NOTE 19. SEGMENT DATA

FASB ASC Topic 280, Segment Reporting, requires companies to provide certain information about their operating segments. We have three operating segments: (1) Broadcast, (2) Digital Media, and (3) Publishing, which also qualify as reportable segments. 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. We continually review our operating segment classifications to align with operational changes in our business and may make 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, which are reported as unallocated corporate expenses in our consolidated statements of operations included in this annual report on Form 10-K. We also exclude costs such as amortization, depreciation, taxes and interest expense.

Segment performance, as defined by Salem, is not necessarily comparable to other similarly titled captions of other companies.

Broadcasting

Our foundational business is radio broadcasting, which includes the ownership and operation of radio stations in large metropolitan markets. Our broadcasting segment includes our national networks and national sales firms. National companies often prefer to advertise across the United States as an efficient and cost effective way to reach their target audiences. Our national platform under which we offer radio airtime, digital campaigns and print advertisements can benefit national companies by reaching audiences throughout the United States.

Salem Radio Network^TM (“SRN^TM”), based in Dallas, Texas, develops, produces and syndicates a broad range of programming specifically targeted to Christian and family-themed talk stations, music stations and News Talk stations. SRN^TM delivers programming via satellite to approximately 3,200 affiliated radio stations throughout the United States, including several of our Salem-owned stations. SRN^TM operates five divisions, SRN^TM Talk, SRN^TM News, SRN^TM Websites, SRN^TM Satellite Services and Salem Music Network that includes Today’s Christian Music (“TCM”) and Singing News^®Radio.

Salem Media Representatives (“SMR”) is our national advertising sales firm with offices in 14 U.S. cities. SMR specializes in placing national advertising on Christian and talk formatted radio stations as well as other commercial radio station formats. SMR sells commercial airtime to national advertisers on our radio stations and through our networks, as well as for independent radio station affiliates. SMR also contracts with independent radio stations to create custom advertising campaigns for national advertisers to reach multiple markets.

During 2018, we launched Salem Surround, a national multimedia advertising agency with locations in 35 markets across the United States. Salem Surround offers a comprehensive suite of digital marketing services to develop and execute audience-based marketing strategies for clients on both the national and local level. Salem Surround specializes in digital marketing services for each of our radio stations and websites as well as provides a full-service digital marketing strategy for each of our clients.

Digital Media

Our digital media based businesses provide Christian, conservative, investing and health-themed content, e-commerce, audio and video streaming, and other resources digitally through the web. SWN websites include Christian content websites; BibleStudyTools.com, Crosswalk.com^®, GodVine.com, iBelieve.com, GodTube^®.com, OnePlace™.com, Christianity.com, GodUpdates.com, CrossCards™.com, ChristianHeadlines.com, LightSource.com, AllCreated.com, ChristianRadio.com, CCMmagazine.com, SingingNews^®.com and SouthernGospel.com and our conservative opinion websites; collectively known as Townhall Media, include Townhall.com^®, HotAir™.com, Twitchy^®.com, RedState^®.com, BearingArms.com, and ConservativeRadio.com. We also publish digital newsletters through Eagle Financial Publications, which provide market analysis and non-individualized investment strategies from financial commentators on a subscription basis.

Our church e-commerce websites, including SermonSearch™.com, ChurchStaffing.com, WorshipHouseMedia.com, SermonSpice™.com, WorshipHouseKids.com, Preaching.com, ChristianJobs.com and Youthworker.com, offer a variety of digital resources including videos, song tracks, sermon archives and job listings to pastors and Church leaders. E-commerce also includes Eagle Wellness, which sells nutritional supplements.

 

Our web content is accessible through all of our radio station websites that feature content of interest to local audiences throughout the United States.

Publishing

Our publishing operating segment includes three businesses: (1) Regnery^® Publishing, a traditional book publisher that has published dozens of bestselling books by leading conservative authors and personalities, including Ann Coulter, Newt Gingrich, David Limbaugh, Ed Klein, Mark Steyn and Dinesh D’Souza; (2) Salem Author Services, a self-publishing service for authors through Xulon Press and Mill City Press; and (3) Singing News^®, which produces and distributes a print magazine.

The table below presents financial information for each operating segment as of December 31, 2018 and 2017 based on the composition of our operating segments:

 

		Broadcast				Digital Media				Publishing				Unallocated Corporate				Consolidated
		(Dollars in thousands)
Year Ended December 31, 2018
Net revenue		$	198,502			$	42,595			$	21,686			$	—			$	262,783
Operating expenses			148,614				33,296				22,396				15,686				219,992
Net operating income (loss) before depreciation, amortization, impairments, change in estimated fair value of contingent earn-out consideration and (gain) loss on the disposition of assets		$	49,888			$	9,299			$	(710	)		$	(15,686	)		$	42,791
Depreciation			7,520				3,169				510				835				12,034
Amortization			38				5,227				926				1				6,192
Impairment of indefinite-lived long-term assets other than goodwill			2,834				—				36				—				2,870
Change in estimated fair value of contingent earn-out consideration			—				76				—				—				76
(Gain) loss on the disposition of assets			4,653				—				—				—				4,653
Operating income (loss)		$	34,843			$	827			$	(2,182	)		$	(16,522	)		$	16,966

 

		Broadcast				Digital Media				Publishing				Unallocated Corporate				Consolidated
		(Dollars in thousands)
Year Ended December 31, 2017
Net revenue		$	196,197			$	43,096			$	24,443			$	—			$	263,736
Operating expenses			145,494				33,675				24,475				16,255				219,899
Net operating income (loss) before depreciation, amortization, impairments, change in estimated fair value of contingent earn-out consideration and (gain) loss on the disposition of assets		$	50,703			$	9,421			$	(32	)		$	(16,255	)		$	43,837
Depreciation			7,754				3,166				644				805				12,369
Amortization			56				3,414				1,121				2				4,593
Impairment of indefinite-lived long-term assets other than goodwill			—				—				19				—				19
Change in estimated fair value of contingent earn-out consideration			—				(23	)			—				—				(23	)
(Gain) loss on the disposition of assets			3,898				—				(5	)			12				3,905
Operating income (loss)		$	38,995			$	2,864			$	(1,811	)		$	(17,074	)		$	22,974

 

		Broadcast				Digital Media				Publishing				Unallocated Corporate				Consolidated
		(Dollars in thousands)
As of December 31, 2018
Inventories, net		$	—			$	290			$	387			$	—			$	677
Property and equipment, net			81,427				6,190				933				7,958				96,508
Broadcast licenses			376,316				—				—				—				376,316
Goodwill			2,960				21,933				1,888				8				26,789
Other indefinite-lived intangible assets			—				—				277				—				277
Amortizable intangible assets, net			303				8,937				2,021				3				11,264
As of December 31, 2017
Inventories, net		$	—			$	313			$	417			$	—			$	730
Property and equipment, net			83,901				6,173				1,281				8,125				99,480
Broadcast licenses			380,914				—				—				—				380,914
Goodwill			3,581				20,947				1,888				8				26,424
Other indefinite-lived intangible assets			—				—				313				—				313
Amortizable intangible assets, net			351				9,801				2,947				5				13,104