Quarterly report pursuant to Section 13 or 15(d)

SEGMENT DATA

v3.3.0.814
SEGMENT DATA
 9 Months Ended
Sep. 30, 2015
SEGMENT DATA [Abstract]  
SEGMENT DATA

NOTE 17. SEGMENT DATA

 

FASB Codification 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 September 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 September 30, 2015                                        
Total net revenue   $  49,186     $  11,393     $  6,912     $  —     $  67,491  
Operating expenses     35,407       8,761       6,966       3,697       54,831  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets   $  13,779     $  2,632     $
 (54 )    $  (3,697 )    $  12,660  
Depreciation     1,929       838       153       216       3,136  
Amortization     23       1,171       136       —  
  1,330  
Change in the estimated fair value of contingent earn-out consideration     —       (105 )      (498 )     —       (603 ) 
(Gain) loss on the sale or disposal of assets     35       11       (57 )      8       (3 ) 
Net operating income (loss)   $  11,792     $  717     $  212     $  (3,921

)

   $  8,800  
                                         
Three Months Ended September 30, 2014                                        
Net revenue   $  48,246     $   11,503     $  9,859     $  —     $   69,608  
Operating expenses     34,402       9,018       8,252       3,880       55,552
  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and loss on the sale or disposal of assets   $  13,844     $  2,485     $   1,607     $  (3,880 )    $  14,056
  
Depreciation     1,971
       764        130        276       3,141
  
Amortization     23
       1,202        304       1       1,530
  
Change in the estimated fair value of contingent earn-out consideration     —      

58

        487       —       545
  
Loss on the sale or disposal of assets     (7 )     —       —
       —       (7 ) 
Net operating income (loss)   $   11,857     $  461     $  686     $  (4,157 )    $  8,847  

 

Broadcast  

Digital

Media

     Publishing     Unallocated
Corporate		     Consolidated  
(Dollars in thousands)
Nine Months Ended September 30, 2015                                  
Total net revenue $ 144,785     $ 33,683     $ 18,172     $ —     $ 196,640  
Operating expenses     104,511       26,528       17,932       11,206
    160,177  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets   $ 40,274     $ 7,155     $ 240     $ (11,206 )   $ 36,463  
Depreciation     5,769       2,396       488       715       9,368  
Amortization     69       3,497       407       1       3,974  
Change in the estimated fair value of contingent earn-out consideration     —       (316 )      (476 )      —       (792 ) 
(Gain) loss on the sale or disposal of assets     194       11       (58 )     9       156  
Net operating income (loss)   $ 34,242     $ 1,567
  $ (121 )   $ (11,931 )   $ 23,757  
                                         
Nine Months Ended September 30, 2014                                        
Net revenue   $ 144,144     $ 35,134     $ 21,311     $ —     $ 200,589  
Operating expenses     103,563       27,138       20,067       12,920       163,688  
Net operating income (loss) before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and loss on the sale or disposal of assets   $ 40,581     $ 7,996     $ 1,244
  $ (12,920 )   $ 36,901  
Depreciation     5,954       2,278       364       841       9,437  
Amortization     75       3,682       909       1       4,667  
Change in the estimated fair value of contingent earn-out consideration     —       275       639       —       914  
Loss on the sale or disposal of assets     214
    —       —       —       214
Net operating income (loss)   $ 34,338     $ 1,761     $ (668 )   $ (13,762 )   $ 21,669  

 

Broadcast  

Digital

Media

     Publishing     Unallocated
Corporate		     Consolidated  
(Dollars in thousands)
As of September 30, 2015                                  
Inventories, net $ —     $ 551     $ 522     $ —     $ 1,073  
Property and equipment, net     86,522       7,190       1,778       8,155       103,645  
Broadcast licenses     390,051       —       —       —       390,051  
Goodwill     3,986       19,930       1,044       8       24,968  
Other indefinite-lived intangible assets     —       —       833       —       833  
Amortizable intangible assets, net     514       10,662       1,521       1       12,698  
                                         
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 September 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 September 30, 2014   Nine Months Ended September 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   $  46,962     $  48,246   $ 140,393     $ 144,144
Net digital media revenue      14,516       11,503       41,827       35,134  
Net publishing revenue     8,130       9,859       18,369       21,311  
Total net revenue   $ 69,608     $ 69,608     $ 200,589     $ 200,589  
Operating expenses by segment:                        
Broadcast operating expenses   $  32,596     $ 34,402     $ 97,695     $ 103,563  
Digital media operating expenses      10,936       9,018       30,827       27,138  
Publishing operating expenses     6,766       8,252       17,624       20,067  
Unallocated corporate expenses     5,254       3,880       17,542       12,920  
    $  55,552     $ 55,552     $ 163,688     $ 163,688  
Net operating income before depreciation, amortization, change in the estimated fair value of contingent earn-out consideration and (gain) loss on the sale or disposal of assets   $ 8,847     $ 8,847     $ 21,669     $ 21,669  

 

(1)
Includes the reclassification of $16,000 of revenue share commissions to digital media operating expenses from digital media revenue to conform to current presentation.