Mar 1, 2018   SOURCE: BusinessWire

Cable ONE Reports Fourth Quarter and Full Year 2017 Results

Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today reported financial and operating results for the quarter and year ended December 31, 2017.(1)

Full year 2017 highlights:

  • Net income was $234.0 million in 2017, an increase of 131.5% year-over-year. Net income includes a $113.0 million income tax benefit as a result of the 2017 Federal tax reform legislation. Adjusted EBITDA(2) was $443.1 million, an increase of 24.0% year-over-year. Net profit margin was 24.4% and Adjusted EBITDA Margin(2) was 46.2%.
  • Net income and Adjusted EBITDA results for 2017 include eight months of NewWave Communications (“NewWave”) operations and the favorable impact of a reduction in expense of $16.3 million due to a change in accounting for capitalized labor costs effective since the first quarter of 2017.
  • Without the contribution from NewWave operations, net income would have increased 123.8% to $226.3 million and Adjusted EBITDA would have increased 10.7% to $395.5 million. In addition, net profit margin would have been 27.2% and Adjusted EBITDA margin would have been 47.5%.
  • Excluding both the NewWave operations and the capitalized labor change, net income would have increased 113.8% to $216.2 million and Adjusted EBITDA would have increased 6.1% to $379.2 million. In addition, net profit margin would have been 26.0% and Adjusted EBITDA margin would have been 45.5%.
  • Net cash provided by operating activities was $324.5 million, an increase of 26.2% year-over-year. Adjusted EBITDA less capital expenditures(2) was $263.7 million, an increase of 16.4% compared to 2016.
  • Total revenues were $960.0 million, including a $127.3 million contribution from NewWave operations, compared to $819.6 million in 2016.
  • Residential data revenues increased 20.4% and business services revenues increased 30.7% year-over-year. Excluding the contribution from NewWave operations, residential data revenues increased 7.9% and business services revenues increased 11.8% compared to the prior year.

Fourth quarter 2017 highlights:

  • Net income was $143.2 million in the fourth quarter of 2017, an increase of 484.3% year-over-year. Net income includes a $113.0 million income tax benefit as a result of the 2017 Federal tax reform legislation. Adjusted EBITDA was $117.0 million, an increase of 26.8% year-over-year. Net profit margin was 55.5% and Adjusted EBITDA margin was 45.4%.
  • Net income and Adjusted EBITDA results in the fourth quarter of 2017 include NewWave operations and the favorable impact of a reduction in expense of $3.1 million due to the capitalized labor change.
  • Without the contribution from NewWave operations, net income would have increased 472.9% to $140.3 million and Adjusted EBITDA would have increased 6.5% to $98.2 million. In addition, net profit margin would have been 66.8% and Adjusted EBITDA margin would have been 46.7%.
  • Excluding both the NewWave operations and the capitalized labor change, net income would have increased 465.1% to $138.5 million and Adjusted EBITDA would have increased 3.2% to $95.1 million. In addition, net profit margin would have been 65.9% and Adjusted EBITDA margin would have been 45.3%.
  • Net cash provided by operating activities was $104.7 million, an increase of 75.7% year-over-year. Adjusted EBITDA less capital expenditures was $66.4 million, an increase of 17.2% compared to the fourth quarter of 2016.
  • Total revenues were $257.7 million, including a $47.6 million contribution from NewWave operations, compared to $206.7 million in the fourth quarter of 2016.
  • Residential data revenues increased 27.2% and business services revenues increased 37.2% year-over-year. Excluding the contribution from NewWave operations, residential data revenues increased 8.6% and business services revenues increased 9.9% compared to the fourth quarter of 2016.
(1)    

Comparative historical financial results have been revised. Refer to the section of this press release entitled “Revision to Previously Issued Financial Statements” for further discussion.

(2)

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

 

Full Year 2017 Financial Results Compared to Full Year 2016

Revenues increased $140.4 million, or 17.1%, to $960.0 million for 2017 due primarily to $127.3 million in revenues attributable to eight months of NewWave operations. For 2017 and 2016, residential data revenues comprised 43.2% and 42.0% of total revenues and business services revenues comprised 13.7% and 12.2% of total revenues, respectively. Excluding the $127.3 million contribution from NewWave operations in 2017, revenues increased $13.1 million from $819.6 million in the prior year.

Operating expenses (excluding depreciation and amortization) were $337.0 million in 2017 and increased $40.5 million, or 13.6%, compared to 2016. Operating expenses as a percentage of revenues were 35.1% for 2017 compared to 36.2% for 2016. Additional operating expenses attributable to the NewWave operations were $63.1 million for 2017. This increase was partially offset by a $12.7 million decrease in labor costs associated with the capitalized labor change, a $3.8 million decrease in programming costs resulting from fewer video subscribers, a $3.1 million decrease in backbone and internet connectivity fees, a $1.3 million decrease in insurance costs and a $1.0 million decrease in repair and maintenance costs. Excluding the impact of NewWave operations, operating expenses would have been $273.9 million in 2017, a decrease of $22.7 million, or 7.6%. Operating expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 32.9% in 2017 compared to 36.2% in 2016.

Selling, general and administrative expenses increased $20.8 million, or 11.3%, to $204.8 million for 2017. Selling, general and administrative expenses as a percentage of revenues were 21.3% and 22.5% for 2017 and 2016, respectively. Additional selling, general and administrative expenses attributable to the NewWave operations were $16.6 million for 2017. Increases in severance costs of $4.4 million, deferred compensation expenses of $2.4 million and software maintenance costs of $2.1 million were partially offset by a $3.6 million decrease in labor costs associated with the capitalized labor change and a $1.8 million decrease in employee incentive costs. Excluding incremental expenses associated with the NewWave operations, selling, general and administrative expenses would have increased $4.2 million, or 2.2%, to $188.2 million for 2017. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 22.6% in 2017 compared to 22.5% in 2016.

Depreciation and amortization increased $33.8 million, or 22.8%, to $181.6 million for 2017 including $32.2 million attributable to NewWave operations. The increase was due primarily to new assets placed in service in 2017 and 2016, including property, plant and equipment and amortizable intangible assets acquired as part of the NewWave acquisition, partially offset by assets that became fully depreciated during those periods. As a percentage of revenues, depreciation and amortization expense was 18.9% for 2017 compared to 18.0% for 2016.

Interest expense increased $16.6 million, or 55.1%, due primarily to additional outstanding debt that was incurred in 2017 to finance the NewWave acquisition.

Net income increased $132.9 million, or 131.5%, to $234.0 million in 2017 compared to $101.1 million in the prior year, which includes an income tax benefit of $113.0 million resulting from the enactment of Federal tax reform legislation in December 2017. Excluding the NewWave operations, net income would have increased 123.8% to $226.3 million in 2017. Without both the NewWave operations and the capitalized labor change, net income would have increased 113.8% to $216.2 million in 2017. Excluding the NewWave operations, the capitalized labor change and the adverse Hurricane Harvey impact, net income would have increased 115.9% to $218.2 million in 2017.

Adjusted EBITDA was $443.1 million and $357.4 million for 2017 and 2016, respectively. Adjusted EBITDA growth of 24.0% in 2017 includes the positive impact of the NewWave operations and the capitalized labor change. Without the contribution from NewWave operations, Adjusted EBITDA would have been $395.5 million and Adjusted EBITDA growth would have been 10.7% for 2017. Excluding both the NewWave operations and the capitalized labor change, Adjusted EBITDA would have been $379.2 million and Adjusted EBITDA growth would have been 6.1%. Excluding the NewWave operations, the capitalized labor change and the adverse Hurricane Harvey impact, Adjusted EBITDA would have been $381.1 million and Adjusted EBITDA growth would have been 6.6%.

Capital expenditures totaled $179.4 million and $130.8 million for 2017 and 2016, respectively. Adjusted EBITDA less capital expenditures for 2017 was $263.7 million, an increase of $37.2 million, or 16.4%, from the prior year. Excluding NewWave operations, capital expenditures would have been $149.1 million. Excluding both the NewWave operations and the capitalized labor change, capital expenditures would have been $132.8 million.

Fourth Quarter 2017 Financial Results Compared to Fourth Quarter 2016

Revenues increased $51.0 million, or 24.7%, to $257.7 million for the fourth quarter of 2017 due primarily to $47.6 million in revenues attributable to the NewWave operations. For the fourth quarter of 2017 and 2016, residential data revenues comprised 43.4% and 42.5% of total revenues and business services revenues comprised 14.2% and 12.9% of total revenues, respectively. Excluding the $47.6 million contribution from NewWave operations in the fourth quarter of 2017, revenues increased to $210.1 million from $206.7 million in the prior year quarter.

Operating expenses (excluding depreciation and amortization) were $92.2 million in the fourth quarter of 2017 and increased $19.6 million, or 27.0%, compared to the fourth quarter of 2016. Operating expenses as a percentage of revenues were 35.8% for the fourth quarter of 2017 compared to 35.1% for the year-ago quarter. Additional operating expenses attributable to the NewWave operations were $22.9 million for the fourth quarter of 2017. This increase was partially offset by a $3.0 million decrease in labor costs associated with the capitalized labor change and a $0.7 million decrease in backbone and internet connectivity fees. Excluding the impact of NewWave operations, operating expenses would have been $69.3 million in the fourth quarter of 2017, a decrease of $3.3 million, or 4.5%, compared to the fourth quarter of 2016. Operating expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 33.0% in the fourth quarter of 2017 compared to 35.1% in the fourth quarter of 2016.

Selling, general and administrative expenses increased $8.1 million, or 17.1%, to $55.4 million for the fourth quarter of 2017. Selling, general and administrative expenses as a percentage of revenues were 21.5% and 22.9% for the fourth quarter of 2017 and 2016, respectively. Additional selling, general and administrative expenses attributable to the NewWave operations were $5.9 million for the fourth quarter of 2017. Medical insurance costs increased $1.6 million, driven mainly by favorable results in the fourth quarter of 2016, and severance costs increased $1.5 million. These increases were partially offset by lower acquisition-related costs of $1.0 million resulting from the completion of the NewWave acquisition. Excluding incremental expenses associated with the NewWave operations, selling, general and administrative expenses would have increased $2.2 million, or 4.6%, to $49.5 million. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 23.5% in the fourth quarter of 2017 compared to 22.9% in the fourth quarter of 2016.

Depreciation and amortization increased $8.4 million, or 21.4%, to $47.3 million for the fourth quarter of 2017 including $12.1 million attributable to the NewWave operations. The increase was due primarily to new assets placed in service since the fourth quarter of 2016, including property, plant and equipment and amortized intangible assets acquired as part of the NewWave acquisition, partially offset by assets that became fully depreciated since the fourth quarter of 2016. As a percentage of revenues, depreciation and amortization expense was 18.4% for the fourth quarter of 2017 compared to 18.9% for the fourth quarter of 2016.

Interest expense increased $5.9 million, or 77.3%, to $13.5 million for the fourth quarter of 2017 due primarily to additional outstanding debt that was incurred in 2017 to finance the NewWave acquisition.

Net income increased $118.7 million, or 484.3%, to $143.2 million in the fourth quarter of 2017 compared to $24.5 million in the prior year quarter, which includes an income tax benefit of $113.0 million resulting from the enactment of Federal tax reform legislation in December 2017. Excluding the impact of NewWave operations, net income would have increased 472.9% to $140.3 million. Without both the NewWave operations and the capitalized labor change, net income would have increased 465.1% to $138.5 million for the fourth quarter of 2017.

Adjusted EBITDA was $117.0 million and $92.2 million for the fourth quarter of 2017 and 2016, respectively. Adjusted EBITDA growth of 26.8% in the fourth quarter of 2017 includes the positive impact of the NewWave operations and the capitalized labor change. Without the contribution from NewWave operations, Adjusted EBITDA would have been $98.2 million and Adjusted EBITDA growth would have been 6.5% for the fourth quarter of 2017. Excluding both the NewWave operations and the capitalized labor change, Adjusted EBITDA would have been $95.1 million and Adjusted EBITDA growth would have been 3.2%.

Capital expenditures totaled $50.5 million and $35.5 million for the fourth quarter of 2017 and 2016, respectively. Adjusted EBITDA less capital expenditures for the fourth quarter of 2017 was $66.4 million, an increase of $9.7 million, or 17.2%, from the prior year quarter. Excluding NewWave operations, capital expenditures would have been $39.3 million. Excluding both the NewWave operations and the capitalized labor change, capital expenditures would have been $36.3 million.

Liquidity and Capital Resources

At December 31, 2017, the Company had $161.8 million of cash and cash equivalents on hand, compared to $138.0 million at December 31, 2016. The Company’s debt balance, excluding the effect of unamortized debt issuance costs, was $1.2 billion at December 31, 2017 and $545.3 million at December 31, 2016. The increase in the Company’s debt balance was primarily due to the $750 million of term loans incurred in connection with the NewWave acquisition, of which $744.4 million was outstanding at December 31, 2017. The Company also had $196.9 million available for borrowing under its revolving credit facility as of December 31, 2017. As a result of the 2017 Federal tax reform legislation, the Company expects to realize approximately $38 million to $42 million of cash tax savings in 2018.

Revision to Previously Issued Financial Statements

Commencing in the first quarter of 2017, the Company changed its accounting for the capitalization of certain internal labor and related costs associated with construction and customer installation activities. The Company initially classified the change as a change in accounting estimate. During the fourth quarter of 2017, the Company determined that a portion of what had previously been reflected as a change in estimate should have been categorized as a change in accounting principle and accounted for prospectively upon adoption given that it was impracticable to apply retrospectively. In addition, the Company identified an error associated with its historical accounting for certain categories of internal labor and related costs, which resulted in an undercapitalization of labor costs in its previously issued financial statements. Although the Company has determined such error to be immaterial to its previously issued financial statements, the cumulative effect of the error would be material if corrected in the current year. Therefore, the Company has revised its historical financial statements to properly reflect the impact of the labor capitalization, including the related impact to depreciation expense and income tax. In connection with this revision, the Company also included other immaterial adjustments for 2016. The financial results included in this press release reflect the impact of the revision. Refer to various tables for reconciliations between previously reported and revised amounts for the years ended December 31, 2016 and 2015 and for the quarters ended March 31, 2017 and 2016, June 30, 2017 and 2016, September 30, 2017 and 2016, and December 31, 2016. Additional information regarding the revision will be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Conference Call

Cable ONE will host a conference call with the financial community to discuss results for the fourth quarter and full year 2017 on Thursday, March 1, 2018, at 11 a.m. Eastern Time (ET).

Shareholders, analysts and other interested parties may register for the conference in advance at http://dpregister.com/10116517. Those unable to pre-register may join the call via the live audio webcast on the Cable ONE Investor Relations website or by dialing 1-844-378-6483 (Canada: 1-855-669-9657/International: 1-412-542-4178) shortly before 11 a.m. ET.

A replay of the call will be available from Thursday, March 1, 2018, until Thursday, March 15, 2018, on the Cable ONE Investor Relations website.

Additional Information Available on Website

The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, which will be posted on the “SEC Filings” section of the Cable ONE Investor Relations website at ir.cableone.net when it is filed with the U.S. Securities and Exchange Commission (the “SEC”). Investors and others interested in more information about Cable ONE should consult our website, which is regularly updated with financial and other important information about the Company.

Use of Non-GAAP Financial Metrics

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

“Adjusted EBITDA” is defined as net income plus interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation expense, severance expense, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on disposal of assets, other (income) expense, net, and other unusual operating expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company’s business as well as other non-cash or special items and is unaffected by the Company’s capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the Company’s cash cost of debt financing. These costs are evaluated through other financial measures.

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

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

The Company uses Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures to assess its performance, and it also uses Adjusted EBITDA less capital expenditures as an indicator of its ability to fund operations and make additional investments with internally-generated funds. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculation under the Company’s credit facilities and outstanding 5.75% senior unsecured notes due 2022 to determine compliance with the covenants contained in the facilities and ability to take certain actions under the indenture governing the notes. For the purpose of calculating compliance with the leverage ratio covenants in the Company’s debt instruments, the Company uses a measure similar to Adjusted EBITDA, as presented. Adjusted EBITDA and capital expenditures are also significant performance measures used by the Company in its annual incentive compensation program. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.

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

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

About Cable ONE

Cable One, Inc. (NYSE: CABO) is among the 10 largest cable companies in the United States and a leading broadband communications provider. Serving nearly 800,000 residential and business customers in 21 states, Cable ONE provides consumers with a wide array of communications and entertainment services, including high-speed internet and advanced Wi-Fi solutions, cable television and phone service. Cable ONE Business provides scalable and cost-effective products for businesses ranging in size from small to mid-market, in addition to enterprise, wholesale and carrier customers.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This communication contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about the cable industry and our business and financial results. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors:

  • the effect of our acquisition of NewWave on our ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners;
  • the potential diversion of senior management’s attention from our ongoing operations due to the acquisition of NewWave;
  • uncertainties as to our ability and the amount of time necessary to realize the expected synergies and other benefits of the acquisition of NewWave;
  • our ability to integrate NewWave’s operations into our own in an efficient and effective manner;
  • rising levels of competition from historical and new entrants in our markets;
  • recent and future changes in technology;
  • our ability to continue to grow our business services product;
  • increases in programming costs and retransmission fees;
  • our ability to obtain hardware, software and operational support from vendors;
  • the effects of any new significant acquisitions by us;
  • adverse economic conditions;
  • the integrity and security of our network and information systems;
  • the impact of possible security breaches and other disruptions, including cyber-attacks;
  • changing and additional regulation of our data, video and voice services, including legislative and regulatory efforts to impose new legal requirements on our data services;
  • changes in broadcast carriage regulations;
  • our ability to renew cable system franchises;
  • increases in pole attachment costs;
  • the potential adverse effect of our indebtedness on our business, financial condition or results of operations and cash flows;
  • the possibility that interest rates will rise, causing our obligations to service our variable rate indebtedness to increase significantly;
  • the failure to meet earnings expectations;
  • the adequacy of our risk management framework;
  • changes in tax and other laws and regulations;
  • changes in our estimates of the impact of the 2017 Federal tax reform legislation;
  • changes in GAAP or other applicable accounting policies; and
  • the other risks and uncertainties detailed in the section titled “Risk Factors” in our latest Annual Report on Form 10-K as filed with the SEC.

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

 
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
                       
Year Ended December 31,

(dollars in thousands, except per share and share data)

2017 2016

$ Change

% Change
Revenues
Residential data $ 414,525 $ 344,184 $ 70,341 20.4 %
Residential video 332,536 294,781 37,755 12.8 %
Residential voice 43,733 42,949 784 1.8 %
Business services 131,155 100,311 30,844 30.7 %
Advertising sales 24,824 27,496 (2,672 ) (9.7 )%
Other   13,256     9,904     3,352   33.8 %
Total Revenues 960,029 819,625 140,404 17.1 %
Costs and Expenses
Operating (excluding depreciation and amortization) 337,040 296,577 40,463 13.6 %
Selling, general and administrative 204,799 184,024 20,775 11.3 %
Depreciation and amortization 181,619 147,839 33,780 22.8 %
(Gain) loss on disposal of assets   574     2,821     (2,247 ) (79.7 )%
Total operating costs and expenses   724,032     631,261     92,771   14.7 %
Income from operations 235,997 188,364 47,633 25.3 %
Interest expense (46,864 ) (30,221 ) (16,643 ) 55.1 %
Other income (expense), net   668     5,121     (4,453 ) (87.0 )%
Income before income taxes 189,801 163,264 26,537 16.3 %
Income tax provision (benefit)   (44,227 )   62,162     (106,389 ) (171.1 )%
Net income $ 234,028   $ 101,102   $ 132,926   131.5 %
 
Other comprehensive gain (loss), net of tax   94     111     (17 ) (15.3 )%
Comprehensive income $ 234,122   $ 101,213   $ 132,909   131.3 %
 
Net income per common share:
Basic $ 41.20   $ 17.60   $ 23.60   134.1 %
Diluted $ 40.72   $ 17.52   $ 23.20   132.4 %
Weighted average common shares outstanding:
Basic 5,680,073 5,743,568
Diluted 5,747,037 5,770,960
 
 
 
CABLE ONE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
                       
Three Months Ended December 31,

(dollars in thousands, except per share and share data)

2017 2016

$ Change

% Change
Revenues
Residential data $ 111,829 $ 87,916 $ 23,913 27.2 %
Residential video 86,608 72,071 14,537 20.2 %
Residential voice 11,184 10,216 968 9.5 %
Business services 36,482 26,587 9,895 37.2 %
Advertising sales 7,348 7,417 (69 ) (0.9 )%
Other   4,263     2,520     1,743   69.2 %
Total Revenues 257,714 206,727 50,987 24.7 %
Costs and Expenses
Operating (excluding depreciation and amortization) 92,213 72,628 19,585 27.0 %
Selling, general and administrative 55,381 47,285 8,096 17.1 %
Depreciation and amortization 47,350 38,993 8,357 21.4 %
(Gain) loss on disposal of assets   3,752     1,195     2,557   214.0 %
Total operating costs and expenses   198,696     160,101     38,595   24.1 %
Income from operations 59,018 46,626 12,392 26.6 %
Interest expense (13,457 ) (7,588 ) (5,869 ) 77.3 %
Other income (expense), net   425     99     326   NM
Income before income taxes 45,986 39,137 6,849 17.5 %
Income tax provision (benefit)   (97,167 )   14,638     (111,805 ) NM
Net income $ 143,153   $ 24,499   $ 118,654   NM
 
Other comprehensive gain (loss), net of tax   89     29     60   206.9 %
Comprehensive income $ 143,242   $ 24,528   $ 118,714   NM
 
Net income per common share:
Basic $ 25.18   $ 4.29   $ 20.89   NM
Diluted $ 24.89   $ 4.25   $ 20.64   NM
Weighted average common shares outstanding:
Basic 5,684,785 5,714,862
Diluted 5,750,420 5,760,834
 
NM = Not meaningful.
 
 
 
CABLE ONE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
                         

(in thousands, except par value and share data)

December 31, 2017 December 31, 2016
Assets
Current Assets:
Cash and cash equivalents $ 161,752 $ 138,040
Accounts receivable, net 51,141 33,049
Income tax receivable 21,331 4,547
Prepaid assets   8,160     10,824  
Total Current Assets 242,384 186,460
Property, plant and equipment, net 831,892 642,915
Intangibles, net 965,745 497,480
Goodwill 172,129 84,928
Other assets   6,179     9,306  
Total Assets $ 2,218,329   $ 1,421,089  
 
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 117,963 $ 82,703
Deferred revenue 38,266 22,190
Long-term debt – current portion   14,375     6,250  
Total Current Liabilities 170,604 111,143
Long-term debt 1,160,682 530,886
Deferred income taxes 205,636 285,349
Accrued compensation and other liabilities   9,991     24,434  
Total Liabilities   1,546,913     951,812  
 
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 5,731,442 and 5,708,223 shares

60

59

outstanding as of December 31, 2017 and 2016, respectively)

Additional paid-in capital 28,412 17,669
Retained earnings 723,354 526,542
Accumulated other comprehensive loss (352 ) (446 )

Treasury stock, at cost (156,457 and 179,676 shares held as of December 31, 2017 and 2016, respectively)

  (80,058 )   (74,547 )
Total Stockholders' Equity   671,416     469,277  
Total Liabilities and Stockholders' Equity $ 2,218,329   $ 1,421,089  
 
 
 
CABLE ONE, INC.
RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited)
                     
Year Ended December 31,

(dollars in thousands)

2017       2016

$ Change

% Change

Net income(1)

$ 234,028 $ 101,102 $ 132,926 131.5 %
 
Net profit margin 24.4 % 12.3 %
 
Plus: Interest expense 46,864 30,221 16,643 55.1 %
Income tax provision (benefit) (44,227 ) 62,162 (106,389 ) (171.1 )%
Depreciation and amortization 181,619 147,839 33,780 22.8 %
Equity-based compensation expense 10,743 12,298 (1,555 ) (12.6 )%
Severance expense 5,461 1,012 4,449 NM
(Gain) loss on deferred compensation 2,753 312 2,441 NM
Acquisition-related costs 5,942 4,719 1,223 25.9 %
(Gain) loss on disposal of assets 574 2,821 (2,247 ) (79.7 )%
Other (income) expense, net   (668 )   (5,121 )   4,453   (87.0 )%

Adjusted EBITDA(1)

$ 443,089 $ 357,365 $ 85,724 24.0 %
 
Adjusted EBITDA margin 46.2 % 43.6 %
 
Less:

Capital expenditures(1)

  179,363     130,824     48,539   37.1 %
Adjusted EBITDA less capital expenditures $ 263,726   $ 226,541   $ 37,185   16.4 %
 
NM = Not meaningful.

(1)

    Net income, Adjusted EBITDA and capital expenditures results for 2017 include eight months of NewWave operations. Net income and Adjusted EBITDA for 2017 include the favorable impact of a reduction in expense, and capital expenditures include the unfavorable impact in additional expenditures, of $16.3 million due to the capitalized labor change. Without the contribution from NewWave operations, net income for 2017 would have increased 123.8% to $226.3 million, Adjusted EBITDA would have increased 10.7% to $395.5 million and capital expenditures would have been $149.1 million. Excluding both the NewWave operations and the capitalized labor change, net income for 2017 would have increased 113.8% to $216.2 million, Adjusted EBITDA would have increased 6.1% to $379.2 million and capital expenditures would have been $132.8 million.
 
                       
Year Ended December 31,

(dollars in thousands)

2017       2016

$ Change

% Change
Net cash provided by operating activities $ 324,486 $ 257,121 $ 67,365 26.2 %
Capital expenditures (179,363 ) (130,824 ) (48,539 ) 37.1 %
Interest expense 46,864 30,221 16,643 55.1 %
Amortization of debt issuance costs (3,174 ) (1,642 ) (1,532 ) 93.3 %
Income tax provision (benefit) (44,227 ) 62,162 (106,389 ) (171.1 )%
Changes in operating assets and liabilities 19,908

2,573

17,335

NM
Deferred income taxes 86,357

1,090

85,267

NM
(Gain) loss on deferred compensation 2,753 312 2,441 NM
Acquisition-related costs 5,942 4,719 1,223 25.9 %

Excess income tax benefits for equity-based compensation activities

- 822 (822 ) (100.0 )%
Severance expense 5,461 1,012 4,449 NM
Gain on sale of cable system - 4,096 (4,096 ) (100.0 )%
Write-off of debt issuance costs (613 ) - (613 ) NM
Other (income) expense, net   (668 )   (5,121 )   4,453   (87.0 )%
Adjusted EBITDA less capital expenditures $ 263,726   $ 226,541   $ 37,185   16.4 %
 
NM = Not meaningful.
 
 
 
CABLE ONE, INC.
RECONCILIATIONS OF NON-GAAP MEASURES
(Unaudited)
                           
Three Months Ended December 31,

(dollars in thousands)

2017 2016

$ Change

% Change

Net income(1)

$ 143,153 $ 24,499 $ 118,654 NM
 
Net profit margin 55.5 % 11.9 %
 
Plus: Interest expense 13,457 7,588 5,869 77.3 %
Income tax provision (benefit) (97,167 ) 14,638 (111,805 ) NM
Depreciation and amortization 47,350 38,993 8,357 21.4 %
Equity-based compensation expense 2,822 2,645 177 6.7 %
Severance expense 2,512 1,012 1,500 148.2 %
(Gain) loss on deferred compensation 839 74 765 NM
Acquisition-related costs 662 1,663 (1,001 ) (60.2 )%
(Gain) loss on disposal of assets 3,752 1,195 2,557 214.0 %
Other (income) expense, net   (425 )   (99 )   (326 ) NM

Adjusted EBITDA(1)

$ 116,955 $ 92,208 $ 24,747 26.8 %
 
Adjusted EBITDA margin 45.4 % 44.6 %
 
Less:

Capital expenditures(1)

  50,533     35,514     15,019   42.3 %
Adjusted EBITDA less capital expenditures $ 66,422   $ 56,694   $ 9,728   17.2 %
 

NM = Not meaningful.

(1)     Net income, Adjusted EBITDA and capital expenditures results for the fourth quarter of 2017 include NewWave operations. Net income and Adjusted EBITDA for the fourth quarter of 2017 include the favorable impact of a reduction in expense, and capital expenditures include the unfavorable impact in additional expenditures, of $3.1 million due to the capitalized labor change. Without the contribution from NewWave operations, net income for the fourth quarter of 2017 would have increased 472.9% to $140.3 million, Adjusted EBITDA would have increased 6.5% to $98.2 million and capital expenditures would have been $39.3 million. Excluding both the NewWave operations and the capitalized labor change, net income for the fourth quarter of 2017 would have increased 465.1% to $138.5 million, Adjusted EBITDA would have increased 3.2% to $95.1 million and capital expenditures would have been $36.3 million.
 
               
Three Months Ended December 31,

(dollars in thousands)

2017   2016

$ Change

% Change
Net cash provided by operating activities $ 104,697 $ 59,583 $ 45,114 75.7 %
Capital expenditures (50,533 ) (35,514 ) (15,019 ) 42.3 %
Interest expense 13,457 7,588 5,869 77.3 %
Amortization of debt issuance costs (991 ) (409 ) (582 ) 142.3 %
Income tax provision (benefit) (97,167 ) 14,638 (111,805 ) NM
Changes in operating assets and liabilities (2,804 ) 6,507 (9,311 ) (143.1 )%
Deferred income taxes 96,175 898 95,277 NM
(Gain) loss on deferred compensation 839 74 765 NM
Acquisition-related costs 662 1,663 (1,001 ) (60.2 )%

Excess income tax benefits for equity-based compensation activities

- 822 (822 ) (100.0 )%
Severance expense 2,512 1,012 1,500 148.2 %
Gain on sale of cable system - (69 ) 69 (100.0 )%
Other (income) expense, net   (425 )   (99 )   (326 ) NM
Adjusted EBITDA less capital expenditures $ 66,422   $ 56,694   $ 9,728   17.2 %
 
NM = Not meaningful.
 
 
   
CABLE ONE, INC.
OPERATING STATISTICS
(Unaudited)
                             
As of December 31, Year-Over-Year
2017       2016 % Change

Legacy

CABO

NewWave Combined

Legacy

CABO

Legacy

CABO

Combined
Homes Passed 1,694,886 450,691 2,145,577 1,669,614 1.5 % 28.5 %
 
Total Customers 651,243 146,294 797,537 657,222 (0.9 )% 21.3 %
Non-video 367,987 67,100 435,087 336,419 9.4 % 29.3 %
Percent of total 56.5 % 45.9 % 54.6 % 51.2 %
 
Residential Customers 595,886 135,125 731,011 605,699 (1.6 )% 20.7 %
 
Data PSUs 476,046 108,808 584,854 469,053 1.5 % 24.7 %
Video PSUs 270,003 76,709 346,712 306,563 (11.9 )% 13.1 %
Voice PSUs   88,424     21,589     110,013     97,724   (9.5 )% 12.6 %
Total residential PSUs 834,473 207,106 1,041,579 873,340 (4.5 )% 19.3 %
 
Business Customers 55,357 11,169 66,526 51,523 7.4 % 29.1 %
 
Data PSUs 48,889 9,410 58,299 44,855 9.0 % 30.0 %
Video PSUs 12,998 4,178 17,176 13,683 (5.0 )% 25.5 %
Voice PSUs   20,028     4,840     24,868     18,087   10.7 % 37.5 %
Total business PSUs 81,915 18,428 100,343 76,625 6.9 % 31.0 %
 
Penetration
Data 31.0 % 26.2 % 30.0 % 30.8 % 0.2 % (0.8 )%
Video 16.7 % 17.9 % 17.0 % 19.2 % (2.5 )% (2.2 )%
Voice 6.4 % 5.9 % 6.3 % 6.9 % (0.5 )% (0.6 )%
 
Share of Fourth Quarter Revenues
Residential data 45.4 % 34.5 % 43.4 % 42.5 % 2.9 % 0.9 %
Business services   13.9 %   15.3 %   14.2 %   12.9 % 1.0 % 1.3 %
Total 59.3 % 49.8 % 57.6 % 55.4 % 3.9 % 2.2 %
 
ARPU - Fourth Quarter

Residential data(1)

$ 67.14 $ 49.95 $ 63.92 $ 62.64 7.2 % 2.0 %

Residential video(1)

$ 81.93 $ 84.10 $ 82.42 $ 77.23 6.1 % 6.7 %

Residential voice(1)

$ 33.33 $ 35.17 $ 33.69 $ 34.36 (3.0 )% (1.9 )%

Business services(2)

$ 178.23 $ 217.64 $ 184.90 $ 173.41 2.8 % 6.6 %
 
Number of Employees 1,802 508 2,310 1,877 (4.0 )% 23.1 %
 

(1)

    Average monthly per unit values represent the applicable residential service revenues divided by the corresponding average of the number of PSUs at the beginning and end of each period.

(2)

Average monthly per unit values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period.
 
 
     
CABLE ONE, INC.
REVISION TO PREVIOUSLY ISSUED ANNUAL FINANCIAL STATEMENTS
(Unaudited)
 

(in thousands, except per share data)

As of and for the Year Ended December 31, 2016
As Reported       Adjustment       As Revised
Consolidated Balance Sheet Information
Accounts receivable, net $ 32,526 $ 523 $ 33,049
Property, plant and equipment, net 619,621 23,294 642,915
Total Assets 1,397,271 23,818 1,421,089
Deferred income taxes 276,297 9,052 285,349
Total Liabilities 942,760 9,052 951,812
Retained earnings 511,776 14,766 526,542
Total Stockholders’ Equity $ 454,511 $ 14,766 $ 469,277
Consolidated Statement of Operations and Comprehensive Income Information
Costs and Expenses
Operating (excluding depreciation and amortization) $ 301,617 $ (5,040 ) $ 296,577
Selling, general and administrative 184,797 (773 ) 184,024
Depreciation and amortization 142,183 5,656 147,839
Total operating costs and expenses 631,418 (157 ) 631,261
Income from operations 188,207 157 188,364
Income before income taxes 163,107 157 163,264
Income tax provision (benefit) 64,168 (2,006 ) 62,162
Net income $ 98,939 $ 2,163 $ 101,102
Comprehensive income $ 99,050 $ 2,163 $ 101,213
Net income per common share:
Basic $ 17.23 $ 0.37 $ 17.60
Diluted $ 17.14 $ 0.38 $ 17.52
Consolidated Statement of Cash Flows Information
Net cash provided by operating activities $ 251,831 $ 5,290 $ 257,121
Net cash used in investing activities $ (136,317 ) $ (5,290 ) $ (141,607 )
 
For the Year Ended December 31, 2015
As Reported Adjustment As Revised
Consolidated Statement of Operations and Comprehensive Income Information
Costs and Expenses
Operating (excluding depreciation and amortization) $ 310,323 $ (5,486 ) $ 304,837
Selling, general and administrative 193,964 (217 ) 193,747
Depreciation and amortization 140,635 3,868 144,503
Total operating costs and expenses 645,524 (1,835 ) 643,689
Income from operations 161,742 1,835 163,577
Income before income taxes 145,420 1,835 147,255
Income tax provision (benefit) 56,387 (954 ) 55,433
Net income $ 89,033 $ 2,789 $ 91,822
Comprehensive income $ 88,476 $ 2,789 $ 91,265
Net income per common share:
Basic $ 15.21 $ 0.48 $ 15.69
Diluted $ 15.19 $ 0.48 $ 15.67
Consolidated Statement of Cash Flows Information
Net cash provided by operating activities $ 246,413 $ 5,703 $ 252,116
Net cash used in investing activities $ (155,225 ) $ (5,703 ) $ (160,928 )
 
 
 
CABLE ONE, INC.
REVISION TO PREVIOUSLY ISSUED 2017 QUARTERLY FINANCIAL STATEMENTS
(Unaudited)
 

(in thousands, except per share data)

      Quarter Ended March 31, 2017
As Reported       Adjustment       As Revised
Revenues $ 207,427 $ - $ 207,427
Operating costs and expenses 147,074 1,655 148,729
Income from operations 60,353 (1,655 ) 58,698
Net income 33,215 (1,026 ) 32,189
 
Net income per common share:
Basic $ 5.86 $ (0.18 ) $ 5.68
Diluted $ 5.80 $ (0.18 ) $ 5.62
 
Quarter Ended June 30, 2017
As Reported Adjustment As Revised
Revenues $ 241,042 $ - $ 241,042
Operating costs and expenses 182,395 1,132 183,527
Income from operations 58,647 (1,132 ) 57,515
Net income 28,576 (702 ) 27,874
 
Net income per common share:
Basic $ 5.03 $ (0.12 ) $ 4.91
Diluted $ 4.97 $ (0.12 ) $ 4.85
 
Quarter Ended September 30, 2017
As Reported Adjustment As Revised
Revenues $ 253,846 $ - $ 253,846
Operating costs and expenses 191,948 1,132 193,080
Income from operations 61,898 (1,132 ) 60,766
Net income 31,514 (702 ) 30,812
 
Net income per common share:
Basic $ 5.55 $ (0.12 ) $ 5.43
Diluted $ 5.48 $ (0.12 ) $ 5.36
 
 
 
CABLE ONE, INC.
REVISION TO PREVIOUSLY ISSUED 2016 QUARTERLY FINANCIAL STATEMENTS
(Unaudited)
 

(in thousands, except per share data)

      Quarter Ended March 31, 2016
As Reported       Adjustment       As Revised
Revenues $ 202,805 $ - $ 202,805
Operating costs and expenses 155,422 (1,274 ) 154,148
Income from operations 47,383 1,274 48,657
Net income 27,044 (1,256 ) 25,788
 
Net income per common share:
Basic $ 4.67 $ (0.22 ) $ 4.45
Diluted $ 4.65 $ (0.21 ) $ 4.44
 
Quarter Ended June 30, 2016
As Reported Adjustment As Revised
Revenues $ 204,557 $ - $ 204,557
Operating costs and expenses 154,000 419 154,419
Income from operations 50,557 (419 ) 50,138
Net income 26,633 (260 ) 26,373
 
Net income per common share:
Basic $ 4.64 $ (0.05 ) $ 4.59
Diluted $ 4.62 $ (0.05 ) $ 4.57
 
Quarter Ended September 30, 2016
As Reported Adjustment As Revised
Revenues $ 205,536 $ - $ 205,536
Operating costs and expenses 161,716 878 162,594
Income from operations 43,820 (878 ) 42,942
Net income 20,874 3,567 24,441
 
Net income per common share:
Basic $ 3.65 $ 0.62   $ 4.27
Diluted $ 3.63 $ 0.62   $ 4.25
 
Quarter Ended December 31, 2016
As Reported Adjustment As Revised
Revenues $ 206,727 $ - $ 206,727
Operating costs and expenses 160,280 (179 ) 160,101
Income from operations 46,447 179 46,626
Net income 24,388 111 24,499
 
Net income per common share:
Basic $ 4.27 $ 0.02   $ 4.29
Diluted $ 4.23 $ 0.02   $ 4.25
 
 
 
CABLE ONE, INC.
REVISION TO 2016 RECONCILIATION OF NON-GAAP MEASURES
(Unaudited)
   
For the Year Ended December 31, 2016

(in thousands)

As Reported Adjustment As Revised
Net income $ 98,939 $ 2,163 $ 101,102
Income tax provision (benefit) 64,168 (2,006 ) 62,162
Depreciation and amortization 142,183 5,656 147,839
Adjusted EBITDA $ 351,552 $ 5,813 $ 357,365