Quarterly report pursuant to Section 13 or 15(d)

SEGMENT DATA

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SEGMENT DATA
 3 Months Ended
Mar. 31, 2015
SEGMENT DATA [Abstract]  
SEGMENT DATA

NOTE 17. SEGMENT DATA

 

FASB ASC Topic 280, Segment Reporting, requires companies to provide certain information about their operating segments. We have two reportable segments, radio broadcasting and digital media. Digital media (formerly “Internet and e-commerce”) became a reportable segment as of the first quarter of 2011 upon the realization of organic and acquisition-related revenue growth. Our acquisition of Eagle Publishing on January 10, 2014, which included Regnery Publishing, Eagle Financial Publications, Eagle Wellness, Human Events and Red State, resulted in operational changes in our business and a realignment of our operating segments. We now have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing.

 

We changed the composition of our operating segments to reflect management's view of the operating results for each segment during the fourth quarter of 2014. Under our new composition, digital revenue generated by our broadcast stations is now reported under broadcast operating revenue as the station sales team and general manager are responsible for this digital revenue under their bonus and commission structure. Digital revenue from our broadcast stations was previously reported as Internet and e-Commerce revenue. E-book revenue is now reported under Publishing revenue as sales goals and bonuses for Eagle Regnery Publishing are inclusive of sales of e-books. The sale of e-Books was previously reported as Internet & e-commerce revenue. Additionally, we have allocated specific corporate departments, such as engineering, broadcast operations, digital and publishing within their respective operating segments. Corporate expenses as revised include unallocated expenses, such as accounting and finance, human resources, and other shared functions.

 

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assesses the performance of each operating segment and determines the appropriate allocations of resources to each segment. Our operating segments do not all meet the quantitative thresholds to qualify as reportable segments; however, we have elected to disclose the results of these non-reportable operating segments as we believe this information is useful to readers of our financial statements. We continue to review our operating segment classifications to align with operational changes in our business and may make future changes as necessary.

 

We measure and evaluate our operating segments based on operating income and operating expenses that do not include allocations of costs related to corporate functions, such as accounting and finance, human resources, legal, tax and treasury; nor do they include costs such as amortization, depreciation, taxes or interest expense. Changes to our operating segments did not impact the reporting units used to test non-amortizable assets for impairment. All prior periods presented have been updated to reflect the new composition of our operating segments.

 

Segment performance, as we define it in accordance with the FASB's guidance relating to segment reporting, is not necessarily comparable to other similarly titled captions of other companies. The table below presents financial information for each operating segment as of March 31, 2014 and 2015 based on the new composition of our operating segments:

 


Broadcast   Digital Media     Publishing     Unallocated Corporate     Consolidated  
(Dollars in thousands)
Three Months Ended March 31, 2015                                  
Net revenue $ 46,539     $ 10,791     $ 4,526     $ —     $ 61,856  
Operating expenses     33,917       9,000       4,497       3,991       51,405  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on disposal of assets   $ 12,622     $ 1,791     $ 29     $ (3,991 )   $ 10,451  
Depreciation     1,951       776       168       277       3,172  
Amortization     23       1,170       136       —       1,329  
Change in the estimated fair value of contingent earn-out consideration     —       33       85       —       118  
(Gain) loss on disposal of assets     129       —       (1 )     1       129  
Net operating income (loss)   $ 10,519     $ (188 )   $ (359 )   $ (4,269 )   $ 5,703  
                                         
Three Months Ended March 31, 2014                                        
Net revenue   $ 46,769     $ 11,312     $ 4,263     $ —     $ 62,344  
Operating expenses     33,346       8,850       5,006       5,064       52,266  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on disposal of assets   $ 13,423     $ 2,462     $ (743 )   $ (5,064 )   $ 10,078  
Depreciation     1,988       753       101       287       3,129  
Amortization     28       1,278       302       —       1,608  
Change in the estimated fair value of contingent earn-out consideration     —       127       —       —       127  
Gain on disposal of assets     (117 )     —       —       —       (117 )
Net operating income (loss)   $ 11,524     $ 304     $ (1,146 )   $ (5,351 )   $ 5,331  

 

Broadcast   Digital Media     Publishing     Unallocated Corporate     Consolidated  
(Dollars in thousands)
As of March 31, 2015                                  
Inventories, net $ —     $ 248     $ 393     $ —     $ 641  
Property and equipment, net     82,317       6,962       1,873       8,226       99,378  
Broadcast licenses     386,302       —       —       —       386,302  
Goodwill     3,959       19,679       1,044       8       24,690  
Other indefinite-lived intangible assets     —       —       833       —       833  
Amortizable intangible assets, net     560       9,428       1,790       2       11,780  
                                         
As of December 31, 2014                                        
Inventories, net   $ —     $ 222     $ 350     $ —     $ 572  
Property and equipment, net     81,948       7,111       1,941       8,227       99,227  
Broadcast licenses     385,726       —       —       —       385,726  
Goodwill     3,955       19,677       1,044       8       24,684  
Other indefinite-lived intangible assets     —       —       833       —       833  
Amortizable intangible assets, net     583       9,884       1,926       2       12,395  

 

The table below presents financial information for each operating segment as of March 31, 2014 with a comparison of the results under the prior composition of our operating segments as compared to the new composition:

 

March 31, 2014

As Reported Original

(1)

   As Updated New   
(dollars in thousands)
Net Revenue by Segment:              
Net broadcast revenue $ 45,576     $ 46,769  
Net digital media revenue     12,921       11,312  
Net publishing revenue     3,847       4,263  
Total net revenue   $ 62,344     $ 62,344  
Operating expenses by segment:        
Broadcast operating expenses   $ 31,189     $ 33,346  
Digital media operating expenses     9,828       8,850  
Publishing operating expenses     4,419       5,006  
Unallocated corporate expenses     6,830       5,064  
    $ 52,266     $ 52,266  
Net operating income before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on disposal of assets   $ 10,078     $ 10,078  

 

(1)
Includes the reclassification of $11,000 of revenue share commissions to digital media operating expenses from digital media revenue to conform to current presentation.