Annual report pursuant to Section 13 and 15(d)

Industry Segments Data

v2.4.1.9
Industry Segments Data
 12 Months Ended
Dec. 31, 2014
Segment Reporting [Abstract]  
Industry Segments Data
Industry Segments Data
We 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 customers, businesses, governmental entities and educational institutions; wholesale data and voice services to 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 rural communities primarily in Southwest Alaska.  

Wireless plan fee and usage revenues from external customers are allocated between our Wireless and Wireline segments.  The Wireless segment recorded subsidies to the Wireline segment related to wireless equipment sales based upon equipment sales and agreed-upon subsidy rates through the AWN transaction close on July 23, 2013. Subsequent to the transaction close and through March 31, 2014, although permitted, the Wireline segment was unable to meet the requirements in order to request a wireless equipment subsidy from the Wireless segment in accordance with the AWN agreements. These subsidies, which eliminate in consolidation, increase the Wireline segment 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 and non-cash contribution adjustment (“Adjusted EBITDA”) and reduce the Wireless segment Adjusted EBITDA.  The wireless equipment subsidy recorded by the Wireless segment was $17.3 million, $12.2 million, and $23.2 million for the years ended December 31, 2014, 2013, and 2012, respectively. 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. Intercompany transactions have been pushed down to the segment level.

We evaluate performance and allocate resources based on 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-K.  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.

Summarized financial information for our reportable segments for the years ended December 31, 2014, 2013 and 2012 follows (amounts in thousands):
 
Wireless
 
Wireline
 
Total Reportable Segments
2014
 
 
 
 
 
Revenues
 
 
 
 
 
Wholesale
$
269,977

 
—

 
269,977

Consumer
—

 
288,014

 
288,014

Business Services
—

 
225,963

 
225,963

Managed Broadband
—

 
126,244

 
126,244

Total
269,977

 
640,221

 
910,198

 
 
 
 
 
 
Cost of Goods Sold
90,920

 
211,784

 
302,704

Contribution
179,057

 
428,437

 
607,494

Less SG&A
21,631

 
272,016

 
293,647

Plus share-based compensation expense
—

 
8,392

 
8,392

Plus accretion expense
733

 
516

 
1,249

Other
—

 
(372
)
 
(372
)
Adjusted EBITDA
$
158,159

 
164,957

 
323,116

 
 
 
 
 
 
Capital expenditures
$
30,243

 
145,866

 
176,109

Goodwill
$
164,312

 
65,248

 
229,560

Total assets
$
625,417

 
1,433,081

 
2,058,498


 
Wireless
 
Wireline
 
Total Reportable Segments
2013
 
 
 
 
 
Revenues
 
 
 
 
 
Wholesale
$
197,218

 
—

 
197,218

Consumer
—

 
274,805

 
274,805

Business Services
—

 
222,814

 
222,814

Managed Broadband
—

 
116,811

 
116,811

Total
197,218

 
614,430

 
811,648

 
 
 
 
 
 
Cost of Good Sold
68,086

 
212,376

 
280,462

Contribution
129,132

 
402,054

 
531,186

Less SG&A
20,030

 
251,035

 
271,065

Plus share-based compensation expense
—

 
6,638

 
6,638

Plus accretion expense
507

 
(430
)
 
77

Other expense
—

 
447

 
447

Adjusted EBITDA
$
109,609

 
157,674

 
267,283

 
 
 
 
 
 
Capital expenditures
$
28,156

 
152,398

 
180,554

Goodwill
$
155,445

 
63,596

 
219,041

Total assets
$
624,740

 
1,387,067

 
2,011,807

 
 
 
 
 
 
2012
 

 
 

 
 

Revenues
 
 
 
 
 
Wholesale
$
124,745

 
—

 
124,745

Consumer
—

 
269,357

 
269,357

Business Services
—

 
207,892

 
207,892

Managed Broadband
—

 
108,187

 
108,187

Total
124,745

 
585,436

 
710,181

 
 
 
 
 
 
Cost of Good Sold
58,737

 
188,764

 
247,501

Contribution
66,008

 
396,672

 
462,680

Less SG&A
15,475

 
227,773

 
243,248

Plus share-based compensation expense
—

 
5,040

 
5,040

Plus non-cash contribution expense
—

 
960

 
960

Plus accretion expense
269

 
239

 
508

Other expense
—

 
869

 
869

Adjusted EBITDA
$
50,802

 
176,007

 
226,809



Effective January 1, 2013, we refocused our business and determined that we have two reportable segments, Wireless and Wireline. Due to our segment change in 2013, capital expenditures and total assets by segment for 2012 are not reported as it is impracticable to allocate our historical balance sheets.


A reconciliation of reportable segment Adjusted EBITDA to consolidated income before income taxes follows (amounts in thousands):
Years Ended December 31,
2014
 
2013
 
2012
Reportable segment Adjusted EBITDA
$
323,116

 
267,283

 
226,809

Less depreciation and amortization expense
(170,285
)
 
(147,259
)
 
(130,452
)
Less share-based compensation expense
(8,392
)
 
(6,638
)
 
(5,040
)
Less non-cash contribution expense
—

 
—

 
(960
)
Less accretion expense
(1,249
)
 
(77
)
 
(508
)
Other
372

 
(447
)
 
(869
)
Consolidated operating income
143,562

 
112,862

 
88,980

Less other expense, net
(74,289
)
 
(70,178
)
 
(67,730
)
Consolidated income before income tax expense
$
69,273

 
42,684

 
21,250



We earn revenues included in both the Wireless and Wireline segment from a major customer. We earned revenues from our major customer, net of discounts, of $108.3 million or 12% of total consolidated revenues for the year ended December 31, 2014. We had no major customers for the years ended December 31, 2013 and 2012.