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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Cable One Inc | NYSE:CABO | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-7.06 | -1.77% | 391.31 | 395.57 | 387.07 | 395.57 | 12,486 | 16:21:43 |
Cable One, Inc. (NYSE: CABO) (the “Company” or “Cable ONE”) today reported financial and operating results for the quarter ended June 30, 2017.
Second quarter 2017 highlights:
“Our second quarter once again yielded strong results as we continue to execute our strategy, with legacy Cable ONE demonstrating top line revenue growth, higher Adjusted EBITDA and industry leading margins,” said Julie Laulis, President and CEO of Cable ONE. “We also are excited about our acquisition of NewWave, and its results are now contributing to our success.”
Second Quarter 2017 Financial Results Compared to Second Quarter 2016
Revenues increased $36.5 million, or 17.8%, due primarily to $32.2 million in revenues attributable to the NewWave operations. For the second quarter of 2017 and 2016, residential data revenues comprised 42.8% and 42.1% of total revenues and business services revenues comprised 13.5% and 12.0% of total revenues, respectively. Excluding the $32.2 million contribution from NewWave in the second quarter of 2017, revenues would have increased $4.3 million, or 2.1%, from the prior year quarter, with increases in residential data and business services more than offsetting decreases in residential video and residential voice.
Operating expenses (excluding depreciation and amortization) were $83.9 million in the second quarter of 2017 and increased $8.2 million, or 10.8%, compared to the second quarter of 2016. Operating expenses as a percentage of revenues were 34.8% for the second quarter of 2017 compared to 37.0% for the year-ago quarter. Additional operating expenses attributable to the NewWave operations were $15.9 million for the second quarter of 2017. This increase was partially offset by a $3.9 million decrease in labor costs associated with our aforementioned change in accounting estimate for capitalized labor costs, a $1.6 million decrease in programming costs resulting from fewer video subscribers and a decrease in backbone and internet connectivity fees. Excluding the impact of the NewWave operations, operating expenses would have been $68.0 million in the second quarter of 2017, a decrease of $7.7 million, or 10.2%. Operating expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 32.6% in the second quarter of 2017 compared to 37.0% in the second quarter of 2016.
Selling, general and administrative expenses increased $7.7 million, or 17.7%, to $51.2 million. Selling, general and administrative expenses as a percentage of revenues were 21.2% and 21.3% for the second quarter of 2017 and 2016, respectively. Additional selling, general and administrative expenses attributable to the NewWave operations were $5.0 million for the second quarter of 2017. The remaining increase was due to higher acquisition-related expenses of $2.8 million and severance costs of $1.3 million, partially offset by a $1.2 million decrease in labor costs in the second quarter of 2017 associated with our aforementioned change in accounting estimate for capitalized labor costs. Excluding the incremental expenses associated with the NewWave operations, selling, general and administrative expenses would have increased $2.7 million, or 6.2%, to $46.2 million. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 22.1% in the second quarter of 2017 compared to 21.3% in the second quarter of 2016.
Depreciation and amortization increased $12.2 million, or 35.2%, including $7.9 million attributable to the NewWave operations. The increase was due primarily to new assets placed in service since the second quarter of 2016, including property, plant and equipment and amortized intangible assets acquired as part of the NewWave acquisition, partially offset by assets that became fully depreciated since the second quarter of 2016. As a percentage of revenues, depreciation and amortization expense was 19.5% for the second quarter of 2017 compared to 17.0% for the second quarter of 2016.
Interest expense increased $4.2 million, or 56.1%, due primarily to additional debt incurred during the second quarter of 2017 to finance the NewWave acquisition.
Net income increased $1.9 million, or 7.3%, to $28.6 million in the second quarter of 2017 compared to $26.6 million in the prior year period. Excluding the impact of the NewWave operations, net income would have been $26.5 million. Without both the NewWave impact and the change in estimate for capitalized labor, net income would have been $23.4 million in the second quarter of 2017.
Adjusted EBITDA was $113.3 million and $89.4 million for the second quarter of 2017 and 2016, respectively. The Adjusted EBITDA growth of 26.8% in the second quarter of 2017 includes the positive impact of the NewWave operations and the aforementioned capitalized labor costs. Without the impact of the NewWave operations, Adjusted EBITDA would have been $102.0 million and Adjusted EBITDA growth would have been 14.2% for the second quarter of 2017. Excluding both the NewWave impact and the change in estimate for capitalized labor, Adjusted EBITDA would have been $96.9 million and Adjusted EBITDA growth would have been 8.4%.
Capital expenditures totaled $40.5 million and $37.6 million for the second quarter of 2017 and 2016, respectively. Adjusted EBITDA less capital expenditures for the second quarter of 2017 was $72.8 million, an increase of $21.1 million, or 40.8%, from the prior year period. Excluding the NewWave operations, capital expenditures would have been $35.5 million. Excluding both the NewWave operations and the change in estimate related to capitalized labor, capital expenditures would have been $30.4 million.
Liquidity and Capital Resources
At June 30, 2017, the Company had $89.8 million of cash and cash equivalents on hand, compared to $138.0 million at December 31, 2016. The Company’s debt balance, excluding unamortized debt issuance costs, was $1.2 billion, which included $750 million of term loan borrowings in connection with the NewWave acquisition, at June 30, 2017 and $545.3 million at December 31, 2016. The Company also had $197.2 million available for borrowing under its revolving credit facility as of June 30, 2017.
Conference Call
Cable ONE will host a conference call with the financial community to discuss results for the second quarter of the 2017 fiscal year on Tuesday, August 8, 2017, at 11 a.m. Eastern Time (ET).
Shareholders, analysts and other interested parties may register for the conference in advance at http://dpregister.com/10109264. Those unable to pre-register may join the call via the live audio webcast on the Cable ONE Investor Relations website or by dialing 1-844-378-6483 (Canada: 1-855-669-9657/International: 1-412-542-4178) shortly before 11 a.m. ET.
A replay of the call will be available from Wednesday, August 9, 2017, until Wednesday, August 23, 2017, on the Cable ONE Investor Relations website.
Additional Information Available on Website
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2017, which will be posted on the “SEC Filings” section of the Cable ONE Investor Relations website at ir.cableone.net when it is filed with the U.S. Securities and Exchange Commission (the “SEC”). Investors and others interested in more information about Cable ONE should consult our website, which is regularly updated with financial and other important information about the Company.
Use of Non-GAAP Financial Metrics
The Company uses certain measures that are not defined by generally accepted accounting principles in the United States (“GAAP”) to evaluate various aspects of its business. Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures are non-GAAP financial measures and should be considered in addition to, not as a substitute for, net income, net profit margin or net cash provided by operating activities reported in accordance with GAAP. These terms, as defined by Cable ONE, may not be comparable to similarly titled measures reported by other companies. Adjusted EBITDA and Adjusted EBITDA less capital expenditures are reconciled to net income, and Adjusted EBITDA margin is reconciled to net profit margin, in the “Reconciliations of Non-GAAP Measures” tables within this press release. Adjusted EBITDA less capital expenditures is also reconciled to net cash provided by operating activities in the “Reconciliations of Non-GAAP Measures” tables within this press release.
“Adjusted EBITDA” is defined as net income plus interest expense, provision for income taxes, depreciation and amortization, equity-based compensation expense, severance expense, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on disposal of assets, other (income) expense, net and other unusual operating expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of the Company’s business as well as other non-cash or special items and is unaffected by the Company’s capital structure or investment activities. This measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues and the Company’s cash cost of financing. These costs are evaluated through other financial metrics.
“Adjusted EBITDA margin” is defined as Adjusted EBITDA divided by total revenues.
“Adjusted EBITDA less capital expenditures,” when used as a liquidity measure, is calculated as net cash provided by operating activities excluding the impact of capital expenditures, interest expense, provision for income taxes, changes in operating assets and liabilities and other unusual operating expenses, as provided in the “Reconciliations of Non-GAAP Measures” tables within this press release.
The Company uses Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures to assess its performance, and it also uses Adjusted EBITDA less capital expenditures as an indicator of its ability to fund operations and make additional investments with internally-generated funds. In addition, Adjusted EBITDA generally correlates to the leverage ratio calculation under the Company’s credit facilities and outstanding 5.75% senior unsecured notes due 2022 to determine compliance with the covenants contained in the facilities and notes. For the purpose of calculating compliance with leverage covenants, the Company uses a measure similar to Adjusted EBITDA, as presented. Adjusted EBITDA and capital expenditures are also significant performance measures used by the Company in its annual incentive compensation program. Adjusted EBITDA does not take into account cash used for mandatory debt service requirements or other non-discretionary expenditures, and thus does not represent residual funds available for discretionary uses.
The Company believes Adjusted EBITDA and Adjusted EBITDA margin are useful to investors in evaluating the operating performance of the Company. The Company believes that Adjusted EBITDA less capital expenditures is useful to investors as it shows the Company’s performance while taking into account cash outflows for capital expenditures and is one of several indicators of the Company’s ability to service debt, make investments and/or return capital to its shareholders.
Adjusted EBITDA, Adjusted EBITDA margin, Adjusted EBITDA less capital expenditures and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in the Company’s industry, although the Company’s measures of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA less capital expenditures may not be directly comparable to similarly titled measures reported by other companies.
About Cable ONE
Cable One, Inc. (NYSE: CABO) is the seventh-largest cable company in the United States. Serving more than 800,000 customers in 21 states with high-speed internet, cable television and telephone service, Cable ONE provides consumers with a wide range of the latest products and services, including wireless internet service, high-definition programming and phone service with free, unlimited long-distance calling in the continental U.S.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This communication contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about the cable industry and our business and financial results. Forward-looking statements often include words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors:
Any forward-looking statements made by us in this communication speak only as of the date on which they are made. We are under no obligation to, and expressly disclaim any obligation to, update or alter our forward-looking statements, whether as a result of new information, subsequent events or otherwise.
CABLE ONE, INC.CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME(Unaudited)
Three Months EndedJune 30,
(dollars in thousands, except per share and share data) 2017 2016$ Change
% Change Revenues Residential data $ 103,155 $ 86,031 $ 17,124 19.9 % Residential video 84,873 74,016 10,857 14.7 % Residential voice 11,417 10,944 473 4.3 % Business services 32,543 24,491 8,052 32.9 % Advertising sales 5,970 6,616 (646 ) (9.8)%
Other 3,084 2,459 625 25.4 % Total Revenues 241,042 204,557 36,485 17.8 % Costs and Expenses Operating (excluding depreciation and amortization) 83,849 75,672 8,177 10.8 % Selling, general and administrative 51,194 43,482 7,712 17.7 % Depreciation and amortization 46,890 34,689 12,201 35.2 % (Gain) loss on disposal of assets 462 157 305 194.3 % Total operating costs and expenses 182,395 154,000 28,395 18.4 % Income from operations 58,647 50,557 8,090 16.0 % Interest expense (11,782 ) (7,549 ) (4,233 ) 56.1 % Other income (expense), net (322 ) 183 (505 ) NM Income before income taxes 46,543 43,191 3,352 7.8 % Provision for income taxes 17,967 16,558 1,409 8.5 % Net income $ 28,576 $ 26,633 $ 1,943 7.3 % Other comprehensive gain (loss), net of tax 2 (28 ) Comprehensive income $ 28,578 $ 26,605 Net income per common share: Basic $ 5.03 $ 4.64 Diluted $ 4.97 $ 4.62 Weighted average common shares outstanding: Basic 5,678,394 5,743,465 Diluted 5,745,617 5,766,312 NM = Not meaningful.CABLE ONE, INC.CONSOLIDATED BALANCE SHEETS
(Unaudited) (in thousands, except par value and share data) June 30, 2017 December 31, 2016 Assets Current Assets: Cash and cash equivalents $ 89,793 $ 138,040 Accounts receivable, net 45,812 32,526 Income tax receivable 16,539 4,547 Prepaid assets 13,256 10,824 Total Current Assets 165,400 185,937 Property, plant and equipment, net 803,383 619,621 Intangibles, net 971,673 497,480 Goodwill 178,374 84,928 Other assets 5,664 9,305 Total Assets $ 2,124,494 $ 1,397,271 Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 86,601 $ 82,703 Deferred revenue 36,795 22,190 Long-term debt - current portion 11,250 6,250 Total Current Liabilities 134,646 111,143 Long-term debt 1,167,458 530,886 Deferred income taxes 294,850 276,297 Accrued compensation and other liabilities 24,392 24,434 Total Liabilities 1,621,346 942,760 Stockholders' EquityPreferred stock ($0.01 par value; 4,000,000 shares authorized;none issued or outstanding)
- -Common stock ($0.01 par value; 40,000,000 shares authorized;5,887,899 shares issued; and 5,725,095 and 5,708,223 sharesoutstanding as of June 30, 2017 and December 31, 2016, respectively)
59 59Additional paid-in capital
22,514 17,669 Retained earnings 556,401 511,776 Accumulated other comprehensive loss(442
)
(446
)
Treasury stock, at cost (162,804 and 179,676 shares held as ofJune 30, 2017 and December 31, 2016, respectively)
(75,384
)
(74,547
)
Total Stockholders’ Equity 503,148 454,511 Total Liabilities and Stockholders' Equity $ 2,124,494 $ 1,397,271
CABLE ONE, INC.RECONCILIATIONS OF NON-GAAP MEASURES(Unaudited)
Three Months EndedJune 30,
(dollars in thousands) 2017 2016$ Change
% Change Net income (1) $ 28,576 $ 26,633 $ 1,943 7.3 % Net profit margin 11.9 % 13.0 % Plus: Interest expense 11,782 7,549 4,233 56.1 % Provision for income taxes 17,967 16,558 1,409 8.5 % Depreciation and amortization 46,890 34,689 12,201 35.2 % Equity-based compensation expense 2,418 3,420 (1,002 ) (29.3 )% Severance expense 1,345 - 1,345 NM (Gain) loss on deferred compensation 339 100 239 239.0 % Acquisition-related costs 3,242 445 2,797 NM (Gain) loss on disposal of assets 462 157 305 194.3 % Other (income) expense, net 322 (183)
505 NM Adjusted EBITDA (1) $ 113,343 $ 89,368 $ 23,975 26.8 % Adjusted EBITDA margin 47.0 % 43.7 % Less: Capital expenditures (1) 40,513 37,628 2,885 7.7 % Adjusted EBITDA less capital expenditures $ 72,830 $ 51,740 $ 21,090 40.8 % NM = Not meaningful.
(1) Net income, Adjusted EBITDA and capital expenditures for the second quarter of 2017 include two months of NewWave operations. Net income and Adjusted EBITDA for the second quarter of 2017 also include the favorable impact of a reduction in expense, and capital expenditures include the unfavorable impact in additional expenditures, of $5.1 million due to a change in accounting estimate related to capitalized labor costs. Without the contribution from NewWave operations, net income would have been $26.5 million, Adjusted EBITDA growth would have been 14.2%, and capital expenditures would have been $35.5 million. Excluding both the NewWave impact and the change in estimate related to capitalized labor, net income would have been $23.4 million, Adjusted EBITDA growth would have been 8.4% and capital expenditures would have been $30.4 million.
Three Months EndedJune 30,
(dollars in thousands) 2017 2016$ Change
% Change Net cash provided by operating activities $ 52,598 $ 48,041 $ 4,557 9.5 % Amortization of debt issuance costs (791 ) (405 ) (386 ) 95.3 % (Provision) benefit for deferred income taxes (7,360 ) 660 (8,020 ) NM Changes in operating assets and liabilities 34,512 16,603 17,909 107.9 % Interest expense 11,782 7,549 4,233 56.1 % Provision for income taxes 17,967 16,558 1,409 8.5 % Severance expense 1,345 - 1,345 NM (Gain) loss on deferred compensation 339 100 239 239.0 % Acquisition-related costs 3,242 445 2,797 NM Write-off of debt issuance costs (613 ) - (613 ) NM Other (income) expense, net 322 (183 ) 505 NM Capital expenditures (40,513 ) (37,628 ) (2,885 ) 7.7 % Adjusted EBITDA less capital expenditures $ 72,830 $ 51,740 $ 21,090 40.8 % NM = Not meaningful.CABLE ONE, INC.OPERATING STATISTICS(Unaudited)
As of June 30, Year-Over-Year Change 2017 2016 % Legacy CABO NewWave Consolidated Historical Legacy CABO Consolidated Homes Passed 1,681,279 446,909 2,128,188 1,653,021 1.7 % 28.7 % Total Customers 655,309 150,174 805,483 659,943 (0.7 )% 22.1 % Non-video 356,812 N/A N/A 316,745 12.6 % N/A Percent of total 54.4 % N/A N/A 48.0 % Residential Customers 601,883 139,342 741,225 610,293 (1.4 )% 21.5 % Data PSUs 474,815 110,234 585,049 465,603 2.0 % 25.7 % Video PSUs 284,695 82,121 366,816 324,982 (12.4 )% 12.9 % Voice PSUs 92,100 22,419 114,519 103,806 (11.3 )% 10.3 % Total residential PSUs 851,610 214,774 1,066,384 894,391 (4.8 )% 19.2 % Business Customers 53,426 10,832 64,258 49,650 7.6 % 29.4 % Data PSUs 46,909 8,379 55,288 42,714 9.8 % 29.4 % Video PSUs 13,295 3,893 17,188 13,992 (5.0 )% 22.8 % Voice PSUs 19,156 4,611 23,767 17,134 11.8 % 38.7 % Total business PSUs 79,360 16,883 96,243 73,840 7.5 % 30.3 % Penetration Data 31.0 % 26.5 % 30.1 % 30.8 % 0.2 % (0.7 )% Video 17.7 % 19.2 % 18.0 % 20.5 % (2.8 )% (2.5 )% Voice 6.6 % 6.0 % 6.5 % 7.3 % (0.7 )% (0.8 )% Share of Second Quarter Revenues Residential data 44.2 % 33.4 % 42.8 % 42.1 % 2.1 % 0.7 % Business services 13.4 % 14.4 % 13.5 % 12.0 % 1.4 % 1.5 % Total 57.6 % 47.8 % 56.3 % 54.1 % 3.5 % 2.2 % ARPUs – Second Quarter Residential data (1) $ 64.70 $ 48.50 $ 62.52 $ 61.49 5.2 % 1.7 % Residential video (1) $ 81.65 $ 84.52 $ 82.11 $ 74.59 9.5 % 10.1 % Residential voice (1) $ 34.98 $ 35.82 $ 35.09 $ 34.55 1.2 % 1.6 % Business services (2) $ 175.69 $ 214.93 $ 180.38 $ 166.61 5.4 % 8.3 % Number of Associates 1,850 552 2,402 1,932 (4.2 )% 24.3 %(1) Average monthly per unit values represent the applicable residential service revenues divided by the corresponding average of the number of PSUs at the beginning and end of each period, except that for any new PSUs added as a result of an acquisition occurring during the reporting period, the associated average monthly per unit values represent the applicable residential service revenues divided by the corresponding weighted average of the number of PSUs during such period.
(2) Average monthly per unit values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, except that for any new business customer relationships added as a result of an acquisition occurring during the reporting period, the associated average monthly per unit values represent business services revenues divided by the weighted average of the number of business customer relationships during such period.
N/A = Information not available.
View source version on businesswire.com: http://www.businesswire.com/news/home/20170808005465/en/
Cable One, Inc.Trish Niemann, 602-364-6372Corporate Communications DirectororKevin Coyle, 602-364-6505Chief Financial Officer
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