Annual report pursuant to Section 13 and 15(d)

Industry Segments Data

v3.6.0.2
Industry Segments Data
 12 Months Ended
Dec. 31, 2016
Segment Reporting [Abstract]  
Industry Segments Data
Industry Segments Data
We have two reportable segments, Wireless and Wireline. 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,
•Gain recorded for adjusting to fair value assets that were included as consideration paid to acquire
a fiber system, 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 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.

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 Adjusted EBITDA and reduce the Wireless segment Adjusted EBITDA.  The wireless equipment subsidy recorded by the Wireless segment was $0 million, $7.7 million, and $17.3 million for the years ended December 31, 2016, 2015 and 2014, 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.

Summarized financial information for our reportable segments for the years ended December 31, 2016, 2015 and 2014 follows (amounts in thousands):
 
Wireless
 
Wireline
 
Total Reportable Segments
2016
 
 
 
 
 
Revenues
 
 
 
 
 
Wholesale
$
208,109

 
—

 
208,109

Consumer
—

 
340,460

 
340,460

Business services
—

 
385,243

 
385,243

Total
208,109

 
725,703

 
933,812

 
 
 
 
 
 
Cost of Goods Sold
62,487

 
240,091

 
302,578

Contribution
145,622

 
485,612

 
631,234

Less SG&A
(16,439
)
 
(341,917
)
 
(358,356
)
Plus share-based compensation expense
—

 
11,043

 
11,043

Plus imputed interest on financed devices
—

 
2,557

 
2,557

Plus accretion expense
252

 
977

 
1,229

Other
—

 
337

 
337

Adjusted EBITDA
$
129,435

 
158,609

 
288,044

 
 
 
 
 
 
Capital expenditures
$
34,555

 
159,923

 
194,478

Goodwill
$
164,312

 
74,951

 
239,263

Total assets
$
601,796

 
1,464,143

 
2,065,939


 
Wireless
 
Wireline
 
Total Reportable Segments
2015
 
 
 
 
 
Revenues
 
 
 
 
 
Wholesale
$
267,676

 
—

 
267,676

Consumer
—

 
351,196

 
351,196

Business services
—

 
359,662

 
359,662

Total
267,676

 
710,858

 
978,534

 
 
 
 
 
 
Cost of Good Sold
70,899

 
251,439

 
322,338

Contribution
196,777

 
459,419

 
656,196

Less SG&A
(18,137
)
 
(320,242
)
 
(338,379
)
Plus share-based compensation expense
—

 
10,902

 
10,902

Plus imputed interest on financed devices
—

 
751

 
751

Plus accretion expense
559

 
562

 
1,121

Other expense
—

 
(240
)
 
(240
)
Adjusted EBITDA
$
179,199

 
151,152

 
330,351

 
 
 
 
 
 
Capital expenditures
$
47,892

 
128,343

 
176,235

Goodwill
$
164,312

 
74,951

 
239,263

Total assets
$
594,250

 
1,372,690

 
1,966,940

 
 
 
 
 
 
2014
 

 
 

 
 

Revenues
 
 
 
 
 
Wholesale
$
269,977

 
—

 
269,977

Consumer
—

 
288,014

 
288,014

Business Services
—

 
352,207

 
352,207

Total
269,977

 
640,221

 
910,198

 
 
 
 
 
 
Cost of Good 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 expense
—

 
(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

 
1,367,344

 
1,992,761



A reconciliation of consolidated income (loss) before income taxes to reportable segment Adjusted EBITDA follows (amounts in thousands):
Years Ended December 31,
2016
 
2015
 
2014
Consolidated income (loss) before income taxes
$
1,069

 
(27,713
)
 
69,273

Plus other expense, net
78,034

 
133,924

 
74,289

Consolidated operating income
79,103

 
106,211

 
143,562

Plus depreciation and amortization expense
193,775

 
181,767

 
170,285

Plus share-based compensation expense
11,043

 
10,902

 
8,392

Plus imputed interest on financed devices
2,557

 
751

 
—

Plus accretion expense
1,229

 
1,121

 
1,249

Plus software impairment charge
—

 
29,839

 
—

Other
337

 
(240
)
 
(372
)
Reportable segment Adjusted EBITDA
$
288,044

 
330,351

 
323,116



We earn revenues included in both the Wireless and Wireline segment from a major customer. We had
no major customers for the year ended December 31, 2016. We earned revenues from a major customer, net of discounts, of $130.8 million or 13%, and $108.3 million or 12% of total consolidated revenues for the years ended December 31, 2015, and 2014 respectively.