Quarterly report pursuant to Section 13 or 15(d)

Segments

v2.4.0.8
Segments
 9 Months Ended
Sep. 30, 2013
Segment Reporting [Abstract]  
Segments
Segments
Effective January 1, 2013, we refocused our business and now have two reportable segments, Wireless and Wireline.  The Wireless segment’s revenue is derived from wholesale wireless services.  The Wireline segment’s revenue includes all of our other revenue, specifically a full range of retail wireless, data, video and voice services to residential, local, national and global businesses, governmental entities and public and private educational institutions; wholesale data and voice services to other common carrier customers; Internet, data network and managed services to rural schools and health organizations and regulated voice services to residential and commercial customers in 61 rural communities primarily in Southwest Alaska.  This change reflects our plan to strategically focus on our wireless network and is how our chief operating decision maker now measures performance and makes resource allocation decisions.  Prior to 2013 we had operated our business under five reportable segments – Consumer, Network Access, Commercial, Managed Broadband and Regulated Operations.  The historical segment data has been reclassified to conform to the revised reportable segments.

Wireless plan fee and excess usage revenues from external customers are allocated between our Wireless and Wireline segments.  The Wireless segment records the Cost of Goods Sold related to wireless equipment sales up to an agreed-upon amount after which it is recorded in the Wireline segment.  Selling, general and administrative expenses are charged to the Wireless segment based upon a shared services agreement.  The remaining selling, general and administrative expenses are charged to the Wireline segment.

We evaluate performance and allocate resources based on earnings before depreciation and amortization expense, net interest expense, income taxes, share-based compensation expense, accretion expense, income or loss attributable to non-controlling interest, non-cash right-to-use expense 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.  We have no intersegment sales.

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.

Net assets in the Wireless segment increased substantially in the current quarter as a result of the consummation of the AWN transaction. See Note 1(d), "Acquisition" of this Form 10-Q for further discussion of the AWN transaction.

Summarized financial information for our reportable segments for the three and nine months ended September 30, 2013 and 2012 follows (amounts in thousands):

 
Three Months Ended
 
Nine Months Ended
 
Wireless
 
Wireline
 
Total Reportable Segments
 
Wireless
 
Wireline
 
Total Reportable Segments
September 30, 2013
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
68,097

 
152,330

 
220,427

 
137,493

 
458,811

 
596,304

Adjusted EBITDA
$
37,260

 
41,457

 
78,717

 
66,722

 
132,783

 
199,505

 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2012
 

 
 

 
 

 
 

 
 

 
 

Revenues
$
32,262

 
146,232

 
178,494

 
92,066

 
434,439

 
526,505

Adjusted EBITDA
$
13,194

 
46,255

 
59,449

 
38,857

 
134,842

 
173,699



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

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2013
 
2012
 
2013
 
2012
Reportable segment Adjusted EBITDA
$
78,717

 
59,449

 
199,505

 
173,699

Less depreciation and amortization
  expense
(37,466
)
 
(32,120
)
 
(105,861
)
 
(97,850
)
Less share-based compensation
  expense
(1,823
)
 
(1,395
)
 
(4,729
)
 
(3,990
)
Less non-cash contribution expense
—

 
—

 
—

 
(960
)
Less accretion expense
(178
)
 
(201
)
 
(460
)
 
(541
)
Less facility rights to use
(563
)
 
—

 
(563
)
 
—

Other
(3
)
 
(341
)
 
(453
)
 
(648
)
Consolidated operating income
38,684

 
25,392

 
87,439

 
69,710

Less other expense
(17,702
)
 
(16,599
)
 
(52,080
)
 
(50,743
)
Consolidated income before
  income tax expense
$
20,982

 
8,793

 
35,359

 
18,967