Quarterly report pursuant to Section 13 or 15(d)

SEGMENT DATA

v3.2.0.727
SEGMENT DATA
 6 Months Ended
Jun. 30, 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 June 30, 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 June 30, 2015                                        
Net revenue   $  49,060     $  11,499     $  6,734     $  —     $  67,293  
Operating expenses     35,187       8,767       6,469       3,518       53,941  
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   $  13,873     $  2,732     $
 265     $  (3,518 )    $  13,352  
Depreciation     1,889       782       167       222       3,060  
Amortization     23       1,156       135       1       1,315  
Change in the estimated fair value of contingent earn-out consideration     —       (244 )      (63  )     —       (307 ) 
Loss on disposal of assets     30       —       —       —       30  
Net operating income (loss)   $  11,931     $  1,038     $  26     $  (3,741

) 

   $  9,254  
                                         
Three Months Ended June 30, 2014                                        
Net revenue   $  49,129     $   12,319     $   7,189     $  —     $   68,637  
Operating expenses     35,815        9,270        6,809        3,976       55,870
  
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   $  13,314     $   3,049     $   380     $  (3,976 )    $  12,767
  
Depreciation     1,995
        761        133        278       3,167
  
Amortization     24
        1,202        303       —       1,529
  
Change in the estimated fair value of contingent earn-out consideration     —      

90

        152       —       242
  
Loss on disposal of assets     338       —       —
       —       338  
Net operating income (loss)   $   10,957     $   996     $  (208 )    $  (4,254 )    $  7,491  

 

Broadcast   Digital Media     Publishing     Unallocated
Corporate		     Consolidated  
(Dollars in thousands)
Six Months Ended June 30, 2015                                  
Net revenue $ 95,599     $ 22,290     $ 11,260     $ —     $ 129,149  
Operating expenses     69,104       17,767       10,966       7,509
    105,346  
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   $ 26,495     $ 4,523     $ 294     $ (7,509 )   $ 23,803  
Depreciation     3,840       1,558       335       499       6,232  
Amortization     46       2,326       271       1       2,644  
Change in the estimated fair value of contingent earn-out consideration     —       (211 )      22       —       (189 ) 
(Gain) loss on disposal of assets     159       —       (1 )     1       159  
Net operating income (loss)   $ 22,450     $ 850
  $ (333 )   $ (8,010 )   $ 14,957  
                                         
Six Months Ended June 30, 2014                                        
Net revenue   $ 95,898     $ 23,631     $ 11,452     $ —     $ 130,981  
Operating expenses     69,161       18,120       11,815       9,040       108,136  
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   $ 26,737     $ 5,511     $ (363 )   $ (9,040 )   $ 22,845  
Depreciation     3,983       1,514       234       565       6,296  
Amortization     52       2,480       605       —       3,137  
Change in the estimated fair value of contingent earn-out consideration     —       217       152       —       369  
Loss on disposal of assets     221
    —       —       —       221
Net operating income (loss)   $ 22,481     $ 1,300     $ (1,354 )   $ (9,605 )   $ 12,822  

 

Broadcast   Digital Media     Publishing     Unallocated
Corporate		     Consolidated  
(Dollars in thousands)
As of June 30, 2015                                  
Inventories, net $ —     $ 402     $ 456     $ —     $ 858  
Property and equipment, net     84,616       7,180       1,830       8,217       101,843  
Broadcast licenses     387,367       —       —       —       387,367  
Goodwill     3,969       19,795       1,044       8       24,816  
Other indefinite-lived intangible assets     —       —       833       —       833  
Amortizable intangible assets, net     537       9,148       1,656       2       11,343  
                                         
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 June 30, 2014 with a comparison of the results under the prior composition of our operating segments as compared to the new composition:

 

   Three Months Ended June 30, 2014   Six Months Ended June 30, 2014
  As Reported
Original (1) 		    As Updated
New		  

As Reported
Original (1)

   As Updated New 
  (Dollars in thousands)     
Net Revenue by Segment:    
                         
Net broadcast revenue   $  47,855      $  49,129   $ 93,431     $ 95,898
Net digital media revenue      14,390        12,319       27,300       23,631  
Net publishing revenue      6,392        7,189       10,250       11,452  
Total net revenue   $  68,637     $  68,637     $ 130,981     $ 130,981  
Operating expenses by segment:                        
Broadcast operating expenses   $  33,910     $  35,815     $ 65,099     $ 69,161  
Digital media operating expenses      10,063        9,270       19,891       18,120  
Publishing operating expenses      6,439        6,809       10,858       11,815  
Unallocated corporate expenses      5,458        3,976       12,288       9,040  
    $   55,870     $  55,870     $ 108,136     $ 108,136  
Net operating income before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on disposal of assets   $  7,491     $  7,491     $ 12,822     $ 12,822  

 

(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.