Quarterly report pursuant to Section 13 or 15(d)

Industry Segments Data

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Industry Segments Data
 9 Months Ended
Sep. 30, 2012
Industry Segments Data [Abstract]  
Industry Segments Data [Text Block]

(6)       Industry Segments Data

Our reportable segments are business units that offer different products and are each managed separately.

 

A description of our reportable segments follows:

 

Consumer - We offer a full range of voice, video, data and wireless services to residential customers.

 

Network Access - We offer a full range of voice, data and wireless services to common carrier customers.

 

Commercial - We offer a full range of voice, video, data and wireless services to small businesses, local, national and global businesses, governmental entities and public and private educational institutions.

 

Managed Broadband - We offer data services to rural school districts, hospitals and health clinics through our SchoolAccess® and ConnectMD® initiatives and managed video conferencing.

 

Regulated Operations - We offer voice and data services to residential, business, and governmental customers in areas of rural Alaska.

       

Corporate related expenses including engineering, information technology, accounting, legal and regulatory, human resources, and other general and administrative expenses for the three and nine months ended September 30, 2012 and 2011, are allocated to our segments using segment margin for the years ended December 31, 2011 and 2010, respectively. Bad debt expense for the three and nine months ended September 30, 2012 and 2011, is allocated to our segments using a combination of specific identification and allocations based upon segment revenue for the three and nine months ended September 30, 2012 and 2011, respectively. Corporate related expenses and bad debt expense are specifically identified for our Regulated Operations segment and therefore, are not included in the allocations.

 

We evaluate performance and allocate resources based on earnings before depreciation and amortization, net interest expense, income taxes, share-based compensation expense, accretion expense, loss attributable to non-controlling interest, and non-cash contribution adjustment (“Adjusted EBITDA”). Management believes that this measure is useful to investors and other users of our financial information in evaluating operating profitability as an analytical indicator of income generated to service debt and fund capital expenditures. In addition, multiples of current or projected earnings before depreciation and amortization, net interest expense, and income taxes (“EBITDA”) are used to estimate current or prospective enterprise value. The accounting policies of the reportable segments are the same as those described in Note 1, “Business and Summary of Significant Accounting Policies” of this Form 10-Q. Intersegment sales are recorded at cost plus an agreed upon intercompany profit.

 

We earn all revenues through sales of services and products within the United States. All of our long-lived assets are located within the United States of America, except approximately 82% of our undersea fiber optic cable systems which transit international waters and all of our satellite transponders.

 

Summarized financial information for our reportable segments for the three and nine months ended September 30, 2012 and 2011, follows (amounts in thousands):

  Three months ended September 30,   Consumer Network Access Commercial Managed Broadband Regulated Operations Total Reportable Segments
  2012              
  Revenues:              
    Intersegment $ (356) 45 1,417 - 47 1,153
    External   86,807 27,475 36,208 22,685 5,319 178,494
      Total revenues   86,451 27,520 37,625 22,685 5,366 179,647
  Adjusted EBITDA $ 20,916 15,383 9,892 12,249 1,009 59,449
                     
  2011              
  Revenues:              
    Intersegment $ - - 1,382 - 4 1,386
    External   89,267 29,467 35,572 17,407 5,990 177,703
      Total revenues   89,267 29,467 36,954 17,407 5,994 179,089
  Adjusted EBITDA $ 30,373 13,729 9,117 8,844 1,038 63,101
                     
                     
                     
  Nine months ended September 30,   Consumer Network Access Commercial Managed Broadband Regulated Operations Total Reportable Segments
  2012              
  Revenues:              
    Intersegment $ - 210 4,228 - 145 4,583
    External   263,114 78,680 105,015 63,431 16,265 526,505
      Total revenues   263,114 78,890 109,243 63,431 16,410 531,088
  Adjusted EBITDA $ 69,718 41,235 26,958 32,561 3,227 173,699
                     
  2011              
  Revenues:              
    Intersegment $ - - 4,207 - 117 4,324
    External   266,238 79,715 101,617 46,041 16,958 510,569
      Total revenues   266,238 79,715 105,824 46,041 17,075 514,893
  Adjusted EBITDA $ 87,024 37,953 23,180 20,264 2,959 171,380

A reconciliation of reportable segment revenues to consolidated revenues follows (amounts in thousands):

        Three Months Ended   Nine Months Ended
        September 30,   September 30,
        2012 2011   2012 2011
  Reportable segment revenues $ 179,647 179,089   531,088 514,893
  Less intersegment revenues eliminated in consolidation   1,153 1,386   4,583 4,324
    Consolidated revenues $ 178,494 177,703   526,505 510,569

A reconciliation of reportable segment Adjusted EBITDA to consolidated income before income taxes follows (amounts in thousands):

                 
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
        2012 2011   2012 2011
  Reportable segment Adjusted EBITDA $ 59,449 63,101   173,699 171,380
  Less depreciation and amortization expense   (32,120) (30,653)   (97,850) (93,298)
  Less share-based compensation expense   (1,395) (384)   (3,990) (3,224)
  Less non-cash contribution expense   - -   (960) -
  Less net loss attributable to non-controlling interest   (177) -   (531) -
  Plus net loss (income) attributable to equity investment   (164) 59   (117) 92
  Less accretion expense   (201) (190)   (541) (456)
    Consolidated operating income   25,392 31,933   69,710 74,494
  Less other expense, net   (16,599) (16,715)   (50,743) (60,597)
    Consolidated income before income tax expense $ 8,793 15,218   18,967 13,897