10-Q 1 cabo20220930_10q.htm FORM 10-Q cabo20220930_10q.htm
0001632127 CABLE ONE, INC. false --12-31 Q3 2022 0.01 0.01 4,000,000 4,000,000 0 0 0 0 0.01 0.01 40,000,000 40,000,000 6,175,399 6,175,399 5,827,960 6,046,362 347,439 129,037 2.85 2.75 8.35 7.75 82.6 58 0 The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $630.7 million being allocated to the MBI equity investment and $19.7 million and $75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $32.7 million and $123.6 million as of June 30, 2022 and December 31, 2021, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option. Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). The Company funded $8.3 million of the then outstanding investment payable to Wisper during the six months ended June 30, 2022. Refer to note 5 for details on this investment. Equity-based compensation awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation. The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio. All other applicable margins are fixed. Payable in equal quarterly installments (expressed as a percentage of the original principal amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions). The Company identified a $186.6 million difference between the fair values of certain of MBI’s finite-lived intangible assets and the respective carrying values recorded by MBI, of which $84.0 million was attributable to the Company’s 45% pro rata portion. The Company is amortizing its share on an accelerated basis over the lives of the respective assets. For the three months ended June 30, 2022, the Company recognized $8.5 million of its pro rata share of MBI’s net income and $3.2 million of its pro rata share of basis difference amortization. For the three months ended June 30, 2021, the Company recognized $1.6 million of its pro rata share of MBI’s net income and $4.0 million of its pro rata share of basis difference amortization. For the six months ended June 30, 2022, the Company recognized $15.2 million of its pro rata share of MBI’s net income and $7.2 million of its pro rata share of basis difference amortization. For the six months ended June 30, 2021, the Company recognized $3.0 million of its pro rata share of MBI’s net income and $6.6 million of its pro rata share of basis difference amortization. Based on a conversion rate of 0.4394 shares of common stock per weighted $1,000 principal amount of Convertible Notes outstanding during all periods presented. Consists of approximately $2.0 billion of cash for the additional approximately 85% equity interest in Hargray that the Company did not already own and the $146.6 million May 3, 2021 fair value of the Company’s existing approximately 15% equity investment in Hargray. The Company recognized a $33.4 million non-cash gain within other income in the consolidated statement of operations and comprehensive income upon the acquisition, representing the difference between the existing equity investment’s fair value and $113.2 million carrying value. The fair value of the existing investment was calculated as approximately 15% of the fair value of Hargray’s total equity value (determined using the discounted cash flow method of the income approach, less debt), excluding the impact of any synergies or control premium that would be realized by a controlling interest. Per annum amortization rates for years one through five following October 30, 2020 are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively. Represents the net value of the Company’s call and put options associated with the remaining equity interests in MBI (as defined in note 5), consisting of an asset of $28.9 million and a liability of $61.7 million, respectively, as of June 30, 2022 and a liability of $17.8 million and a liability of $105.8 million, respectively, as of December 31, 2021. 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Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

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

 

For the quarterly period ended September 30, 2022

 

or

 

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

 

For the transition period from _____ to _____

 

Commission File Number: 001-36863

 


 

logo01.jpg

Cable One, Inc. 

(Exact name of registrant as specified in its charter)

 


 

Delaware

 

13-3060083

(State or Other Jurisdiction of Incorporation or Organization)

 

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

 

210 E. Earll Drive, Phoenix, Arizona

 

85012

(Address of Principal Executive Offices)

 

(Zip Code)

 

(602) 364-6000

(Registrants Telephone Number, Including Area Code)

 

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

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Common Stock, par value $0.01

 

CABO

 

New York Stock Exchange

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

     

Non-accelerated filer

 

Smaller reporting company

    
  

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ☑

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

 

Description of Class Shares Outstanding as of October 28, 2022
Common stock, par value $0.01 5,809,413

 

 

 

CABLE ONE, INC.

FORM 10-Q

TABLE OF CONTENTS

 

 

PART I:  FINANCIAL INFORMATION 1
     
Item 1.  Condensed Consolidated Financial Statements 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 37
     
Item 4. Controls and Procedures 37
   
PART II: OTHER INFORMATION 38
   
Item 1. Legal Proceedings 38
     
Item 1A. Risk Factors 38
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 38
     
Item 3. Defaults Upon Senior Securities 38
     
Item 4. Mine Safety Disclosures 38
     
Item 5. Other Information 38
     
Item 6. Exhibits 39
     
SIGNATURES 40

 

References herein to “Cable One,” “us,” “our,” “we” or the “Company” refer to Cable One, Inc., together with its wholly owned subsidiaries.

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This document 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 our industry, business, strategy, acquisitions and strategic investments, dividend policy, financial results and financial condition. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. 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, which are discussed in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”):

 

 

the duration and severity of the COVID-19 pandemic and its effects on our business, financial condition, results of operations and cash flows;

 

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 products;

 

increases in programming costs and retransmission fees;

 

our ability to obtain hardware, software and operational support from vendors;

 

risks that we may fail to realize the benefits anticipated as a result of our purchase of the remaining interests in Hargray Acquisition Holdings, LLC (“Hargray”) that we did not already own (the “Hargray Acquisition”);

 

risks relating to existing or future acquisitions and strategic investments by us;

 

risks that the implementation of our new enterprise resource planning system disrupts business operations;

 

the integrity and security of our network and information systems;

 

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

 

our failure to obtain necessary intellectual and proprietary rights to operate our business and the risk of intellectual property claims and litigation against us;

 

legislative or regulatory efforts to impose network neutrality and other new requirements on our data services;

 

additional regulation of our video and voice services;

 

our ability to renew cable system franchises;

 

increases in pole attachment costs;

 

changes in local governmental franchising authority and broadcast carriage regulations;

 

the potential adverse effect of our level of indebtedness on our business, financial condition or results of operations and cash flows;

 

the restrictions the terms of our indebtedness place on our business and corporate actions;

 

the possibility that interest rates will continue to rise, causing our obligations to service our variable rate indebtedness to increase significantly;

  the transition away from the London Interbank Offered Rate ("LIBOR") and the adoption of alternative reference rates;
 

risks associated with our convertible indebtedness;

 

our ability to continue to pay dividends;

 

provisions in our charter, by-laws and Delaware law that could discourage takeovers and limit the judicial forum for certain disputes;

 

adverse economic conditions, labor shortages, supply chain disruptions and changes in rates of inflation;

  lower demand for our residential data and business services;
 

fluctuations in our stock price;

 

dilution from equity awards, convertible indebtedness and potential future convertible debt and stock issuances;

 

damage to our reputation or brand image;

 

our ability to retain key employees (whom we refer to as associates);

 

our ability to incur future indebtedness;

 

provisions in our charter that could limit the liabilities for directors; and

 

the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to those described under "Risk Factors" in our 2021 Form 10-K.

 

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

 

 

 

PART I:  FINANCIAL INFORMATION

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

(dollars in thousands, except par values)

 

September 30, 2022

  

December 31, 2021

 

Assets

        

Current Assets:

        

Cash and cash equivalents

 $255,719  $388,802 

Accounts receivable, net

  61,468   56,253 

Income taxes receivable

  3,139   24,193 

Prepaid and other current assets

  61,249   31,705 

Total Current Assets

  381,575   500,953 

Equity investments

  1,185,936   727,565 

Property, plant and equipment, net

  1,659,769   1,854,104 

Intangible assets, net

  2,688,114   2,861,137 

Goodwill

  928,947   967,913 

Other noncurrent assets

  87,911   42,322 

Total Assets

 $6,932,252  $6,953,994 
         

Liabilities and Stockholders' Equity

        

Current Liabilities:

        

Accounts payable and accrued liabilities

 $193,497  $203,387 

Deferred revenue

  23,611   26,851 

Current portion of long-term debt

  51,659   38,837 

Total Current Liabilities

  268,767   269,075 

Long-term debt

  3,767,677   3,799,500 

Deferred income taxes

  933,653   854,156 

Interest rate swap liability

  -   81,627 

Other noncurrent liabilities

  65,023   156,541 

Total Liabilities

  5,035,120   5,160,899 
         

Commitments and contingencies (refer to note 16)

          
         

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; 6,175,399 shares issued; and 5,827,960 and 6,046,362 shares outstanding as of September 30, 2022 and December 31, 2021, respectively)

  62   62 

Additional paid-in capital

  572,656   555,640 

Retained earnings

  1,718,120   1,456,543 

Accumulated other comprehensive income (loss)

  54,506   (82,795)

Treasury stock, at cost (347,439 and 129,037 shares held as of September 30, 2022 and December 31, 2021, respectively)

  (448,212)  (136,355)

Total Stockholders' Equity

  1,897,132   1,793,095 

Total Liabilities and Stockholders' Equity

 $6,932,252  $6,953,994 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

CABLE ONE, INC.

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 

(dollars in thousands, except per share data)

 

2022

   

2021

   

2022

   

2021

 

Revenues

  $ 424,718     $ 430,237     $ 1,280,528     $ 1,173,248  

Costs and Expenses:

                               

Operating (excluding depreciation and amortization)

    120,487       121,657       358,299       335,473  

Selling, general and administrative

    86,018       95,103       264,571       252,160  

Depreciation and amortization

    87,222       92,600       263,564       246,045  

(Gain) loss on asset sales and disposals, net

    2,952       3,376       7,615       4,314  

(Gain) loss on sales of businesses, net

    -       -       (13,833 )     -  

Total Costs and Expenses

    296,679       312,736       880,216       837,992  

Income from operations

    128,039       117,501       400,312       335,256  

Interest expense

    (36,389 )     (30,495 )     (98,549 )     (83,023 )

Other income (expense), net

    834       (22,833 )     96,960       (2,584 )

Income before income taxes and equity method investment income (loss), net

    92,484       64,173       398,723       249,649  

Income tax provision

    21,891       13,029       86,165       22,129  

Income before equity method investment income (loss), net

    70,593       51,144       312,558       227,520  

Equity method investment income (loss), net

    14       1,111       (1,230 )     (531 )

Net income

  $ 70,607     $ 52,255     $ 311,328     $ 226,989  
                                 

Net Income per Common Share:

                               

Basic

  $ 12.10     $ 8.68     $ 52.47     $ 37.73  

Diluted

  $ 11.53     $ 8.33     $ 49.70     $ 36.24  

Weighted Average Common Shares Outstanding:

                               

Basic

    5,836,731       6,019,517       5,933,372       6,015,450  

Diluted

    6,261,257       6,460,875       6,357,955       6,362,736  
                                 

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

  $ 47,251     $ 9,506     $ 137,301     $ 48,952  

Comprehensive income

  $ 117,858     $ 61,761     $ 448,629     $ 275,941  

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

(Unaudited)

 

          

Additional

      

Accumulated Other

  

Treasury

  

Total

 
  

Common Stock

  

Paid-In

  

Retained

  

Comprehensive

  

Stock,

  

Stockholders’

 

(dollars in thousands, except per share data)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Gain

  

at cost

  

Equity

 

Balance at June 30, 2022

  5,916,571  $62  $566,796  $1,664,176  $7,255  $(332,785) $1,905,504 

Net income

  -   -   -   70,607   -   -   70,607 

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

  -   -   -   -   47,251   -   47,251 

Equity-based compensation

  -   -   5,860   -   -   -   5,860 

Issuance of equity awards, net of forfeitures

  469   -   -   -   -   -   - 

Repurchases of common stock

  (89,000)  -   -   -   -   (115,322)  (115,322)

Withholding tax for equity awards

  (80)  -   -   -   -   (105)  (105)

Dividends paid to stockholders ($2.85 per common share)

  -   -   -   (16,663)  -   -   (16,663)

Balance at September 30, 2022

  5,827,960  $62  $572,656  $1,718,120  $54,506  $(448,212) $1,897,132 

 

          

Additional

      

Accumulated Other

  

Treasury

  

Total

 
  

Common Stock

  

Paid-In

  

Retained

  

Comprehensive

  

Stock,

  

Stockholders’

 

(dollars in thousands, except per share data)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

at cost

  

Equity

 

Balance at June 30, 2021

  6,036,582  $62  $544,992  $1,372,724  $(101,237) $(135,696) $1,680,845 

Net income

  -   -   -   52,255   -   -   52,255 

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

  -   -   -   -   9,506   -   9,506 

Equity-based compensation

  -   -   5,428   -   -   -   5,428 

Issuance of equity awards, net of forfeitures

  8,443   -   -   -   -   -   - 

Withholding tax for equity awards

  (93)  -   -   -   -   (177)  (177)

Dividends paid to stockholders ($2.75 per common share)

  -   -   -   (16,633)  -   -   (16,633)

Balance at September 30, 2021

  6,044,932  $62  $550,420  $1,408,346  $(91,731) $(135,873) $1,731,224 

 

 

          

Additional

      

Accumulated Other

  

Treasury

  

Total

 
  

Common Stock

  

Paid-In

  

Retained

  

Comprehensive

  

Stock,

  

Stockholders’

 

(dollars in thousands, except per share data)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Gain (Loss)

  

at cost

  

Equity

 

Balance at December 31, 2021

  6,046,362  $62  $555,640  $1,456,543  $(82,795) $(136,355) $1,793,095 

Net income

  -   -   -   311,328   -   -   311,328 

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

  -   -   -   -   137,301   -   137,301 

Equity-based compensation

  -   -   17,016   -   -   -   17,016 

Issuance of equity awards, net of forfeitures

  17,025   -   -   -   -   -   - 

Repurchases of common stock

  (232,637)  -   -   -   -   (307,031)  (307,031)

Withholding tax for equity awards

  (2,790)  -   -   -   -   (4,826)  (4,826)

Dividends paid to stockholders ($8.35 per common share)

  -   -   -   (49,751)  -   -   (49,751)

Balance at September 30, 2022

  5,827,960  $62  $572,656  $1,718,120  $54,506  $(448,212) $1,897,132 

 

          

Additional

      

Accumulated Other

  

Treasury

  

Total

 
  

Common Stock

  

Paid-In

  

Retained

  

Comprehensive

  

Stock,

  

Stockholders’

 

(dollars in thousands, except per share data)

 

Shares

  

Amount

  

Capital

  

Earnings

  

Loss

  

at cost

  

Equity

 

Balance at December 31, 2020

  6,027,704  $62  $535,586  $1,228,172  $(140,683) $(127,838) $1,495,299 

Net income

  -   -   -   226,989   -   -   226,989 

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

  -   -   -   -   48,952   -   48,952 

Equity-based compensation

  -   -   14,834   -   -   -   14,834 

Issuance of equity awards, net of forfeitures

  20,878   -   -   -   -   -   - 

Withholding tax for equity awards

  (3,650)  -   -   -   -   (8,035)  (8,035)

Dividends paid to stockholders ($7.75 per common share)

  -   -   -   (46,815)  -   -   (46,815)

Balance at September 30, 2021

  6,044,932  $62  $550,420  $1,408,346  $(91,731) $(135,873) $1,731,224 

 

See accompanying notes to the condensed consolidated financial statements.

 

 

 

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   

Nine Months Ended September 30,

 

(in thousands)

 

2022

   

2021

 

Cash flows from operating activities:

               

Net income

  $ 311,328     $ 226,989  

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

               

Depreciation and amortization

    263,564       246,045  

Non-cash interest expense, net

    7,124       6,730  

Equity-based compensation

    17,016       14,834  

Write-off of debt issuance costs

    -       2,131  

Change in deferred income taxes

    32,472       1,680  

(Gain) loss on asset sales and disposals, net

    7,615       4,314  

(Gain) loss on sales of businesses

    (13,833 )     -  

Equity method investment (income) loss, net

    1,230       531  

Fair value adjustments

    (88,020 )     41,390  

Gain on step acquisition

    -       (33,406 )

Changes in operating assets and liabilities:

               

Accounts receivable, net

    (8,544 )     764  

Income taxes receivable

    21,054       21,019  

Prepaid and other current assets

    (14,848 )     (7,149 )

Accounts payable and accrued liabilities

    25,107       4,216  

Deferred revenue

    (484 )     2,919  

Other

    9,012       (2,721 )

Net cash provided by operating activities

    569,793       530,286  
                 

Cash flows from investing activities:

               

Purchase of business, net of cash acquired

    -       (1,953,643 )

Cash paid for debt and equity investments

    (25,075 )     -  

Capital expenditures

    (307,252 )     (282,024 )

Change in accrued expenses related to capital expenditures

    3,985       12,666  

Proceeds from sales of property, plant and equipment

    3,609       282  

Proceeds from sales of operations

    9,227       -  

Net cash used in investing activities

    (315,506 )     (2,222,719 )
                 

Cash flows from financing activities:

               

Proceeds from long-term debt borrowings

    -       1,695,850  

Payment of debt issuance costs

    -       (13,741 )

Payments on long-term debt

    (25,762 )     (21,683 )

Repurchases of common stock

    (307,031 )     -  

Payment of withholding tax for equity awards

    (4,826 )     (8,035 )

Dividends paid to stockholders

    (49,751 )     (46,815 )

Deposits received for asset construction

    -       1,485  

Net cash provided by (used in) financing activities

    (387,370 )     1,607,061  
                 

Decrease in cash and cash equivalents

    (133,083 )     (85,372 )

Cash and cash equivalents, beginning of period

    388,802       574,909  

Cash and cash equivalents, end of period

  $ 255,719     $ 489,537  
                 

Supplemental cash flow disclosures:

               

Cash paid for interest, net of capitalized interest

  $ 83,602     $ 69,450  

Cash paid for income taxes, net of refunds received

  $ 18,497     $ (1,068 )

 

See accompanying notes to the condensed consolidated financial statements.

 

 

CABLE ONE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.      DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

 

Description of Business. Cable One is a fully integrated provider of data, video and voice services to residential and business customers in 24 Western, Midwestern and Southern U.S. states. Cable One provided service to approximately 1.1 million residential and business customers, of which approximately 1,062,000 subscribed to data services, 202,000 subscribed to video services and 136,000 subscribed to voice services, as of September 30, 2022.

 

On October 1, 2020, the Company contributed its Anniston, Alabama system (the “Anniston System”) to Hargray in exchange for an approximately 15% equity interest in Hargray on a fully diluted basis. On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis. The all-cash transaction was funded through a combination of cash on hand and proceeds from new indebtedness. Refer to note 2 for further details on this transaction.

 

On  December 30, 2021, the Company acquired certain assets and assumed certain liabilities from Cable America Missouri, LLC, a data, video and voice services provider in central Missouri ("CableAmerica"), for $113.1 million in cash on a debt-free basis. The all-cash transaction was financed with cash on hand. Refer to note 2 for further details on this transaction.

 

On  January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Delta Communications, L.L.C. ("Clearwave")) (the "Clearwave Fiber Contribution") and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber LLC ("Clearwave Fiber"). The operations contributed by the Company generated approximately 3% of Cable One's consolidated revenues for the three months ended  December 31, 2021. The Company's approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. Clearwave Fiber is intended to accelerate deployment of fiber internet to residents and businesses in existing markets and near-adjacent areas, as well as to provide connectivity to unserved and underserved areas in such markets via fiber-to-the-premises service. Clearwave Fiber is reported on Cable One’s balance sheet under the equity method of accounting, with the proportionate share of its net income (loss) each period reflected within Cable One's operating results on a one quarter lag. Refer to note 5 for further details on this transaction and on the Company’s other equity investments.

 

Basis of Presentation. The condensed consolidated financial statements and accompanying notes thereto have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“GAAP”) for interim financial information; and (ii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the SEC. As permitted under such guidance, certain notes and other financial information normally required by GAAP have been omitted. Management believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash flows as of and for the periods presented herein. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the 2021 Form 10-K.

 

The December 31, 2021 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the 2021 Form 10-K, but does not include all disclosures required by GAAP. The Company’s interim results of operations may not be indicative of its future results.

 

Principles of Consolidation. The accompanying condensed consolidated financial statements include the accounts of the Company, including its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

 

Segment Reporting. Accounting Standards Codification ("ASC") 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. Based on the Company’s chief operating decision maker’s review and assessment of the Company’s operating performance for purposes of performance monitoring and resource allocation, the Company determined that its operations, including the decisions to allocate resources and deploy capital, are organized and managed on a consolidated basis. Accordingly, management has identified one operating segment, which is its reportable segment, under this organizational and reporting structure.

 

Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the amounts reported herein. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in those estimates and underlying assumptions.

 

6

 

Recently Adopted Accounting Pronouncements. In  November 2021, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires additional disclosure around the type of any government assistance received and its impact on the consolidated financial statements. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.

 

In  October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. ASU 2021-08 requires entities to apply existing revenue recognition guidance when recognizing and measuring contract assets acquired and contract liabilities assumed in a business combination. The Company adopted the updated guidance in the first quarter of 2022. The adoption did not have a material impact on the Company's consolidated financial statements.

 

Recently Issued But Not Yet Adopted Accounting Pronouncements. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference LIBOR and other reference rates that are to be discontinued. The ASU may be adopted at any time through December 31, 2022. The Company currently holds certain debt and interest rate swaps that reference LIBOR. The Company plans to adopt ASU 2020-04 when the contracts underlying such instruments are amended as a result of reference rate reform. The Company is currently evaluating the expected impact of the adoption of this guidance on its consolidated financial statements.

 

 

2.      ACQUISITIONS

 

The Company accounts for certain acquisitions as business combinations pursuant to ASC 805 - Business Combinations. In accordance with ASC 805, the Company uses its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that is available as of the acquisition date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for each acquisition, however, preliminary measurements of fair value for each acquisition are subject to change during the measurement period, and such changes could be material. The Company expects to finalize the valuation after each acquisition as soon as practicable but no later than one year after the acquisition date.

 

Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis.

 

Acquisition costs incurred by the Company are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred $0.3 million and $0.8 million of acquisition costs during the three months ended September 30, 2022 and 2021, respectively, and $2.8 million and $10.0 million of acquisition costs during the nine months ended September 30, 2022 and 2021, respectively. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations and comprehensive income.

 

The following acquisitions occurred during the periods presented:

 

CableAmerica. On  December 30, 2021, the Company acquired certain assets and assumed certain liabilities of CableAmerica, a data, video and voice services provider in central Missouri, for a purchase price of $113.1 million on a cash-free and debt-free basis.

 

Acquired identifiable intangible assets associated with the CableAmerica acquisition consisted of the following (dollars in thousands):

 

           

Useful Life

 
   

Fair Value

   

(in years)

 

Customer relationships

  $ 15,400       14.0  

Trademark and trade name

  $ 500       3.0  

Franchise agreements

  $ 49,600    

Indefinite

 

 

Customer relationships and franchise agreements were valued using the multi-period excess earnings method (“MPEEM”) of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future earnings before interest, taxes, depreciation and amortization (“EBITDA” and as adjusted, “Adjusted EBITDA”) margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is 13.7 years.

 

The CableAmerica acquisition resulted in the recognition of $25.6 million of goodwill, which is deductible for tax purposes.

 

7

 

Hargray. On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray, a data, video and voice services provider, that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis. 

 

The following table summarizes the allocation of the Hargray purchase price consideration as of the acquisition date, reflecting immaterial measurement period adjustments (in thousands):

 

   

Initial Purchase Price Allocation

   

Measurement Period Adjustments

   

Purchase Price Allocation

 

Assets Acquired

                       

Cash and cash equivalents

  $ 17,652     $ -     $ 17,652  

Accounts receivable

    17,991       (62 )     17,929  

Income taxes receivable

    -       720       720  

Prepaid and other current assets

    8,006       -       8,006  

Property, plant and equipment

    457,158       (525 )     456,633  

Intangible assets

    1,592,000       -       1,592,000  

Other noncurrent assets

    4,636       2,940       7,576  

Total Assets Acquired

    2,097,443       3,073       2,100,516  
                         

Liabilities Assumed

                       

Accounts payable and accrued liabilities

    36,457       1,770       38,227  

Deferred revenue (short-term portion)

    8,462       -       8,462  

Current portion of long-term debt

    1,375       (1,375 )     -  

Long-term debt

    2,912       (2,912 )     -  

Deferred income taxes

    437,725       3,652       441,377  

Other noncurrent liabilities

    6,974       2,912       9,886  

Total Liabilities Assumed

    493,905       4,047       497,952  
                         

Net assets acquired

    1,603,538       (974 )     1,602,564  

Purchase price consideration(1)

    2,117,866       (756 )     2,117,110  

Goodwill recognized

  $ 514,328     $ 218     $ 514,546  

 


(1)

Consists of approximately $2.0 billion of cash for the additional approximately 85% equity interest in Hargray that the Company did not already own and the $146.6 million May 3, 2021 fair value of the Company’s existing approximately 15% equity investment in Hargray. The Company recognized a $33.4 million non-cash gain within other income in the condensed consolidated statement of operations and comprehensive income upon the acquisition, representing the difference between the existing equity investment’s fair value and $113.2 million carrying value. The fair value of the existing investment was calculated as approximately 15% of the fair value of Hargray’s total equity value (determined using the discounted cash flow method of the income approach, less debt), excluding the impact of any synergies or control premium that would be realized by a controlling interest.

 

Acquired identifiable intangible assets associated with the Hargray Acquisition consisted of the following (dollars in thousands):

 

           

Useful Life

 
   

Fair Value

   

(in years)

 

Customer relationships

  $ 472,000       13.7  

Trademark and trade name

  $ 10,000       4.2  

Franchise agreements

  $ 1,110,000    

Indefinite

 

 

Customer relationships and franchise agreements were valued using the MPEEM of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future EBITDA margins, future capital expenditures and appropriate discount rates. No residual value was assigned to the acquired customer relationships, trademark and trade name or franchise agreements. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is 13.5 years.

 

The Hargray Acquisition resulted in the recognition of $514.5 million of goodwill, which is not deductible for tax purposes.

 

8

 
 

3.      REVENUES

 

Revenues by product line and other revenue-related disclosures were as follows (in thousands):   

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2022

   

2021

   

2022

   

2021

 

Residential:

                               

Data

  $ 233,834     $ 219,942     $ 697,317     $ 611,196  

Video

    80,525       89,507       249,944       252,764  

Voice

    10,494       12,645       33,105       35,235  

Business services

    75,847       85,728       228,999       222,706  

Other

    24,018       22,415       71,163       51,347  

Total revenues

  $ 424,718     $ 430,237     $ 1,280,528     $ 1,173,248  
                                 

Franchise and other regulatory fees

  $ 7,796     $ 8,683     $ 23,852     $ 22,945  

Deferred commission amortization

  $ 1,282     $ 1,318     $ 3,799     $ 4,051  

 

Other revenues are comprised primarily of regulatory revenues, advertising sales, late charges and reconnect fees.

 

Fees imposed on the Company by various governmental authorities, including franchise fees, are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities. As the Company acts as principal, these fees are reported in video and voice revenues on a gross basis with corresponding expenses included within operating expenses in the condensed consolidated statements of operations and comprehensive income.

 

Deferred commission amortization expense is included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

 

Current deferred revenue liabilities consist of refundable customer prepayments, up-front charges and installation fees. As of September 30, 2022, the Company’s remaining performance obligations pertain to the refundable customer prepayments and consist of providing future data, video and voice services to customers. Of the $26.9 million of current deferred revenue at December 31, 2021, $23.9 million was recognized during the nine months ended September 30, 2022. Noncurrent deferred revenue liabilities consist of up-front charges and installation fees from business customers.

 

 

4.      OPERATING ASSETS AND LIABILITIES

 

Accounts receivable consisted of the following (in thousands):

 

   

September 30, 2022

   

December 31, 2021

 

Trade receivables

  $ 47,553     $ 41,947  

Other receivables

    17,148       16,847  

Less: Allowance for credit losses

    (3,233 )     (2,541 )

Total accounts receivable, net

  $ 61,468     $ 56,253  

 

The changes in the allowance for credit losses were as follows (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2022

   

2021

     

2022

    2021(1)  

Beginning balance

  $ 3,255     $ 2,843     $ 2,541     $ 1,252  

Additions - charged to costs and expenses

    2,979       2,190       6,774       4,812  

Deductions - write-offs

    (4,324 )     (3,580 )     (10,216 )     (7,931 )

Recoveries collected

    1,323       1,340       4,134       4,660  

Ending balance

  $ 3,233     $ 2,793     $ 3,233     $ 2,793  

 


(1)

Additions include $1.4 million of additional reserves assumed in the Hargray Acquisition.

 

9

 

Prepaid and other current assets consisted of the following (in thousands):

 

   

September 30, 2022

   

December 31, 2021

 

Prepaid repairs and maintenance

  $ 5,321     $ 4,788  

Software implementation costs

    1,349       1,199  

Prepaid insurance

    5,045       3,325  

Prepaid rent

    3,508       2,107  

Prepaid software

    7,540       6,982  

Deferred commissions

    4,444       4,295  

Interest rate swap asset

    18,994       -  

Inventory

    5,137       -  

All other current assets

    9,911       9,009  

Total prepaid and other current assets

  $ 61,249     $ 31,705  

 

Other noncurrent assets consisted of the following (in thousands):

 

   

September 30, 2022

   

December 31, 2021

 

Operating lease right-of-use assets

  $ 10,912     $ 15,501  

Deferred commissions

    8,483       8,624  

Software implementation costs

    6,809       7,782  

Debt issuance costs

    2,073       2,576  

Debt investment

    2,072       -  

Assets held for sale

    1,032       3,819  

Interest rate swap asset

    54,305       -  

All other noncurrent assets

    2,225       4,020  

Total other noncurrent assets

  $ 87,911     $ 42,322  

 

Accounts payable and accrued liabilities consisted of the following (in thousands):

 

   

September 30, 2022

   

December 31, 2021

 

Accounts payable

  $ 39,684     $ 35,716  

Accrued programming costs

    22,795       23,703  

Accrued compensation and related benefits

    31,680       34,731  

Accrued sales and other operating taxes

    15,826       12,872  

Accrued franchise fees

    4,039       4,397  

Deposits

    6,399       6,840  

Operating lease liabilities

    3,833       5,633  

Interest rate swap liability

    -       26,662  

Accrued insurance costs

    6,267       5,542  

Cash overdrafts

    17,207       11,517  

Equity investment payable(1)

    3,087       13,387  

Interest payable

    11,001       5,172  

Income taxes payable

    14,177       -  

All other accrued liabilities

    17,502       17,215  

Total accounts payable and accrued liabilities

  $ 193,497     $ 203,387  

 


(1)

Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). The Company funded $10.3 million of the then outstanding investment payable to Wisper during the nine months ended September 30, 2022. Refer to note 5 for details on this investment.

 

10

 

Other noncurrent liabilities consisted of the following (in thousands):

 

   

September 30, 2022

   

December 31, 2021

 

Operating lease liabilities

  $ 6,352     $ 9,098  

Accrued compensation and related benefits

    9,990       11,010  

Deferred revenue

    8,126       6,854  

MBI Net Option (as defined in note 5)(1)

    35,520       123,620  

All other noncurrent liabilities

    5,035       5,959  

Total other noncurrent liabilities

  $ 65,023     $ 156,541  

 


(1)

Represents the net value of the Company’s call and put options associated with the remaining equity interests in MBI (as defined in note 5), consisting of an asset of $27.0 million and a liability of $62.5 million, respectively, as of September 30, 2022 and a liability of $17.8 million and a liability of $105.8 million, respectively, as of December 31, 2021. Refer to notes 5 and 10 for further information on the MBI Net Option (as defined in note 5).

 

 

5.     EQUITY INVESTMENTS

 

On May 4, 2020, the Company made a minority equity investment for a less than 10% ownership interest in AMG Technology Investment Group, LLC, a wireless internet service provider (“Nextlink”), for $27.2 million. On July 10, 2020, the Company acquired a 40.4% minority equity interest in Wisper, a wireless internet service provider, for total consideration of $25.3 million. The Company has funded $22.2 million of the total consideration for Wisper. On October 1, 2020, the Company contributed the Anniston System to Hargray, a data, video and voice services provider, in exchange for an approximately 15% equity interest in Hargray on a fully diluted basis and recognized an $82.6 million non-cash gain. On November 12, 2020, the Company acquired a 45.0% minority equity interest in Mega Broadband Investments Holdings LLC, a data, video and voice services provider (“MBI”), for $574.9 million in cash.

 

On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, and recognized a $33.4 million non-cash gain as a result of the fair value remeasurement of the Company’s existing equity interest on the acquisition date. On  October 1, 2021, the Company made a minority equity investment for a less than 10% ownership interest in Point Broadband Holdings, LLC, a fiber internet service provider ("Point Broadband"), for $25.0 million. On  October 18, 2021, the Company completed a minority equity investment for a less than 10% ownership interest in Tristar Acquisition I Corp, a special-purpose acquisition company ("Tristar"), for $20.8 million. On  November 5, 2021, the Company invested an additional $50.0 million to acquire preferred units in Nextlink, increasing its equity interest to approximately 17%.


On  January 1, 2022, the Company closed a joint venture transaction in which the Company contributed certain fiber operations (including certain fiber assets of Hargray and a majority of the operations of Clearwave) and certain unaffiliated third-party investors contributed cash to a newly formed entity, Clearwave Fiber. The operations contributed by the Company generated approximately 3% of Cable One's consolidated revenues for the three months ended  December 31, 2021. The Company's approximately 58% investment in Clearwave Fiber was valued at $440.0 million as of the closing date. The Company recognized a non-cash gain of $22.1 million associated with this transaction. On March 24, 2022, the Company invested an additional $5.4 million in Point Broadband, increasing its equity interest to approximately 7%. On April 1, 2022, the Company contributed its Tallahassee, Florida system to MetroNet Systems, LLC, a fiber internet service provider ("MetroNet"), in exchange for cash consideration of $7.0 million and an equity interest of less than 10% in MetroNet valued at $7.0 million. On June 1, 2022, the Company completed a minority equity investment for a less than 10% ownership interest in Visionary Communications, Inc., an internet service provider ("Visionary"), for $7.2 million. On September 6, 2022, the Company entered into a subscription agreement with Northwest Fiber Holdco, LLC, a fiber internet service provider ("Ziply"), under which the Company agreed to invest up to $50.0 million in Ziply for a less than 10% equity interest. The Company had not funded any of this commitment as of  September 30, 2022.

 

11

 

The carrying value of the Company’s equity investments without readily determinable fair values are determined based on fair valuations as of their respective acquisition dates. As Tristar is publicly traded, the carrying value of the Company's Tristar investment is remeasured to fair value on a quarterly basis using market information.

 

The carrying value of the Company's equity investments consisted of the following (dollars in thousands):

 

   

Ownership

 

September 30,

   

December 31,

 
   

Percentage

 

2022

   

2021

 

Cost Method Investments

                   

MetroNet

 

<10%

  $ 7,000     $ -  

Nextlink

 

<20%

    77,245       77,245  

Point Broadband

  <10%     30,373       25,000  

Tristar

 

<10%

    23,003       23,083  

Visionary

 

<10%

    7,190       -  

Others

 

<10%

    13,288       13,170  

Total cost method investments

      $ 158,099     $ 138,498  
                     

Equity Method Investments

                   

Clearwave Fiber

 

~58%

  $ 425,525     $ -  

MBI(1)

 

45.0%

    569,033       557,715  

Wisper

 

40.4%

    33,279       31,352  

Total equity method investments

      $ 1,027,837     $ 589,067  
                     

Total equity investments

      $ 1,185,936     $ 727,565  

 


(1)

The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $630.7 million being allocated to the MBI equity investment and $19.7 million and $75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $35.5 million and $123.6 million as of September 30, 2022 and December 31, 2021, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option.

 

The carrying value of MBI exceeded the Company’s underlying equity in MBI’s net assets by approximately $499.6 million and $508.3 million as of September 30, 2022 and December 31, 2021, respectively.

 

12

 

Equity method investment income (losses), which increase (decrease) the carrying value of the respective investment, and which are recorded on a one quarter lag, and the change in fair value of the MBI Net Option were as follows (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2022

   

2021

   

2022

   

2021

 

Equity Method Investment Income (Loss)

                               

Clearwave Fiber

  $ (3,550 )   $ -     $ (14,475 )   $ -  

MBI(1)

    3,243       (132 )     11,318       (3,753 )

Wisper

    321       1,243       1,927       3,222  

Total

  $ 14     $ 1,111     $ (1,230 )   $ (531 )
                                 

Other Income (Expense), Net

                               

MBI Net Option change in fair value

  $ (2,800 )   $ (25,600 )   $ 88,100     $ (41,390 )

 


(1)

The Company identified a $186.6 million difference between the fair values of certain of MBI’s finite-lived intangible assets and the respective carrying values recorded by MBI, of which $84.0 million was attributable to the Company’s 45% pro rata portion. The Company is amortizing its share on an accelerated basis over the lives of the respective assets. For the three months ended September 30, 2022, the Company recognized $6.4 million of its pro rata share of MBI’s net income and $3.2 million of its pro rata share of basis difference amortization. For the three months ended  September 30, 2021, the Company recognized $3.8 million of its pro rata share of MBI’s net income and $4.0 million of its pro rata share of basis difference amortization. For the nine months ended September 30, 2022, the Company recognized $21.7 million of its pro rata share of MBI’s net income and $10.3 million of its pro rata share of basis difference amortization. For the nine months ended September 30, 2021, the Company recognized $6.8 million of its pro rata share of MBI’s net income and $10.6 million of its pro rata share of basis difference amortization.

 

The Company assesses each equity investment for indicators of impairment on a quarterly basis. No impairments were recorded for any of the periods presented.

 

 

6.      PROPERTY, PLANT AND EQUIPMENT

 

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

 

   

September 30, 2022

   

December 31, 2021

 

Cable distribution systems

  $ 2,391,160     $ 2,509,795  

Customer premise equipment

    334,663       320,937  

Other equipment and fixtures

    464,562       472,319  

Buildings and improvements

    136,926       142,754  

Capitalized software

    96,239       89,662  

Construction in progress

    212,395       172,706  

Land

    12,134       12,134  

Right-of-use assets

    11,310       11,241  

Property, plant and equipment, gross

    3,659,389       3,731,548  

Less: Accumulated depreciation and amortization

    (1,999,620 )     (1,877,444 )

Property, plant and equipment, net

  $ 1,659,769     $ 1,854,104  

 

The Company contributed $280.0 million of property, plant and equipment, net, to the Clearwave Fiber joint venture on January 1, 2022 and recognized a $22.1 million non-cash gain on the transaction. The Company divested $6.8 million of property, plant and equipment, net, in the dispositions of our Tallahassee, Florida system and certain other non-core assets during the three months ended June 30, 2022 and recognized an $8.3 million non-cash loss.

 

The Company classified $1.0 million of property, plant and equipment as held for sale as of September 30, 2022. Such assets are included within other noncurrent assets in the condensed consolidated balance sheet.

 

Depreciation and amortization expense for property, plant and equipment was $66.4 million and $69.3 million for the three months ended September 30, 2022 and 2021, respectively, and $201.2 million and $193.3 million for the nine months ended September 30, 2022 and 2021, respectively.

 

 

7.      GOODWILL AND INTANGIBLE ASSETS

 

The carrying amount of goodwill was $928.9 million at September 30, 2022 and $967.9 million at December 31, 2021, with the decrease attributable to $39.9 million of goodwill divested in the Clearwave Fiber transaction on January 1, 2022 and $1.8 million of goodwill divested in other transactions during the three months ended June 30, 2022, partially offset by a $2.7 million increase in goodwill related to a measurement period adjustment associated with the Hargray Acquisition. The Company has not historically recorded any impairment of goodwill.

 

13

 

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

 

         

September 30, 2022

   

December 31, 2021

 
   

Useful Life

   

Gross

           

Net

   

Gross

           

Net

 
   

Range

   

Carrying

   

Accumulated

   

Carrying

   

Carrying

   

Accumulated

   

Carrying

 
   

(in years)

   

Amount

   

Amortization

   

Amount

   

Amount

   

Amortization