LIBERTY BROADBAND CORPORATION
Condensed Consolidated Balance Sheets
(unaudited)
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|
|
|
|
|
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|
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March 31,
|
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December 31,
|
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|
|
2019
|
|
2018
|
|
|
|
(amounts in thousands)
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
73,178
|
|
83,103
|
|
Other current assets
|
|
|
1,121
|
|
1,471
|
|
Total current assets
|
|
|
74,299
|
|
84,574
|
|
Investment in Charter, accounted for using the equity method (note 4)
|
|
|
11,999,494
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|
12,004,376
|
|
Other assets
|
|
|
9,585
|
|
9,487
|
|
Total assets
|
|
$
|
12,083,378
|
|
12,098,437
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|
Liabilities and Equity
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|
|
|
|
|
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Current liabilities:
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
2,922
|
|
3,504
|
|
Deferred revenue and other current liabilities
|
|
|
2,902
|
|
4,691
|
|
Total current liabilities
|
|
|
5,824
|
|
8,195
|
|
Debt (note 5)
|
|
|
523,238
|
|
522,928
|
|
Deferred income tax liabilities
|
|
|
961,665
|
|
965,829
|
|
Other liabilities
|
|
|
2,896
|
|
2,867
|
|
Total liabilities
|
|
|
1,493,623
|
|
1,499,819
|
|
Equity
|
|
|
|
|
|
|
Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued
|
|
|
—
|
|
—
|
|
Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 26,338,807 shares at March 31, 2019 and 26,311,681 shares at December 31, 2018
|
|
|
263
|
|
263
|
|
Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,454,520 shares at March 31, 2019 and December 31, 2018
|
|
|
25
|
|
25
|
|
Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 152,636,809 shares at March 31, 2019 and 152,591,939 shares at December 31, 2018
|
|
|
1,526
|
|
1,526
|
|
Additional paid-in capital
|
|
|
7,943,795
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|
7,938,357
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|
Accumulated other comprehensive earnings, net of taxes
|
|
|
7,778
|
|
7,778
|
|
Retained earnings
|
|
|
2,636,368
|
|
2,650,669
|
|
Total equity
|
|
|
10,589,755
|
|
10,598,618
|
|
Commitments and contingencies (note 7)
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|
|
|
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Total liabilities and equity
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$
|
12,083,378
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|
12,098,437
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|
See accompanying notes to the condensed consolidated financial statements.
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Operations
(unaudited)
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Three months ended
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March 31,
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2019
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2018
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(amounts in thousands, except per share amounts)
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Revenue:
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|
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Software sales
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$
|
3,458
|
|
11,791
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|
Total revenue
|
|
|
3,458
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|
11,791
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|
Operating costs and expenses
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|
|
|
|
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Operating, including stock-based compensation (note 6)
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2,253
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|
1,909
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|
Selling, general and administrative, including stock-based compensation (note 6)
|
|
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6,938
|
|
6,727
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|
Depreciation and amortization
|
|
|
468
|
|
909
|
|
|
|
|
9,659
|
|
9,545
|
|
Operating income (loss)
|
|
|
(6,201)
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|
2,246
|
|
Other income (expense):
|
|
|
|
|
|
|
Interest expense
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|
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(6,543)
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|
(5,037)
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|
Dividend and interest income
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|
|
418
|
|
225
|
|
Share of earnings (losses) of affiliates (note 4)
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|
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34,849
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|
9,302
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|
Gain (loss) on dilution of investment in affiliate (note 4)
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(41,403)
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(26,757)
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|
Other, net
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|
|
5
|
|
—
|
|
Net earnings (loss) before income taxes
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|
|
(18,875)
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|
(20,021)
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|
Income tax benefit (expense)
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|
|
4,574
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|
4,951
|
|
Net earnings (loss) attributable to Liberty Broadband shareholders
|
|
$
|
(14,301)
|
|
(15,070)
|
|
Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)
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|
$
|
(0.08)
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|
(0.08)
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|
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)
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|
$
|
(0.08)
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|
(0.08)
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|
See accompanying notes to the condensed consolidated financial statements.
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited)
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Three months ended
|
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March 31,
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|
|
2019
|
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2018
|
|
|
|
(amounts in thousands)
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|
Cash flows from operating activities:
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|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(14,301)
|
|
(15,070)
|
|
Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
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|
|
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|
Depreciation and amortization
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|
|
468
|
|
909
|
|
Stock-based compensation
|
|
|
2,616
|
|
1,405
|
|
Share of (earnings) losses of affiliates, net
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|
|
(34,849)
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|
(9,302)
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|
(Gain) loss on dilution of investment in affiliate
|
|
|
41,403
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|
26,757
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|
Deferred income tax expense (benefit)
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|
|
(4,574)
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|
(4,950)
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|
Other, net
|
|
|
302
|
|
394
|
|
Changes in operating assets and liabilities:
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|
|
|
|
|
|
Current and other assets
|
|
|
349
|
|
1,282
|
|
Payables and other liabilities
|
|
|
(2,975)
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|
(5,121)
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|
Net cash provided (used) by operating activities
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|
|
(11,561)
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|
(3,696)
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|
Cash flows from investing activities:
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|
|
|
|
|
|
Capital expended for property and equipment
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|
|
(17)
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|
(14)
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|
Net cash provided (used) by investing activities
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|
(17)
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|
(14)
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|
Cash flows from financing activities:
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|
|
|
|
|
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Other financing activities, net
|
|
|
1,653
|
|
541
|
|
Net cash provided (used) by financing activities
|
|
|
1,653
|
|
541
|
|
Net increase (decrease) in cash
|
|
|
(9,925)
|
|
(3,169)
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
|
|
83,103
|
|
81,257
|
|
Cash, cash equivalents and restricted cash, end of period
|
|
$
|
73,178
|
|
78,088
|
|
See accompanying notes to the condensed consolidated financial statements.
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statement of Equity
(unaudited)
Three Months ended March 31, 2019
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|
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|
|
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Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
other
|
|
|
|
|
|
|
|
Preferred
|
|
Common
stock
|
|
paid-in
|
|
comprehensive
|
|
Retained
|
|
|
|
|
|
Stock
|
|
Series A
|
|
Series B
|
|
Series C
|
|
capital
|
|
earnings
|
|
earnings
|
|
Total equity
|
|
|
|
(amounts in thousands)
|
|
Balance at January 1, 2019
|
|
$
|
—
|
|
263
|
|
25
|
|
1,526
|
|
7,938,357
|
|
7,778
|
|
2,650,669
|
|
10,598,618
|
|
Net earnings (loss)
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(14,301)
|
|
(14,301)
|
|
Stock-based compensation
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2,523
|
|
—
|
|
—
|
|
2,523
|
|
Issuance of common stock upon exercise of stock options
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,653
|
|
—
|
|
—
|
|
1,653
|
|
Noncontrolling interest activity at Charter
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,262
|
|
—
|
|
—
|
|
1,262
|
|
Balance at March 31, 2019
|
|
$
|
—
|
|
263
|
|
25
|
|
1,526
|
|
7,943,795
|
|
7,778
|
|
2,636,368
|
|
10,589,755
|
|
See accompanying notes to the condensed consolidated financial statements.
Condensed Consolidated Statement of Equity
(unaudited)
Three Months ended March 31, 2018
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
other
|
|
|
|
|
|
|
Preferred
|
|
Common
stock
|
|
paid-in
|
|
comprehensive
|
|
Retained
|
|
|
|
|
Stock
|
|
Series A
|
|
Series B
|
|
Series C
|
|
capital
|
|
earnings
|
|
earnings
|
|
Total equity
|
|
|
(amounts in thousands)
|
Balance at January 1, 2018
|
|
$
|
—
|
|
262
|
|
25
|
|
1,526
|
|
7,907,900
|
|
8,424
|
|
2,568,764
|
|
10,486,901
|
Net earnings (loss)
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
(15,070)
|
|
(15,070)
|
Stock-based compensation
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,352
|
|
—
|
|
—
|
|
1,352
|
Issuance of common stock upon exercise of stock options
|
|
|
—
|
|
1
|
|
—
|
|
—
|
|
540
|
|
—
|
|
—
|
|
541
|
Cumulative effect of accounting change
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
1,223
|
|
1,223
|
Cumulative effect of accounting change at Charter
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
5,802
|
|
5,802
|
Noncontrolling interest activity at Charter
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
30,646
|
|
—
|
|
—
|
|
30,646
|
Balance at March 31, 2018
|
|
$
|
—
|
|
263
|
|
25
|
|
1,526
|
|
7,940,438
|
|
8,424
|
|
2,560,719
|
|
10,511,395
|
See accompanying notes to the condensed consolidated financial statements.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock (the “Broadband Spin-Off”). These financial statements refer to Liberty Broadband Corporation as “Liberty Broadband,” “the Company,” “us,” “we” and “our” in the notes to the condensed consolidated financial statements.
Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter Communications, Inc. (“Charter”). Pursuant to proxy agreements with GCI Liberty, Inc. (“GCI Liberty”) and Advance/Newhouse Partnership (“A/N”), Liberty Broadband controls 25.01% of the aggregate voting power of Charter.
The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (“Skyhook”), focuses on the development and sale of Skyhook’s device-based location technology. Skyhook markets and sells two primary products: (1) a location determination service called the Precision Location Solution; and (2) a location intelligence and data insights service called Geospatial Insights.
The accompanying (a) condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty Broadband's Annual Report on Form 10-K for the year ended December 31, 2018. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers the application of the equity method of accounting for investments in affiliates and accounting for income taxes to be its most significant estimates
.
Liberty Broadband holds an investment in Charter that is accounted for using the equity method. Liberty Broadband does not control the decision making process or business management practices of this affiliate. Accordingly, Liberty Broadband relies on the management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty Broadband relies on audit reports that are provided by the affiliate's independent auditor on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Liberty Broadband's condensed consolidated financial statements.
Spin-Off Arrangements
Following the Broadband Spin-Off, Liberty and Liberty Broadband operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Broadband Spin-Off, Liberty (for accounting purposes a related party of the Company) and Liberty Broadband entered into certain agreements in order to
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
govern certain of the ongoing relationships between the two companies after the Broadband Spin-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.
The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Broadband Spin-Off, certain conditions to the Broadband Spin-Off and provisions governing the relationship between Liberty Broadband and Liberty with respect to and resulting from the Broadband Spin-Off. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and Liberty Broadband and other agreements related to tax matters. Pursuant to the tax sharing agreement, Liberty Broadband has agreed to indemnify Liberty, subject to certain limited exceptions, for losses and taxes resulting from the Broadband Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by Liberty Broadband (applicable to actions or failures to act by Liberty Broadband and its subsidiaries following the completion of the Broadband Spin-Off). Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement, Liberty Broadband shares office space with Liberty and related amenities at Liberty’s corporate headquarters. Liberty Broadband will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services which will be negotiated semi-annually. Under these various agreements, approximately $924 thousand and $950 thousand was reimbursable to Liberty for the three months ended March 31, 2019 and 2018, respectively.
(2) Earnings (Loss) per Share
Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty Broadband shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. The basic and diluted EPS calculations are based on the following weighted average number of shares of outstanding common stock.
|
|
|
|
|
|
|
|
Liberty Broadband Common Stock
|
|
|
|
Three months
|
|
Three months
|
|
|
|
ended
|
|
ended
|
|
|
|
March 31, 2019
|
|
March 31, 2018
|
|
|
|
(numbers of shares in thousands)
|
|
Basic WASO
|
|
181,366
|
|
181,316
|
|
Potentially dilutive shares (1)
|
|
1,299
|
|
1,398
|
|
Diluted WASO
|
|
182,665
|
|
182,714
|
|
(1) Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.
(3) Assets and Liabilities Measured at Fair Value
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company’s assets and (liabilities) measured at fair value are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
Quoted prices
|
|
Significant
|
|
|
|
Quoted prices
|
|
Significant
|
|
|
|
|
|
|
in active
|
|
other
|
|
|
|
in active
|
|
other
|
|
|
|
|
|
|
markets for
|
|
observable
|
|
|
|
markets for
|
|
observable
|
|
|
|
|
|
|
identical assets
|
|
inputs
|
|
|
|
identical assets
|
|
inputs
|
|
Description
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
Total
|
|
(Level 1)
|
|
(Level 2)
|
|
|
|
(amounts in thousands)
|
|
Cash equivalents
|
|
$
|
63,735
|
|
63,735
|
|
—
|
|
67,329
|
|
67,329
|
|
—
|
|
Other Financial Instruments
Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt bears interest at a variable rate and therefore is also considered to approximate fair value.
(4) Investment in Charter Accounted for Using the Equity Method
Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter. The investment in Charter is accounted for as an equity method affiliate based on our ownership interest and the board seats held by individuals appointed by Liberty Broadband. As of March 31, 2019, the carrying value of Liberty Broadband’s ownership in Charter was approximately $11,999 million. The market value of Liberty Broadband’s ownership in Charter as of March 31, 2019 was approximately $18,758 million, which represented an approximate economic ownership of 24.2% of the outstanding equity of Charter as of that date.
Pursuant to proxy agreements with GCI Liberty and A/N (the “GCI Liberty Proxy” and “A/N Proxy”, respectively), Liberty Broadband has an irrevocable proxy to vote certain shares of Charter common stock owned beneficially or of record by GCI Liberty and A/N, for a five year term expiring May 18, 2021, subject to extension upon the mutual agreement of both parties, subject to certain limitations.
As a result of the A/N Proxy and the GCI Liberty Proxy, Liberty Broadband controls 25.01% of the aggregate voting power of Charter and is Charter’s largest stockholder.
Additionally, so long as the A/N Proxy is in effect, if A/N proposes to transfer common units of Charter Communications Holdings, LLC (which units are exchangeable into Charter shares and which will, under certain circumstances, result in the conversion of certain shares of Class B Common Stock into Charter shares) or Charter shares, in each case, constituting either (i) shares representing the first 7.0% of the outstanding voting power of Charter held by A/N or (ii) shares representing the last 7.0% of the outstanding voting power of New Charter held by A/N, Liberty Broadband will have a right of first refusal (“ROFR”) to purchase all or a portion of any such securities A/N proposes to transfer. The purchase price per share for any securities sold to Liberty Broadband pursuant to the ROFR will be the volume-weighted average price of Charter shares for the two trading day period before the notice of a proposed sale by A/N, payable in cash. Certain transfers are permitted to affiliates of A/N, subject to the transferee entity entering into an agreement assuming the transferor’s obligations under the A/N Proxy.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Investment in Charter
The excess basis in our investment in Charter of $3,351 million as of March 31, 2019 is allocated within memo accounts used for equity accounting purposes as follows (amounts in millions):
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
Property and equipment
|
|
$
|
302
|
|
328
|
Customer relationships
|
|
|
736
|
|
721
|
Franchise fees
|
|
|
1,836
|
|
1,821
|
Trademarks
|
|
|
29
|
|
29
|
Goodwill
|
|
|
1,238
|
|
1,202
|
Debt
|
|
|
(87)
|
|
(105)
|
Deferred income tax liability
|
|
|
(703)
|
|
(698)
|
|
|
$
|
3,351
|
|
3,298
|
Property and equipment and customer relationships have remaining useful lives of 7 years and 11 years, respectively, and franchise fees, trademarks and goodwill have indefinite lives. The excess basis of outstanding debt is amortized over the contractual period using the straight-line method. The increase in excess basis for the three months ended March 31, 2019, was primarily due to Charter’s share buyback program. The Company’s share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $25.6 million and $28.7 million, net of related taxes, for the three months ended March 31, 2019 and 2018, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.
The Company had a dilution loss of $41.4 million and $26.8 million during the three months ended March 31, 2019 and 2018, respectively. The dilution losses for the periods presented were attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per share.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Summarized unaudited financial information for Charter is as follows (amounts in millions):
Charter condensed consolidated balance sheets
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Current assets
|
|
$
|
3,926
|
|
2,944
|
|
Property and equipment, net
|
|
|
34,859
|
|
35,126
|
|
Goodwill
|
|
|
29,554
|
|
29,554
|
|
Intangible assets, net
|
|
|
76,316
|
|
76,884
|
|
Other assets
|
|
|
2,602
|
|
1,622
|
|
Total assets
|
|
$
|
147,257
|
|
146,130
|
|
Current liabilities
|
|
|
11,950
|
|
12,095
|
|
Deferred income taxes
|
|
|
17,473
|
|
17,389
|
|
Long-term debt
|
|
|
70,567
|
|
69,537
|
|
Other liabilities
|
|
|
3,624
|
|
2,837
|
|
Equity
|
|
|
43,643
|
|
44,272
|
|
Total liabilities and shareholders’ equity
|
|
$
|
147,257
|
|
146,130
|
|
Charter condensed consolidated statements of operations
|
|
|
|
|
|
Three months ended
|
|
March 31,
|
|
2019
|
|
2018
|
Revenue
|
$
|
11,206
|
|
10,657
|
Cost and expenses:
|
|
|
|
|
Operating costs and expenses (excluding depreciation and amortization)
|
|
7,236
|
|
6,836
|
Depreciation and amortization
|
|
2,550
|
|
2,710
|
Other operating (income) expenses, net
|
|
(5)
|
|
69
|
|
|
9,781
|
|
9,615
|
Operating income
|
|
1,425
|
|
1,042
|
Interest expense, net
|
|
(925)
|
|
(851)
|
Other income (expense), net
|
|
(64)
|
|
60
|
Income tax benefit (expense)
|
|
(119)
|
|
(28)
|
Net income (loss)
|
|
317
|
|
223
|
Less: Net income attributable to noncontrolling interests
|
|
(64)
|
|
(55)
|
Net income (loss) attributable to Charter shareholders
|
$
|
253
|
|
168
|
(5) Debt
Amended 2017 Margin Loan Facility
On August 24, 2018, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”), entered into Amendment No. 1 to its multi-draw margin loan credit facility (the “Amended 2017 Margin Loan Facility” and, the credit agreement governing such facility, the “Amended 2017 Margin Loan Agreement”) with Wilmington Trust, National Association as the successor administrative agent, BNP Paribas, Dublin Branch, as the successor calculation agent, and the lenders thereunder. SPV is permitted, subject to certain funding conditions, to borrow term loans up to an aggregate principal amount equal to $1.0 billion. SPV will also have the ability from time to time to request additional loans in an aggregate principal amount of up to $1.0 billion on an uncommitted basis subject to certain conditions. SPV had borrowed $525 million
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
as of March 31, 2019 and December 31, 2018. SPV had $475 million available to be drawn until August 27, 2019. The maturity date of the loans under the Amended 2017 Margin Loan Agreement is August 24, 2020 (except for any incremental loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). Accordingly, the debt is classified as noncurrent as of March 31, 2019. Borrowings under the Amended 2017 Margin Loan Agreement bear interest at the three-month LIBOR rate plus a per annum spread of 1.5%. Borrowings outstanding under this margin loan bore interest at a rate of 4.10% per annum at March 31, 2019. Interest is payable quarterly in arrears beginning on September 29, 2017. SPV used available cash and a portion of the proceeds of the loans under the Amended 2017 Margin Loan Facility to repay the two margin loan agreements entered into by a wholly-owned special purpose subsidiary of the Company on October 30, 2014 and two margin loan agreements entered into by another wholly-owned special purpose subsidiary of the Company on March 21, 2016. Borrowings may also be used for distribution as a dividend or a return of capital, for the purchase of margin stock and for general corporate purposes.
The Amended 2017 Margin Loan Agreement contains various affirmative and negative covenants that restrict the activities of the SPV (and, in some cases, the Company and its subsidiaries with respect to shares of Charter owned by the Company and its subsidiaries). The Amended 2017 Margin Loan Agreement does not include any financial covenants. The Amended 2017 Margin Loan Agreement also contains restrictions related to additional indebtedness and events of default customary for margin loans of this type.
SPV’s obligations under the Amended 2017 Margin Loan Agreement are secured by first priority liens on a portion of the Company’s ownership interest in Charter, sufficient for SPV to meet the loan to value requirements under the Amended 2017 Margin Loan Agreement. The Amended 2017 Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares transferred, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreements.
As of March 31, 2019, 6.8 million shares of Charter with a value of $2.3 billion were pledged as collateral pursuant to the Amended 2017 Margin Loan Agreement.
(6) Stock-Based Compensation
Liberty Broadband grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock and stock options to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.
Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation for the three months ended March 31, 2019 and 2018 (amounts in thousands):
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
Operating expense
|
|
$
|
37
|
|
17
|
|
Selling, general and administrative
|
|
|
2,579
|
|
1,388
|
|
|
|
$
|
2,616
|
|
1,405
|
|
Liberty Broadband – Grants of Stock Options
During the three months ended March 31, 2019, Liberty Broadband granted 41 thousand options to purchase shares of Series C Liberty Broadband common stock and 25 thousand performance-based restricted stock units (“RSUs”) of Series
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
C Liberty Broadband common stock to our CEO. Such options had a GDFV of $25.46 per share. The RSUs had a GDFV of $88.99 per share at the time they were granted. The options vest on December 31, 2019, and the RSUs cliff vest in one year, subject to satisfaction of certain performance objectives. Performance objectives, which are subjective, are considered in determining the timing and amount of the compensation expense recognized. When the satisfaction of the performance objectives becomes probable, the Company records compensation expense. The probability of satisfying the performance objectives is assessed at the end of each reporting period.
There were no options to purchase shares of Series A or Series B common stock granted during the three months ended March 31, 2019.
The Company calculates the GDFV for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Liberty Broadband common stock and the implied volatility of publicly traded Liberty Broadband options. The Company uses a zero dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject options.
Liberty Broadband – Outstanding Awards
The following tables present the number and weighted average exercise price (“WAEP”) of Awards to purchase Liberty Broadband common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
remaining
|
|
Aggregate
|
|
|
|
|
|
|
|
contractual
|
|
intrinsic
|
|
|
Series A
|
|
WAEP
|
|
life
|
|
value
|
|
|
(in thousands)
|
|
|
|
|
(in years)
|
|
(in millions)
|
Outstanding at January 1, 2019
|
|
393
|
|
$
|
33.31
|
|
|
|
|
|
Granted
|
|
—
|
|
$
|
—
|
|
|
|
|
|
Exercised
|
|
(42)
|
|
$
|
33.05
|
|
|
|
|
|
Forfeited/cancelled
|
|
—
|
|
$
|
—
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
351
|
|
$
|
33.35
|
|
0.8
|
|
$
|
20
|
Exercisable at March 31, 2019
|
|
350
|
|
$
|
33.30
|
|
0.8
|
|
$
|
20
|
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
average
|
|
|
|
|
|
|
|
|
|
|
remaining
|
|
Aggregate
|
|
|
|
|
|
|
|
contractual
|
|
intrinsic
|
|
|
Series C
|
|
WAEP
|
|
life
|
|
value
|
|
|
(in thousands)
|
|
|
|
|
(in years)
|
|
(in millions)
|
Outstanding at January 1, 2019
|
|
2,356
|
|
$
|
43.77
|
|
|
|
|
|
Granted
|
|
41
|
|
$
|
88.99
|
|
|
|
|
|
Exercised
|
|
(62)
|
|
$
|
32.95
|
|
|
|
|
|
Forfeited/cancelled
|
|
—
|
|
$
|
—
|
|
|
|
|
|
Outstanding at March 31, 2019
|
|
2,335
|
|
$
|
44.86
|
|
4.2
|
|
$
|
109
|
Exercisable at March 31, 2019
|
|
1,533
|
|
$
|
41.83
|
|
3.3
|
|
$
|
76
|
As of
March 31, 2019
, the total unrecognized compensation cost related to unvested Awards was approximately
$4.4 million
. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 1.0 year.
As of March 31, 2019, Liberty Broadband reserved 2.7 million shares of Series A and Series C common stock for issuance under exercise privileges of outstanding stock Awards.
Skyhook Equity Incentive Plans
Long-Term Incentive Plans
Skyhook has a long-term incentive plan which provides for the granting of phantom stock appreciation rights (“PARs”) and phantom stock units (“PSUs”) to employees, directors, and consultants of Skyhook that is not significant to Liberty Broadband. As of March 31, 2019 and December 31, 2018, $1.2 million and $1.1 million, respectively, are included in other liabilities for the fair value (Level 2) of the Company’s long-term incentive plan obligations.
(7) Commitments and Contingencies
General Litigation
In the ordinary course of business, the Company and its consolidated subsidiary are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.
Certain Risks and Concentrations
The Skyhook business is subject to certain risks and concentrations including dependence on relationships with its customers. The Company’s largest customers, that accounted for greater than 10% of revenue, aggregated 73% and 72% of total revenue for the three months ended March 31, 2019 and 2018, respectively.
Off-Balance Sheet Arrangements
Liberty Broadband did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(8) Segment Information
Liberty Broadband identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Liberty Broadband’s annual pre-tax earnings (losses).
Liberty Broadband evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Liberty Broadband reviews nonfinancial measures such as subscriber growth.
Liberty Broadband defines Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Liberty Broadband believes this measure is an important indicator of the operational strength and performance of its businesses, including each business’s ability to service debt and fund capital expenditures. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net earnings, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty Broadband generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.
For the three months ended March 31, 2019, Liberty Broadband has identified the following consolidated company and equity method investment as its reportable segments:
|
·
|
|
Skyhook—a wholly owned subsidiary of the Company that provides the Precision Location Solution (a location determination service) and Geospatial Insights product (a location intelligence and data insights service).
|
|
·
|
|
Charter—an equity method investment that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers.
|
Liberty Broadband’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated companies are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter, 100% of the Charter amounts are included in the schedule below and subsequently eliminated in order to reconcile the account totals to the Liberty Broadband condensed consolidated financial statements.
Table of Contents
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Performance Measures
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
|
|
Adjusted
|
|
|
|
Adjusted
|
|
|
|
Revenue
|
|
OIBDA
|
|
Revenue
|
|
OIBDA
|
|
|
|
|
(amounts in thousands)
|
|
Skyhook
|
|
$
|
3,458
|
|
(1,193)
|
|
11,791
|
|
6,099
|
|
Charter
|
|
|
11,206,000
|
|
4,060,000
|
|
10,657,000
|
|
3,824,000
|
|
Corporate and other
|
|
|
—
|
|
(1,924)
|
|
—
|
|
(1,539)
|
|
|
|
|
11,209,458
|
|
4,056,883
|
|
10,668,791
|
|
3,828,560
|
|
Eliminate equity method affiliate
|
|
|
(11,206,000)
|
|
(4,060,000)
|
|
(10,657,000)
|
|
(3,824,000)
|
|
Consolidated Liberty Broadband
|
|
$
|
3,458
|
|
(3,117)
|
|
11,791
|
|
4,560
|
|
Other Information
|
|
|
|
|
|
|
|
|
|
|
March 31, 2019
|
|
|
|
Total
|
|
Investments
|
|
Capital
|
|
|
|
assets
|
|
in affiliates
|
|
expenditures
|
|
|
|
(amounts in thousands)
|
|
Skyhook
|
|
$
|
18,037
|
|
—
|
|
17
|
|
Charter
|
|
|
147,257,000
|
|
—
|
|
1,665,000
|
|
Corporate and other
|
|
|
12,065,341
|
|
11,999,494
|
|
—
|
|
|
|
|
159,340,378
|
|
11,999,494
|
|
1,665,017
|
|
Eliminate equity method affiliate
|
|
|
(147,257,000)
|
|
—
|
|
(1,665,000)
|
|
Consolidated Liberty Broadband
|
|
$
|
12,083,378
|
|
11,999,494
|
|
17
|
|
The following table provides a reconciliation of consolidated segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
|
(amounts in thousands)
|
|
Consolidated segment Adjusted OIBDA
|
|
$
|
(3,117)
|
|
4,560
|
|
Stock-based compensation
|
|
|
(2,616)
|
|
(1,405)
|
|
Depreciation and amortization
|
|
|
(468)
|
|
(909)
|
|
Operating income (loss)
|
|
|
(6,201)
|
|
2,246
|
|
Interest expense
|
|
|
(6,543)
|
|
(5,037)
|
|
Dividend and interest income
|
|
|
418
|
|
225
|
|
Share of earnings (loss) of affiliates, net
|
|
|
34,849
|
|
9,302
|
|
Gain (loss) on dilution of investment in affiliate
|
|
|
(41,403)
|
|
(26,757)
|
|
Other, net
|
|
|
5
|
|
—
|
|
Earnings (loss) before income taxes
|
|
$
|
(18,875)
|
|
(20,021)
|
|
Results of Operations—Consolidated—March 31, 2019 and 2018
Consolidated operating results:
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
|
|
(amounts in thousands)
|
|
Revenue
|
|
$
|
3,458
|
|
11,791
|
|
Operating expense
|
|
|
2,216
|
|
1,892
|
|
Selling, general and administrative
|
|
|
4,359
|
|
5,339
|
|
Stock-based compensation
|
|
|
2,616
|
|
1,405
|
|
Depreciation and amortization
|
|
|
468
|
|
909
|
|
Operating income (loss)
|
|
|
(6,201)
|
|
2,246
|
|
Less impact of stock-based compensation and depreciation and amortization
|
|
|
3,084
|
|
2,314
|
|
Adjusted OIBDA
|
|
$
|
(3,117)
|
|
4,560
|
|
Revenue
Revenue decreased $8.3 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease in revenue for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily due to a license agreement in the prior year. On February 16, 2018, Skyhook entered into a license agreement pursuant to which Skyhook agreed to grant to the licensee a perpetual, non-exclusive, non-transferable, worldwide license to patents and patent applications owned by Skyhook. In exchange for this grant, the licensee agreed to pay a one-time lump sum payment of $8.5 million that was recognized as revenue during the three months ended March 31, 2018.
Operating expense and selling, general and administrative expenses
Operating expense increased by $0.3 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The increases in operating expense were primarily due to increased personnel, data acquisition and cloud computing costs. Selling, general, and administrative expense decreased by $1.0 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease in selling, general and administrative expense during the three month period was primarily to legal expenses of $0.8 million and other costs associated with the license agreement in the prior year, partially offset by increased corporate costs.
Stock-based compensation
The increase in stock-based compensation expense of $1.2 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily due to an increase in the number of options to purchase shares of Liberty Broadband Series C common stock granted during the first quarter of 2019.
Depreciation and amortization
Depreciation and amortization expense decreased by $0.4 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year, due to certain assets becoming fully depreciated.
Operating income (loss)
Operating loss increased $8.4 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year due to the items discussed above.
Adjusted OIBDA
We define Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses, including each business’s ability to service debt and fund capital expenditures. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to generally accepted accounting principles in the United States (“GAAP”). Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 8 to the accompanying condensed consolidated financial statements for a reconciliation of Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes.
Adjusted OIBDA decreased $7.7 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease in Skyhook Adjusted OIBDA for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was due primarily to a license agreement entered into during the three months ended March 31, 2018, coupled with higher operating expenses resulting from increased personnel, data acquisition, cloud computing and corporate costs, partially offset by legal and other costs associated with the license agreement discussed above.
Other Income and Expense
Components of Other income (expense) are presented in the table below.
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Three months ended
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March 31,
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2019
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2018
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(amounts in thousands)
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Other income (expense):
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Interest expense
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$
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(6,543)
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(5,037)
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Dividend and interest income
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418
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225
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Share of earnings (losses) of affiliates
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34,849
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9,302
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Gain (loss) on dilution of investment in affiliate
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(41,403)
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(26,757)
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Other, net
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5
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—
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$
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(12,674)
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(22,267)
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Interest expense
Interest expense increased $1.5 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The increase was attributable to additional amounts outstanding on the Amended 2017 Margin Loan, as well as an increase in our weighted average interest rate during the current period as compared to corresponding period in the prior year.
Dividend and interest income
Dividend and interest income increased $193 thousand during the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The increase in dividend and interest income for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was the result of increased interest rates.
Share of earnings (losses) of affiliates
Share of earnings of affiliates increased $25.5 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The Company’s Share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $25.6 million and $28.7 million, net of related taxes, for the three months ended March 31, 2019 and 2018, respectively, due to the increase in excess basis of assets with identifiable useful lives and debt, which was primarily due to Charter’s share buyback program, partly offset by a realignment with Charter’s debt retirements. The increase in the share of earnings of affiliates in the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was the result of increased net income at Charter.
The following is a discussion of Charter’s results of operations. In order to provide a better understanding of Charter’s operations, we have included a summarized presentation of Charter’s results from operations.
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Three months ended
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March 31,
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2019
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2018
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(amounts in millions)
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Revenue
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$
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11,206
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10,657
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Operating expenses, excluding stock-based compensation
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(7,146)
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(6,833)
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Adjusted OIBDA
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4,060
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3,824
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Depreciation and amortization
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(2,550)
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(2,710)
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Stock-based compensation
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(85)
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(72)
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Operating income
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1,425
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1,042
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Other expenses, net
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(989)
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(791)
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Net earnings (loss) before income taxes
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436
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251
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Income tax benefit (expense)
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(119)
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(28)
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Net earnings (loss)
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$
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317
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223
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Charter net earnings increased $94 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year.
Charter’s revenue increased $549 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, primarily due to increases in the number of residential Internet and commercial business customers, price adjustments as well as the launch of Charter’s mobile service in the second half of 2018 offset by a decrease in video customers.
The increase in revenue during the three months ended March 31, 2019 was partially offset by the net impact of an increase in operating expenses, excluding stock-based compensation, of $313 million, as compared to the corresponding period in the prior year. Operating costs increased primarily due to rising programming costs and incremental costs comprised of mobile device costs, mobile launch costs, and mobile service and operating costs.
Programming costs increased as a result of contractual rate adjustments, including renewals and increases in amounts paid for retransmission consents partly offset by lower video customers and pay-per-view during the three months ended March 31, 2019. Charter expects programming expenses will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming, particularly new services. Charter has been unable to fully pass these increases on to its customers nor does it expect to be able to do so in the future without a potential loss of customers.
Charter’s Adjusted OIBDA for the three months ended March 31, 2019 increased as a result of the discussion above.
Depreciation and amortization expense decreased $160 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year. The decrease was primarily due to a decrease in depreciation and
amortization as certain assets acquired from Time Warner Cable, Inc. (“TWC” or “Legacy TWC”) and Bright House Networks, LLC become fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.
Charter’s results were also impacted by an increase in other expenses, net of $198 million for the three months ended March 31, 2019. The increase in other expenses, net for the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily due to an impairment on Charter’s equity-method investments of approximately $110 million, as well as increased interest expense, net of $74 million as a result of an increase in weighted average debt outstanding.
Income tax expense increased $91 million for the three months ended March 31, 2019, as compared to the corresponding period in the prior year. Income tax expense increased year over year primarily as a result of higher pretax income
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Gain (loss) on dilution of investment in affiliate
The loss on dilution of investment in affiliate increased by $14.6 million during the three months ended March 31, 2019, as compared to the corresponding period in the prior year, primarily due to an increase in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share. As Liberty Broadband’s ownership in Charter changes due to exercises of Charter stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.
Income tax benefit (expense)
During the three months ended March 31, 2019, we had an income tax benefit of $4.6 million and the effective rate was approximately 24.2%. For the three months ended March 31, 2018, we had an income tax benefit of $5.0 million and the effective tax rate was approximately 24.7%. The difference between the effective income tax rate of 24.2% and the U.S. Federal income tax rate of 21% for the three months ended March 31, 2019 was primarily due to the effect of state income taxes. The difference between the effective income tax rate of 24.7% and the U.S. Federal income tax rate of 21% for the three months ended March 31, 2018 was primarily due to the effect of state income taxes.
Liquidity and Capital Resources
As of March 31, 2019, substantially all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.
The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), proceeds from asset sales, monetization of our investments, outstanding debt facilities, including $475 million available to be drawn under our Amended 2017 Margin Loan Facility (as defined in note 5 to the accompanying condensed consolidated financial statements) until August 27, 2019, debt and equity issuances, and dividend and interest receipts.
As of March 31, 2019, Liberty Broadband had a cash balance of $73 million.
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Three months ended March 31,
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2019
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2018
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(amounts in thousands)
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Cash flow information
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Net cash provided (used) by operating activities
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$
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(11,561)
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(3,696)
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Net cash provided (used) by investing activities
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$
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(17)
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(14)
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Net cash provided (used) by financing activities
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$
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1,653
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541
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The increase in cash used by operating activities in the three months ended March 31, 2019, as compared to the corresponding period in the prior year, was primarily driven by the decrease in operating income in the current period, as well as the timing of differences in cash receipts and payments.
During the three months ended March 31, 2019 and 2018, net cash flows from financing activities were primarily related to the issuance of common stock upon the exercise of stock options.
The projected use of our cash will be primarily to fund any operational needs of our subsidiary, to service debt, to fund potential investment opportunities, and refinance Liberty Broadband’s margin loans, under its Amended 2017 Margin Loan Facility, that come due in 2020. We expect corporate cash to cover corporate expenses for the foreseeable future.