UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number
(Exact name of Registrant as specified in its charter)
State of | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
(Address of principal executive offices) | (Zip Code) |
Registrant's 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 |
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.
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).
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.
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
The number of outstanding shares of Liberty Broadband Corporation’s common stock as of October 31, 2020 was:
Series A | Series B | Series C | ||||
Liberty Broadband Corporation Common Stock | ||||||
Table of Contents
Part I - Financial Information
I-1
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Balance Sheets
(unaudited)
September 30, | December 31, |
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2020 | 2019 |
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(amounts in thousands) |
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Assets |
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Current assets: | ||||||
Cash and cash equivalents | $ | |
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Other current assets |
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Total current assets |
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Investment in Charter, accounted for using the equity method (note 4) |
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Other assets |
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Total assets | $ | |
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Liabilities and Equity | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | |
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Deferred revenue and other current liabilities |
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Total current liabilities |
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Debt, including $ | | | ||||
Deferred income tax liabilities | | | ||||
Other liabilities | | | ||||
Total liabilities | |
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Equity | ||||||
Preferred stock, $ | ||||||
Series A common stock, $ | | | ||||
Series B common stock, $ | | | ||||
Series C common stock, $ | | | ||||
Additional paid-in capital | | | ||||
Accumulated other comprehensive earnings, net of taxes |
| ( |
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Retained earnings |
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Total equity |
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Commitments and contingencies (note 7) | ||||||
Total liabilities and equity | $ | |
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See accompanying notes to the condensed consolidated financial statements.
I-2
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Operations
(unaudited)
Three months ended | Nine months ended |
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September 30, | September 30, |
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2020 |
| 2019 |
| 2020 | 2019 |
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(amounts in thousands, except per share amounts) | ||||||||||
Revenue: | ||||||||||
Software sales | $ | | | | | |||||
Service | | — | | — | ||||||
Total revenue | | | | | ||||||
Operating costs and expenses | ||||||||||
Operating, including stock-based compensation (note 6) | | | |
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Selling, general and administrative, including stock-based compensation (note 6) | | | |
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Depreciation and amortization | | | |
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Operating income (loss) | ( | ( | ( |
| ( | |||||
Other income (expense): | ||||||||||
Interest expense | ( | ( | ( | ( | ||||||
Share of earnings (losses) of affiliates (note 4) | | | |
| | |||||
Gain (loss) on dilution of investment in affiliate (note 4) | ( | ( | ( |
| ( | |||||
Realized and unrealized gains (losses) on financial instruments, net (note 3) | ( | ( | ( |
| ( | |||||
Other, net | | | |
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Net earnings (loss) before income taxes | | | |
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Income tax benefit (expense) | ( | ( | ( |
| ( | |||||
Net earnings (loss) attributable to Liberty Broadband shareholders | $ | | | |
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Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2) | $ | | | | | |||||
Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2) | $ | | | | | |||||
See accompanying notes to the condensed consolidated financial statements.
I-3
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Comprehensive Earnings (Loss)
(unaudited)
Three months ended | Nine months ended |
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September 30, | September 30, |
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2020 |
| 2019 |
| 2020 | 2019 |
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(amounts in thousands) |
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Net earnings (loss) |
| $ | | | |
| | |||
Other comprehensive earnings (loss), net of taxes: | ||||||||||
Comprehensive earnings (loss) attributable to debt credit risk adjustments | ( | — | ( |
| — | |||||
Other comprehensive earnings (loss), net of taxes | ( | — | ( |
| — | |||||
Comprehensive earnings (loss) attributable to Liberty Broadband shareholders | $ | | | |
| | ||||
See accompanying notes to the condensed consolidated financial statements.
I-4
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Cash Flows
(unaudited)
Nine months ended | ||||||
September 30, |
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2020 | 2019 |
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(amounts in thousands) |
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Cash flows from operating activities: |
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Net earnings (loss) | $ | |
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Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: | ||||||
Depreciation and amortization |
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Stock-based compensation |
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Share of (earnings) losses of affiliates, net |
| ( |
| ( | ||
(Gain) loss on dilution of investment in affiliate |
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Realized and unrealized (gains) losses on financial instruments, net |
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Deferred income tax expense (benefit) |
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Other, net |
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Changes in operating assets and liabilities: | ||||||
Current and other assets |
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| ( | ||
Payables and other liabilities |
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Net cash provided (used) by operating activities |
| ( |
| ( | ||
Cash flows from investing activities: | ||||||
Capital expended for property and equipment |
| ( |
| ( | ||
Exercise of preemptive right to purchase Charter shares | ( | — | ||||
Net cash provided (used) by investing activities |
| ( |
| ( | ||
Cash flows from financing activities: | ||||||
Borrowings of debt | | | ||||
Repurchases of Liberty Broadband common stock | ( | |||||
Payments from issuances of financial instruments | — | ( | ||||
Payment to former parent under tax sharing agreement related to net settlement of Awards | — | ( | ||||
Taxes paid in lieu of shares issued for stock-based compensation | ( | — | ||||
Other financing activities, net | ( | | ||||
Net cash provided (used) by financing activities |
| |
| ( | ||
Net increase (decrease) in cash |
| |
| ( | ||
Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period | $ | |
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See accompanying notes to the condensed consolidated financial statements.
I-5
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Equity
(unaudited)
Accumulated | ||||||||||||||||||
Additional | other | |||||||||||||||||
Preferred | Common stock | paid-in | comprehensive | Retained | ||||||||||||||
Stock | Series A |
| Series B |
| Series C |
| capital | earnings | earnings | Total equity | ||||||||
(amounts in thousands) | ||||||||||||||||||
Balance at January 1, 2020 |
| $ | — | | | | |
| |
| |
| | |||||
Net earnings (loss) |
| — | — | — | — | — |
| — |
| |
| | ||||||
Other comprehensive loss | — | — | — | — | — | ( | — | ( | ||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||
Issuance of common stock upon exercise of stock options | — | — | — | | | — | — | | ||||||||||
Withholding taxes on net share settlements of stock-based compensation | — | — | — | — | ( | — | — | ( | ||||||||||
Series C Liberty Broadband stock repurchases | — | — | — | ( | ( | — | — | ( | ||||||||||
Noncontrolling interest activity at Charter | — | — | — | — | ( | — | — | ( | ||||||||||
Balance at September 30, 2020 | $ | — | | | | |
| ( |
| |
| | ||||||
Accumulated |
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Additional | other |
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Preferred | Common stock | paid-in | comprehensive | Retained |
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Stock | Series A |
| Series B |
| Series C |
| capital | earnings | earnings | Total equity |
| |||||||
(amounts in thousands) |
| |||||||||||||||||
Balance at June 30, 2020 | $ | — | | | | | | | | |||||||||
Net earnings (loss) | — | — | — | — | — | — | | | ||||||||||
Other comprehensive loss | — | — | — | — | — | ( | — | ( | ||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||
Series C Liberty Broadband stock repurchases | — | — | — | ( | ( | — | — | ( | ||||||||||
Noncontrolling interest activity at Charter | — | — | — | — | ( | — | — | ( | ||||||||||
Balance at September 30, 2020 | $ | — | | | | | ( | | | |||||||||
See accompanying notes to the condensed consolidated financial statements.
I-6
LIBERTY BROADBAND CORPORATION
Condensed Consolidated Statements of Equity (continued)
(unaudited)
Accumulated | ||||||||||||||||||
Additional | other | |||||||||||||||||
Preferred | Common stock | paid-in | comprehensive | Retained | ||||||||||||||
Stock | Series A |
| Series B |
| Series C |
| capital | earnings | earnings | Total equity | ||||||||
(amounts in thousands) | ||||||||||||||||||
Balance at January 1, 2019 | $ | — | | | | | | | | |||||||||
Net earnings (loss) | — | — | — | — | — | — | | | ||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||
Issuance of common stock upon exercise of stock options | — | | — | | | — | — | | ||||||||||
Tax sharing arrangement with former parent | — | — | — | — | ( | — | — | ( | ||||||||||
Noncontrolling interest activity at Charter | — | — | — | — | ( | — | — | ( | ||||||||||
Balance at September 30, 2019 | $ | — | | | | | | | | |||||||||
Accumulated |
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Additional | other |
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Preferred | Common stock | paid-in | comprehensive | Retained |
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Stock | Series A |
| Series B |
| Series C |
| capital | earnings | earnings | Total equity |
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(amounts in thousands) |
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Balance at June 30, 2019 | $ | — | | | | |
| |
| |
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Net earnings (loss) | — | — | — | — | — | — | | | ||||||||||
Stock-based compensation | — | — | — | — | | — | — | | ||||||||||
Issuance of common stock upon exercise of stock options | — | — | — | — | | — | — | | ||||||||||
Noncontrolling interest activity at Charter | — | — | — | — | ( | — | — | ( | ||||||||||
Balance at September 30, 2019 | $ | — | | | | | | | | |||||||||
See accompanying notes to the condensed consolidated financial statements.
I-7
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(1) Basis of Presentation
During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock (the “Broadband Spin-Off”). These financial statements refer to Liberty Broadband Corporation as “Liberty Broadband,” “the Company,” “us,” “we” and “our” in the notes to the condensed consolidated financial statements.
Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter Communications, Inc. (“Charter”). Pursuant to proxy agreements with GCI Liberty, Inc. (“GCI Liberty”) and Advance/Newhouse Partnership (“A/N”), Liberty Broadband controls
The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (“Skyhook”), focuses on the development and sale of Skyhook’s device-based location technology. Skyhook markets and sells
The accompanying (a) condensed consolidated balance sheet as of December 31, 2019, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty Broadband's Annual Report on Form 10-K for the year ended December 31, 2019. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers the application of the equity method of accounting for investments in affiliates and accounting for income taxes to be its most significant estimates.
In December 2019, Chinese officials reported a novel coronavirus outbreak (“COVID-19”). COVID-19 has since spread through China and internationally. On March 11, 2020, the World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices.
We are not presently aware of any events or circumstances arising from the COVID-19 pandemic that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the consolidated financial statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.
Liberty Broadband holds an investment in Charter that is accounted for using the equity method. Liberty Broadband does not control the decision making process or business management practices of this affiliate. Accordingly, Liberty Broadband relies on the management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty Broadband relies on audit
I-8
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
reports that are provided by the affiliate's independent auditor on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Liberty Broadband's condensed consolidated financial statements.
On August 6, 2020, Liberty Broadband and GCI Liberty entered into a definitive merger agreement under which Liberty Broadband agreed to acquire all of the outstanding shares of GCI Liberty in a stock-for-stock merger (the “Combination”). Under the terms of the merger agreement each holder of Series A and B common stock of GCI Liberty will receive
Spin-Off Arrangements
Following the Broadband Spin-Off, Liberty and Liberty Broadband operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise, in the other. In connection with the Broadband Spin-Off, Liberty (for accounting purposes a related party of the Company) and Liberty Broadband entered into certain agreements in order to govern certain of the ongoing relationships between the two companies after the Broadband Spin-Off and to provide for an orderly transition. These agreements include a reorganization agreement, a services agreement, a facilities sharing agreement and a tax sharing agreement.
The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Broadband Spin-Off, certain conditions to the Broadband Spin-Off and provisions governing the relationship between Liberty Broadband and Liberty with respect to and resulting from the Broadband Spin-Off. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and Liberty Broadband and other agreements related to tax matters. Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. See below for a description of an amendment to the services agreement in December 2019. Under the facilities sharing agreement, Liberty Broadband shares office space with Liberty and related amenities at Liberty’s corporate headquarters. Liberty Broadband will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services which will be negotiated semi-annually. Under these various agreements, amounts reimbursable to Liberty were approximately $
In December 2019, the Company entered into an amendment to the services agreement with Liberty in connection with Liberty’s entry into a new employment arrangement with Gregory B. Maffei, the Company’s President and Chief Executive Officer. Under the amended services agreement, components of his compensation will either be paid directly to him by each of the Company, Liberty TripAdvisor Holdings, Inc., GCI Liberty, and Qurate Retail, Inc. (collectively, the “Service Companies”) or reimbursed to Liberty, in each case, based on allocations among Liberty and the Service Companies set forth in the amended services agreement, currently set at
I-9
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(2) Earnings (Loss) per Share
Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty Broadband shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. The basic and diluted EPS calculations are based on the following weighted average number of shares of outstanding common stock.
Liberty Broadband Common Stock | |||||||||
Three months | Three months | Nine months | Nine months |
| |||||
ended | ended | ended | ended | ||||||
| September 30, 2020 |
| September 30, 2019 |
| September 30, 2020 |
| September 30, 2019 |
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(numbers of shares in thousands) | |||||||||
Basic WASO |
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Potentially dilutive shares (1) |
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Diluted WASO |
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(1) Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.
(3) Assets and Liabilities Measured at Fair Value
For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.
The Company’s assets and (liabilities) measured at fair value are as follows:
September 30, 2020 | December 31, 2019 |
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Quoted prices | Significant | Quoted prices | Significant |
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in active | other | in active | other |
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markets for | observable | markets for | observable |
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identical assets | inputs | identical assets | inputs |
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Description | Total | (Level 1) | (Level 2) | Total | (Level 1) | (Level 2) |
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(amounts in thousands) |
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Cash equivalents | $ | | | — | | | — | |||||||
Exchangeable senior debentures | $ | |
| — |
| |
| — |
| — |
| — | ||
The Company’s exchangeable senior debentures are debt instruments with quoted market value prices that are not considered to be traded on “active markets”, as defined in GAAP, and are reported in the foregoing table as Level 2 fair value.
Other Financial Instruments
The carrying amounts of other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, and accrued and other current liabilities, which approximate fair value due to the short maturity
I-10
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt under the Margin Loan Facility (as defined in note 5 to the accompanying condensed consolidated financial statements) bears interest at a variable rate and therefore is also considered to approximate fair value.
Realized and Unrealized Gains (Losses) on Financial Instruments
Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:
Three months ended | Nine months ended |
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September 30, | September 30, |
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2020 | 2019 | 2020 | 2019 |
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(amounts in thousands) |
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Derivative instruments (1) | $ | — | ( | — | ( | ||||||
Exchangeable senior debentures (2) | ( | NA | ( | NA | |||||||
$ | ( | ( | ( |
| ( | ||||||
| (1) | In September 2019, the Company entered into a zero-strike call option on |
| (2) | The Company has elected to account for its exchangeable senior debentures entered into in August 2020 using the fair value option. Changes in the fair value of the exchangeable senior debentures recognized in the condensed consolidated statements of operations are primarily due to market factors driven by changes in the fair value of the underlying shares into which debt is exchangeable. The Company isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a loss of $ |
(4) Investment in Charter Accounted for Using the Equity Method
Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter. The investment in Charter is accounted for as an equity method affiliate based on our voting and ownership interest and the board seats held by individuals appointed by Liberty Broadband. As of September 30, 2020, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately $
Pursuant to proxy agreements with GCI Liberty and A/N (the “GCI Liberty Proxy” and “A/N Proxy”, respectively), Liberty Broadband has an irrevocable proxy to vote certain shares of Charter common stock owned beneficially or of record by GCI Liberty and A/N, for a
Liberty Broadband’s overall voting interest (
Liberty Broadband’s equity ownership in Charter (on a fully diluted basis) is capped at the greater of
I-11
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Additionally, so long as the A/N Proxy is in effect, if A/N proposes to transfer common units of Charter Communications Holdings, LLC (which units are exchangeable into Charter shares and which will, under certain circumstances, result in the conversion of certain shares of Charter class B common stock into Charter shares) or Charter shares, in each case, constituting either (i) shares representing the first
During the nine months ended September 30, 2020, Liberty Broadband exercised its preemptive right to purchase an aggregate of approximately
Investment in Charter
The excess basis in our investment in Charter of $
September 30, | December 31, | ||||
2020 | 2019 | ||||
Property and equipment |
| $ | | | |
Customer relationships |
| | | ||
Franchise fees |
| | | ||
Trademarks |
| | | ||
Goodwill |
| | | ||
Debt |
| ( | ( | ||
Deferred income tax liability |
| ( | ( | ||
$ | | |
Property and equipment and customer relationships have weighted average remaining useful lives of approximately
The Company had a dilution loss of $
I-12
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Summarized unaudited financial information for Charter is as follows (amounts in millions):
Charter condensed consolidated balance sheets
| September 30, 2020 | December 31, 2019 |
| |||
Current assets | $ | | | |||
Property and equipment, net |
| | | |||
Goodwill |
| | | |||
Intangible assets, net |
| | | |||
Other assets |
| | | |||
Total assets | $ | | | |||
Current liabilities | | | ||||
Deferred income taxes |
| | | |||
Long-term debt |
| | | |||
Other liabilities |
| | | |||
Equity |
| | | |||
Total liabilities and shareholders’ equity | $ | | | |||
Charter condensed consolidated statements of operations
Three months ended |
| Nine months ended | ||||||
September 30, | September 30, | |||||||
2020 | 2019 | 2020 | 2019 | |||||
Revenue | $ | | | | | |||
Cost and expenses: | ||||||||
Operating costs and expenses (excluding depreciation and amortization) |
| | | | | |||
Depreciation and amortization |
| | | | | |||
Other operating (income) expenses, net |
| | | | | |||
| | | | |||||
Operating income | | | | | ||||
Interest expense, net |
| ( | ( | ( | ( | |||
Other income (expense), net | ( | ( | ( | ( | ||||
Income tax benefit (expense) |
| ( | ( | ( | ( | |||
Net income (loss) | | | | | ||||
Less: Net income attributable to noncontrolling interests | ( | ( | ( | ( | ||||
Net income (loss) attributable to Charter shareholders | $ | | | | | |||
I-13
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(5) Debt
Debt is summarized as follows:
Outstanding | ||||||
principal | Carrying value | |||||
September 30, | September 30, | December 31, | ||||
2020 | 2020 | 2019 | ||||
(amounts in thousands) | ||||||
Margin Loan | $ | | | | ||
Exchangeable Senior Debentures | | | — | |||
Deferred financing costs | — | ( | ( | |||
Total | $ | | ||||
Margin Loan Facility
On August 12, 2020, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”), entered into Amendment No. 3 to its multi-draw margin loan credit facility and Amendment No. 2 to its Collateral Account Control Agreement (the “Third Amendment”), which amends SPV’s margin loan agreement, dated as of August 31, 2017 (as amended by Amendment No. 1 to Margin Loan Agreement, dated as of August 24, 2018, and as further amended by Amendment No. 2 to Margin Loan Agreement and Amendment No. 1 to Collateral Account Control Agreement, dated August 19, 2019, the “Existing Margin Loan Agreement”; the Existing Margin Loan Agreement, as amended by the Third Amendment, the “Margin Loan Agreement”), with Wilmington Trust, National Association, as the administrative agent, BNP Paribas, as the calculation agent, and the lenders party thereto. The Margin Loan Agreement provides for, among other things, a multi-draw term loan credit facility (the “Margin Loan Facility”) in an aggregate principal amount of up to $
SPV is permitted, subject to certain funding conditions, to borrow term loans up to an aggregate principal amount equal to $
The Margin Loan Agreement contains various affirmative and negative covenants that restrict the activities of the SPV (and, in some cases, the Company and its subsidiaries with respect to shares of Charter owned by the Company and its subsidiaries). The Margin Loan Agreement does not include any financial covenants. The Margin Loan Agreement also contains restrictions related to additional indebtedness and events of default customary for margin loans of this type.
SPV’s obligations under the Margin Loan Agreement are secured by first priority liens on a portion of the Company’s ownership interest in Charter, sufficient for SPV to meet the loan to value requirements under the Margin Loan
I-14
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Agreement. The Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares transferred, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreements. As of September 30, 2020,
Exchangeable Senior Debentures
On August 27, 2020, the Company closed a private offering of $
(6) Stock-Based Compensation
Liberty Broadband grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock, restricted stock units (“RSUs”) and stock options to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasures the fair value of the Award at each reporting date.
Included in the accompanying condensed consolidated statements of operations are the following amounts of stock-based compensation for the three and nine months ended September 30, 2020 and 2019 (amounts in thousands):
Three months | Nine months |
| ||||||||
ended | ended |
| ||||||||
September 30, | September 30, |
| ||||||||
2020 | 2019 | 2020 | 2019 |
| ||||||
Operating expense |
| $ | |
| |
| |
| | |
Selling, general and administrative |
| | | |
| | ||||
$ | | | |
| | |||||
I-15
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Liberty Broadband – Grants of Awards
During the nine months ended September 30, 2020, Liberty Broadband granted
There were
During the nine months ended September 30, 2020, Liberty Broadband granted
The Company calculates the GDFV for all of its equity classified awards and any subsequent remeasurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards based on historical exercise and forfeiture data. The volatility used in the calculation for Awards is based on the historical volatility of Liberty Broadband common stock. The Company uses a
Liberty Broadband – Outstanding Awards
The following tables present the number and weighted average exercise price (“WAEP”) of Awards to purchase Liberty Broadband common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.
|
|
|
|
| Weighted |
|
| |||
average | ||||||||||
remaining | Aggregate | |||||||||
contractual | intrinsic | |||||||||
Series A | WAEP | life | value | |||||||
(in thousands) | (in years) | (in millions) | ||||||||
Outstanding at January 1, 2020 |
| | $ | | ||||||
Granted |
| — | $ | — | ||||||
Exercised |
| ( | $ | | ||||||
Forfeited/cancelled | — | $ | — | |||||||
Outstanding at September 30, 2020 |
| | $ | |
| $ | — | |||
Exercisable at September 30, 2020 |
| | $ | |
| $ | — | |||
I-16
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
|
|
|
|
| Weighted |
|
| |||
average | ||||||||||
remaining | Aggregate | |||||||||
contractual | intrinsic | |||||||||
Series C | WAEP | life | value | |||||||
(in thousands) | (in years) | (in millions) | ||||||||
Outstanding at January 1, 2020 |
| | $ | | ||||||
Granted |
| | $ | | ||||||
Exercised |
| ( | $ | | ||||||
Forfeited/cancelled | — | $ | — | |||||||
Outstanding at September 30, 2020 |
| | $ | |
| $ | | |||
Exercisable at September 30, 2020 |
| | $ | |
| $ | | |||
As of September 30, 2020, the total unrecognized compensation cost related to unvested Awards was approximately $
As of September 30, 2020, Liberty Broadband reserved
Skyhook Equity Incentive Plans
Long-Term Incentive Plans
Skyhook has a long-term incentive plan which provides for the granting of phantom stock appreciation rights and phantom stock units to employees, directors, and consultants of Skyhook that is not significant to Liberty Broadband. As of September 30, 2020 and December 31, 2019, $
(7) Commitments and Contingencies
General Litigation
In the ordinary course of business, the Company and its consolidated subsidiary are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.
Certain Risks and Concentrations
The Skyhook business is subject to certain risks and concentrations including dependence on relationships with its customers. The Company’s largest customers, that accounted for greater than 10% of revenue individually, aggregated
Off-Balance Sheet Arrangements
Liberty Broadband did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources.
I-17
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
(8) Segment Information
Liberty Broadband identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Liberty Broadband’s annual pre-tax earnings (losses).
Liberty Broadband evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Liberty Broadband reviews nonfinancial measures such as subscriber growth.
For segment reporting purposes, Liberty Broadband defines Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excluding stock-based compensation). Liberty Broadband believes this measure is an important indicator of the operational strength and performance of its businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net earnings, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty Broadband generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.
For the nine months ended September 30, 2020, Liberty Broadband has identified the following consolidated company and equity method investment as its reportable segments:
| ● | Skyhook—a wholly owned subsidiary of the Company that provides the Precision Location Solution (a location determination service) and Geospatial Insights product (a location intelligence and data insights service). |
| ● | Charter—an equity method investment that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers. |
Liberty Broadband’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated companies are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2019. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter,
I-18
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
Performance Measures
Three months ended September 30, |
| |||||||||
2020 | 2019 |
| ||||||||
Adjusted | Adjusted |
| ||||||||
Revenue | OIBDA | Revenue | OIBDA |
| ||||||
(amounts in thousands) |
| |||||||||
Skyhook |
| $ | |
| ( |
| |
| ( | |
Charter |
| | | | | |||||
Corporate and other |
| — | ( | — | ( | |||||
| | | | | ||||||
Eliminate equity method affiliate |
| ( | ( | ( | ( | |||||
Consolidated Liberty Broadband | $ | | ( | | ( | |||||
Nine months ended September 30, |
| |||||||||
2020 | 2019 |
| ||||||||
Adjusted | Adjusted |
| ||||||||
Revenue | OIBDA | Revenue | OIBDA |
| ||||||
(amounts in thousands) |
| |||||||||
Skyhook |
| $ | |
| ( |
| |
| ( | |
Charter |
| |
| |
| |
| | ||
Corporate and other |
| — |
| ( |
| — |
| ( | ||
| |
| |
| |
| | |||
Eliminate equity method affiliate |
| ( |
| ( |
| ( |
| ( | ||
Consolidated Liberty Broadband | $ | |
| ( |
| |
| ( | ||
Other Information
September 30, 2020 |
| |||||||
Total | Investments | Capital |
| |||||
assets | in affiliates | expenditures |
| |||||
(amounts in thousands) |
| |||||||
Skyhook |
| $ | |
| — |
| | |
Charter |
| |
| — |
| | ||
Corporate and other |
| |
| |
| — | ||
| |
| |
| | |||
Eliminate equity method affiliate |
| ( |
| — |
| ( | ||
Consolidated Liberty Broadband | $ | |
| |
| | ||
I-19
LIBERTY BROADBAND CORPORATION
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following table provides a reconciliation of Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:
Three months ended | Nine months |
| ||||||||
September 30, | ended September 30, |
| ||||||||
2020 | 2019 | 2020 |
| 2019 |
| |||||
(amounts in thousands) |
| |||||||||
Adjusted OIBDA |
| $ | ( |
| ( |
| ( |
| ( | |
Stock-based compensation |
| ( | ( | ( |
| ( | ||||
Depreciation and amortization |
| ( | ( | ( |
| ( | ||||
Operating income (loss) | ( | ( | ( | ( | ||||||
Interest expense | ( | ( | ( |
| ( | |||||
Share of earnings (loss) of affiliates, net |
| | | |
| | ||||
Gain (loss) on dilution of investment in affiliate |
| ( | ( | ( |
| ( | ||||
Realized and unrealized gains (losses) on financial instruments, net |
| ( | ( | ( |
| ( | ||||
Other, net |
| | | |
| | ||||
Earnings (loss) before income taxes | $ | | | |
| | ||||
I-20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding new service and product offerings; future expenses; the performance of our equity affiliate, Charter Communications, Inc. (“Charter”), and its expectations related to COVID-19 (as defined below); the Combination (as defined below); our projected sources and uses of cash; indebtedness; and the anticipated non-material impact of certain contingent liabilities related to legal proceedings and other matters arising in the ordinary course of business. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors (as they relate to our consolidated subsidiary and equity affiliate) that could cause actual results or events to differ materially from those anticipated:
| ● | The impact of the novel coronavirus (“COVID-19”) pandemic and local, state and federal governmental responses to the pandemic on the economy, our customers, our vendors, and our businesses generally; |
| ● | the satisfaction of conditions to the Combination; |
| ● | Charter’s ability to sustain and grow revenue and cash flow from operations by offering Internet, video, voice, mobile, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in its service areas and to maintain and grow its customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures; |
| ● | the impact of competition from other market participants, including but not limited to incumbent telephone companies, direct broadcast satellite operators, wireless broadband and telephone providers, digital subscriber line providers, fiber to the home providers, and providers of video content over broadband Internet connections; |
| ● | Charter’s ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents); |
| ● | Charter’s ability to develop and deploy new products and technologies, including mobile products and any other consumer services and service platforms; |
| ● | any events that disrupt Charter’s or Skyhook’s networks, information systems or properties and impair their operating activities or negatively impact their respective reputation; |
| ● | the effects of governmental regulation on the business of Charter and Skyhook, including costs, disruptions and possible limitations on Charter’s operating flexibility related to, and its ability to comply with, regulatory conditions applicable to Charter as a result of previous mergers; |
| ● | general business conditions, economic uncertainty or downturn, including the impacts of the COVID-19 pandemic to unemployment levels and the level of activity in the housing sector; |
| ● | failure to protect the security of personal information about the customers of our operating subsidiary and equity affiliate, subjecting us to costly government enforcement actions or private litigation and reputational damage; |
| ● | changes in, or failure or inability to comply with, government regulations, including, without limitation, regulations of the Federal Communications Commission, and adverse outcomes from regulatory proceedings; |
| ● | the ability to retain and hire key personnel; |
| ● | the ability of suppliers and vendors to deliver products, equipment, software and services; |
I-21
| ● | the outcome of any pending or threatened litigation; |
| ● | changes in the nature of key strategic relationships with partners, vendors and joint ventures; |
| ● | the availability and access, in general, of funds to meet debt obligations prior to or when they become due and to fund operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets; |
| ● | the ability of Charter and our company to comply with all covenants in their and our respective debt instruments, any violation of which, if not cured in a timely manner, could trigger a default of other obligations under cross-default provisions; and |
| ● | our ability to successfully monetize certain of our assets. |
For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 and this Quarterly Report on Form 10-Q. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.
The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2019.
Overview
During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock. Liberty Broadband was formed in 2014 as a Delaware corporation.
Through a number of prior years’ transactions, Liberty Broadband has acquired an interest in Charter. Pursuant to proxy agreements with GCI Liberty, Inc. (“GCI Liberty”) and Advance/Newhouse Partnership, Liberty Broadband controls 25.01% of the aggregate voting power of Charter.
The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (“Skyhook”), focuses on the development and sale of Skyhook’s device-based location technology. Skyhook markets and sells two primary products: (1) a location determination service called the Precision Location Solution; and (2) a location intelligence and data insights service called Geospatial Insights.
The financial information represents a consolidation of the historical financial information of Skyhook, Liberty Broadband’s interest in Charter and certain deferred tax liabilities. This financial information refers to Liberty Broadband Corporation as “Liberty Broadband,” “the Company,” “us,” “we” and “our” here and in the notes to the accompanying condensed consolidated financial statements.
On August 6, 2020, Liberty Broadband and GCI Liberty entered into a definitive merger agreement under which Liberty Broadband agreed to acquire all of the outstanding shares of GCI Liberty in a stock-for-stock merger (the “Combination”). Under the terms of the merger agreement each holder of Series A and B common stock of GCI Liberty will receive 0.58 of a share of Series C common stock and Series B common stock, respectively, of Liberty Broadband. Additionally, holders of a share of Series A Cumulative Redeemable Preferred Stock of GCI Liberty will receive one share of Series A Cumulative Redeemable Preferred Stock with mirror terms to be issued by Liberty Broadband. The Combination was recommended to the Company’s Board of Directors for approval by a special committee composed solely of independent, disinterested directors and advised by independent financial and legal advisors. The closing of the Combination is subject to certain customary conditions, including: (i) the adoption of the merger agreement by holders of a majority of the aggregate
I-22
voting power of the GCI Liberty outstanding stock entitled to vote thereon not owned by John C. Malone and certain other persons, (ii) the adoption of the merger agreement by holders of a majority of the aggregate voting power of the Liberty Broadband outstanding stock entitled to vote thereon not owned by John C. Malone and certain other persons, (iii) the adoption of the merger agreement by holders of a majority of the aggregate voting power of the GCI Liberty outstanding stock entitled to vote thereon, (iv) approval of the Liberty Broadband stock issuance by holders of a majority of the aggregate voting power of the Liberty Broadband outstanding stock present in person or by proxy at the stockholder meeting and entitled to vote thereon and (v) the receipt of any applicable regulatory approvals. Liberty Broadband and GCI Liberty expect the Combination to close no later than the first quarter of 2021, subject to potential COVID-19 related delays.
In December 2019, Chinese officials reported a novel coronavirus outbreak. COVID-19 has since spread through China and internationally. On March 11, 2020, the World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices. During this time, Skyhook has maintained function of all departments and service has been uninterrupted. Skyhook’s business results for the three and nine months ended September 30, 2020 were largely unaffected by the pandemic; however, Skyhook cannot predict the ultimate impact of COVID-19 on its business, including its customer renewals, ability to generate new business and its ability to collect on payments from customers.
As the COVID-19 pandemic continues to significantly impact the United States, Charter has continued to deliver services uninterrupted by the pandemic. Because Charter has invested significantly in its network and through normal course capacity increases, Charter has been able to respond to the significant increase in network activity from the private and public response to COVID-19 as Charter does its part as a major provider of Internet services in the United States by, among other things, enabling social distancing through telecommuting and e-learning across its footprint of 41 states. Charter has invested significantly in its self-service infrastructure, and customers have accelerated the adoption of its self-installation and digital self-service capabilities. Increased demand for Charter’s connectivity and the positive response to Charter’s Remote Education Offer pursuant to which new customers with students or educators in the household were eligible to receive Internet service for free for 60 days and the Keep Americans Connected (“KAC”) Pledge, which paused collection efforts and related disconnects for residential and small and medium business (“SMB”) customers with COVID-19 related payment challenges through June 30, 2020, have positively impacted Charter’s results for the nine months ended September 30, 2020 with retention rates for these customers similar to Charter’s average customer base.
During the three and nine months ended September 30, 2020, Charter’s results were negatively impacted by COVID-19, including recording $218 million of estimated customer credits to be provided to video customers offset by $173 million in-period recognition of estimated rebates from sports programming networks as a result of canceled sporting events and related costs. The difference between the $218 million estimated credit to customers which lowered video revenue and the $163 million reduction in programming expense and $10 million reduction in regulatory, connectivity and produced content costs relates to an expected reduction in sports rights content costs which is being amortized over the life of the contract, consistent with the deferral of expense in the three months ended June 30, 2020 when games were canceled. Charter intends to provide a credit on customers’ invoices for all of the rebates provided by the sports programming networks when details are finalized with these networks.
Charter has also seen declines in advertising revenue as a result of COVID-19 and lower revenue from seasonal plans offered to SMB and Enterprise hospitality customers that have requested a reduced level of service due to temporary business closure or because these customers have reduced their service offering to their own customers. In addition, in an effort to assist COVID-19 impacted customers with overdue balances at the end of the KAC program, Charter waived approximately $85 million of receivables which was recorded as a reduction of revenue in the second quarter of 2020.
Charter cannot predict the ultimate impact of COVID-19 on its business, including the depth and duration of the economic impact to household formation and growth and its residential and business customers’ ability to pay for its products and services including the impact of extended unemployment benefits and other stimulus packages. Charter expects that some of the COVID-19 programs discussed above may result in incremental churn and bad debt during the remainder of the year and into 2021. In addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to Charter, the pace of new housing construction, changes in business spend in its local and national ad sales business, the effects to employees’ health and safety and resulting reorientation
I-23
of its work activities, and the risk of limitations on the deployment and maintenance of services (including by limiting customer support and on-site service repairs and installations).
Results of Operations—Consolidated—September 30, 2020 and 2019
Consolidated operating results:
Three months ended | Nine months ended |
| ||||||||
September 30, | September 30, |
| ||||||||
2020 | 2019 | 2020 | 2019 |
| ||||||
(amounts in thousands) |
| |||||||||
Revenue |
| $ | 4,219 |
| 3,713 |
| 12,437 |
| 10,918 | |
Operating expense |
| 2,513 | 2,311 | 7,492 |
| 6,743 | ||||
Selling, general and administrative |
| 15,976 | 5,988 | 31,603 |
| 16,052 | ||||
Stock-based compensation |
| 2,002 | 2,531 | 5,736 |
| 7,670 | ||||
Depreciation and amortization |
| 56 | 471 | 1,041 |
| 1,408 | ||||
Operating income (loss) | (16,328) | (7,588) | (33,435) |
| (20,955) | |||||
Less impact of stock-based compensation and depreciation and amortization | 2,058 | 3,002 | 6,777 | 9,078 | ||||||
Adjusted OIBDA | $ | (14,270) | (4,586) | (26,658) |
| (11,877) | ||||
Revenue
Revenue increased $0.5 million and $1.5 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The increase in revenue for the three and nine months ended September 30, 2020, as compared to the corresponding periods in the prior year, was primarily due to increased revenue from existing customers.
Operating expense and selling, general and administrative expenses
Operating expense increased by $0.2 million and $0.7 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year, primarily due to increased personnel and cloud computing costs. Selling, general, and administrative expense increased by $10.0 million and $15.6 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The increases in selling, general and administrative expense during the three and nine months ended September 30, 2020, compared to the corresponding periods in the prior year, were primarily due to increased professional service fees at the corporate level of $9.8 million and $15.2 million, respectively, due to the Combination and certain fees related to debt activity.
Stock-based compensation
The decrease in stock-based compensation expense of $0.5 million and $1.9 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year, was primarily due to a decrease in the value of restricted stock units of Liberty Broadband Series C common stock granted during the first half of 2020.
Depreciation and amortization
Depreciation and amortization expense decreased by $0.4 million for both the three and nine months ended September 30, 2020, as compared to the corresponding periods in the prior year, primarily due to certain intangible assets becoming fully amortized.
Operating income (loss)
Operating loss increased $8.7 million and $12.5 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year due to the items discussed above.
I-24
Adjusted OIBDA
To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure. We define Adjusted OIBDA as operating income (loss) plus depreciation and amortization, stock-based compensation, separately reported litigation settlements, restructuring, acquisition and other related costs and impairment charges. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses by identifying those items that are not directly a reflection of each business’ performance or indicative of ongoing business trends. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with U.S. generally accepted accounting principles.
Adjusted OIBDA decreased $9.7 million and $14.8 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The decreases in Adjusted OIBDA for the three and nine months ended September 30, 2020, as compared to the corresponding periods in the prior year, were due primarily to the increases in operating and selling, general and administrative expenses, partially offset by the increases in revenue, as discussed above.
Other Income and Expense
Components of Other income (expense) are presented in the table below.
Three months ended | Nine months ended |
| ||||||||
September 30, | September 30, |
| ||||||||
2020 | 2019 | 2020 | 2019 |
| ||||||
(amounts in thousands) |
| |||||||||
Other income (expense): |
|
|
|
|
|
|
| |||
Interest expense | $ | (3,719) | (6,123) | (14,711) |
| (19,008) | ||||
Share of earnings (losses) of affiliates |
| 188,586 | 61,633 | 408,396 |
| 141,882 | ||||
Gain (loss) on dilution of investment in affiliate |
| (35,284) | (11,219) | (140,610) |
| (68,944) | ||||
Realized and unrealized gains (losses) on financial instruments, net |
| (39,324) | (433) | (39,324) |
| (433) | ||||
Other, net |
| 8 | 350 | 199 |
| 1,179 | ||||
$ | 110,267 | 44,208 | 213,950 |
| 54,676 | |||||
Interest expense
Interest expense decreased $2.4 million and $4.3 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The decreases were driven by a decrease in our weighted average interest rate during the current periods as compared to the corresponding periods in the prior year, partially offset by additional amounts outstanding on the Margin Loan Facility and Debentures (as defined in note 5 to the accompanying condensed consolidated financial statements) that were borrowed in August 2020.
Share of earnings (losses) of affiliates
Share of earnings of affiliates increased $127.0 million and $266.5 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The Company’s Share of earnings (losses) of affiliates line item in the accompanying condensed consolidated statements of operations includes expenses of $25.5 million and $32.7 million, net of related taxes, for the three months ended September 30, 2020 and 2019, respectively, and $107.3 million and $88.7 million, net of related taxes, for the nine months ended September 30, 2020 and 2019, respectively, due to the increase in amortization of the excess basis of assets with identifiable useful lives and debt, which was primarily due to Charter’s share buyback program. The change in the share of earnings of affiliates in the three
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and nine months ended September 30, 2020, as compared to the corresponding periods in the prior year, was the result of the corresponding change in net income at Charter.
The following is a discussion of Charter’s results of operations. In order to provide a better understanding of Charter’s operations, we have included a summarized presentation of Charter’s results from operations.
Three months ended | Nine months ended | |||||||||
September 30, | September 30, | |||||||||
2020 | 2019 | 2020 | 2019 | |||||||
(amounts in millions) | ||||||||||
Revenue |
| $ | 12,039 |
| 11,450 | 35,473 |
| 34,003 | ||
Operating expenses, excluding stock-based compensation |
| (7,414) | (7,378) | (21,972) |
| (21,748) | ||||
Adjusted OIBDA |
| 4,625 | 4,072 | 13,501 |
| 12,255 | ||||
Depreciation and amortization |
| (2,370) | (2,415) | (7,295) |
| (7,465) | ||||
Stock-based compensation |
| (83) | (71) | (263) |
| (238) | ||||
Operating income |
| 2,172 | 1,586 | 5,943 |
| 4,552 | ||||
Other expenses, net |
| (1,063) | (993) | (3,296) |
| (3,053) | ||||
Net earnings (loss) before income taxes |
| 1,109 | 593 | 2,647 |
| 1,499 | ||||
Income tax benefit (expense) |
| (177) | (126) | (372) |
| (329) | ||||
Net earnings (loss) | $ | 932 | 467 | 2,275 |
| 1,170 | ||||
Charter net earnings increased $465 million and $1,105 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year.
Charter’s revenue increased $589 million and $1,470 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year, primarily due to increases in the number of residential Internet and mobile customers, price adjustments and during the three months ended September 30, 2020, advertising sales offset by a decrease in video customers and $218 million of estimated customer credits to be issued to video customers due to canceled sporting events. For the nine months ended September 30, 2020, revenue also decreased as compared to the corresponding prior period due to $85 million of waived receivables related to the KAC program.
During the three and nine months ended September 30, 2020, operating expenses, excluding stock-based compensation, increased $36 million and $224 million as compared to the corresponding periods in the prior year, respectively. Operating costs increased primarily due to increased mobile device costs and mobile service and operating costs, and for the nine months ended September 30, 2020, increases in costs to service customers offset by lower regulatory, connectivity and produced content costs.
Programming costs during the three and nine months ended September 30, 2020 were reduced by $163 million of estimated rebates from sports programming networks as a result of canceled sporting events due to COVID-19 and further benefited from a higher mix of lower cost video packages within Charter’s video customer base and lower video customers. The decrease was offset by contractual rate adjustments, including renewals and increases in amounts paid for retransmission consent. Charter expects programming expenses will continue to increase due to a variety of factors, including annual increases imposed by programmers with additional selling power as a result of media consolidation, increased demands by owners of broadcast stations for payment for retransmission consent or linking carriage of other services to retransmission consent, and additional programming, particularly new services. Charter has been unable to fully pass these increases on to its customers nor does it expect to be able to do so in the future without a potential loss of customers.
Costs to service customers increased primarily due to higher labor costs resulting from COVID-19 related wage increases and flex time benefits along with 6.8% customer growth offset by a decrease in bad debt expense given the revenue write-off associated with the KAC program and better collections enhanced by government stimulus benefits.
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Regulatory, connectivity and produced content costs remained constant and decreased during the three and nine months ended September 30, 2020, respectively, due to deferred sports rights costs associated with the shortened baseball season resulting from COVID-19.
Charter’s Adjusted OIBDA for the three and nine months ended September 30, 2020 increased for the reasons described above.
Depreciation and amortization expense decreased $45 million and $170 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year primarily due to a decrease in depreciation and amortization as certain assets acquired in acquisitions become fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.
Charter’s results were also impacted by other expenses, net which increased $70 million and $243 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The increase in other expenses, net for the three months ended September 30, 2020, as compared to the corresponding period in the prior year, was primarily due to increased other pension costs and a loss on extinguishment of debt, partially offset by increased gains on financial instruments. The increase in other expenses, net for the nine months ended September 30, 2020, as compared to the corresponding period in the prior year, was primarily due to increased other pension costs and a loss on extinguishment of debt, partially offset by a decrease to other expense.
Income tax expense increased $51 million and $43 million for the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. Income tax expense increased during the three and nine months ended September 30, 2020 compared to the corresponding periods in 2019 primarily as a result of higher pretax income offset by increased recognition of excess tax benefits resulting from share-based compensation during 2020.
Gain (loss) on dilution of investment in affiliate
The loss on dilution of investment in affiliate increased by $24.1 million and $71.7 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year, primarily due to an increase in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share. As Liberty Broadband’s ownership in Charter changes due to exercises of Charter stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.
Realized and unrealized gains (losses) on financial instruments, net
Realized and unrealized gains (losses) on financial instruments, net for the three and nine months ended September 30, 2020, were primarily related to changes in fair value of the Debentures related to changes in market price of underlying Charter stock. Realized and unrealized gains (losses) on financial instruments, net for the three and nine months ended September 30, 2019, were related to the zero-strike call options. See discussion in note 3 to the accompanying condensed consolidated financial statements for additional information.
Other, net
Other, net decreased $0.3 million and $1.0 million during the three and nine months ended September 30, 2020, respectively, as compared to the corresponding periods in the prior year. The decreases were primarily due to decreases in dividend and interest income as a result of lower interest rates and lower cash balances during the current year.
Income tax benefit (expense)
During the three and nine months ended September 30, 2020, we had an income tax expense of $25.0 million and $47.2 million, respectively, and the effective rate was approximately 26.6% and 26.1%. For the three and nine months ended September 30, 2019, we had an income tax expense of $9.1 million and $8.5 million, respectively, and the effective tax rate was approximately 24.9% and 25.1%, respectively. The differences between the effective income tax rates and the U.S.
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Federal income tax rate of 21% for the three and nine months ended September 30, 2020 and September 30, 2019 were primarily due to the effect of state income taxes.
Liquidity and Capital Resources
As of September 30, 2020, substantially all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.
The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries and is not otherwise restricted), proceeds from asset sales, monetization of our investments, outstanding debt facilities, including $300 million available to be drawn under the Margin Loan Facility (as defined in note 5 to the accompanying condensed consolidated financial statements) until August 12, 2021, debt and equity issuances, and dividend and interest receipts.
As of September 30, 2020, Liberty Broadband had a cash balance of $400 million.
Nine months ended September 30, |
| |||||
2020 | 2019 |
| ||||
(amounts in thousands) |
| |||||
Cash flow information |
|
|
|
| ||
Net cash provided (used) by operating activities | $ | (36,812) |
| (27,232) | ||
Net cash provided (used) by investing activities | $ | (14,952) |
| (75) | ||
Net cash provided (used) by financing activities | $ | 402,308 |
| (9,250) | ||
The increase in cash used by operating activities in the nine months ended September 30, 2020, as compared to the corresponding period in the prior year, was primarily driven by the increase in operating loss.
During the nine months ended September 30, 2020, net cash flows used by investing activities were primarily for the exercise of preemptive rights to purchase an aggregate of approximately 35 thousand shares of Charter’s Class A common stock for an aggregate purchase price of $14.9 million.
During the nine months ended September 30, 2020, net cash flows provided by financing activities were primarily borrowings of $700 million under the Company’s margin loan and Debentures (see note 5 to the accompanying condensed financial statements for more information), partially offset by repurchases of Series C Liberty Broadband common stock of $285.7 million.
The projected use of our cash will be primarily to fund any operational needs of our subsidiary, to service debt, to reimburse Liberty for amounts due under various agreements, to fund potential investment opportunities, the potential buyback of common stock under the approved share buyback program and to refinance Liberty Broadband’s margin loan, under its Margin Loan Facility, maturing in 2022. We expect corporate cash and other available sources of liquidity to cover corporate expenses for the foreseeable future.
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Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities. Market risk refers to the risk of loss arising from adverse changes in stock prices and interest rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.
We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which could include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We manage our exposure to interest rates by maintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We could achieve this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates and (iii) entering into interest rate swap arrangements when we deem appropriate. As of September 30, 2020, our debt is comprised of the following amounts:
Variable rate debt | Fixed rate debt |
| |||||||
Principal |
| Weighted avg |
| Principal |
| Weighted avg |
| ||
amount | interest rate | amount | interest rate |
| |||||
(dollar amounts in millions) |
| ||||||||
$ | 700 | 1.72% | $ | 575 | 2.75% | ||||
Our stock in Charter (our equity method affiliate) is publicly traded and not reflected at fair value in our balance sheet. Our investment in Charter is also subject to market risk that is not directly reflected in our financial statements.
Item 4. Controls and Procedures
In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of September 30, 2020 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
There has been no change in the Company's internal control over financial reporting that occurred during the three months ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings
Our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Reports on Form 10-Q for the quarters ended on March 31, 2020 and June 30, 2020 include "Legal Proceedings" under Item 3 of Part I and Item 1 of Part II, respectively. There have been no material changes from the legal proceedings described in these Forms 10-K and 10-Q, except as described below.
On December 19, 2011, Sprint Communications Company L.P. (“Sprint”) filed a complaint in the United States District Court for the District of Kansas alleging that Time Warner Cable, Inc. (“TWC” or “Legacy TWC”) infringed certain U.S. patents purportedly relating to Voice over Internet Protocol (“VoIP”) services. At the trial, the jury returned a verdict of $140 million against TWC and further concluded that TWC had willfully infringed Sprint’s patents. The court subsequently declined to enhance the damage award as a result of the purported willful infringement and awarded Sprint an additional $6 million, representing pre-judgment interest on the damages award. Charter has now paid the verdict, interest and costs in full. Charter continues to pursue indemnity from its vendors and has brought a patent suit against Sprint (TC Tech, LLC v. Sprint) in the United States District Court for the District of Delaware implicating Sprint's LTE technology and a similar suit against T-Mobile USA, Inc. in the Western District of Texas. The ultimate outcomes of the pursuit of indemnity against Charter’s vendors and the TC Tech litigation cannot be predicted. Charter does not expect the outcome of its indemnity claims nor the outcome of the TC Tech litigation will have a material adverse effect on its operations or financial condition.
Sprint filed a second patent suit against Charter and Bright House Networks, LLC (“Bright House”) on December 2, 2017 in the United States District Court for the District of Delaware. This suit alleges infringement of 11 patents related to Charter's provision of VoIP services (ten of which were asserted against Legacy TWC in the matter described above).
On February 18, 2020 Sprint filed a lawsuit against Charter, Bright House, and TWC in the District Court for Johnson County, Kansas. Sprint alleges that Charter misappropriated trade secrets from Sprint years ago through employees hired by Bright House. Sprint asserts that the alleged trade secrets relate to the VoIP business of Charter and Bright House. Charter has removed this case to the United States District Court for the District of Kansas.
Sprint filed a third patent suit against Charter on May 17, 2018 in the United States District Court for the Eastern District of Virginia. This suit alleges infringement of two patents related to Charter's video on demand services. The court transferred this case to the United States District Court for the District of Delaware on December 20, 2018 pursuant to an agreement between the parties.
While Charter is vigorously defending these suits and is unable to predict the outcome of the Sprint lawsuits, it does not expect that the litigation will have a material effect on its operations, financial condition, or cash flows.
On October 23, 2020, a lawsuit was filed by a purported GCI Liberty stockholder in the United States District Court for the District of Delaware under the caption Lewis Baker v. GCI Liberty, Inc., et al., Case No. 1:20-cv-01425-UNA. The lawsuit named as defendants GCI Liberty, the members of the GCI Liberty board of directors, Liberty Broadband and certain subsidiaries of Liberty Broadband. The lawsuit asserted claims under Section 14(a) of the Exchange Act and Rule 14a-9 under the Exchange Act, as well as Section 20(a) of the Exchange Act. The lawsuit alleged that the defendants caused a registration statement that omitted material information to be filed in connection with the Combination, which allegedly rendered the registration statement false and misleading. The lawsuit further alleged that the members of the GCI Liberty board of directors and Liberty Broadband acted as controlling persons of GCI Liberty and had knowledge of the allegedly false and misleading statements contained in the registration statement. The lawsuit sought an injunction barring the Combination, rescission of the Combination in the event it had been consummated, an order directing the GCI Liberty board of directors to disseminate a registration statement that did not contain any allegedly untrue statements or omit material facts, a declaration that defendants violated the Exchange Act, costs and attorneys’ fees, and other relief.
Liberty Broadband believes this lawsuit was without merit. On October 29, 2020, the plaintiff voluntarily dismissed the lawsuit with prejudice.
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Item 1A. Risk Factors
Except as discussed below, there have been no material changes in the Company's risk factors from those disclosed in Part I, Item 1A. Risk Factors of its Annual Report on Form 10-K for the year ended December 31, 2019 and Part II, Item 1A. Risk Factors of its Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
Liberty Broadband will incur direct and indirect costs as a result of the Combination.
Liberty Broadband will incur substantial expenses in connection with and as a result of completing the Combination, including advisory, legal and other transaction costs, and, following the completion of the Combination, Liberty Broadband expects to incur additional expenses in connection with combining the companies. A majority of these costs have already been incurred or will be incurred regardless of whether the Combination is completed. Factors beyond Liberty Broadband’s control could affect the total amount or timing of these expenses, many of which, by their nature, are difficult to estimate accurately. Management of Liberty Broadband continues to assess the magnitude of these costs, and additional unanticipated costs may be incurred in connection with the Combination. Although Liberty Broadband expects that the realization of benefits related to the Combination will offset such costs and expenses over time, no assurances can be made that this net benefit will be achieved in the near term, or at all.
The announcement and pendency of the Combination could divert the attention of management and cause disruptions in the businesses of Liberty Broadband, which could have an adverse effect on the business and financial results of Liberty Broadband.
Management of Liberty Broadband may be required to divert a disproportionate amount of attention away from its day-to-day activities and operations, and devote time and effort to consummating the Combination. The risks, and adverse effects, of such disruptions and diversions could be exacerbated by a delay in the completion of the Combination. These factors could adversely affect the financial position or results of operations of Liberty Broadband, regardless of whether the Combination is completed.
Liberty Broadband is subject to contractual restrictions while the Combination is pending, which could adversely affect its business and operations.
Under the terms of the merger agreement, Liberty Broadband is subject to certain restrictions on the conduct of its business prior to completing the Combination which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to amend its organizational documents, pay extraordinary dividends or distributions or incur indebtedness. Such limitations could adversely affect Liberty Broadband prior to the completion of the Combination. These risks may be exacerbated by delays or other adverse developments with respect to the completion of the Combination.
The Combination is subject to conditions, some or all of which may not be satisfied, or completed on a timely basis, if at all. Failure to complete the Combination could have material adverse effects on Liberty Broadband.
The completion of the Combination is subject to a number of conditions, including, among other things, receipt of the required Liberty Broadband and GCI Liberty stockholder approvals, including approval of the merger agreement by the affirmative vote of holders of a majority of the aggregate voting power of outstanding shares of each company that are not owned by John C. Malone and certain other persons for each company. While the parties have agreed in the merger agreement to use reasonable best efforts to satisfy the closing conditions, the parties may not be successful in their efforts to do so. The failure to satisfy all of the required conditions could delay the completion of the Combination for a significant period of time or prevent it from occurring at all. Any delay in completing the Combination could cause Liberty Broadband not to realize some or all of the benefits, or realize them on a different timeline than expected, that Liberty Broadband expects to achieve if the Combination is successfully completed within the expected timeframe. There can be no assurance that the conditions to the closing of the Combination will be satisfied or (to the extent permitted) waived or that the Combination will be completed. Also, subject to limited exceptions, either Liberty Broadband or GCI Liberty may terminate the merger agreement if the Combination has not been completed by August 6, 2021, subject to possible extension as set forth in the merger agreement.
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If the Combination is not completed, Liberty Broadband may be materially adversely affected and, without realizing any of the benefits of having completed the Combination, and Liberty Broadband will be subject to a number of risks, including the following:
| ● | the market price of Liberty Broadband common stock could decline; |
| ● | Liberty Broadband could owe a substantial termination fee to GCI Liberty under certain circumstances; |
| ● | if the merger agreement is terminated and Liberty Broadband seeks another business combination, Liberty Broadband may not find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms agreed to in the merger agreement; |
| ● | time and resources, financial and other, committed by Liberty Broadband’s and its subsidiaries’ management to matters relating to the Combination could otherwise have been devoted to pursuing other beneficial opportunities; |
| ● | Liberty Broadband and its subsidiaries may experience negative reactions from the financial markets or from its customers, suppliers or employees; |
| ● | Liberty Broadband will be required to pay its costs relating to the Combination, such as legal, accounting, financial advisory and printing fees, whether or not the Combination is completed; and |
| ● | reputational harm due to the adverse perception of any failure to successfully complete the Combination. |
In addition, if the Combination is not completed, Liberty Broadband could be subject to litigation related to any failure to complete the Combination or related to any enforcement proceeding commenced against it to perform its obligations under the merger agreement. Any of these risks could materially and adversely impact Liberty Broadband’s financial condition, financial results and stock price.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Share Repurchase Programs
In December 2016, the Board of Directors authorized the repurchase of $250 million of Liberty Broadband Series A and Series C common stock. In August 2020, the Board of Directors increased its repurchase authorization by $1.0 billion, with an aggregate repurchase amount not to exceed $1.3 billion.
A summary of the repurchase activity for the three months ended September 30, 2020 is as follows:
Series C Common Stock |
| |||||||||||
|
|
| (c) Total Number |
| (d) Maximum Number |
| ||||||
of Shares | (or Approximate Dollar |
| ||||||||||
Purchased as | Value) of Shares that |
| ||||||||||
(a) Total Number | (b) Average | Part of Publicly | May Yet Be Purchased |
| ||||||||
of Shares | Price Paid per | Announced Plans or | Under the Plans or |
| ||||||||
Period | Purchased | Share | Programs | Programs |
| |||||||
July 1 - 31, 2020 | – | $ | – | – | $202 | million | ||||||
August 1 - 31, 2020 |
| 559,621 | $ | 140.89 | 559,621 | $1,123 | million | |||||
September 1 - 30, 2020 |
| 1,471,865 | $ | 140.55 | 1,471,865 | $917 | million | |||||
Total |
| 2,031,486 | $ | 140.65 |
| 2,031,486 | ||||||
II-3
There were no repurchases of Series A or Series B common stock during the three months ended September 30, 2020.
During the three months ended September 30, 2020, no shares of Liberty Broadband Series A common stock and no shares of Series C common stock were surrendered by our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted stock.
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Item 6. Exhibits
| (a) | Exhibits |
Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):
2.1 | ||
4.1 | ||
10.1 | ||
10.2 | ||
10.3 | ||
31.1 | ||
31.2 | ||
32 | ||
101.INS | XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document* | |
101.CAL | Inline XBRL Taxonomy Calculation Linkbase Document* | |
101.LAB | Inline XBRL Taxonomy Label Linkbase Document* | |
101.PRE | Inline XBRL Taxonomy Presentation Linkbase Document* | |
101.DEF | Inline XBRL Taxonomy Definition Document* | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)* |
* Filed herewith
** Furnished herewith
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| LIBERTY BROADBAND CORPORATION | ||
Date: November 4, 2020 | By: | /s/ GREGORY B. MAFFEI | |
Gregory B. Maffei President and Chief Executive Officer | |||
Date: November 4, 2020 | By: | /s/ BRIAN J. WENDLING | |
Brian J. Wendling Chief Accounting Officer and Principal Financial Officer | |||
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