Salem Media Group, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

SEGMENT DATA

SEGMENT DATA

6 Months Ended

Jun. 30, 2017

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. Unallocated corporate expenses include shared services, such as accounting and finance, human resources, legal, tax and treasury that are not directly attributable to any one of our operating segments.

During the third quarter of 2016, we reclassed Salem Consumer Products, our e-commerce business that sells books, DVD’s and editorial content developed by our on-air personalities, from our Digital Media segment to our Broadcast segment. With this reclassification, all revenue and expenses generated by on-air hosts, including broadcast programs and e-commerce product sales are consolidated to assess the financial performance of each network program.

Our operating segments reflect how our chief operating decision makers, which we define as a collective group of senior executives, assess the performance of each operating segment and determine the appropriate allocations of resources to each segment. 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 are updated to reflect the new composition of our operating segments. Segment performance, as defined by Salem, 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, 2017 and 2016 based on the new composition of our operating segments:

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated

	(Dollars in thousands)
Three Months Ended June 30, 2017
Net revenue	$	49,251	$	10,866	$	5,995	$		$	66,112
Operating expenses		35,931		8,370		5,668		3,825		53,794
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and (gain) loss on disposal of assets	$	13,320	$	2,496	$	327	$	(3,825)	$	12,318
Depreciation		1,929		820		162		198		3,109
Amortization		18		816		308		1		1,143
Change in the estimated fair value of contingent earn-out consideration				(43)						(43)
Impairment of indefinite-lived long-term assets other than goodwill
Net gain on disposal of assets		(494)				(16)				(510)
Net operating income (loss)	$	11,867	$	903	$	(127)	$	(4,024)	$	8,619

Three Months Ended June 30, 2016
Net revenue	$	49,971	$	11,047	$	6,761	$		$	67,779
Operating expenses		35,871		8,619		6,983		3,568		55,041
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment losses and (gain) loss on disposal of assets	$	14,100	$	2,428	$	(222)	$	(3,568)	$	12,738
Depreciation		1,815		785		165		217		2,982
Amortization		23		1,093		72		1		1,189
Change in the estimated fair value of contingent earn-out consideration				(36)		(98)				(134)
Impairment of long-lived assets		700								700
Net (gain) loss on disposal of assets		(1,721)		20		(3)		3		(1,701)
Net operating income (loss)	$	13,283	$	566	$	(358)	$	(3,789)	$	9,702

							Unallocated
			Digital				Corporate
	Broadcast		Media		Publishing		Expenses		Consolidated

	(Dollars in thousands)
Six Months Ended June 30, 2017
Net revenue	$	97,055	$	21,552	$	12,485	$		$	131,092
Operating expenses		71,767		17,072		12,019		8,950		109,808
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and (gain) loss on disposal of assets	$	25,288		4,480	$	466	$	(8,950)	$	21,284
Depreciation		3,748		1,597		356		388		6,089
Amortization		35		1,634		615		1		2,285
Change in the estimated fair value of contingent earn-out consideration				(42)						(42)
Impairment of indefinite-lived long-term assets other than goodwill						19				19
Net gain on disposal of assets		(496)				(9)				(505)
Net operating income (loss)	$	22,001	$	1,291	$	(515)	$	(9,339)	$	13,438

Six Months Ended June 30, 2016
Net revenue	$	98,716	$	22,057	$	11,581	$		$	132,354
Operating expenses		72,021		17,643		11,931		7,781		109,376
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairment losses and (gain) loss on disposal of assets	$	26,695	$	4,414	$	(350)	$	(7,781)	$	22,978
Depreciation		3,678		1,552		315		429		5,974
Amortization		45		2,142		144		1		2,332
Change in the estimated fair value of contingent earn-out consideration				(106)		(156)				(262)
Impairment of long-lived assets		700								700
Net (gain) loss on disposal of assets		(1,542)		6		(21)		6		(1,551)
Net operating income (loss)	$	23,814	$	820	$	(632)	$	(8,217)	$	15,785

							Unallocated
	Broadcast		Digital Media		Publishing		Corporate		Consolidated
	(Dollars in thousands)
As of June 30, 2017
Inventories, net	$		$	240	$	627	$		$	867
Property and equipment, net		85,691		6,520		1,379		8,027		101,617
Broadcast licenses		388,678								388,678
Goodwill		3,581		20,151		1,888		8		25,628
Other indefinite-lived intangible assets						313				313
Amortizable intangible assets, net		372		8,373		3,454		5		12,204

As of December 31, 2016
Inventories, net	$		$	300	$	370	$		$	670
Property and equipment, net		86,976		6,634		1,779		7,401		102,790
Broadcast licenses		388,517								388,517
Goodwill		3,581		20,136		1,888		8		25,613
Other indefinite-lived intangible assets						332				332
Amortizable intangible assets, net		407		9,927		4,069		5		14,408