Quarterly report pursuant to Section 13 or 15(d)

Segments

v3.5.0.2
Segments
 9 Months Ended
Sep. 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 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.  

In the first quarter of 2016, we added an adjustment to Adjusted EBITDA, our measure of segment profitability, for cash received in excess of revenue recognized for long-term roaming arrangements ("Roaming Adjustment"). In the third quarter of 2016, we reevaluated our measure of segment profitability and decided to eliminate this adjustment due to the fact that this adjustment is not appropriate to include in non-GAAP metrics, which resulted in differences between our measure of segment profitability and disclosures of non-GAAP metrics.


The effect of removing the Roaming Adjustment from Adjusted EBITDA for the three months ended March 31, 2016 and the three and six months ended June 30, 2016 follows (amounts in thousands):
 
Wireless Segment Adjusted EBITDA
 
Adjusted EBITDA as Previously Defined
Removal of Roaming Adjustment
Adjusted EBITDA
First Quarter 2016
$
40,064

(7,500
)
32,564

Second Quarter 2016
$
40,334

(7,500
)
32,834

Six Months Ended June 30, 2016
$
80,398

(15,000
)
65,398



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 the majority 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, 2016 and 2015 follows (amounts in thousands):
 
Three Months Ended
 
Nine Months Ended
 
Wireless
 
Wireline
 
Total Reportable Segments
 
Wireless
 
Wireline
 
Total Reportable Segments
September 30, 2016
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
52,327

 
184,328

 
236,655

 
$
157,664

 
543,855

 
701,519

Adjusted EBITDA
$
32,018

 
46,167

 
78,185

 
$
97,416

 
122,915

 
220,331

 
 
 
 
 
 
 
 
 
 
 
 
September 30, 2015
 
 
 
 
 
 
 
 
 
 
 

Revenues
$
80,424

 
178,149

 
258,573

 
$
207,568

 
529,622

 
737,190

Adjusted EBITDA
$
57,404

 
39,122

 
96,526

 
$
140,518

 
119,312

 
259,830



A reconciliation of reportable segment Adjusted EBITDA to consolidated income (loss) before income taxes follows (amounts in thousands):
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2016
 
2015
 
2016
 
2015
Reportable segment Adjusted EBITDA
$
78,185

 
96,526

 
220,331

 
259,830

Less depreciation and amortization expense
(47,819
)
 
(45,157
)
 
(143,033
)
 
(135,563
)
Less share-based compensation expense
(2,810
)
 
(2,660
)
 
(7,820
)
 
(8,074
)
Less imputed interest on financed devices
(651
)
 
(268
)
 
(1,885
)
 
(438
)
Less accretion expense
(406
)
 
(191
)
 
(1,240
)
 
(992
)
Less software impairment charge
—

 
(2,571
)
 
—

 
(29,839
)
Other
(131
)
 
(206
)
 
(435
)
 
493

Consolidated operating income
26,368

 
45,473

 
65,918

 
85,417

Less other expense, net
(16,134
)
 
(19,856
)
 
(46,215
)
 
(107,361
)
Consolidated income (loss) before income taxes
$
10,234

 
25,617

 
19,703

 
(21,944
)