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Section 1: 8-K (CURRENT REPORT)




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): January 17, 2017
 


Cable One, Inc.

(Exact name of registrant as specified in its charter)
 


Delaware
1-36863
13-3060083
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(IRS 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))





Item 1.01.  Entry into a Material Definitive Agreement.

Cable One, Inc. (the “Company”) and Frequency Merger Sub, LLC, a wholly owned subsidiary of the Company, entered into an Agreement and Plan of Merger dated as of January 17, 2017 (the “Merger Agreement”) with RBI Holding LLC (“NewWave”), RBI Blocker Corp., RBI Blocker Holdings LLC and GTCR-RBI, LLC, as equityholder representative, pursuant to which the Company has agreed to acquire all of the outstanding equity interests in NewWave. NewWave is owned by funds affiliated with GTCR LLC, a leading private equity firm based in Chicago.

Under the terms of the Merger Agreement, the Company will pay a purchase price of $735 million in cash, subject to customary post-closing adjustments. The closing of the transaction is subject to the receipt of certain regulatory approvals and other customary closing conditions. The Company currently anticipates that the transaction will be completed in the second quarter of the Company’s fiscal year ending December 31, 2017.
 
The Company expects to finance the transaction with $650 million of senior secured loans and cash on hand. On January 17, 2017, in connection with the entry into the Merger Agreement, the Company entered into a commitment letter with JPMorgan Chase Bank, N.A. (“JPMorgan”).  Pursuant to the commitment letter, and subject to the terms and conditions set forth therein, if an amendment to the Company’s existing credit agreement is obtained, JPMorgan has committed to provide the Company with $300 million of incremental five-year term “A” loans and $350 million of incremental seven-year term “B” loans to finance the transaction.  If such amendment is not obtained, JPMorgan has committed to provide the Company with $395 million of new five-year term “A” loans, $350 million of new seven-year term “B” loans and $200 million of five-year revolving commitments to finance the transaction and refinance the Company’s existing credit facilities.

Cautionary Statement Regarding Forward-Looking Statements

This communication 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 the cable industry and the Company’s business and financial results. Forward-looking statements often include words such as “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 the Company’s forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on the Company’s behalf. Important factors that could cause the Company’s actual results to differ materially from those in the Company’s forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors:
 
 

 
 
uncertainties as to the timing of the acquisition of NewWave and the risk that the transaction may not be completed in a timely manner or at all;
the possibility that any or all of the various conditions to the consummation of the acquisition of NewWave may not be satisfied or waived, including failure to receive any required regulatory approvals (or any conditions, limitations or restrictions placed in connection with such approvals);
risks regarding the failure to obtain the necessary financing to complete the transaction;
the effect of the announcement or pendency of the transaction on the Company’s and NewWave’s ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners;
risks related to diverting management’s attention from the Company’s ongoing business operations;
uncertainties as to the Company’s ability and the amount of time necessary to realize the expected synergies and other benefits of the transaction;
the Company’s ability to integrate NewWave’s operations into its own;
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 product;
increases in programming costs and retransmission fees;
the Company’s ability to obtain support from vendors;
the effects of any significant acquisitions by the Company;
adverse economic conditions;
the integrity and security of the Company’s network and information systems;
legislative and regulatory efforts to impose new legal requirements on the Company’s data services;
changing and additional regulation of the Company’s data, video and voice services;
the Company’s ability to renew cable system franchises;
increases in pole attachment costs;
the failure to meet earnings expectations;
the adequacy of the Company’s risk management framework;
changes in tax and other laws and regulations;
changes in GAAP or other applicable accounting policies; and
the other risks and uncertainties detailed in the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K as filed with the SEC on March 7, 2016.
 
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 to, and expressly disclaims any obligation to, update or alter the Company’s forward-looking statements, whether as a result of new information, subsequent events or otherwise.

Item 7.01   Regulation FD Disclosure.

On January 18, 2017, the Company issued a press release announcing the transaction.  A copy of this press release is furnished as Exhibit 99.1 hereto.

Also on January 18, 2017, the Company posted a presentation containing additional information with respect to the transaction on the Cable ONE Investor Relations website at ir.cableone.net.  A copy of this presentation is furnished as Exhibit 99.2 hereto.
 
 


 
The information contained in this Item 7.01 and in Exhibit 99.1 and Exhibit 99.2 is furnished and shall not be deemed to be “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 into any of the Company’s filings under the Securities Act or the Exchange Act.

Item 9.01   Financial Statements and Exhibits.
 
Exhibit
 
Description
 
 
99.1
 
Press release issued by Cable One, Inc. on January 18, 2017.
99.2
 
Presentation by Cable One, Inc.


 


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/ Alan H. Silverman
 
 
 
Name:
Alan H. Silverman
 
 
 
Title:
Senior Vice President, General Counsel, Director of Administration and Secretary
 
 
 
 
 
 
Date: January 18, 2017





EXHIBIT INDEX

Exhibit
 
Description
 
 
99.1
 
Press release issued by Cable One, Inc. on January 18, 2017.
99.2
 
Presentation by Cable One, Inc.



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Section 2: EX-99.1 (PRESS RELEASE)

Exhibit 99.1
 
 
 
 
Cable ONE to Acquire NewWave Communications

Estimated annual cost synergies of $24 million and tax benefit value of approximately $152 million


January 18, 2017 – Phoenix, AZ – Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today announced it has entered into a definitive agreement to acquire NewWave Communications (“NewWave”) for $735 million in cash. NewWave is owned by funds affiliated with GTCR LLC, a leading private equity firm based in Chicago.

NewWave is a cable operator providing high-speed data, video and voice services to residential and business customers throughout non-urban areas of Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas. NewWave’s network passes nearly 428,000 homes and has more than 214,000 residential primary service units (“PSUs”) and 31,000 business PSUs. NewWave is headquartered in Sikeston, Missouri.

“We are excited about our acquisition of NewWave, which operates in non-urban markets similar to ours and has significant high-speed data (“HSD”) and business services opportunities that we are well-positioned to execute on,” said Julie Laulis, President and CEO of Cable ONE. “The transaction represents an attractive opportunity to utilize Cable ONE’s existing balance sheet capacity for a value-enhancing acquisition.”

Together, Cable ONE and NewWave will serve more than 1.2 million PSUs. NewWave has fully-upgraded systems and a high capacity plant, including more than 10,500 network plant miles and over 3,700 fiber miles, capable of delivering top-tier speeds and services. NewWave provides an attractive opportunity for growth in residential HSD and business services revenues due to relatively low HSD penetration in its markets.

“It has been my great pleasure to lead the NewWave team these past several years, and I am proud of the hard work of our employees and their many accomplishments,” said Phil Spencer, CEO of NewWave. “Over the last four years we have invested significant capital to upgrade our networks, roll out 100 Mbps internet service and enhance our business services. We are excited to become a part of the Cable ONE team. We both share a common vision and commitment to bring high-quality products and services to the communities we serve.”  

After giving effect to the transaction, Cable ONE would have had last quarter annualized (“LQA”) revenues of approximately $1 billion for the third quarter of 2016 and would remain among the industry leaders with LQA Adjusted EBITDA margins of approximately 41% for the third quarter of 2016 prior to the impact of annual cost synergies, which Cable ONE estimates at approximately $24 million. Furthermore, the acquisition is expected to provide estimated tax benefits of approximately $152 million on a present value basis.

The purchase price of $735 million represents multiples for NewWave based on estimated LQA Adjusted EBITDA of $64 million for the fourth quarter of 2016 of (i) 11.5x before adjusting the purchase price for the present value of anticipated tax benefits and without taking into account any additional Adjusted EBITDA from the realization of estimated run-rate cost synergies, (ii) 8.4x after assuming the immediate realization in full of $24 million of estimated run-rate cost synergies (but before adjusting the purchase price for the present value of anticipated tax benefits) and (iii) 6.6x after adjusting the purchase price for the present value of anticipated tax benefits and assuming the immediate realization in full of $24 million of estimated run-rate cost synergies. Cable ONE’s net income for the third quarter of 2016 was approximately $21 million and NewWave’s net loss for the third quarter of 2016 and estimated net loss for the fourth quarter of 2016 were approximately $3 million and $3 million, respectively.  NewWave’s estimated results for the fourth quarter of 2016 are preliminary results and actual results may differ from those provided herein due to the completion of financial closing procedures, application of final adjustments, review by NewWave’s independent auditor and other developments.
 
 


 
The financial results for NewWave in this press release have been derived from the unaudited financial statements prepared by NewWave, without adjustment to conform to the accounting policies and methodologies used by Cable ONE. The accounting policies and methodologies used by NewWave differ in certain respects from those used by Cable ONE, but Cable ONE does not believe these differences are material to the combined company.

Transaction Details

The transaction is expected to be financed with $650 million of senior secured loans and cash on hand. The transaction is subject to customary regulatory closing conditions and is expected to be completed during the second quarter of 2017.

J.P. Morgan acted as financial advisor, and Cravath, Swaine & Moore LLP acted as legal advisor to Cable ONE on this transaction.

Additional Information Available on Website

A presentation containing additional information with respect to the acquisition has been furnished to the Securities and Exchange Commission and is posted on the Cable ONE Investor Relations website at ir.cableone.net.

Questions regarding this transaction will be addressed during the Cable ONE Fourth Quarter and Full Year 2016 earnings call in February 2017.


###


About Cable ONE

Cable One, Inc. is among the 10 largest cable companies in the United States. Serving more than 650,000 customers in 19 states with high-speed Internet, cable television and telephone service, Cable ONE provides consumers with a wide range of the latest products and services, including wireless Internet service, high-definition programming and phone service with free, unlimited long-distance calling in the continental U.S.


CONTACTS:
Trish Niemann
Public Relations Director
602.364.6372

Kevin Coyle
Chief Financial Officer
602.364.6505
 
 


 
Use of Non-GAAP Financial Metrics

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 and Adjusted EBITDA Margin are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income (loss) or net profit (loss) margin reported in accordance with GAAP. These terms, as defined by Cable ONE, may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA and Adjusted EBITDA Margin are reconciled to net income (loss) and net profit (loss) margin below.

“Adjusted EBITDA” is defined as net income (loss) plus net interest expense, provision for income taxes, depreciation and amortization, equity-based compensation expense, loss on deferred compensation, other income, net, acquisition-related costs, loss on disposal of fixed assets and other unusual operating expenses. 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 financing. These costs are evaluated through other financial measures.

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

The Company uses Adjusted EBITDA and Adjusted EBITDA Margin to assess its performance. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company’s credit facilities and outstanding 5.75% senior unsecured notes due 2022 to determine compliance with the covenants contained in the facilities and notes. For the purpose of calculating compliance with leverage covenants, the Company uses a measure similar to Adjusted EBITDA, as presented. Adjusted EBITDA is also a significant performance measure 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 and Adjusted EBITDA Margin are useful to investors in evaluating the operating performance of the Company.

Adjusted EBITDA, Adjusted EBITDA Margin, 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 and Adjusted EBITDA Margin may not be directly comparable to similarly titled measures reported by other companies.
 
 



 
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This communication 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 the cable industry and our business and financial results. Forward-looking statements often include words such as “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:

 
uncertainties as to the timing of the acquisition of NewWave and the risk that the transaction may not be completed in a timely manner or at all;
 
the possibility that any or all of the various conditions to the consummation of the acquisition of NewWave may not be satisfied or waived, including failure to receive any required regulatory approvals (or any conditions, limitations or restrictions placed in connection with such approvals);
 
risks regarding the failure to obtain the necessary financing to complete the transaction;
 
the effect of the announcement or pendency of the transaction on our and NewWave’s ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners;
 
risks related to diverting management’s attention from our ongoing business operations;
 
uncertainties as to our ability and the amount of time necessary to realize the expected synergies and other benefits of the transaction;
 
our ability to integrate NewWave’s operations into our own;
 
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 product;
 
increases in programming costs and retransmission fees;
 
our ability to obtain support from vendors;
 
the effects of any significant acquisitions by us;
 
adverse economic conditions;
 
the integrity and security of our network and information systems;
 
legislative and regulatory efforts to impose new legal requirements on our data services;
 
changing and additional regulation of our data, video and voice services;
 
our ability to renew cable system franchises;
 
increases in pole attachment costs;
 
the failure to meet earnings expectations;
 
the adequacy of our risk management framework;
 
changes in tax and other laws and regulations;
 
changes in GAAP or other applicable accounting policies; and
 
the other risks and uncertainties detailed in the section titled “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on March 7, 2016.
 
 
 

 
 
Any forward-looking statements made by us in this communication speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.

RECONCILIATION OF NON-GAAP MEASURES
 
   
3Q2016
   
4Q2016
(estimated)
 
($ in millions)
 
Cable ONE
   
NewWave
   
Combined
   
NewWave
 
Revenue
 
$
206
   
$
45
   
$
251
   
na
 
                               
Net Income (Loss)
 
$
21
   
(3)
 
 
$
18
   
(3)
 
Net Profit (Loss) Margin(1)
   
10%
 
   
(6%)
 
   
7%
 
 
na
 
                                 
Plus:   Interest expense
   
8
     
5
     
13
     
5
 
           Provision for income taxes
   
20
     
0
     
20
     
0
 
           Depreciation and amortization
   
36
     
12
     
48
     
12
 
           Equity-based compensation expense
   
3
     
0
     
3
     
0
 
           Loss on deferred compensation
   
0
     
0
     
0
     
0
 
           Other income, net
   
(4)
 
   
0
     
(4)
 
   
0
 
           Acquisition-related costs
   
3
     
0
     
3
     
2
 
           Loss on disposal of fixed assets
   
1
     
0
     
1
     
0
 
                                 
Adjusted EBITDA
 
$
87
   
$
14
   
$
102
   
$
16
 
Adjusted EBITDA Margin(2)
   
42%
 
   
32%
 
   
41%
 
 
na
 
                                 
Annualized Adjusted EBITDA(3)
 
$
349
   
$
58
   
$
406
   
$
64
 
 
 
 
 

(1) Net Profit (Loss) Margin equals net income (loss) divided by revenue.
(2) Adjusted EBITDA Margin equals Adjusted EBITDA divided by revenue.
(3) Annualized Adjusted EBITDA equals quarterly Adjusted EBITDA times 4. Product may not equal annualized amount due to rounding.
 
 
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Section 3: EX-99.2 (PRESENTATION)

Exhibit 99.2
 
 

 
   Acquisition of NewWaveJanuary 2017 
 

 
 Disclaimer  1  This presentation has been prepared by Cable One, Inc. (Cable ONE). The information contained in this presentation is for informational purposes only. The information contained in this presentation is not investment or financial product advice and is not intended to be used as the basis for making an investment decision. This presentation has been prepared without taking into account the investment objectives, financial situation or particular needs of any particular person.No representation or warranty, expressed or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions or conclusions contained in this presentation. To the maximum extent permitted by law, none of Cable ONE, its directors, employees or agents, nor any other person, accepts any liability, including, without limitation, any liability arising out of fault or negligence for any loss arising from the use of the information contained in this presentation.This presentation 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 the cable industry and our business and financial results. Forward-looking statements often include words such as “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: uncertainties as to the timing of the acquisition of NewWave Communications (NewWave) and the risk that the transaction may not be completed in a timely manner or at all; the possibility that any or all of the various conditions to the consummation of the acquisition of NewWave may not be satisfied or waived, including failure to receive any required regulatory approvals (or any conditions, limitations or restrictions placed in connection with such approvals); risks regarding the failure to obtain the necessary financing to complete the transaction; the effect of the announcement or pendency of the transaction on our and NewWave's ability to retain and hire key personnel and our and NewWave’s ability to maintain relationships with customers, suppliers and other business partners; risks related to diverting management’s attention from our ongoing business operations; uncertainties as to our ability and the amount of time necessary to realize the expected synergies and other benefits of the transaction; our ability to integrate NewWave’s operations into our own; 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 product; increases in programming costs and retransmission fees; our ability to obtain support from vendors; the effects of any significant acquisitions by us; adverse economic conditions; the integrity and security of our network and information systems; legislative and regulatory efforts to impose new legal requirements on our data services; changing and additional regulation of our data, video and voice services; our ability to renew cable system franchises; increases in pole attachment costs; the failure to meet earnings expectations; the adequacy of our risk management framework; changes in tax and other laws and regulations; changes in GAAP or other applicable accounting policies; and the other risks and uncertainties detailed in the section titled “Risk Factors” in our Annual Report on Form 10-K as filed with the SEC on March 7, 2016.Any forward-looking statements made by us in this communication speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.Except as otherwise expressly provided, all information herein speaks only as of (1) the date hereof, in the case of information about Cable ONE, or (2) the date of such information, in the case of information from persons other than Cable ONE. Cable ONE undertakes no duty to update or revise the information contained herein, publicly or otherwise. Estimates regarding Cable ONE’s or NewWave's industry and end markets are based on sources we believe to be reliable, however there can be no assurance these forecasts and estimates will prove accurate in whole or in part.The financial results for NewWave in this presentation have been derived from the unaudited financial statements prepared by NewWave, without adjustment to conform to the accounting policies and methodologies used by Cable ONE. The accounting policies and methodologies used by NewWave differ in certain respects from those used by Cable ONE, but Cable ONE does not believe these differences are material to the combined company. 
 

 
 
 Key transaction terms  2  Purchase price  Estimated synergies  Adjusted EBITDA multiples(1)  Financing  Pro forma net leverage(1)(2)  Expected closing  $735 million total enterprise value (TEV)All cash consideration  Estimated annual run-rate cost synergies of $24 millionStructure is expected to provide tax benefits estimated at a present value (PV of tax benefits) of $152 million  11.5x (before tax benefits and cost synergies)8.4x (after cost synergies and before tax benefits)6.6x (after tax benefits and cost synergies)  Transaction is expected to be financed with $650 million of senior secured loans and $105 million of cash on hand  2.9x (before cost synergies)2.7x (after cost synergies)  2nd quarter 2017  Assumes estimated unaudited NewWave last-quarter annualized (LQA) Adjusted EBITDA of $64 million for the quarter ended December 31, 2016 (excluding synergies), PV of tax benefits of $152 million and estimated annual run-rate cost synergies of $24 million. 11.5x calculated as $735 million TEV divided by $64 million of NewWave LQA Adjusted EBITDA; 8.4x calculated as $735 million TEV divided by the sum of $64 million of NewWave LQA Adjusted EBITDA and $24 million of estimated annual run-rate cost synergies assumed to be immediately realized in full; and 6.6x calculated as $735 million TEV less $152 million of PV of tax benefits divided by the sum of $64 million of NewWave LQA Adjusted EBITDA and $24 million of estimated annual run-rate cost synergies assumed to be immediately realized in full. Cable ONE net income for the third quarter of 2016 was $21 million, and NewWave net loss for the third quarter of 2016 was $3 million. NewWave estimated unaudited LQA Adjusted EBITDA for the fourth quarter of 2016 is reconciled to net income (loss) on page 10 of this presentation.Pro forma net leverage ratios are based on unaudited NewWave LQA Adjusted EBITDA of $58 million for the quarter ended September 30, 2016, estimated annual run-rate cost synergies of $24 million, Cable ONE LQA Adjusted EBITDA of $349 million for the quarter ended September 30, 2016, Cable ONE debt of $547 million and Cable ONE cash and equivalents of $124 million as of September 30, 2016, $105 million of Cable ONE cash on hand assumed to be used in the transaction and $650 million of new debt financing. Cable ONE and NewWave LQA Adjusted EBITDA for the third quarter of 2016 are reconciled to net income (loss) on page 10 of this presentation. 
 

 
 Investment thesis  3  Adds scale in similar markets(1)(2)  Significant market growth opportunity(1)  Recently upgraded plant  Differentiated service provider  Meaningful synergies  Shareholder value creation  Serves 428k homes passed in non-urban markets214k residential primary service units (PSUs), including 104k HSD PSUs, and 31k business services PSUsCombined company with 1.2 million PSUs and $1 billion of revenue  NewWave data penetration of 26.1 percent vs. 30.8 percent for Cable ONEBusiness services revenue CAGR was 24 percent from 2014 to LTM 9/30/16, but significant and underpenetrated business services opportunity remains given low penetration  Over $60 million invested during the prior 3 years to increase system capacity, consolidate headends and establish ownership of network backbone  Only residential provider of triple play services with high-speed data (HSD) offering (up to 100 Mbps) in 90 percent of footprint10 Gbps available to enterprise customers  Estimated annual run-rate cost synergies of $24 millionTax benefits estimated at a PV of $152 million  Cable ONE will use balance sheet capacity for value-enhancing acquisition  Data as of September 30, 2016.Based on Cable ONE LQA revenue of $822 million for the quarter ended September 30, 2016, Cable ONE PSUs of 958k as of September 30, 2016, unaudited NewWave LQA revenue of $180 million for the quarter ended September 30, 2016 and NewWave PSUs of 245k as of September 30, 2016. 
 

 
 
 NewWave geographic coverage and key metrics  4  Nineteenth largest cable operator in the United StatesProvides HSD, video and voice services to residential and business services customers in non-urban markets of IL, TX, IN, LA, MO, MS and AR  Key metrics (3Q16A)  System map  Metric  Performance      Homes Passed  428k          Video Penetration  23.5%          HSD Penetration  26.1%          Voice Penetration  7.5%          Business ServicesShare of Revenue  13.3%          Homes Passedat 750MHz or Greater  91%              Cable ONE   NewWave 
 

 
 
 NewWave has grown significantly over the last several years, driven by residential HSD and business services, with headroom for additional growth  5  Revenue ($ million)   Residential HSD revenue ($ million)  HSD penetration of homes passed  CAGR: 5.5%  Business services revenue ($ million)  Note: NewWave figures for 2016 are unaudited.  CAGR: 15%  CAGR: 24%      CABO 
 

 
 NewWave has significantly upgraded its systems to deliver top-tier speeds and services  6  Invested over $60 million during the last 3 years to upgrade systems in-line with other leading MSOsOver 90 percent of homes passed have bandwidth capacity of 750MHz or greater, including over 60 percent at 870MHzHeadend consolidation with over 90 percent of customer base now served by 4 master headendsHSD-enabled systems are 100 percent DOCSIS 3.0-capable with 100 Mbps speeds available to over 95 percent of homes passed 10 Gbps available to enterprise customersOver 10,500 network plant miles, including over 3,700 fiber milesBackbone is mostly owned with less than 10 percent of intersystem transport leased  Overview  Fiber Network                                                                                          Dallas  Houston  Lake Providence  Tallulah  Jasper  Woodville  Cleveland  Sour Lake  Hempstead  Sealy  Giddings  La Grange  Schulenburg  Hallettsville  El Campo  Edna  Blessing  Kingsville  Angleton  Wharton  Bay City  Belle Chasse  Delhi  Winnsboro  Logansport  Mansfield  Blanchard  Monroe  Farmerville  Homer  Springhill  Vivian  Mooringsport  Shreveport                                                                              Chicago  Indianapolis  St. Louis  Edinburgh  Mitchell  Washington  Mt. Carmel  Carmi  Flora  Kennett  Portageville  Maiden  Poplar Bluff  Dexter  Du Quoin  Sparta  Fairfield  Jerseyville  Litchfield  Taylorville  Vandalia  Brazil  Olney  Vincennes  Terre Haute  Paris  Westville  Hoopeston  Clinton          TX  AR  MS  LA  AR  MO  IL  IN  KY  TN  NewWave Hub / System  Connectivity Point  NewWave System  NewWave Fiber               
 

 
 7  Significant tax value and substantial synergies  Key drivers of $152 million in present value of estimated future tax benefits include: Transaction will be structured so that Cable ONE receives a tax basis step-upStep up of assets depreciated and amortized between 5 and 15 years  Key drivers of $24 million in estimated annual run-rate cost synergies include: Reduction in programming costsSystem operating savingsCorporate overhead savings of approximately $4 million, a substantial portion of which are expected to be available within 6 months of transaction close  Taxsynergies  Costsynergies 
 

 
 Key highlights  Transaction sources and uses ($ million)  Sources and uses and pro forma capital structure  8  Sources  Uses  Finance acquisition with $300 million of incremental Term Loan A (TLA) and $350 million of incremental Term Loan B (TLB)Amend existing Credit AgreementAfter giving effect to the transaction, Cable ONE will have net leverage of 2.9x based on a combined LQA Adjusted EBITDA of $406 million for the third quarter of 2016 (not taking into account $24 million of estimated annual run-rate cost synergies)(1)Pro forma leverage remains below target leverage ratio of 3.5x  Cable ONE pro forma net leverage(1)  Incremental TLA  $300  Incremental TLB  $350  Cash on hand  $105  Total sources  $755  Purchase price  $735  Transaction costs  $20      Total uses  $755  Pro forma net leverage ratios are based on unaudited NewWave LQA Adjusted EBITDA of $58 million for the quarter ended September 30, 2016, Cable ONE LQA Adjusted EBITDA of $349 million for the quarter ended September 30, 2016, Cable ONE debt of $547 million and Cable ONE cash and equivalents of $124 million as of September 30, 2016, $105 million of Cable ONE cash on hand assumed to be used in the transaction and $650 million of new debt financing. 
 

 
 9  Cable ONE 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 is a non-GAAP financial measure and should be considered in addition to, not as a substitute for, net income (loss) reported in accordance with GAAP. This term, as defined by Cable ONE, may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA is reconciled to net income (loss) on page 10.“Adjusted EBITDA” is defined as net income (loss) plus net interest expense, provision for income taxes, depreciation and amortization, equity-based compensation expense, loss on deferred compensation, other income, net, acquisition-related costs, loss on disposal of fixed assets and other unusual operating expenses. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of Cable ONE’s business as well as other non-cash or special items and is unaffected by Cable ONE’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 Cable ONE’s cash cost of financing. These costs are evaluated through other financial measures.Cable ONE uses Adjusted EBITDA to assess its performance. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under Cable ONE’s credit facilities and outstanding 5.75% senior unsecured notes due 2022 to determine compliance with the covenants contained in the facilities and notes. For the purpose of calculating compliance with leverage covenants, Cable ONE uses a measure similar to Adjusted EBITDA, as presented. Adjusted EBITDA is also a significant performance measure used by Cable ONE 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.Cable ONE believes Adjusted EBITDA is useful to investors in evaluating the operating performance of Cable ONE.Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in Cable ONE’s industry, although Cable ONE’s measure of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.The financial results for NewWave in this presentation have been derived from the unaudited financial statements prepared by NewWave, without adjustment to conform to the accounting policies and methodologies used by Cable ONE. The accounting policies and methodologies used by NewWave differ in certain respects from those used by Cable ONE, but Cable ONE does not believe these differences are material to the combined company.  Use of Non-GAAP Financial Metrics 
 

 
 Reconciliation of Net Income to Adjusted EBITDA  10  Note: $ in millions.NewWave’s estimated results for the fourth quarter of 2016 are preliminary results, and actual results may differ from those provided herein due to the completion of financial closing procedures, application of final adjustments, review by NewWave’s independent auditor and other developments.Annualized Adjusted EBITDA equals quarterly Adjusted EBITDA times 4. Product may not equal annualized amount due to rounding.      3Q2016                        4Q2016Estimated(1)          Cable ONE        NewWave        Combined        NewWave                                        Net Income (Loss)      $21         ($3  )      $18         ($3  )                                    Plus:                                  Interest expense      $8         $5         $13         $5     Provision for income taxes      $20         $0         $20         $0     Depreciation and amortization      $36         $12         $48         $12     Equity-based compensation expense      $3         $0         $3         $0     Loss on deferred compensation      $0         $0         $0         $0     Other income, net      ($4  )      $0         ($4  )      $0     Acquisition-related costs      $3         $0         $3         $2     Loss on disposal of fixed assets      $1         $0         $1         $0                                       Adjusted EBITDA      $87         $14         $102         $16                                       Annualized Adjusted EBITDA(2)      $349         $58         $406         $64    
 

 
  
 
 
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