View Filing Data

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Dec. 31, 2019	Mar. 06, 2020	Jun. 30, 2019
Entity Registrant Name	Hemisphere Media Group, Inc.
Entity Central Index Key	0001567345
Document Type	10-K
Document Period End Date	Dec. 31, 2019
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 Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Public Float			$ 232,459,347
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	FY
Common Class A
Entity Common Stock, Shares Outstanding		20,184,412
Common Class B
Entity Common Stock, Shares Outstanding		19,720,381

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Current Assets
Cash	$ 92,151	$ 94,478
Accounts receivable, net of allowance for doubtful accounts of $507 and $2,645, respectively	29,269	28,411
Due from related parties	1,626	970
Programming rights	11,691	10,735
Prepaid taxes and other current assets	11,003	7,801
Total current assets	145,740	142,395
Programming rights, net of current portion	14,804	15,321
Property and equipment, net	34,319	32,209
Operating lease right-of-use assets	1,833
Broadcast license	41,356	41,356
Goodwill	167,322	169,994
Other intangibles, net	32,587	39,086
Deferred income taxes	1,208	4,290
Equity method investments	49,639	51,658
Other assets	3,979	4,958
Total Assets	492,787	501,267
Current Liabilities
Accounts payable	1,925	2,515
Due to related parties	669	626
Accrued agency commissions	4,662	5,061
Accrued compensation and benefits	5,021	5,855
Accrued marketing	5,327	5,619
Other accrued expenses	6,596	6,810
Income taxes payable		2,265
Programming rights payable	6,369	4,051
Investee losses in excess of investment	1,484	4,982
Current portion of long-term debt	2,134	2,134
Total current liabilities	34,187	39,918
Programming rights payable, net of current portion	820	1,133
Long-term debt, net of current portion	202,406	203,957
Deferred income taxes	19,331	19,520
Other long-term liabilities	2,917	1,080
Defined benefit pension obligation	2,457	2,260
Total Liabilities	262,118	267,868
Stockholders' Equity
Preferred stock, $0.0001 par value; 50,000,000 shares authorized; 0 shares issued at December 31, 2019 and December 31, 2018
Additional paid-in capital	274,518	270,345
Retained earnings	16,075	19,495
Accumulated other comprehensive (loss) income	(792)	1,155
Total Hemisphere Media Group Stockholders' Equity	229,285	231,911
Equity attributable to non-controlling interest	1,384	1,488
Total Stockholders' Equity	230,669	233,399
Total Liabilities and Stockholders' Equity	492,787	501,267
Common Class A
Stockholders' Equity
Common stock	3	2
Class A treasury stock, at cost 5,609,966 and 5,523,838 at December 31, 2019 and 2018, respectively	(60,521)	(59,088)
Common Class B
Stockholders' Equity
Common stock	$ 2	$ 2

Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated Statements of Operations
Net revenues	$ 149,387	$ 147,079
Operating expenses:
Cost of revenues	43,138	42,174
Selling, general and administrative	44,761	44,499
Depreciation and amortization	12,533	16,081
Other expenses	1,451	1,473
Gain from FCC spectrum repack and other	(1,739)	(1,880)
Total operating expenses	100,144	102,347
Operating income	49,243	44,732
Other expenses, net:
Interest expense, net	(11,953)	(12,132)
Loss on equity method investments	(30,271)	(35,206)
Gain on insurance proceeds and other, net	1,596	2,080
Total other expenses, net	(40,628)	(45,258)
Income (loss) before income tax expense	8,615	(526)
Income tax expense	(12,086)	(10,271)
Net loss	(3,471)	(10,797)
Net loss (income) attributable to non-controlling interest	104	(109)
Net loss attributable to Hemisphere Media Group, Inc.	$ (3,367)	$ (10,906)
Loss per share attributable to Hemisphere Media Group, Inc.:
Basic (in dollars per share)	$ (0.09)	$ (0.28)
Diluted (in dollars per share)	$ (0.09)	$ (0.28)
Weighted average shares outstanding:
Basic (in shares)	39,158	38,986
Diluted (in shares)	39,158	38,986

Consolidated Statement of Comprehensive Loss - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Consolidated Statements of Comprehensive Loss
Net loss	$ (3,471)	$ (10,797)
Other comprehensive (loss) income:
Change in fair value of interest rate swap, net of income taxes	(1,885)	656
Adjustment to defined benefit plan, net of income taxes	(115)	27
Total other comprehensive (loss) income	(2,000)	683
Comprehensive loss	(5,471)	(10,114)
Comprehensive loss (income) attributable to non-controlling interest	104	(109)
Comprehensive loss attributable to Hemisphere Media Group, Inc.	$ (5,367)	$ (10,223)

- Definition

The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1A
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669619-108580

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (a)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 220
-SubTopic 10
-Section 45
-Paragraph 1B
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=118930883&loc=SL7669625-108580

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 50
-Paragraph 1A
-Subparagraph (c)(1)
-URI http://asc.fasb.org/extlink&oid=109239629&loc=SL4573702-111684

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 22
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8736-108599

Reference 6: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4J
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591551-111686

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 230
-SubTopic 10
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=118932676&loc=d3e3000-108585

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 45
-Paragraph 19
-URI http://asc.fasb.org/extlink&oid=108774443&loc=SL4569616-111683

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 280
-SubTopic 10
-Section 50
-Paragraph 32
-Subparagraph (c)
-URI http://asc.fasb.org/extlink&oid=115929826&loc=d3e8933-108599

Reference 10: http://www.xbrl.org/2003/role/exampleRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 810
-SubTopic 10
-Section 55
-Paragraph 4K
-URI http://asc.fasb.org/extlink&oid=116874947&loc=SL4591552-111686

+ Details

Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock Common Class A	Common Stock Common Class B	Additional Paid In Capital Common Class A	Additional Paid In Capital Common Class B	Additional Paid In Capital	Treasury Stock Common Class A	Retained Earnings	Accumulated Comprehensive Income	Non-controlling Interest	Total
Balance at the beginning of the period at Dec. 31, 2017	$ 3	$ 2			$ 265,329	$ (57,303)	$ 30,401	$ 472		$ 238,904
Balance at the beginning of the period (in shares) at Dec. 31, 2017	25,171,000	20,801,000
Condensed 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 Media					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)	218,000
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)	(544,000)	(1,081,000)
Exercise of warrants	$ 0				20					20
Exercise of warrants (in shares)	2,000
Exercise of options	$ 0				0	(14)				(14)
Exercise of options (in shares)	3,000
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	24,850,000	19,720,000
Condensed Consolidated Statements of Changes in Stockholders' Equity
Net (loss) income							(3,367)		(104)	(3,471)
Issuance of treasury shares for acquisition of Snap Media					(588)	588
Vesting of restricted stock	$ 1				1,925	(1,513)				413
Vesting of restricted stock (in shares)	352,000
Stock-based compensation					2,883					2,883
Repurchases of Class A common stock						$ (662)				(662)
Repurchases of Class A common stock (in shares)						51,227
Exercise of options					(47)	$ 154				107
Adoption of accounting standards \| ASU 2018-02							(53)	53
Other comprehensive income, net of tax								(2,000)		(2,000)
Balance at the end of the period at Dec. 31, 2019	$ 3	$ 2			$ 274,518	$ (60,521)	$ 16,075	$ (792)	$ 1,384	$ 230,669
Balance at the end of the period (in shares) at Dec. 31, 2019	25,202,000	19,720,000

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2019	Dec. 31, 2018
Cash Flows From Operating Activities:
Net loss	$ (3,471)	$ (10,797)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	12,533	16,081
Program amortization	13,648	12,509
Amortization of deferred financing costs and original issue discount	580	591
Stock-based compensation	4,808	3,933
Provision for bad debts	135	417
Gain on disposition of assets	(22)	(38)
Gain from FCC spectrum repack	(1,717)	(1,477)
Deferred tax expense	3,593	1,040
Loss on equity investments	30,271	35,206
Amortization of operating lease right-of-use assets	486
Gain from insurance proceeds	(1,661)	(2,080)
(Increase) decrease in:
Accounts receivable	(993)	(7,402)
Due from related parties, net	(613)	(60)
Programming rights	(14,087)	(19,322)
Prepaid expenses and other assets	(6,235)	2,239
Increase (decrease) in:
Accounts payable	(590)	(1,209)
Other accrued expenses	(1,819)	3,435
Programming rights payable	2,005	1,163
Income taxes payable	(2,265)	2,240
Other liabilities	1,033	321
Net cash provided by operating activities	35,619	36,790
Cash Flows From Investing Activities:
Funding of equity method investments	(31,747)	(53,782)
Capital expenditures	(5,376)	(10,628)
Insurance proceeds	1,661	2,080
FCC spectrum repack proceeds	1,717	1,477
Net payment for the acquisition of Snap Media		(772)
Net cash used in investing activities	(33,745)	(61,625)
Cash Flows From Financing Activities:
Principle payments of long-term debt	(2,133)	(2,133)
Purchases of common stock	(2,175)	(2,873)
Proceeds from exercise of options	107
Proceeds from exercise of warrants		20
Net cash used in financing activities	(4,201)	(4,986)
Net decrease in cash	(2,327)	(29,821)
Cash:
Beginning	94,478	124,299
Ending	92,151	94,478
Cash payments for:
Interest	12,863	10,574
Income taxes	13,459	8
Non-cash investing activity:
Acquisition financed in part by treasury shares	588	$ 1,397
Non-cash financing activity:
Cashless exercise of options issued from treasury shares	$ 47

Nature of Business and Significant Accounting Policies

12 Months Ended

Dec. 31, 2019

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 HMTV Distribution, LLC, the parent of 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 its initial public offering, 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.

Reclassification: Certain prior year amounts on the presented Consolidated Balance Sheets and Consolidated Statement of Cash Flows have been reclassified to conform with current period presentation.

Principles of consolidation: The accompanying 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.

For more information on our equity method investments, see Note 7, “Equity Method Investments” of Notes to Consolidated Financial Statements.

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 is computed by dividing loss attributable to Hemisphere Media Group, Inc. common stockholders by the number of weighted‑average outstanding shares of common stock. Diluted loss per share 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 loss per share attributable to Hemisphere Media Group, Inc. (amounts in thousands, except per share amounts):


	Years Ended December 31,
	2019		2018
Numerator for loss per common share calculation:
Net loss attributable to Hemisphere Media Group, Inc.	$	(3,367)	$	(10,906)
Denominator for loss per common share calculation:
Weighted-average common shares, basic		39,158		38,986
Effect of dilutive securities
Stock options, restricted stock and warrants		—		—
Weighted-average common shares, diluted		39,158		38,986
Loss per share attributable to Hemisphere Media Group, Inc.
Basic	$	(0.09)	$	(0.28)
Diluted	$	(0.09)	$	(0.28)

We apply the treasury stock method to measure the dilutive effect of its outstanding stock options and restricted stock awards and include the respective common share equivalents in the denominator of our diluted loss 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 loss per share computation (ASC 260-10-45-23). The assumed exercise only occurs when the options are “In the Money” (exercise price is lower than the average market price for the period). If the options 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 1.3 million and 1.6 million shares of common stock for the years ended December 31, 2019 and 2018, 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 attributable to Hemisphere Media Group, Inc. 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, 2019 and 2018, 0.7 million and 0.4 million outstanding awards, respectively, were not included in the computation of diluted loss per share because their effect was anti-dilutive.

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):


	Year ended
	December 31,
	2019		2018
Barter revenue	$	872	$	877
Barter expense		(557)		(583)
	$	315	$	294

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.

On January 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2018-07—Compensation —Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. The amendments in this ASU applied to any entity that enters into share-based payment transactions with nonemployees. The new guidance eliminated the requirement to revalue nonemployee share-based transactions on a recurring quarterly basis. The adoption of this ASU did not have an impact on our consolidated financial statements as of and for the year ended December 31, 2019.

Advertising and marketing costs: The Company expenses advertising and marketing costs as incurred. The Company incurred advertising and marketing costs of $3.7 million and $3.0 million for the years ended December 31, 2019 and 2018, 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, 2019 and 2018 consisted of the following (amounts in thousands):


		Beginning		Provisions						End
Year	Description	of Year		for bad debt		Write-offs		Recoveries		of Year
2019	Allowance for doubtful accounts	$	2,645	$	135	$	2,274	$	1	$	507
2018	Allowance for doubtful accounts	$	2,327	$	417	$	107	$	8	$	2,645

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, 2019, there was no write-down was deemed necessary. 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. 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 $13.6 million and $12.5 million for the years ended December 31, 2019 and 2018, respectively, is recorded as part of cost of revenues in the accompanying consolidated statements of operations. Accumulated amortization of the programming rights was $58.7 million and $45.1 million at December 31, 2019 and 2018, 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.

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, 2019 and 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.) exceeded our investment in Pantaya by $1.5 million and $5.0 million, respectively. These amounts are recorded as “Investee losses in excess of investment” on our consolidated balance sheet at December 31, 2019 and 2018, respectively, 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.

Leases: On January 1, 2019, we adopted Financial Accounting Standards Board (“the FASB”) ASC Topic 842, Leases (ASC 842) (the “new lease standard”), using a modified retrospective transition approach with application as of the effective date of initial application without restating comparative period financial statements. The core principle of the new lease standard is that a lessee should recognize the assets and liabilities that arise from leases, including operating leases, in the statement of financial position. We elected to apply the package of practical expedients to our adoption of the new lease standard, which includes allowing us to continue utilizing historical classification of leases. We did not elect the practical expedient that permits a reassessment of lease terms for existing leases. Upon our transition to the new lease standard, we recognized $2.1 million and $1.9 million of operating lease liabilities and corresponding right of use (“ROU”) assets, respectively. The adoption of the new lease standard did not have an impact on the consolidated statement of operations.

For additional information about our leases, see Note 14, “Leases” 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 is determined utilizing a combination of a discounted cash flow analysis incorporating variables such as revenue projections, projected operating cash flow margins, and discount rates, as well as a market based approach employing comparable sales analysis.

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.

The Company completed their impairment reviews for goodwill and other intangibles and no impairment resulted as of December 31, 2019 and 2018.

For more information on Goodwill and intangible assets, see Note 6, “Goodwill and Intangible Assets” of Notes to Consolidated Financial Statements.

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 $0.3 million and $0.2 million, which is included in interest expense, net in the accompanying consolidated statements of operations for the years ended December 31, 2019 and 2018, respectively. Accumulated amortization of deferred financing costs was $2.3 million and $2.0 million at December 31, 2019 and 2018, respectively. The net deferred financing costs of $1.0 million and $1.3 million at December 31, 2019 and 2018, respectively, and have been presented on the consolidated balance sheets as a reduction to the principal amount of the long-term debt outstanding.

For more information on deferred financing costs, see Note 9, “Long Term Debt” of Notes to Consolidated Financial Statements.

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.

On January 1, 2019, we adopted 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 applied to any entity that has items of other comprehensive income (“OCI”) for which the related tax effects are presented in accumulated other comprehensive income (“AOCI”), as previously required by GAAP. This ASU permitted a one-time reclassification from AOCI to Retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act enacted on December 22, 2017. The adoption of this ASU resulted in a one-time reclassification of $0.1 million from AOCI to Retained earnings, which was recorded in the current period. For the impact of this adoption, see Consolidated Statement of Changes in Stockholders’ Equity located in Item I Financial Statements.

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, 2019, there were no adjustments to fair value. For the year ended December 31, 2018, management deemed it necessary to write-down certain program rights of $1.0 million.

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, 2019 and 2018.

For more information on fair value instruments, see Note 11, “Fair Value Measurements” of Notes to Consolidated Financial Statements.

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.

On January 1, 2019, we adopted ASU 2017-12 — Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The amendments in this ASU applied 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 adoption of this ASU did not have an impact on our consolidated financial statements as of and for the year ended December 31, 2019.

For more information on derivative instruments, see Note 10, “Derivative Instruments” of Notes to Consolidated Financial Statements.

Major customers and suppliers: One of our distributors accounted for more than 10% of our total net revenues for the year ended December 31, 2019. Our Networks are provided to these distributors pursuant to affiliation agreements with varying terms.

Accounting guidance not yet adopted: In January 2017, the FASB issued ASU Update 2017 04—Intangibles—Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment. The amendments in this Update simplify how an entity is required to test goodwill for impairment by eliminating step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Under amendments in this Update, an entity would perform its annual, or interim, testing by comparing the fair value of a reporting unit with its carrying amount. An entity would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The amendments in this update are effective for Small Reporting Companies with fiscal years beginning after December 15, 2022, and interim periods within those annual periods. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact, if any, that the updated accounting guidance will have on our consolidated financial statements.

In March 2019, the FASB issued ASU 2019-02—Entertainment—Films-Other Assets-Film Costs (Subtopic 926-20): Improvements to Accounting for Costs of Films. The updated guidance aligns the accounting for production costs of episodic television series with those of films, allowing for costs to be capitalized in excess of amounts of revenue contracted for each episode. The updated guidance also updates certain presentation and disclosure requirements for capitalized film and television costs, and requires impairment testing to be performed at a group level for capitalized film and television costs when the content is predominately monetized with other owned or licensed content. The updated guidance is effective for the fiscal years beginning after December 15, 2019 and early adoption is permitted. We will adopt this standard beginning January 1, 2020 and expect no material impact to our consolidated financial statements moving forward.

In December 2019, the FASB issued ASU 2019-12—Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The updated guidance simplifies the accounting for income taxes in several areas by removing certain exceptions and by clarifying and amending existing guidance applicable to accounting for income taxes. The updated guidance is effective for the fiscal years beginning after December 15, 2020, and interim periods within those fiscal periods and early adoption is permitted. We are currently in the initial stages of our assessment in determining the impact, if any, that the updated accounting guidance will have on our consolidated financial statements.

Use of estimates: In preparing the accompanying 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.

Goodwill and Intangible Assets

12 Months Ended

Dec. 31, 2019

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, 2019 and 2018 (amounts in thousands):


	December 31,
	2019		2018
Broadcast license	$	41,356	$	41,356
Goodwill		167,322		169,994
Other intangibles		32,587		39,086
Total intangible assets	$	241,265	$	250,436

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, 2019 and 2018, is as follows (amounts in thousands):


	Net Balance at						Net Balance at
	December 31, 2018		Additions		Impairment		December 31, 2019
Broadcast license	$	41,356	$	—	$	—	$	41,356
Goodwill		169,994		(2,672)		—		167,322
Brands		15,986		—		—		15,986
Other intangibles		700		—		—		700
Total indefinite-lived intangibles	$	228,036	$	(2,672)	$	—	$	225,364


	Net Balance at						Net Balance at
	December 31, 2017		Additions		Impairment		December 31, 2018
Broadcast licenses	$	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

A summary of the changes in the Company’s other amortizable intangible assets for the years ended December 31, 2019 and 2018 is as follows (amounts in thousands):


	Net Balance at						Net Balance at
	December 31, 2018		Additions		Amortization		December 31, 2019
Affiliate relationships	$	20,273	$	1,668	$	(7,589)	$	14,352
Advertiser relationships		690		—		(552)		138
Non-compete agreement		686		1,078		(938)		826
Other intangibles		144		—		(76)		68
Programming contracts		607		—		(90)		517
Total finite-lived intangibles	$	22,400	$	2,746	$	(9,245)	$	15,901


	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

For more information on the allocation of goodwill and intangible assets, see Note 4, “Snap Media Acquisition” of Notes to Consolidated Financial Statements.

The aggregate amortization expense of the Company’s amortizable intangible assets was $9.2 million and $13.3 million for the years ended December 31, 2019 and 2018, respectively. The weighted average remaining amortization period is 2.6 years at December 31, 2019. Future estimated amortization expense is as follows (amounts in thousands):


Year Ending December 31,	Amount
2020	$	6,767
2021		6,425
2022		1,766
2023		328
2024 and thereafter		615
	$	15,901

Equity Method Investments

12 Months Ended

Dec. 31, 2019

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, as described in detail below. 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, 2019, we have funded $8.5 million in capital contributions to Pantaya. We record the income or loss on investment on a one quarter lag. As of March 31, 2019, our applicable pro rata share of the inception-to-date losses exceeded our contractual funding commitment of $10 million. As such, our cumulative share of the losses is limited to $10 million and no additional losses were recorded following the three months ended March 31, 2019. For the years ended December 31, 2019 and 2018, we recorded $0.3 million and $6.9 million, respectively in loss on equity method investments in the accompanying consolidated statements of operations. In accordance with U.S. GAAP, since we are committed to provide future capital contributions to Pantaya, we also present as a liability in the accompanying consolidated balance sheets the net balance recorded for our share of Pantaya’s losses in excess of the amount funded into Pantaya, which was $1.5 million and $5.0 million at December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, we had a receivable balance of $3.9 million and $2.0 million, respectively, and is included in accounts receivable and other assets 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%. In July 2019, the Colombian government enacted legislation resulting in the extension of the concession license for Canal 1 for an additional ten years for no additional consideration. The concession is now due to expire on April 30, 2037 and is renewable for an additional 20-year period. The joint venture is deemed a VIE that is accounted for under the equity method. As of December 31, 2019, we have funded $111.7 million in capital contributions to Canal 1. 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, 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. We record the income or loss on investment on a one quarter lag. For years ended December 31, 2019 and 2018, we recorded $30.2 million and $28.3 million in loss on equity method investment, net of a preferred return on capital funded, in the accompanying consolidated statements of operations, respectively. The net balance recorded in equity method investments related to the Canal 1 joint venture was $44.2 million and $46.7 million at December 31, 2019 and 2018, respectively, and is included in equity method investments in the accompanying consolidated balance sheets. At December 31, 2019 and 2018, we had a receivable balance of $2.0 million and $1.4 million, respectively, and is included in other assets 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, for $5.0 million. We record the income or loss on investment on a one quarter lag. For the year ended December 31, 2019, we recorded $0.5 million in gain on equity method investment inclusive of preferred return on capital funded, in the accompanying consolidated statement of operations. For the year ended December 31, 2018, we recorded $0.1 million in loss on equity method investment, inclusive of preferred return on capital funded, in the accompanying consolidated statement of operations. The net balance recorded in equity method investments was $5.5 million and $5.0 million at December 31, 2019 and 2018, respectively, and is included in the accompanying consolidated balance sheets. We have no additional commitment to fund the operations of the venture.

On November 26, 2018, Snap Media acquired a 50% interest in Snap JV, LLC (“Snap JV”) (we own 75% of Snap Media), a newly formed joint venture with Mar Vista Entertainment, LLC (“MarVista”), to co-produce original movies and series. The investment is deemed a VIE that is accounted for under the equity method. As of December 31, 2019, we have funded $0.3 million into Snap JV. We record the income or loss on investment on a one quarter lag. For the years ended December 31, 2019 and 2018, we have recorded $0.3 million and $0 million, respectively, in loss on equity method investments in the accompanying consolidated statements of operations. The net balance recorded in equity method investments related to Snap JV was $0.0 million and $0 million at December 31, 2019 and 2018, respectively, and is included in equity method investments in the accompanying consolidated balance sheets.

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, 2019 are included below (amounts in thousands):


	Equity
	Investees
Current assets	$	34,719
Non-current assets		29,507
Current liabilities		74,917
Non-current liabilities		41,296
Redeemable stock and non-controlling interests		(392)
Net revenue		37,380
Operating loss		(37,623)
Net loss	$	(58,057)

Income Taxes

12 Months Ended

Dec. 31, 2019

Income Taxes

Income Taxes

Note 8. Income Taxes

For the years ended December 31, 2019 and 2018, Income before provision for income taxes, includes the following components (amounts in thousands):


	2019		2018
Domestic income	$	21,695	$	9,797
Foreign loss		(13,080)		(10,323)
Income before provision for income taxes	$	8,615	$	(526)

For the years ended December 31, 2019 and 2018, income tax expense is comprised of the following (amounts in thousands):


	2019		2018
Current income tax expense	$	8,493	$	9,231
Deferred income tax		3,593		1,040
Income tax expense	$	12,086	$	10,271

Current tax expense for the years ended December 31, 2019 and 2018, includes foreign withholding tax of $1.4 million and $1.5 million, respectively.

For the years ended December 31, 2019 and 2018, the reconciliation of income tax (benefit) expense computed at the U.S. federal statutory rates to income tax expense is (amounts in thousands):


	2019		2018
Income tax (benefit) expense at federal statutory rate-US Only	$	1,810	$	(108)
Income tax expense at federal statutory rate-Foreign Only		3,637		3,832
Permanent items		184		836
Return to provision true-ups -Current/ Deferred		301		(51)
Foreign rate differential		(2,284)		(141)
Foreign tax credits		(5,501)		(7,890)
Foreign valuation allowance		10,007		9,429
Change in FTC valuation allowance		3,785		4,141
Revaluation of Puerto Rico deferred taxes		(1,361)		—
Foreign withholding taxes		1,449		1,499
Deferred foreign tax credit offset		(421)		(873)
State taxes and state rate change		480		374
Puerto Rico tax rate change		—		(722)
UTP adjustment		—		(55)
Income tax expense	$	12,086	$	10,271

The effective tax rate for the period ending December 31, 2019, excluding our share of the operating results from our equity investment in Canal 1 and return to provision adjustments, was 30%.

The 2017 Tax Cuts and Jobs Act (“Jobs Act”) enacted on December 22, 2017. The Jobs Act revised the U.S. corporate income tax by lowering the statutory corporate tax rate from 35% to 21% in 2018. 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. Additionally, the Company evaluated the potential interest limitation established under the tax act and determined that no limitation would affect the 2019 provision for income taxes.

For the year ended December 31, 2019, 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 2019 of $3.8 million and the loss on the Company’s equity investment in Canal 1, which created a deferred tax asset, requiring an additional $10 million valuation allowance. In 2019, the Company qualified for Puerto Rico tax incentive in connection with local programming, and as a result, the company revalued certain deferred tax assets and liabilities, resulting in a net reduction of deferred tax liabilities of $1.4 million. Additionally, the increase in deferred tax liabilities in Puerto Rico increased the offsetting deferred tax asset in the U.S.

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 of $4.1 million and the loss on the Company’s equity investment in Canal 1, 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.

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, 2019 and 2018 (amounts in thousands):


	2019		2018
Deferred tax assets:
Allowances for doubtful accounts	$	776	$	820
Deferred branch tax benefit		11,813		11,801
Deferred revenue		109		84
NOL credit and other carryovers		274		204
Fixed assets		94		51
Accrued expenses		1,455		1,123
Foreign tax credit		18,497		14,729
Stock compensation		3,634		3,613
Pension		360		196
Interest rate swap		178		—
Intangibles		1,354		1,447
Equity method gains and losses		21,976		12,900
Other DTA		38		17
Less: Foreign income valuation allowance		(22,570)		(12,546)
Less: Foreign tax credit valuation allowance		(18,497)		(14,729)
Total deferred tax assets		19,491		19,710
Deferred tax liabilities:
Prepaid expenses		(504)		(404)
Intangibles		(15,496)		(15,788)
Interest rate swap		—		(365)
Property and equipment		(8,225)

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2019	Dec. 31, 2018
Accounts receivable, allowance for doubtful accounts	$ 507	$ 2,645
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
Treasury stock, shares	5,609,966	5,523,838
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	25,202,314	24,849,589
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	19,720,381