, such as foreign withholding tax. Revenue related to the sale of advertising and contracted time is recognized, net of agency commissions, at the time of broadcast. The Company determines whether gross or net presentation is appropriate based on its relationship in the applicable transactions with its ultimate customer. Affiliate revenue received from multi-channel video providers are recognized in the period in which the services are performed, generally pursuant to multi‑year carriage agreements based on the number of subscribers. On January 1, 2018, we adopted, on a modified retrospective basis, Financial Accounting Standards Board (the “FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) (the “new revenue standard”), which provides accounting guidance that establishes a new revenue recognition framework in GAAP for all companies and industries. The core principle of the new revenue framework is that an entity should recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive for those goods or services. The revenue framework includes a five-step model to determine the timing and amount of revenue to recognize related to contracts with customers. In addition, this revenue framework requires new or expanded disclosures related to the amounts of revenue recognized and judgments made by companies when following this framework. The adoption of the new accounting guidance did not result in changes in the way the Company records affiliate revenue, advertising revenue or content licensing fees. Guidance pertaining to the evaluation of whether revenue should be presented on a gross or net basis was changed in connection with the new revenue standard and the application of such change has been made in the presentation of revenues in the consolidated financial statements. The adoption of the new revenue standard did not have a material impact to our statement of operations for the year ended December 31, 2018, and did not have a material impact to our consolidated balance sheet as of December 31, 2018. For more information, see Note 2, “Revenue Recognition” of Notes to Consolidated Financial Statements. Barter transactions: The Company engages in barter transactions in which advertising time is exchanged for products or services. Barter transactions are accounted for at the estimated fair value of the products or services received, or advertising time given up, whichever is more clearly determinable. Barter revenue is recognized at the time the advertising is broadcast. Barter expense is recorded at the time the merchandise or services are used and/or received. Barter revenue and expense included in the consolidated statements of operations are as follows ( amounts in thousands ): 2018 2017 Barter revenue $ 877 $ 710 Barter expense (583) (676) $ 294 $ 34 Programming costs: Programming costs are recorded in cost of revenues based on the Company’s contractual agreements with various third party programming distributors which are generally multi‑year agreements. Equity-based compensation: We have given equity incentives to certain employees. We account for such equity incentives in accordance with ASC 718 “Stock Compensation,” which requires us to measure compensation cost for equity settled awards at fair value on the date of grant and recognize compensation cost in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. Compensation cost is determined using the Black‑Scholes option pricing model. Advertising and marketing costs: The Company expenses advertising and marketing costs as incurred. The Company incurred advertising and marketing costs of $3.0 million and $3.3 million for the years ended December 31, 2018 and 2017, respectively. Cash: The Company maintains its cash in bank deposit accounts which, at times, may exceed federally‑insured limits. The Company has not experienced any losses in such accounts. Accounts receivable: Accounts receivable are carried at the original charge amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded as income when received. The Company considers an account receivable to be past due if any portion of the receivable balance is outstanding for more than 90 days. Changes in the allowance for doubtful accounts for the years ended December 31, 2018 and 2017 consisted of the following (amounts in thousands): Beginning Provisions End Year Description of Year for bad debt Write-offs Recoveries of Year 2018 Allowance for doubtful accounts $ 2,327 $ 417 $ 107 $ 8 $ 2,645 2017 Allowance for doubtful accounts $ 1,711 $ 756 $ 160 $ 20 $ 2,327 Programming rights: We enter into multi-year license agreements with various programming Distributors for distribution of their respective programming (“programming rights”) and capitalize amounts paid to secure or extend these programming rights at the lower of unamortized cost or estimated net realizable value. If management estimates that the unamortized cost of programming rights exceeds the estimated net realizable value, an adjustment is recorded to reduce the carrying value of the programming rights. For the year ended December 31, 2018, management deemed it necessary to write-down certain program rights of $1.0 million, which is included in the amortization of programming rights below. No such write-down was deemed necessary during the year ended December 31, 2017. Programming rights are amortized over the term of the related license agreements or the number of exhibitions, whichever occurs first. The amortization of these rights, was $12.5 million and $11.8 million for the years ended December 31, 2018 and 2017, respectively, is recorded as part of cost of revenues in the accompanying consolidated statements of operations. Accumulated amortization of the programming rights was $45.1 million and $32.6 million at December 31, 2018 and 2017, respectively. Costs incurred in connection with the purchase of programs to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast subsequently are considered noncurrent. Program obligations are classified as current or noncurrent in accordance with the payment terms of the license agreement. Property and equipment: Property and equipment are recorded at cost. Depreciation is determined using the straight‑line method over the expected remaining useful lives of the respective assets. Useful lives range from 1 ‑ 40 years for improvements, equipment, buildings and towers. Upon retirement or other disposition, the cost and related accumulated depreciation of the assets are removed from the accounts and the resulting gain or loss is reflected in the determination of net income or loss. Expenditures for maintenance and repairs are expensed as incurred. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In 2017, we recorded an impairment charge of $0.5 million related to property and equipment damaged by Hurricane Maria. For more information on our property and equipment, see Note 5, “Property and Equipment” of Notes to Consolidated Financial Statements. Equity method investments: The Company holds investments in equity method investees. Investments in equity method investees are those for which the Company has the ability to exercise significant influence, but does not have control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless persuasive evidence to the contrary exists. Under this method of accounting, the Company typically records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances. In the event we incur losses in excess of the carrying amount of an equity investment and reduce our investment balance to zero, we would not record additional losses unless (i) we guaranteed obligations of the investee, (ii) we are otherwise committed to provide further financial support for the investee, or (iii) it is anticipated that the investee’s return to profitability is imminent. If we provided a commitment to fund losses, we would continue to record losses resulting in a negative equity method investment, which is presented as a liability. As of December 31, 2018, our proportionate share of the losses of Pantaya (“Pantaya” refers to Pantaya, LLC, a Delaware limited liability company, a joint venture among us and a subsidiary of Lions Gate Entertainment, Inc.) exceeds our investment in Pantaya by $5.0 million. This amount is recorded as “Investee losses in excess of investment” on our consolidated balance sheet at December 31, 2018, due to our commitment for future capital funding. Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis. An equity method investment is written down to fair value if there is evidence of a loss in value which is other-than-temporary. The Company may estimate the fair value of its equity method investments by considering recent investee equity transactions, discounted cash flow analysis, recent operating results, comparable public company operating cash flow multiples and in certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as: the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value and general market conditions. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions For our foreign equity investment, we perform an annual review of the international financial reporting standards (“IFRS”) versus U.S. GAAP accounting. Any significant differences are considered and adjusted to ensure a U.S. GAAP presentation. There were no differences noted in the presentation of our foreign investment’s IFRS financial statements when compared to U.S. GAAP. For more information on Equity method investments, see Note 7, “Equity Method Investments” of Notes to Consolidated Financial Statements. Goodwill and other intangibles: The Company’s goodwill is recorded as a result of the Company’s business combinations using the acquisition method of accounting. Indefinite lived intangible assets include a broadcast license, trademarks and tradenames. Other intangible assets include customer relationships, non-compete agreements, affiliate agreements, and programming rights with an estimated useful life of one to ten years. Other intangible assets are amortized over their estimated lives using the straight‑line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. The Company tests its broadcast license annually for impairment or whenever events or changes in circumstances indicate that such assets might be impaired. The impairment test consists of a comparison of the fair value of these assets with their carrying amounts using a discounted cash flow valuation method, assuming a hypothetical start‑up scenario. The Company tests its trademarks and tradenames annually for impairment or whenever events or changes in circumstances indicate that such assets might be impaired. The test consists of a comparison of the fair value of these assets with the carrying amounts utilizing an income approach in the form of the royalty relief method, which measures the cost savings that a business enjoys since it does not have to pay a royalty rate for the use of a particular domain name and brand. The Company tests its goodwill annually for impairment or whenever events or changes in circumstances indicate that goodwill might be impaired. The first step of the goodwill impairment test compares the fair value of each reporting unit with its carrying amount, including goodwill. The fair value of the reporting units are determined through the use of a discounted cash flow analysis incorporating variables such as revenue projections, projected operating cash flow margins, and discount rates. The valuation assumptions used in the discounted cash flow model reflect historical performance of the Company and prevailing values in the broadcast and cable markets. If the fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss shall be recognized in an amount equal to that excess. The Company tests its other finite lived intangible asset for impairment whenever events or changes in circumstances indicate that such asset or asset group might be impaired. This analysis is performed by comparing the respective carrying value of the asset group to the current and expected future cash flows, on an undiscounted basis, to be generated from such asset group. If such analysis indicates that the carrying value of this asset group is not recoverable, the carrying value of such asset group is reduced to fair value. Deferred financing costs: Deferred financing costs are recorded net of accumulated amortization and are presented as a reduction to the principal amount of the long-term debt. Amortization is calculated on the effective‑interest method over the term of the applicable loan. Amortization of deferred financing costs was $0.2 million and $0.3 million, which is included in interest expense, net in the accompanying consolidated statements of operations for the years ended December 31, 2018 and 2017, respectively. Accumulated amortization of deferred financing costs was $2.0 million and $1.8 million at December 31, 2018 and 2017. The net deferred financing costs of $1.3 million and $1.5 million at December 31, 2018 and 2017, respectively, and have been presented on the consolidated balance sheets as a reduction to the principal amount of the Long-term debt outstanding. Income taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record foreign withholding tax, which is withheld by foreign customers from their remittances to us, on a gross basis as a component of income taxes and separate from revenue in the consolidated statement of operations. We follow the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more‑likely‑than‑not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de‑recognition, classification, interest and penalties on income taxes, and accounting in interim periods. To the extent that interest and penalties are assessed by taxing authorities on any underpayment of income taxes, such amounts are accrued and classified as a component of income tax expense. For more information on Income taxes, see Note 8, “Income Taxes” of Notes to Consolidated Financial Statements. Fair value of financial instruments: The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of these items. The carrying value of the long‑term debt approximates fair value because this instrument bears interest at a variable rate, is pre-payable, and is at terms currently available to the Company. U.S. GAAP establishes a framework for measuring fair value and expanded disclosures about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1—inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date. Level 2—inputs to the valuation methodology include quoted prices in markets that are not active or quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3—inputs to the valuation methodology are unobservable, reflecting the entity’s own assumptions about assumptions market participants would use in pricing the asset or liability. The categorization of an asset or liability within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s programming rights and goodwill are classified as Level 3 in the fair value hierarchy, as they are measured at fair value on a non-recurring basis and are adjusted to fair value only when the carrying values exceed their fair values. For the year ended December 31, 2018, management deemed it necessary to write-down certain program rights of $1.0 million. For the year ended December 31,2017, there were no adjustments to fair value. The Company’s variable-rate debt and interest rate swaps are classified as Level 2 in the fair value hierarchy, as its estimated fair value is derived from quoted market prices by independent dealers. The carrying value of the long-term debt approximates fair value at December 31, 2018 and 2017. Derivative Instruments: The Company uses derivative financial instruments from time to time to modify its exposure to market risks from changes in interest rates. The Company may designate derivative instruments as cash flow hedges or fair value hedges, as appropriate. The Company records all derivative instruments at fair value on a gross basis. For those derivative instruments designated as cash flow hedges that qualify for hedge accounting, gains or losses on the effective portion of derivative instruments are initially recorded in accumulated other comprehensive loss on the consolidated balance sheets and reclassified to the same account on the consolidated statements of operations in which the hedged item is recognized on the consolidated statements of operations. Major customers and suppliers: Two of our distributors each accounted for more than 10% of our total net revenues for the year ended December 31, 2018. There were no other distributors or other customers that accounted for more than 10% of revenue in any year. Our Networks are provided to these distributors pursuant to affiliation agreements with varying terms. Accounting guidance not yet adopted: In June 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-07—Compensation —Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU apply to any entity that enters into share-based payment transactions with nonemployees. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606. We will adopt this standard beginning January 1, 2019 and expect no material impact to our consolidated financial statements moving forward. In February 2018, the FASB issued ASU 2018-02—Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of certain tax effects from Accumulated other comprehensive income . The amendments in this ASU apply to any entity that has items of other comprehensive income (“OCI”) for which the related tax effects are presented in OCI, as previously required by GAAP. This ASU allows a one time reclassification from OCI to Retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The amendments in this ASU are effective for all entities for annual periods beginning after December 31, 2018. Early adoption is permitted and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We will adopt this standard beginning January 1, 2019 and expect no material impact to our consolidated financial statements moving forward. In August 2017, the FASB issued ASU 2017-12—Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . The amendments in this ASU apply to any entity that elects to apply hedge accounting and is intended to better align an entity’s risk management activities and financial reporting for hedging relationships. The ASU amends effectiveness testing requirements, income statement presentation and disclosures and permits additional risk management strategies to qualify for hedge accounting. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019. Early application is permitted; the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of this Update on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842) . ASU 2016-02 amends the FASB ASC, creating Topic 842, Leases. Topic 842 affects any entity that enters into a lease, with specified scope exemptions, and supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases, including operating leases, in the statement of financial position. The guidan |
Revenue Recognition
Revenue Recognition | 12 Months Ended |
Dec. 31, 2018 | |
Revenue Recognition | |
Revenue Recognition | Note 2. Revenue Recognition We transitioned to the FASB ASC 606, from ASC 605, Revenue Recognition , on January 1, 2018 using the modified retrospective method. Our consolidated financial statements reflect the application of ASC 606 guidance beginning January 1, 2018, while our consolidated financial statements for prior periods were prepared under ASC 605 guidance. There were no cumulative effects of our transition to ASC 606. For more information, see Note 1, “Basis of Presentation” of Notes to Consolidated Financial Statements. The following table presents the revenues disaggregated by revenue source (amounts in thousands): Year ended December 31, Revenues by type 2018 2017 Affiliate revenue $ 77,765 $ 74,303 Advertising revenue 59,692 47,980 Other revenue 9,622 2,181 Total revenue $ 147,079 $ 124,464 The following is a description of principal activities from which we generate our revenue: Affiliate revenue: We enter into arrangements with multi-channel video distributors, such as cable, satellite and telecommunications companies (referred to as “MVPDs”) to provide a continuous feed of our programming generally based on a per subscriber fee pursuant to multi-year contracts, referred to as “affiliation agreements”, which typically provide for annual rate increases. We have used the practical expedient related to the right to invoice and recognize revenue at the amount to which we have the right to invoice for services performed. The specific affiliate revenues we earn vary from period to period, distributor to distributor and also vary among our Networks, but are generally based upon the number of each distributor’s paying subscribers who receive our Networks. Changes in affiliate revenues are primarily derived from changes in contractual per subscriber rates charged for our Networks and changes in the number of subscribers. MVPDs report their subscriber numbers to us generally on a two month lag. We record revenue based on estimates of the number of subscribers utilizing the most recently received remittance reporting of each MVPD, which is consistent with our past practice and industry practice. Revenue is recognized on a month by month basis when the performance obligations to provide service to the MVPDs is satisfied. Payment is typically received within sixty days. Advertising revenue: Advertising revenues are generated from the sale of commercial time, which is typically sold pursuant to sales orders with advertisers providing for an agreed upon commitment and price per spot. We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue. Payment is typically due and received within thirty days. Other revenue: Other revenues are derived primarily through the licensing of our content. We enter into agreements to license content and recognize revenue when the performance obligation is satisfied and control is transferred, which is generally upon delivery of the content. For the year ended December 31, 2018, we received $5.8 million from our business interruption insurance policies related to Hurricane Maria in 2017. Excluding $5.8 million received from our business interruption policies, our total revenue from customers is $141.3 million. Comparison to amounts if ASC 605 had been in effect The following table reflects the impact of adoption of ASC 606 on our consolidated statements of operations for the year ended December 31, 2018, and the amounts as if ASC 605 was still in effect (“ASC 605 Presentation”) (amounts in thousands): Year ended December 31, 2018 ASC 606 Reported Reclassification ASC 605 Presentation Net revenues $ 147,079 $ (3,759) $ 143,320 Operating expenses 102,347 (3,759) 98,588 Operating income $ 44,732 $ — $ 44,732 |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions | |
Related Party Transactions | Note 3. Related Party Transactions The Company has various agreements with MVS, a Mexican media and television conglomerate, which has directors and stockholders in common with the Company as follows: · On November 15, 2018, an amendment to agreement was executed, effective through February 28, 2022, pursuant to which MVS provides Cinelatino with satellite and support services including origination, uplinking and satellite delivery of two feeds of Cinelatino’s channel (for U.S. and Latin America), master control and monitoring, dubbing, subtitling and close captioning, and other support services (the “Satellite and Support Services Agreement”). This original agreement was amended on May 20, 2015, to expand the services MVS provides to Cinelatino to include commercial insertion and editing services to support advertising sales on Cinelatino’s U.S. feed. Expenses incurred under this agreement are included in cost of revenues in the accompanying consolidated statements of operations. Total expenses incurred were $2.4 million and $2.6 million for the years ended December 31, 2018 and 2017, respectively. Amounts due to MVS pursuant to the agreements noted above amounted to $0.7 million and $1.9 million at December 31, 2018 and 2017, respectively. · On November 15, 2018, an amendment to affiliation agreement was executed, effective through February 28, 2022 for the distribution and exhibition of Cinelatino’s programming service through Dish Mexico (d/b/a Comercializadora de Frecuencias Satelitales, S. de R.L. de C.V.), an MVS affiliate that transmits television programming services throughout Mexico. Total revenues recognized were $1.8 million and $2.1 million for the years ended December 31, 2018 and 2017, respectively. Amounts due from Dish Mexico amounted to $0.3 million at December 31, 2018 and 2017. · On November 15, 2018, an amendment was executed to extend MVS the non-exclusive right to duplicate, distribute and exhibit Cinelatino’s service via cable, satellite or by any other means in Mexico. Pursuant to the arrangement, Cinelatino receives revenues net of MVS’s distribution fee, which is presently equal to 13.5% of all license fees collected from third party distributors managed by MVS to the extent that distribution is not owned by MVS. Total revenues recognized were $1.1 million and $1.6 million for the years ended December 31, 2018 and 2017, respectively. Amounts due from MVS pursuant to the agreements noted above amounted to $0.7 million and $1.8 million at December 31, 2018 and 2017, respectively. We renewed the three‑year consulting agreement effective April 9, 2016 with James M. McNamara, a member of the Company’s board of directors, to provide the development, production and maintenance of programming, affiliate relations, identification and negotiation of carriage opportunities, and the development, identification and negotiation of new business initiatives including sponsorship, new channels, direct‑to‑consumer programs and other interactive initiatives. Total expenses incurred under these agreements are included in selling, general and administrative expenses and amounted to $0.5 million for each of the years ended December 31, 2018 and 2017, respectively. No amounts were due to this related party at December 31, 2018 and 2017. We entered into agreements effective February 1, 2015, to license the rights to motion pictures from Lions Gate Films, Inc. (“Lionsgate”) for a total license fee of $1.0 million. Some of the titles are owned or controlled by Pantelion Films, LLC (“Pantelion”), for which Lionsgate acts as Pantelion’s exclusive licensing agent. Pantelion is a joint venture made up of several organizations, including Panamax (an entity owned by James M. McNamara), Lionsgate and Grupo Televisa. Fees paid by Cinelatino to Lionsgate may be remunerated to Pantelion in accordance with their financial arrangements. Expenses incurred under this agreement are included in cost of revenues in the accompanying consolidated statements of operations, and amounted to $0.1 million and $0.3 million for the years ended December 31, 2018 and 2017, respectively. At December 31, 2018 and 2017, $0 million and $0.1 million, respectively, is included in programming rights in the accompanying consolidated balance sheets. We entered into an output agreement effective November 2, 2016, with Pantelion for the licensing of movie titles. Expenses incurred under this agreement are included in cost of revenues in the accompanying consolidated statements of operations and amounted to $0.0 million for year ended December 31, 2018. There were no costs incurred for the year ended December 31, 2017. At December 31, 2018, $0.5 million is included in programming rights in the accompanying consolidated balance sheets related to these agreements. There were no amounts included in programming rights at December 31, 2017. |
Snap Media Acquisition
Snap Media Acquisition | 12 Months Ended |
Dec. 31, 2018 | |
Snap Media Acquisition | |
Snap Media Acquisition | Note 4. Snap Media Acquisition On November 26, 2018, the Company completed the acquisition of a seventy five percent (75%) interest in Snap Global, LLC (“Snap Media”), pursuant to the terms of a Transaction Agreement (the “Snap Media Acquisition”). Snap Media is a leading independent distributor of content in Latin America to broadcast, pay TV and OTT platforms. The opportunity is to leverage Snap to drive licensing of our content and to identify co-production opportunities in Latin America. The Snap Media Acquisition was accounted for as a business combination using the acquisition method of accounting. Total consideration in connection with the Snap Media Acquisition is $4.8 million (net of $0.7 million of cash acquired), which includes 101,818 shares of the Company’s Class A common stock issued and $1.5 million paid at closing. Additional consideration to be paid includes 54,825 shares of the Company’s Class A common stock to be issued and $0.8 million to be paid in 2019 and $0.5 million to be paid in each of 2020 and 2021. The fair value of shares of the Company’s Class A common stock included in consideration is based on the closing price of the Company’s Class A common shares on November 26, 2018. Future consideration is classified as Other accrued expenses, Other long-term liabilities and Additional paid in capital in the Company’s consolidated balance sheet. Fees and expenses related to the Snap Media Acquisition totaled $0.6 million consisting primarily of professional fees, all of which are classified as selling, general and administrative expenses in the accompanying condensed consolidated statements of operations. The preliminary allocation of consideration to the net tangible and intangible assets acquired is presented in the table below (amounts in thousands): 2018 Accounts receivable $ 1,419 Other current assets 30 Intangible asset–content library 616 Accounts payable (259) Accrued expenses (589) Deferred revenue (140) Fair value of net assets acquired 1,077 Goodwill 5,107 Non-controlling interest (1,379) Total purchase price consideration $ 4,805 Programming rights intangible assets have an amortization period of approximately 7.0 years. The purchase price allocation reflects preliminary fair value estimates based on preliminary work and analyses performed by management and is subject to change as additional information to assist in determining the fair value of the net assets acquired at the closing date is obtained during the post-closing measurement period. Goodwill attributable to the Snap Media Acquisition is expected to be deductible for tax purposes. Goodwill represents the excess of the purchase price consideration over the fair value of the underlying net assets acquired and largely results from expected future synergies from combining operations as well as an assembled workforce, which does not qualify for separate recognition. The non-controlling interest fair value reflects the fair value of purchase price consideration for a controlling interest, less discounts for lack of control and marketability. The Snap Media Acquisition is not material to our consolidated financial statements, and therefore, supplemental pro forma financial information related to the acquisition is not included herein. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Property and Equipment | Note 5. Property and Equipment Property and equipment at December 31, 2018 and 2017 consists of the following (amounts in thousands ): 2018 2017 Land and improvements $ 8,724 $ 8,724 Building 11,258 11,258 Equipment 25,921 27,930 Towers 1,536 1,450 47,439 49,362 Less: accumulated depreciation (25,069) (26,220) 22,370 23,142 Equipment installations in progress 9,839 1,291 $ 32,209 $ 24,433 Depreciation expense was $2.8 million and $2.9 million for the years ended December 31, 2018 and 2017, respectively. On September 20, 2017, Hurricane Maria made landfall in Puerto Rico, causing damage to WAPA’s infrastructure including one of its transmission towers, which was completely destroyed. Accordingly, we recorded a $0.5 million fixed asset impairment charge related to the net book value of the identified damaged assets in 2017. A significant portion of the damaged assets have been in service for more than 10 years and, as such, were largely fully depreciated. We anticipate the replacement cost will be well in excess of the net book value, though we expect insurance will cover most of the replacement costs, subject to deductibles and other costs. There can be no assurances of the timing and amount of proceeds we may recover under our insurance policies. For the years ended December 31, 2018 and 2017, we received and recognized $2.1 million and $3.3 million, respectively, in insurance recoveries related to these assets. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Goodwill and Intangible Assets | Note 6. Goodwill and Intangible Assets Goodwill and intangible assets consist of the following at December 31, 2018 and 2017 ( amounts in thousands ): December 31, 2018 2017 Broadcast license $ 41,356 $ 41,356 Goodwill 169,994 164,887 Other intangibles 39,086 51,661 Total intangible assets $ 250,436 $ 257,904 A summary of changes in the Company’s goodwill and other indefinite lived intangible assets, on a net basis, for the years ended December 31, 2018 and 2017, is as follows (amounts in thousands ): Net Balance at Net Balance at December 31, 2017 Additions Impairment December 31, 2018 Broadcast license $ 41,356 $ — $ — $ 41,356 Goodwill 164,887 5,107 — 169,994 Brands 15,986 — — 15,986 Other intangibles 700 — — 700 Total indefinite-lived intangibles $ 222,929 $ 5,107 $ — $ 228,036 Net Balance at Net Balance at December 31, 2016 Additions Impairment December 31, 2017 Broadcast licenses $ 41,356 $ — $ — $ 41,356 Goodwill 164,887 — — 164,887 Brands 15,986 — — 15,986 Other intangibles 700 — — 700 Total indefinite-lived intangibles $ 222,929 $ — $ — $ 222,929 A summary of the changes in the Company’s other amortizable intangible assets for the years ended December 31, 2018 and 2017 is as follows ( amounts in thousands ): Net Balance at Net Balance at December 31, 2017 Additions Amortization December 31, 2018 Affiliate relationships $ 32,343 $ — $ (12,070) $ 20,273 Advertiser relationships 1,240 — (550) 690 Non-compete agreement 1,235 — (549) 686 Other intangibles 157 65 (78) 144 Programming contracts — 616 (9) 607 Total finite-lived intangibles $ 34,975 $ 681 $ (13,256) $ 22,400 Net Balance at Net Balance at December 31, 2016 Additions Amortization December 31, 2017 Affiliate relationships $ 44,468 $ — $ (12,125) $ 32,343 Advertiser relationships 1,792 — (552) 1,240 Non-compete agreement 1,784 — (549) 1,235 Other intangibles 119 92 (54) 157 Total finite-lived intangibles $ 48,163 $ 92 $ (13,280) $ 34,975 The aggregate amortization expense of the Company’s amortizable intangible assets was $13.3 million for each of the years ended December 31, 2018 and 2017. The weighted average remaining amortization period is 3.0 years at December 31, 2018. Future estimated amortization expense is as follows (amounts in thousands): Year Ending December 31, Amount 2019 $ 8,597 2020 6,170 2021 5,857 2022 1,528 2023 and thereafter $ 22,400 |
Equity Method Investments
Equity Method Investments | 12 Months Ended |
Dec. 31, 2018 | |
Equity Method Investments | |
Equity Method Investments | Note 7. Equity Method Investments The Company makes investments that support its underlying business strategy and enable it to enter new markets. The carrying values of the Company’s equity method investments are typically consistent with its ownership in the underlying net assets of the investees, with the exception of Canal 1 and Pantaya. Due to losses in excess of capital contributions, the Company has recorded nearly 100% of the losses on Canal 1. The Company has also recorded losses in excess of the amount invested in Pantaya. Certain of the Company’s equity investments are variable interest entities, for which the Company is not the primary beneficiary. On November 3, 2016, we acquired a 25% interest in Pantaya, a newly formed joint venture with Lionsgate, to launch a Spanish-language OTT movie service. The service launched on August 1, 2017. The investment is deemed a variable interest entity (“VIE”) that is accounted for under the equity method. As of December 31, 2018, we have funded $4.7 million in capital contributions to Pantaya. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Pantaya, we continue to record our proportionate share of losses on a one quarter lag. For the years ended December 31, 2018 and 2017, we have recorded $6.9 million and $2.8 million, respectively in loss on equity method investments related to Pantaya, which is presented as a liability in the accompanying consolidated balance sheets. The net balance recorded in investee losses in excess of investment related to Pantaya joint venture was $5.0 million and $2.8 million at December 31, 2018 and 2017, respectively, and is included in the accompanying consolidated balance sheets. On November 30, 2016, we, in partnership with Colombian content producers, Radio Television Interamericana S.A., Compania de Medios de Informacion S.A.S. and NTC Nacional de Television y Comunicaciones S.A., were awarded a ten (10) year renewable television broadcast concession license for Canal 1 in Colombia. The partnership began operating Canal 1 on May 1, 2017. On February 7, 2018, Colombian regulatory authorities approved an increase in our ownership in the joint venture from 20% to 40%. The joint venture is deemed a VIE that is accounted for under the equity method. We earn a preferred return on the capital funded, which is recorded quarterly as an offset to the loss on the investment. As of December 31, 2018, we have recorded $84.1 million in equity method funding related to Canal 1. We record the income or loss on investment on a one quarter lag. For the years ended December 31, 2018 and 2017, we recorded $28.3 million and $9.1 million, net of preferred return, in loss on equity method investments, respectively. The Canal 1 joint venture losses to date have exceeded the capital contributions of the common equity partners and in accordance with equity method accounting, equity losses in excess of the common equity have been recorded against the next layer of the capital structure, in this case, preferred equity. The Company is currently the sole preferred equity holder in Canal 1 and therefore, the Company has recorded nearly 100% of the losses of the joint venture. For the years ended December 31, 2018 and 2017, we recorded $8.4 million and $1.7 million of preferred return, as an offset to losses incurred in loss on equity method investments, respectively. The net balance recorded in equity method investments related to Canal 1 joint venture was $46.7 million and $25.9 million at December 31, 2018 and 2017, respectively, and is included in equity method investments in the accompanying consolidated balance sheets. On April 28, 2017, we acquired a 25.5% interest in REMEZCLA, a digital media company targeting English speaking and bilingual U.S. Hispanic millennials through innovative content. As of December 31, 2018, we have recorded $5.0 million in equity method funding related to REMEZCLA. We record the income or loss on investment on a one quarter lag. Additionally, we earn a preferred return on the capital funded, which is recorded quarterly as an offset to the loss on the investment. For the year ended December 31, 2018, we recorded a $0.1 million loss, net of preferred return, in loss on equity method investment. For the year ended December 31, 2017, we recorded a $0.0 million gain inclusive of the preferred return, as an offset to loss on equity method investment. For the years ended December 31, 2018 and 2017, we recorded $0.6 million and $0.4 million of preferred return, as an offset to the loss on equity method investments, respectively. The net investment recorded in Equity method investments was $5.0 million at December 31, 2018 and 2017, and is included in equity method investments in the accompanying consolidated balance sheets. We have no additional commitment to fund the operations of the venture, which limits the maximum exposure to loss on our investment in Remezcla to our investment of $5.0 million. The Company records the income or loss on investment on a one quarter lag. Summary unaudited financial data for our equity investments as of and for the twelve months ended September 30, 2018 are included below (amounts in thousands): Equity Investees Current assets $ 20,999 Non-current assets 53,453 Current liabilities 53,145 Non-current liabilities 90,731 Redeemable stock and non-controlling interests 14,187 Net revenue 21,703 Operating loss (57,387) Net loss $ (66,819) |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Income Taxes | Note 8. Income Taxes For the years ended December 31, 2018 and 2017, Income before provision for income taxes, includes the following components (amounts in thousands) : 2018 2017 Domestic income $ 9,797 $ 9,984 Foreign loss (10,323) (4,714) $ (526) $ 5,270 For the years ended December 31, 2018 and 2017, income tax expense is comprised of the following (amounts in thousands ): 2018 2017 Current income tax expense $ 9,231 $ 4,233 Deferred income tax 1,040 14,473 $ 10,271 $ 18,706 Current tax expense for each of the years ended December 31, 2018 and 2017, includes $1.5 million of foreign withholding tax. For the years ended December 31, 2018 and 2017, the reconciliation of income tax (benefit) expense computed at the U.S. federal statutory rates to income tax expense is (amounts in thousands) : 2018 2017 Income tax (benefit) expense at federal statutory rate-US Only $ (108) $ 1,852 Income tax expense at federal statutory rate-Foreign Only 3,832 1,655 Permanent items 836 829 Return to provision true-ups -Current/ Deferred (51) (223) Foreign rate differential (141) 348 Foreign tax credits (7,890) (2,733) Foreign valuation allowance 9,429 3,116 Change in FTC valuation allowance 4,141 10,588 Puerto Rico tax rate change (722) — Tax Cut and Jobs Act law changes — 2,976 Foreign withholding taxes 1,499 1,535 Deferred foreign tax credit offset (873) (1,160) State taxes and state rate change 374 60 UTP adjustment (55) (137) Income tax expense $ 10,271 $ 18,706 Prior year presentation in the table above has been conformed to current year presentation for comparability. The effective rate for the period ending December 31, 2018, excluding our share of the equity investment in Colombia and return to provision adjustments, was 38%. The 2017 Tax Cut and Jobs Act (“Tax Act”) was signed into law on December 22, 2017. The Tax Act revised the U.S. corporate income tax by, among other things, lowering the statutory corporate tax rate from 35% to 21% in 2018, eliminating certain deductions, imposing a mandatory one-time transition tax, or deemed repatriation tax on accumulated earnings of foreign subsidiaries as of 2017 that were previously tax deferred. The Company generates income in higher tax rate foreign locations, which result in foreign tax credits. The lower federal corporate tax rate reduces the likelihood or our utilization of foreign tax credits created by income taxes paid in Puerto Rico and Latin America, resulting in a valuation allowance. The Tax Act also establishes new tax provisions that may affect 2018 and future periods, including, but not limited to, generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; establishing a new minimum tax on Global Intangible Low-Taxed Income ("GILTI"), a new Base Erosion Anti-Abuse Tax, and a new U.S. corporate deduction for Foreign-Derived Intangible Income. Potential limitation interest deductibility and changes to performance based compensation exception for highly compensated employees. The Company evaluated and determined that these provisions did not affect the 2018 provision for income taxes. For the year ended December 31, 2018, the items that significantly affect the differences between the tax provision calculated at the statutory federal income tax rate , are the continued impact of the Tax Act that reduced the federal tax rate to 21%, resulting in a valuation allowance on foreign tax credit carryforwards generated in 2018 and the loss on the Company’s equity investment in Colombia, which created a deferred tax asset , requiring an additional $9.4 million valuation allowance. Additionally, increase in deferred tax liabilities in Puerto Rico increased the offsetting deferred tax asset in the U.S. For the year ended December 31, 2017, the items that significantly affect the differences between the tax provision calculated at the statutory federal income tax rate and the actual tax expense recorded related primarily to the Tax Act that reduced the federal tax rate to 21%, and the loss on the Company’s equity investment in Colombia, which created a deferred tax asset against which we established a $3.1 million valuation allowance. The investment in Colombia also impacted the foreign rate differential, as the Colombia tax rate was lower than the federal corporate tax rate in 2017. Increases in deferred tax liabilities in Puerto Rico increased the offsetting deferred tax asset in the U.S. The impact of permanent items as a percentage were higher due to lower income in 2017, but as a dollar amount were actually lower as compared to prior years. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities calculated for financial reporting purposes and the amounts calculated for preparing its income tax returns in accordance with tax regulations and the net tax effects of operating loss and tax credits carried forward. Net deferred tax liabilities consist of the following components as of December 31, 2018 and 2017 (amounts in thousands) : 2018 2017 Deferred tax assets: Allowances for doubtful accounts $ 820 $ 1,308 Deferred branch tax benefit 11,801 10,846 Deferred revenue 84 42 NOL credit and other carryovers 204 111 Fixed assets 51 47 Accrued expenses 1,123 935 Foreign tax credit 14,729 10,588 Stock compensation 3,613 3,081 Pension 196 397 Intangibles 1,447 1,355 Equity method gains and losses 12,900 — Other DTA 17 438 Less: Foreign income valuation allowance (12,546) (3,117) Less: Foreign tax credit valuation allowance (14,729) (10,588) Total deferred tax assets 19,710 15,443 Deferred tax liabilities: Prepaid expenses (404) (328) Intangibles (15,788) (17,676) Interest rate swap (365) (173) Property and equipment (6,678) (1,443) Amortization expense (11,705) (9,784) Total deferred tax liabilities (34,940) (29,404) $ (15,230) $ (13,961) The deferred tax amounts mentioned above have been classified on the accompanying consolidated balance sheets at December 31, 2018 and 2017 as follows ( amounts in thousands ): 2018 2017 Non-current assets $ 4,290 $ 4,802 Non-current liabilities $ 19,520 $ 18,763 At December 31, 2018 and 2017, the Company has foreign tax credit carryforwards for U.S. federal purposes and foreign minimum credits totaling $14.7 million and $10.6 million, respectively, which expire during the years 2021 through 2026. In addition, the impact of foreign tax credits and related valuation allowance had an impact on the tax rate. These tax credits were generated on revenues earned by our channels for airing content in Puerto Rico, and Latin America. The realization of deferred tax assets depends on the generation of sufficient taxable income of the appropriate character and in the appropriate taxing jurisdiction during the future periods in which the related temporary differences become deductible. A valuation allowance is provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized. As the Tax Act significantly reduced the U.S. tax rate to 21%, the Company anticipates generating excess foreign tax credits and would not be able to use its historic foreign tax credits before they expire. As a result, in 2018 and in 2017, the Company recorded a valuation allowance against our foreign tax credits of $14.7 million and $10.6 million, respectively. In addition, the Colombia operations incurred a significant loss in 2018 and 2017 and the Company evaluated the ability to use the created deferred tax assets and recorded a valuation allowance of $12.5 million and $3.1 million against the balance at December 31, 2018 and 2017, respectively. The Company has foreign net operating losses carryforwards related to its Colombia operations totaling $0.6 million and $0.3 million, at December 31, 2018 and 2017, respectively, which expire beginning in 2029. Upon audit, taxing authorities may prohibit the realization of all or part of an uncertain tax position. The Company regularly assesses the outcome of potential examinations in each of the tax jurisdictions when determining the adequacy of the amount of unrecognized tax benefit recorded. The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense. Upon filing for an accounting method change related to an uncertain tax position in 2017, the Company reduced its uncertain tax position reserve in the amount of $0.1 million for related interest expense. In 2018, the Company received approval of the accounting method change and reversed the respective uncertain tax position. As of December 31, 2018 and 2017, the Company has uncertain tax position reserves of $0 million and $0.3 million, respectively. |
Long Term Debt
Long Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Long Term Debt | |
Long Term Debt | Note 9. Long‑Term Debt Long‑term debt as of December 31, 2018 and 2017 consists of the following ( amounts in thousands ): December 31, 2018 December 31, 2017 Senior Notes due February 2024 $ 206,091 $ 207,642 Less: Current portion 2,134 2,133 $ 203,957 $ 205,509 On February 14, 2017 (the “Closing Date”), the Borrowers amended the Term Loan Facility (the “Second Amended Term Loan Facility”). The Second Amended Term Loan Facility provides for a $213.3 million senior secured term loan B facility, which matures on February 14, 2024. The Second Amended Term Loan Facility, bears interest at the Borrowers’ option of either (i) London Inter-bank Offered Rate ("LIBOR') plus a margin of 3.50% (decreased from a margin of 4.00% under the Term Loan Facility) or (ii) an Alternate Base Rate (“ABR”) plus a margin of 2.50% (decreased from a margin of 3.00% under the Term Loan Facility). There is no LIBOR floor (a decrease from a LIBOR floor of 1.00% under the Term Loan Facility). The Second Amended Term Loan Facility, among other terms, provides for an uncommitted incremental loan option (the “Incremental Facility”) allowing for increases for borrowings under the Second Amended Term Loan Facility and borrowing of new tranches of term loans, up to an aggregate principal amount equal to (i) $65.0 million plus (ii) an additional amount (the “Incremental Facility Increase”) provided, that after giving effect to such Incremental Facility Increase (as well as any other additional term loans), on a pro forma basis, the First Lien Net Leverage Ratio (as defined in the Second Amended Term Loan Facility) for the most recent four consecutive fiscal quarters does not exceed 4.00:1.00 and the Total Net Leverage Ratio (as defined in the Second Amended Term Loan Facility) for the most recent four consecutive fiscal quarters does not exceed 6.00:1.00. The First Lien Net Leverage Ratio and the Total Net Leverage Ratio each cap the cash netted against debt up to a maximum amount of $60.0 million (increased from $45.0 million under the Term Loan Facility). Additionally, the Second Amended Term Loan Facility also provides for an uncommitted incremental revolving loan option (the “Incremental Revolving Facility”) allowing for an aggregate principal amount of up to $30.0 million, which will be secured on a pari passu basis by the collateral securing the Second Amended Term Loan Facility. The Second Amended Term Loan Facility requires the Borrowers to make amortization payments (in quarterly installments) equal to 1.00% per annum with respect to the Second Amended Term Loan Facility with any remaining amount due at final maturity. The Second Amended Term Loan Facility principal payments commenced on March 31, 2017, with a final installment due on February 14, 2024. Voluntary prepayments are permitted, in whole or in part, subject to certain minimum prepayment requirements. In addition, pursuant to the terms of the Second Amended Term Loan Facility, within 90 days after the end of each fiscal year, the Borrowers are required to make a prepayment of the loan principal in an amount equal to a percentage of the excess cash flow of the most recently completed fiscal year. Excess cash flow is generally defined as net (loss) income plus depreciation and amortization expense, less mandatory prepayments of the term loan, income taxes and capital expenditures, and adjusted for the change in working capital. The percentage of the excess cash flow used to determine the amount of the prepayment of the loan declines from 50% to 25%, and again to 0% at lower leverage ratios. Pursuant to the terms of the Second Amended Term Loan Facility, our net leverage ratio was 2.5x at December 31, 2018, resulting in an excess cash flow percentage of 0% and therefore, no excess cash flow payment will be due in March 2019. Pursuant to the terms of the Second Amended Term Loan Facility, in March of 2018, the Company made an excess cash flow payment of $2.1 million. As permitted under the Second Amended Term Loan Facility, the excess cash flow payment was allocated in direct order of maturity, accordingly, we were not required to make the scheduled quarterly loan amortization payments in 2018. As of December 31, 2018, the original issue discount balance was $1.7 million, net of accumulated amortization of $1.8 million and was recorded as a reduction to the principal amount of the Second Amended Term Loan Facility outstanding as presented on the consolidated balance sheet and will be amortized as a component of interest expense over the term of the Second Amended Term Loan Facility. In accordance with ASU 2015-15 Interest —Imputation of Interest (Subtopic 835-30) Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line of Credit Arrangements, deferred financing fees of $1.3 million, net of accumulated amortization of $2.0 million, are presented as a reduction to the Second Amended Term Loan Facility outstanding at December 31, 2018 as presented on the consolidated balance sheet, and will be amortized as a component of interest expense over the term of the Second Amended Term Loan Facility. The carrying value of the long-term debt approximates fair value at December 31, 2018 and 2017, and was derived from quoted market prices by independent dealers (Level 2 in the fair value hierarchy under ASC 820, Fair Value Measurements and Disclosures ). The following are the maturities of our long-term debt as of December 31, 2018 (amounts in thousands) : Year Ending December 31, 2019 $ 2,134 2020 2,133 2021 2,133 2022 2,133 2023 and thereafter 200,548 $ 209,081 |
Derivative instruments
Derivative instruments | 12 Months Ended |
Dec. 31, 2018 | |
Derivative instruments | |
Derivative instruments | Note 10. Derivative instruments We use derivative financial instruments in the management of our interest rate exposure. Our strategy is to eliminate the cash flow risk on a portion of the variable rate debt caused by changes in the designated benchmark interest rate, LIBOR. The Company does not enter into or hold derivative financial instruments for speculative trading purposes. On May 4, 2017, we entered into two identical pay-fixed, receive-variable, interest rate swaps with two different counter parties, to hedge the variability in the LIBOR interest payments on an aggregate notional value of $100.0 million of our Second Amended Term Loan Facility beginning May 31, 2017, through the expiration of the swaps on June 30, 2022. At inception, these interest rate swaps were designated as cash flow hedges of interest rate risk, and as such, the effective portion of unrealized changes in market value is recorded in Accumulated other comprehensive income (“AOCI”). Any losses from hedge ineffectiveness will be recognized in current operations. The change in the fair value of the interest rate swap agreements for the years ended December 31, 2018 and 2017, resulted in an unrealized gain of $0.8 million, respectively, and was included in AOCI net of taxes. The Company received $0.1 million of net interest on the settlement of the interest rate swap agreements for the year ended December 31, 2018. The Company paid $0.4 million of net interest on the settlement of the interest rate swap agreements for the year ended December 31, 2017. As of December 31, 2018, the Company estimates that none of the unrealized gain included in AOCI related to these interest rate swap agreements will be realized and reported in operations within the next twelve months. No gain or loss was recorded in operations for the years ended December 31, 2018 and 2017, respectively. The aggregate fair value of the interest rate swaps was $1.6 million and $0.8 million as of December 31, 2018 and 2017, respectively. These were recorded in Swap assets in non-current assets on the accompanying consolidated balance sheets. By entering into derivative instrument contracts, we are exposed to counterparty credit risk. Counterparty credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is in an asset position, the counterparty has a liability to us, which creates credit risk for us. We attempt to minimize this risk by selecting counterparties with investment grade credit ratings and regularly monitoring our market position with each counterparty. Our derivative instruments do not contain any credit-risk related contingent features. |
Fair Value Measurements
Fair Value Measurements | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
Fair Value Measurements | Note 11. Fair Value Measurements Our derivatives are valued using a discounted cash flow analysis that incorporates observable market parameters, such as interest rate yield curves, classified as Level 2 within the valuation hierarchy. Derivative valuations incorporate credit risk adjustments that are necessary to reflect the probability of default by us or the counterparty. The following table presents our assets and liabilities measured at fair value on a recurring basis and the levels of inputs used to measure fair value, which include derivatives designated as cash flow hedging instruments, as well as their location on our accompanying consolidated balance sheets as of December 31, 2018 and 2017 (amounts in thousands) : Estimated Fair Value December 31, 2018 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Cash flow hedges: Interest rate swap Other assets — $ 1,619 — $ 1,619 Estimated Fair Value December 31, 2017 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Cash flow hedges: Interest rate swap Other assets — $ 773 — $ 773 Certain non-financial assets and liabilities are measured at fair value on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to periodic impairment tests. These items primarily include long-lived assets, goodwill and other intangible assets. During the years ended December 31, 2018 and 2017, there were no assets and liabilities measured at fair value on a non-recurring basis. The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of these items. The carrying value of the long-term debt approximates fair value because this instrument bears interest at a variable rate, is pre-payable, and is at terms currently available to the Company. |
Stockholders' equity
Stockholders' equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' equity | |
Stockholders' equity | Note 12. Stockholders’ equity Capitalization Capital Stock As of December 31, 2018, the Company had 19,696,810 shares of Class A common stock, and 19,720,381 shares of Class B common stock, issued and outstanding. On June 20, 2017, the Company announced that its Board of Directors authorized the repurchase of up to $25.0 million of the Company’s Class A common stock, par value $0.0001 per share (“Class A common stock”). Under the Company’s stock repurchase program, management is authorized to purchase shares of the Company’s common stock from time to time through open market purchases at prevailing prices, subject to stock price, business and market conditions and other factors. During the year ended December 31, 2018, the Company repurchased 199,600 shares of Class A common stock under the repurchase program for an aggregate purchase price of $2.4 million. As of December 31, 2018, the Company repurchased 2.0 million shares of Class A common stock under the repurchase program for an aggregate purchase price of $24.4 million, and was recorded as treasury stock on the consolidated balance sheet. As of December 31, 2018, the Company had $0.6 million remaining for future repurchases under the existing stock repurchase program, which expires on May 24, 2019. On August 15, 2018, the Company announced that its Board of Directors authorized the repurchase of up to an additional $25.0 million of the Company’s Class A common stock on an opportunistic basis. Voting Class B common stock votes on a 10 to 1 basis with the Class A common stock, which means that each share of Class B common stock will have 10 votes and each share of Class A common stock will have 1 vote. The Class B common stock shall be convertible in whole or in part at any time at the option of the holder or holders thereof, into an equal number of Class A common stock. Warrants are not entitled to vote, unless converted into shares of the Company’s Class A common stock. Equity Incentive Plans Effective May 16, 2016, the stockholders of all classes of capital stock of the Company approved at the annual stockholder meeting the Hemisphere Media Group, Inc. Amended and Restated 2013 Equity Incentive Plan (the “2013 Equity Incentive Plan”) to increase the number of shares of Class A common stock that may be delivered under the 2013 Equity Incentive Plan to an aggregate of 7.2 million shares of our Class A common stock. At December 31, 2018, 2.7 million shares remained available for issuance of stock options or other stock‑based awards under our 2013 Equity Incentive Plan (including shares of restricted Class A common stock surrendered to the Company in payment of taxes required to be withheld in respect of vested shares of restricted Class A common stock, which are available for re-issuance). The expiration date of the 2013 Equity Incentive Plan, on and after which date no awards may be granted, is April 4, 2023. The Company’s Board of Directors, or a committee thereof, administers the 2013 Equity Incentive Plan and has the sole and plenary authority to, among other things: (i) designate participants; (ii) determine the type, size, and terms and conditions of awards to be granted; and (iii) determine the method by which an award may be settled, exercised, canceled, forfeited or suspended. The Company’s time‑based restricted stock awards and option awards generally vest in three equal annual installments beginning on the first anniversary of the grant date, subject to the grantee’s continued employment or service with the Company. The Company’s event‑based restricted stock awards and option awards generally vest either upon the Company’s Class A common stock attaining a $15.00 closing price per share, as quoted on the NASDAQ Global Market, on at least 10 trading days, subject to the grantee’s continued employment or service with the Company. Other event‑based restricted stock awards granted to certain members of our Board vest on the day preceding the Company’s annual shareholder meeting. Stock‑Based Compensation Stock‑based compensation expense relates to both stock options and restricted stock. Stock-based compensation expense $3.9 million and $4.1 million for the years ended December 31, 2018 and 2017, respectively. At December 31, 2018, there was $0.9 million of total unrecognized compensation cost related to non‑vested stock options, which is expected to be recognized over a weighted‑average period of 1.8 years. At December 31, 2018, there was $1.1 million of total unrecognized compensation cost related to non‑vested restricted stock, which is expected to be recognized over a weighted‑average period of 0.9 years. Stock Options The fair value of stock options granted is estimated at the date of grant using the Black‑Scholes pricing model for time‑based options and the Monte Carlo simulation model for event‑based options. The expected term of options granted is derived using the simplified method under ASC 718‑10‑S99‑1/SEC Topic 14.D for “plain vanilla” options and the Monte Carlo simulation for event‑based options. Expected volatility is based on the historical volatility of the Company’s competitors given its lack of trading history. The risk‑free interest rate is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The Company has estimated forfeitures of 1.5%, as the awards are to management for which the Company expects lower turnover, and has assumed no dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future. Black-Scholes Option Valuation Assumptions 2018 2017 Risk-free interest rate 2.7 % - 3.0 % 2.2 % Dividend yield — — Volatility 39.0 % - 41.0 % 25.8 % Weighted-average expected term (years) 6.0 6.0 The following table summarizes stock option activity for the years ended December 31, 2018 and 2017 (shares and intrinsic values in thousands) : Weighted- average Weighted- remaining Aggregate Number of average exercise contractual intrinsic shares price term value Outstanding at December 31, 2016 2,920 $ 11.64 7.6 $ 1,274 Granted 55 $ 11.35 6.0 — Exercised — — — — Forfeited (37) 10.39 — — Expired (40) $ 11.51 — — Outstanding at December 31, 2017 2,898 $ 11.62 6.5 $ 1,738 Granted 109 $ 12.84 6.0 — Exercised (67) 13.38 — — Forfeited (24) 12.30 — — Expired (6) $ 12.10 — — Outstanding at December 31, 2018 2,910 $ 11.62 5.6 $ 2,806 Vested at December 31, 2018 2,175 $ 11.71 5.3 $ 2,102 Exercisable at December 31, 2018 2,175 $ 11.71 5.3 $ 2,102 The weighted average grant date fair value of options granted for the years ended December 31, 2018 and 2017 was $5.49 and $3.39. At December 31, 2018, 0.3 million options granted are unvested, event‑based options. Restricted Stock Certain employees and directors have been awarded restricted stock under the 2013 Equity Incentive Plan. The time‑based restricted stock grants vest primarily over a period of three years. The fair value and expected term of event‑based restricted stock grants is estimated at the grant date using the Monte Carlo simulation model. The following table summarizes restricted share activity for the years ended December 31, 2018 and 2017 (shares in thousands) : Number of Weighted-average shares grant date fair value Outstanding at December 31, 2016 561 $ 10.58 Granted 154 11.19 Vested (203) 11.80 Forfeited (8) 13.38 Outstanding at December 31, 2017 504 $ 10.23 Granted 93 11.85 Vested (218) 11.49 Forfeited (9) 11.85 Outstanding at December 31, 2018 370 $ 9.86 At December 31, 2018, 0.2 million shares of restricted stock issued are unvested, event‑based shares. |
Contingencies
Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Contingencies | |
Contingencies | Note 13. Contingencies The Company is involved in various legal actions, generally related to its operations. Management believes, based on advice from legal counsel, that the outcome of such legal actions will not adversely affect the financial condition of the Company. |
Commitments
Commitments | 12 Months Ended |
Dec. 31, 2018 | |
Commitments | |
Commitments | Note 14. Commitments The Company has entered into certain rental property contracts with third parties, which are accounted for as operating leases. Rental expense was $2.2 million and $0.7 million for the years ended December 31, 2018 and 2017, respectively The Company has certain commitments including various operating leases. Future minimum payments for these commitments and other commitments, primarily programming and equity method capital contributions, are as follows (amounts in thousands): Operating Other Year Ending December 31, Leases Commitments Total 2019 $ 1,571 $ 11,961 $ 13,532 2020 367 6,229 6,596 2021 350 2,846 3,196 2022 355 489 844 2023 and thereafter 302 - 302 Total $ 2,945 $ 21,525 $ 24,470 |
Retirement Plans
Retirement Plans | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Plans | |
Retirement Plans | Note 15. Retirement Plans WAPA, a wholly owned subsidiary of the Company, makes contributions to the Televicentro de Puerto Rico Special Retirement Benefits (the “Retirement Plan”). The Retirement Plan is available to all reporters and union employees after completing three (3) months of service. Eligible employees, those meeting active service minimums and minimum age requirements, are eligible to receive a one-time lump sum payment at retirement, of two (2) weeks per year of service capped at a maximum payment of forty-five (45) weeks. The number of retirees is capped at five (5) per year. There are 164 participants in the Retirement Plan. Following is the plan’s projected benefit obligation at December 31, 2018 and 2017 (amounts in thousands) : 2018 2017 Projected benefit obligation: Balance, beginning of the year $ 2,242 $ 3,027 Service cost 89 80 Interest cost 74 85 Actuarial (gain) loss (43) (469) Benefits paid to participants — (481) Balance, end of year $ 2,362 $ 2,242 At December 31, 2018 and 2017, the funded status of the plan was as follows ( amounts in thousands ): 2018 2017 Excess of benefit obligation over the value of plan assets $ (2,362) $ (2,242) Unrecognized net actuarial loss 290 347 Unrecognized prior service cost 36 44 Accrued benefit cost $ (2,036) $ (1,851) The plan is unfunded. As such, the Company is not required to make annual contributions to the plan. At December 31, 2018 and 2017, the amounts recognized in the consolidated balance sheets were classified as follows ( amounts in thousands): 2018 2017 Accrued benefit cost $ (2,362) $ (2,242) Accumulated other comprehensive loss 326 391 Net amount recognized $ (2,036) $ (1,851) Amounts recorded in accumulated other comprehensive loss are reported net of tax. The benefits expected to be paid in each of the next five years and thereafter are as follows ( amounts in thousands ): Years Ending December 31, Amount 2019 $ 104 2020 164 2021 266 2022 171 2023 141 2024 through 2027 677 $ 1,523 At December 31, 2018 and 2017, the following weighted‑average rates were used: 2018 2017 Discount rate on the benefit obligation 3.96 % 3.35 % Rate of employee compensation increase(a) 1.75 % - 2.50 % % - 2.50 % (a) Rate of employee compensation increase is 1.75% per year through 2021, and 2.5% per year thereafter. Pension expense for the years ended December 31, 2018 and 2017, consists of the following ( amounts in thousands ): 2018 2017 Service cost $ 89 $ 80 Interest cost 74 85 Expected return on plan assets — — Recognized actuarial loss (gain) — — Amortization of prior service cost 8 8 Net loss amortization 14 1 $ 185 $ 174 WAPA makes contributions to the Plan, a multiemployer pension plan with a plan year end of December 31 that provides defined benefits to certain employees covered by the main CBA. Our main CBA expires on May 31, 2022 and covers all of our unionized employees except for four employees covered by the other CBA scheduled to expire on June 27, 2019. The risks in participating in such a plan are different from the risks of single‑employer plans, in the following respects: · Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of any other participating employer. · If a participating employer ceases to contribute to a multiemployer plan, the unfunded obligation of the plan allocable to such withdrawing employer may be borne by the remaining participating employer. If WAPA completely or partially withdrew from the Plan, it would be obligated to pay complete or partial withdrawal liability. Under the statutory requirements applicable to withdrawal liability with respect to a multiemployer pension plan, in the event of a complete withdrawal from the Plan, WAPA would be obligated to make withdrawal liability payments to fund its proportionate share of the Plan’s UVB’s. WAPA’s payment amount for a given year would be determined based on its highest contribution rate (as limited by MPRA) and its highest average contribution hours over a period of three consecutive plan years out of the ten-year period preceding the date of withdrawal. To the extent that the prescribed payment amount was not sufficient to discharge WAPA’s share of the Plan’s UVBs, WAPA’s payment obligation would nevertheless end after 20 years of payments (absent a withdrawal that is part of a mass withdrawal, in which case the annual payments would continue indefinitely or until WAPA paid its share of the Plan’s UVBs at the time of withdrawal). WAPA has received Annual Funding Notices, Report of Summary Plan Information, Critical Status Notices (“Notices”) and the above-noted Rehabilitation Plan, as defined by the Pension Protection Act of 2006 (“PPA”), from the Plan. The Notices indicate that the Plan actuary has certified that the Plan is in critical and declining status, the “Red Zone”, as defined by the PPA and MPRA, due to the projected insolvency of the Plan within the next 19 years. A plan of rehabilitation (“Rehabilitation Plan”) was adopted by the Trustees of the Plan (“Trustees”) on May 1, 2010 and then updated on November 17, 2015. On May 29, 2010, the Trustees sent WAPA a Notice of Reduction and Adjustment of Benefits Due to Critical Status explaining all changes adopted under the Rehabilitation Plan, including the reduction or elimination of benefits referred to as “adjustable benefits.” In connection with the adoption of the Rehabilitation Plan, most of the Plan participating unions and contributing employers (including the Newspaper Guild International and WAPA), agreed to one of the “schedules” of changes as set forth under the Rehabilitation Plan. In 2015, the Plan’s Trustee’s reviewed the Rehabilitation Plan and the financial projections under the Plan and determined that is was not prudent to continue benefit accruals under the current Plan and that implementation of an updated plan with a new benefit design would be in the best interest of the Plan’s participants. On July 1, 2017, WAPA executed an updated MOA under which it agreed to remain a contributing employer to the Plan through May 31, 2022 and to make contributions to the Plan at a fixed rate of $18.03 per week for each WAPA covered employee during such period (i.e., its contributions per employee will not increase during the term of its CBA or through any period during which a new CBA is entered into, if any). The contributions required under the terms of the CBA and the effect of the Rehabilitation Plan as described above are not anticipated to have a material effect on the Company’s results of operations. However, in the event other contributing employers are unable to, or fail to, meet their ongoing funding obligations, the financial impact on WAPA to contribute to any plan underfunding may be material. In addition, if a United States multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service may impose a nondeductible excise tax of 5.0% on the amount of the accumulated funding deficiency for those employers contributing to the fund. Pursuant to the last available notice (for the Plan year ended December 31, 2017), WAPA’s contributions to the Plan exceeded 5% of total contributions made to the Plan. Further information about the Plan is presented in the table below ( amounts in thousands ): Expiration Date of Pension Protection Funding Improvement WAPA’s Collective Act Zone Status Plan/Rehabilitation Plan Contribution Surcharge Bargaining Pension Fund EIN 2017 Status 2018 2017 Imposed Agreements TNGIPP (Plan No. 001) 52-1082662 Red Implemented $ 138 $ 149 No June 27, 2019 May 31, 2022 |
Nature of Business and Signif_2
Nature of Business and Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Business and Significant Accounting Policies | |
Reclassification: | Reclassification: Certain prior year amounts on the presented consolidated balance sheet and consolidated statement of cash flows, respectively, have been reclassified to conform with current year presentation. |
Principles of consolidation: | Principles of consolidation: The Consolidated Financial Statements include our accounts and the accounts of our subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The Company has interests in various entities including corporations and limited liability companies. For each such entity, the Company evaluates its ownership interest to determine whether the entity is a Variable Interest Entity (“VIE”) and, if so, whether it is the primary beneficiary of the VIE. An entity is generally a VIE if it meets any of the following criteria: (i) the entity has insufficient equity to finance its activities without additional subordinated financial support from other parties, (ii) the equity investors cannot make significant decisions about the entity’s operations, or (iii) the voting rights of some investors are not proportional to their obligations to absorb the expected losses of the entity or receive the expected returns of the entity and substantially all of the entity’s activities involve or are conducted on behalf of the investor with disproportionately few voting rights. The Company would consolidate any entity for which it was the primary beneficiary, regardless of its ownership or voting interests. The primary beneficiary is the party involved with the VIE that (i) has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Upon inception of a variable interest or the occurrence of a reconsideration event, the Company makes judgments in determining whether entities in which it invests are VIEs. If so, the Company makes judgments to determine whether it is the primary beneficiary and is thus required to consolidate the entity. If it is concluded that an entity is not a VIE, then the Company considers its proportional voting interests in the entity. The Company consolidates majority-owned subsidiaries in which a controlling financial interest is maintained. A controlling financial interest is determined by majority ownership and the absence of significant third-party participating rights. Ownership interests in entities for which the Company has significant influence that are not consolidated under the Company’s consolidation policy are accounted for as equity method investments. Related party transactions between the Company and its equity method investees have not been eliminated. |
Basis of presentation: | Basis of presentation: The accompanying consolidated financial statements for us and our subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
Operating segments: | Operating segments: The Company determines its operating segments based upon (i) financial information reviewed by the chief operating decision maker, the Chief Executive Officer, (ii) internal management and related reporting structure and (iii) the basis upon which the chief operating decision maker makes resource allocation decisions. We have one operating segment, Hemisphere. |
Net loss per common share: | Net loss per common share: Basic loss per share (“LPS”) are computed by dividing income attributable to Hemisphere Media Group common stockholders by the number of weighted‑average outstanding shares of common stock. Diluted LPS reflects the effect of the assumed exercise of stock options and vesting of restricted shares only in the periods in which such effect would have been dilutive. The following table sets forth the computation of the common shares outstanding used in determining basic and diluted LPS available to Hemisphere Media Group ( amounts in thousands, except per share amounts ): Years Ended December 31, 2018 2017 Numerator for earnings per common share calculation: Net loss available to Hemisphere Media Group $ (10,906) $ (13,436) Denominator for earnings per common share calculation: Weighted-average common shares, basic 38,986 40,164 Effect of dilutive securities Stock options, restricted stock and warrants — — Weighted-average common shares, diluted 38,986 40,164 Loss per share available to Hemisphere Media Group Basic $ (0.28) $ (0.33) Diluted $ (0.28) $ (0.33) We apply the treasury stock method to measure the dilutive effect of its outstanding warrants, stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted income per common share calculation. Per the Accounting Standards Codification (“ASC”) 260 accounting guidance, under the treasury stock method, the incremental shares (difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted LPS computation (ASC 260-10-45-23). The assumed exercise only occurs when the warrants are “In the Money” (exercise price is lower than the average market price for the period). If the warrants are “Out of the Money” (exercise price is higher than the average market price for the period), the exercise is not assumed since the result would be anti-dilutive. Potentially dilutive securities representing 1.6 million and 2.0 million shares of common stock for the years ended December 31, 2018 and 2017, respectively, were excluded from the computation of diluted loss per common share for this period because their effect would have been anti-dilutive. The net loss per share available to Hemisphere Media Group amounts are the same for our Class A and Class B common stock because the holders of each class are legally entitled to equal per share distributions whether through dividends or in liquidation. As a result of the loss from continuing operations for each of the years ended December 31, 2018 and 2017, 0.4 million and 0.3 million outstanding awards, respectively, were not included in the computation of diluted loss per share because their effect was anti-dilutive. In computing loss per share, the Company’s Nonvoting Stock is considered a participating security. Each share of Nonvoting Stock has identical rights, powers, limitations and restrictions in all respects as each share of common of the Company, including the right to receive the same consideration per share payable in respect of each share of common stock, except that holders of Nonvoting Stock shall have no voting rights or powers whatsoever. |
Revenue recognition: | Revenue recognition: Prior to 2018, revenue was recognized when persuasive evidence of a sales arrangement exists, services are rendered or delivery occurs, the sales price is fixed or determinable and collectability is reasonably assured. Revenues do not include taxes collected from customers on behalf of taxing authorities such as sales tax and value-added tax. However, certain revenues include taxes that customers pay to taxing authorities on the Company’s behalf, such as foreign withholding tax. Revenue related to the sale of advertising and contracted time is recognized, net of agency commissions, at the time of broadcast. The Company determines whether gross or net presentation is appropriate based on its relationship in the applicable transactions with its ultimate customer. Affiliate revenue received from multi-channel video providers are recognized in the period in which the services are performed, generally pursuant to multi‑year carriage agreements based on the number of subscribers. On January 1, 2018, we adopted, on a modified retrospective basis, Financial Accounting Standards Board (the “FASB”) ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) (the “new revenue standard”), which provides accounting guidance that establishes a new revenue recognition framework in GAAP for all companies and industries. The core principle of the new revenue framework is that an entity should recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration the entity expects to receive for those goods or services. The revenue framework includes a five-step model to determine the timing and amount of revenue to recognize related to contracts with customers. In addition, this revenue framework requires new or expanded disclosures related to the amounts of revenue recognized and judgments made by companies when following this framework. The adoption of the new accounting guidance did not result in changes in the way the Company records affiliate revenue, advertising revenue or content licensing fees. Guidance pertaining to the evaluation of whether revenue should be presented on a gross or net basis was changed in connection with the new revenue standard and the application of such change has been made in the presentation of revenues in the consolidated financial statements. The adoption of the new revenue standard did not have a material impact to our statement of operations for the year ended December 31, 2018, and did not have a material impact to our consolidated balance sheet as of December 31, 2018. For more information, see Note 2, “Revenue Recognition” of Notes to Consolidated Financial Statements. |
Barter transactions: | Barter transactions: The Company engages in barter transactions in which advertising time is exchanged for products or services. Barter transactions are accounted for at the estimated fair value of the products or services received, or advertising time given up, whichever is more clearly determinable. Barter revenue is recognized at the time the advertising is broadcast. Barter expense is recorded at the time the merchandise or services are used and/or received. Barter revenue and expense included in the consolidated statements of operations are as follows ( amounts in thousands ): 2018 2017 Barter revenue $ 877 $ 710 Barter expense (583) (676) $ 294 $ 34 |
Programming costs: | Programming costs: Programming costs are recorded in cost of revenues based on the Company’s contractual agreements with various third party programming distributors which are generally multi‑year agreements. |
Equity-based compensation | Equity-based compensation: We have given equity incentives to certain employees. We account for such equity incentives in accordance with ASC 718 “Stock Compensation,” which requires us to measure compensation cost for equity settled awards at fair value on the date of grant and recognize compensation cost in the consolidated statements of operations over the requisite service or performance period the award is expected to vest. Compensation cost is determined using the Black‑Scholes option pricing model. |
Advertising and marketing costs: | Advertising and marketing costs: The Company expenses advertising and marketing costs as incurred. The Company incurred advertising and marketing costs of $3.0 million and $3.3 million for the years ended December 31, 2018 and 2017, respectively. |
Cash: | Cash: The Company maintains its cash in bank deposit accounts which, at times, may exceed federally‑insured limits. The Company has not experienced any losses in such accounts. |
Accounts receivable: | Accounts receivable: Accounts receivable are carried at the original charge amount less an estimate made for doubtful receivables based on a review of all outstanding amounts. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering a customer’s financial condition and current economic conditions. Accounts receivable are written off when deemed uncollectible. Recoveries of accounts receivable previously written off are recorded as income when received. The Company considers an account receivable to be past due if any portion of the receivable balance is outstanding for more than 90 days. Changes in the allowance for doubtful accounts for the years ended December 31, 2018 and 2017 consisted of the following (amounts in thousands): Beginning Provisions End Year Description of Year for bad debt Write-offs Recoveries of Year 2018 Allowance for doubtful accounts $ 2,327 $ 417 $ 107 $ 8 $ 2,645 2017 Allowance for doubtful accounts $ 1,711 $ 756 $ 160 $ 20 $ 2,327 |
Programming rights: | Programming rights: We enter into multi-year license agreements with various programming Distributors for distribution of their respective programming (“programming rights”) and capitalize amounts paid to secure or extend these programming rights at the lower of unamortized cost or estimated net realizable value. If management estimates that the unamortized cost of programming rights exceeds the estimated net realizable value, an adjustment is recorded to reduce the carrying value of the programming rights. For the year ended December 31, 2018, management deemed it necessary to write-down certain program rights of $1.0 million, which is included in the amortization of programming rights below. No such write-down was deemed necessary during the year ended December 31, 2017. Programming rights are amortized over the term of the related license agreements or the number of exhibitions, whichever occurs first. The amortization of these rights, was $12.5 million and $11.8 million for the years ended December 31, 2018 and 2017, respectively, is recorded as part of cost of revenues in the accompanying consolidated statements of operations. Accumulated amortization of the programming rights was $45.1 million and $32.6 million at December 31, 2018 and 2017, respectively. Costs incurred in connection with the purchase of programs to be broadcast within one year are classified as current assets, while costs of those programs to be broadcast subsequently are considered noncurrent. Program obligations are classified as current or noncurrent in accordance with the payment terms of the license agreement. |
Property and equipment: | Property and equipment: Property and equipment are recorded at cost. Depreciation is determined using the straight‑line method over the expected remaining useful lives of the respective assets. Useful lives range from 1 ‑ 40 years for improvements, equipment, buildings and towers. Upon retirement or other disposition, the cost and related accumulated depreciation of the assets are removed from the accounts and the resulting gain or loss is reflected in the determination of net income or loss. Expenditures for maintenance and repairs are expensed as incurred. Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In 2017, we recorded an impairment charge of $0.5 million related to property and equipment damaged by Hurricane Maria. For more information on our property and equipment, see Note 5, “Property and Equipment” of Notes to Consolidated Financial Statements. |
Equity method investments: | Equity method investments: The Company holds investments in equity method investees. Investments in equity method investees are those for which the Company has the ability to exercise significant influence, but does not have control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless persuasive evidence to the contrary exists. Under this method of accounting, the Company typically records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances. In the event we incur losses in excess of the carrying amount of an equity investment and reduce our investment balance to zero, we would not record additional losses unless (i) we guaranteed obligations of the investee, (ii) we are otherwise committed to provide further financial support for the investee, or (iii) it is anticipated that the investee’s return to profitability is imminent. If we provided a commitment to fund losses, we would continue to record losses resulting in a negative equity method investment, which is presented as a liability. As of December 31, 2018, our proportionate share of the losses of Pantaya (“Pantaya” refers to Pantaya, LLC, a Delaware limited liability company, a joint venture among us and a subsidiary of Lions Gate Entertainment, Inc.) exceeds our investment in Pantaya by $5.0 million. This amount is recorded as “Investee losses in excess of investment” on our consolidated balance sheet at December 31, 2018, due to our commitment for future capital funding. Equity method investments are reviewed for indicators of other-than-temporary impairment on a quarterly basis. An equity method investment is written down to fair value if there is evidence of a loss in value which is other-than-temporary. The Company may estimate the fair value of its equity method investments by considering recent investee equity transactions, discounted cash flow analysis, recent operating results, comparable public company operating cash flow multiples and in certain situations, balance sheet liquidation values. If the fair value of the investment has dropped below the carrying amount, management considers several factors when determining whether an other-than-temporary decline has occurred, such as: the length of the time and the extent to which the estimated fair value or market value has been below the carrying value, the financial condition and the near-term prospects of the investee, the intent and ability of the Company to retain its investment in the investee for a period of time sufficient to allow for any anticipated recovery in market value and general market conditions. The estimation of fair value and whether an other-than-temporary impairment has occurred requires the application of significant judgment and future results may vary from current assumptions For our foreign equity investment, we perform an annual review of the international financial reporting standards (“IFRS”) versus U.S. GAAP accounting. Any significant differences are considered and adjusted to ensure a U.S. GAAP presentation. There were no differences noted in the presentation of our foreign investment’s IFRS financial statements when compared to U.S. GAAP. For more information on Equity method investments, see Note 7, “Equity Method Investments” of Notes to Consolidated Financial Statements. |
Goodwill and other intangibles: | Goodwill and other intangibles: The Company’s goodwill is recorded as a result of the Company’s business combinations using the acquisition method of accounting. Indefinite lived intangible assets include a broadcast license, trademarks and tradenames. Other intangible assets include customer relationships, non-compete agreements, affiliate agreements, and programming rights with an estimated useful life of one to ten years. Other intangible assets are amortized over their estimated lives using the straight‑line method. Costs incurred to renew or extend the term of recognized intangible assets are capitalized and amortized over the useful life of the asset. The Company tests its broadcast license annually for impairment or whenever events or changes in circumstances indicate that such assets might be impaired. The impairment test consists of a comparison of the fair value of these assets with their carrying amounts using a discounted cash flow valuation method, assuming a hypothetical start‑up scenario. The Company tests its trademarks and tradenames annually for impairment or whenever events or changes in circumstances indicate that such assets might be impaired. The test consists of a comparison of the fair value of these assets with the carrying amounts utilizing an income approach in the form of the royalty relief method, which measures the cost savings that a business enjoys since it does not have to pay a royalty rate for the use of a particular domain name and brand. The Company tests its goodwill annually for impairment or whenever events or changes in circumstances indicate that goodwill might be impaired. The first step of the goodwill impairment test compares the fair value of each reporting unit with its carrying amount, including goodwill. The fair value of the reporting units are determined through the use of a discounted cash flow analysis incorporating variables such as revenue projections, projected operating cash flow margins, and discount rates. The valuation assumptions used in the discounted cash flow model reflect historical performance of the Company and prevailing values in the broadcast and cable markets. If the fair value exceeds the carrying amount, goodwill is not considered impaired. If the carrying amount exceeds the fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of goodwill with the carrying amount of that goodwill. If the carrying amount of goodwill exceeds the implied fair value, an impairment loss shall be recognized in an amount equal to that excess. The Company tests its other finite lived intangible asset for impairment whenever events or changes in circumstances indicate that such asset or asset group might be impaired. This analysis is performed by comparing the respective carrying value of the asset group to the current and expected future cash flows, on an undiscounted basis, to be generated from such asset group. If such analysis indicates that the carrying value of this asset group is not recoverable, the carrying value of such asset group is reduced to fair value. |
Deferred financing costs: | Deferred financing costs: Deferred financing costs are recorded net of accumulated amortization and are presented as a reduction to the principal amount of the long-term debt. Amortization is calculated on the effective‑interest method over the term of the applicable loan. Amortization of deferred financing costs was $0.2 million and $0.3 million, which is included in interest expense, net in the accompanying consolidated statements of operations for the years ended December 31, 2018 and 2017, respectively. Accumulated amortization of deferred financing costs was $2.0 million and $1.8 million at December 31, 2018 and 2017. The net deferred financing costs of $1.3 million and $1.5 million at December 31, 2018 and 2017, respectively, and have been presented on the consolidated balance sheets as a reduction to the principal amount of the Long-term debt outstanding. |
Income taxes: | Income taxes: Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We record foreign withholding tax, which is withheld by foreign customers from their remittances to us, on a gross basis as a component of income taxes and separate from revenue in the consolidated statement of operations. We follow the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more‑likely‑than‑not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de‑recognition, classification, interest and penalties on income taxes, and accounting in interim periods. To the extent that interest and penalties are assessed by taxing authorities on any underpayment of income taxes, such amounts are accrued and classified as a component of income tax expense. For more information on Income taxes, see Note 8, “Income Taxes” of Notes to Consolidated Financial Statements. |
Fair value of financial instruments: | Fair value of financial instruments: The carrying amounts of cash, accounts receivable and accounts payable approximate fair value because of the short maturity of these items. The carrying value of the long‑term debt approximates fair value because this instrument bears interest at a variable rate, is pre-payable, and is at terms currently available to the Company. U.S. GAAP establishes a framework for measuring fair value and expanded disclosures about fair value measurements. This guidance enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. Under this guidance, assets and liabilities carried at fair value must be classified and disclosed in one of the following three categories: Level 1—inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that are accessible at the measurement date. Level 2—inputs to the valuation methodology include quoted prices in markets that are not active or quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3—inputs to the valuation methodology are unobservable, reflecting the entity’s own assumptions about assumptions market participants would use in pricing the asset or liability. The categorization of an asset or liability within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The Company’s programming rights and goodwill are classified as Level 3 in the fair value hierarchy, as they are measured at fair value on a non-recurring basis and are adjusted to fair value only when the carrying values exceed their fair values. For the year ended December 31, 2018, management deemed it necessary to write-down certain program rights of $1.0 million. For the year ended December 31,2017, there were no adjustments to fair value. The Company’s variable-rate debt and interest rate swaps are classified as Level 2 in the fair value hierarchy, as its estimated fair value is derived from quoted market prices by independent dealers. The carrying value of the long-term debt approximates fair value at December 31, 2018 and 2017. |
Derivative Instruments: | Derivative Instruments: The Company uses derivative financial instruments from time to time to modify its exposure to market risks from changes in interest rates. The Company may designate derivative instruments as cash flow hedges or fair value hedges, as appropriate. The Company records all derivative instruments at fair value on a gross basis. For those derivative instruments designated as cash flow hedges that qualify for hedge accounting, gains or losses on the effective portion of derivative instruments are initially recorded in accumulated other comprehensive loss on the consolidated balance sheets and reclassified to the same account on the consolidated statements of operations in which the hedged item is recognized on the consolidated statements of operations. |
Major customers and suppliers: | Major customers and suppliers: Two of our distributors each accounted for more than 10% of our total net revenues for the year ended December 31, 2018. There were no other distributors or other customers that accounted for more than 10% of revenue in any year. Our Networks are provided to these distributors pursuant to affiliation agreements with varying terms. |
Recently adopted accounting standards and accounting guidance not yet adopted: | Accounting guidance not yet adopted: In June 2018, the FASB issued Accounting Standards Update (“ASU”) 2018-07—Compensation —Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU apply to any entity that enters into share-based payment transactions with nonemployees. The amendments in this ASU are effective for public business entities for fiscal years beginning after December 15, 2018. Early adoption is permitted, but no earlier than an entity’s adoption date of ASC 606. We will adopt this standard beginning January 1, 2019 and expect no material impact to our consolidated financial statements moving forward. In February 2018, the FASB issued ASU 2018-02—Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of certain tax effects from Accumulated other comprehensive income . The amendments in this ASU apply to any entity that has items of other comprehensive income (“OCI”) for which the related tax effects are presented in OCI, as previously required by GAAP. This ASU allows a one time reclassification from OCI to Retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The amendments in this ASU are effective for all entities for annual periods beginning after December 31, 2018. Early adoption is permitted and the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We will adopt this standard beginning January 1, 2019 and expect no material impact to our consolidated financial statements moving forward. In August 2017, the FASB issued ASU 2017-12—Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities . The amendments in this ASU apply to any entity that elects to apply hedge accounting and is intended to better align an entity’s risk management activities and financial reporting for hedging relationships. The ASU amends effectiveness testing requirements, income statement presentation and disclosures and permits additional risk management strategies to qualify for hedge accounting. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019. Early application is permitted; the effect of the adoption should be reflected as of the beginning of the fiscal year of adoption. We are currently evaluating the impact of this Update on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02—Leases (Topic 842) . ASU 2016-02 amends the FASB ASC, creating Topic 842, Leases. Topic 842 affects any entity that enters into a lease, with specified scope exemptions, and supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases, including operating leases, in the statement of financial position. The guidance will be effective for the first interim period of our 2019 fiscal year and requires a modified retrospective transition approach with application either in all comparative periods presented (the “comparative method”), or as of the effective date of initial application without restating comparative period financial statements (the “effective date method”). The new guidance also provides several optional practical expedients that companies may elect under either transition method. We have elected to apply the effective date method and the package of practical expedients, which includes allowing us to continue utilizing historical classification of leases. We do not expect to elect the practical expedient that permits a reassessment of lease terms for existing leases. Upon our transition to the new guidance, we expect to recognize approximately $2 million of operating lease liabilities and corresponding right of use (“ROU”) assets. We do not expect the adoption of this new guidance to have an impact on the amount or timing of our cash flows, liquidity, or income statement. |
Use of estimates: | Use of estimates: In preparing these Consolidated Financial Statements, management made estimates and assumptions that affected the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the balance sheet date, and the reported revenues and expenses for the years then ended. Such estimates are based on historical experience and other assumptions that are considered appropriate in the circumstances. However, actual results could differ from those estimates. |
Nature of Business and Signif_3
Nature of Business and Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Nature of Business and Significant Accounting Policies | |
Schedule of the computation of the common shares outstanding used in determining basic and diluted LPS | The following table sets forth the computation of the common shares outstanding used in determining basic and diluted LPS available to Hemisphere Media Group ( amounts in thousands, except per share amounts ): Years Ended December 31, 2018 2017 Numerator for earnings per common share calculation: Net loss available to Hemisphere Media Group $ (10,906) $ (13,436) Denominator for earnings per common share calculation: Weighted-average common shares, basic 38,986 40,164 Effect of dilutive securities Stock options, restricted stock and warrants — — Weighted-average common shares, diluted 38,986 40,164 Loss per share available to Hemisphere Media Group Basic $ (0.28) $ (0.33) Diluted $ (0.28) $ (0.33) |
Schedule of barter revenue and expense included in the consolidated statements of operations | Barter revenue and expense included in the consolidated statements of operations are as follows ( amounts in thousands ): 2018 2017 Barter revenue $ 877 $ 710 Barter expense (583) (676) $ 294 $ 34 |
Schedule of changes in the allowance for doubtful accounts | Changes in the allowance for doubtful accounts for the years ended December 31, 2018 and 2017 consisted of the following (amounts in thousands): Beginning Provisions End Year Description of Year for bad debt Write-offs Recoveries of Year 2018 Allowance for doubtful accounts $ 2,327 $ 417 $ 107 $ 8 $ 2,645 2017 Allowance for doubtful accounts $ 1,711 $ 756 $ 160 $ 20 $ 2,327 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenue Recognition | |
Schedule of disaggregation of revenue | The following table presents the revenues disaggregated by revenue source (amounts in thousands): Year ended December 31, Revenues by type 2018 2017 Affiliate revenue $ 77,765 $ 74,303 Advertising revenue 59,692 47,980 Other revenue 9,622 2,181 Total revenue $ 147,079 $ 124,464 |
Schedule of application of changes in the presentation of revenues in the consolidated financial statements. | The following table reflects the impact of adoption of ASC 606 on our consolidated statements of operations for the year ended December 31, 2018, and the amounts as if ASC 605 was still in effect (“ASC 605 Presentation”) (amounts in thousands): Year ended December 31, 2018 ASC 606 Reported Reclassification ASC 605 Presentation Net revenues $ 147,079 $ (3,759) $ 143,320 Operating expenses 102,347 (3,759) 98,588 Operating income $ 44,732 $ — $ 44,732 |
Snap Media Acquisition (Tables)
Snap Media Acquisition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Snap Media Acquisition | |
Schedule of preliminary allocation of consideration to the net tangible and intangible assets acquired | The preliminary allocation of consideration to the net tangible and intangible assets acquired is presented in the table below (amounts in thousands): 2018 Accounts receivable $ 1,419 Other current assets 30 Intangible asset–content library 616 Accounts payable (259) Accrued expenses (589) Deferred revenue (140) Fair value of net assets acquired 1,077 Goodwill 5,107 Non-controlling interest (1,379) Total purchase price consideration $ 4,805 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property and Equipment | |
Schedule of property and equipment | Property and equipment at December 31, 2018 and 2017 consists of the following (amounts in thousands ): 2018 2017 Land and improvements $ 8,724 $ 8,724 Building 11,258 11,258 Equipment 25,921 27,930 Towers 1,536 1,450 47,439 49,362 Less: accumulated depreciation (25,069) (26,220) 22,370 23,142 Equipment installations in progress 9,839 1,291 $ 32,209 $ 24,433 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets | |
Schedule of goodwill and intangible assets | Goodwill and intangible assets consist of the following at December 31, 2018 and 2017 ( amounts in thousands ): December 31, 2018 2017 Broadcast license $ 41,356 $ 41,356 Goodwill 169,994 164,887 Other intangibles 39,086 51,661 Total intangible assets $ 250,436 $ 257,904 |
Summary of the changes in goodwill and other indefinite-lived intangible assets | A summary of changes in the Company’s goodwill and other indefinite lived intangible assets, on a net basis, for the years ended December 31, 2018 and 2017, is as follows (amounts in thousands ): Net Balance at Net Balance at December 31, 2017 Additions Impairment December 31, 2018 Broadcast license $ 41,356 $ — $ — $ 41,356 Goodwill 164,887 5,107 — 169,994 Brands 15,986 — — 15,986 Other intangibles 700 — — 700 Total indefinite-lived intangibles $ 222,929 $ 5,107 $ — $ 228,036 Net Balance at Net Balance at December 31, 2016 Additions Impairment December 31, 2017 Broadcast licenses $ 41,356 $ — $ — $ 41,356 Goodwill 164,887 — — 164,887 Brands 15,986 — — 15,986 Other intangibles 700 — — 700 Total indefinite-lived intangibles $ 222,929 $ — $ — $ 222,929 |
Summary of the changes in other amortizable intangible assets | A summary of the changes in the Company’s other amortizable intangible assets for the years ended December 31, 2018 and 2017 is as follows ( amounts in thousands ): Net Balance at Net Balance at December 31, 2017 Additions Amortization December 31, 2018 Affiliate relationships $ 32,343 $ — $ (12,070) $ 20,273 Advertiser relationships 1,240 — (550) 690 Non-compete agreement 1,235 — (549) 686 Other intangibles 157 65 (78) 144 Programming contracts — 616 (9) 607 Total finite-lived intangibles $ 34,975 $ 681 $ (13,256) $ 22,400 Net Balance at Net Balance at December 31, 2016 Additions Amortization December 31, 2017 Affiliate relationships $ 44,468 $ — $ (12,125) $ 32,343 Advertiser relationships 1,792 — (552) 1,240 Non-compete agreement 1,784 — (549) 1,235 Other intangibles 119 92 (54) 157 Total finite-lived intangibles $ 48,163 $ 92 $ (13,280) $ 34,975 |
Schedule of future estimated amortization expense | Future estimated amortization expense is as follows (amounts in thousands): Year Ending December 31, Amount 2019 $ 8,597 2020 6,170 2021 5,857 2022 1,528 2023 and thereafter $ 22,400 |
Equity method investments (Tabl
Equity method investments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Equity Method Investments | |
Schedule of financial data of equity method investments | The Company records the income or loss on investment on a one quarter lag. Summary unaudited financial data for our equity investments as of and for the twelve months ended September 30, 2018 are included below (amounts in thousands): Equity Investees Current assets $ 20,999 Non-current assets 53,453 Current liabilities 53,145 Non-current liabilities 90,731 Redeemable stock and non-controlling interests 14,187 Net revenue 21,703 Operating loss (57,387) Net loss $ (66,819) |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes | |
Schedule of components of income before provision for income taxes | For the years ended December 31, 2018 and 2017, Income before provision for income taxes, includes the following components (amounts in thousands) : 2018 2017 Domestic income $ 9,797 $ 9,984 Foreign loss (10,323) (4,714) $ (526) $ 5,270 |
Schedule of composition of income tax expense | For the years ended December 31, 2018 and 2017, income tax expense is comprised of the following (amounts in thousands ): 2018 2017 Current income tax expense $ 9,231 $ 4,233 Deferred income tax 1,040 14,473 $ 10,271 $ 18,706 |
Schedule of reconciliation of income tax (benefit) expense | For the years ended December 31, 2018 and 2017, the reconciliation of income tax (benefit) expense computed at the U.S. federal statutory rates to income tax expense is (amounts in thousands) : 2018 2017 Income tax (benefit) expense at federal statutory rate-US Only $ (108) $ 1,852 Income tax expense at federal statutory rate-Foreign Only 3,832 1,655 Permanent items 836 829 Return to provision true-ups -Current/ Deferred (51) (223) Foreign rate differential (141) 348 Foreign tax credits (7,890) (2,733) Foreign valuation allowance 9,429 3,116 Change in FTC valuation allowance 4,141 10,588 Puerto Rico tax rate change (722) — Tax Cut and Jobs Act law changes — 2,976 Foreign withholding taxes 1,499 1,535 Deferred foreign tax credit offset (873) (1,160) State taxes and state rate change 374 60 UTP adjustment (55) (137) Income tax expense $ 10,271 $ 18,706 |
Schedule of components of net deferred tax liabilities | Net deferred tax liabilities consist of the following components as of December 31, 2018 and 2017 (amounts in thousands) : 2018 2017 Deferred tax assets: Allowances for doubtful accounts $ 820 $ 1,308 Deferred branch tax benefit 11,801 10,846 Deferred revenue 84 42 NOL credit and other carryovers 204 111 Fixed assets 51 47 Accrued expenses 1,123 935 Foreign tax credit 14,729 10,588 Stock compensation 3,613 3,081 Pension 196 397 Intangibles 1,447 1,355 Equity method gains and losses 12,900 — Other DTA 17 438 Less: Foreign income valuation allowance (12,546) (3,117) Less: Foreign tax credit valuation allowance (14,729) (10,588) Total deferred tax assets 19,710 15,443 Deferred tax liabilities: Prepaid expenses (404) (328) Intangibles (15,788) (17,676) Interest rate swap (365) (173) Property and equipment (6,678) (1,443) Amortization expense (11,705) (9,784) Total deferred tax liabilities (34,940) (29,404) $ (15,230) $ (13,961) |
Schedule of classification of deferred tax amounts | The deferred tax amounts mentioned above have been classified on the accompanying consolidated balance sheets at December 31, 2018 and 2017 as follows ( amounts in thousands ): 2018 2017 Non-current assets $ 4,290 $ 4,802 Non-current liabilities $ 19,520 $ 18,763 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Long Term Debt | |
Schedule of long-term debt | Long‑term debt as of December 31, 2018 and 2017 consists of the following ( amounts in thousands ): December 31, 2018 December 31, 2017 Senior Notes due February 2024 $ 206,091 $ 207,642 Less: Current portion 2,134 2,133 $ 203,957 $ 205,509 |
Schedule of maturities of long-term debt | The carrying value of the long-term debt approximates fair value at December 31, 2018 and 2017, and was derived from quoted market prices by independent dealers (Level 2 in the fair value hierarchy under ASC 820, Fair Value Measurements and Disclosures ). The following are the maturities of our long-term debt as of December 31, 2018 (amounts in thousands) : Year Ending December 31, 2019 $ 2,134 2020 2,133 2021 2,133 2022 2,133 2023 and thereafter 200,548 $ 209,081 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurements | |
Schedule of assets and liabilities that are measured at fair value on a recurring basis | The following table presents our assets and liabilities measured at fair value on a recurring basis and the levels of inputs used to measure fair value, which include derivatives designated as cash flow hedging instruments, as well as their location on our accompanying consolidated balance sheets as of December 31, 2018 and 2017 (amounts in thousands) : Estimated Fair Value December 31, 2018 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Cash flow hedges: Interest rate swap Other assets — $ 1,619 — $ 1,619 Estimated Fair Value December 31, 2017 Category Balance Sheet Location Level 1 Level 2 Level 3 Total Cash flow hedges: Interest rate swap Other assets — $ 773 — $ 773 |
Stockholders' equity (Tables)
Stockholders' equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders' equity | |
Summary of stock option activity | The following table summarizes stock option activity for the years ended December 31, 2018 and 2017 (shares and intrinsic values in thousands) : Weighted- average Weighted- remaining Aggregate Number of average exercise contractual intrinsic shares price term value Outstanding at December 31, 2016 2,920 $ 11.64 7.6 $ 1,274 Granted 55 $ 11.35 6.0 — Exercised — — — — Forfeited (37) 10.39 — — Expired (40) $ 11.51 — — Outstanding at December 31, 2017 2,898 $ 11.62 6.5 $ 1,738 Granted 109 $ 12.84 6.0 — Exercised (67) 13.38 — — Forfeited (24) 12.30 — — Expired (6) $ 12.10 — — Outstanding at December 31, 2018 2,910 $ 11.62 5.6 $ 2,806 Vested at December 31, 2018 2,175 $ 11.71 5.3 $ 2,102 Exercisable at December 31, 2018 2,175 $ 11.71 5.3 $ 2,102 |
Summary of restricted share activity | The following table summarizes restricted share activity for the years ended December 31, 2018 and 2017 (shares in thousands) : Number of Weighted-average shares grant date fair value Outstanding at December 31, 2016 561 $ 10.58 Granted 154 11.19 Vested (203) 11.80 Forfeited (8) 13.38 Outstanding at December 31, 2017 504 $ 10.23 Granted 93 11.85 Vested (218) 11.49 Forfeited (9) 11.85 Outstanding at December 31, 2018 370 $ 9.86 |
Time Based Stock Option | Black Scholes Pricing Model | |
Stockholders' equity | |
Schedule of valuation assumptions | Black-Scholes Option Valuation Assumptions 2018 2017 Risk-free interest rate 2.7 % - 3.0 % 2.2 % Dividend yield — — Volatility 39.0 % - 41.0 % 25.8 % Weighted-average expected term (years) 6.0 6.0 |
Commitments (Tables)
Commitments (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments | |
Future minimum payments for these commitments and other commitments, primarily programming | Future minimum payments for these commitments and other commitments, primarily programming and equity method capital contributions, are as follows (amounts in thousands): Operating Other Year Ending December 31, Leases Commitments Total 2019 $ 1,571 $ 11,961 $ 13,532 2020 367 6,229 6,596 2021 350 2,846 3,196 2022 355 489 844 2023 and thereafter 302 - 302 Total $ 2,945 $ 21,525 $ 24,470 |
Retirement Plans (Tables)
Retirement Plans (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Plans | |
Schedule of projected benefit obligation | Following is the plan’s projected benefit obligation at December 31, 2018 and 2017 (amounts in thousands) : 2018 2017 Projected benefit obligation: Balance, beginning of the year $ 2,242 $ 3,027 Service cost 89 80 Interest cost 74 85 Actuarial (gain) loss (43) (469) Benefits paid to participants — (481) Balance, end of year $ 2,362 $ 2,242 |
Schedule of funded status of the plan | At December 31, 2018 and 2017, the funded status of the plan was as follows ( amounts in thousands ): 2018 2017 Excess of benefit obligation over the value of plan assets $ (2,362) $ (2,242) Unrecognized net actuarial loss 290 347 Unrecognized prior service cost 36 44 Accrued benefit cost $ (2,036) $ (1,851) |
Schedule of amounts recognized in the consolidated balance sheets | At December 31, 2018 and 2017, the amounts recognized in the consolidated balance sheets were classified as follows ( amounts in thousands): 2018 2017 Accrued benefit cost $ (2,362) $ (2,242) Accumulated other comprehensive loss 326 391 Net amount recognized $ (2,036) $ (1,851) |
Schedule of benefits expected to be paid in each of the next five years and thereafter | The benefits expected to be paid in each of the next five years and thereafter are as follows ( amounts in thousands ): Years Ending December 31, Amount 2019 $ 104 2020 164 2021 266 2022 171 2023 141 2024 through 2027 677 $ 1,523 |
Schedule of weighted-average rates used | 2018 2017 Discount rate on the benefit obligation 3.96 % 3.35 % Rate of employee compensation increase(a) 1.75 % - 2.50 % % - 2.50 % (a) Rate of employee compensation increase is 1.75% per year through 2021, and 2.5% per year thereafter. |
Schedule of pension expenses | Pension expense for the years ended December 31, 2018 and 2017, consists of the following ( amounts in thousands ): 2018 2017 Service cost $ 89 $ 80 Interest cost 74 85 Expected return on plan assets — — Recognized actuarial loss (gain) — — Amortization of prior service cost 8 8 Net loss amortization 14 1 $ 185 $ 174 |
Schedule of further information about the Plan | Further information about the Plan is presented in the table below ( amounts in thousands ): Expiration Date of Pension Protection Funding Improvement WAPA’s Collective Act Zone Status Plan/Rehabilitation Plan Contribution Surcharge Bargaining Pension Fund EIN 2017 Status 2018 2017 Imposed Agreements TNGIPP (Plan No. 001) 52-1082662 Red Implemented $ 138 $ 149 No June 27, 2019 May 31, 2022 |
Nature of Business and Signif_4
Nature of Business and Significant Accounting Policies (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018USD ($)segment$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Nov. 26, 2018 | |
Nature of Business | |||
Number of operating segments | segment | 1 | ||
Numerator for earnings per common share calculation: | |||
Net loss available to Hemisphere Media Group | $ | $ (10,906) | $ (13,436) | |
Denominator for earnings per common share calculation: | |||
Weighted-average common shares, basic | 38,986 | 40,164 | |
Effect of dilutive securities | |||
Weighted-average common shares, diluted | 38,986 | 40,164 | |
Loss per share available to Hemisphere Media Group, | |||
Basic (in dollars per share) | $ / shares | $ (0.28) | $ (0.33) | |
Diluted (in dollars per share) | $ / shares | $ (0.28) | $ (0.33) | |
Shares excluded from the computation of diluted loss per common share | 1,600 | 2,000 | |
Outstanding awards excluded from computation of diluted loss per share | 400 | 300 | |
Snap Media | |||
Nature of Business | |||
Voting interest acquired (as a percent) | 75.00% |
Nature of Business and Signif_5
Nature of Business and Significant Accounting Policies - Barter, Advertising and Marketing Costs (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Barter transactions: | ||
Barter revenue | $ 877 | $ 710 |
Barter expense | (583) | (676) |
Barter revenue and expense | 294 | 34 |
Advertising and Marketing costs: | ||
Advertising and marketing costs | $ 3,000 | $ 3,300 |
Nature of Business and Signif_6
Nature of Business and Significant Accounting Policies - Allowance For Doubtful Accounts and Programming Rights (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Accounts receivable: | ||
Threshold period for considering receivable as past due | 90 days | |
Changes in the allowance for doubtful accounts | ||
Beginning of Year | $ 2,327 | $ 1,711 |
Provisions for bad debt | 417 | 756 |
Write-offs | 107 | 160 |
Recoveries | 8 | 20 |
End of Year | 2,645 | 2,327 |
Programming rights: | ||
Impairment of programming rights | 1,000 | 0 |
Amortization of programming rights | 12,509 | 11,806 |
Accumulated amortization of programming rights | $ 45,100 | $ 32,600 |
Nature of Business and Signif_7
Nature of Business and Significant Accounting Policies - Property And Equipment (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
WAPA | ||
Property and equipment | ||
Impairment charge related to property and equipment | $ 0.5 | |
Minimum | ||
Property and equipment | ||
Useful life | 1 year | |
Maximum | ||
Property and equipment | ||
Useful life | 40 years |
Nature of Business and Signif_8
Nature of Business and Significant Accounting Policies - Equity Method Investments (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Nature of Business and Significant Accounting Policies | ||
Investee losses in excess of investment | $ 4,982 | $ 2,806 |
Nature of Business and Signif_9
Nature of Business and Significant Accounting Policies - Goodwill and Other Intangibles and Deferred Financing Costs (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred financing costs: | ||
Accumulated amortization of deferred financing costs | $ 2 | $ 1.8 |
Deferred financing costs, net | 1.3 | 1.5 |
Interest expense | ||
Deferred financing costs: | ||
Amortization of deferred financing costs | $ 0.2 | $ 0.3 |
Customer relationships, non-compete agreements, affiliate agreements, and programming rights | Minimum | ||
Goodwill and other intangibles: | ||
Useful lives | 1 year | |
Customer relationships, non-compete agreements, affiliate agreements, and programming rights | Maximum | ||
Goodwill and other intangibles: | ||
Useful lives | 10 years |
Nature of Business and Signi_10
Nature of Business and Significant Accounting Policies - Fair Value of Financial Instruments and Major Customers and Suppliers - (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($) | |
Revenue | Customer concentration risk | ||
Concentration risk | ||
Number of distributors who accounted for more than 10% | item | 2 | |
Programming rights | Level 3 | Fair Value, Measurements, Nonrecurring | ||
Fair value of financial instruments: | ||
Adjustments to fair value | $ | $ 1,000 | $ 0 |
Nature of Business and Signi_11
Nature of Business and Significant Accounting Policies - Accounting Guidance Not Yet Adopted (Details) - ASU 2016-02 - Restatement Adjustment $ in Millions | Jan. 01, 2019USD ($) |
Operating lease liability | $ 2 |
Operating lease, right of use assets | $ 2 |
Revenue Recognition (Details)
Revenue Recognition (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Revenues | ||
Total revenue | $ 147,079 | $ 124,464 |
Total revenue from customers | 141,300 | |
Affiliate revenue | ||
Revenues | ||
Total revenue | 77,765 | 74,303 |
Advertising revenue | ||
Revenues | ||
Total revenue | 59,692 | 47,980 |
Other revenue | ||
Revenues | ||
Total revenue | $ 9,622 | $ 2,181 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-31 | Affiliate revenue | ||
Revenues | ||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 60 days | |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2018-12-31 | Advertising revenue | ||
Revenues | ||
Revenue, remaining performance obligation, expected timing of satisfaction, period | 30 days | |
Hurricane Maria | Other revenue | ||
Revenues | ||
Total revenue | $ 5,800 |
Revenue Recognition - Compariso
Revenue Recognition - Comparison to Amounts if ASC 605 Had Been in Effect (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Comparison to Amounts if ASC 605 Had Been in Effect | ||
Net revenues | $ 147,079 | $ 124,464 |
Operating expenses | 102,347 | 99,108 |
Operating income | 44,732 | $ 25,356 |
ASU 2014-09 | Reclassification | ||
Comparison to Amounts if ASC 605 Had Been in Effect | ||
Net revenues | (3,759) | |
Operating expenses | (3,759) | |
ASU 2014-09 | ASC 605 Presentation | ||
Comparison to Amounts if ASC 605 Had Been in Effect | ||
Net revenues | 143,320 | |
Operating expenses | 98,588 | |
Operating income | $ 44,732 |
Related Party Transactions (Det
Related Party Transactions (Details) $ in Millions | Apr. 09, 2016 | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($) |
MVS Multivision Digital Sde RLde CV and Affiliates | Satellite and Support Services Agreement | Cinelatino | |||
Related party transactions | |||
Number of channel feeds delivered through satellite | item | 2 | ||
Total expense | $ 2.4 | $ 2.6 | |
Due to related parties | 0.7 | 1.9 | |
MVS Multivision Digital Sde RLde CV and Affiliates | Affiliation Agreement | |||
Related party transactions | |||
Revenue recognized from related party | 1.8 | 2.1 | |
Due from related parties | $ 0.3 | 0.3 | |
MVS Multivision Digital Sde RLde CV and Affiliates | Master License Agreement | Cinelatino | |||
Related party transactions | |||
Distribution fee as a percentage of revenue earned | 13.50% | ||
Revenue recognized from related party | $ 1.1 | 1.6 | |
Due from related parties | 0.7 | 1.8 | |
Director | Consulting Agreement with Director | |||
Related party transactions | |||
Total expense | 0.5 | 0.5 | |
Term of agreement | 3 years | ||
Due to related parties | 0 | 0 | |
Pantelion Films | Movie License Agreement | |||
Related party transactions | |||
Total expense | 0 | 0 | |
Programming rights | 0.5 | 0 | |
Lionsgate | Movie License Agreement | Cinelatino | |||
Related party transactions | |||
Total expense | 0.1 | 0.3 | |
License fee under agreement with related party | 1 | ||
Programming rights | $ 0 | $ 0.1 |
Snap Media Acquisition (Details
Snap Media Acquisition (Details) - USD ($) | Nov. 26, 2018 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2021 | Dec. 31, 2020 | Dec. 31, 2017 | Dec. 31, 2016 |
Preliminary allocation of consideration to the net tangible and intangible assets acquired | |||||||
Goodwill | $ 169,994,000 | $ 164,887,000 | $ 164,887,000 | ||||
Snap Media | |||||||
Snap TV Acquisition | |||||||
Voting interest acquired (as a percent) | 75.00% | ||||||
Net cash acquired | $ 700,000 | ||||||
Cash paid as purchase consideration | 1,500,000 | ||||||
Cash consideration payable for acquisition of business | $ 800,000 | $ 500,000 | $ 500,000 | ||||
Fees and expenses related to acquisition | 600,000 | ||||||
Preliminary allocation of consideration to the net tangible and intangible assets acquired | |||||||
Accounts receivable | 1,419,000 | ||||||
Other current assets | 30,000 | ||||||
Intangible asset - content library | 616,000 | ||||||
Accounts payable | (259,000) | ||||||
Accrued expenses | (589,000) | ||||||
Deferred revenue | (140,000) | ||||||
Fair value of net assets acquired | 1,077,000 | ||||||
Goodwill | 5,107,000 | ||||||
Non-controlling interest | (1,379,000) | ||||||
Total purchase price consideration | $ 4,805,000 | ||||||
Snap Media | Programming rights | |||||||
Preliminary allocation of consideration to the net tangible and intangible assets acquired | |||||||
Amortization period | 7 years | ||||||
Snap Media | Common Class A | |||||||
Snap TV Acquisition | |||||||
Shares issued or issuable as purchase consideration | $ 101,818 | $ 54,825 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and equipment | ||
Property and equipment, gross | $ 47,439 | $ 49,362 |
Less: accumulated depreciation | (25,069) | (26,220) |
Property and equipment, net excluding equipment installations in progress | 22,370 | 23,142 |
Property and equipment, net | 32,209 | 24,433 |
Depreciation expense | 2,800 | 2,900 |
Gain on insurance proceeds | (2,080) | (3,250) |
Land and improvements | ||
Property and equipment | ||
Property and equipment, gross | 8,724 | 8,724 |
Building | ||
Property and equipment | ||
Property and equipment, gross | 11,258 | 11,258 |
Equipment | ||
Property and equipment | ||
Property and equipment, gross | 25,921 | 27,930 |
Towers | ||
Property and equipment | ||
Property and equipment, gross | 1,536 | 1,450 |
Equipment installations in progress | ||
Property and equipment | ||
Property and equipment, net | $ 9,839 | 1,291 |
WAPA | ||
Property and equipment | ||
Fixed asset impairment charge | 500 | |
Minimum period of significant portion of damaged assets have been in service | 10 years | |
Gain on insurance proceeds | $ 2,100 | $ 3,300 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Goodwill and Intangible Assets | |||
Broadcast license | $ 41,356 | $ 41,356 | |
Goodwill | 169,994 | 164,887 | $ 164,887 |
Other intangibles | 39,086 | 51,661 | |
Total intangible assets | $ 250,436 | $ 257,904 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - Indefinite Lived Net Balance (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Changes in other indefinite-lived intangible assets | ||
Impairment | $ 0 | $ 0 |
Changes in the goodwill | ||
Net balance at the beginning of the period | 164,887 | 164,887 |
Additions | 5,107 | 0 |
Impairment | 0 | 0 |
Net balance at the end of the period | 169,994 | 164,887 |
Changes in the goodwill and other indefinite lived intangible assets, on a net basis | ||
Net balance at the beginning of the period | 222,929 | 222,929 |
Additions | 5,107 | 0 |
Impairment | 0 | 0 |
Net balance at the end of the period | 228,036 | 222,929 |
Broadcast license | ||
Changes in other indefinite-lived intangible assets | ||
Net balance at the beginning of the period | 41,356 | 41,356 |
Additions | 0 | 0 |
Impairment | 0 | 0 |
Net balance at the end of the period | 41,356 | 41,356 |
Changes in the goodwill and other indefinite lived intangible assets, on a net basis | ||
Impairment | 0 | 0 |
Brands | ||
Changes in other indefinite-lived intangible assets | ||
Net balance at the beginning of the period | 15,986 | 15,986 |
Additions | 0 | 0 |
Impairment | 0 | 0 |
Net balance at the end of the period | 15,986 | 15,986 |
Changes in the goodwill and other indefinite lived intangible assets, on a net basis | ||
Impairment | 0 | 0 |
Other intangibles | ||
Changes in other indefinite-lived intangible assets | ||
Net balance at the beginning of the period | 700 | 700 |
Additions | 0 | 0 |
Impairment | 0 | 0 |
Net balance at the end of the period | 700 | 700 |
Changes in the goodwill and other indefinite lived intangible assets, on a net basis | ||
Impairment | $ 0 | $ 0 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Other (Details) - USD ($) $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | |
Changes in other amortizable intangible assets | |||
Balance at the beginning of the period | $ 34,975 | $ 48,163 | |
Additions | 681 | 92 | |
Amortization | (13,256) | (13,280) | |
Net balance at the end of the period | 22,400 | 34,975 | |
Future estimated amortization expense | |||
2019 | $ 8,597 | ||
2020 | 6,170 | ||
2021 | 5,857 | ||
2022 | 1,528 | ||
2023 and thereafter | 248 | ||
Total | $ 34,975 | 48,163 | 22,400 |
Weighted Average | |||
Changes in other amortizable intangible assets | |||
Remaining amortization period | 3 years | ||
Affiliate relationships | |||
Changes in other amortizable intangible assets | |||
Balance at the beginning of the period | $ 32,343 | 44,468 | |
Amortization | (12,070) | (12,125) | |
Net balance at the end of the period | 20,273 | 32,343 | |
Future estimated amortization expense | |||
Total | 32,343 | 44,468 | 20,273 |
Advertiser relationships | |||
Changes in other amortizable intangible assets | |||
Balance at the beginning of the period | 1,240 | 1,792 | |
Amortization | (550) | (552) | |
Net balance at the end of the period | 690 | 1,240 | |
Future estimated amortization expense | |||
Total | 1,240 | 1,792 | 690 |
Non-compete agreement | |||
Changes in other amortizable intangible assets | |||
Balance at the beginning of the period | 1,235 | 1,784 | |
Amortization | (549) | (549) | |
Net balance at the end of the period | 686 | 1,235 | |
Future estimated amortization expense | |||
Total | 1,235 | 1,784 | 686 |
Other intangibles | |||
Changes in other amortizable intangible assets | |||
Balance at the beginning of the period | 157 | 119 | |
Additions | 65 | 92 | |
Amortization | (78) | (54) | |
Net balance at the end of the period | 144 | 157 | |
Future estimated amortization expense | |||
Total | 157 | $ 119 | 144 |
Programming contracts | |||
Changes in other amortizable intangible assets | |||
Additions | 616 | ||
Amortization | (9) | ||
Net balance at the end of the period | 607 | ||
Future estimated amortization expense | |||
Total | $ 607 | $ 607 |
Equity method investments - (De
Equity method investments - (Details) - USD ($) $ in Thousands | Nov. 30, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | Feb. 07, 2018 | Feb. 06, 2018 | Apr. 28, 2017 | Nov. 03, 2016 |
Equity Method Investments | |||||||
Equity method investments | $ 51,658 | $ 30,907 | |||||
Income (loss) on equity method investments | 35,206 | 11,885 | |||||
Net balance of investee losses in excess of investment | 4,982 | 2,806 | |||||
PANTAYA | |||||||
Equity Method Investments | |||||||
Ownership Percentage | 25.00% | ||||||
Equity method investments | 4,700 | ||||||
Income (loss) on equity method investments | 6,900 | 2,800 | |||||
Net balance of investee losses in excess of investment | 5,000 | 2,800 | |||||
Canal 1 | |||||||
Equity Method Investments | |||||||
Equity method investments | 84,100 | ||||||
Income (loss) on equity method investments | $ 28,300 | 9,100 | |||||
Percentage of losses recorded | 100.00% | ||||||
Return on capital equity investment | $ 8,400 | 1,700 | |||||
Net equity method investments | 46,700 | 25,900 | |||||
Colombian content producers, Radio television and NTC nacional | Television broadcast license | |||||||
Equity Method Investments | |||||||
Ownership Percentage | 40.00% | 20.00% | |||||
License life (in years) | 10 years | ||||||
REMEZCLA | |||||||
Equity Method Investments | |||||||
Ownership Percentage | 25.50% | ||||||
Equity method investments | 5,000 | ||||||
Income (loss) on equity method investments | 100 | 0 | |||||
Return on capital equity investment | 600 | 400 | |||||
Net equity method investments | 5,000 | $ 5,000 | |||||
Maximum exposure to loss | $ 5,000 |
Equity Method Investments - Sum
Equity Method Investments - Summarized unaudited financial data (Details) $ in Thousands | 9 Months Ended |
Sep. 30, 2018USD ($) | |
Summary financial information of equity method investments | |
Current assets | $ 20,999 |
Non-current assets | 53,453 |
Current liabilities | 53,145 |
Non-current liabilities | 90,731 |
Redeemable stock and non-controlling interests | 14,187 |
Net revenue | 21,703 |
Operating loss | (57,387) |
Net loss | $ (66,819) |
Income Taxes - Effective Tax Re
Income Taxes - Effective Tax Reconciliation (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Components of income before income taxes | ||
Domestic income | $ 9,797 | $ 9,984 |
Foreign loss | (10,323) | (4,714) |
(Loss) income before income tax expense | (526) | 5,270 |
Income tax expense | ||
Current income tax expense | 9,231 | 4,233 |
Deferred income tax | 1,040 | 14,473 |
Income tax expense | 10,271 | 18,706 |
Foreign withholding tax included in current tax expense | $ 1,500 | 1,500 |
Effective tax rates reconciliation | ||
Equity investment and Colombia and return to provision adjustments (as a percent) | 38.00% | |
Income tax expense reconciliation | ||
Income tax (benefit) expense at federal statutory rate - US Only | $ (108) | 1,852 |
Income tax expense at federal statutory rate - Foreign Only | 3,832 | 1,655 |
Permanent Items | 836 | 829 |
Return to provision true ups - Current/Deferred | (51) | (223) |
Foreign rate dfferential | (141) | 348 |
Foreign tax credits | (7,890) | (2,733) |
Foreign valuation allowance | 9,429 | 3,116 |
Change in FTC valuation allowance | 4,141 | 10,588 |
Puerto Rico tax rate change | (722) | |
Tax Cut and Jobs Act law changes | 2,976 | |
Foreign withholding taxes | 1,499 | 1,535 |
Deferred foreign tax credit offse | (873) | (1,160) |
State taxes and state rate change | 374 | 60 |
UTP adjustment | (55) | (137) |
Income tax expense | $ 10,271 | $ 18,706 |
Income Taxes - Deferred (Detail
Income Taxes - Deferred (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Taxes | ||
Deferred tax asset additional valuation allowance | $ 9,400 | |
Classification of deferred tax amounts | ||
Non-current assets | 4,290 | $ 4,802 |
Non-current liabilities | 19,520 | 18,763 |
Deferred tax assets: | ||
Allowances for doubtful accounts | 820 | 1,308 |
Deferred branch tax benefit | 11,801 | 10,846 |
Deferred revenue | 84 | 42 |
NOL credit and other carryovers | 204 | 111 |
Fixed assets | 51 | 47 |
Accrued expenses | 1,123 | 935 |
Foreign tax credit | 14,729 | 10,588 |
Stock compensation | 3,613 | 3,081 |
Pension | 196 | 397 |
Intangibles | 1,447 | 1,355 |
Equity method gains and losses | 12,900 | |
Other DTA | 17 | 438 |
Less: Foreign income valuation allowance | (12,546) | (3,117) |
Less: Foreign tax credit valuation allowance | (14,729) | (10,588) |
Deferred tax assets, gross | 19,710 | 15,443 |
Deferred tax liabilities: | ||
Prepaid expenses | (404) | (328) |
Intangibles | (15,788) | (17,676) |
Interest Rate Swap | (365) | (173) |
Property and equipment | (6,678) | (1,443) |
Amortization expense | (11,705) | (9,784) |
Total deferred tax liabilities | (34,940) | (29,404) |
Net deferred tax liabilities | $ (15,230) | $ (13,961) |
Income Taxes - Other (Details)
Income Taxes - Other (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Income Taxes | ||
Uncertain tax position reserves | $ 0 | $ 0.3 |
Interest expense related to uncertain tax positions | 0.1 | |
Colombian content producers, Radio television and NTC nacional | ||
Income Taxes | ||
Foreign net operating losses carryforwards | 0.6 | 0.3 |
Foreign tax authority | Puerto Rico, Latin America, and Mexico | ||
Income Taxes | ||
Foreign tax credit carryforwards | $ 14.7 | $ 10.6 |
Long-Term Debt (Details)
Long-Term Debt (Details) $ in Thousands | Feb. 14, 2017USD ($)item | Mar. 31, 2018USD ($) | Dec. 31, 2018USD ($)item | Dec. 31, 2017USD ($) |
Long-term debt | ||||
Less: Current portion | $ (2,134) | $ (2,133) | ||
Long-term debt less current portion | 203,957 | 205,509 | ||
Deferred financing costs | 1,300 | 1,500 | ||
Accumulated amortization | 2,000 | 1,800 | ||
Gain loss in fair value | 0 | 0 | ||
Maturities of long-term debt | ||||
2019 | 2,134 | |||
2020 | 2,133 | |||
2021 | 2,133 | |||
2022 | 2,133 | |||
2023 and thereafter | 200,548 | |||
Total maturities | $ 209,081 | |||
Second Amended Term Loan Facility | ||||
Long-term debt | ||||
Amount of term loan | $ 213,300 | |||
Uncommitted accordion option multiplier of net leverage ratio | item | 2.50 | |||
OID | $ 1,700 | |||
Accumulated amortization of original issue discount | 1,800 | |||
Deferred financing costs | 1,300 | |||
Accumulated amortization | $ 2,000 | |||
Maximum period after each fiscal year for prepayment of debt | 90 days | |||
First prepayment of debt as a percentage of excess cash flow, if lower leverage ratio is maintained | 0.00% | |||
Payment of excess cash flow | $ 2,100 | |||
Amortization payments (in percentage) | 1.00% | |||
Second Amended Term Loan Facility | First Lien and Total Net Leverage Ratio | ||||
Long-term debt | ||||
Debt caps amount | $ 60,000 | |||
Second Amended Term Loan Facility | LIBOR | ||||
Long-term debt | ||||
Interest rate margin (as a percent) | 3.50% | |||
Interest rate floor (as a percent) | 0.00% | |||
Second Amended Term Loan Facility | Alternate Base Rate (ABR) | ||||
Long-term debt | ||||
Interest rate margin (as a percent) | 2.50% | |||
Senior Notes due February 2024 | ||||
Long-term debt | ||||
Long-term Debt | $ 206,091 | $ 207,642 | ||
Existing Senior Secured Term Loan B Facility | ||||
Long-term debt | ||||
Uncommitted accordion option base amount | $ 65,000 | |||
Prepayment of debt as a percentage of excess cash flow | 50.00% | |||
First prepayment of debt as a percentage of excess cash flow, if lower leverage ratio is maintained | 25.00% | |||
Second prepayment of debt as a percentage of excess cash flow, if lower leverage ratio is maintained | 0.00% | |||
Existing Senior Secured Term Loan B Facility | LIBOR | ||||
Long-term debt | ||||
Interest rate margin (as a percent) | 4.00% | |||
Interest rate floor (as a percent) | 1.00% | |||
Existing Senior Secured Term Loan B Facility | Alternate Base Rate (ABR) | ||||
Long-term debt | ||||
Interest rate margin (as a percent) | 3.00% | |||
Amended Term Loan Facility | ||||
Long-term debt | ||||
Borrowing capacity | $ 30,000 | |||
Debt caps amount | $ 45,000 | |||
Amended Term Loan Facility | First Lien Net Leverage Ratio | ||||
Long-term debt | ||||
Uncommitted accordion option multiplier of net leverage ratio | item | 4 | |||
Number of consecutive fiscal quarters | item | 4 | |||
Amended Term Loan Facility | Total Net Leverage Ratio | ||||
Long-term debt | ||||
Uncommitted accordion option multiplier of net leverage ratio | item | 6 | |||
Number of consecutive fiscal quarters | item | 4 |
Derivative instruments (Details
Derivative instruments (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | May 31, 2017 | |
Derivative | |||
Net change in fair value of cash flow hedge | $ 0.8 | $ 0.8 | |
Gain loss in fair value | 0 | 0 | |
Interest Rate Swap | |||
Derivative | |||
Net interest income (expense) | 0.1 | (0.4) | |
Interest rate swap | $ 1.6 | $ 0.8 | |
LIBOR | Nondesignated | Interest Rate Swap | |||
Derivative | |||
Notional amount | $ 100 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Thousands | Dec. 31, 2018 | Dec. 31, 2017 |
Fair value measurements | ||
Assets fair value | $ 0 | $ 0 |
Liabilities fair value | 0 | 0 |
Cash flow hedges | Other assets | ||
Fair value measurements | ||
Interest rate swap | 1,619 | 773 |
Cash flow hedges | Other assets | Level 2 | ||
Fair value measurements | ||
Interest rate swap | $ 1,619 | $ 773 |
Stockholders' equity - Capital
Stockholders' equity - Capital Stock (Details) $ / shares in Units, $ in Thousands | 12 Months Ended | 18 Months Ended | |||
Dec. 31, 2018USD ($)itemshares | Dec. 31, 2017USD ($)shares | Dec. 31, 2018USD ($)itemshares | Aug. 15, 2018USD ($) | Jun. 20, 2017USD ($)$ / shares | |
Capital Stock | |||||
Amount of stock repurchased | $ | $ 2,443 | $ 21,910 | |||
Common Class B | |||||
Capital Stock | |||||
Common stock, shares issued | 19,720,381 | 20,800,998 | 19,720,381 | ||
Common stock, shares outstanding | 19,720,381 | 19,720,381 | |||
Number of votes per share of common stock | item | 10 | 10 | |||
Common Class A | |||||
Capital Stock | |||||
Common stock, shares issued excluding treasury shares | 19,696,810 | 19,696,810 | |||
Common stock, shares issued | 24,849,589 | 25,171,433 | 24,849,589 | ||
Common stock, shares outstanding | 19,696,810 | 19,696,810 | |||
Stock repurchase price (in dollars per share) | $ / shares | $ 0.0001 | ||||
Number of votes per share of common stock | item | 1 | 1 | |||
Common Class A | Treasury Stock | |||||
Capital Stock | |||||
Number of shares repurchased | 199,600 | 2,000,000 | |||
Amount of stock repurchased | $ | $ 2,443 | $ 21,910 | $ 24,400 | ||
Remaining authorization for future repurchases | $ | $ 600 | $ 600 | |||
Common Class A | Maximum | |||||
Capital Stock | |||||
Authorized repurchase amount | $ | $ 25,000 | $ 25,000 |
Stockholders' equity - Other (D
Stockholders' equity - Other (Details) $ / shares in Units, shares in Thousands, $ in Thousands | 12 Months Ended | ||
Dec. 31, 2018USD ($)item$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | Dec. 31, 2016USD ($)$ / sharesshares | |
Stockholders' equity | |||
Shares available for issuance | 2,700 | ||
Stock option and restricted stock | |||
Stock-based compensation | |||
Stock-based compensation expense (in dollars) | $ | $ 3,900 | $ 4,100 | |
Stock options | |||
Stock-based compensation | |||
Unrecognized compensation cost related to unvested stock options (in dollars) | $ | $ 900 | ||
Weighted-average periods over which unrecognized compensation cost recognized | 1 year 9 months 18 days | ||
Estimated forfeitures (as a percent) | 1.50% | ||
Valuation assumptions | |||
Dividend yield (as a percent) | 0.00% | ||
Number of shares | |||
Outstanding at the beginning of the period (in shares) | 2,898 | 2,920 | |
Granted (in shares) | 109 | 55 | |
Exercised (in shares) | (67) | ||
Forfeited (in shares) | (24) | (37) | |
Expired (in shares) | (6) | (40) | |
Outstanding at the end of the period (in shares) | 2,910 | 2,898 | 2,920 |
Vested at the end of the period (in shares) | 2,175 | ||
Exercisable at the end of the period (in shares) | 2,175 | ||
Weighted-average exercise price | |||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 11.62 | $ 11.64 | |
Granted (in dollars per share) | $ / shares | 12.84 | 11.35 | |
Exercised (in dollars per share) | $ / shares | 13.38 | ||
Forfeited (in dollars per share) | $ / shares | 12.30 | 10.39 | |
Expired (in dollars per share) | $ / shares | 12.10 | 11.51 | |
Outstanding at the end of the period (in dollars per share) | $ / shares | 11.62 | $ 11.62 | $ 11.64 |
Vested at the end of the period (in dollars per share) | $ / shares | 11.71 | ||
Exercisable at the end of the period (in dollars per share) | $ / shares | $ 11.71 | ||
Weighted-average remaining contractual term | |||
Outstanding | 5 years 7 months 6 days | 6 years 6 months | 7 years 7 months 6 days |
Granted | 6 years | 6 years | |
Vested at the end of the period | 5 years 3 months 18 days | ||
Exercisable at the end of the period | 5 years 3 months 18 days | ||
Aggregate intrinsic value | |||
Outstanding at the beginning of the period (in dollars) | $ | $ 1,738 | $ 1,274 | |
Outstanding at the end of the period (in dollars) | $ | 2,806 | $ 1,738 | $ 1,274 |
Vested at the end of the period (in dollars) | $ | 2,102 | ||
Exercisable at the end of the period (in dollars) | $ | $ 2,102 | ||
Weighted-average grant date fair value of options granted (in dollars per share) | $ / shares | $ 5.49 | $ 3.39 | |
Restricted Stock | |||
Stock-based compensation | |||
Unrecognized compensation cost related to unvested restricted stock (in dollars) | $ | $ 1,100 | ||
Weighted-average periods over which unrecognized compensation cost recognized | 10 months 24 days | ||
Number of shares | |||
Outstanding at the beginning of the period (in shares) | 504 | 561 | |
Granted (in shares) | 93 | 154 | |
Vested (in shares) | (218) | (203) | |
Forfeited (in shares) | (9) | (8) | |
Outstanding at the end of the period (in shares) | 370 | 504 | 561 |
Weighted-average grant date fair value | |||
Outstanding at the beginning of the period (in dollars per share) | $ / shares | $ 10.23 | $ 10.58 | |
Granted (in dollars per share) | $ / shares | 11.85 | 11.19 | |
Vested (in dollars per share) | $ / shares | 11.49 | 11.80 | |
Forfeited (in dollars per share) | $ / shares | 11.85 | 13.38 | |
Outstanding at the end of the period (in dollars per share) | $ / shares | $ 9.86 | $ 10.23 | $ 10.58 |
Time Based Restricted Stock Awards and Stock Option | |||
Stockholders' equity | |||
Number of equal annual installments for vesting of awards | item | 3 | ||
Time Based Stock Option | Black Scholes Pricing Model | |||
Valuation assumptions | |||
Risk-free interest rate, minimum (as a percent) | 2.70% | ||
Risk-free interest rate, maximum (as a percent) | 3.00% | ||
Risk-free interest rate (as a percent) | 2.20% | ||
Volatility, minimum (as a percent) | 39.00% | ||
Volatility, maximum (as a percent) | 41.00% | ||
Volatility (as a percent) | 25.80% | ||
Weighted-average expected term(years) | 6 years | 6 years | |
Time Based Restricted Stock | |||
Weighted-average grant date fair value | |||
Vesting period | 3 years | ||
Event Based Stock Option | |||
Aggregate intrinsic value | |||
Unvested options | 300 | ||
Event Based Restricted Stock | |||
Aggregate intrinsic value | |||
Unvested options | 200 | ||
Common Class A | |||
Stockholders' equity | |||
Shares authorized for issuance | 7,200 | ||
Common Class A | Event Based Restricted Stock and Stock Option | |||
Stockholders' equity | |||
Closing price per share to be attained for vesting of awards to begin (in dollars per share) | $ / shares | $ 15 | ||
Common Class A | Event Based Restricted Stock and Stock Option | Minimum | |||
Stockholders' equity | |||
Number of trading days on which the closing price per share should attain the specified price per share for vesting of awards to begin | item | 10 |
Commitments (Details)
Commitments (Details) - USD ($) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments | ||
Rental expense | $ 2,200 | $ 700 |
Future minimum payments for operating leases | ||
2019 | 1,571 | |
2020 | 367 | |
2021 | 350 | |
2022 | 355 | |
2023 and thereafter | 302 | |
Total | 2,945 | |
Future minimum payments for other commitments | ||
2019 | 11,961 | |
2020 | 6,229 | |
2021 | 2,846 | |
2022 | 489 | |
Total | 21,525 | |
Future minimum payments for operating leases and other commitments | ||
2019 | 13,532 | |
2020 | 6,596 | |
2021 | 3,196 | |
2022 | 844 | |
2023 and thereafter | 302 | |
Total | $ 24,470 |
Retirement Plans - Other (Detai
Retirement Plans - Other (Details) $ in Thousands | 12 Months Ended | |
Dec. 31, 2018USD ($)employeeitem | Dec. 31, 2017USD ($) | |
Projected benefit obligation: | ||
Balance, beginning of the year | $ 2,242 | $ 3,027 |
Service cost | 89 | 80 |
Interest cost | 74 | 85 |
Actuarial (gain) loss | (43) | (469) |
Benefits paid to participants | (481) | |
Balance, end of year | 2,362 | 2,242 |
Funded status of the plan | ||
Excess of benefit obligation over the value of plan assets | (2,362) | (2,242) |
Unrecognized net actuarial loss | 290 | 347 |
Unrecognized prior service cost | 36 | 44 |
Accrued benefit cost | (2,036) | (1,851) |
Net amounts recognized in the consolidated balance sheets | ||
Accrued benefit cost | (2,362) | (2,242) |
Accumulated other comprehensive loss | 326 | 391 |
Accrued benefit cost | (2,036) | $ (1,851) |
Benefits expected to be paid in each of the next five years and thereafter | ||
2019 | 104 | |
2020 | 164 | |
2021 | 266 | |
2022 | 171 | |
2023 | 141 | |
2024 through 2027 | 677 | |
Total | $ 1,523 | |
Weighted-average rates used | ||
Discount rate on the benefit obligation (as a percent) | 3.96% | 3.35% |
Pension expense | ||
Service cost | $ 89 | $ 80 |
Interest cost | 74 | 85 |
Amortization of prior service cost | 8 | 8 |
Net loss amortization | 14 | 1 |
Net periodic benefit cost | $ 185 | $ 174 |
Maximum | ||
Weighted-average rates used | ||
Rate of employee compensation increase (as a percent) | 2.50% | 2.50% |
Minimum | ||
Weighted-average rates used | ||
Rate of employee compensation increase (as a percent) | 1.75% | 1.75% |
WAPA | ||
Number of months to be in service for applicability of retirement plan | 3 months | |
Number of weeks per year of service for one-time lump sum payment at retirement | 14 days | |
Maximum number of retirees per year under the plan | employee | 5 | |
Number of retirees per year under the retirement plan | item | 164 | |
WAPA | Maximum | ||
Number of weeks per year of service for one-time lump sum payment at retirement | 315 days |
Retirement Plans - Multiemploye
Retirement Plans - Multiemployer Pension (Details) | Jul. 01, 2017USD ($) | Dec. 31, 2018USD ($)employee | Dec. 31, 2017USD ($) |
Multiemployer pension | |||
Number of unionized employees covered under CBA expiring on June 27, 2019 | employee | 4 | ||
Multiemployer Plans, Pension | WAPA | |||
Multiemployer pension | |||
Period for payments under the plan (in years) | 3 years | ||
Maximum period for payments under the plan (in years) | 10 years | ||
Period for ending of payment obligation (in years) | 20 years | ||
Projected insolvency of the plan (in years) | 19 years | ||
Employer contributions to the plan per week through May 31, 2022 | $ 18.03 | ||
Contribution to the plan assets (as a percent) | 5.00% | ||
Contributions | $ 138,000 | $ 149,000 |