Quarterly report pursuant to Section 13 or 15(d)

Information About the Company's Operating Segments

v3.19.3
Information About the Company's Operating Segments
 9 Months Ended
Sep. 30, 2019
Segment Reporting [Abstract]  
Information About the Company's Operating Segments Information About the Company's Operating Segments

The Company, through its interests in subsidiaries and other companies, is primarily engaged in the broadband communications services industry. The Company identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA (as defined below) or total assets and (B) those equity method affiliates whose share of earnings represent 10% or more of the Company’s annual pre‑tax earnings.

The Company evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue, Adjusted OIBDA (as defined below), and subscriber metrics.
    
For the three and nine months ended September 30, 2019, the Company has identified the following subsidiary as a reportable segment:

•
GCI Holdings-provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska.

For presentation purposes the Company is providing financial information for Liberty Broadband. While the Company’s equity method investment in Liberty Broadband does not meet the reportable segment threshold defined above, the Company believes that the inclusion of such information is relevant to users of these financial statements.

•
Liberty Broadband-an equity method affiliate of the Company, accounted for at fair value, has a non‑controlling interest in Charter, and a wholly‑owned subsidiary, Skyhook Wireless, Inc. ("Skyhook"). Charter is the second largest cable operator in the United States and a leading broadband communications services company providing video, Internet and voice services. Skyhook provides a Wi‑Fi based location platform focused on providing positioning technology and contextual location intelligence solutions.

The Company’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the consolidated subsidiaries included in the segments are the same as those described in the Company’s Summary of Significant Accounting Policies in note 2 to the accompanying consolidated financial statements to the Annual Report on Form 10-K for the year ended December 31, 2018.

Performance Measures

Revenue by segment from contracts with customers, classified by customer type and significant service offerings follows:
 
Three months ended
 
Nine months ended
 
September 30,
 
September 30,
 
2019
 
2018
 
2019
 
2018
 
amounts in thousands
GCI Holdings
 
 
 
 
 
 
 
Consumer Revenue
 
 
 
 
 
 
 
Wireless
$
29,509

 
25,584

 
84,506

 
62,312

Data
42,920

 
39,652

 
125,555

 
88,921

Video
21,194

 
22,272

 
63,255

 
50,180

Voice
4,051

 
4,368

 
12,833

 
10,246

Business Revenue
 
 
 
 
 
 
 
Wireless
20,060

 
18,071

 
57,837

 
44,889

Data
69,960

 
59,585

 
201,803

 
154,239

Video
4,115

 
4,927

 
11,928

 
9,436

Voice
6,747

 
6,361

 
19,587

 
14,282

Lease, grant, and revenue from subsidies
22,472

 
24,226

 
67,914

 
55,114

Total GCI Holdings
221,028

 
205,046

 
645,218

 
489,619

Corporate and other
6,016

 
5,100

 
17,128

 
15,221

Total
$
227,044

 
210,146

 
662,346

 
504,840



Liberty Broadband revenue totaled $3.7 million and $3.5 million for the three months ended September 30, 2019 and 2018, respectively and $10.9 million and $18.7 million for the nine months ended September 30, 2019 and 2018, respectively.

The Company had gross receivables of $216 million and deferred revenue of $38 million at September 30, 2019 from contracts with customers, which amounts exclude receivables and deferred revenue arising from leases, grants, and subsidies. Our customers generally pay for services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in the accompanying condensed consolidated statements of operations as the services are provided. Changes in the contract liability balance for the Company during the nine months ended September 30, 2019 were not materially impacted by other factors.

The Company expects to recognize revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) of approximately $63 million in the remainder of 2019, $233 million in 2020, $164 million in 2021, $112 million in 2022 and $97 million in 2023 and thereafter.

The Company applies certain practical expedients as permitted under ASC 606 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, information about revenue remaining from usage based performance obligations that are recognized over time as-invoiced, or variable consideration allocated to wholly unsatisfied performance obligations.

For segment reporting purposes, the Company defines Adjusted OIBDA as revenue less cost of sales, operating expenses, and selling, general and administrative expenses (excluding stock‑based compensation). The Company believes this measure is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business' performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock‑based compensation, separately reported litigation settlements, insurance proceeds and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in
addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP.

Adjusted OIBDA is summarized as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
 
amounts in thousands
GCI Holdings
$
71,960

 
57,945

 
182,552

 
156,608

Liberty Broadband
(4,586
)
 
(2,198
)
 
(11,877
)
 
(414
)
Corporate and other
(5,382
)
 
(7,205
)
 
(17,199
)
 
(20,256
)
 
61,992

 
48,542

 
153,476

 
135,938

Eliminate Liberty Broadband
4,586

 
2,198

 
11,877

 
414

 
$
66,578

 
50,740

 
165,353

 
136,352



Other Information
 
 
September 30, 2019
 
 
Total
 
Investments
 
Capital
 
 
assets
 
in affiliates
 
expenditures
 
 
amounts in thousands
GCI Holdings
 
$
3,346,168

 
580

 
107,431

Liberty Broadband
 
12,172,047

 
12,067,329

 
75

Corporate and other
 
7,299,135

 
168,259

 
1,202

Eliminate Liberty Broadband
 
(12,172,047
)
 
(12,067,329
)
 
(75
)
Consolidated
 
$
10,645,303

 
168,839

 
108,633



The following table provides a reconciliation of Adjusted OIBDA to operating income (loss) and earnings (loss) from continuing operations before income taxes:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2019
 
2018
 
2019
 
2018
 
amounts in thousands
Adjusted OIBDA
$
66,578

 
50,740

 
165,353

 
136,352

Stock‑based compensation
(5,768
)
 
(7,761
)
 
(18,153
)
 
(20,926
)
Depreciation and amortization
(66,466
)
 
(62,848
)
 
(200,035
)
 
(143,257
)
Insurance proceeds and restructuring, net
1,482

 
—

 
(236
)
 
—

Operating income (loss)
(4,174
)
 
(19,869
)
 
(53,071
)
 
(27,831
)
Interest expense
(38,353
)
 
(37,614
)
 
(116,357
)
 
(81,304
)
Share of earnings (loss) of affiliates, net
1,921

 
10,856

 
(2,443
)
 
18,714

Realized and unrealized gains (losses) on financial instruments, net
156,165

 
495,509

 
1,844,863

 
(4,328
)
Tax Sharing Agreement
2,362

 
2,492

 
18,895

 
(25,456
)
Other, net
(540
)
 
(834
)
 
13,824

 
(982
)
Earnings (loss) from continuing operations before income taxes
$
117,381

 
450,540

 
1,705,711

 
(121,187
)