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Section 1: 8-K (FORM 8-K)

cabo20200217_8k.htm
false 0001632127 0001632127 2020-02-27 2020-02-27

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

___________________________

 

FORM 8-K

___________________________

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): February 27, 2020

___________________________

 

Cable One, Inc.

 

(Exact Name of Registrant as Specified in Its Charter)

___________________________

 

Delaware

001-36863

13-3060083

(State or Other Jurisdiction of

Incorporation or Organization)

(Commission File Number)

(I.R.S. Employer Identification No.)

 

210 E. Earll Drive, Phoenix, Arizona

85012

(Address of Principal Executive Offices)

(Zip Code)

 

Registrant’s Telephone Number, Including Area Code: (602) 364-6000

___________________________

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

   

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

   

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

   

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common Stock, par value $0.01

 

CABO

 

New York Stock Exchange

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). 

 

Emerging growth company 

 

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. ☐

 

 

 

 

Item 2.02        Results of Operations and Financial Condition.

 

On February 27, 2020, Cable One, Inc. (the “Company”) issued a press release related to its results for the fourth quarter and year ended December 31, 2019. A copy of this press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information contained in this Item 2.02 as well as in Exhibit 99.1 is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and such information shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01 Financial Statements and Exhibits.

 

  Exhibit

 

Description

 

 

99.1

 

Press release issued by Cable One, Inc. on February 27, 2020.

104

 

The cover page of this Current Report on Form 8-K, formatted in Inline XBRL.

 

 

 

 

SIGNATURE

 

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 hereunto duly authorized.

 

 

 

Cable One, Inc.

 

 

 

 

 

 

By:

/s/ Peter N. Witty

 

 

 

Name:

Peter N. Witty

 

 

 

Title:

Senior Vice President, General Counsel and Secretary

 

 

 

 

 

 

Date: February 27, 2020

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_173055.htm
 

Exhibit 99.1

 

 

 

 

Cable One Reports Fourth Quarter and Full Year 2019 Results

 

February 27, 2020 Phoenix, Arizona (BUSINESS WIRE) Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable One”) today reported financial and operating results for the quarter and year ended December 31, 2019.

 

Cable One completed the acquisition of Clearwave Communications (“Clearwave”) on January 8, 2019 and the acquisition of Fidelity Communications Co.’s data, video and voice business and certain related assets (collectively, “Fidelity”) on October 1, 2019. The results discussed below and presented in the tables within this press release include Clearwave and Fidelity operations for the periods since the completion of their respective acquisitions.

 

Fourth Quarter 2019 Highlights:

 

 

Total revenues were $318.8 million in the fourth quarter of 2019 compared to $269.9 million in the fourth quarter of 2018, an increase of 18.1%. Residential data revenues increased 18.9% and business services revenues increased 41.6% year-over-year.

 

 

Net income was $53.6 million in the fourth quarter of 2019, an increase of 27.6% year-over-year. Adjusted EBITDA(1) was $158.3 million, an increase of 24.0% year-over-year. Net profit margin was 16.8% and Adjusted EBITDA margin(1) was 49.7%.

 

 

Net cash provided by operating activities was $156.6 million in the fourth quarter of 2019, an increase of 56.3% year-over-year. Adjusted EBITDA less capital expenditures(1) was $72.3 million in the fourth quarter of 2019 compared to $69.0 million in the fourth quarter of 2018.

 

 

Residential data primary service units (“PSUs”) grew by over 94,000, or 15.7%, year-over-year and by nearly 76,000, or 12.3%, sequentially. Business services PSUs grew by nearly 24,000, or 22.4%, year-over-year and by nearly 14,000, or 12.0%, sequentially.

 

Full Year 2019 Highlights:

 

 

Total revenues were $1.2 billion in 2019 compared to $1.1 billion in 2018, an increase of 8.9%. Residential data revenues increased 11.0% and business services revenues increased 31.1% year-over-year.

 

 

Net income was $178.6 million in 2019, an increase of 8.4% year-over-year. Adjusted EBITDA was $569.0 million, an increase of 13.6% year-over-year. Net profit margin was 15.3% and Adjusted EBITDA margin was 48.7%.

 

 

Net cash provided by operating activities was $491.7 million in 2019, an increase of 20.6% year-over-year. Adjusted EBITDA less capital expenditures was $306.6 million in 2019, an increase of 8.3% year-over-year.

 

(1) Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures are defined in the section of this press release entitled “Use of Non-GAAP Financial Measures.” Adjusted EBITDA and Adjusted EBITDA less capital expenditures are reconciled to net income, Adjusted EBITDA margin is reconciled to net profit margin and Adjusted EBITDA less capital expenditures is also reconciled to net cash provided by operating activities. Refer to the “Reconciliations of Non-GAAP Measures” tables within this press release.

 

Fourth Quarter 2019 Financial Results Compared to Fourth Quarter 2018

 

Revenues increased $48.9 million, or 18.1%, to $318.8 million for the fourth quarter of 2019, including $39.4 million from Clearwave and Fidelity operations. The remaining increase was driven primarily by organic residential data and business services revenue growth. For the fourth quarter of 2019 and 2018, residential data revenues comprised 47.1% and 46.8% of total revenues and business services revenues comprised 17.9% and 14.9% of total revenues, respectively.

 

1

 

 

Operating expenses (excluding depreciation and amortization) were $103.4 million in the fourth quarter of 2019 compared to $91.8 million in the fourth quarter of 2018. Operating expenses as a percentage of revenues were 32.5% for the fourth quarter of 2019 compared to 34.0% for the year-ago quarter. The increase in operating expenses was primarily attributable to $12.6 million of additional expenses related to Clearwave and Fidelity operations. Operating expenses as a percentage of revenues, excluding the impact of Clearwave and Fidelity operations, were also 32.5% for the fourth quarter of 2019 compared to 34.0% for the fourth quarter of 2018.

 

Selling, general and administrative expenses were $64.7 million for the fourth quarter of 2019 and increased $7.1 million, or 12.3%, compared to the fourth quarter of 2018. Selling, general and administrative expenses as a percentage of revenues were 20.3% and 21.4% for the fourth quarter of 2019 and 2018, respectively. The increase in selling, general and administrative expenses was primarily attributable to $6.5 million of additional expenses related to Clearwave and Fidelity operations. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of Clearwave and Fidelity operations, were 20.8% and 21.4% for the fourth quarter of 2019 and 2018, respectively.

 

Depreciation and amortization expense was $59.3 million for the fourth quarter of 2019 and increased $9.8 million, or 19.7%, including $11.9 million attributable to Clearwave and Fidelity operations. As a percentage of revenues, depreciation and amortization expense was 18.6% for the fourth quarter of 2019 compared to 18.3% for the fourth quarter of 2018. The Company recognized $2.8 million and $1.7 million of net losses on asset disposals during the fourth quarter of 2019 and 2018, respectively.

 

Interest expense increased $3.8 million, or 24.6%, to $19.0 million, driven primarily by additional outstanding debt incurred in connection with the Clearwave and Fidelity acquisitions and interest rate swap settlements, partially offset by lower interest rates.

 

Other income of $1.3 million and $1.5 million in the fourth quarter of 2019 and 2018, respectively, consisted primarily of interest and investment income.

 

The income tax provision was $17.2 million in the fourth quarter of 2019 compared to $13.5 million in the prior year quarter. The effective tax rate was 24.3% for both the fourth quarter of 2019 and 2018.

 

Net income was $53.6 million in the fourth quarter of 2019 compared to $42.0 million in the prior year quarter.

 

Adjusted EBITDA was $158.3 million and $127.6 million for the fourth quarter of 2019 and 2018, respectively, an increase of 24.0%. Capital expenditures for the fourth quarter of 2019 totaled $86.0 million, including capital expenditures for Clearwave and Fidelity operations, compared to $58.6 million for the fourth quarter of 2018. Adjusted EBITDA less capital expenditures for the fourth quarter of 2019 was $72.3 million compared to $69.0 million in the prior year quarter.

 

Full Year 2019 Financial Results Compared to Full Year 2018

 

Revenues increased $95.7 million, or 8.9%, to $1.2 billion for 2019, driven primarily by $59.3 million from Clearwave and Fidelity operations as well as organic residential data and business services revenue growth, partially offset by a decrease in residential video revenues. For 2019 and 2018, residential data revenues comprised 46.9% and 46.0% of total revenues and business services revenues comprised 17.5% and 14.5% of total revenues, respectively.

 

Operating expenses (excluding depreciation and amortization) were $388.6 million for 2019 and increased $18.3 million, or 4.9%, compared to 2018. Operating expenses as a percentage of revenues were 33.3% for 2019 compared to 34.5% for 2018. The increase in operating expenses attributable to Clearwave and Fidelity operations was $15.4 million. Excluding the expenses associated with Clearwave and Fidelity operations, operating expenses were $373.1 million for 2019, an increase of $2.9 million, or 0.8%, compared to 2018. The increase was due primarily to higher regulatory costs resulting from certain passthrough fees that were historically reported on a net basis, partially offset by lower programming expenses. Operating expenses as a percentage of revenues, excluding the impact of Clearwave and Fidelity operations, were 33.7% for 2019 compared to 34.5% for 2018.

 

Selling, general and administrative expenses increased $22.9 million, or 10.3%, to $245.1 million. Selling, general and administrative expenses as a percentage of revenues were 21.0% and 20.7% for 2019 and 2018, respectively. The increase in selling, general and administrative expenses attributable to Clearwave and Fidelity operations was $9.8 million. Excluding the expenses associated with Clearwave and Fidelity operations, selling, general and administrative expenses increased $13.1 million, or 5.9%, to $235.3 million due primarily to acquisition-related and rebranding costs incurred during 2019. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of Clearwave and Fidelity operations, were 21.2% for 2019 compared to 20.7% for 2018.

 

2

 

 

Depreciation and amortization expense increased $19.0 million, or 9.6%, including a $21.0 million increase attributable to Clearwave and Fidelity operations. As a percentage of revenues, depreciation and amortization expense was 18.6% for 2019 compared to 18.4% for 2018.

 

The Company recognized a net loss on asset disposals of $7.2 million in 2019 compared to $14.2 million in 2018. In 2019, the Company recognized a gain on the sale of a non-operating property that housed its former headquarters, while the prior year included more asset disposals.

 

Interest expense increased $11.3 million, or 18.7%, to $71.7 million, driven primarily by additional outstanding debt incurred in connection with the Clearwave and Fidelity acquisitions and interest rate swap settlements, partially offset by lower interest rates on variable rate term loans, including loans used to redeem $450.0 million of higher rate senior unsecured notes in the second quarter of 2019 (the “Note Redemption”).

 

The Company recognized other expense of $4.9 million during 2019, consisting primarily of a $6.5 million call premium related to the Note Redemption and $4.9 million of debt issuance cost write-offs and expenses associated with financing transactions, partially offset by interest and investment income. The Company recognized other income of $4.5 million during 2018, consisting primarily of interest and investment income.

 

The income tax provision increased $8.0 million, or 17.0%, due primarily to an increase in taxable income of $21.8 million, or 10.3%. The Company’s effective tax rate was 23.6% and 22.3% for 2019 and 2018, respectively.

 

Net income was $178.6 million in 2019 compared to $164.8 million in 2018.

 

Adjusted EBITDA was $569.0 million and $500.8 million for 2019 and 2018, respectively, an increase of 13.6%. Capital expenditures totaled $262.4 million and $217.8 million for 2019 and 2018, respectively. Adjusted EBITDA less capital expenditures for 2019 was $306.6 million, an increase of $23.5 million, or 8.3%, from the prior year.

 

Liquidity and Capital Resources

 

At December 31, 2019, the Company had $125.3 million of cash and cash equivalents on hand compared to $264.1 million at December 31, 2018. The Company’s debt balance was $1.8 billion and $1.2 billion at December 31, 2019 and December 31, 2018, respectively. The Company also had $343.3 million available for borrowing under its revolving credit facility as of December 31, 2019. The Company repurchased 5,984 shares for $5.1 million during the first quarter of 2019.

 

The Company paid $48.5 million in dividends to stockholders during 2019, including $12.9 million during the fourth quarter.

 

Conference Call

 

Cable One will host a conference call with the financial community to discuss results for the fourth quarter and full year 2019 on Thursday, February 27, 2020, at 5 p.m. Eastern Time (ET).

 

Shareholders, analysts and other interested parties may register for the conference in advance at http://dpregister.com/10138555. Those unable to pre-register may join the call via the live audio webcast on the Cable One Investor Relations website or by dialing 1-844-378-6483 (Canada: 1-855-669-9657/International: 1-412-542-4178) shortly before 5 p.m. ET.

 

A replay of the call will be available from Thursday, February 27, 2020 until Thursday, March 12, 2020 on the Cable One Investor Relations website.

 

Additional Information Available on Website

 

The information in this press release should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the period ended December 31, 2019, which will be posted on the “SEC Filings” section of the Cable One Investor Relations website at ir.cableone.net when it is filed with the Securities and Exchange Commission (the “SEC”). Investors and others interested in more information about Cable One should consult the Company’s website, which is regularly updated with financial and other important information about the Company.

 

3

 

 

Use of Non-GAAP Financial Measures

 

The Company uses certain measures that are not defined by generally accepted accounting principles in the United States (“GAAP”) to evaluate various aspects of its business. Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA are non-GAAP financial measures and should be considered in addition to, not as superior to, or as a substitute for, net income, net profit margin, net cash provided by operating activities or capital expenditures as a percentage of net income reported in accordance with GAAP. Adjusted EBITDA and Adjusted EBITDA less capital expenditures are reconciled to net income, Adjusted EBITDA margin is reconciled to net profit margin and capital expenditures as a percentage of Adjusted EBITDA is reconciled to capital expenditures as a percentage of net income. Adjusted EBITDA less capital expenditures is also reconciled to net cash provided by operating activities. These reconciliations are included in the “Reconciliations of Non-GAAP Measures” tables within this press release.

 

“Adjusted EBITDA” is defined as net income plus interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance expense, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on asset disposals, system conversion costs, rebranding costs, other (income) expense and other unusual expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company’s business as well as other non-cash or special items and is unaffected by the Company’s 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 the Company’s cash cost of debt financing. These costs are evaluated through other financial measures.

 

“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by total revenues.

 

“Adjusted EBITDA less capital expenditures,” when used as a liquidity measure, is calculated as net cash provided by operating activities excluding the impact of capital expenditures, interest expense, income tax provision, changes in operating assets and liabilities, change in deferred income taxes and other unusual expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release.

 

“Capital expenditures as a percentage of Adjusted EBITDA” is defined as capital expenditures divided by Adjusted EBITDA.

 

The Company uses Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA to assess its performance, and it also uses Adjusted EBITDA less capital expenditures as an indicator of its ability to fund operations and make additional investments with internally generated funds. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under the Company’s credit facilities to determine compliance with the covenants contained in the credit agreement. Adjusted EBITDA and capital expenditures are also significant performance measures used by the Company in its annual incentive compensation program. 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.

 

The Company believes Adjusted EBITDA, Adjusted EBITDA margin and capital expenditures as a percentage of Adjusted EBITDA are useful to investors in evaluating the operating performance of the Company. The Company believes that Adjusted EBITDA less capital expenditures is useful to investors as it shows the Company’s performance while taking into account cash outflows for capital expenditures and is one of several indicators of the Company’s ability to service debt, make investments and/or return capital to its shareholders.

 

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures, capital expenditures as a percentage of Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in the Company’s industry, although the Company’s measures of Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and capital expenditures as a percentage of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.

 

About Cable One

 

Cable One, Inc. (NYSE: CABO) is a leading broadband communications provider serving more than 900,000 residential and business customers in 21 states through its Sparklight® and Clearwave brands. Sparklight provides consumers with a wide array of connectivity and entertainment services, including high-speed internet and advanced Wi-Fi solutions, cable television and phone service. Sparklight Business and Clearwave provide scalable and cost-effective products for businesses ranging in size from small to mid-market, in addition to enterprise, wholesale and carrier customers.

 

Contacts

 

Trish Niemann    Steven Cochran  

Senior Director, Corporate Communications

 

Chief Financial Officer

 
602-364-6372   [email protected]  
[email protected]      
       

 

4

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This communication may contain “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 the Company’s industry, business, 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. The Company’s actual results may vary materially from those expressed or implied in its forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by the Company or on its behalf. Important factors that could cause the Company’s actual results to differ materially from those in its forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors, which are discussed in the Company’s Annual Report on Form 10-K for the period ended December 31, 2019 to be filed with the SEC:

 

 

rising levels of competition from historical and new entrants in the Company’s markets;

 

recent and future changes in technology;

 

the Company’s ability to continue to grow its business services products;

 

increases in programming costs and retransmission fees;

 

the Company’s ability to obtain hardware, software and operational support from vendors;

 

the effects of any acquisitions and strategic investments by the Company;

 

risks that the Company’s rebranding may not produce the benefits expected;

 

damage to the Company’s reputation or brand image;

 

risks that the implementation of the Company’s new enterprise resource planning system disrupts business operations;

 

adverse economic conditions;

 

the integrity and security of the Company’s network and information systems;

 

the impact of possible security breaches and other disruptions, including cyber-attacks;

 

the Company’s failure to obtain necessary intellectual and proprietary rights to operate its business and the risk of intellectual property claims and litigation against the Company;

 

the Company’s ability to retain key employees;

 

legislative or regulatory efforts to impose network neutrality and other new requirements on the Company’s data services;

 

additional regulation of the Company’s video and voice services;

 

the Company’s 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 the Company’s level of indebtedness on its business, financial condition or results of operations and cash flows;

 

the restrictions the terms of the Company’s indebtedness place on its business and corporate actions;

 

the possibility that interest rates will rise, causing the Company’s obligations to service its variable rate indebtedness to increase significantly;

 

the Company’s ability to incur future indebtedness;

 

fluctuations in the Company’s stock price;

 

the Company’s ability to continue to pay dividends;

 

dilution from equity awards and potential stock issuances in connection with acquisitions and strategic investments;

 

provisions in the Company’s charter, by-laws and Delaware law that could discourage takeovers; and

  the other risks and uncertainties detailed from time to time in the Company’s filings with the SEC, including but not limited to its latest Annual Report on Form 10-K as filed with the SEC.

 

Any forward-looking statements made by the Company in this communication speak only as of the date on which they are made. The Company is under no obligation, and expressly disclaims any obligation, except as required by law, to update or alter its forward-looking statements, whether as a result of new information, subsequent events or otherwise.

 

5

 

 

CABLE ONE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 

(Unaudited)

 
                                 
   

Three Months Ended December 31,

                 

(dollars in thousands, except per share data)

 

2019

   

2018

   

$ Change

   

% Change

 

Revenues:

 

Residential data

  $ 150,285     $ 126,397     $ 23,888       18.9 %

Residential video

    86,356       82,578       3,778       4.6 %

Residential voice

    12,938       9,934       3,004       30.2 %

Business services

    56,936       40,213       16,723       41.6 %

Other

    12,236       10,730       1,506       14.0 %

Total Revenues

    318,751       269,852       48,899       18.1 %

Costs and Expenses:

                               

Operating (excluding depreciation and amortization)

    103,448       91,791       11,657       12.7 %

Selling, general and administrative

    64,713       57,632       7,081       12.3 %

Depreciation and amortization

    59,271       49,506       9,765       19.7 %

Loss on asset disposals, net

    2,812       1,659       1,153       69.5 %

Total Costs and Expenses

    230,244       200,588       29,656       14.8 %

Income from operations

    88,507       69,264       19,243       27.8 %

Interest expense

    (19,038 )     (15,279 )     (3,759 )     24.6 %

Other income, net

    1,341       1,485       (144 )     (9.7 )%

Income before income taxes

    70,810       55,470       15,340       27.7 %

Income tax provision

    17,197       13,462       3,735       27.7 %

Net income

  $ 53,613     $ 42,008     $ 11,605       27.6 %
                                 

Net Income per Common Share:

 

Basic

  $ 9.43     $ 7.40     $ 2.03       27.4 %

Diluted

  $ 9.32     $ 7.34     $ 1.98       27.0 %

Weighted Average Common Shares Outstanding:

 

Basic

    5,685,840       5,674,067       11,773       0.2 %

Diluted

    5,751,970       5,723,528       28,442       0.5 %
                                 

Deferred gain on cash flow hedges and other, net of tax

  $ 23,043     $ 254     $ 22,789       NM  

Comprehensive income

  $ 76,656     $ 42,262     $ 34,394       81.4 %

 


NM = Not meaningful.

 

6

 

 

CABLE ONE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

 

(Unaudited)

 
                                 
   

Year Ended December 31,

                 

(dollars in thousands, except per share data)

 

2019

   

2018

   

$ Change

   

% Change

 
Revenues:                                

Residential data

  $ 547,240     $ 492,816     $ 54,424       11.0 %

Residential video

    335,190       343,384       (8,194 )     (2.4 )%

Residential voice

    43,521       41,278       2,243       5.4 %

Business services

    204,500       155,952       48,548       31.1 %

Other

    37,546       38,865       (1,319 )     (3.4 )%

Total Revenues

    1,167,997       1,072,295       95,702       8.9 %

Costs and Expenses:

                               

Operating (excluding depreciation and amortization)

    388,552       370,269       18,283       4.9 %

Selling, general and administrative

    245,120       222,216       22,904       10.3 %

Depreciation and amortization

    216,687       197,731       18,956       9.6 %

Loss on asset disposals, net

    7,187       14,167       (6,980 )     (49.3 )%

Total Costs and Expenses

    857,546       804,383       53,163       6.6 %

Income from operations

    310,451       267,912       42,539       15.9 %

Interest expense

    (71,729 )     (60,415 )     (11,314 )     18.7 %

Other income (expense), net

    (4,907 )     4,487       (9,394 )     (209.4 )%

Income before income taxes

    233,815       211,984       21,831       10.3 %

Income tax provision

    55,233       47,224       8,009       17.0 %

Net income

  $ 178,582     $ 164,760     $ 13,822       8.4 %
                                 

Net Income per Common Share:

 

Basic

  $ 31.45     $ 28.98     $ 2.47       8.5 %

Diluted

  $ 31.12     $ 28.77     $ 2.35       8.2 %

Weighted Average Common Shares Outstanding:

 

Basic

    5,678,990       5,684,375       (5,385 )     (0.1 )%

Diluted

    5,737,856       5,725,963       11,893       0.2 %
                                 

Deferred gain (loss) on cash flow hedges and other, net of tax

  $ (68,062 )   $ 256     $ (68,318 )     NM  

Comprehensive income

  $ 110,520     $ 165,016     $ (54,496 )     (33.0 )%

 


NM = Not meaningful.

 

7

 

 

CABLE ONE, INC.

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

 
                 

(dollars in thousands, except par values)

 

December 31, 2019

   

December 31, 2018

 

Assets

 

Current Assets:

 

Cash and cash equivalents

  $ 125,271     $ 264,113  

Accounts receivable, net

    38,452       29,947  

Income taxes receivable

    2,146       10,713  

Prepaid and other current assets

    15,619       13,090  

Total Current Assets

    181,488       317,863  

Property, plant and equipment, net

    1,201,271       847,979  

Intangible assets, net

    1,312,381       953,851  

Goodwill

    429,597       172,129  

Other noncurrent assets

    27,094       11,412  

Total Assets

  $ 3,151,831     $ 2,303,234  
                 

Liabilities and Stockholders' Equity

 

Current Liabilities:

 

Accounts payable and accrued liabilities

  $ 136,993     $ 94,134  

Deferred revenue

    23,640       18,954  

Current portion of long-term debt

    28,909       20,625  

Total Current Liabilities

    189,542       133,713  

Long-term debt

    1,711,937       1,142,056  

Deferred income taxes

    303,314       242,127  

Other noncurrent liabilities

    105,469       9,980  

Total Liabilities

    2,310,262       1,527,876  
                 

Stockholders' Equity

 

Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding)

    -       -  

Common stock ($0.01 par value; 40,000,000 shares authorized; 5,887,899 shares issued; and 5,715,377 and 5,703,402 shares outstanding as of December 31, 2019 and 2018, respectively)

    59       59  

Additional paid-in capital

    51,198       38,898  

Retained earnings

    980,355       850,292  

Accumulated other comprehensive loss

    (68,158 )     (96 )

Treasury stock, at cost (172,522 and 184,497 shares held as of December 31, 2019 and 2018, respectively)

    (121,885 )     (113,795 )

Total Stockholders' Equity

    841,569       775,358  

Total Liabilities and Stockholders' Equity

  $ 3,151,831     $ 2,303,234  

 

8

 

 

CABLE ONE, INC.

 

RECONCILIATIONS OF NON-GAAP MEASURES

 

(Unaudited)

 
                                   
     

Three Months Ended December 31,

                 

(dollars in thousands)

 

2019

   

2018

   

$ Change

   

% Change

 

Net income

  $ 53,613     $ 42,008     $ 11,605       27.6 %

Net profit margin

    16.8 %     15.6 %                
                                   

Plus:

Interest expense

  $ 19,038     $ 15,279     $ 3,759       24.6 %
 

Income tax provision

    17,197       13,462       3,735       27.7 %
 

Depreciation and amortization

    59,271       49,506       9,765       19.7 %
 

Equity-based compensation

    3,139       3,224       (85 )     (2.6 )%
 

Severance expense

    -       729       (729 )     (100.0 )%
 

(Gain) loss on deferred compensation

    106       (191 )     297       (155.5 )%
 

Acquisition-related costs

    2,268       1,734       534       30.8 %
 

Loss on asset disposals, net

    2,812       1,659       1,153       69.5 %
 

System conversion costs

    1,541       1,135       406       35.8 %
 

Rebranding costs

    636       545       91       16.7 %
 

Other income, net

    (1,341 )     (1,485 )     144       (9.7 )%

Adjusted EBITDA

  $ 158,280     $ 127,605     $ 30,675       24.0 %

Adjusted EBITDA margin

    49.7 %     47.3 %                
                                   

Less:

Capital expenditures

  $ 86,028     $ 58,596     $ 27,432       46.8 %

Capital expenditures as a percentage of net income

    160.5 %     139.5 %                

Capital expenditures as a percentage of Adjusted EBITDA

    54.4 %     45.9 %                
                                   

Adjusted EBITDA less capital expenditures

  $ 72,252     $ 69,009     $ 3,243       4.7 %

 

 

   

Three Months Ended December 31,

                 

(dollars in thousands)

 

2019

   

2018

   

$ Change

   

% Change

 

Net cash provided by operating activities

  $ 156,556     $ 100,152     $ 56,404       56.3 %

Capital expenditures

    (86,028 )     (58,596 )     (27,432 )     46.8 %

Interest expense

    19,038       15,279       3,759       24.6 %

Amortization of debt issuance costs

    (1,119 )     (1,075 )     (44 )     4.1 %

Income tax provision

    17,197       13,462       3,735       27.7 %

Changes in operating assets and liabilities

    (9,300 )     13,667       (22,967 )     (168.0 )%

Decrease in deferred income taxes

    (27,299 )     (16,347 )     (10,952 )     67.0 %

(Gain) loss on deferred compensation

    106       (191 )     297       (155.5 )%

Acquisition-related costs

    2,268       1,734       534       30.8 %

Severance expense

    -       729       (729 )     (100.0 )%

Write-off of debt issuance costs

    (3 )     -       (3 )     NM  

System conversion costs

    1,541       1,135       406       35.8 %

Rebranding costs

    636       545       91       16.7 %

Other income, net

    (1,341 )     (1,485 )     144       (9.7 )%

Adjusted EBITDA less capital expenditures

  $ 72,252     $ 69,009     $ 3,243       4.7 %

 


NM = Not meaningful.

 

9

 

 

CABLE ONE, INC.

 

RECONCILIATIONS OF NON-GAAP MEASURES

 

(Unaudited)

 
                                   
     

Year Ended December 31,

                 

(dollars in thousands)

 

2019

   

2018

   

$ Change

   

% Change

 

Net income

  $ 178,582     $ 164,760     $ 13,822       8.4 %

Net profit margin

    15.3 %     15.4 %                
                                   

Plus:

Interest expense

    71,729       60,415       11,314       18.7 %
 

Income tax provision

    55,233       47,224       8,009       17.0 %
 

Depreciation and amortization

    216,687       197,731       18,956       9.6 %
 

Equity-based compensation

    12,300       10,486       1,814       17.3 %
 

Severance expense

    215       2,347       (2,132 )     (90.8 )%
 

Loss on deferred compensation

    400       425       (25 )     (5.9 )%
 

Acquisition-related costs

    9,590       1,773       7,817       NM  
 

Loss on asset disposals, net

    7,187       14,167       (6,980 )     (49.3 )%
 

System conversion costs

    4,828       5,037       (209 )     (4.1 )%
 

Rebranding costs

    7,294       968       6,326       NM  
 

Other income (expense), net

    4,907       (4,487 )     9,394       (209.4 )%

Adjusted EBITDA

  $ 568,952     $ 500,846     $ 68,106       13.6 %

Adjusted EBITDA margin

    48.7 %     46.7 %                
                                   

Less:

Capital expenditures

    262,352       217,766       44,586       20.5 %

Capital expenditures as a percentage of net income

    146.9 %     132.2 %                

Capital expenditures as a percentage of Adjusted EBITDA

    46.1 %     43.5 %                
                                   

Adjusted EBITDA less capital expenditures

  $ 306,600     $ 283,080     $ 23,520       8.3 %

 


NM = Not meaningful.

 

     

Year Ended December 31,

                 

(dollars in thousands)

 

2019

   

2018

   

$ Change

   

% Change

 

Net cash provided by operating activities

  $ 491,741     $ 407,769     $ 83,972       20.6 %
 

Capital expenditures

    (262,352 )     (217,766 )     (44,586 )     20.5 %
 

Interest expense

    71,729       60,415       11,314       18.7 %
 

Amortization of debt issuance costs

    (4,646 )     (4,163 )     (483 )     11.6 %
 

Income tax provision

    55,233       47,224       8,009       17.0 %
 

Changes in operating assets and liabilities

    (18,118 )     18,621       (36,739 )     (197.3 )%
 

Decrease in deferred income taxes

    (50,011 )     (34,973 )     (15,038 )     43.0 %
 

Loss on deferred compensation

    400       425       (25 )     (5.9 )%
 

Acquisition-related costs

    9,590       1,773       7,817       NM  
 

Severance expense

    215       2,347       (2,132 )     (90.8 )%
 

Write-off of debt issuance costs

    (4,210 )     (110 )     (4,100 )     NM  
 

System conversion costs

    4,828       5,037       (209 )     (4.1 )%
 

Rebranding costs

    7,294       968       6,326       NM  
 

Other income (expense), net

    4,907       (4,487 )     9,394       (209.4 )%

Adjusted EBITDA less capital expenditures

  $ 306,600     $ 283,080     $ 23,520       8.3 %

 


NM = Not meaningful.

 

10

 

 

CABLE ONE, INC.

 

OPERATING STATISTICS

 

(Unaudited)

 

 

   

As of December 31,

   

Change

 

(in thousands, except percentages, ARPU and employee data)

 

2019

   

2018

   

Amount

   

%

 

Homes Passed

    2,326       2,094       233       11.1 %
                                 

Residential Customers

    822       734       88       12.0 %
                                 

Data PSUs

    695       601       94       15.7 %

Video PSUs

    298       310       (12 )     (3.9 )%

Voice PSUs

    105       99       6       5.7 %

Total residential PSUs

    1,098       1,010       88       8.7 %
                                 

Business Customers

    85       71       14       20.2 %
                                 

Data PSUs

    78       62       16       25.8 %

Video PSUs

    16       16       (0 )     (1.5 )%

Voice PSUs

    35       27       8       28.8 %

Total business services PSUs

    129       105       24       22.4 %
                                 

Total Customers

    907       805       102       12.7 %

Total non-video

    592       478       113       23.6 %

Percent of total

    65.2 %     59.4 %                
                                 

Data PSUs

    773       663       110       16.6 %

Video PSUs

    314       326       (12 )     (3.8 )%

Voice PSUs

    139       126       13       10.7 %

Total PSUs

    1,227       1,115       111       10.0 %
                                 

Penetration

 

Data

    33.2 %     31.7 %             1.5 %

Video

    13.5 %     15.6 %             (2.1 )%

Voice

    6.0 %     6.0 %             0.0 %
                                 

Share of Fourth Quarter Revenues

 

Residential data

    47.1 %     46.8 %             0.3 %

Business services

    17.9 %     14.9 %             3.0 %

Total

    65.0 %     61.7 %             3.3 %
                                 

ARPU - Fourth Quarter

 

Residential data(1)

  $ 71.72     $ 69.90     $ 1.82       2.6 %

Residential video(1)

  $ 94.30     $ 88.22     $ 6.08       6.9 %

Residential voice(1), (2)

  $ 40.52     $ 32.97     $ 7.55       22.9 %

Business services(2), (3)

  $ 224.41     $ 189.40     $ 35.01       18.5 %
                                 

Number of Employees

    2,751       2,224       527       23.7 %

 


Note:

 

All totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.

(1)  

Average monthly revenue per unit (“ARPU”) values represent the applicable quarterly 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 three.

(2)  

The increases in residential voice and business services ARPU from the prior year were partially a result of certain passthrough fees that were historically reported on a net basis. Residential voice and business services ARPU for the fourth quarter of 2019 would have been $35.67 and $220.66, respectively, if reported on a comparable basis.

(3)  

ARPU values represent quarterly business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by three.

 

11

 

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