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Section 1: 10-Q (FORM 10-Q)

cabo20190930_10q.htm
0001632127CABLE ONE, INC.false--12-31Q3201972.700185155771.1Equity-based 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. The excluded number of anti-dilutive equity-based awards totaled 93 and 1,589 for the three months ended September 30, 2019 and 2018, respectively, and 828 and 2,029 for the nine months ended September 30, 2019 and 2018, respectively. Includes $3.3 million of ROU assets acquired in the Clearwave 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

  (Mark One)

  

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

or

 

  

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 001-36863

 


 

Cable One, Inc. 

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

13-3060083

(State or Other Jurisdiction of Incorporation or Organization)

 

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

  

210 E. Earll Drive, Phoenix, Arizona

 

85012

(Address of Principal Executive Offices)

 

(Zip Code)

 

(602) 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

 

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: (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. 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). 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.

 

Large accelerated filer

 

Accelerated filer

   

 

 

 

Non-accelerated filer

 

Smaller reporting company

 

 

 

 
   

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes 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 November 1, 2019

Common stock, par value $0.01       5,711,214

 

 

Table of Contents
 

 

CABLE ONE, INC.

FORM 10-Q

TABLE OF CONTENTS

 

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

20

   

Item 3.     Quantitative and Qualitative Disclosures About Market Risk

32

   

Item 4.     Controls and Procedures

33

   

PART II: OTHER INFORMATION

33

   

Item 1.     Legal Proceedings

33

   

Item 1A.  Risk Factors

33

   

Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

34

   

Item 3.     Defaults Upon Senior Securities

35

   

Item 4.     Mine Safety Disclosures

35

   

Item 5.     Other Information

35

   

Item 6.     Exhibits

35

   

SIGNATURES

36

 

i

Table of Contents
 

 

PART I:  FINANCIAL INFORMATION

 

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(dollars in thousands, except par values)

 

September 30, 2019

   

December 31, 2018

 

Assets

               

Current Assets:

               

Cash and cash equivalents

  $ 145,848     $ 264,113  

Accounts receivable, net

    30,931       29,947  

Income taxes receivable

    1,761       10,713  

Prepaid and other current assets

    17,578       13,090  

Total Current Assets

    196,118       317,863  

Property, plant and equipment, net

    997,145       847,979  

Intangible assets, net

    1,030,993       953,851  

Goodwill

    358,014       172,129  

Other noncurrent assets

    26,057       11,412  

Total Assets

  $ 2,608,327     $ 2,303,234  
                 

Liabilities and Stockholders' Equity

               

Current Liabilities:

               

Accounts payable and accrued liabilities

  $ 113,397     $ 94,134  

Deferred revenue

    22,567       18,954  

Current portion of long-term debt

    17,215       20,625  

Total Current Liabilities

    153,179       133,713  

Long-term debt

    1,278,110       1,142,056  

Deferred income taxes

    267,797       242,127  

Other noncurrent liabilities

    134,482       9,980  

Total Liabilities

    1,833,568       1,527,876  
                 

Commitments and contingencies (refer to note 14)

           
                 

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 5,709,593 and 5,703,402 shares outstanding as of September 30, 2019 and December 31, 2018, respectively)

    59       59  

Additional paid-in capital

    48,059       38,898  

Retained earnings

    939,602       850,292  

Accumulated other comprehensive loss

    (91,201 )     (96 )

Treasury stock, at cost (178,306 and 184,497 shares held as of September 30, 2019 and December 31, 2018, respectively)

    (121,760 )     (113,795 )

Total Stockholders' Equity

    774,759       775,358  

Total Liabilities and Stockholders' Equity

  $ 2,608,327     $ 2,303,234  

 

See accompanying notes to the condensed consolidated financial statements.

 

1

Table of Contents
 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 

(dollars in thousands, except per share data)

 

2019

   

2018

   

2019

   

2018

 

Revenues

  $ 284,991     $ 268,268     $ 849,246     $ 802,443  

Costs and Expenses:

                               

Operating (excluding depreciation and amortization)

    94,898       91,956       285,104       278,478  

Selling, general and administrative

    58,861       59,439       180,407       164,584  

Depreciation and amortization

    48,737       50,414       157,416       148,225  

Loss on asset disposals, net

    2,362       3,140       4,375       12,508  

Total Costs and Expenses

    204,858       204,949       627,302       603,795  

Income from operations

    80,133       63,319       221,944       198,648  

Interest expense

    (16,079 )     (15,460 )     (52,691 )     (45,136 )

Other income (expense), net

    1,582       1,503       (6,248 )     3,002  

Income before income taxes

    65,636       49,362       163,005       156,514  

Income tax provision

    15,801       11,048       38,036       33,762  

Net income

  $ 49,835     $ 38,314     $ 124,969     $ 122,752  
                                 

Net Income per Common Share:

                               

Basic

  $ 8.77     $ 6.75     $ 22.01     $ 21.58  

Diluted

  $ 8.68     $ 6.70     $ 21.81     $ 21.44  

Weighted Average Common Shares Outstanding:

                               

Basic

    5,682,167       5,674,224       5,676,681       5,687,849  

Diluted

    5,741,666       5,717,575       5,730,798       5,725,520  
                                 

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

  $ (28,066 )   $ 1     $ (91,105 )   $ 2  

Comprehensive income

  $ 21,769     $ 38,315     $ 33,864     $ 122,754  

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents
 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

 

                                   

Accumulated

                 
                   

Additional

            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 June 30, 2019

    5,706,812     $ 59     $ 45,001     $ 902,615     $ (63,135 )   $ (121,632 )   $ 762,908  

Net income

    -       -       -       49,835       -       -       49,835  

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

    -       -       -       -       (28,066 )     -       (28,066 )

Equity-based compensation

    -       -       3,058       -       -       -       3,058  

Issuance of equity awards, net of forfeitures

    2,882       -       -       -       -       -       -  

Withholding tax for equity awards

    (101 )     -       -       -       -       (128 )     (128 )

Dividends paid to stockholders ($2.25 per common share)

    -       -       -       (12,848 )     -       -       (12,848 )

Balance at September 30, 2019

    5,709,593     $ 59     $ 48,059     $ 939,602     $ (91,201 )   $ (121,760 )   $ 774,759  

 

                                   

Accumulated

                 
                   

Additional

            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 June 30, 2018

    5,703,337     $ 59     $ 33,256     $ 792,784     $ (351 )   $ (109,815 )   $ 715,933  

Net income

    -       -       -       38,314       -       -       38,314  

Changes in pension, net of tax

    -       -       -       -       1       -       1  

Equity-based compensation

    -       -       2,418       -       -       -       2,418  

Issuance of equity awards, net of forfeitures

    1,942       -       -       -       -       -       -  

Withholding tax for equity awards

    (220 )     -       -       -       -       80       80  

Dividends paid to stockholders ($2.00 per common share)

    -       -       -       (11,411 )     -       -       (11,411 )

Balance at September 30, 2018

    5,705,059     $ 59     $ 35,674     $ 819,687     $ (350 )   $ (109,735 )   $ 745,335  

 

                                   

Accumulated

                 
                   

Additional

            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, 2018

    5,703,402     $ 59     $ 38,898     $ 850,292     $ (96 )   $ (113,795 )   $ 775,358  

Lease accounting standard adoption cumulative adjustment

    -       -       -       8       -       -       8  

Net income

    -       -       -       124,969       -       -       124,969  

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

    -       -       -       -       (91,105 )     -       (91,105 )

Equity-based compensation

    -       -       9,161       -       -       -       9,161  

Issuance of equity awards, net of forfeitures

    15,599       -       -       -       -       -       -  

Repurchases of common stock

    (5,984 )     -       -       -       -       (5,073 )     (5,073 )

Withholding tax for equity awards

    (3,424 )     -       -       -       -       (2,892 )     (2,892 )

Dividends paid to stockholders ($6.25 per common share)

    -       -       -       (35,667 )     -       -       (35,667 )

Balance at September 30, 2019

    5,709,593     $ 59     $ 48,059     $ 939,602     $ (91,201 )   $ (121,760 )   $ 774,759  

 

                                   

Accumulated

                 
                   

Additional

            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, 2017

    5,731,442     $ 59     $ 28,412     $ 728,386     $ (352 )   $ (80,058 )   $ 676,447  

Net income

    -       -       -       122,752       -       -       122,752  

Changes in pension, net of tax

    -       -       -       -       2       -       2  

Equity-based compensation

    -       -       7,262       -       -       -       7,262  

Issuance of equity awards, net of forfeitures

    17,635       -       -       -       -       -       -  

Repurchases of common stock

    (34,028 )     -       -       -       -       (22,556 )     (22,556 )

Withholding tax for equity awards

    (9,990 )     -       -       -       -       (7,121 )     (7,121 )

Dividends paid to stockholders ($5.50 per common share)

    -       -       -       (31,451 )     -       -       (31,451 )

Balance at September 30, 2018

    5,705,059     $ 59     $ 35,674     $ 819,687     $ (350 )   $ (109,735 )   $ 745,335  

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents
 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Nine Months Ended September 30,

 

(in thousands)

 

2019

   

2018

 

Cash flows from operating activities:

               

Net income

  $ 124,969     $ 122,752  

Adjustments to reconcile net income to net cash provided by operating activities:

               

Depreciation and amortization

    157,416       148,225  

Amortization of debt issuance cost

    3,527       3,088  

Equity-based compensation

    9,161       7,262  

Write-off of debt issuance costs

    4,207       110  

Increase in deferred income taxes

    22,712       18,626  

Loss on asset disposals, net

    4,375       12,508  

Changes in operating assets and liabilities, net of effects from acquisitions:

               

Decrease in accounts receivable, net

    310       1,762  

Decrease in income taxes receivable

    8,952       12,765  

Increase in prepaid and other current assets

    (4,177 )     (5,796 )

Increase (decrease) in accounts payable and accrued liabilities

    8,723       (14,437 )

Increase (decrease) in deferred revenue

    (709 )     3,673  

Other, net

    (4,281 )     (2,921 )

Net cash provided by operating activities

    335,185       307,617  
                 

Cash flows from investing activities:

               

Purchase of business, net of cash acquired

    (356,917 )     -  

Capital expenditures

    (176,324 )     (159,170 )

Increase (decrease) in accrued expenses related to capital expenditures

    (1,431 )     1,740  

Proceeds from sales of property, plant and equipment

    7,050       1,827  

Net cash used in investing activities

    (527,622 )     (155,603 )
                 

Cash flows from financing activities:

               

Proceeds from issuance of long-term debt

    825,000       -  

Payment of debt issuance costs

    (11,756 )     (2,131 )

Payments on long-term debt

    (695,440 )     (10,013 )

Repurchases of common stock

    (5,073 )     (22,556 )

Payment of withholding tax for equity awards

    (2,892 )     (7,121 )

Dividends paid to stockholders

    (35,667 )     (31,451 )

Change in cash overdraft

    -       (3,593 )

Net cash provided by (used in) financing activities

    74,172       (76,865 )
                 

Increase (decrease) in cash and cash equivalents

    (118,265 )     75,149  

Cash and cash equivalents, beginning of period

    264,113       161,752  

Cash and cash equivalents, end of period

  $ 145,848     $ 236,901  
                 

Supplemental cash flow disclosures:

               

Cash paid for interest, net of capitalized interest

  $ 49,740     $ 35,571  

Cash paid for income taxes, net of refunds received

  $ 3,823     $ 2,366  

 

See accompanying notes to the condensed consolidated financial statements.

 

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Table of Contents

 

CABLE ONE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.        DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Description of Business. Cable One, Inc., together with its wholly owned subsidiaries (collectively, “Cable One,” “us,” “our,” “we” or the “Company”) is a fully integrated provider of data, video and voice services to residential and business subscribers in 21 Western, Midwestern and Southern U.S. states. As of September 30, 2019, Cable One provided service to 821,079 residential and business customers, of which 689,138 subscribed to data services, 298,063 subscribed to video services and 121,095 subscribed to voice services.

 

On January 8, 2019, the Company acquired Delta Communications, L.L.C. (“Clearwave”) for a purchase price of $358.8 million in cash on a debt-free basis. Refer to note 2 for details on this transaction and note 7 for details on the related financing.

 

On March 31, 2019, the Company entered into a definitive agreement with Fidelity Communications Co. to acquire its data, video and voice business and certain related assets (collectively, “Fidelity”) for a base purchase price of $525.9 million in cash, subject to customary adjustments. Fidelity is a cable operator that provides residential and business services to customers throughout greater Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas. Cable One and Fidelity share similar strategies, customer demographics and products. Accordingly, the Company believes the acquisition of Fidelity offers it opportunities for revenue growth and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) margin expansion as well as the potential to realize cost synergies. The all-cash transaction was completed on October 1, 2019 and was funded through a combination of cash on hand and proceeds from new indebtedness. Refer to note 15 for details on this transaction and the related financing.

 

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 Securities and Exchange Commission (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 Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the “2018 Form 10-K”).

 

The December 31, 2018 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the 2018 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 Standard Codification (“ASC”) 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. The Company’s operations are organized and managed on the basis of operating systems within its geographic divisions. Each operating system derives revenues from the delivery of similar products and services to a customer base that is also similar. Each operating system deploys similar technology to deliver the Company’s products and services, operates within a similar regulatory environment, has similar economic characteristics and is managed by the Company’s chief operating decision maker as part of an aggregate of all operating systems within the Company’s material geographic divisions. Management evaluated the criteria for aggregation under ASC 280 and has concluded that the Company meets each of the respective criteria set forth therein. Accordingly, management has identified one reportable segment.

 

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.

 

5

Table of Contents

 

Recently Adopted Accounting Pronouncements. In June 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 expands the scope of ASC 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU was effective January 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and also simplifies the application of hedge accounting under GAAP. The ASU was effective January 1, 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 requires lessees to record substantially all of their leases on the balance sheet as a right-of-use (“ROU”) asset and a corresponding lease liability with the exception of short-term leases. The Company is required to classify each separate lease component as an operating or a finance lease at the lease commencement date. Initial measurement of the ROU asset and lease liability is the same for both operating and finance leases, however, expense recognition and amortization of the ROU asset differs. Operating leases reflect lease expense on a straight-line basis similar to previous operating leases while finance leases reflect a front-loaded expense pattern similar to previous capital leases. The Company adopted the updated guidance on January 1, 2019.

 

With respect to the adoption of ASU 2016-02, the Company elected the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption is as originally reported under ASC 840 - Leases. Upon adoption on January 1, 2019, the Company recorded ROU assets of $14.9 million and lease liabilities of $13.3 million. The adoption of this guidance did not have a material impact on Company’s consolidated financial statements.

 

ASU 2016-02 provides several optional practical expedients in transition. The Company elected the lessee and lessor transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs.

 

The Company also made certain lessee accounting policy elections, including a short-term lease exception policy, permitting the exclusion of short-term leases (leases with terms of 12 months or less) from the recognition requirements of ASU 2016-02, and an accounting policy to account for lease and non-lease components as a single component for all classes of assets, permitting common area maintenance, real estate taxes, fiber network power charges and routine maintenance fees to be combined with the associated lease component. The portfolio approach, which allows a lessee to account for its leases at a portfolio level, was elected for certain equipment and fiber leases in which the difference in accounting for each asset separately would not have been materially different from accounting for the assets as a combined unit. As a lessee, the Company also elected the practical expedient not to reevaluate whether any expired or existing land easements are, or contain, leases.

 

The Company provides residential and business customers with certain hardware to deliver data, video and voice services. As a lessor, the Company elected the practical expedient not to separate lease components from the associated non-lease component for all classes of assets. The Company concluded the non-lease components would otherwise be accounted for under the new revenue recognition standard and both the timing and pattern of transfer are the same for the non-lease components and associated lease component based on the interrelated nature of the services provided and the underlying leased hardware and, if accounted for separately, the lease component would be classified as an operating lease.

 

Refer to note 6 for the requisite disclosures regarding the amount, timing and any uncertainty regarding lease-related cash flows.

 

Recently Issued But Not Yet Adopted Accounting Pronouncements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation, setup and other upfront costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing such costs incurred to develop or obtain internal-use software. The ASU specifies which costs are to be expensed and which are to be capitalized, the period over which capitalized costs are to be amortized, the process for identifying and recognizing impairment and the proper presentation of such costs within the consolidated financial statements. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019 and may be adopted either retrospectively or prospectively. The Company plans to adopt the updated guidance prospectively and is currently evaluating the expected impact of ASU 2018-15 on its consolidated financial statements.

 

6

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to recognize an allowance for expected lifetime credit losses through earnings concurrent with the recognition of a financial asset measured at amortized cost. The estimate of expected credit losses is required to be adjusted each reporting period over the life of the financial asset. The ASU is effective for annual and interim periods beginning after December 15, 2019 and requires a modified retrospective adoption approach. The Company does not expect ASU 2016-13 to have a material impact on its consolidated financial statements upon adoption, but it may have an impact in the future.

 

 

2. CLEARWAVE ACQUISITION

 

On January 8, 2019, the Company acquired Clearwave, a facilities-based service provider that owns and operates a high-capacity fiber network offering dense regional coverage in Southern Illinois. The Company funded the purchase price of $358.8 million with cash on hand and the additional seven-year incremental term “B” loan borrowings described in note 7. The acquisition provides the Company with a premier fiber network within its existing footprint, further enables the Company to supply its customers with enhanced business services solutions and provides a platform to allow the Company to replicate Clearwave’s strategy in several of its other markets.

 

The Company accounted for the Clearwave acquisition as a business combination pursuant to ASC 805 - Business Combinations. Accordingly, acquisition costs are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. During the three and nine months ended September 30, 2019, the Company incurred acquisition-related costs of $1.2 million and $7.3 million, respectively, including $0.1 million and $3.5 million associated with the Clearwave acquisition, respectively. The remainder of these costs was primarily associated with the Fidelity acquisition that closed on October 1, 2019. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statement of operations and comprehensive income.

 

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 was 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. The preliminary measurements of fair value set forth herein are subject to change and such changes could be material. The Company expects to finalize the valuation as soon as practicable but no later than one year from the acquisition date. During the three months ended September 30, 2019, the Company recorded a measurement period adjustment increasing both deferred income taxes and goodwill by $2.7 million as a result of the Company’s election for Clearwave to be treated as a disregarded entity for Federal income tax purposes. The following table summarizes the current allocation of the purchase price consideration as of the acquisition date (in thousands):

 

   

Original

Estimate

   

Measurement

Period

Adjustment

   

Preliminary

Purchase Price

Allocation

 

Assets Acquired

                       

Cash and cash equivalents

  $ 1,913     $ -     $ 1,913  

Accounts receivable

    1,294       -       1,294  

Prepaid and other current assets

    311       -       311  

Property, plant and equipment

    120,472       -       120,472  

Intangible assets

    89,700       -       89,700  

Other noncurrent assets

    3,533       -       3,533  

Total Assets Acquired

  $ 217,223     $ -     $ 217,223  
                         

Liabilities Assumed

                       

Accounts payable and accrued liabilities

  $ 2,128     $ -     $ 2,128  

Deferred revenue

    4,322       -       4,322  

Deferred income taxes

    30,104       2,667       32,771  

Other noncurrent liabilities

    5,057       -       5,057  

Total Liabilities Assumed

  $ 41,611     $ 2,667     $ 44,278  
                         

Net assets acquired

  $ 175,612     $ (2,667 )   $ 172,945  

Purchase price consideration

    358,830       -       358,830  

Goodwill recognized

  $ 183,218     $ 2,667     $ 185,885  

 

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Table of Contents

 

Acquired identifiable intangible assets consist of the following (dollars in thousands):

 

   

Preliminary Fair

Value

   

Preliminary Useful Life

(in years)

 

Customer relationships

  $ 83,000       17  

Trademark and trade name

  $ 6,700       Indefinite  

 

No residual value was assigned to the acquired customer relationships.

 

The acquisition produced $185.9 million of goodwill, increasing the Company’s goodwill balance from $172.1 million at December 31, 2018 to $358.0 million at September 30, 2019. Goodwill represents the excess of the purchase price consideration over the fair value of the underlying net assets acquired and largely results from expected future synergies from combining operations as well as an assembled workforce, which does not qualify for separate recognition. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis. Goodwill arising from the Clearwave acquisition is not deductible for tax purposes.

 

For the three months ended September 30, 2019, the Company recognized revenues of $7.0 million and net income of $1.4 million from Clearwave operations, which reflected acquired intangible assets amortization expense of $1.2 million. For the period from January 8, 2019 to September 30, 2019, the Company recognized revenues of $19.9 million and net income of $3.6 million from Clearwave operations, which reflected acquired intangible assets amortization expense of $3.6 million.

 

 

3.        REVENUES

 

The Company’s revenues by product line were as follows (in thousands):   

 

   

Three Months Ended

September 30,

   

Nine Months Ended

September 30,

 
   

2019

   

2018

   

2019

   

2018

 

Residential

                               

Data

  $ 134,320     $ 124,089     $ 396,955     $ 366,418  

Video

    80,999       84,583       248,834       260,807  

Voice

    10,254       10,169       30,584       31,345  

Business services

    50,662       39,567       147,564       115,739  

Advertising sales

    5,054       6,288       14,534       17,445  

Other

    3,702       3,572       10,775       10,689  

Total revenues

  $ 284,991     $ 268,268     $ 849,246     $ 802,443  

 

Fees imposed on the Company by various governmental authorities are passed through monthly to the Company’s customers and are periodically remitted to authorities. These fees were $5.1 million and $4.0 million for the three months ended September 30, 2019 and 2018, respectively, and $15.1 million and $12.1 million for the nine months ended September 30, 2019 and 2018, respectively. 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.

 

Other revenues are comprised primarily of customer late charges and reconnect fees.

 

Net accounts receivable from contracts with customers totaled $30.3 million and $29.8 million at September 30, 2019 and December 31, 2018, respectively.

 

Deferred commissions totaled $8.2 million and $7.8 million at September 30, 2019 and December 31, 2018, respectively, and were included within prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets. Commission amortization expense was $0.9 million and $1.0 million for the three months ended September 30, 2019 and 2018, respectively, and $2.8 million and $2.7 million for the nine months ended September 30, 2019 and 2018, respectively, and was included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. Deferred commissions of $3.3 million included within prepaid and other current assets in the condensed consolidated balance sheet as of September 30, 2019 are expected to be amortized over the next 12 months.

 

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Current deferred revenue liabilities, consisting of refundable customer prepayments, up-front charges and installation fees, were $22.6 million and $19.0 million at September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019, 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 $19.0 million of current deferred revenue at December 31, 2018, nearly all was recognized during the nine months ended September 30, 2019. Noncurrent deferred revenue liabilities, consisting of up-front charges and installation fees from business customers, were $5.8 million and $2.8 million as of September 30, 2019 and December 31, 2018, respectively, and were included within other noncurrent liabilities in the condensed consolidated balance sheets.

 

 

4. PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment consisted of the following (in thousands):  

 

   

September 30, 2019

   

December 31, 2018

 

Cable distribution systems

  $ 1,628,627     $ 1,421,820  

Customer premise equipment

    232,135       220,571  

Other equipment and fixtures

    417,853       406,011  

Buildings and leasehold improvements

    103,426       100,625  

Capitalized software

    98,036       94,801  

Construction in progress

    79,854       69,163  

Land

    12,268       11,946  

Right-of-use assets

    6,257       -  

Property, plant and equipment, gross

    2,578,456       2,324,937  

Less accumulated depreciation

    (1,581,311 )     (1,476,958 )

Property, plant and equipment, net

  $ 997,145     $ 847,979  

 

Depreciation expense was $44.5 million and $47.4 million for the three months ended September 30, 2019 and 2018, respectively, and $144.9 million and $139.5 million for the nine months ended September 30, 2019 and 2018, respectively.

 

In January 2019, the remaining portion of the Company's previous headquarters building and adjoining property was sold for $6.3 million in gross proceeds and the Company recognized a related gain of $1.6 million. The property’s carrying value of $4.6 million was included within other noncurrent assets in the condensed consolidated balance sheet as assets held for sale at December 31, 2018.

 

 

5. GOODWILL AND INTANGIBLE ASSETS

 

The carrying amount of goodwill was $358.0 million and $172.1 million at September 30, 2019 and December 31, 2018, respectively. The increase related to goodwill recognized upon the acquisition of Clearwave in January 2019.

 

During the third quarter of 2019, the Company prospectively changed its annual goodwill impairment testing date from November 30 to October 1. The voluntary change was to better align its goodwill impairment testing procedures with its annual planning and budgeting process. This change did not delay, accelerate, or avoid an impairment loss, nor did the change have a cumulative effect on pre-tax income, net income, retained earnings, or net assets. This change was applied prospectively beginning on October 1, 2019.

 

The Company has not historically recorded any impairment of goodwill.

 

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Intangible assets (excluding goodwill) consisted of the following (dollars in thousands):   

 

                           

September 30, 2019

   

December 31, 2018

 
   

Useful Life

Range

(in years)

   

Gross

Carrying

Amount

   

Accumulated

Amortization

   

Net

Carrying

Amount

   

Gross

Carrying

Amount

   

Accumulated Amortization

   

Net

Carrying

Amount

 

Finite-Lived Intangible Assets

                                                 

Franchise renewals

    1             25     $ 2,927     $ 2,893     $ 34     $ 2,927     $ 2,887     $ 40  

Customer relationships

    14             17       243,000       31,234       211,766       160,000       19,047       140,953  

Trademark and trade name

            2.7               1,300       1,178       122       1,300       813       487  

Total Finite-Lived Intangible Assets

    $ 247,227     $ 35,305     $ 211,922     $ 164,227     $ 22,747     $ 141,480  
                                                                         

Indefinite-Lived Intangible Assets

                                                 

Franchise agreements

                          $ 812,371                     $ 812,371                  

Trademark and trade name

                            6,700                       -                  

Total Indefinite-Lived Intangible Assets

    $ 819,071                     $ 812,371                  

 

Intangible asset amortization expense was $4.2 million and $3.0 million for the three months ended September 30, 2019 and 2018, respectively, and $12.6 million and $8.7 million for the nine months ended September 30, 2019 and 2018, respectively.

 

As of September 30, 2019, the future amortization of intangible assets was as follows (in thousands):

 

Year Ending December 31,

 

Amount

 

2019 (remaining three months)

  $ 4,140  

2020

    16,319  

2021

    16,318  

2022

    16,315  

2023

    16,313  

Thereafter

    142,517  

Total

  $ 211,922  

 

Actual amortization expense in future periods may differ from the amounts above as a result of new intangible asset acquisitions or divestitures, changes in useful life estimates, impairments or other relevant factors.

 

 

6. LEASES

 

As a lessee, the Company has operating leases for buildings, equipment, data centers, fiber optic networks and towers and finance leases for certain buildings and fiber optic networks. These leases have remaining lease terms ranging from under 1 year to 24 years, with some including an option to extend the lease for up to 15 additional years and some including an option to terminate the lease within 1 year.

 

As a lessor, the Company has operating leases for the use of its fiber optic networks, towers and customer premise equipment. These leases have remaining lease terms ranging from under one year to eight years, with some including a lessee option to extend the leases for up to five additional years and some including an option to terminate the lease within one year.

 

Significant judgment is required when determining whether a fiber optic contract contains a lease, defining the duration of the lease term and selecting the discount rate.

 

 

The Company concluded it was the lessee or lessor for fiber arrangements only when the asset is specifically identifiable and both substantially all the economic benefit is obtained and the right to direct the use of the asset exists.

 

 

The Company’s lease terms are only for periods in which there are enforceable rights. A lease is no longer enforceable when both the lessee and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. The Company’s lease terms are impacted by options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

 

 

Most of the Company’s leases do not contain an implicit interest rate. Therefore, the Company held discussions with lenders, evaluated its published credit score and incorporated interest rates on currently held debt in determining discount rates that reflect what the Company would pay to borrow on a collateralized basis over similar terms for its lease obligations.

 

As of September 30, 2019, additional operating leases that have not yet commenced were not material.

 

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Lessee Financial Information. The Company’s ROU assets and lease liabilities consisted of the following (in thousands):

 

   

September 30,

2019

 

ROU Assets

       

Property, plant and equipment, net:

       

Finance leases

  $ 5,933  

Other noncurrent assets:

       

Operating leases

  $ 15,989  
         

Lease Liabilities

       

Accounts payable and accrued liabilities:

       

Operating leases

  $ 4,159  

Current portion of long-term debt:

       

Finance leases

  $ 215  

Long-term debt:

       

Finance leases

  $ 4,017  

Other noncurrent liabilities:

       

Operating leases

  $ 10,630  

Total:

       

Finance leases

  $ 4,232  

Operating leases

  $ 14,789  

 

The components of the Company’s lease expense were as follows (in thousands):

 

   

Three Months Ended

September 30, 2019

   

Nine Months Ended

September 30, 2019

 

Finance lease expense:

               

Amortization of ROU assets

  $ 128     $ 338  

Interest on lease liabilities

    69       201  

Operating lease expense

    1,366       3,828  

Short-term lease expense

    236       708  

Variable lease expense

    39       137  

Total lease expense

  $ 1,838     $ 5,212  

 

Finance lease expense is included within depreciation and amortization expense and interest expense, and operating lease expense is included within operating expenses and selling, general and administrative expenses in the condensed consolidated statement of operations and comprehensive income.

 

Supplemental lessee financial information is as follows (dollars in thousands):

 

   

Three Months Ended

September 30, 2019

   

Nine Months Ended

September 30, 2019

 

Cash paid for amounts included in the measurement of lease liabilities:

               

Finance leases - financing cash flows

  $ 10     $ 565  

Finance leases - operating cash flows

  $ 69     $ 201  

Operating leases - operating cash flows

  $ 1,341     $ 3,901  

ROU assets obtained in exchange for new lease liabilities:

               

Finance leases

  $ 377     $ 1,478  

Operating leases (1)

  $ 671     $ 7,753  

                         

(1) 

Includes $3.3 million of ROU assets acquired in the Clearwave transaction.

 

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September 30,

2019

 

Weighted average remaining lease term:

       

Finance leases (in years)

    12.6  

Operating leases (in years)

    4.6  

Weighted average discount rate:

       

Finance leases

    7.62 %

Operating leases

    5.05 %

 

As of September 30, 2019, the future maturities of existing lease liabilities were as follows (in thousands):

 

Year Ending December 31,

 

Finance

Leases

   

Operating

Leases

 

2019 (remaining three months)

  $ 93     $ 1,257  

2020

    513       4,617  

2021

    524       3,495  

2022

    535       2,571  

2023

    542       2,194  

Thereafter

    4,389       2,501  

Total

    6,596       16,635  

Less present value discount

    (2,364 )     (1,846 )

Lease liability

  $ 4,232     $ 14,789  

 

As of December 31, 2018, the Company’s outstanding operating lease obligations under the previous accounting guidance were as follows (in thousands):

 

Year Ending December 31,

 

Operating Leases

 

2019

  $ 1,767  

2020

    1,219  

2021

    911  

2022

    398  

2023

    204  

Thereafter

    299  

Total

  $ 4,798  

 

Lessor Financial Information. The Company’s lease income, which is included within revenues in the condensed consolidated statements of operations and comprehensive income, was as follows (in thousands):

 

   

Three Months Ended

September 30, 2019

   

Nine Months Ended

September 30, 2019

 

Lease income relating to lease payments

  $ 115     $ 374  

 

As of September 30, 2019, the future maturities of existing lease receivables were as follows (in thousands):

 

Year Ending December 31,

 

Operating

Leases

 

2019 (remaining three months)

  $ 133  

2020

    398  

2021

    235  

2022

    32  

2023

    29  

Thereafter

    78  

Total

  $ 905  

 

As of September 30, 2019, the current and noncurrent portions of operating lease receivables were $0.5 million and $0.4 million, respectively, and were included within accounts receivable, net and other noncurrent assets in the condensed consolidated balance sheet, respectively.

 

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7. DEBT

 

The carrying amount of long-term debt consisted of the following (in thousands):

 

   

September 30, 2019

   

December 31, 2018

 

Notes (as defined below)

  $ -     $ 450,000  

Senior Credit Facilities (as defined below)

    1,310,125       730,000  

Finance lease liabilities

    4,232       251  

Total debt

    1,314,357       1,180,251  

Less unamortized debt issuance costs

    (19,032 )     (17,570 )

Less current portion

    (17,215 )     (20,625 )

Total long-term debt

  $ 1,278,110     $ 1,142,056  

 

Notes. On June 17, 2015, the Company issued $450 million aggregate principal amount of 5.75% senior unsecured notes due 2022 (the “Notes”). The Notes were jointly and severally guaranteed on a senior unsecured basis by each of the subsidiaries that guarantee the Senior Credit Facilities (as defined below). The Notes were scheduled to mature on June 15, 2022 and interest was payable on June 15th and December 15th of each year. The indenture governing the Notes provided for early redemption of the Notes, at the option of the Company, at the prices and subject to the terms specified in the indenture.

 

On June 15, 2019, the Company redeemed all $450 million aggregate principal amount of outstanding Notes. In conjunction with the redemption, the Company incurred a $6.5 million call premium and wrote off the remaining $3.8 million debt issuance cost associated with the Notes. These amounts are recorded within other income (expense), net in the condensed consolidated statement of operations and comprehensive income.

 

Senior Credit Facilities. On June 30, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, and the other agents party thereto, which provided for a five-year revolving credit facility in an aggregate principal amount of $200 million (the “Original Revolving Credit Facility”) and a five-year term loan facility (the “Original Term Loan”).

 

On May 1, 2017, the Company and the lenders amended and restated the Credit Agreement (the “Amended and Restated Credit Agreement”) and the Company incurred $750 million of senior secured term loans (the “2017 New Loans”), the proceeds of which were used, together with cash on hand, to finance the acquisition of NewWave Communications (“NewWave”), repay in full the Original Term Loan and pay related fees and expenses. The 2017 New Loans consist of a five-year term “A” loan in an original aggregate principal amount of $250 million (the “Term Loan A-1”) and a seven-year term “B” loan in an original aggregate principal amount of $500 million (the “Term Loan B-1”).

 

On January 7, 2019, the Company entered into Amendment No. 2 to the Amended and Restated Credit Agreement (“Amendment No. 2”) with CoBank, ACB (“CoBank”), as lender, and JPMorgan, as administrative agent, and incurred a new seven-year incremental term “B” loan in an aggregate principal amount of $250 million (the “Term Loan B-2”), the proceeds of which were used to finance, in part, the Clearwave acquisition.

 

On April 12, 2019, the Company entered into Amendment No. 3 to the Amended and Restated Credit Agreement (“Amendment No. 3”) with CoBank, as lender, and JPMorgan, as administrative agent, to provide for a new delayed draw incremental term “B” loan in an aggregate principal amount of $325 million (the “Term Loan B-3”). The Term Loan B-3 was drawn in full on June 14, 2019.

 

On May 8, 2019, the Company entered into a Second Restatement Agreement with JPMorgan, as administrative agent, and the lenders party thereto, to amend and restate the Amended and Restated Credit Agreement (the “Second Restatement Agreement”). The Second Restatement Agreement provides for a new senior secured term “A” loan in an aggregate principal amount of $250 million (the “Term Loan A-2”), a new senior secured delayed draw term “A” loan in an aggregate principal amount of $450 million (the “Delayed Draw Term Loan A-2”) and a new $350 million senior secured revolving credit facility (the “New Revolving Credit Facility” and, together with the Term Loan A-2, the Delayed Draw Term Loan A-2, the Term Loan B-1, the Term Loan B-2 and the Term Loan B-3, the “Senior Credit Facilities”). The Second Restatement Agreement did not alter the principal terms of the Company’s previously established Term Loan B-1, Term Loan B-2 or Term Loan B-3.

 

A portion of the proceeds from the Term Loan A-2, the Term Loan B-3 and the New Revolving Credit Facility, together with cash on hand, were used to refinance the Original Revolving Credit Facility and Term Loan A-1, to redeem the Notes and for other general corporate purposes. The remaining proceeds, together with proceeds from the Delayed Draw Term Loan A-2 and cash on hand, were used to finance the acquisition of Fidelity and for other general corporate purposes. Refer to note 15 for additional details.

 

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The Term Loan B-1 will mature on May 1, 2024 and both the Term Loan B-2 and the Term Loan B-3 will mature on January 7, 2026. The principal amounts of these term loans amortize in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 1.0% per annum (subject to customary adjustments in the event of any prepayment), with the balance due upon maturity.

 

The Term Loan A-2, Delayed Draw Term Loan A-2 and New Revolving Credit Facility will mature on May 8, 2024 (unless certain of the Company’s existing indebtedness remains outstanding after certain specified dates, in which case the final maturity date of both facilities will be an earlier date as specified in the Second Restatement Agreement).

 

The principal amounts of the Term Loan A-2 and the Delayed Draw Term Loan A-2 amortize in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 2.5% per annum for the first year following the closing date, 2.5% per annum for the second year following the closing date, 5.0% per annum for the third year following the closing date, 7.5% per annum for the fourth year following the closing date and 12.5% per annum for the fifth year following the closing date (in each case subject to customary adjustments in the event of any prepayment), with the balance due upon maturity.

 

Loans under the Delayed Draw Term Loan A-2 have the same terms as, and constitute one class of term loans with, the loans under the Term Loan A-2 described above. The Company was required to pay a ticking fee, which accrued at a per annum rate of 0.30% on the average daily undrawn portion of the Delayed Draw Term Loan A-2 accruing during the period commencing on June 15, 2019 up to, but excluding, October 1, 2019.

 

The Senior Credit Facilities are guaranteed by the Company’s wholly owned subsidiaries (the “Guarantors”) and are secured, subject to certain exceptions, by substantially all of the assets of the Company and the Guarantors.

 

The Senior Credit Facilities may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions).

 

The interest margins applicable to the Senior Credit Facilities are, at the Company’s option, equal to either LIBOR or a base rate, plus an applicable margin equal to, (i) with respect to the Term Loan A-2, Delayed Draw Term Loan A-2 and New Revolving Credit Facility, 1.25% to 1.75% for LIBOR loans and 0.25% to 0.75% for base rate loans, determined on a quarterly basis by reference to a pricing grid based on the Company’s total net leverage ratio, (ii) with respect to the Term Loan B-1, (x) for any day on or prior to April 22, 2018, 2.25% for LIBOR loans and 1.25% for base rate loans and (y) for any day thereafter, 1.75% for LIBOR loans and 0.75% for base rate loans, and (iii) with respect to the Term Loan B-2 and Term Loan B-3, 2.0% for LIBOR loans and 1.0% for base rate loans.

 

The Company may, subject to certain specified terms and provisions, obtain additional credit facilities of up to $600 million under the Second Restatement Agreement plus an unlimited amount so long as, on a pro forma basis, the Company’s First Lien Net Leverage Ratio (as defined in the Second Restatement Agreement) is no greater than 3.0 to 1.0.

 

The Company was in compliance with all debt covenants as of September 30, 2019. 

 

As of September 30, 2019, outstanding borrowings under the Term Loan A-2, Term Loan B-1, Term Loan B-2 and Term Loan B-3 were $248.4 million, $488.8 million, $248.8 million and $324.2 million, respectively, and bore interest at rates ranging from 3.55% to 4.05% per annum. Letter of credit issuances under the New Revolving Credit Facility totaled $6.7 million and the Company had $343.3 million available for borrowing under the New Revolving Credit Facility at September 30, 2019.

 

In connection with the financing transactions during 2019, the Company incurred $11.8 million of debt issuance costs. The Company also wrote-off $4.2 million of existing unamortized debt issuance costs, including the $3.8 million associated with the Notes for the nine months ended September 30, 2019. The Company recorded $1.1 million of debt issuance cost amortization for both the three months ended September 30, 2019 and 2018 and $3.5 million and $3.1 million of debt issuance cost amortization for the nine months ended September 30, 2019 and 2018, respectively. These amounts are reflected within interest expense in the condensed consolidated statements of operations and comprehensive income. Unamortized debt issuance costs totaled $21.6 million and $17.6 million at September 30, 2019 and December 31, 2018, respectively, of which $2.6 million and $0 are reflected within other noncurrent assets, respectively, and $19.0 million and $17.6 million are reflected as reductions to long-term debt in the condensed consolidated balance sheets, respectively.

 

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As of September 30, 2019, the future maturities of outstanding debt, excluding lease liability payment obligations, were as follows (in thousands): 

 

Year Ending December 31,

 

Amount

 

2019 (remaining three months)

  $ 4,250  

2020