Quarterly report pursuant to Section 13 or 15(d)

Segments

v3.5.0.2
Segments
 6 Months Ended
Jun. 30, 2016
Segment Reporting [Abstract]  
Segments
Segments
Our reportable segments are business units that offer different products and are each managed separately. A description of our reportable segments follows:

Wireless - We offer wholesale wireless services.  

Wireline - We provide a full range of wireless, data, video, voice, and managed services to residential customers, businesses, governmental entities, and educational and medical institutions primarily in Alaska.

We evaluate performance and allocate resources based on Adjusted EBITDA, which is defined as earnings plus cash received in excess of revenue recognized for long-term fixed roaming arrangements and imputed interest on financed devices before:
•Net interest expense,
•Income taxes,
•Depreciation and amortization expense,
•Loss on extinguishment of debt,
•Software impairment charge,
•Derivative instrument unrealized income (loss),
•Share-based compensation expense,
•Accretion expense,
•Loss attributable to non-controlling interest resulting from NMTC transactions,
•Gains and impairment losses on equity and cost method investments, and
•Other non-cash adjustments.

Management believes that this measure is useful to investors and other users of our financial information in understanding and evaluating operating performance as an analytical indicator of income generated to service debt and fund capital expenditures.  In addition, multiples of current or projected Adjusted 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.

Summarized financial information for our reportable segments for the three and six months ended June 30, 2016 and 2015 follows (amounts in thousands):
 
Three Months Ended
 
Six Months Ended
 
Wireless
 
Wireline
 
Total Reportable Segments
 
Wireless
 
Wireline
 
Total Reportable Segments
June 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
53,875

 
179,891

 
233,766

 
$
105,337

 
359,527

 
464,864

Adjusted EBITDA
$
40,334

 
38,706

 
79,040

 
$
80,398

 
76,748

 
157,146

 
 
 
 
 
 
 
 
 
 
 
 
June 30, 2015
 
 
 
 
 
 
 
 
 
 
 

Revenues
$
67,940

 
179,588

 
247,528

 
$
127,144

 
351,473

 
478,617

Adjusted EBITDA
$
45,727

 
42,274

 
88,001

 
$
83,114

 
80,190

 
163,304



A reconciliation of reportable segment Adjusted EBITDA to consolidated income (loss) before income taxes follows (amounts in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2016
 
2015
 
2016
 
2015
Reportable segment Adjusted EBITDA
$
79,040

 
88,001

 
157,146

 
163,304

Less depreciation and amortization expense
(48,072
)
 
(45,171
)
 
(95,214
)
 
(90,406
)
Less cash received in excess of revenue recognized for long-term roaming arrangements
(7,500
)
 
—

 
(15,000
)
 
—

Less share-based compensation expense
(2,683
)
 
(2,613
)
 
(5,010
)
 
(5,414
)
Less accretion expense
(442
)
 
(351
)
 
(834
)
 
(801
)
Less software impairment charge
—

 
(851
)
 
—

 
(27,268
)
Other
(812
)
 
188

 
(1,538
)
 
529

Consolidated operating income
19,531

 
39,203

 
39,550

 
39,944

Less other expense, net
(14,111
)
 
(61,253
)
 
(30,081
)
 
(87,505
)
Consolidated income (loss) before income taxes
$
5,420

 
(22,050
)
 
9,469

 
(47,561
)


We entered into new long-term roaming and backhaul agreements with our largest roaming partners. The revenue recognized for these contracts was determined by calculating the cumulative minimum cash payments and recognizing the amount evenly over the life of the contracts. In the early years of the contracts the cash received is in excess of the revenue recognized; in the later years the cash received will be less than the revenue recognized. EBITDA is adjusted for the difference between the cash received and the revenue recognized for such arrangements to ensure Adjusted EBITDA is useful to investors and other users of our financial information in understanding and evaluating operating performance.