| SEGMENT DATA |
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 September 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 September 30, 2017 | | | | | | | | | | | | | | | | | | Net revenue | | $ | 48,424 | | $ | 10,446 | | $ | 6,563 | | $ | | | $ | 65,433 | | | Operating expenses | | | 37,040 | | | 8,169 | | | 6,686 | | | 4,233 | | | 56,128 | | | Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets | | $ | 11,384 | | $ | 2,277 | | $ | (123) | | $ | (4,233) | | $ | 9,305 | | | Depreciation | | | 1,920 | | | 792 | | | 159 | | | 211 | | | 3,082 | | | Amortization | | | 11 | | | 860 | | | 264 | | | | | | 1,135 | | | Change in the estimated fair value of contingent earn-out consideration | | | | | | (12) | | | | | | | | | (12) | | | Net (gain) loss on the sale or disposal of assets | | | 97 | | | | | | | | | (2) | | | 95 | | | Net operating income (loss) | | $ | 9,356 | | $ | 637 | | $ | (546) | | $ | (4,442) | | $ | 5,005 | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | Net revenue | | $ | 51,052 | | $ | 11,999 | | $ | 8,221 | | $ | | | $ | 71,272 | | | Operating expenses | | | 37,434 | | | 9,172 | | | 8,020 | | | 4,147 | | | 58,773 | | | Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and net (gain) loss on the sale or disposal of assets | | $ | 13,618 | | $ | 2,827 | | $ | 201 | | $ | (4,147) | | $ | 12,499 | | | Depreciation | | | 1,753 | | | 840 | | | 174 | | | 209 | | | 2,976 | | | Amortization | | | 22 | | | 1,091 | | | 228 | | | | | | 1,341 | | | Change in the estimated fair value of contingent earn-out consideration | | | | | | (13) | | | (183) | | | | | | (196) | | | Net (gain) loss on the sale or disposal of assets | | | (633) | | | 176 | | | | | | | | | (457) | | | Net operating income (loss) | | $ | 12,476 | | $ | 733 | | $ | (18) | | $ | (4,356) | | $ | 8,835 | |
| | | | | | | | | Unallocated | | | | | | | | | Digital | | | | Corporate | | | | | | | Broadcast | | Media | | Publishing | | Expenses | | Consolidated | | | | | (Dollars in thousands) | | | Nine Months Ended September 30, 2017 | | | | | | | | | | | | | | | | | | Net revenue | | $ | 145,479 | | $ | 31,998 | | $ | 19,048 | | $ | | | $ | 196,525 | | | Operating expenses | | | 108,807 | | | 25,241 | | | 18,705 | | | 13,183 | | | 165,936 | | | Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets | | $ | 36,672 | | | 6,757 | | $ | 343 | | $ | (13,183) | | $ | 30,589 | | | Depreciation | | | 5,668 | | | 2,389 | | | 515 | | | 599 | | | 9,171 | | | Amortization | | | 46 | | | 2,494 | | | 879 | | | 1 | | | 3,420 | | | Change in the estimated fair value of contingent earn-out consideration | | | | | | (54) | | | | | | | | | (54) | | | Impairment of indefinite-lived long-term assets other than goodwill | | | | | | | | | 19 | | | | | | 19 | | | Net (gain) loss on the sale or disposal of assets | | | (399) | | | | | | (9) | | | (2) | | | (410) | | | Net operating income (loss) | | $ | 31,357 | | $ | 1,928 | | $ | (1,061) | | $ | (13,781) | | $ | 18,443 | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2016 | | | | | | | | | | | | | | | | | | Net revenue | | $ | 149,768 | | $ | 34,056 | | $ | 19,802 | | $ | | | $ | 203,626 | | | Operating expenses | | | 109,455 | | | 26,815 | | | 19,951 | | | 11,928 | | | 168,149 | | | Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration, impairments and net (gain) loss on the sale or disposal of assets | | $ | 40,313 | | $ | 7,241 | | $ | (149) | | $ | (11,928) | | $ | 35,477 | | | Depreciation | | | 5,431 | | | 2,392 | | | 489 | | | 638 | | | 8,950 | | | Amortization | | | 67 | | | 3,233 | | | 372 | | | 1 | | | 3,673 | | | Change in the estimated fair value of contingent earn-out consideration | | | | | | (119) | | | (339) | | | | | | (458) | | | Impairment of long-lived assets | | | 700 | | | | | | | | | | | | 700 | | | Net (gain) loss on the sale or disposal of assets | | | (2,175) | | | 182 | | | (21) | | | 6 | | | (2,008) | | | Net operating income (loss) | | $ | 36,290 | | $ | 1,553 | | $ | (650) | | $ | (12,573) | | $ | 24,620 | |
| | | | | Digital | | | | Unallocated | | | | | | | Broadcast | | Media | | Publishing | | Corporate | | Consolidated | | | | | (Dollars in thousands) | | | As of September 30, 2017 | | | | | | | | | | | | | | | | | | Inventories, net | | $ | | | $ | 327 | | $ | 482 | | $ | | | $ | 809 | | | Property and equipment, net | | | 86,187 | | | 6,603 | | | 1,326 | | | 8,087 | | | 102,203 | | | Broadcast licenses | | | 388,720 | | | | | | | | | | | | 388,720 | | | Goodwill | | | 3,594 | | | 20,946 | | | 1,888 | | | 8 | | | 26,436 | | | Other indefinite-lived intangible assets | | | | | | | | | 313 | | | | | | 313 | | | Amortizable intangible assets, net | | | 361 | | | 10,720 | | | 3,190 | | | 5 | | | 14,276 | | | | | | | | | | | | | | | | | | | | | 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 | |
|