3. Discontinued Operations

On May 9, 2017 we entered into a definitive agreement to sell our Joplin, Missouri and Victoria, Texas television stations (“Television Sale”) for approximately $66.6 million, subject to certain adjustments, to Evening Telegram Company d/b/a Morgan Murphy Media. The Television Sale was completed on September 1, 2017 and the Company received net proceeds of $69.5 million which included the sales price of $66.6 million, the sale of accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of $500 thousand. The Company recognized a pretax gain of $50.8 million as a result of the Television Sale in the third quarter of 2017. The gain net of tax for the Television Sale was $29.9 million. Effective September 1, 2017, the Company used $24.2 million of the proceeds from the Television Sale to finance the acquisition of radio stations in South Carolina, which included the purchase price of $23 million, the purchase of $1.3 million in accounts receivable offset by certain closing adjustments and transactional costs of approximately $50,000 (as described in Note 9). On October 5, 2017 and November 3, 2017, the Company used $5,287,000 and $5,000,000 respectively of the proceeds from the Television Sale to pay down a portion of its Revolving Credit Facility (as defined and described in Note 4).

In accordance with authoritative guidance we have reported the results of operations of the Joplin, Missouri and Victoria, Texas television stations as discontinued operations in the accompanying consolidated financial statements. For all previously reported periods, certain amounts in the consolidated financial statements have been reclassified. All of the assets and liabilities of the Joplin, Missouri and Victoria, Texas television stations have been classified as discontinued operations and the net results of operations have been reclassified from continuing operations to discontinued operations. These were previously included in the Company’s television segment.

The following table shows the components of the results from discontinued operations associated with the Television Sale as reflected in the Company’s Consolidated Statements of Operations (in thousands):

	Year Ended December 31,
	2017 ⁽⁵⁾		2016		2015

Net operating revenue	$	14,238	$	23,636	$	21,064
Station operating expense ⁽¹⁾		9,757		14,743		14,080
Other operating (income) expense		31		(42)		32
Operating income		4,450		8,935		6,952
Interest expense ⁽²⁾		21		32		33
Other income ⁽³⁾		—		—		(417)
Income before income taxes		4,429		8,903		7,336
Pretax gain on the disposal of discontinued operations		50,842		—		—
Total pretax gain on discontinued operations		55,271		8,903		7,336
Income tax expense ⁽⁴⁾		22,800		3,627		3,068
Income from discontinued operations, net of tax	$	32,471	$	5,276	$	4,268

⁽¹⁾

No depreciation expense was recorded by the Company beginning May 9, 2017, the date the Television segment assets’ were held for sale.

⁽²⁾

Interest expense related to the Surtsey debt that is guaranteed by the Television stations. Our affiliate repaid this loan when the television stations were sold on September 1, 2017.

⁽³⁾

Other income in 2015 relates to a gain on an insurance claim.

⁽⁴⁾

The effective tax rates on pretax income from discontinued operations were approximately 41%.

⁽⁵⁾

Results of operations for the Television stations are reflected through August 31, 2017. The effective date of the sale was September 1, 2017.

The following table is a summary of the assets and liabilities of discontinued operations (in thousands):

	December 31, 2017		December 31, 2016
Major Classes of Current Assets of Discontinued Operations
Accounts receivable	$	—	$	3,868
Prepaid expenses and other current assets		—		625
Barter transactions		—		132
Total of current assets of discontinued operations	$	—	$	4,625

Major Classes of Non-Current Assets of Discontinued Operations
Property and equipment, net ⁽¹⁾	$	—	$	7,388
Broadcast licenses, net ⁽¹⁾		—		9,607
Other intangibles, deferred costs and investments, net ⁽¹⁾		—		1,053
Total of non-current assets of discontinued operations	$	—	$	18,048
Total Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	—	$	22,673

Major Classes of Current Liabilities of Discontinued Operations
Accounts payable	$	—	$	759
Barter transactions		—		163
Current portion of long term debt		—		1,078
Other liabilities ⁽¹⁾		—		971
Total of current liabilities of discontinued operations	$	—	$	2,971

Major Classes of Current Liabilities of Discontinued Operations
Other liabilities ⁽¹⁾	$	—	$	1,058
Total of non-current liabilities of discontinued operations	$	—	$	1,058
Total Liabilities Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	—	$	4,029
Net Assets Classified as Part of Discontinued Operations in the Condensed Consolidated Balance Sheets	$	—	$	18,644

(1)

For prior periods, the current and long-term classification of assets and liabilities does not change as they did not meet the held-for-sale criteria the prior periods. We closed the disposition on September 1, 2017, therefore all amounts in the current year are considered current assets or liabilities of discontinued operations.

The following table represents the components of the results from discontinued operations associated with the Television Sale as reflected in the Company’s unaudited Condensed Consolidated Statements of Cash Flows (in thousands):

	December 31, 2017		December 31, 2016		December 31, 2015

Cash paid during the period
Interest	$	21	$	32	$	33
Income taxes		23,260		2,677		1,972

Significant operating non-cash items
Depreciation and amortization ⁽¹⁾	$	445	$	1,387	$	1,399
Broadcast program rights amortization		418		628		637
Barter revenue, net		18		32		(50)
Acquisition of property and equipment		—		43		3
Loss (gain) on sale of assets		31		(42)		32
Pretax gain on television sale		50,842		—		—

Significant investing items
Acquisition of property and equipment	$	335	$	894	$	1,973
Proceeds from sale and disposal of assets		—		(59)		(3)
Net proceeds from sale of television stations ⁽²⁾		69,528		—		—
Proceeds from insurance claim		—		—		(777)

⁽¹⁾

No depreciation expense was recorded by the Company beginning May 9, 2017, the date the Television segment assets’ were held for sale.

⁽²⁾

Net proceeds from the sale of the television stations reflect the sales price of $66.6 million, the sale of accounts receivable of approximately $3.4 million, offset by certain closing adjustments and transactional costs of approximately $500 thousand.