APPRAISAL OF THE
INTANGIBLE ASSETS OF THE
RADIO STATIONS OWNED BY THE
NEW JERSEY PUBLIC BROADCAST AUTHORITY
AS OF OCTOBER 1, 2010
PREPARED FOR
STATE OF NEW JERSEY, DEPARTMENT OF THE TREASURY,
DIVISION OF ADMINSTRATION
Project No. 4050129
15120 Enterprise Court, Suite 100
Chantilly, Virginia 20151
Phone: 703.818.2425 „ Fax: 703.803.3299
www.bia.com
January 24, 2011
Mr. Michael Jonas
Department of the Treasury
Division of Administration
State of New Jersey
50 West State Street, 8th Floor
PO Box 211
Trenton, New Jersey 08625-0211
Phone: 609-984-4847
Re:
Estimate of the Fair Market Value of the Intangible Assets of the radio stations owned by the
New Jersey Public Broadcast Authority (NJPBA), as of October 1, 2010
Dear Mr. Jonas:
Pursuant to your request, BIA Advisory Services, LLC (d/b/a “BIA/Kelsey”) has prepared appraisals
to arrive at an opinion as to the Fair Market Value of the tangible and intangible assets of the radio
stations owned by the New Jersey Public Broadcast Authority (NJPBA), as of October 1, 2010.
Fair Market Value is defined later in this report.
The valuation of the tangible assets is contained in another report, however, the total value of the
tangible assets is used in this report.
Media Intelligence and Investment Resources
Based on the data, analyses, and conclusions set forth in the report that follows, it is our opinion that
the fair market values of these tangible and intangible assets, as of October 1, 2010, are as stated in
the following value summary.
Respectfully Submitted,
BIA ADVISORY SERVICES, LLC (d/b/a BIA/Kelsey)
William Redpath, ASA, CFA, CPA, ABV, CIPM
Vice President
Media Intelligence and Investment Resources
Value Summary
New Jersey Network
Radio Stations
as of October 1, 2010
Asset
Value
Tangible Assets
$692,921
FCC Licenses
2,658,000
Contributors Base Asset
51,587
Underwriters Base Asset
46,893
Goodwill
Total
842,599
$4,292,000
TABLE OF CONTENTS
STATEMENT OF INTRODUCTION ........................................................................................ 3 STATEMENT OF INTRODUCTION ....................................................................................... 3 IDENTIFICATION OF THE PROPERTY ................................................................................ 3 PURPOSE, INTENDED USE AND METHODOLOGY........................................................... 4 RIGHTS AND LIMITING CONDITIONS ................................................................................ 5 STATEMENT OF APPRAISERS’ INDEPENDENCE ............................................................. 6 INTANGIBLE ASSETS VALUATION ...................................................................................... 9 INTANGIBLE ASSETS VALUATION .................................................................................... 9 FCC LICENSES ....................................................................................................................... 10 CONTRIBUTORS BASE ASSET ........................................................................................... 16 UNDERWRITERS BASE ASSET ........................................................................................... 20 EXHIBIT A.................................................................................................................................. 24 WEIGHTED AVERAGE RETURN ON ASSETS ANALYSIS ............................................. 25 EXHIBIT B .................................................................................................................................. 27 QUALIFICATIONS ................................................................................................................. 28 BIA/Kelsey
1
STATEMENT OF
INTRODUCTION
BIA/Kelsey
2
STATEMENT OF INTRODUCTION
STATEMENT OF INTRODUCTION
STATEMENT OF INTRODUCTION
BIA/Kelsey has been retained by NJPBA to estimate the Fair Market Value of the intangible assets
of the radio stations owned by NJPBA, as of October 1, 2010.
In this document, we have appraised the intangible assets that are separable from goodwill. The
methodology, life, and value of each of the intangible assets are stated in the text of that particular
asset. The most appropriate methods available were used in valuing these intangible assets.
In the course of the appraisal, BIA/Kelsey was provided with station-related data and other
information. BIA/Kelsey also spoke with Mike Jonas, and Rick Williams, Operations Manager and
Assistant Director of NJN Engineering, in connection with our analysis. BIA/Kelsey has made no
investigation as to the accuracy of this data or to the title of the assets.
IDENTIFICATION OF THE PROPERTY
As of October 1, 2010, NJPBA was the licensee of WNJB-FM, WNJM-FM, WNJN-FM,
WNJO(FM), WNJP(FM), WNJS-FM, WNJT-FM, WNJY(FM), WNJZ(FM).
In a separate valuation report, BIA/Kelsey estimated the fair market value of those radio stations, in
asset sales, as going concerns, at $4,292,000, as of October 1, 2010. The purpose of this report is to
identify the intangible assets and estimate their fair market values for review by the Department of
the Treasury of the State of New Jersey.
BIA/Kelsey estimated the fair market value of the tangible assets, in place and in use, of the radio
stations of NJPBA, as of October 1, 2010, in a separate report. The total value of the tangible assets
from that report will be used in this report.
BIA/Kelsey has been retained by NJPBA to estimate the fair market values of the intangible assets
that could be separated from goodwill. Those assets are: (1) FCC licenses; (2) the Contributors
Base Asset; and (3) a Underwriters Base Asset.
BIA/Kelsey
3
STATEMENT OF INTRODUCTION
All of these intangible assets meet the following tests1:
(1) those assets are capable of being separated or divided from the acquired entity and sold,
transferred, licensed, rented, or exchanged; or
(2) those assets arise from contractual or other legal rights (regardless of whether those rights are
transferable or separate from the acquired entity or from other rights and obligations).
Details pertaining to the assets valued are included in the report.
PURPOSE, INTENDED USE AND METHODOLOGY
The purpose of this appraisal is to estimate, as of October 1, 2010, the fair market value of these
intangible assets. This report is intended to be used for internal review by the Department of the
Treasury of the State of New Jersey.
In valuing the intangible assets, I have considered three approaches to value. These are the cost
approach, the market approach, and the income approach.
The cost approach is that approach which measures value by determining the current cost of an
asset and deducting depreciation, that is, physical deterioration and functional and economic
obsolescence. In its simplest form, it is nothing more than current replacement cost less all
depreciation.
The market approach is that approach to value in which recent sales and offering prices of
comparable properties are analyzed to arrive at an indication of the most probable selling price of the
subject property.
The income approach is that approach to value in which income generated by the subject property
is analyzed and projected over a specified time period and capitalized at an appropriate market rate
to arrive at the property’s value.
1
Source: Statement of Financial Accounting Standards No. 141; June 2001.
BIA/Kelsey
4
STATEMENT OF INTRODUCTION
I have chosen the market approach for the FCC licenses, and an income approach for the
Contributors Base Asset and the Underwriters Base Asset, as explained in the individual asset
valuations in this report.
For the purposes of this report, the definition of fair value, according to the Glossary in the
American Society of Appraisers’ Business Valuation Standards, is:
• Fair Market Value - “The price, expressed in terms of cash equivalents, at which property would
change hands between a hypothetical willing and able buyer and a hypothetical willing and able
seller, acting at arm’s length in an open and unrestricted market, when neither is under compulsion
to buy or sell and when both have reasonable knowledge of the relevant facts.”
RIGHTS AND LIMITING CONDITIONS
This appraisal of the intangible assets of NJPBA has been prepared for the internal review of the
Department of the Treasury of the State of New Jersey, and any other use of this report is invalid.
It should be noted that the appraisal of the intangible assets of NJPBA has been prepared exclusively
for the Department of the Treasury of the State of New Jersey (DTNJ) and is not to be reproduced in
whole or in part for any reason without the express written consent of DTNJ and BIA/Kelsey.
It should be noted that these intangible assets are a part of the going concern enterprise value of the
radio stations of NJPBA. The values of these assets are a part of, not in addition to, the fair market
value, in an asset sale, as a going concern, of those radio stations.
The appraiser assumes no responsibility for matters of a legal nature affecting the property
appraised. The appraiser also assumes property free and clear of all liens and other encumbrances.
The information provided by the client was assumed to be accurate and no steps were taken to
independently verify the material.
This appraisal is valid only for the appraisal date or dates specified herein and only for the appraisal
purpose specified herein. The client warrants that any reports, analyses, or other documents
BIA/Kelsey
5
STATEMENT OF INTRODUCTION
prepared for it by the appraiser will be used only in compliance with all applicable laws and
regulations.
No site visit to the studio or offices of NJPBA was conducted in the completion of this report.
STATEMENT OF APPRAISERS’ INDEPENDENCE
We certify to the best of our knowledge and belief:
The statements of fact contained in this report are true and correct.
The reported analyses, opinions and conclusions are limited only by the reported assumptions and
limiting conditions, and are my personal, unbiased professional analyses, opinions and conclusions.
BIA/Kelsey and we have no present or prospective interest in the property that is the subject of this
report, and we have no personal interest or bias with respect to the parties involved.
BIA/Kelsey’s and our compensation are not contingent upon the development or reporting of a
predetermined value or direction in value that favors the cause of the client, the amount of the value
opinion, the attainment of a stipulated result, or the occurrence of a subsequent event directly related
to the intended use of this appraisal.
I hereby certify that, to the best of our knowledge and belief, the statements of fact contained in the
report are true and correct, and this report has been prepared in conformity with the Uniform
Standards of Professional Appraisal Practice of The Appraisal Foundation and the Principles and
Code of Ethics of the American Society of Appraisers, and the Statement on Standards for Valuation
Services #1 from the American Institute of Certified Public Accountants.
BIA/Kelsey
6
STATEMENT OF INTRODUCTION
No one provided significant professional assistance to the person signing this report.
The American Society of Appraisers has a mandatory recertification program for all of its Senior
members. Mr. Redpath is in compliance with that program.
BIA ADVISORY SERVICES, LLC (d/b/a BIA/Kelsey)
William Redpath, ASA, CFA, CPA, ABV, CIPM
Vice President
Geoffrey C. Price
Vice President
15120 Enterprise Court
Chantilly, VA 20151
703-818-2425
January 24, 2011
William
Redpath
BIA/Kelsey
Digitally signed by William Redpath
DN: cn=William Redpath, o=BIA
Advisory Services, LLC, ou,
[email protected], c=US
Date: 2011.01.24 16:39:32 -05'00'
7
INTANGIBLE ASSETS
VALUATION
BIA/Kelsey
8
INTANGIBLE ASSETS VALUATION
INTANGIBLE ASSETS VALUATION
There are three (3) categories of intangible assets: (1) FCC Licenses; (2) Contributors Base Asset;
and (3) Underwriters Base Asset. The fair values of these assets, by category, are seen in the Value
Summary.
The values of these assets, and their remaining useful lives, are stated in the preceding value
summary and the following text. In certain tables, numbers may not exactly sum due to internal
rounding.
BIA/Kelsey
9
FCC Licenses of NJPBA Radio Stations
FCC LICENSES
BIA Advisory Services, LLC (“BIA/Kelsey”) has prepared a valuation analysis of the FCC licenses
of Radio Stations WNJS-FM, WNJM(FM), WNJO(FM), WNJY(FM), WNJN-FM, WNJZ(FM),
WNJT-FM, WNJB-FM and WNJP(FM), as of October 1, 2010.
The FCC licenses held by WNJS-FM, WNJM, WNJO, WNJY, WNJN-FM, WNJZ, WNJT-FM,
WNJB-FM, and WNJP dictate the stations’ operating guidelines as specified by the Federal
Communications Commission (FCC). The FCC licenses specify the transmitting power, antenna
height and location the stations must use while broadcasting. These parameters effectively define the
area over which the stations may broadcast.
FCC rules and regulations also affect program content, by proscribing certain types of programming
and requiring the programming to be “in the public interest.” Additionally, the FCC must approve
any transfer WNJS-FM, WNJM, WNJO, WNJY, WNJN-FM, WNJZ, WNJT-FM, WNJB-FM, and
WNJP’s licenses and has the power to revoke the stations’ licenses or assign them to another party at
the end of each eight-year license period.
WNJS-FM is a Class A radio station allotted to Berlin, New Jersey. WNJS-FM operates with an
effective radiated power (ERP) of 20 watts vertically-polarized, and one watt horizontally-polarized,
at a height above average terrain (HAAT) of 781 feet, on an assigned frequency of 88.1 megahertz
(MHz). WNJS-FM also holds a construction permit (CP) to increase the vertically-polarized ERP to
80 watts, and increase the HAAT to 942 feet. The station had begun implementing the CP as of the
October 1, 2010 valuation date and expected to complete construction by the end of October.
WNJM is a Class A FM radio station licensed to Manahawkin, New Jersey. WNJM operates with
an ERP of 200 watts vertically-polarized, one watt horizontally-polarized, at a HAAT of 259 feet, on
an assigned frequency of 89.9 MHz.
WNJO is a Class A FM radio station licensed to Toms River, New Jersey. WNJO operates with an
ERP of four kilowatts (kW) vertically-polarized, one watt horizontally-polarized, at a HAAT of 121
feet, on an assigned frequency of 90.3 MHz.
BIA/Kelsey
10
FCC Licenses of NJPBA Radio Stations
WNJY is a Class A FM radio station licensed to Netcong, New Jersey. WNJY operates with an ERP
of 520 watts vertically-polarized and one watt horizontally-polarized, at a HAAT of 430 feet, on an
assigned frequency of 89.3 MHz.
WNJN-FM is a Class A radio station licensed to Atlantic City, New Jersey. WNJN-FM operates
with an ERP of 6.0 kW vertically-polarized, 25 watts horizontally-polarized, at a HAAT of 276 feet,
on an assigned frequency of 89.7 MHz.
WNJZ is a Class A FM radio station licensed to Cape May Court House, New Jersey. WNJZ
operates with an ERP of 6.0 kW circularly-polarized, at a HAAT of 236 feet, on an assigned
frequency of 90.3 MHz.
WNJT-FM is a Class A radio station licensed to Trenton, New Jersey. WNJT-FM operates with an
ERP of 110 watts vertically-polarized, at a HAAT of 689 feet, on an assigned frequency of 88.1
MHz.
WNJT-FM hold a CP (BPED-19990716MB) for a new satellite station licensed to
Bernardsville, New Jersey. The CP was granted in July 1999 and has been extended to 2012,
according to Mr. Rick Williams of NJPBA. According to Mr. Williams, the satellite station has not
been constructed.
WNJP is a Class A FM radio station licensed to Sussex, New Jersey. WNJP operates with an ERP
of 450 watts circularly-polarized, at a HAAT of 637 feet on an assigned frequency of 88.5 MHz.
WNJB-FM is a Class A radio station licensed to Bridgeton, New Jersey. WNJB-FM operates with
an ERP of 2.5 kW vertically-polarized and one watt horizontally-polarized, at a HAAT of 220 feet
on an assigned frequency of 89.3 MHz.
A basic assumption in our valuation of these FCC licenses was that these radio stations were new
radio stations, signing on-the-air as of the date of this valuation, October 1, 2010. We assumed the
competitive situation that existed in the market as of that date, except that these stations were just
beginning operations. In doing so, we extract the value of going concern and any other assets
acquired, and are strictly valuing the FCC licenses. We have estimated the combined fair market
value of the FCC licenses of the radio stations to be $2,658,000.
The values of the NJPBA’s FCC licenses have been estimated using the market approach with the
exception of WNJM-FM, WNJS-FM, and WNJZ, which have been valued using the cost approach.
Because these radio stations are operated as non-commercial FM radio stations, the appraiser
BIA/Kelsey
11
FCC Licenses of NJPBA Radio Stations
believes that valuing the radio FCC licenses using a market approach is more appropriate than using
the income approach. BIA/Kelsey analyzed merger and acquisition transactions of non-commercial
radios stations to arrive at the fair market value of these radio stations. BIA/Kelsey was able to find
21 relevant transactions between January 2010 and September 2010. This information is shown in
Table 1.
For each of the non-commercial stations that were sold during that time BIA/Kelsey analyzed
purchase price versus population coverage reachable by the stations’ 60 dBu signal contour. The
sales price of each of the stations was divided by the number of pops reachable by a 60 dBu signal to
calculate price per pop.
BIA/Kelsey
12
FCC Licenses of NJPBA Radio Stations
Table 1 – Comparable Sales Information
Lumpkin
GA
Unrated
60,348
160
01/10
Price Per
Pop.
$2.65
89.7
Astoria
OR
Unrated
28,566
85
01/10
$2.98
KVNC
90.7
Minturn
CO
Unrated
12,383
60
01/10
$4.85
WCJL
90.9
Morgantown
IN
Indianapolis, IN
145,736
1,000
01/10
$6.86
KLWO
90.3
Longview
WA
Unrated
96,835
200
02/10
$2.07
WLFE
90.9
Cutler Bay
FL
Miami-Ft. Lauderdale-Hollywood, FL
12
425,817
2,500
02/10
$5.87
WLIU
88.3
Southampton
NY
Nassau-Suffolk, NY
18
131,782
850
03/10
$6.45
WCBW
89.7
East St. Louis
IL
St. Louis, MO
21
163,532
200
04/10
$1.22
KNCH
90.1
San Angelo
TX
San Angelo, TX
281
106,426
350
04/10
$3.29
WXEL
90.7
W. Palm Beach
FL
West Palm Beach-Boca Raton, FL
47
2,649,861
3,850
04/10
$1.45
KJCQ
88.5
Westwood
CA
Unrated
23,299
100
05/10
$4.29
KAJC
90.1
Salem
OR
Portland, OR
23
21,407
100
06/10
$4.67
WCIN
91.3
Tunkhannock
PA
Wilkes Barre-Scranton, PA
70
274,219
275
06/10
$1.00
WSMR
89.1
Sarasota
FL
Sarasota-Bradenton, FL
73
696,197
1,275
08/10
$1.83
WDYN
89.7
Chattanooga
TN
Chattanooga, TN
106
852,508
2,500
08/10
$2.93
KRLJ
89.9
Jackson
MO
Unrated
104,428
220
08/10
$2.11
KBCP
90.7
Sealy
TX
Unrated
21,194
65
08/10
$3.07
KTRU
91.7
Houston
TX
Houston-Galveston, TX
6
3,416,534
9,500
08/10
$2.78
WHSS
89.5
Hamilton
OH
Cincinnati, OH
28
98,701
156
09/10
$1.58
WSRX
89.5
Naples
FL
Ft. Myers-Naples-Marco Island, FL
62
342,935
2,000
09/10
$5.83
KXWA
89.7
Loveland
CO
Ft. Collins-Greeley, CO
120
953,785
3,050
09/10
$3.20
Average
$3.38
Median
$2.98
CALLS
WBOJ
Freq.
88.5
KOAC
BIA/Kelsey
City of License
State
Market
Mkt
Rank
39
60 dBu
Cov. Pop
Sales Price Sales
($)000s Date
13
FCC Licenses of NJPBA Radio Stations
The median price per pop of the 60 dBu signals computed to be $2.98. Below is a table showing the
60 dBu signal coverage and the radio stations’ population for the nine NJPBA stations and the
estimated “stick” value of these radio stations when multiplied by the 60 dBu calculated median
price per pop of $2.98.
Calls
WNJB
WNJM
WNJN
WNJO
WNJP
WNJS
WNJT
WNJY
WNJZ
City of License
Bridgeton
Manahawkin
Atlantic City
Toms River
Sussex
Berlin
Trenton
Netcong
Cape May
Population Served under
60 dBu Contour
157,668
48,509
189,140
166,526
135,585
47,570
428,571
195,173
73,721
“Stick” Value
$469,000
$144,000
$563,000
$496,000
$403,000
$142,000
$1,275,000
$581,000
$219,000
We have estimated that the following construction costs would be incurred for sufficient technical
equipment and for the structuring of operational facilities for the nine FM stations: WNJB-FM,
$195,000; WNJM-FM, $195,000; WNJN-FM, $219,000; WNJO, $188,000; WNJP, $177,000;
WNJS-FM, $272,000; WNJT-FM, $248,000; WNJY, $177,000; and WNJZ $217,000. The
construction cost estimates assume the minimum necessary technical plant required in order for the
stations to begin their broadcast operations. The estimate construction cost figures are exclusive of
land, buildings, towers, and associated improvements as it is assumed that the new stations would
lease both their transmitter sites and studio and office locations. Deducting the aforementioned
construction costs from the estimated “stick” values results in the following FCC licenses for the
radio stations: WNJB-FM, $274,000; WNJN-FM, $344,000; WNJO, $308,000; WNJP, $226,000;
WNJT-FM, $1,027,000; and WNJY, $404,000.
BIA/Kelsey
14
FCC Licenses of NJPBA Radio Stations
We attempted to value WNJM-FM, WNJS-FM, and WNJZ’s FCC licenses using the market
approach, but were unable to return a positive number due to the construction costs being higher
than the arrived at “stick” value figure for each of the stations. As a result, the values of WNJM,
WNJS, and WNJZ’s FCC licenses are based on their replacement costs. The appraiser estimates this
replacement value, based on estimated legal, consulting, engineering, and in-house charges to be
$25,000 for each station.
WNJB-FM’s FCC License:
WNJM-FM’s FCC License:
WNJN-FM’s FCC License:
WNJO(FM)’s FCC License:
WNJP(FM)’s FCC License:
WNJS-FM’s FCC License:
WNJT-FM’s FCC License:
WNJY(FM)’s FCC License:
WNJZ(FM)’s FCC License:
$274,000
25,000
344,000
308,000
226,000
25,000
1,027,000
404,000
25,000
Total FCC License Value: $2,658,000
BIA/Kelsey
15
Contributors Base Asset
CONTRIBUTORS BASE ASSET
The value of the Contributors Base Asset is equal to the present value of all the net cash flows that
would be expected to be received from the contributors base in the future, given projected future
revenues and its expected life.
To estimate the survival rate for the radio division’s contributors base, I reviewed data from
DonorCentrics Executive Program Overview report on NJN’s Annual TV Gifts for Fiscal Year 2010.
This report had contributor attrition data for the NJN television stations. Because no such data was
supplied to us for NJN’s radio stations, I used this attrition data for the radio stations.
In this section of this report is the sheet the contributor attrition data. Fiscal years end on June 30 of
each year. The data is by number of contributors, not contributor revenue. Such data was not
available for an attrition analysis.
I summed the “Renew” and “Additional” number for each year FY 2007 through FY 2010 and
divided by the total number of contributors from the previous fiscal year.
The survival rates calculated to 46.25% in FY 2007, 39.57% in FY 2008, 41.76% in FY 2009 and
48.35% in FY 2010. The average of the four survival rates is 43.98%, and I will use that as the
projected annual survival rate going forward.
As seen on Table 2, I projected revenues for this contributors base through FY 2024. This projection
is my estimate of the revenues to be earned in the future from the contributors who were already
contributing to NJN Radio, as of October 1, 2010.
Based on our knowledge of the not-for-profit radio industry and discussions with Mike Jonas, it is
our belief that non-for-profit radio stations would continue operating even if they did not receive
these underwriters’ revenues. Therefore, I did not deduct operating expenses or deduct contributory
asset charges for contributing assets, such as tangible assets, working capital and an assembled
workforce asset. Also, because this is an asset for a non-for-profit entity, I did not deduct any tax
payments.
BIA/Kelsey
16
Contributors Base Asset
The annual net benefits, which equal each year’s projected revenues, are then discounted to present
value using an after-tax discount rate of 10.00% (see Appendix B for an explanation).
The present value of the discounted cash flows generated by the Contributors Base Asset, as of
October 1, 2010, is $51,587, which is the value of this asset. The estimated remaining useful life of
this asset is about 14 years.
Fair Market Value: $51,587
BIA/Kelsey
17
NJN Public Television
Annual TV Gifts
Fiscal Year 2010
dono/CentricsrM Executive Program Overview
Gift Type Comparison: Section C
Regardless of station database coding, donorCentrics™ uses standardized gift-timing rules to determine
whether a donor is new, renewed, rejoined or gave additional gifts. Standardized business rules based on gift
timing make it possible to benchmark and compare performance across all stations or to allow a single station to
analyze performance when station rules change.
•
»
•
•
New: the first gift on a donor's record.
Renewal: a gift within 9 to 17 months of the previous membership gift.
Rejoin: any gift made 17 or more months after the previous membership gift.
Additional: gifts made from 0 to 9 months after a membership gift.
Donor Counts by Gift Type
FY06
FY07
FY08
09-10
06-10
%Chanae %Chanae
FY09
FY10
7,951
7,244
7,168
4,281
3,513
-1.0%
-10.7%
-11.5%
3,933
Renew
8,104
8,361
Rejoin
3,571
4,143
12,140
10,212
9,023
6,792
6,348
-6.5%
-47.7%
3,745
4,386
2,776
2,792
2,870
2.8%
-23.4%
27,560
27,102
24,031
20,761
19,899
-4.2%
-27.8%
New
Additional
Total
-1.6%
30,000
3,745
25,000 I
4,386
2,77$
1
20,000 1
2,792
12,140
I
10,212
15,000 ;
6,792
10,000
3,571
4,143
2,870
DAdd
9,023
4,281
6,348
a New
a Rejoin
3,933
3,513
m Renew
5,000 '
f
& tft^ t
FY06
?,1S8
FY07
FY08
FY09
FY10
Consultant Cprnmentary
Copyright 2010 Target Analytics
Confidential
PageS
Table 2
State of New Jersey Radio Stations
Valuation of Contributors Base Asset
Fiscal
Year1 Total Revenue
2011
$24,468
2012
18,917
2013
8,320
2014
3,659
2015
1,609
2016
708
2017
311
2018
137
2019
60
2020
26
2021
12
2022
5
2023
2
2024
1
2025
0
EBITDA
Margin
$24,468
18,917
8,320
3,659
1,609
708
311
137
60
26
12
5
2
1
0
Tax
$0
-
After Tax
Cash Flow
$24,468
18,917
8,320
3,659
1,609
708
311
137
60
26
12
5
2
1
0
Capital
Charges
$0
-
Total Present Value of Net Benefits:
Net Benefit
$24,468
18,917
8,320
3,659
1,609
708
311
137
60
26
12
5
2
1
0
Present Value
at 10.00%
$23,609
16,792
6,714
2,684
1,073
429
172
69
27
11
4
2
1
0
0
$51,587
Underwriters Base Asset
UNDERWRITERS BASE ASSET
The value of the Underwriters Base Asset is equal to the present value of all the net cash flows that
would be expected to be received from the underwriters base in the future, given projected future
revenues and its expected life.
To estimate the survival rate for the radio division’s underwriters base, we reviewed historical
underwriter data for NJN Radio for each fiscal year from FY 1999 through FY 2009. We did not
have sufficient data to do an actuarially sound analysis, so we instead analyzed the number of
underwriters who continued with NJN Radio in the year after they served as an underwriter in order
to estimate an annual survival rate. The results can be seen in this section of the report.
In terms of revenue, the average survival rate was 33.4%, and that is the projected survival rate that I
used as the projected annual survival rate going forward.
As seen on Table 3, I projected revenues for this underwriters contributors base through FY 2021.
This projection is my estimate of the revenues to be earned in the future from the underwriters who
were already underwriting NJN Radio, as of October 1, 2010.
Based on our knowledge of the not-for-profit radio industry and discussions with Mike Jonas, it is
our belief that non-for-profit radio stations would continue operating even if they did not receive
these contributors’ donations. Therefore, I did not deduct operating expenses or deduct contributory
asset charges for contributing assets, such as tangible assets, working capital and an assembled
workforce asset. Also, because this is an asset for a non-for-profit entity, I did not deduct any tax
payments.
The annual net benefits, which equal each year’s projected revenues, are then discounted to present
value using an after-tax discount rate of 10.00% (see Appendix B for an explanation).
BIA/Kelsey
20
Underwriters Base Asset
The present value of the discounted cash flows generated by the Underwriters Base Asset, as of
October 1, 2010, is $46,893, which is the value of this asset. The estimated remaining useful life of
this asset is about 11 years.
Fair Market Value: $46,893
BIA/Kelsey
21
Underwriters Base Asset
NJN Radio
Year
Underwriter
Count
Sum
$
# of Underwriters
that Survived
from Prev. Year
1999
5
2000
7
28,490
1
2001
9
23,500
2002
10
2003
16
2004
Underwriter
Revenue that
Survived from
Prev. Year
Revenue
Survival
%
6,897
1,170
17.0%
0
0
0.0%
38,350
5
11,000
46.8%
78,204
5
16,235
42.3%
27
194,489
10
55,510
71.0%
2005
31
205,644
11
38,734
19.9%
2006
26
125,242
9
48,652
23.7%
2007
21
104,301
6
36,678
29.3%
2008
19
135,612
9
68,373
65.6%
2009
22
103,017
3
24,540
18.1%
BIA/Kelsey
$
Average:
33.4%
Median:
26.5%
22
Table 3
State of New Jersey Radio Stations
Valuation of Underwriters Base Asset
Fiscal
Year1 Total Revenue
2011
$25,828
2012
17,236
2013
5,757
2014
1,923
2015
642
2016
214
2017
72
2018
24
2019
8
2020
3
2021
1
2022
0
EBITDA
Margin
$25,828
17,236
5,757
1,923
642
214
72
24
8
3
1
0
Tax
$0
-
After Tax
Cash Flow
$25,828
17,236
5,757
1,923
642
214
72
24
8
3
1
0
Capital
Charges
$0
-
Total Present Value of Net Benefits:
1
Fiscal Years Ending June 30.
Net Benefit
$25,828
17,236
5,757
1,923
642
214
72
24
8
3
1
0
Present Value
at 10.00%
$24,921
15,300
4,646
1,411
428
130
39
12
4
1
0
0
$46,893
EXHIBIT A
EXHIBIT A
WARA ANALYSIS
BIA/Kelsey
24
WEIGHTED AVERAGE RETURN ON ASSETS ANALYSIS
In considering the discount rates to use on the intangible assets in this report, I began by considering
the after-tax Weighted Average Cost of Capital (“WACC”) for the radio stations of NJPBA.
Because the fair market value report of the nine subject NJPBA radio stations used only a market
valuation approach, not an income valuation approach, there was no WACC determined for the radio
stations in that report.
I did a valuation of commercial radio stations and commercial radio networks in another valuation
report, as of October 1, 2010, in which an income valuation approach was used. The after-tax
WACC in that report was 8.35%. I think that is the appropriate WACC to use in this report.
I then used a Weighted Average Return on Assets (“WARA”) to reconcile the overall WACC to the
returns on the assets that constitute this business enterprise.
Weighted Average Return on Assets (“WARA”)
The WARA for the Consumer Division can be seen on Table A-4. The value-weighted after-tax
returns on assets sum to 8.350%, which is my estimated after-tax WACC.
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25
Table A-1
Weighted Average Return on Assets
Asset
Value
Tangible Assets
Percentage
of Value
After-Tax
Rate of
Return
WARA
Remaining Life
$692,921
16.14%
6.00%
0.97%
Varies by Category
2,658,000
61.93%
8.00%
4.95%
Indefinite
Contributors Base Asset
51,587
1.20%
10.00%
0.12%
14 years
Underwriters Base Asset
46,893
1.09%
10.00%
0.11%
11 years
842,599
19.63%
11.20%
2.20%
Indefinite
$4,292,000
100.00%
FCC Licenses
Goodwill
Total
BIA/Kelsey
8.35%
26
EXHIBIT B
EXHIBIT B
QUALIFICATIONS
BIA/Kelsey
27
Qualifications
QUALIFICATIONS
Qualifications
Of
William Redpath, ASA, CFA, CIPM, CPA, ABV
William Redpath is a Vice President for BIA/Kelsey, a financial and strategic consulting firm with
an expertise in the appraisal of broadcasting, cable, and telecommunications properties and
preparation of financial presentations for communications clients. Prior to joining BIA/Kelsey in
1985, Mr. Redpath was a Senior Financial Analyst with NBC in New York.
Mr. Redpath earned his B.A. degree in Economics and Political Science from Indiana University and
his M.B.A. from The University of Chicago.
After completing his formal education, Mr. Redpath was a staff auditor in the Cincinnati office of
Arthur Andersen & Co. from 1980 to 1982. Subsequent to that, he was Assistant Financial Manager
of WISH-TV, Indianapolis. He then joined the Internal Audit Department at ABC, New York, where
he worked on numerous audits, including those of WXYZ(AM) (now WXYT), WRIF(FM) and
WXYZ(TV), Detroit, after which he joined NBC.
Mr. Redpath has prepared hundreds of valuations of business enterprises, privately-held equity
interests, and purchase price allocations for financial and tax reporting purposes. He has been an
expert witness in numerous litigations. He has authored articles for the BCFM Journal and other
professional journals on intangible asset valuation. He has testified in state courts, United States
District Court and United States Bankruptcy Court on valuation matters.
Mr. Redpath is a Certified Public Accountant licensed in the Commonwealth of Virginia. He is a
member of the American Institute of Certified Public Accountants, from which he has earned the
Accredited in Business Valuation (ABV) designation. He is also an Accredited Senior Appraiser
(ASA) in Business Valuation with the American Society of Appraisers, a Chartered Financial
Analyst (CFA), and he holds the Certificate in Investment Performance Measurement (CIPM)
designation from the CFA Institute.
BIA/Kelsey
28
Qualifications
Qualifications
Of
Geoffrey C. Price
Geoffrey C. Price is a Vice President for BIA/Kelsey, a financial and strategic consulting firm
specializing in the fair market valuations, asset appraisals, strategic analyses, and business plans of
broadcast and telecommunications properties. In his current position at BIA/Kelsey, Mr. Price is
responsible for the managing and operating of the company’s nationwide leading Consulting Group.
Mr. Price has been at BIA/Kelsey since 1988 and has appraised hundreds of media and
telecommunications properties worth in aggregate in the tens of billions of dollars.
As a Vice President with BIA/Kelsey, Mr. Price has been responsible for the preparation of asset
appraisals, valuation studies, strategic consulting assignments, and litigation support for clients in
the communications and broadcast industries. He has also been responsible at BIA/Kelsey for
assisting many publicly traded and privately held broadcast companies with their valuation needs
associated with FASB 141/142. In addition, Mr. Price is part of the business development team at
BIA/Kelsey and is responsible for the client relationships with many of the largest broadcast
companies nationwide. Mr. Price’s appraisal and valuation experience is diverse, including reports
for firms in the cellular, paging, SMR, cable, print, tower, and broadcast industries.
Prior to joining BIA/Kelsey, Mr. Price was employed by ADT Security Systems, Inc. in its
Accounting Center located in Alexandria, Virginia. Mr. Price earned his B.S. degree in Finance
from Virginia Polytechnic Institute and State University in Blacksburg, Virginia. Mr. Price received
his M.B.A. from George Mason University in Fairfax, Virginia.
BIA/Kelsey
29