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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 8/05/22 Cable One, Inc. 10-Q 6/30/22 90:9.8M RDG Filings/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 1.85M
2: EX-31.1 Certification -- §302 - SOA'02 HTML 30K
3: EX-31.2 Certification -- §302 - SOA'02 HTML 31K
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10: R1 Document And Entity Information HTML 78K
11: R2 Condensed Consolidated Balance Sheets (Unaudited) HTML 130K
12: R3 Condensed Consolidated Balance Sheets (Unaudited) HTML 44K
(Parentheticals)
13: R4 Condensed Consolidated Statement of Operations and HTML 107K
Comprehensive Income (Unaudited)
14: R5 Condensed Consolidated Statements of Stockholders' HTML 86K
Equity (Unaudited)
15: R6 Condensed Consolidated Statements of Stockholders' HTML 27K
Equity (Unaudited) (Parentheticals)
16: R7 Condensed Consolidated Statements of Cash Flows HTML 129K
(Unaudited)
17: R8 Note 1 - Description of Business and Basis of HTML 39K
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18: R9 Note 2 - Acquisitions HTML 79K
19: R10 Note 3 - Revenues HTML 51K
20: R11 Note 4 - Operating Assets and Liabilities HTML 92K
21: R12 Note 5 - Equity Investments HTML 74K
22: R13 Note 6 - Property, Plant and Equipment HTML 42K
23: R14 Note 7 - Goodwill and Intangible Assets HTML 74K
24: R15 Note 8 - Debt HTML 155K
25: R16 Note 9 - Interest Rate Swaps HTML 68K
26: R17 Note 10 - Fair Value Measurements HTML 62K
27: R18 Note 11 - Stockholders' Equity HTML 35K
28: R19 Note 12 - Equity-based Compensation HTML 79K
29: R20 Note 13 - Income Taxes HTML 31K
30: R21 Note 14 - Other Income and Expense HTML 41K
31: R22 Note 15 - Net Income Per Common Share HTML 58K
32: R23 Note 16 - Commitments and Contingencies HTML 32K
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43: R34 Note 14 - Other Income and Expense (Tables) HTML 40K
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Price Consideration (Details)
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50: R41 Note 3 - Revenues - Revenues by Product Line HTML 43K
(Details)
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52: R43 Note 4 - Operating Assets and Liabilities - HTML 32K
Summary of Accounts Receivable (Details)
53: R44 Note 4 - Operating Assets and Liabilities - HTML 34K
Allowance for Doubtful Accounts (Details)
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Prepaid and Other Current Assets (Details)
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Noncurrent Assets (Details)
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| Page | (sequential) | (alphabetic) | ↑Top | ||
|---|---|---|---|---|---|
| 1 | 1st Page – Filing Submission | ||||
| " | Table of Contents | ||||
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM i 10-Q
| (Mark One) |
| i ☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended i June 30, 2022
or
| i ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____ to _____
Commission File Number: i 001-36863
Cable One, Inc.
(Exact name of registrant as specified in its charter)
| i Delaware | i 13-3060083 | |
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
| i 210 E. Earll Drive, i Phoenix, i Arizona | i 85012 | |
| (Address of Principal Executive Offices) | (Zip Code) | |
( i 602) i 364-6000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||
| i Common Stock, par value $0.01 | i CABO | i New York Stock Exchange |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. i Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). i Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| i Large accelerated filer | ☑ | Accelerated filer | ☐ | |
| Non-accelerated filer | ☐ | Smaller reporting company | i ☐ | |
| Emerging growth company | i ☐ | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes i ☐ No ☑
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:
| Description of Class | Shares Outstanding as of July 29, 2022 |
| Common stock, par value $0.01 | i 5,879,342 |
FORM 10-Q
| PART I: FINANCIAL INFORMATION | 1 | |
| Item 1. | Condensed Consolidated Financial Statements | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 37 |
| Item 4. | Controls and Procedures | 37 |
| PART II: OTHER INFORMATION | 38 | |
| Item 1. | Legal Proceedings | 38 |
| Item 1A. | Risk Factors | 38 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 38 |
| Item 3. | Defaults Upon Senior Securities | 38 |
| Item 4. | Mine Safety Disclosures | 38 |
| Item 5. | Other Information | 38 |
| Item 6. | Exhibits | 39 |
| SIGNATURES | 40 | |
References herein to “Cable One,” “us,” “our,” “we” or the “Company” refer to Cable One, Inc., together with its wholly owned subsidiaries.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This document contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business, strategy, acquisitions and strategic investments, dividend policy, financial results and financial condition. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors, which are discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”):
| ● |
the duration and severity of the COVID-19 pandemic and its effects on our business, financial condition, results of operations and cash flows; |
| ● |
rising levels of competition from historical and new entrants in our markets; |
| ● |
recent and future changes in technology; |
| ● |
our ability to continue to grow our business services products; |
| ● |
increases in programming costs and retransmission fees; |
| ● |
our ability to obtain hardware, software and operational support from vendors; |
| ● |
risks that we may fail to realize the benefits anticipated as a result of our purchase of the remaining interests in Hargray Acquisition Holdings, LLC (“Hargray”) that we did not already own (the “Hargray Acquisition”); |
| ● |
risks relating to existing or future acquisitions and strategic investments by us; |
| ● |
risks that the implementation of our new enterprise resource planning system disrupts business operations; |
| ● |
the integrity and security of our network and information systems; |
| ● |
the impact of possible security breaches and other disruptions, including cyber-attacks; |
| ● |
our failure to obtain necessary intellectual and proprietary rights to operate our business and the risk of intellectual property claims and litigation against us; |
| ● |
legislative or regulatory efforts to impose network neutrality and other new requirements on our data services; |
| ● |
additional regulation of our video and voice services; |
| ● |
our ability to renew cable system franchises; |
| ● |
increases in pole attachment costs; |
| ● |
changes in local governmental franchising authority and broadcast carriage regulations; |
| ● |
the potential adverse effect of our level of indebtedness on our business, financial condition or results of operations and cash flows; |
| ● |
the restrictions the terms of our indebtedness place on our business and corporate actions; |
| ● |
the possibility that interest rates will continue to rise, causing our obligations to service our variable rate indebtedness to increase significantly; |
|
| ● | the transition away from the London Interbank Offered Rate ("LIBOR") and the adoption of alternative reference rates; |
| ● |
risks associated with our convertible indebtedness; |
| ● |
our ability to continue to pay dividends; |
| ● |
provisions in our charter, by-laws and Delaware law that could discourage takeovers and limit the judicial forum for certain disputes; |
| ● |
adverse economic conditions, labor shortages, supply chain disruptions and changes in rates of inflation; |
|
| ● | lower demand for our residential data and business services; |
| ● |
fluctuations in our stock price; |
| ● |
dilution from equity awards, convertible indebtedness and potential future convertible debt and stock issuances; |
| ● |
damage to our reputation or brand image; |
| ● |
our ability to retain key employees (whom we refer to as associates); |
| ● |
our ability to incur future indebtedness; |
| ● |
provisions in our charter that could limit the liabilities for directors; and |
| ● |
the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to those described under "Risk Factors" in our 2021 Form 10-K. |
Any forward-looking statements made by us in this document speak only as of the date on which they are made. We are under no obligation, and expressly disclaim any obligation, except as required by law, to update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CABLE ONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
| (dollars in thousands, except par values) | ||||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | $ | i 279,978 | $ | i 388,802 | ||||
| Accounts receivable, net | i 63,073 | i 56,253 | ||||||
| Income taxes receivable | i 13,659 | i 24,193 | ||||||
| Prepaid and other current assets | i 39,311 | i 31,705 | ||||||
| Total Current Assets | i 396,021 | i 500,953 | ||||||
| Equity investments | i 1,185,518 | i 727,565 | ||||||
| Property, plant and equipment, net | i 1,631,251 | i 1,854,104 | ||||||
| Intangible assets, net | i 2,708,895 | i 2,861,137 | ||||||
| Goodwill | i 928,947 | i 967,913 | ||||||
| Other noncurrent assets | i 44,444 | i 42,322 | ||||||
| Total Assets | $ | i 6,895,076 | $ | i 6,953,994 | ||||
| Liabilities and Stockholders' Equity | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | i 164,780 | $ | i 203,387 | ||||
| Deferred revenue | i 23,113 | i 26,851 | ||||||
| Current portion of long-term debt | i 47,374 | i 38,837 | ||||||
| Total Current Liabilities | i 235,267 | i 269,075 | ||||||
| Long-term debt | i 3,778,181 | i 3,799,500 | ||||||
| Deferred income taxes | i 915,494 | i 854,156 | ||||||
| Interest rate swap liability | i - | i 81,627 | ||||||
| Other noncurrent liabilities | i 60,630 | i 156,541 | ||||||
| Total Liabilities | i 4,989,572 | i 5,160,899 | ||||||
| Commitments and contingencies (refer to note 16) | ||||||||
| Stockholders' Equity | ||||||||
| Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding) | i - | i - | ||||||
| Common stock ($0.01 par value; 40,000,000 shares authorized; 6,175,399 shares issued; and 5,916,571 and 6,046,362 shares outstanding as of June 30, 2022 and December 31, 2021, respectively) | i 62 | i 62 | ||||||
| Additional paid-in capital | i 566,796 | i 555,640 | ||||||
| Retained earnings | i 1,664,176 | i 1,456,543 | ||||||
| Accumulated other comprehensive income (loss) | i 7,255 | ( i 82,795 | ) | |||||
| Treasury stock, at cost (258,828 and 129,037 shares held as of June 30, 2022 and December 31, 2021, respectively) | ( i 332,785 | ) | ( i 136,355 | ) | ||||
| Total Stockholders' Equity | i 1,905,504 | i 1,793,095 | ||||||
| Total Liabilities and Stockholders' Equity | $ | i 6,895,076 | $ | i 6,953,994 | ||||
See accompanying notes to the condensed consolidated financial statements.
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (dollars in thousands, except per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenues | $ | i 429,085 | $ | i 401,749 | $ | i 855,811 | $ | i 743,011 | ||||||||
| Costs and Expenses: | ||||||||||||||||
| Operating (excluding depreciation and amortization) | i 118,393 | i 112,350 | i 237,812 | i 213,814 | ||||||||||||
| Selling, general and administrative | i 90,787 | i 88,017 | i 178,553 | i 157,059 | ||||||||||||
| Depreciation and amortization | i 88,423 | i 84,915 | i 176,343 | i 153,445 | ||||||||||||
| (Gain) loss on asset sales and disposals, net | i 2,173 | i 1,058 | i 4,663 | i 938 | ||||||||||||
| (Gain) loss on sales of businesses | i 8,253 | i - | ( i 13,833 | ) | i - | |||||||||||
| Total Costs and Expenses | i 308,029 | i 286,340 | i 583,538 | i 525,256 | ||||||||||||
| Income from operations | i 121,056 | i 115,409 | i 272,273 | i 217,755 | ||||||||||||
| Interest expense | ( i 32,080 | ) | ( i 28,947 | ) | ( i 62,160 | ) | ( i 52,528 | ) | ||||||||
| Other income (expense), net | i 8,066 | i 12,149 | i 96,126 | i 20,249 | ||||||||||||
| Income before income taxes and equity method investment income (loss), net | i 97,042 | i 98,611 | i 306,239 | i 185,476 | ||||||||||||
| Income tax provision (benefit) | i 22,773 | ( i 8,616 | ) | i 64,274 | i 9,099 | |||||||||||
| Income before equity method investment income (loss), net | i 74,269 | i 107,227 | i 241,965 | i 176,377 | ||||||||||||
| Equity method investment income (loss), net | ( i 5,024 | ) | ( i 1,074 | ) | ( i 1,244 | ) | ( i 1,642 | ) | ||||||||
| Net income | $ | i 69,245 | $ | i 106,153 | $ | i 240,721 | $ | i 174,735 | ||||||||
| Net Income per Common Share: | ||||||||||||||||
| Basic | $ | i 11.64 | $ | i 17.65 | $ | i 40.24 | $ | i 29.06 | ||||||||
| Diluted | $ | i 11.11 | $ | i 16.68 | $ | i 38.05 | $ | i 28.00 | ||||||||
| Weighted Average Common Shares Outstanding: | ||||||||||||||||
| Basic | i 5,946,507 | i 6,014,351 | i 5,982,494 | i 6,013,382 | ||||||||||||
| Diluted | i 6,369,649 | i 6,455,817 | i 6,407,106 | i 6,312,843 | ||||||||||||
| Unrealized gain (loss) on cash flow hedges and other, net of tax | $ | i 32,646 | $ | ( i 16,021 | ) | $ | i 90,050 | $ | i 39,446 | |||||||
| Comprehensive income | $ | i 101,891 | $ | i 90,132 | $ | i 330,771 | $ | i 214,181 | ||||||||
See accompanying notes to the condensed consolidated financial statements.
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
| Additional | Accumulated Other | Treasury | Total | |||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Stock, | Stockholders’ | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | Shares | Amount | Capital | Earnings | Gain (Loss) | at cost | Equity | |||||||||||||||||||||
| Balance at March 31, 2022 | i 6,011,790 | $ | i 62 | $ | i 560,845 | $ | i 1,611,357 | $ | ( i 25,391 | ) | $ | ( i 210,726 | ) | $ | i 1,936,147 | |||||||||||||
| Net income | - | - | - | i 69,245 | - | - | i 69,245 | |||||||||||||||||||||
| Unrealized gain on cash flow hedges and other, net of tax | - | - | - | - | i 32,646 | - | i 32,646 | |||||||||||||||||||||
| Equity-based compensation | - | - | i 5,951 | - | - | - | i 5,951 | |||||||||||||||||||||
| Issuance of equity awards, net of forfeitures | i 647 | i - | i - | i - | i - | i - | i - | |||||||||||||||||||||
| Repurchases of common stock | ( i 95,837 | ) | i - | i - | i - | i - | ( i 122,013 | ) | ( i 122,013 | ) | ||||||||||||||||||
| Withholding tax for equity awards | ( i 29 | ) | - | - | - | - | ( i 46 | ) | ( i 46 | ) | ||||||||||||||||||
| Dividends paid to stockholders ($2.75 per common share) | - | - | - | ( i 16,426 | ) | - | - | ( i 16,426 | ) | |||||||||||||||||||
| Balance at June 30, 2022 | i 5,916,571 | $ | i 62 | $ | i 566,796 | $ | i 1,664,176 | $ | i 7,255 | $ | ( i 332,785 | ) | $ | i 1,905,504 | ||||||||||||||
| Additional | Accumulated Other | Treasury | Total | |||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Stock, | Stockholders’ | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | Shares | Amount | Capital | Earnings | Loss | at cost | Equity | |||||||||||||||||||||
| Balance at March 31, 2021 | i 6,034,609 | $ | i 62 | $ | i 539,713 | $ | i 1,281,667 | $ | ( i 85,216 | ) | $ | ( i 135,579 | ) | $ | i 1,600,647 | |||||||||||||
| Net income | - | - | - | i 106,153 | - | - | i 106,153 | |||||||||||||||||||||
| Unrealized loss on cash flow hedges and other, net of tax | - | i - | i - | i - | ( i 16,021 | ) | i - | ( i 16,021 | ) | |||||||||||||||||||
| Equity-based compensation | - | - | i 5,279 | - | - | - | i 5,279 | |||||||||||||||||||||
| Issuance of equity awards, net of forfeitures | i 2,037 | i - | i - | i - | i - | i - | i - | |||||||||||||||||||||
| Withholding tax for equity awards | ( i 64 | ) | - | - | - | - | ( i 117 | ) | ( i 117 | ) | ||||||||||||||||||
| Dividends paid to stockholders ($2.50 per common share) | - | - | - | ( i 15,096 | ) | - | - | ( i 15,096 | ) | |||||||||||||||||||
| Balance at June 30, 2021 | i 6,036,582 | $ | i 62 | $ | i 544,992 | $ | i 1,372,724 | $ | ( i 101,237 | ) | $ | ( i 135,696 | ) | $ | i 1,680,845 | |||||||||||||
| Additional | Accumulated Other | Treasury | Total | |||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Stock, | Stockholders’ | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | Shares | Amount | Capital | Earnings | Gain (Loss) | at cost | Equity | |||||||||||||||||||||
| Balance at December 31, 2021 | i 6,046,362 | $ | i 62 | $ | i 555,640 | $ | i 1,456,543 | $ | ( i 82,795 | ) | $ | ( i 136,355 | ) | $ | i 1,793,095 | |||||||||||||
| Net income | - | - | - | i 240,721 | - | - | i 240,721 | |||||||||||||||||||||
| Unrealized gain on cash flow hedges and other, net of tax | - | - | - | - | i 90,050 | - | i 90,050 | |||||||||||||||||||||
| Equity-based compensation | - | - | i 11,156 | - | - | - | i 11,156 | |||||||||||||||||||||
| Issuance of equity awards, net of forfeitures | i 16,556 | i - | i - | i - | i - | i - | i - | |||||||||||||||||||||
| Repurchases of common stock | ( i 143,637 | ) | i - | i - | i - | i - | ( i 191,709 | ) | ( i 191,709 | ) | ||||||||||||||||||
| Withholding tax for equity awards | ( i 2,710 | ) | - | - | - | - | ( i 4,721 | ) | ( i 4,721 | ) | ||||||||||||||||||
| Dividends paid to stockholders ($5.50 per common share) | - | - | - | ( i 33,088 | ) | - | - | ( i 33,088 | ) | |||||||||||||||||||
| Balance at June 30, 2022 | i 5,916,571 | $ | i 62 | $ | i 566,796 | $ | i 1,664,176 | $ | i 7,255 | $ | ( i 332,785 | ) | $ | i 1,905,504 | ||||||||||||||
| Additional | Accumulated Other | Treasury | Total | |||||||||||||||||||||||||
| Common Stock | Paid-In | Retained | Comprehensive | Stock, | Stockholders’ | |||||||||||||||||||||||
| (dollars in thousands, except per share data) | Shares | Amount | Capital | Earnings | Loss | at cost | Equity | |||||||||||||||||||||
| Balance at December 31, 2020 | i 6,027,704 | $ | i 62 | $ | i 535,586 | $ | i 1,228,172 | $ | ( i 140,683 | ) | $ | ( i 127,838 | ) | $ | i 1,495,299 | |||||||||||||
| Net income | - | - | - | i 174,735 | - | - | i 174,735 | |||||||||||||||||||||
| Unrealized gain on cash flow hedges and other, net of tax | - | - | - | - | i 39,446 | - | i 39,446 | |||||||||||||||||||||
| Equity-based compensation | - | - | i 9,406 | - | - | - | i 9,406 | |||||||||||||||||||||
| Issuance of equity awards, net of forfeitures | i 12,435 | i - | i - | i - | i - | i - | i - | |||||||||||||||||||||
| Withholding tax for equity awards | ( i 3,557 | ) | - | - | - | - | ( i 7,858 | ) | ( i 7,858 | ) | ||||||||||||||||||
| Dividends paid to stockholders ($5.00 per common share) | - | - | - | ( i 30,183 | ) | - | - | ( i 30,183 | ) | |||||||||||||||||||
| Balance at June 30, 2021 | i 6,036,582 | $ | i 62 | $ | i 544,992 | $ | i 1,372,724 | $ | ( i 101,237 | ) | $ | ( i 135,696 | ) | $ | i 1,680,845 | |||||||||||||
See accompanying notes to the condensed consolidated financial statements.
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Six Months Ended June 30, | ||||||||
| (in thousands) | 2022 | 2021 | ||||||
| Cash flows from operating activities: | ||||||||
| Net income | $ | i 240,721 | $ | i 174,735 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | i 176,343 | i 153,445 | ||||||
| Non-cash interest expense | i 4,770 | i 4,307 | ||||||
| Equity-based compensation | i 11,156 | i 9,406 | ||||||
| Write-off of debt issuance costs | i - | i 2,131 | ||||||
| Change in deferred income taxes | i 29,582 | ( i 10,900 | ) | |||||
| (Gain) loss on asset sales and disposals, net | i 4,663 | i 938 | ||||||
| (Gain) loss on sales of businesses | ( i 13,833 | ) | i - | |||||
| Equity method investment (income) loss, net | i 1,244 | i 1,642 | ||||||
| Fair value adjustments | ( i 90,724 | ) | i 15,790 | |||||
| Gain on step acquisition | i - | ( i 33,406 | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | ( i 10,149 | ) | i 1,574 | |||||
| Income taxes receivable | i 10,534 | i 24,218 | ||||||
| Prepaid and other current assets | ( i 7,219 | ) | ( i 7,134 | ) | ||||
| Accounts payable and accrued liabilities | ( i 6,719 | ) | i 9,787 | |||||
| Deferred revenue | ( i 982 | ) | i 2,521 | |||||
| Other | i 3,699 | ( i 1,429 | ) | |||||
| Net cash provided by operating activities | i 353,086 | i 347,625 | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of business, net of cash acquired | i - | ( i 1,953,643 | ) | |||||
| Cash paid for debt and equity investments | ( i 23,075 | ) | i - | |||||
| Capital expenditures | ( i 206,737 | ) | ( i 161,165 | ) | ||||
| Change in accrued expenses related to capital expenditures | i 5,094 | i 8,616 | ||||||
| Proceeds from sales of property, plant and equipment | i 319 | i 229 | ||||||
| Proceeds from sales of operations | i 9,227 | i - | ||||||
| Net cash used in investing activities | ( i 215,172 | ) | ( i 2,105,963 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from long-term debt borrowings | i - | i 1,695,850 | ||||||
| Payment of debt issuance costs | i - | ( i 13,741 | ) | |||||
| Payments on long-term debt | ( i 17,220 | ) | ( i 13,159 | ) | ||||
| Repurchases of common stock | ( i 191,709 | ) | i - | |||||
| Payment of withholding tax for equity awards | ( i 4,721 | ) | ( i 7,858 | ) | ||||
| Dividends paid to stockholders | ( i 33,088 | ) | ( i 30,183 | ) | ||||
| Deposits received for asset construction | i - | i 1,485 | ||||||
| Net cash provided by (used in) financing activities | ( i 246,738 | ) | i 1,632,394 | |||||
| Decrease in cash and cash equivalents | ( i 108,824 | ) | ( i 125,944 | ) | ||||
| Cash and cash equivalents, beginning of period | i 388,802 | i 574,909 | ||||||
| Cash and cash equivalents, end of period | $ | i 279,978 | $ | i 448,965 | ||||
| Supplemental cash flow disclosures: | ||||||||
| Cash paid for interest, net of capitalized interest | $ | i 57,343 | $ | i 46,950 | ||||
| Cash paid for income taxes, net of refunds received | $ | i 24,193 | $ | ( i 4,240 | ) | |||
See accompanying notes to the condensed consolidated financial statements.
CABLE ONE, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business. Cable One is a fully integrated provider of data, video and voice services to residential and business customers in i 24 Western, Midwestern and Southern U.S. states. Cable One provided service to approximately i 1.1 million residential and business customers, of which approximately i 1,059,000 subscribed to data services, i 221,000 subscribed to video services and i 140,000 subscribed to voice services, as of June 30, 2022.
On October 1, 2020, the Company contributed its Anniston, Alabama system (the “Anniston System”) to Hargray in exchange for an approximately i 15% equity interest in Hargray on a fully diluted basis. On May 3, 2021, the Company acquired the remaining approximately i 85% equity interest in Hargray that it did not already own for an approximately $ i 2.0 billion cash purchase price, which implied a $ i 2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis. The all-cash transaction was funded through a combination of cash on hand and proceeds from new indebtedness. Refer to note 2 for further details on this transaction.
On December 30, 2021, the Company acquired certain assets and assumed certain liabilities from Cable America Missouri, LLC, a data, video and voice services provider in central Missouri ("CableAmerica"), for $ i 113.1 million in cash on a debt-free basis. The all-cash transaction was financed with cash on hand. Refer to note 2 for further details on this transaction.
On January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Delta Communications, L.L.C. ("Clearwave")) (the "Clearwave Fiber Contribution") and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber LLC ("Clearwave Fiber"). The operations contributed by the Company generated approximately i 3% of Cable One's consolidated revenues for the three months ended December 31, 2021. The Company's approximately i 58% investment in Clearwave Fiber was valued at $ i 440.0 million as of the closing date. Clearwave Fiber is intended to accelerate deployment of fiber internet to residents and businesses in existing markets and near-adjacent areas, as well as to provide connectivity to unserved and underserved areas in such markets via fiber-to-the-premises service. Clearwave Fiber is reported on Cable One’s balance sheet under the equity method of accounting, with the proportionate share of its net income (loss) each period reflected within Cable One's operating results on a one quarter lag. Refer to note 5 for further details on this transaction and on the Company’s other equity investments.
Basis of Presentation. The condensed consolidated financial statements and accompanying notes thereto have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“GAAP”) for interim financial information; and (ii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the SEC. As permitted under such guidance, certain notes and other financial information normally required by GAAP have been omitted. Management believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash flows as of and for the periods presented herein. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the 2021 Form 10-K.
The December 31, 2021 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the 2021 Form 10-K, but does not include all disclosures required by GAAP. The Company’s interim results of operations may not be indicative of its future results.
Principles of Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company, including its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Segment Reporting. Accounting Standards Codification ("ASC") 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. Based on the Company’s chief operating decision maker’s review and assessment of the Company’s operating performance for purposes of performance monitoring and resource allocation, the Company determined that its operations, including the decisions to allocate resources and deploy capital, are organized and managed on a consolidated basis. Accordingly, management has identified i one operating segment, which is its reportable segment, under this organizational and reporting structure.
Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates and underlying assumptions.
Recently Adopted Accounting Pronouncements. In November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires additional disclosure around the type of any government assistance received and its impact on the consolidated financial statements. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires entities to apply existing revenue recognition guidance when recognizing and measuring contract assets acquired and contract liabilities assumed in a business combination. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.
Recently Issued But Not Yet Adopted Accounting Pronouncements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR and other reference rates that are to be discontinued. The ASU may be adopted at any time through December 31, 2022. The Company currently holds certain debt and interest rate swaps that reference LIBOR. The Company plans to adopt ASU 2020-04 when the contracts underlying such instruments are amended as a result of reference rate reform. The Company is currently evaluating the expected impact of the adoption of this guidance on its consolidated financial statements.
/
2. ACQUISITIONS
The Company accounts for certain acquisitions as business combinations pursuant to ASC 805 - Business Combinations. In accordance with ASC 805, the Company uses its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that is available as of the acquisition date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for each acquisition, however, preliminary measurements of fair value for each acquisition are subject to change during the measurement period, and such changes could be material. The Company expects to finalize the valuation after each acquisition as soon as practicable but no later than one year after the acquisition date.
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis.
Acquisition costs incurred by the Company are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred $ i 1.2 million and $ i 4.8 million of acquisition costs during the three months ended June 30, 2022 and 2021, respectively, and $ i 2.5 million and $ i 9.2 million of acquisition costs during the six months ended June 30, 2022 and 2021, respectively. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations and comprehensive income.
The following acquisitions occurred during the periods presented:
CableAmerica. On December 30, 2021, the Company acquired certain assets and assumed certain liabilities of CableAmerica, a data, video and voice services provider in central Missouri, for a purchase price of $ i 113.1 million on a cash-free and debt-free basis.
Acquired identifiable intangible assets associated with the CableAmerica acquisition consisted of the following (dollars in thousands):
i
| Useful Life | ||||||||
| Fair Value | (in years) | |||||||
| Customer relationships | $ | i 15,400 | i 14.0 | |||||
| Trademark and trade name | $ | i 500 | i 3.0 | |||||
| Franchise agreements | $ | i 49,600 | Indefinite | |||||
Customer relationships and franchise agreements were valued using the multi-period excess earnings method (“MPEEM”) of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future earnings before interest, taxes, depreciation and amortization (“EBITDA” and as adjusted, “Adjusted EBITDA”) margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is i 13.7 years.
The CableAmerica acquisition resulted in the recognition of $ i 25.6 million of goodwill, which is deductible for tax purposes.
Hargray. On May 3, 2021, the Company acquired the remaining approximately i 85% equity interest in Hargray, a data, video and voice services provider, that it did not already own for an approximately $ i 2.0 billion cash purchase price, which implied a $ i 2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis.
The following table summarizes the allocation of the Hargray purchase price consideration as of the acquisition date, reflecting immaterial measurement period adjustments (in thousands):
i
| Initial Purchase Price Allocation | Measurement Period Adjustments | Purchase Price Allocation | ||||||||||
| Assets Acquired | ||||||||||||
| Cash and cash equivalents | $ | i 17,652 | $ | i - | $ | i 17,652 | ||||||
| Accounts receivable | i 17,991 | ( i 62 | ) | i 17,929 | ||||||||
| Income taxes receivable | i - | i 720 | i 720 | |||||||||
| Prepaid and other current assets | i 8,006 | i - | i 8,006 | |||||||||
| Property, plant and equipment | i 457,158 | ( i 525 | ) | i 456,633 | ||||||||
| Intangible assets | i 1,592,000 | i - | i 1,592,000 | |||||||||
| Other noncurrent assets | i 4,636 | i 2,940 | i 7,576 | |||||||||
| Total Assets Acquired | i 2,097,443 | i 3,073 | i 2,100,516 | |||||||||
| Liabilities Assumed | ||||||||||||
| Accounts payable and accrued liabilities | i 36,457 | i 1,770 | i 38,227 | |||||||||
| Deferred revenue (short-term portion) | i 8,462 | i - | i 8,462 | |||||||||
| Current portion of long-term debt | i 1,375 | ( i 1,375 | ) | i - | ||||||||
| Long-term debt | i 2,912 | ( i 2,912 | ) | i - | ||||||||
| Deferred income taxes | i 437,725 | i 3,652 | i 441,377 | |||||||||
| Other noncurrent liabilities | i 6,974 | i 2,912 | i 9,886 | |||||||||
| Total Liabilities Assumed | i 493,905 | i 4,047 | i 497,952 | |||||||||
| Net assets acquired | i 1,603,538 | ( i 974 | ) | i 1,602,564 | ||||||||
| Purchase price consideration(1) | i 2,117,866 | ( i 756 | ) | i 2,117,110 | ||||||||
| Goodwill recognized | $ | i 514,328 | $ | i 218 | $ | i 514,546 | ||||||
| (1) | Consists of approximately $ i 2.0 billion of cash for the additional approximately i 85% equity interest in Hargray that the Company did not already own and the $ i 146.6 million May 3, 2021 fair value of the Company’s existing approximately i 15% equity investment in Hargray. The Company recognized a $ i 33.4 million non-cash gain within other income in the condensed consolidated statement of operations and comprehensive income upon the acquisition, representing the difference between the existing equity investment’s fair value and $ i 113.2 million carrying value. The fair value of the existing investment was calculated as approximately i 15% of the fair value of Hargray’s total equity value (determined using the discounted cash flow method of the income approach, less debt), excluding the impact of any synergies or control premium that would be realized by a controlling interest. |
Acquired identifiable intangible assets associated with the Hargray Acquisition consisted of the following (dollars in thousands):
| Useful Life | ||||||||
| Fair Value | (in years) | |||||||
| Customer relationships | $ | i 472,000 | i 13.7 | |||||
| Trademark and trade name | $ | i 10,000 | i 4.2 | |||||
| Franchise agreements | $ | i 1,110,000 | Indefinite | |||||
Customer relationships and franchise agreements were valued using the MPEEM of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future EBITDA margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is i 13.5 years.
The Hargray Acquisition resulted in the recognition of $ i 514.5 million of goodwill, which is not deductible for tax purposes.
3. REVENUES
Revenues by product line and other revenue-related disclosures were as follows (in thousands):
i
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | ||||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| Residential: | ||||||||||||||||
| Data | $ | i 233,330 | $ | i 207,648 | $ | i 463,483 | $ | i 391,253 | ||||||||
| Video | i 84,761 | i 87,240 | i 169,419 | i 163,257 | ||||||||||||
| Voice | i 10,715 | i 12,112 | i 22,610 | i 22,589 | ||||||||||||
| Business services | i 76,660 | i 76,616 | i 153,152 | i 136,978 | ||||||||||||
| Other | i 23,619 | i 18,133 | i 47,147 | i 28,934 | ||||||||||||
| Total revenues | $ | i 429,085 | $ | i 401,749 | $ | i 855,811 | $ | i 743,011 | ||||||||
| Franchise and other regulatory fees | $ | i 7,962 | $ | i 8,110 | $ | i 16,056 | $ | i 14,262 | ||||||||
| Deferred commission amortization | $ | i 1,263 | $ | i 1,265 | $ | i 2,517 | $ | i 2,733 | ||||||||
Other revenues are comprised primarily of regulatory revenues, advertising sales, late charges and reconnect fees.
Fees imposed on the Company by various governmental authorities, including franchise fees, are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities. As the Company acts as principal, these fees are reported in video and voice revenues on a gross basis with corresponding expenses included within operating expenses in the condensed consolidated statements of operations and comprehensive income.
Deferred commission amortization expense is included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.
Current deferred revenue liabilities consist of refundable customer prepayments, up-front charges and installation fees. As of June 30, 2022, the Company’s remaining performance obligations pertain to the refundable customer prepayments and consist of providing future data, video and voice services to customers. Of the $ i 26.9 million of current deferred revenue at December 31, 2021, $ i 23.1 million was recognized during the six months ended June 30, 2022. Noncurrent deferred revenue liabilities consist of up-front charges and installation fees from business customers.
/
4. OPERATING ASSETS AND LIABILITIES
Accounts receivable consisted of the following (in thousands):
i
| Trade receivables |
$ | i 49,994 | $ | i 41,947 | ||||
| Other receivables |
i 16,334 | i 16,847 | ||||||
| Less: Allowance for credit losses |
( i 3,255 | ) | ( i 2,541 | ) | ||||
| Total accounts receivable, net |
$ | i 63,073 | $ | i 56,253 | ||||
The changes in the allowance for credit losses were as follows (in thousands):
i
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| Beginning balance | $ | i 2,580 | $ | i 1,374 | $ | i 2,541 | $ | i 1,252 | ||||||||
| Additions - charged to costs and expenses | i 2,077 | i 1,484 | i 3,795 | i 2,127 | ||||||||||||
| Deductions - write-offs | ( i 2,631 | ) | ( i 1,405 | ) | ( i 5,892 | ) | ( i 3,856 | ) | ||||||||
| Recoveries collected | i 1,229 | i 1,390 | i 2,811 | i 3,320 | ||||||||||||
| Ending balance | $ | i 3,255 | $ | i 2,843 | $ | i 3,255 | $ | i 2,843 | ||||||||
Prepaid and other current assets consisted of the following (in thousands):
i
| Prepaid repairs and maintenance |
$ | i 8,379 | $ | i 4,788 | ||||
| Software implementation costs |
i 1,349 | i 1,199 | ||||||
| Prepaid insurance |
i 173 | i 3,325 | ||||||
| Prepaid rent |
i 2,800 | i 2,107 | ||||||
| Prepaid software |
i 6,179 | i 6,982 | ||||||
| Deferred commissions |
i 2,976 | i 4,295 | ||||||
| Interest rate swap asset |
i 4,685 | i - | ||||||
| All other current assets |
i 12,770 | i 9,009 | ||||||
| Total prepaid and other current assets |
$ | i 39,311 | $ | i 31,705 | ||||
Other noncurrent assets consisted of the following (in thousands):
i
| Operating lease right-of-use assets |
$ | i 11,470 | $ | i 15,501 | ||||
| Deferred commissions |
i 9,514 | i 8,624 | ||||||
| Software implementation costs |
i 7,147 | i 7,782 | ||||||
| Debt issuance costs |
i 2,243 | i 2,576 | ||||||
| Debt investment |
i 2,000 | i - | ||||||
| Assets held for sale |
i 3,527 | i 3,819 | ||||||
| Interest rate swap asset |
i 6,097 | i - | ||||||
| All other noncurrent assets |
i 2,446 | i 4,020 | ||||||
| Total other noncurrent assets |
$ | i 44,444 | $ | i 42,322 | ||||
Accounts payable and accrued liabilities consisted of the following (in thousands):
i
| Accounts payable | $ | i 39,723 | $ | i 35,716 | ||||
| Accrued programming costs | i 23,884 | i 23,703 | ||||||
| Accrued compensation and related benefits | i 32,841 | i 34,731 | ||||||
| Accrued sales and other operating taxes | i 11,399 | i 12,872 | ||||||
| Accrued franchise fees | i 3,902 | i 4,397 | ||||||
| Deposits | i 6,602 | i 6,840 | ||||||
| Operating lease liabilities | i 4,103 | i 5,633 | ||||||
| Interest rate swap liability | i - | i 26,662 | ||||||
| Accrued insurance costs | i 6,223 | i 5,542 | ||||||
| Cash overdrafts | i 8,506 | i 11,517 | ||||||
| Equity investment payable(1) | i 5,087 | i 13,387 | ||||||
| Interest payable | i 5,308 | i 5,172 | ||||||
| All other accrued liabilities | i 17,202 | i 17,215 | ||||||
| Total accounts payable and accrued liabilities | $ | i 164,780 | $ | i 203,387 | ||||
| (1) |
Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). The Company funded $ i 8.3 million of the then outstanding investment payable to Wisper during the six months ended June 30, 2022. Refer to note 5 for details on this investment. |
Other noncurrent liabilities consisted of the following (in thousands):
i
| Operating lease liabilities |
$ | i 6,672 | $ | i 9,098 | ||||
| Accrued compensation and related benefits |
i 10,086 | i 11,010 | ||||||
| Deferred revenue |
i 6,305 | i 6,854 | ||||||
| MBI Net Option (as defined in note 5)(1) |
i 32,720 | i 123,620 | ||||||
| All other noncurrent liabilities |
i 4,847 | i 5,959 | ||||||
| Total other noncurrent liabilities |
$ | i 60,630 | $ | i 156,541 | ||||
| (1) |
Represents the net value of the Company’s call and put options associated with the remaining equity interests in MBI (as defined in note 5), consisting of an asset of $ i 28.9 million and a liability of $ i 61.7 million, respectively, as of June 30, 2022 and a liability of $ i 17.8 million and a liability of $ i 105.8 million, respectively, as of December 31, 2021. Refer to notes 5 and 10 for further information on the MBI Net Option (as defined in note 5). |
5. EQUITY INVESTMENTS
On May 4, 2020, the Company made a minority equity investment for a less than i 10% ownership interest in AMG Technology Investment Group, LLC, a wireless internet service provider (“Nextlink”), for $ i 27.2 million. On July 10, 2020, the Company acquired a i 40.4% minority equity interest in Wisper, a wireless internet service provider, for total consideration of $ i 25.3 million. The Company has funded $ i 20.2 million of the total consideration for Wisper and expects to fund the remainder within the next twelve months. On October 1, 2020, the Company contributed the Anniston System to Hargray, a data, video and voice services provider, in exchange for an approximately i 15% equity interest in Hargray on a fully diluted basis and recognized an $82.6 million non-cash gain. On November 12, 2020, the Company acquired a i 45.0% minority equity interest in Mega Broadband Investments Holdings LLC, a data, video and voice services provider (“MBI”), for $ i 574.9 million in cash.
On May 3, 2021, the Company acquired the remaining approximately i 85% equity interest in Hargray that it did not already own for an approximately $ i 2.0 billion cash purchase price, which implied a $ i 2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, and recognized a $ i 33.4 million non-cash gain as a result of the fair value remeasurement of the Company’s existing equity interest on the acquisition date. On October 1, 2021, the Company made a minority equity investment for a less than i 10% ownership interest in Point Broadband Holdings, LLC, a fiber internet service provider ("Point Broadband"), for $ i 25.0 million. On October 18, 2021, the Company completed a minority equity investment for a less than i 10% ownership interest in Tristar Acquisition I Corp, a special-purpose acquisition company ("Tristar"), for $ i 20.8 million. On November 5, 2021, the Company invested an additional $ i 50.0 million to acquire preferred units in Nextlink, increasing its equity interest to approximately i 17%.
On January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Clearwave) and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber. The operations contributed by the Company generated approximately i 3%
of Cable One's consolidated revenues for the three months ended December 31, 2021. The Company's approximately i 58% investment in Clearwave Fiber was valued at $ i 440.0 million
as of the closing date. The Company recognized a non-cash gain of $ i 22.1 million associated with this transaction. On March 24, 2022, the Company invested an additional $ i 5.4
million in Point Broadband, increasing its equity interest to approximately i 7%. On April 1, 2022, the Company contributed its Tallahassee, Florida system to MetroNet Systems, LLC, a fiber internet service provider ("MetroNet"), in exchange for cash consideration of $ i 7.0
million and an equity interest of less than i 10% in MetroNet valued at $ i 7.0 million. On June 1,
2022, the Company completed a minority equity investment for a less than i 10% ownership interest in Visionary Communications, Inc., an internet service provider ("Visionary"), for $ i 7.2
million.
The carrying value of the Company’s equity investments without readily determinable fair values are determined based on fair valuations as of their respective acquisition dates. As Tristar is publicly traded, the carrying value of the Company's Tristar investment is remeasured to fair value on a quarterly basis using market information.
The carrying value of the Company's equity investments consisted of the following (dollars in thousands):
i
| Ownership | June 30, | December 31, | ||||||||
| Percentage | 2022 | 2021 | ||||||||
| Cost Method Investments | ||||||||||
| MetroNet | <10% | $ | i 7,000 | $ | i - | |||||
| Nextlink | <20% | i 77,245 | i 77,245 | |||||||
| Point Broadband | <10% | i 30,373 | i 25,000 | |||||||
| Tristar | <10% | i 22,907 | i 23,083 | |||||||
| Visionary | <10% | i 7,190 | i - | |||||||
| Others | <10% | i 12,980 | i 13,170 | |||||||
| Total cost method investments | $ | i 157,695 | $ | i 138,498 | ||||||
| Equity Method Investments | ||||||||||
| Clearwave Fiber | ~58% | $ | i 429,075 | $ | i - | |||||
| MBI(1) | i 45.0% | i 565,789 | i 557,715 | |||||||
| Wisper | i 40.4% | i 32,959 | i 31,352 | |||||||
| Total equity method investments | $ | i 1,027,823 | $ | i 589,067 | ||||||
| Total equity investments | $ | i 1,185,518 | $ | i 727,565 | ||||||
| (1) | The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $ i 630.7 million being allocated to the MBI equity investment and $ i 19.7 million and $ i 75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $ i 32.7 million and $ i 123.6 million as of June 30, 2022 and December 31, 2021, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option. |
The carrying value of MBI exceeded the Company’s underlying equity in MBI’s net assets by approximately $ i 501.7 million and $ i 508.3 million as of June 30, 2022 and December 31, 2021, respectively.
Equity method investment income (losses), which increase (decrease) the carrying value of the respective investment, and which are recorded on a one quarter lag, and the change in fair value of the MBI Net Option were as follows (in thousands):
i
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| Equity Method Investment Income (Loss) | ||||||||||||||||
| Clearwave Fiber | $ | ( i 10,925 | ) | $ | i - | $ | ( i 10,925 | ) | $ | i - | ||||||
| MBI(1) | i 5,293 | ( i 2,407 | ) | i 8,074 | ( i 3,621 | ) | ||||||||||
| Wisper | i 608 | i 1,333 | i 1,607 | i 1,979 | ||||||||||||
| Total | $ | ( i 5,024 | ) | $ | ( i 1,074 | ) | $ | ( i 1,244 | ) | $ | ( i 1,642 | ) | ||||
| Other Income (Expense), Net | ||||||||||||||||
| MBI Net Option change in fair value | $ | i 6,290 | $ | ( i 21,350 | ) | $ | i 90,900 | $ | ( i 15,790 | ) | ||||||
| (1) | The Company identified a $ i 186.6 million difference between the fair values of certain of MBI’s finite-lived intangible assets and the respective carrying values recorded by MBI, of which $ i 84.0 million was attributable to the Company’s i 45% pro rata portion. The Company is amortizing its share on an accelerated basis over the lives of the respective assets. For the three months ended June 30, 2022, the Company recognized $ i 8.5 million of its pro rata share of MBI’s net income and $ i 3.2 million of its pro rata share of basis difference amortization. For the three months ended June 30, 2021, the Company recognized $ i 1.6 million of its pro rata share of MBI’s net income and $ i 4.0 million of its pro rata share of basis difference amortization. For the six months ended June 30, 2022, the Company recognized $ i 15.2 million of its pro rata share of MBI’s net income and $ i 7.2 million of its pro rata share of basis difference amortization. For the six months ended June 30, 2021, the Company recognized $ i 3.0 million of its pro rata share of MBI’s net income and $ i 6.6 million of its pro rata share of basis difference amortization. |
The Company assesses each equity investment for indicators of impairment on a quarterly basis. No impairments were recorded for any of the periods presented.
/
6. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following (in thousands):
i
| Cable distribution systems | $ | i 2,360,973 | $ | i 2,509,795 | ||||
| Customer premise equipment | i 330,392 | i 320,937 | ||||||
| Other equipment and fixtures | i 462,366 | i 472,319 | ||||||
| Buildings and improvements | i 134,832 | i 142,754 | ||||||
| Capitalized software | i 92,080 | i 89,662 | ||||||
| Construction in progress | i 177,533 | i 172,706 | ||||||
| Land | i 12,280 | i 12,134 | ||||||
| Right-of-use assets | i 11,241 | i 11,241 | ||||||
| Property, plant and equipment, gross | i 3,581,697 | i 3,731,548 | ||||||
| Less: Accumulated depreciation and amortization | ( i 1,950,446 | ) | ( i 1,877,444 | ) | ||||
| Property, plant and equipment, net | $ | i 1,631,251 | $ | i 1,854,104 | ||||
The Company contributed $ i 280.0 million of property, plant and equipment, net, to the Clearwave Fiber joint venture on January 1, 2022 and recognized a $ i 22.1 million non-cash gain on the transaction. The Company divested $ i 6.8 million of property, plant and equipment, net, in the dispositions of our Tallahassee, Florida system and certain other non-core assets during the three months ended June 30, 2022 and recognized an $ i 8.3 million non-cash loss.
The Company classified $ i 3.5 million of property, plant and equipment as held for sale as of June 30, 2022. Such assets are included within other noncurrent assets in the condensed consolidated balance sheet.
Depreciation and amortization expense for property, plant and equipment was $ i 67.6 million and $ i 65.9 million for the three months ended June 30, 2022 and 2021, respectively, and $ i 134.8 million and $ i 123.9 million for the six months ended June 30, 2022 and 2021, respectively.
/
7. GOODWILL AND INTANGIBLE ASSETS
The carrying amount of goodwill was $ i 928.9 million at June 30, 2022 and $ i 967.9 at December 31, 2021, with the decrease attributable to $ i 39.9 million of goodwill divested in the Clearwave Fiber transaction on January 1, 2022 and $ i 1.8 million of goodwill divested in other transactions during the three months ended June 30, 2022, partially offset by a $ i 2.7 million increase in goodwill related to a measurement period adjustment associated with the Hargray Acquisition. The Company has not historically recorded any impairment of goodwill.
Intangible assets consisted of the following (dollars in thousands):
i
| Useful Life | Gross | Net | Gross | Net | |||||||||||||||||||||||
| Range | Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||||
| (in years) | Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||||
| Finite-Lived Intangible Assets | |||||||||||||||||||||||||||
| Customer relationships | i 13.5 – i 17 | $ | i 781,344 | $ | i 181,462 | $ | i 599,882 | $ | i 857,100 | $ | i 153,699 | $ | i 703,401 | ||||||||||||||
| Trademarks and trade names | i 2.7 – i 4.2 | i 11,846 | i 5,383 | i 6,463 | i 13,500 | i 3,852 | i 9,648 | ||||||||||||||||||||
| Wireless licenses | i 10 – i 15 | i 1,418 | i 214 | i 1,204 | i 1,418 | i 142 | i 1,276 | ||||||||||||||||||||
| Total finite-lived intangible assets | $ | i 794,608 | $ | i 187,059 | $ | i 607,549 | $ | i 872,018 | $ | i 157,693 | $ | i 714,325 | |||||||||||||||
| Indefinite-Lived Intangible Assets | |||||||||||||||||||||||||||
| Franchise agreements | $ | i 2,100,546 | $ | i 2,139,312 | |||||||||||||||||||||||
| Trade names | i 800 | i 7,500 | |||||||||||||||||||||||||
| Total indefinite-lived intangible assets | $ | i 2,101,346 | $ | i 2,146,812 | |||||||||||||||||||||||
| Total intangible assets, net | $ | i 2,708,895 | $ | i 2,861,137 | |||||||||||||||||||||||
The $ i 152.2 million decrease in the net carrying amount of intangible assets from December 31, 2021 to June 30, 2022 included $ i 59.7 million of customer relationships, $ i 8.1 million of trademarks and trade names and $ i 27.7 million of franchise agreements divested in the Clearwave Fiber transaction on January 1, 2022 and an additional $ i 4.0 million of customer relationships, $ i 0.2 million of trademarks and trade names and $ i 11.0 million of franchise agreements divested in other transactions during the three months ended June 30, 2022.
Intangible asset amortization expense was $ i 20.8 million and $ i 19.0 million for the three months ended June 30, 2022 and 2021, respectively, and $ i 41.6 million and $ i 29.5 million for the six months ended June 30, 2022 and 2021, respectively.
The future amortization of existing finite-lived intangible assets as of June 30, 2022 was as follows (in thousands):
i
| Year Ending December 31, | Amount | |||
| 2022 (remaining six months) | $ | i 42,061 | ||
| 2023 | i 72,618 | |||
| 2024 | i 65,828 | |||
| 2025 | i 60,840 | |||
| 2026 | i 55,326 | |||
| Thereafter | i 310,876 | |||
| Total | $ | i 607,549 | ||
Actual amortization expense in future periods may differ from the amounts above as a result of intangible asset acquisitions or divestitures, changes in useful life estimates, impairments or other relevant factors.
/
8. DEBT
The carrying amount of long-term debt consisted of the following (in thousands):
i
| Senior Credit Facilities (as defined below) | $ | i 2,295,025 | $ | i 2,311,890 | ||||
| Senior Notes (as defined below) | i 650,000 | i 650,000 | ||||||
| Convertible Notes (as defined below) | i 920,000 | i 920,000 | ||||||
| Finance lease liabilities | i 5,267 | i 5,621 | ||||||
| Total debt | i 3,870,292 | i 3,887,511 | ||||||
| Less: Unamortized debt discount | ( i 18,475 | ) | ( i 20,602 | ) | ||||
| Less: Unamortized debt issuance costs | ( i 26,262 | ) | ( i 28,572 | ) | ||||
| Less: Current portion of long-term debt | ( i 47,374 | ) | ( i 38,837 | ) | ||||
| Total long-term debt | $ | i 3,778,181 | $ | i 3,799,500 | ||||
Senior Credit Facilities. The Company has in place a credit agreement (the "Credit Agreement") that provides for senior secured term loans in original aggregate principal amounts of $ i 700.0 million maturing in 2025 (the “Term Loan A-2”), $ i 250.0 million maturing in 2027 (the “Term Loan B-2”), $ i 625.0 million maturing in 2027 (the “Term Loan B-3”) and $ i 800.0 million maturing in 2028 (the "Term Loan B-4"), as well as a $ i 500.0 million revolving credit facility maturing in 2025 (the “Revolving Credit Facility” and, together with the Term Loan A-2, the Term Loan B-2, the Term Loan B-3 and the Term Loan B-4, the “Senior Credit Facilities”). The Revolving Credit Facility also gives the Company the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.
i
| Instrument | Draw Date(s) | Original Principal | Amortization Per Annum(1) | Outstanding Principal | Final Maturity Date | Final Scheduled Principal Payment | Benchmark Rate | Applicable Margin(2) | Interest Rate | ||||||||||||||||
| Term Loan A-2 | 5/8/2019(3) 10/1/2019(3) | $ | i 700,000 | Varies(4) | $ | i 651,079 |
10/30/2025 | $ | i 476,607 | LIBOR | i 1.75% | i 3.42% | |||||||||||||
| Term Loan B-2 | 1/7/2019 | i 250,000 | i 1.0% | i 241,875 | 10/30/2027 | i 228,750 |
LIBOR | i 2.00% | i 3.67% | ||||||||||||||||
| Term Loan B-3 | 6/14/2019(5) 10/30/2020(5) | i 625,000 | i 1.0% | i 610,071 | 10/30/2027 | i 577,472 |
LIBOR | i 2.00% | i 3.67% | ||||||||||||||||
| Term Loan B-4 | 5/3/2021 | i 800,000 | i 1.0% | i 792,000 | 5/3/2028 | i 746,000 |
LIBOR | i 2.00% | i 3.67% | ||||||||||||||||
| Total | $ | i 2,375,000 | $ | i 2,295,025 | $ | i 2,028,829 | |||||||||||||||||||
| (1) | Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions). |
| (2) | The Term Loan A-2 interest rate spread can vary between i 1.25% and i 1.75%, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement). All other applicable margins are fixed. |
| (3) | On May 8, 2019, $ i 250.0 million was drawn. On October 1, 2019, an additional $ i 450.0 million was drawn. On October 30, 2020, the amortization schedule was reset. |
| (4) | Per annum amortization rates for years one through five following October 30, 2020 are i 2.5%, i 2.5%, i 5.0%, i 7.5% and i 12.5%, respectively. |
| (5) | On June 14, 2019, $ i 325.0 million was drawn. On October 30, 2020, an additional $ i 300.0 million was drawn. |
Senior Notes. In November 2020, the Company issued $ i 650.0 million aggregate principal amount of i 4.00% senior notes due 2030 (the “Senior Notes”). The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year. The terms of the Senior Notes are governed by an indenture dated as of November 9, 2020 (the “Senior Notes Indenture”), among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (“BNY”), as trustee.
At any time and from time to time prior to November 15, 2025, the Company may redeem some or all of the Senior Notes for cash at a redemption price equal to i 100% of their principal amount, plus the “make-whole” premium described in the Senior Notes Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on November 15, 2025, the Company may redeem some or all of the Senior Notes at any time and from time to time at the applicable redemption prices listed in the Senior Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to November 15, 2023, the Company may redeem up to i 40% of the aggregate principal amount of Senior Notes with funds in an aggregate amount not exceeding the net cash proceeds from one or more equity offerings at a redemption price equal to 104% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
Upon the occurrence of a Change of Control and a Below Investment Grade Rating Event (each as defined in the Senior Notes Indenture), the Company is required to offer to repurchase the Senior Notes at i 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.
Convertible Notes. In March 2021, the Company issued $ i 575.0 million aggregate principal amount of i 0.000% convertible senior notes due 2026 (the “2026 Notes”) and $ i 345.0 million aggregate principal amount of i 1.125% convertible senior notes due 2028 (the “2028 Notes” and, together with the 2026 Notes, the “Convertible Notes,” and the Convertible Notes collectively with the Senior Notes, the “Notes”). The terms of the 2026 Notes and the 2028 Notes are each governed by a separate indenture dated as of March 5, 2021 (collectively, the “Convertible Notes Indentures” and together with the Senior Notes Indenture, the “Indentures”), in each case, among the Company, the guarantors party thereto and BNY, as trustee.
The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes does not accrete. The 2028 Notes bear interest at a rate of i 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is i 0.4394 shares of the Company’s common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $ i 2,275.83 per share of common stock).
The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of the Company’s common stock or a combination thereof is at the election of the Company. Prior to the close of business on the business day immediately preceding December 15, 2025, the 2026 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2025, holders may convert their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. Prior to the close of business on the business day immediately preceding December 15, 2027, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2027, holders may convert their 2028 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. If the Company undergoes a “fundamental change” (as defined in the applicable Convertible Notes Indenture), holders of the applicable series of Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes of such series at a purchase price equal to i 100% of the principal amount of the Convertible Notes of such series to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date.
The Company may not redeem the 2026 Notes prior to March 20, 2024 and it may not redeem the 2028 Notes prior to March 20, 2025. No “sinking fund” is provided for the Convertible Notes. On or after March 20, 2024 and prior to December 15, 2025, the Company may redeem for cash all or any portion of the 2026 Notes, at its option, and on or after March 20, 2025 and prior to December 15, 2027, the Company may redeem for cash all or any portion of the 2028 Notes, at its option, in each case, if the last reported sale price per share of common stock has been at least i 130% of the conversion price for such series of Convertible Notes then in effect for at least i 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any i 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to i 100% of the principal amount of the Convertible Notes of such series to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.
In addition, following a “make-whole fundamental change” (as defined in the applicable Convertible Notes Indenture) or if the Company delivers a notice of redemption in respect of any Convertible Notes of a series, in certain circumstances, the conversion rate applicable to such series of Convertible Notes will be increased for a holder who elects to convert any of such Convertible Notes in connection with such a make-whole fundamental change or convert any of such Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.
The carrying amounts of the Convertible Notes consisted of the following (in thousands):
i
| 2026 Notes | 2028 Notes | Total | 2026 Notes | 2028 Notes | Total | |||||||||||||||||||
| Gross carrying amount | $ | i 575,000 | $ | i 345,000 | $ | i 920,000 | $ | i 575,000 | $ | i 345,000 | $ | i 920,000 | ||||||||||||
| Less: Unamortized discount | ( i 11,123 | ) | ( i 7,352 | ) | ( i 18,475 | ) | ( i 12,611 | ) | ( i 7,991 | ) | ( i 20,602 | ) | ||||||||||||
| Less: Unamortized debt issuance costs | ( i 304 | ) | ( i 208 | ) | ( i 512 | ) | ( i 344 | ) | ( i 226 | ) | ( i 570 | ) | ||||||||||||
| Net carrying amount | $ | i 563,573 | $ | i 337,440 | $ | i 901,013 | $ | i 562,045 | $ | i 336,783 | $ | i 898,828 | ||||||||||||
Interest expense on the Convertible Notes consisted of the following (dollars in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||||||||||||||||||
| 2026 Notes | 2028 Notes | Total | 2026 Notes | 2028 Notes | Total | 2026 Notes | 2028 Notes | Total | 2026 Notes | 2028 Notes | Total | |||||||||||||||||||||||||||||||||||||
| Contractual interest expense | $ | - | $ | i 970 | $ | i 970 | $ | - | $ | i 970 | $ | i 970 | $ | i - | $ | i 1,941 | $ | i 1,941 | $ | i - | $ | i 1,261 | $ | i 1,261 | ||||||||||||||||||||||||
| Amortization of discount | i 748 | i 321 | i 1,069 | i 748 | i 321 | i 1,069 | i 1,488 | i 639 | i 2,127 | i 970 | i 416 | i 1,386 | ||||||||||||||||||||||||||||||||||||
| Amortization of debt issuance costs | i 20 | i 9 | i 29 | i 20 | i 9 | i 29 | i 40 | i 18 | i 58 | i 26 | i 12 | i 38 | ||||||||||||||||||||||||||||||||||||
| Total interest expense | $ | i 768 | $ | i 1,300 | $ | i 2,068 | $ | i 768 | $ | i 1,300 | $ | i 2,068 | $ | i 1,528 | $ | i 2,598 | $ | i 4,126 | $ | i 996 | $ | i 1,689 | $ | i 2,685 | ||||||||||||||||||||||||
| Effective interest rate | i 0.5 | % | i 1.5 | % | i 0.5 | % | i 1.5 | % | i 0.5 | % | i 1.5 | % | i 0.5 | % | i 1.5 | % | ||||||||||||||||||||||||||||||||
General. The Notes are senior unsecured obligations of the Company and are guaranteed by the Company’s wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain capital market debt of the Company in an aggregate principal amount in excess of $250.0 million.
Each Indenture contains covenants that, among other things and subject to certain exceptions, limit (i) the Company’s ability to consolidate or merge with or into another person or sell or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole) and (ii) the ability of the guarantors to consolidate with or merge with or into another person. The Senior Notes Indenture also contains a covenant that, subject to certain exceptions, limits the Company’s ability and the ability of its subsidiaries to incur any liens securing indebtedness for borrowed money.
Each Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, default in payment of principal or interest, breach of other agreements or covenants in respect of the relevant Notes by the Company or any guarantors, failure to pay certain other indebtedness at final maturity, acceleration of certain indebtedness prior to final maturity, failure to pay certain final judgments, failure of certain guarantees to be enforceable and certain events of bankruptcy, insolvency or reorganization; and, in the case of each Convertible Notes Indenture, failure to comply with the Company’s obligation to convert the relevant Convertible Notes under the applicable Convertible Notes Indenture and failure to give a fundamental change notice or a notice of a make-whole fundamental change under the applicable Convertible Notes Indenture.
Unamortized debt issuance costs consisted of the following (in thousands):
i
| Revolving Credit Facility portion: | ||||||||
| Other noncurrent assets | $ | i 2,243 | $ | i 2,576 | ||||
| Term loans and Notes portion: | ||||||||
| Long-term debt (contra account) | i 26,262 | i 28,572 | ||||||
| Total | $ | i 28,505 | $ | i 31,148 | ||||
The Company recorded debt issuance cost amortization of $ i 1.3 million and $ i 1.8 million for the three months ended June 30, 2022 and 2021, respectively, and $ i 2.6 million and $ i 2.9 million for the six months ended June 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.
The future maturities of outstanding borrowings as of June 30, 2022 were as follows (in thousands):
i
| Year Ending December 31, | Amount | |||
| 2022 (remaining six months) | $ | i 21,121 | ||
| 2023 | i 55,008 | |||
| 2024 | i 76,285 | |||
| 2025 | i 557,147 | |||
| 2026 | i 591,709 | |||
| Thereafter | i 2,563,755 | |||
| Total | $ | i 3,865,025 | ||
The Company has issued letters of credit totaling $ i 44.1 million on behalf of Wisper to guarantee its performance obligations under a Federal Communications Commission (“FCC”) broadband funding program, as of June 30, 2022. The fair value of the letters of credit approximates face value based on the short-term nature of the agreements. The Company would be liable for up to the total amount outstanding under the letters of credit if Wisper were to fail to satisfy all or some of its performance obligations under the FCC program. Wisper has guaranteed and indemnified the Company in connection with such letters of credit. As of June 30, 2022, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheets. Total letter of credit issuances under the Revolving Credit Facility were $ i 51.2 million at June 30, 2022 and accrued fees at a rate of approximately i 1.88% per annum.
On May 3, 2022, the Company entered into a letter of credit agreement with MUFG Bank, Ltd. ("MUFG") which provides for an additional $ i 75.0 million letter of credit issuing capacity. i No letters of credit were issued under this agreement as of June 30, 2022.
The Company was in compliance with all debt covenants as of June 30, 2022.
/
9. INTEREST RATE SWAPS
The Company is party to two interest rate swap agreements, designated as cash flow hedges, to manage the risk of fluctuations in interest rates on its variable rate LIBOR debt. Changes in the fair values of the interest rate swaps are reported through other comprehensive income until the underlying hedged debt’s interest expense impacts net income, at which point the corresponding change in fair value is reclassified from accumulated other comprehensive income to interest expense.
A summary of the significant terms of the Company’s interest rate swap agreements is as follows (dollars in thousands):
i
| Entry |
Effective |
Maturity |
Notional |
Settlement |
Settlement |
Fixed |
|||||||||
| Date |
Date |
Date(1) |
Amount |
Type |
Frequency |
Base Rate |
|||||||||
| Swap A |
3/7/2019 |
3/11/2019 |
3/11/2029 |
$ | i 850,000 | Receive one-month LIBOR, pay fixed |
Monthly |
i 2.653% |
|||||||
| Swap B |
3/6/2019 |
6/15/2020 |
2/28/2029 |
i 350,000 | Receive one-month LIBOR, pay fixed |
Monthly |
i 2.739% |
||||||||
| Total |
$ | i 1,200,000 | |||||||||||||
| (1) |
Each swap may be terminated prior to the scheduled maturity at the election of the Company or the financial institution counterparty under the terms provided in each swap agreement. |
The combined fair values of the Company’s interest rate swaps are reflected within the condensed consolidated balance sheets as follows (in thousands):
i
| Assets: | ||||||||
| Current portion: | ||||||||
| Prepaid and other current assets | $ | i 4,685 | $ | i - | ||||
| Noncurrent portion: | ||||||||
| Other noncurrent assets | $ | i 6,097 | $ | i - | ||||
| Liabilities: | ||||||||
| Current portion: | ||||||||
| Accounts payable and accrued liabilities | $ | i - | $ | i 26,662 | ||||
| Noncurrent portion: | ||||||||
| Interest rate swap liability | $ | i - | $ | i 81,627 | ||||
| Net Asset (Liability) | $ | i 10,782 | $ | ( i 108,289 | ) | |||
| Stockholders’ Equity: | ||||||||
| Accumulated other comprehensive income (loss) | $ | i 8,140 | $ | ( i 81,873 | ) | |||
The combined effect of the Company’s interest rate swaps on the condensed consolidated statements of operations and comprehensive income was as follows (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| Interest expense | $ | i 5,800 | $ | i 7,803 | $ | i 13,409 | $ | i 15,451 | ||||||||
| Unrealized gain (loss) on cash flow hedges, gross | $ | i 43,240 | $ | ( i 21,013 | ) | $ | i 119,071 | $ | i 52,569 | |||||||
| Less: Tax effect | ( i 10,597 | ) | i 4,989 | ( i 29,058 | ) | ( i 13,130 | ) | |||||||||
| Unrealized gain (loss) on cash flow hedges, net of tax | $ | i 32,643 | $ | ( i 16,024 | ) | $ | i 90,013 | $ | i 39,439 | |||||||
The Company does not hold any derivative instruments for speculative trading purposes.
/
10. FAIR VALUE MEASUREMENTS
Financial Assets and Liabilities. The Company has estimated the fair values of its financial instruments as of June 30, 2022 using available market information or other appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the following fair value estimates are not necessarily indicative of the amounts the Company would realize in an actual market exchange.
The carrying amounts, fair values and related fair value hierarchy levels of the Company’s financial assets and liabilities as of June 30, 2022 were as follows (in thousands):
i
| Carrying |
Fair |
Fair Value |
|||||||
| Amount |
Value |
Hierarchy |
|||||||
| Assets: |
|||||||||
| Cash and cash equivalents: |
|||||||||
| Money market investments |
$ | i 191,557 | $ | i 191,557 | Level 1 |
||||
| Commercial paper |
$ | i 50,112 | $ | i 49,960 | Level 2 |
||||
| Other noncurrent assets (including current portion): |
|||||||||
| Interest rate swap asset |
$ | i 10,782 | $ | i 10,782 | Level 2 |
||||
| Liabilities: |
|||||||||
| Long-term debt (including current portion): |
|||||||||
| Term loans |
$ | i 2,295,025 | $ | i 2,230,122 | Level 2 |
||||
| Senior Notes |
$ | i 650,000 | $ | i 528,775 | Level 2 |
||||
| Convertible Notes |
$ | i 920,000 | $ | i 762,715 | Level 2 |
||||
| Other noncurrent liabilities: |
|||||||||
| MBI Net Option |
$ | i 32,720 | $ | i 32,720 | Level 3 |
||||
Money market investments are held primarily in U.S. Treasury securities and registered money market funds and are valued using a market approach based on quoted market prices (level 1). Commercial paper is primarily held with high-quality companies and is valued using quoted market prices for investments similar to the commercial paper (level 2). Money market investments and commercial paper with original maturities of three months or less are included within cash and cash equivalents in the condensed consolidated balance sheets. Interest rate swaps are measured at fair value within the condensed consolidated balance sheets on a recurring basis, with fair value determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (level 2). The fair value of the term loans, Senior Notes and Convertible Notes are estimated based on market prices for similar instruments in active markets (level 2). The fair value of the MBI Net Option is measured using Monte Carlo simulations that use inputs considered unobservable and significant to the fair value measurement (level 3).
The assumptions used to determine the fair value of the MBI Net Option consisted of the following:
i
| Cable One |
MBI |
Cable One |
MBI |
|||||||||||||
| Equity volatility |
i 30.0 | % | i 30.0 | % | i 30.0 | % | i 30.0 | % | ||||||||
| EBITDA volatility |
i 10.0 | % | i 10.0 | % | i 10.0 | % | i 10.0 | % | ||||||||
| EBITDA risk-adjusted discount rate |
i 7.5 | % | i 9.0 | % | i 5.0 | % | i 6.5 | % | ||||||||
| Cost of debt |
i 6.5 | % | i 4.0 | % | ||||||||||||
The Company regularly evaluates each of the assumptions used in establishing the fair value of the MBI Net Option. Significant changes in any of these assumptions could result in a significantly lower or higher fair value measurement. A change in one of these assumptions is not necessarily accompanied by a change in another assumption. Refer to note 5 for further information on the MBI Net Option.
The carrying amounts of accounts receivable, accounts payable and other financial assets and liabilities approximate fair value because of the short-term nature of these instruments.
Nonfinancial Assets and Liabilities. The Company’s nonfinancial assets, such as property, plant and equipment, intangible assets and goodwill, are not measured at fair value on a recurring basis. Assets acquired, including identifiable intangible assets and goodwill, and liabilities assumed in acquisitions are recorded at fair value on the respective acquisition dates, subject to potential future measurement period adjustments. Nonfinancial assets are subject to fair value adjustments when there is evidence that impairment may exist. No material impairments were recorded during the six months ended June 30, 2022 or 2021.
11. STOCKHOLDERS’ EQUITY
Treasury Stock. Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the condensed consolidated financial statements. Treasury shares of i 258,828 held at June 30, 2022 include shares repurchased under the Company’s share repurchase programs and shares withheld for withholding tax, as described below.
Share Repurchase Programs. On July 1, 2015, the Company’s board of directors (the “Board”) authorized up to $ i 250.0 million of share repurchases (subject to a total cap of i 600,000 shares of common stock) (the "2015 Program"). On May 20, 2022, the Company's Board authorized up to $ i 450.0 million of additional share repurchases (with no cap as to the number of shares of common stock) (the "2022 Program" and, together with the 2015 Program, the "Share Repurchase Programs"). At the end of the second quarter of 2022, the Company had exhausted the share repurchase authorization under the 2015 Program and had $ i 403.4 million of remaining share repurchase authorization under the 2022 Program. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the Share Repurchase Programs through June 30, 2022, the Company had repurchased i 354,268 shares of its common stock at an aggregate cost of $ i 296.6 million, including i 143,637 shares purchased at an aggregate cost of$ i 191.7 million during the six months ended June 30, 2022.
Tax Withholding for Equity Awards. At the employee’s option, shares of common stock are withheld by the Company upon the vesting of restricted stock and exercise of stock appreciation rights (“SARs”) to cover the applicable statutory minimum amount of employee withholding taxes, which the Company then pays to the taxing authorities in cash. The amounts remitted during the six months ended June 30, 2022 and 2021 were $ i 4.7 million and $ i 7.9 million, for which the Company withheld i 2,710 and i 3,557 shares of common stock, respectively.
/
12. EQUITY-BASED COMPENSATION
At the Company’s 2022 annual meeting of stockholders held on May 20, 2022, the Company’s stockholders approved the Cable One, Inc. 2022 Omnibus Incentive Compensation Plan (the “2022 Plan”), which had been previously approved, subject to stockholder approval, by the Board on March 28, 2022. The 2022 Plan superseded and replaced the then existing Amended and Restated Cable One, Inc. 2015 Omnibus Incentive Compensation Plan (the “2015 Plan” and, together with the 2022 Plan, the "Incentive Compensation Plans"), provided, however, that any awards previously granted under the 2015 Plan will remain in effect pursuant to their respective terms. No further awards will be granted under the 2015 Plan. The 2015 Plan provided for, and the 2022 Plan provides for, grants of incentive stock options, non-qualified stock options, restricted stock awards, SARs, restricted stock units (“RSUs”), cash-based awards, performance-based awards, dividend equivalent units (“DEUs” and, together with restricted stock awards and RSUs, “Restricted Stock”) and other stock-based awards, including performance stock units and deferred stock units. Directors, officers, employees and consultants of the Company are eligible for grants under the Incentive Compensation Plans as part of the Company’s long-term incentive compensation programs. At June 30, 2022, i 470,410 shares were available for issuance under the 2022 Plan.
Compensation expense associated with equity-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award, with forfeitures recognized as incurred. The Company’s equity-based compensation expense, included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income, was as follows (in thousands):
i
| Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
| 2021 |
2022 |
2021 |
||||||||||||||
| Restricted Stock |
$ | i 5,185 | $ | i 4,549 | $ | i 9,822 | $ | i 7,973 | ||||||||
| SARs |
i 766 | i 730 | i 1,334 | i 1,433 | ||||||||||||
| Total |
$ | i 5,951 | $ | i 5,279 | $ | i 11,156 | $ | i 9,406 | ||||||||
The Company recognized excess tax benefits of $ i 0.0 million and $ i 0.9 million during the three months ended June 30, 2022 and 2021, respectively, and $ i 0.5 million and $ i 4.5 million during the six months ended June 30, 2022 and 2021, respectively. The deferred tax asset related to all outstanding equity-based awards was $ i 5.0 million as of June 30, 2022.
Restricted Stock. A summary of Restricted Stock activity during the six months ended June 30, 2022 is as follows:
i
| Weighted |
||||||||
| Average Grant |
||||||||
| Restricted |
Date Fair Value |
|||||||
| Stock |
Per Share |
|||||||
| Outstanding as of December 31, 2021 |
i 34,026 | $ | i 1,487.02 | |||||
| Granted |
i 18,707 | $ | i 1,692.29 | |||||
| Forfeited |
( i 1,282 | ) | $ | i 1,899.54 | ||||
| Vested and issued |
( i 7,451 | ) | $ | i 1,178.21 | ||||
| Outstanding as of June 30, 2022 |
i 44,000 | $ | i 1,614.57 | |||||
| Vested and deferred as of June 30, 2022 |
i 6,927 | $ | i 889.05 | |||||
At June 30, 2022, there was $ i 36.4 million of unrecognized compensation expense related to Restricted Stock, which is expected to be recognized over a weighted average period of i 1.6 years.
Stock Appreciation Rights. A summary of SARs activity during the six months ended June 30, 2022 is as follows:
i
| Weighted |
||||||||||||||||||||
| Weighted |
Average |
|||||||||||||||||||
| Weighted |
Average |
Aggregate |
Remaining |
|||||||||||||||||
| Stock |
Average |
Grant |
Intrinsic |
Contractual |
||||||||||||||||
| Appreciation |
Exercise |
Date Fair |
Value |
Term |
||||||||||||||||
| Rights |
Price |
Value |
(in thousands) |
(in years) |
||||||||||||||||
| Outstanding as of December 31, 2021 |
i 45,740 | $ | i 1,075.34 | $ | i 263.62 | $ | i 32,897 | i 7.1 | ||||||||||||
| Granted |
i - | $ | i - | $ | i - | $ | - | - | ||||||||||||
| Exercised |
( i 1,500 | ) | $ | i 765.50 | $ | i 182.44 | $ | i 805 | - | |||||||||||
| Forfeited |
( i 1,750 | ) | $ | i 1,492.73 | $ | i 375.76 | ||||||||||||||
| Expired |
( i 375 | ) | $ | i 1,851.23 | $ | i 469.52 | ||||||||||||||
| Outstanding as of June 30, 2022 |
i 42,115 | $ | i 1,062.12 | $ | i 260.02 | $ | i 15,550 | i 6.5 | ||||||||||||
| Exercisable as of June 30, 2022 |
i 27,115 | $ | i 815.46 | $ | i 192.80 | $ | i 13,815 | i 5.8 | ||||||||||||
At June 30, 2022, there was $ i 4.2 million of unrecognized compensation expense related to SARs, which is expected to be recognized over a weighted average period of i 1.1 years.
/
13. INCOME TAXES
The Company’s effective tax rate was i 23.5% and - i 8.7% for the three months ended June 30, 2022 and 2021, respectively, and i 21.0% and i 4.9% for the six months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate for the three months ended June 30, 2022 compared to the prior year quarter was due primarily to a $ i 35.4 million income tax benefit from the reversal of a pre-existing deferred tax liability on the investment in Hargray in the prior year that did not recur. The increase in the effective tax rate for the six months ended June 30, 2022 compared to the prior year period was due primarily to the aforementioned $ i 35.4 million income tax benefit, partially offset by $ i 20.4 million of income tax expense related to a change in valuation allowance in the prior year that did not recur.
14. OTHER INCOME AND EXPENSE
Other income (expense) consisted of the following (in thousands):
i
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| MBI Net Option fair value adjustment | $ | i 6,290 | $ | ( i 21,350 | ) | $ | i 90,900 | $ | ( i 15,790 | ) | ||||||
| Write-off of debt issuance costs | i - | ( i 1,644 | ) | i - | ( i 2,131 | ) | ||||||||||
| Interest and investment income | i 3,043 | i 2,392 | i 6,485 | i 5,617 | ||||||||||||
| Gain on step acquisition | i - | i 33,406 | i - | i 33,406 | ||||||||||||
| Mark-to-market adjustments and other | ( i 1,267 | ) | ( i 655 | ) | ( i 1,259 | ) | ( i 853 | ) | ||||||||
| Other income (expense), net | $ | i 8,066 | $ | i 12,149 | $ | i 96,126 | $ | i 20,249 | ||||||||
/
15. NET INCOME PER COMMON SHARE
Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. The denominator used in calculating diluted net income per common share further includes any common shares available to be issued upon vesting or exercise of outstanding equity-based compensation awards if such inclusion would be dilutive, calculated using the treasury stock method, and any common shares to be issued upon conversion of the Convertible Notes, calculated using the if-converted method.
The computation of basic and diluted net income per common share was as follows (dollars in thousands, except per share amounts):
i
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2021 | 2022 | 2021 | ||||||||||||||
| Numerator: | ||||||||||||||||
| Net income - basic | $ | i 69,245 | $ | i 106,153 | $ | i 240,721 | $ | i 174,735 | ||||||||
| Add: Convertible Notes interest expense, net of tax | i 1,551 | i 1,551 | i 3,095 | i 2,014 | ||||||||||||
| Net income - diluted | $ | i 70,796 | $ | i 107,704 | $ | i 243,816 | $ | i 176,749 | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average common shares outstanding - basic | i 5,946,507 | i 6,014,351 | i 5,982,494 | i 6,013,382 | ||||||||||||
| Effect of dilutive equity-based compensation awards(1) | i 18,894 | i 37,218 | i 20,364 | i 38,831 | ||||||||||||
| Effect of dilution from if-converted Convertible Notes(2) | i 404,248 | i 404,248 | i 404,248 | i 260,630 | ||||||||||||
| Weighted average common shares outstanding - diluted | i 6,369,649 | i 6,455,817 | i 6,407,106 | i 6,312,843 | ||||||||||||
| Net Income per Common Share: | ||||||||||||||||
| Basic | $ | i 11.64 | $ | i 17.65 | $ | i 40.24 | $ | i 29.06 | ||||||||
| Diluted | $ | i 11.11 | $ | i 16.68 | $ | i 38.05 | $ | i 28.00 | ||||||||
| Supplemental Net Income per Common Share Disclosure: | ||||||||||||||||
| Anti-dilutive shares from equity-based compensation awards(1) | i 14,667 | i 8,415 | i 14,667 | i 8,415 | ||||||||||||
| (1) | Equity-based compensation awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation. |
| (2) | Based on a conversion rate of i 0.4394 shares of common stock per weighted $1,000 principal amount of Convertible Notes outstanding during all periods presented. |
16. COMMITMENTS AND CONTINGENCIES
Contractual Obligations. The Company has obligations to make future payments for goods and services under certain contractual arrangements. These contractual obligations secure the future rights to various goods and services to be used in the normal course of the Company’s operations. In accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as certain purchase obligations under contracts, are not reflected as assets or liabilities in the condensed consolidated balance sheets. As of June 30, 2022, there have been no material changes to the contractual obligations previously disclosed in the 2021 Form 10-K.
In addition, the Company incurs recurring utility pole rental costs and fees imposed by various governmental authorities, including franchise fees, as part of its operations. However, these costs are not included in the Company’s contractual obligations as they are cancellable on short notice, in the case of pole rental costs, or are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities, in the case of fees imposed by governmental authorities. The Company also has franchise agreements requiring plant construction and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, the Company obtains surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments under these arrangements are required only in the remote event of nonperformance. The Company issued letters of credit totaling $ i 44.1 million on behalf of Wisper to guarantee its performance obligations under an FCC broadband funding program. As of June 30, 2022, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheet. Refer to note 8 for further details on this transaction.
Litigation and Legal Matters. The Company is subject to complaints and administrative proceedings and has been a defendant in various civil lawsuits that have arisen in the ordinary course of its business. Such matters include contract disputes; actions alleging negligence, invasion of privacy, trademark, copyright and patent infringement, and violations of applicable wage and hour laws; statutory or common law claims involving current and former employees; and other matters. Although the outcomes of any legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, the Company believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its business, financial condition, results of operations or cash flows.
Regulation in the Company’s Industry. The Company’s operations are extensively regulated by the FCC, some state governments and most local governments. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease-and-desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations. Future legislative and regulatory changes could adversely affect the Company’s operations.
/
| MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2021 and the related “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are contained in our 2021 Form 10-K. Our results of operations and financial condition discussed herein may not be indicative of our future results and trends.
Throughout this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.
The results discussed below include Hargray operations for the period since the May 3, 2021 acquisition date and CableAmerica operations for the period since the December 30, 2021 acquisition date, and exclude the operations contributed to Clearwave Fiber (the "Clearwave Fiber Contribution") for the period since the January 1, 2022 contribution date. Hargray and CableAmerica operations are collectively referred to as the "Acquired Operations" within the following discussion.
Overview
We are a fully integrated provider of data, video and voice services to residential and business customers in 24 Western, Midwestern and Southern states as of June 30, 2022. The markets we serve are primarily non-metropolitan, secondary and tertiary markets, with approximately 73% of our customers located in seven states as of June 30, 2022: Arizona, Idaho, Mississippi, Missouri, Oklahoma, South Carolina and Texas. Our biggest customer concentrations are in the Mississippi Gulf Coast region and in the greater Boise, Idaho region. We provided service to approximately 1.1 million residential and business customers out of approximately 2.7 million homes passed as of June 30, 2022. Of these customers, approximately 1,059,000 subscribed to data services, 221,000 subscribed to video services and 140,000 subscribed to voice services as of June 30, 2022.
We generate substantially all of our revenues through three primary product lines. Ranked by share of our total revenues through the first six months of 2022, they are residential data (54.2%), residential video (19.8%) and business services (data, voice and video: 17.9%). The profit margins, growth rates and/or capital intensity of these three primary product lines vary significantly due to competition, product maturity and relative costs.
We focus on growing our higher margin businesses, namely residential data and business services. Beginning in 2013, we began our shift away from our prior concentration on growing revenues through subscriber retention and maximizing customer primary service units (“PSUs”). We adapted our strategy to face the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily to increasing programming costs and retransmission fees and competition from other content providers, and the declining revenues from residential voice services are due primarily to the increasing use of wireless voice services instead of residential voice services. Separately, we have also focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, are less attracted by discounting, require less support and churn less. This strategy focuses on increasing Adjusted EBITDA, Adjusted EBITDA less capital expenditures and producing higher margins.
Excluding the effects of our recently completed and any potential future acquisitions and divestitures, the trends described above have impacted, and are expected to further impact, our three primary product lines in the following ways:
| ● |
Residential data. We have experienced growth in residential data customers and revenues every year since 2013. We expect growth for this product line to continue over the long-term as we believe upgrades in our broadband capacity, our ability to offer higher access speeds than many of our competitors, the reliability and flexibility of our data service offerings and our WiFi support service will enable us to continue to grow average monthly revenue per unit ("ARPU") from our existing customers and capture additional market share from both data subscribers who use other providers as well as households in our footprint that do not yet subscribe to data services from any provider. We experienced elevated growth rates in residential data customers and revenues during the first two years of the COVID-19 pandemic, but are now seeing a return to more normalized, pre-pandemic growth patterns. |
| ● |
Residential video. Residential video service is an increasingly costly and fragmenting business, with programming costs and retransmission fees continuing to escalate in the face of a proliferation of streaming content alternatives. We intend to continue our strategy of focusing on the higher-margin businesses of residential data and business services while de-emphasizing our residential video business. As a result of our video strategy, we expect that residential video customers and revenues will decline further in the future. In 2021, we began the launch of Sparklight® TV, an internet protocol-based (“IPTV”) video service that allows customers with our Sparklight TV app to stream our video channels from the cloud. Currently, all of our homes passed in non-Hargray markets have access to Sparklight TV, and we are now working to expand access to the Hargray markets as well. This transition from linear to IPTV video service enables us to reclaim bandwidth, freeing up network capacity to increase data speeds and capacity across our network. |
| ● |
Business services. We have experienced significant growth in business data customers and revenues, and we expect this growth to continue over the long-term. We attribute this growth to our strategic focus on increasing sales to business customers and our efforts to attract enterprise business customers. Margins for products sold to business customers have remained attractive, which we expect will continue. |
We continue to experience increased competition, particularly from telephone companies, fiber and municipal overbuilders, over-the-top (“OTT”) video providers and direct broadcast satellite (“DBS”) television providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. More than 60% of our total capital expenditures since 2017 were focused on infrastructure improvements that were intended to grow these measures. We continue to invest capital to, among other things, increase fiber density and coverage, expand our footprint, increase plant and data capacity, enhance network reliability and improve the customer experience. We offer Gigabit data service to nearly all of our homes passed and have deployed DOCSIS 3.1, which, together with Sparklight TV, further increases our network capacity and enables future growth in our residential data and business services product lines.
We expect to continue to devote financial resources to infrastructure improvements in existing and newly acquired markets as well as to expand high-speed data service in areas where our consortium was designated the winning bidder for the FCC’s Rural Digital Opportunity Fund Phase I auction. We believe these investments are necessary to continually meet our customers’ needs and to remain competitive. The capital enhancements associated with recent acquisitions include rebuilding low-capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back office functions such as billing, accounting and service provisioning; migrating products to legacy Cable One platforms; and expanding our high-capacity fiber network.
Our primary goals are to continue growing residential data and business services revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value and follow through with further planned investments in broadband plant upgrades, including the deployment of DOCSIS 4.0 capabilities and new data service offerings for residential and business customers. At the same time, we intend to continue balancing the impact of the COVID-19 pandemic on our business, associates, customers and other stakeholders. We also plan to continue seeking broadband-related acquisition and strategic investment opportunities in rural markets in addition to pursuing organic growth through market expansion projects.
Our recent acquisitions and strategic investments include:
| ● |
On May 3, 2021, we acquired the remaining approximately 85% equity interest in Hargray, a data, video and voice services provider to residential and business customers throughout Alabama, Florida, Georgia and South Carolina, that we did not already own for an approximately $2.0 billion cash purchase price that implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis. |
| ● |
On October 1, 2021, we made a minority equity investment for a less than 10% ownership interest in Point Broadband, a fiber internet service provider, for $25.0 million. On March 24, 2022, we invested an additional $5.4 million in Point Broadband. |
| ● |
On October 18, 2021, we completed a minority equity investment for a less than 10% ownership interest in Tristar, a special-purpose acquisition company, for $20.8 million. |
| ● |
On November 5, 2021, we invested an additional $50.0 million in Nextlink, a wireless internet service provider, resulting in us owning an approximately 17% equity interest in Nextlink. |
| ● |
On December 30, 2021, we acquired certain assets and assumed certain liabilities from CableAmerica, a data, video and voice services provider in central Missouri, for $113.1 million in cash on a debt-free basis. |
| ● |
On January 1, 2022, we closed a joint venture transaction in which we contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Clearwave) and certain unaffiliated third-party investors contributed cash, to a newly formed entity, Clearwave Fiber. The operations we contributed generated approximately 3% of our consolidated revenues for the three months ended December 31, 2021. Our approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. We recognized a non-cash gain of $22.1 million associated with this transaction. Clearwave Fiber is intended to accelerate deployment of fiber internet to residents and businesses in existing markets and near-adjacent areas, as well as to provide connectivity to unserved and underserved areas in such markets via fiber-to-the-premises service. |
| ● |
On April 1, 2022, we contributed our Tallahassee, Florida system to MetroNet, a fiber internet service provider, in exchange for cash consideration of $7.0 million and an equity interest of less than 10% in MetroNet valued at $7.0 million. |
| ● |
On June 1, 2022, we completed a minority equity investment for a less than 10% ownership interest in Visionary, an internet service provider, for $7.2 million. |
Results of Operations
PSU and Customer Counts
Selected subscriber data for the periods presented was as follows (in thousands, except percentages):
| As of June 30, |
Annual Net Gain (Loss) |
|||||||||||||||
| 2022 |
2021 |
Change |
% Change |
|||||||||||||
| Residential data PSUs |
964 | 923 | 41 | 4.4 | ||||||||||||
| Residential video PSUs |
208 | 272 | (64 | ) | (23.6 | ) | ||||||||||
| Residential voice PSUs |
99 | 110 | (11 | ) | (10.2 | ) | ||||||||||
| Total residential PSUs |
1,270 | 1,305 | (35 | ) | (2.6 | ) | ||||||||||
| Business data PSUs |
96 | 94 | 2 | 1.7 | ||||||||||||
| Business video PSUs |
13 | 14 | (2 | ) | (13.3 | ) | ||||||||||
| Business voice PSUs |
41 | 44 | (3 | ) | (5.8 | ) | ||||||||||
| Total business services PSUs |
149 | 152 | (3 | ) | (1.9 | ) | ||||||||||
| Total data PSUs |
1,059 | 1,017 | 43 | 4.2 | ||||||||||||
| Total video PSUs |
221 | 287 | (66 | ) | (23.1 | ) | ||||||||||
| Total voice PSUs |
140 | 153 | (14 | ) | (9.0 | ) | ||||||||||
| Total PSUs |
1,420 | 1,457 | (37 | ) | (2.6 | ) | ||||||||||
| Residential customer relationships |
1,025 | 1,032 | (7 | ) | (0.7 | ) | ||||||||||
| Business customer relationships |
102 | 102 | (1 | ) | (0.8 | ) | ||||||||||
| Total customer relationships |
1,126 | 1,134 | (8 | ) | (0.7 | ) | ||||||||||
In recent years, our customer mix has shifted away from double- and triple-play packages combining data, video and/or voice services, which is in line with our strategy of focusing on our higher margin residential data and business services product lines. This is largely because some residential video customers have defected to DBS services and OTT offerings and households continue to discontinue residential voice service. In addition, we have focused on selling data-only packages to new customers rather than cross-selling video to these customers.
Use of Nonfinancial Metrics and ARPU
We use various nonfinancial metrics to measure, manage and monitor our operating performance on an ongoing basis. Such metrics include homes passed, PSUs and customer relationships. Homes passed represents the number of serviceable and marketable homes and businesses passed by our active plant. A PSU represents a single subscription to a particular service offering. Residential bulk multi-dwelling PSUs are generally classified as residential and are counted at the individual unit level. Business voice customers who have multiple voice lines are counted as a single PSU. A customer relationship represents a single customer who subscribes to one or more PSUs.
We believe homes passed, PSU and customer relationship counts are useful to investors in evaluating our operating performance. Similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measures of homes passed, PSUs and customer relationships may not be directly comparable to similarly titled measures reported by other companies.
We use ARPU to evaluate and monitor the amount of revenue generated by each type of service subscribed to by customers and the contribution to total revenues as well as to analyze and compare growth patterns. Residential ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by the number of months in the period, except that for any PSUs added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the pro-rated average number of PSUs during such period. Business services ARPU values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by the number of months in the period, except that for any business customer relationships added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent business services revenues divided by the pro-rated average number of business customer relationships during such period.
We believe ARPU is useful to investors in evaluating our operating performance. ARPU and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of ARPU may not be directly comparable to similarly titled measures reported by other companies.
Comparison of Three Months Ended June 30, 2022 to Three Months Ended June 30, 2021
Revenues
Revenues increased $27.3 million, or 6.8%, due primarily to $25.2 million of additional revenues from the Acquired Operations as well as an increase in higher margin residential data and business services revenues, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $5.6 million of revenues in the prior year quarter and decreases in residential video and residential voice revenues.
Revenues by service offering for the three months ended June 30, 2022 and 2021, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):
| Three Months Ended June 30, |
||||||||||||||||||||||||
| 2021 |
2022 vs. 2021 |
|||||||||||||||||||||||
| Revenues |
% of Total |
Revenues |
% of Total |
$ Change |
% Change |
|||||||||||||||||||
| Residential data |
$ | 233,330 | 54.4 | $ | 207,648 | 51.7 | $ | 25,682 | 12.4 | |||||||||||||||
| Residential video |
84,761 | 19.8 | 87,240 | 21.7 | (2,479 | ) | (2.8 | ) | ||||||||||||||||
| Residential voice |
10,715 | 2.5 | 12,112 | 3.0 | (1,397 | ) | (11.5 | ) | ||||||||||||||||
| Business services |
76,660 | 17.9 | 76,616 | 19.1 | 44 | 0.1 | ||||||||||||||||||
| Other |
23,619 | 5.5 | 18,133 | 4.5 | 5,486 | 30.3 | ||||||||||||||||||
| Total revenues |
$ | 429,085 | 100.0 | $ | 401,749 | 100.0 | $ | 27,336 | 6.8 | |||||||||||||||
Residential data service revenues increased $25.7 million, or 12.4%, due primarily to $13.6 million of additional revenues from the Acquired Operations, as well as subscriber growth, a reduction in package discounting and increased customer subscriptions to premium tiers, including the migration of customers on our 100 Megabits per second ("Mbps") plan to our 200 Mbps plan in March 2022.
Residential video service revenues decreased $2.5 million, or 2.8%, due primarily to a decrease in residential video subscribers, partially offset by $5.1 million of additional revenues from the Acquired Operations and a rate adjustment implemented in March 2022.
Residential voice service revenues decreased $1.4 million, or 11.5%, due primarily to a decrease in residential voice subscribers, partially offset by $0.6 million of additional revenues from the Acquired Operations.
Business services revenues increased slightly due primarily to $1.3 million of additional revenues from the Acquired Operations and growth in our business data and voice services to small and medium-sized businesses and enterprise customers, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $5.6 million of business services revenues in the second quarter of 2021.
Other revenues increased $5.5 million, or 30.3%, due primarily to $4.7 million of additional revenues from the Acquired Operations, consisting primarily of regulatory revenues.
ARPU for the indicated service offerings for the three months ended June 30, 2022 and 2021 were as follows:
| Three Months Ended June 30, |
2022 vs. 2021 |
||||||||||
| 2022 |
2021 |
$ Change |
% Change |
||||||||
| Residential data |
$ | 80.44 | $ | 78.34 | $ | 2.10 | 2.7 | ||||
| Residential video |
$ | 130.28 | $ | 110.32 | $ | 19.96 | 18.1 | ||||
| Residential voice |
$ | 35.52 | $ | 39.28 | $ | (3.76 | ) | (9.6 | ) | ||
| Business services |
$ | 252.00 | $ | 263.86 | $ | (11.86 | ) | (4.5 | ) | ||
Costs and Expenses
Operating expenses (excluding depreciation and amortization) were $118.4 million for the three months ended June 30, 2022 and increased $6.0 million, or 5.4%, compared to the three months ended June 30, 2021. The increase in operating expenses was primarily attributable to $6.7 million of additional expenses related to the Acquired Operations and $2.7 million of higher labor and other compensation-related costs, partially offset by $4.1 million of lower programming expenses as a result of video customer losses. Operating expenses as a percentage of revenues were 27.6% and 28.0% for the three months ended June 30, 2022 and 2021, respectively.
Selling, general and administrative expenses were $90.8 million for the three months ended June 30, 2022 and increased $2.8 million, or 3.1%, compared to the three months ended June 30, 2021. The increase in selling, general and administrative expenses was primarily attributable to $1.1 million of additional expenses related to the Acquired Operations and increases in labor and other compensation-related costs of $1.8 million, bad debt expense of $1.5 million, marketing costs of $1.4 million and professional fees of $1.4 million, partially offset by lower acquisition-related costs of $3.6 million and system conversion costs of $1.1 million. Selling, general and administrative expenses as a percentage of revenues were 21.2% and 21.9% for the three months ended June 30, 2022 and 2021, respectively.
Depreciation and amortization expense was $88.4 million for the three months ended June 30, 2022 and increased $3.5 million, or 4.1%, compared to the three months ended June 30, 2021. The increase in depreciation and amortization expense was primarily due to $8.6 million of additional expenses from the Acquired Operations, partially offset by lower expenses resulting from the Clearwave Fiber Contribution. Depreciation and amortization expense as a percentage of revenues was 20.6% and 21.1% for the three months ended June 30, 2022 and 2021, respectively.
We recognized $8.3 million in non-cash losses associated with the dispositions of our Tallahassee, Florida system and certain other non-core assets during the three months ended June 30, 2022.
Interest Expense
Interest expense was $32.1 million for the three months ended June 30, 2022 and increased $3.1 million, or 10.8%, compared to the three months ended June 30, 2021. The increase was driven primarily by additional outstanding debt throughout the period and higher interest rates.
Other Income (Expense), Net
Other income, net, was $8.1 million for the three months ended June 30, 2022 and consisted primarily of a $6.3 million non-cash gain on fair value adjustment associated with the MBI Net Option and interest and investment income. Other income, net, was $12.1 million for the three months ended June 30, 2021 and consisted primarily of a $33.4 million non-cash gain on fair value adjustment associated with our existing investment in Hargray upon the acquisition of Hargray and interest and investment income, partially offset by a $21.4 million non-cash loss on fair value adjustment associated with the MBI Net Option.
Income Tax Provision (Benefit)
Income tax provision was $22.8 million for the three months ended June 30, 2022 compared to an income tax benefit of $8.6 million for the three months ended June 30, 2021 and our effective tax rate was 23.5% and -8.7% for the three months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate was due primarily to a $35.4 million income tax benefit from the reversal of a pre-existing deferred tax liability on the investment in Hargray in the prior year that did not recur.
Net Income
Net income was $69.2 million for the three months ended June 30, 2022 compared to $106.2 million for the three months ended June 30, 2021.
Unrealized Gain on Cash Flow Hedges and Other, Net of Tax
Unrealized gain on cash flow hedges and other, net of tax was $32.6 million for the three months ended June 30, 2022 compared to $16.0 million loss for the three months ended June 30, 2021. The $48.7 million change was due to comparatively higher projected future increases in interest rates.
Comparison of Six Months Ended June 30, 2022 to Six Months Ended June 30, 2021
Revenues
Revenues increased $112.8 million, or 15.2%, due primarily to $102.1 million of additional revenues from the Acquired Operations as well as an increase in higher margin residential data and business services revenues, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $11.0 million of revenues in the prior year period and decreases in residential video and residential voice revenues.
Revenues by service offering for the six months ended June 30, 2022 and 2021, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):
| Six Months Ended June 30, |
||||||||||||||||||||||||
| 2021 |
2022 vs. 2021 |
|||||||||||||||||||||||
| Revenues |
% of Total |
Revenues |
% of Total |
$ Change |
% Change |
|||||||||||||||||||
| Residential data |
$ | 463,483 | 54.2 | $ | 391,253 | 52.7 | $ | 72,230 | 18.5 | |||||||||||||||
| Residential video |
169,419 | 19.8 | 163,257 | 22.0 | 6,162 | 3.8 | ||||||||||||||||||
| Residential voice |
22,610 | 2.6 | 22,589 | 3.0 | 21 | 0.1 | ||||||||||||||||||
| Business services |
153,152 | 17.9 | 136,978 | 18.4 | 16,174 | 11.8 | ||||||||||||||||||
| Other |
47,147 | 5.5 | 28,934 | 3.9 | 18,213 | 62.9 | ||||||||||||||||||
| Total revenues |
$ | 855,811 | 100.0 | $ | 743,011 | 100.0 | $ | 112,800 | 15.2 | |||||||||||||||
Residential data service revenues increased $72.2 million, or 18.5%, due primarily to $44.2 million of additional revenues from the Acquired Operations, as well as subscriber growth, a reduction in package discounting and increased customer subscriptions to premium tiers, including the migration of customers on our 100 Mbps plan to our 200 Mbps plan in March 2022.
Residential video service revenues increased $6.2 million, or 3.8%, due primarily to $19.1 million of additional revenues from the Acquired Operations and a rate adjustment implemented in March 2022, partially offset by a decrease in residential video subscribers.
Residential voice service revenues were unchanged from prior year as the decrease in residential voice subscribers was offset by $3.2 million of additional revenues from the Acquired Operations.
Business services revenues increased $16.2 million, or 11.8%, due primarily to $18.8 million of additional revenues from the Acquired Operations and growth in our business data and voice services to small and medium-sized businesses and enterprise customers, partially offset by the contribution of Clearwave operations to Clearwave Fiber that generated $11.0 million of business services revenues in the first half of 2021.
Other revenues increased $18.2 million, or 62.9%, due primarily to $16.7 million of additional revenues from the Acquired Operations, consisting primarily of regulatory revenues.
ARPU for the indicated service offerings for the six months ended June 30, 2022 and 2021 were as follows:
| Six Months Ended June 30, |
2022 vs. 2021 |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Residential data |
$ | 80.46 | $ | 78.03 | $ | 2.43 | 3.1 | |||||||||
| Residential video |
$ | 124.43 | $ | 107.15 | $ | 17.28 | 16.1 | |||||||||
| Residential voice |
$ | 37.03 | $ | 39.32 | $ | (2.29 | ) | (5.8 | ) | |||||||
| Business services |
$ | 252.87 | $ | 250.30 | $ | 2.57 | 1.0 | |||||||||
Costs and Expenses
Operating expenses (excluding depreciation and amortization) were $237.8 million for the six months ended June 30, 2022 and increased $24.0 million, or 11.2%, compared to the six months ended June 30, 2021. The increase in operating expenses was primarily attributable to $29.4 million of additional expenses related to the Acquired Operations and a $3.1 million increase in labor and other compensation-related costs, partially offset by a $9.5 million reduction in programming expenses as a result of video customer losses. Operating expenses as a percentage of revenues were 27.8% and 28.8% for the six months ended June 30, 2022 and 2021, respectively.
Selling, general and administrative expenses were $178.6 million for the six months ended June 30, 2022 and increased $21.5 million, or 13.7%, compared to the six months ended June 30, 2021. The increase in selling, general and administrative expenses was primarily attributable to $17.1 million of additional expenses related to the Acquired Operations and increases of $3.6 million in marketing costs, $3.4 million in professional fees, $3.0 million in labor and other compensation-related costs, $2.2 million in health insurance costs and $2.0 million in bad debt expense, partially offset by a $6.7 million decrease in acquisition-related costs. Selling, general and administrative expenses as a percentage of revenues were 20.9% and 21.1% for the six months ended June 30, 2022 and 2021, respectively.
Depreciation and amortization expense was $176.3 million for the six months ended June 30, 2022 and increased $22.9 million, or 14.9%, compared to the six months ended June 30, 2021. The increase in depreciation and amortization expense was primarily due to $33.0 million of additional expenses from the Acquired Operations, partially offset by lower expenses resulting from the Clearwave Fiber Contribution. Depreciation and amortization expense as a percentage of revenues was 20.6% and 20.7% for the six months ended June 30, 2022 and 2021, respectively.
We recognized a $13.8 million net non-cash gain associated with the Clearwave Fiber Contribution and the dispositions of our Tallahassee, Florida system and certain other non-core assets during the six months ended June 30, 2022.
Interest Expense
Interest expense was $62.2 million for the six months ended June 30, 2022 and increased $9.6 million, or 18.3%, compared to the six months ended June 30, 2021. The increase was driven primarily by additional outstanding debt throughout the period and higher interest rates.
Other Income (Expense), Net
Other income, net, was $96.1 million for the six months ended June 30, 2022 and consisted primarily of a $90.9 million non-cash gain on fair value adjustment associated with the MBI Net Option and interest and investment income. Other income, net, was $20.2 million for the six months ended June 30, 2021 and consisted primarily of a $33.4 million non-cash gain on fair value adjustment associated with our existing investment in Hargray upon the Hargray Acquisition and interest and investment income, partially offset by a $15.8 million non-cash loss on fair value adjustment associated with the MBI Net Option.
Income Tax Provision
Income tax provision was $64.3 million and $9.1 million for the six months ended June 30, 2022 and 2021, respectively, and our effective tax rate was 21.0% and 4.9% for the six months ended June 30, 2022 and 2021, respectively. The increase in the effective tax rate was due primarily to a $35.4 million income tax benefit from the reversal of a pre-existing deferred tax liability on the investment in Hargray in the prior year that did not recur, partially offset by $20.4 million of income tax expense related to a change in valuation allowance in the prior year that did not recur.
Net Income
Net income was $240.7 million for the six months ended June 30, 2022 compared to $174.7 million for the six months ended June 30, 2021.
Unrealized Gain on Cash Flow Hedges and Other, Net of Tax
Unrealized gain on cash flow hedges and other, net of tax was $90.1 million and $39.4 million for the six months ended June 30, 2022 and 2021, respectively, and increased $50.6 million, or 128.3%, due to comparatively higher projected future increases in interest rates.
Use of Adjusted EBITDA
We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP. Adjusted EBITDA is reconciled to net income below, the most directly comparable GAAP financial measure.
Adjusted EBITDA is defined as net income plus interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on asset sales and disposals, system conversion costs, rebranding costs, (gain) loss on sales of businesses, equity method investment (income) loss, other (income) expense and other unusual items, as provided in the following table. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and our cash cost of debt financing. These costs are evaluated through other financial measures.
We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the Credit Agreement and the Senior Notes Indenture to determine compliance with the covenants contained in the Credit Agreement and the ability to take certain actions under the Senior Notes Indenture. Adjusted EBITDA is also a significant performance measure used by us in connection with our incentive compensation programs. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.
| Three Months Ended June 30, |
2022 vs. 2021 |
|||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
$ Change |
% Change |
||||||||||||
| Net income |
$ | 69,245 | $ | 106,153 | $ | (36,908 | ) | (34.8 | ) | |||||||
| Plus: Interest expense |
32,080 | 28,947 | 3,133 | 10.8 | ||||||||||||
| Income tax provision (benefit) |
22,773 | (8,616 | ) | 31,389 | NM | |||||||||||
| Depreciation and amortization |
88,423 | 84,915 | 3,508 | 4.1 | ||||||||||||
| Equity-based compensation |
5,951 | 5,279 | 672 | 12.7 | ||||||||||||
| (Gain) loss on deferred compensation |
(94 | ) | 78 | (172 | ) | (220.5 | ) | |||||||||
| Acquisition-related costs |
1,221 | 4,835 | (3,614 | ) | (74.7 | ) | ||||||||||
| (Gain) loss on asset sales and disposals, net |
2,173 | 1,058 | 1,115 | 105.4 | ||||||||||||
| System conversion costs |
498 | 1,618 | (1,120 | ) | (69.2 | ) | ||||||||||
| Rebranding costs |
- | 26 | (26 | ) | (100.0 | ) | ||||||||||
| (Gain) loss on sales of businesses |
8,253 | - | 8,253 | NM | ||||||||||||
| Equity method investment (income) loss, net |
5,024 | 1,074 | 3,950 | NM | ||||||||||||
| Other (income) expense, net |
(8,066 | ) | (12,149 | ) | 4,083 | (33.6 | ) | |||||||||
| Adjusted EBITDA |
$ | 227,481 | $ | 213,218 | $ | 14,263 | 6.7 | |||||||||
| NM = Not meaningful.
|
| Six Months Ended June 30, |
2022 vs. 2021 |
|||||||||||||||
| (dollars in thousands) |
2022 |
2021 |
$ Change |
% Change |
||||||||||||
| Net income |
$ | 240,721 | $ | 174,735 | $ | 65,986 | 37.8 | |||||||||
| Plus: Interest expense |
62,160 | 52,528 | 9,632 | 18.3 | ||||||||||||
| Income tax provision |
64,274 | 9,099 | 55,175 | NM | ||||||||||||
| Depreciation and amortization |
176,343 | 153,445 | 22,898 | 14.9 | ||||||||||||
| Equity-based compensation |
11,156 | 9,406 | 1,750 | 18.6 | ||||||||||||
| (Gain) loss on deferred compensation |
(160 | ) | 105 | (265 | ) | NM | ||||||||||
| Acquisition-related costs |
2,503 | 9,205 | (6,702 | ) | (72.8 | ) | ||||||||||
| (Gain) loss on asset sales and disposals, net |
4,663 | 938 | 3,725 | NM | ||||||||||||
| System conversion costs |
1,071 | 2,669 | (1,598 | ) | (59.9 | ) | ||||||||||
| Rebranding costs |
- | 70 | (70 | ) | (100.0 | ) | ||||||||||
| (Gain) loss on sales of businesses |
(13,833 | ) | - | (13,833 | ) | NM | ||||||||||
| Equity method investment (income) loss, net |
1,244 | 1,642 | (398 | ) | (24.2 | ) | ||||||||||
| Other (income) expense, net |
(96,126 | ) | (20,249 | ) | (75,877 | ) | NM | |||||||||
| Adjusted EBITDA |
$ | 454,016 | $ | 393,593 | $ | 60,423 | 15.4 | |||||||||
| NM = Not meaningful. |
We believe that Adjusted EBITDA is useful to investors in evaluating our operating performance. Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.
Financial Condition: Liquidity and Capital Resources
Liquidity
Our primary funding requirements are for our ongoing operations, capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. We believe that existing cash balances, our Senior Credit Facilities and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to fund operations, make capital expenditures, make future acquisitions and strategic investments, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.
As part of our 45% minority equity interest in MBI, we acquired a call option to purchase all but not less than all of the remaining equity interests in MBI that we do not already own, which is exercisable at any time between January 1, 2023 and June 30, 2024. If we do not exercise the call option, then investors affiliated with GTCR LLC, a private equity firm based in Chicago, may exercise a put option under which we are obligated to purchase all but not less than all of the direct and indirect equity interests in MBI that we do not already own from all members of MBI other than us, which is exercisable at any time between July 1, 2025 through September 30, 2025. The purchase price payable upon the exercise of the call option or the put option, as applicable, will be calculated under a formula based on a multiple of MBI’s adjusted EBITDA. We have not yet obtained the capital that we believe will be necessary to pay the purchase price if either the call option or the put option are exercised.
A summary of our net cash flows for the periods indicated was as follows (dollars in thousands):
| Six Months Ended June 30, |
2022 vs. 2021 |
|||||||||||||||
| 2022 |
2021 |
$ Change |
% Change |
|||||||||||||
| Net cash provided by operating activities |
$ | 353,086 | $ | 347,625 | $ | 5,461 | 1.6 | |||||||||
| Net cash used in investing activities |
(215,172 | ) | (2,105,963 | ) | 1,890,791 | (89.8 | ) | |||||||||
| Net cash provided by (used in) financing activities |
(246,738 | ) | 1,632,394 | (1,879,132 | ) | (115.1 | ) | |||||||||
| Decrease in cash and cash equivalents |
(108,824 | ) | (125,944 | ) | 17,120 | (13.6 | ) | |||||||||
| Cash and cash equivalents, beginning of period |
388,802 | 574,909 | (186,107 | ) | (32.4 | ) | ||||||||||
| Cash and cash equivalents, end of period |
$ | 279,978 | $ | 448,965 | $ | (168,987 | ) | (37.6 | ) | |||||||
The $5.5 million year-over-year increase in net cash provided by operating activities was primarily attributable to an increase in Adjusted EBITDA of $60.4 million and lower acquisition-related and system conversion costs, partially offset by increases in cash paid for income taxes and interest and unfavorable changes in accounts receivable and accounts payable.
The $1.9 billion decrease in net cash used in investing activities from the prior year period was due primarily to the $2.0 billion paid for the Hargray Acquisition in the prior year and $9.2 million of proceeds received from the dispositions of our Tallahassee, Florida system and certain other non-core assets during 2022, partially offset by a $49.1 million increase in cash paid for capital expenditures and $23.1 million invested in debt and equity investments during 2022 that did not occur in the prior year.
The $1.9 billion change in net cash provided by (used in) financing activities from the prior year period was due primarily to net proceeds of $1.7 billion from debt issuances in the prior year that did not recur, as well as $191.7 million of share repurchases during 2022 that did not occur in the prior year.
On July 1, 2015, the Board authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of our common stock). On May 20, 2022, the Company's Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock). At the end of the second quarter of 2022, we had exhausted the share repurchase authorization under the 2015 Program and had $403.4 million of remaining share repurchase authorization under the 2022 Program. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the Share Repurchase Programs through June 30, 2022, we have repurchased 354,268 shares of our common stock at an aggregate cost of $296.6 million, including 143,637 shares purchased at an aggregate cost of $191.7 million during the six months ended June 30, 2022. We may, from time to time, continue to opportunistically repurchase shares depending on the trading price of our common stock, market conditions and other factors.
We currently expect to continue to pay comparable quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the second quarter of 2022, the Board approved a quarterly dividend of $2.75 per share of common stock, which was paid on June 17, 2022.
Financing Activity
Senior Credit Facilities
The Credit Agreement provides for the Term Loan A-2, the Term Loan B-2, the Term Loan B-3, the Term Loan B-4 and the Revolving Credit Facility. The Revolving Credit Facility gives us the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.
As of June 30, 2022, we had approximately $2.3 billion of aggregate outstanding term loans, $51.2 million of outstanding letters of credit and $448.8 million available for borrowing under the Revolving Credit Facility. A summary of our outstanding term loans as of June 30, 2022 is as follows (dollars in thousands):
| Instrument |
Draw Date(s) |
Original Principal |
Amortization Per Annum(1) |
Outstanding Principal |
Final Maturity Date |
Final Scheduled Principal Payment |
Benchmark Rate |
Applicable Margin(2) |
Interest Rate |
||||||||||||
| Term Loan A-2 |
5/8/2019(3) 10/1/2019(3) |
$ | 700,000 | Varies(4) |
$ | 651,079 | 10/30/2025 |
$ | 476,607 | LIBOR |
1.75% |
3.42% |
|||||||||
| Term Loan B-2 |
1/7/2019 |
250,000 | 1.0% |
241,875 | 10/30/2027 |
228,750 | LIBOR |
2.00% |
3.67% |
||||||||||||
| Term Loan B-3 |
6/14/2019(5) 10/30/2020(5) |
625,000 | 1.0% |
610,071 | 10/30/2027 |
577,472 | LIBOR |
2.00% |
3.67% |
||||||||||||
| Term Loan B-4 |
5/3/2021 |
800,000 | 1.0% |
792,000 | 5/3/2028 |
746,000 | LIBOR |
2.00% |
3.67% |
||||||||||||
| Total |
$ | 2,375,000 | $ | 2,295,025 | $ | 2,028,829 | |||||||||||||||
| (1) |
Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions). |
| (2) |
The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on our Total Net Leverage Ratio (as defined in the Credit Agreement). All other applicable margins are fixed. |
| (3) |
On May 8, 2019, $250.0 million was drawn. On October 1, 2019, an additional $450.0 million was drawn. On October 30, 2020, the amortization schedule was reset. |
| (4) |
Per annum amortization rates for years one through five following October 30, 2020 are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively. |
| (5) |
On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn. |
Senior Notes
In November 2020, we completed the offering of $650.0 million aggregate principal amount of Senior Notes due 2030. The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of our existing and future wholly owned domestic subsidiaries that guarantees our obligations under our Senior Credit Facilities or that guarantees certain capital markets debt of ours or a guarantor in an aggregate principal amount in excess of $250.0 million.
Convertible Notes
In March 2021, we completed the Convertible Notes offering of $575.0 million aggregate principal amount of 2026 Notes and $345.0 million aggregate principal amount of 2028 Notes. The Convertible Notes are senior unsecured obligations of ours and are guaranteed by our wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain of our Notes in an aggregate principal amount in excess of $250.0 million. The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes do not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of our common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock). The initial conversion price of each of the 2026 Notes and the 2028 Notes represents a premium of 25.0% over the last reported sale price of $1,820.83 per share of our common stock on March 2, 2021. The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of our common stock or a combination thereof is at our election.
Other Debt-Related Information
As of June 30, 2022, letter of credit issuances totaled $51.2 million and accrued fees at a rate of approximately 1.88% per annum.
On May 3, 2022, we entered into a letter of credit agreement with MUFG which provides for an additional $75.0 million of letter of credit issuing capacity. No letters of credit were issued under this agreement as of June 30, 2022.
We were in compliance with all debt covenants as of June 30, 2022.
We recorded debt issuance cost amortization of $1.3 million and $1.8 million for the three months ended June 30, 2022 and 2021, respectively, and $2.6 million and $2.9 million for the six months ended June 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.
Unamortized debt issuance costs consisted of the following (in thousands):
| Revolving Credit Facility portion: |
||||||||
| Other noncurrent assets |
$ | 2,243 | $ | 2,576 | ||||
| Term loans and Notes portion: |
||||||||
| Long-term debt (contra account) |
26,262 | 28,572 | ||||||
| Total |
$ | 28,505 | $ | 31,148 | ||||
The unamortized debt discount associated with the Convertible Notes was $18.5 million as of June 30, 2022. We recorded debt discount amortization of $1.1 million for both the three months ended June 30, 2022 and 2021, respectively, and $2.1 million and $1.4 million for the six months ended June 30, 2022 and 2021, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.
We are party to two interest rate swap agreements to convert our interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate LIBOR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.653%. Under the second swap agreement, with respect to a notional amount of $350.0 million, our monthly payment obligation is determined at a fixed base rate of 2.739%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized losses of $5.8 million and $7.8 million on interest rate swaps during the three months ended June 30, 2022 and 2021, respectively, and losses of $13.4 million and $15.5 million for the six months ended June 30, 2022 and 2021, respectively, which were reflected within interest expense in the condensed consolidated statements of operations and comprehensive income.
Refer to notes 10 and 12 to our audited consolidated financial statements included in the 2021 Form 10-K and notes 8 and 9 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further details regarding our financing activity, outstanding debt and interest rate swaps.
Capital Expenditures
We have significant ongoing capital expenditure requirements as well as capital enhancements associated with acquired operations, including rebuilding low capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 4.0; consolidating back office functions such as billing, accounting and service provisioning; migrating products to legacy Cable One platforms; and expanding our high-capacity fiber network. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.
Our capital expenditures by category for the six months ended June 30, 2022 and 2021 were as follows (in thousands):
| Six Months Ended June 30, |
||||||||
| 2021 |
||||||||
| Customer premise equipment(1) |
$ | 51,005 | $ | 36,856 | ||||
| Commercial(2) |
16,439 | 21,233 | ||||||
| Scalable infrastructure(3) |
35,307 | 25,398 | ||||||
| Line extensions(4) |
23,375 | 18,904 | ||||||
| Upgrade/rebuild(5) |
37,732 | 36,898 | ||||||
| Support capital(6) |
42,879 | 21,876 | ||||||
| Total |
$ | 206,737 | $ | 161,165 | ||||
| (1) |
Customer premise equipment includes costs incurred at customer locations, including installation costs and customer premise equipment (e.g., modems and set-top boxes). |
| (2) |
Commercial includes costs related to securing business services customers and PSUs, including small and medium-sized businesses and enterprise customers. |
| (3) |
Scalable infrastructure includes costs not related to customer premise equipment to secure growth of new customers and PSUs or provide service enhancements (e.g., headend equipment). |
| (4) |
Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering). |
| (5) |
Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments. |
| (6) |
Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles) and capitalized internal labor costs not associated with customer installation activities. |
Contractual Obligations and Contingent Commitments
As of June 30, 2022, there have been no material changes to the contractual obligations and contingent commitments previously disclosed in the 2021 Form 10-K.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements or financing arrangements with special-purpose entities.
Critical Accounting Policies and Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.
An accounting policy is considered to be critical if it is important to our results of operations and financial condition and if it requires management’s most difficult, subjective and complex judgments in its application.
There have been no material changes to our critical accounting policy and estimate disclosures described in our 2021 Form 10-K.
| QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Market risk is the potential loss arising from changes in market rates and prices. There have been no material changes to the market risk disclosures described in the 2021 Form 10-K other than as set forth below.
As of June 30, 2022, we had $650.0 million, $575.0 million and $345.0 million aggregate principal amount of the Senior Notes, 2026 Notes and 2028 Notes, respectively, outstanding. Although the Senior Notes and 2028 Notes are based on fixed rates and the 2026 Notes do not bear interest, changes in interest rates could impact the fair market value of such notes. As of June 30, 2022, the fair market values of the Senior Notes, 2026 Notes and 2028 Notes were $528.8 million, $473.7 million and $289.0 million, respectively.
| CONTROLS AND PROCEDURES |
Disclosure Controls and Procedures
The Company’s management is responsible for establishing and maintaining adequate disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation as of June 30, 2022 of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on the Company’s evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control Over Financial Reporting
There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
| LEGAL PROCEEDINGS |
None.
| RISK FACTORS |
There have been no material changes to the risk factors previously disclosed in the 2021 Form 10-K.
| UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
Certain information relating to common stock repurchases by the Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended June 30, 2022 were as follows (dollars in thousands, except per share data):
| Approximate Dollar |
||||||||||||||||
| Total Number of |
Value of Shares |
|||||||||||||||
| Shares Purchased |
that May Yet Be |
|||||||||||||||
| Total Number |
as Part of Publicly |
Purchased Under |
||||||||||||||
| of Shares |
Average Price |
Announced Plans |
the Plans or |
|||||||||||||
| Period |
Purchased |
Paid Per Share |
or Programs(1) |
Programs |
||||||||||||
| April 1 to 30, 2022(2) |
19,166 | $ | 1,416.69 | 19,137 | $ | 48,277 | ||||||||||
| May 1 to 31, 2022 |
22,700 | $ | 1,177.21 | 22,700 | $ | 471,554 | ||||||||||
| June 1 to 30, 2022 |
54,000 | $ | 1,262.63 | 54,000 | $ | 403,372 | ||||||||||
| Total |
95,866 | $ | 1,273.20 | 95,837 | ||||||||||||
| (1) |
On July 1, 2015, the Board authorized up to $250.0 million of share repurchases (subject to a total cap of 600,000 shares of common stock), which was announced on August 7, 2015 (the "2015 Program"). On May 20, 2022, the Company's Board authorized up to $450.0 million of additional share repurchases (with no cap as to the number of shares of common stock), which was announced on May 23, 2022 (the "2022 Program"). The 2022 Program was in addition to the repurchase authorization then remaining under the 2015 Program. The authorizations do not have an expiration date. At the end of the second quarter of 2022, the Company had exhausted the share repurchase authorization under the 2015 Program and had $403.4 million of remaining share repurchase authorization under the 2022 Program. Additional purchases under the 2022 Program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. |
| (2) |
Includes shares withheld from associates to satisfy estimated tax withholding obligations in connection with the vesting of restricted stock and/or exercises of SARs under the Incentive Compensation Plans. The average price paid per share for the common stock withheld was based on the closing price of the Company’s common stock on the applicable vesting or exercise measurement date. |
| DEFAULTS UPON SENIOR SECURITIES |
None.
| MINE SAFETY DISCLOSURES |
Not applicable.
| OTHER INFORMATION |
Not applicable.
| EXHIBITS |
| 101.INS |
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document.* |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document.* |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
| 104 |
The cover page of this Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, formatted in Inline XBRL (included within the Exhibit 101 attachments). |
__________
** Furnished herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Cable One, Inc. (Registrant) |
|||
| By: |
/s/ Julia M. Laulis |
||
| Name: |
|||
| Title: |
Chair of the Board, President and Chief Executive Officer |
||
Date: August 4, 2022
| By: |
/s/ Todd M. Koetje |
||
| Name: |
|||
| Title: |
Chief Financial Officer |
||
Date: August 4, 2022
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 3/15/28 | ||||
| 12/15/27 | ||||
| 3/15/26 | ||||
| 12/15/25 | ||||
| 11/15/25 | ||||
| 9/30/25 | ||||
| 7/1/25 | ||||
| 3/20/25 | ||||
| 6/30/24 | ||||
| 3/20/24 | ||||
| 11/15/23 | ||||
| 1/1/23 | ||||
| 12/31/22 | ||||
| Filed as of: | 8/5/22 | |||
| Filed on: | 8/4/22 | 8-K | ||
| 7/29/22 | ||||
| For Period end: | 6/30/22 | |||
| 6/17/22 | 4 | |||
| 6/1/22 | 4 | |||
| 5/23/22 | ||||
| 5/20/22 | 4, DEF 14A, PRE 14A, S-8, S-8 POS | |||
| 5/3/22 | ||||
| 4/1/22 | 4 | |||
| 3/31/22 | 10-Q | |||
| 3/28/22 | ||||
| 3/24/22 | ||||
| 1/1/22 | ||||
| 12/31/21 | 10-K, 8-K | |||
| 12/30/21 | ||||
| 11/5/21 | 10-Q | |||
| 10/18/21 | ||||
| 10/1/21 | 4 | |||
| 6/30/21 | 10-Q, 4 | |||
| 5/3/21 | 3, 8-K | |||
| 3/31/21 | 10-Q | |||
| 3/5/21 | 4, 8-K | |||
| 3/2/21 | 8-K | |||
| 12/31/20 | 10-K | |||
| 11/12/20 | 4, 8-K | |||
| 11/9/20 | 8-K | |||
| 10/30/20 | 8-K | |||
| 10/1/20 | ||||
| 7/10/20 | SC 13G/A | |||
| 5/4/20 | ||||
| 10/1/19 | 8-K, 8-K/A | |||
| 6/14/19 | ||||
| 5/8/19 | 4, 8-K | |||
| 8/7/15 | 10-Q | |||
| 7/1/15 | 3, 3/A, 4, 4/A, 8-K, S-8 | |||
| List all Filings | ||||
As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 5/25/22 Cable One, Inc. 8-K/A:5,9 4/08/22 20:962K RDG Filings/FA |