UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, ~~2018~~2019

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

Commission File Number: 001-36863

Cable One, Inc.

(Exact name of registrant as specified in its charter)

Delaware		13-3060083
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

210 E. Earll Drive, Phoenix, Arizona		85012
(Address of Principal Executive Offices)		(Zip Code)

(602) 364-6000

(Registrant’s ~~telephone number, including area code)~~Telephone Number, Including Area Code)

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

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, par value $0.01		CABO		New York Stock Exchange

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes ☑ No ☐

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

Large accelerated filer	☑	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
~~(Do not check if a smaller reporting company)~~
		Emerging growth company	☐

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

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

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

Description of Class	Shares Outstanding as of May ~~4, 2018~~3, 2019
Common stock, par value $0.01	~~5,727,206~~5,699,603

Table of Contents

CABLE ONE, INC.

FORM 10-Q

TABLE OF CONTENTS

PART I: FINANCIAL INFORMATION		1

Item 1.	Condensed Consolidated Financial Statements	1

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29

Item 4.	Controls and Procedures	29

PART II: OTHER INFORMATION		2930

Item 1.	Legal Proceedings	2930

Item 1A.	Risk Factors	30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30

Item 3.	Defaults Upon Senior Securities	30

Item 4.	Mine Safety Disclosures	30

Item 5.	Other Information	30

Item 6. ~~Exhibits~~	Exhibits	3031

SIGNATURES		32

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CABLE ONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands, except par value and share data)	March 31, 2018			December 31, 2017
(dollars in thousands, except par values)							March 31, 2019			December 31, 2018
Assets
Current Assets:
Cash and cash equivalents	$	185,493		$	161,752		$	187,559		$	264,113
Accounts receivable, net		25,477			29,930			28,410			29,947
Income taxes receivable		16,782			21,331			4,658			10,713
Prepaid and other current assets		19,474			10,898			21,742			13,090
Total Current Assets		247,226			223,911			242,369			317,863
Property, plant and equipment, net		820,009			831,892			965,396			847,979
Intangibles, net		962,933			965,745
Intangible assets, net								1,039,427			953,851
Goodwill		172,129			172,129			355,347			172,129
Other assets		11,489			10,955
Other noncurrent assets								21,698			11,412
Total Assets	$	2,213,786		$	2,204,632		$	2,624,237		$	2,303,234

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	98,379		$	117,855		$	92,216		$	94,134
Deferred revenue		17,780			15,008			24,096			18,954
Current portion of long-term debt		15,938			14,375			24,892			20,625
Total Current Liabilities		132,097			147,238			141,204			133,713
Long-term debt		1,157,273			1,160,682			1,385,475			1,142,056
Deferred income taxes		212,864			207,154			269,816			242,127
Other liabilities		11,642			13,111
Other noncurrent liabilities								58,707			9,980
Total Liabilities		1,513,876			1,528,185			1,855,202			1,527,876

Commitments and contingencies (refer to note 14)

Stockholders' Equity
Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding)		-			-			-			-
Common stock ($0.01 par value; 40,000,000 shares authorized; 5,887,899 shares issued; and 5,732,441 and 5,731,442 shares outstanding as of March 31, 2018 and December 31, 2017, respectively)		59			59
Common stock ($0.01 par value; 40,000,000 shares authorized; 5,887,899 shares issued; and 5,699,330 and 5,703,402 shares outstanding as of March 31, 2019 and December 31, 2018, respectively)								59			59
Additional paid-in capital		30,750			28,412			41,919			38,898
Retained earnings		759,004			728,386			877,644			850,292
Accumulated other comprehensive loss		(351	)		(352	)		(29,165	)		(96	)
Treasury stock, at cost (155,458 and 156,457 shares held as of March 31, 2018 and December 31, 2017, respectively)		(89,552	)		(80,058	)
Treasury stock, at cost (188,569 and 184,497 shares held as of March 31, 2019 and December 31, 2018, respectively)								(121,422	)		(113,795	)
Total Stockholders' Equity		699,910			676,447			769,035			775,358
Total Liabilities and Stockholders' Equity	$	2,213,786		$	2,204,632		$	2,624,237		$	2,303,234

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended						Three Months Ended
	March 31,						March 31,
(in thousands, except per share and share data)	2018			2017
(dollars in thousands, except per share data)							2019			2018
Revenues	$	265,761		$	207,434		$	278,605		$	265,761
Costs and expenses
Costs and Expenses:
Operating (excluding depreciation and amortization)		94,739			69,083			94,518			94,739
Selling, general and administrative		50,949			46,385			61,443			50,949
Depreciation and amortization		48,778			39,536			53,844			48,778
(Gain) loss on disposal of assets, net		6,634			(6,146	)
Total costs and expenses		201,100			148,858
Loss on asset disposals, net								1,103			6,634
Total Costs and Expenses								210,908			201,100
Income from operations		64,661			58,576			67,697			64,661
Interest expense		(14,723	)		(7,606	)		(18,096	)		(14,723	)
Other income (expense), net		617			287
Other income, net								1,802			617
Income before income taxes		50,555			51,257			51,403			50,555
Income tax provision		9,902			19,144			12,664			9,902
Net income	$	40,653		$	32,113		$	38,739		$	40,653

Net income per common share:
Net Income per Common Share:
Basic	$	7.13		$	5.66		$	6.83		$	7.13
Diluted	$	7.08		$	5.60		$	6.78		$	7.08
Weighted average common shares outstanding:
Weighted Average Common Shares Outstanding:
Basic		5,702,539			5,671,838			5,674,120			5,702,539
Diluted		5,742,648			5,730,901			5,716,585			5,742,648

Other comprehensive gain (loss), net of tax	$	1		$	2
Deferred gain (loss) on cash flow hedges and other, net of tax							$	(29,069	)	$	1
Comprehensive income	$	40,654		$	32,115		$	9,670		$	40,654

Dividends declared per common share	$	1.75		$	1.50

See accompanying notes to the condensed consolidated financial statements.

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CABLE ONE, INC.

CONDENSED CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited)

						Additional					Treasury			Accumulated Other			Total								Additional					Accumulated Other			Treasury			Total
	Common Stock					Paid-In		Retained			Stock,			Comprehensive			Stockholders’			Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’
(in thousands, except share data)	Shares			Amount		Capital		Earnings			at cost			Loss			Equity
Balance at December 31, 2017		5,731,442		$	59	$	28,412	$	728,386		$	(80,058	)	$	(352	)	$	676,447
(dollars in thousands, except per share data)																				Shares			Amount		Capital		Earnings			Loss			at cost			Equity
Balance at December 31, 2018																					5,703,402		$	59	$	38,898	$	850,292		$	(96	)	$	(113,795	)	$	775,358
Lease accounting standard adoption cumulative adjustment																					-			-		-		8			-			-			8
Net income		-			-		-		40,653			-			-			40,653			-			-		-		38,739			-			-			38,739
Changes in pension, net of tax		-			-		-		-			-			1			1
Deferred loss on cash flow hedges and other, net of tax																					-			-		-		-			(29,069	)		-			(29,069	)
Equity-based compensation		-			-		2,338		-			-			-			2,338			-			-		3,021		-			-			-			3,021
Issuance of equity awards, net of forfeitures		14,077			-		-		-			-			-			-			5,222			-		-		-			-			-			-
Repurchases of common stock		(3,311	)		-		-		-			(2,295	)		-			(2,295	)		(5,984	)		-		-		-			-			(5,073	)		(5,073	)
Withholding tax for equity awards		(9,767	)		-		-		-			(7,199	)		-			(7,199	)		(3,310	)		-		-		-			-			(2,554	)		(2,554	)
Dividends paid to stockholders		-			-		-		(10,035	)		-			-			(10,035	)
Balance at March 31, 2018		5,732,441		$	59	$	30,750	$	759,004		$	(89,552	)	$	(351	)	$	699,910
Dividends paid to stockholders ($2.00 per common share)																					-			-		-		(11,395	)		-			-			(11,395	)
Balance at March 31, 2019																					5,699,330		$	59	$	41,919	$	877,644		$	(29,165	)	$	(121,422	)	$	769,035

						Additional					Accumulated Other			Treasury			Total
	Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’
(dollars in thousands, except per share data)	Shares			Amount		Capital		Earnings			Loss			at cost			Equity
Balance at December 31, 2017		5,731,442		$	59	$	28,412	$	728,386		$	(352	)	$	(80,058	)	$	676,447
Net income		-			-		-		40,653			-			-			40,653
Changes in pension, net of tax		-			-		-		-			1			-			1
Equity-based compensation		-			-		2,338		-			-			-			2,338
Issuance of equity awards, net of forfeitures		14,077			-		-		-			-			-			-
Repurchases of common stock		(3,311	)		-		-		-			-			(2,295	)		(2,295	)
Withholding tax for equity awards		(9,767	)		-		-		-			-			(7,199	)		(7,199	)
Dividends paid to stockholders ($1.75 per common share)		-			-		-		(10,035	)		-			-			(10,035	)
Balance at March 31, 2018		5,732,441		$	59	$	30,750	$	759,004		$	(351	)	$	(89,552	)	$	699,910

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,							Three Months Ended March 31,
(in thousands)	2018			2017
(in thousands)								2019			2018
Cash flows from operating activities:
Net income	$	40,653		$	32,113			$	38,739		$	40,653
Adjustments to reconcile net income to net cash provided by operating activities:							Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		48,778			39,536				53,844			48,778
Amortization of debt issuance cost		970			400				1,118			970
Equity-based compensation		2,338			2,427				3,021			2,338
Change in deferred income taxes		5,710			(203	)
(Gain) loss on disposal of assets, net		6,634			(6,146	)
Changes in operating assets and liabilities:
Accounts receivable, net		4,453			2,009
Income taxes receivable		4,549			4,547
Prepaid and other current assets		(8,576	)		(3,336	)
Accounts payable and accrued liabilities		(11,663	)		(7,977	)
Deferred revenue		2,772			527
Income taxes payable		-			14,758
Other assets and liabilities, net		(1,926	)		(395	)
Increase (decrease) in deferred income taxes									7,102			5,710
Loss on asset disposals, net									1,103			6,634
Changes in operating assets and liabilities, net of effects from acquisitions:
Decrease in accounts receivable, net									2,831			4,453
Decrease in income taxes receivable									6,055			4,549
Increase in prepaid and other current assets									(8,341	)		(8,576	)
Increase (decrease) in accounts payable and accrued liabilities									1,442			(11,663	)
Increase in deferred revenue									820			2,772
Other, net									(3,356	)		(1,926	)
Net cash provided by operating activities		94,692			78,260				104,378			94,692

Cash flows from investing activities:
Purchase of business, net of cash acquired									(356,917	)		-
Capital expenditures		(41,019	)		(35,917	)			(46,627	)		(41,019	)
Change in accrued expenses related to capital expenditures		(4,826	)		(1,143	)
Decrease in accrued expenses related to capital expenditures									(7,751	)		(4,826	)
Proceeds from sales of property, plant and equipment		226			10,075				6,326			226
Net cash used in investing activities		(45,619	)		(26,985	)			(404,969	)		(45,619	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt									250,000			-
Payment of debt issuance costs									(2,410	)		-
Payments on long-term debt		(2,816	)		(1,254	)			(4,531	)		(2,816	)
Repurchases of common stock		(2,295	)		(399	)			(5,073	)		(2,295	)
Payment of withholding tax for equity awards		(7,199	)		(331	)			(2,554	)		(7,199	)
Dividends paid to stockholders		(10,035	)		(8,579	)			(11,395	)		(10,035	)
Change in cash overdraft		(2,987	)		(5,285	)			-			(2,987	)
Net cash used in financing activities		(25,332	)		(15,848	)
Net cash provided by (used in) financing activities									224,037			(25,332	)

Change in cash and cash equivalents		23,741			35,427
Increase (decrease) in cash and cash equivalents									(76,554	)		23,741
Cash and cash equivalents, beginning of period		161,752			138,040				264,113			161,752
Cash and cash equivalents, end of period	$	185,493		$	173,467			$	187,559		$	185,493

Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized interest	$	7,072		$	743			$	9,421		$	7,072
Cash paid for income taxes, net of refunds	$	35		$	42
Cash paid for income taxes, net of refunds received								$	(59	)	$	35

See accompanying notes to the condensed consolidated financial statements.

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CABLE ONE, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. ~~DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION~~

DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

Description of Business. Cable One, Inc. ~~(“Cable One”) owns and operates cable systems that provide data, video and voice services to residential and commercial subscribers in~~ 21 ~~Western, Midwestern and Southern states of the United States. As of~~ ~~March 31, 2018,~~ ~~Cable One provided service to~~ ~~651,550~~ ~~data customers,~~ ~~350,874~~ ~~video customers and~~ ~~131,920~~ ~~voice customers.~~

On ~~May 1, 2017,~~ ~~Cable One completed the acquisition of all of the outstanding equity interests of RBI Holding LLC (“NewWave”)~~, ~~which became a~~together with its wholly owned ~~subsidiary of Cable One. Refer to note~~ 4 ~~for details on the transaction and note~~ 8 ~~for details on the related financing.~~

~~Unless otherwise stated or the context otherwise indicates, all references in this Quarterly Report on Form~~ 10~~-Q to~~subsidiaries (collectively, “Cable One,” “us,” “our,” “we” or the “Company” ~~refer~~) is a fully integrated provider of data, video and voice services to residential and business subscribers in 21 Western, Midwestern and Southern U.S. states. As of March 31, 2019, Cable One ~~Inc.~~provided service to 818,330 residential and ~~its wholly owned subsidiaries.~~business customers, of which 678,385 subscribed to data services, 320,611 subscribed to video services and 125,486 subscribed to voice services.

On January 8, 2019, the Company acquired Delta Communications, L.L.C. (“Clearwave”) for a purchase price of $358.8 million in cash on a debt-free basis. Refer to note 2 for details on this transaction and note 7 for details on the related financing.

Basis of Presentation. The condensed consolidated financial statements and accompanying notes thereto have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“GAAP”) for interim financial information; and (ii) the guidance of Rule 10-0110-01 of Regulation S-XS-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the Securities and Exchange Commission (the “SEC”). As permitted under such guidance, certain notes and other financial information normally required by GAAP have been omitted. Management believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash flows as of and for the periods presented herein. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K10-K for the fiscal year ended December 31, ~~2017~~ ~~filed with the SEC on~~ ~~March 1,~~ 2018 (~~the~~ ~~“2017~~(the “2018 Form 10~~-K”~~10-K”).

The December 31, ~~2017~~ 2018 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the 2018 Form 10-K, but does not include all disclosures required by GAAP. The Company’s interim results of operations may not be indicative of its future results.

Certain amounts in the tables in this Quarterly Report on Form 10-Q may not foot due to rounding.

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

Segment Reporting. Accounting Standard Codification (“ASC”) 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. The Company’s operations are organized and managed on the basis of ~~cable~~operating systems within its geographic ~~regions.~~divisions. Each ~~cable~~operating system derives revenues from the delivery of similar products and services to a customer base that is also similar. Each ~~cable~~operating system deploys similar technology to deliver the Company’s products and services, operates within a similar regulatory environment, has similar economic characteristics and is managed by the Company’s chief operating decision maker as part of an aggregate of all ~~cable~~operating systems. Management evaluated the criteria for aggregation under ASC 280 and ~~believes~~has concluded that the Company meets each of the respective criteria set forth therein. Accordingly, management has identified one reportable segment.

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

~~Revenue Recognition.~~ ~~The Company recognizes revenue in accordance with ASC~~ ~~606~~ - ~~Revenue from Contracts with Customers~~. Residential revenues are generated through subscriptions for data, video and voice services, which are sold individually and through bundles, typically at a discounted rate on month to month terms, without penalty for cancellations. If a customer has bundled subscriptions, the sales price is allocated amongst the product lines based on the relative standalone selling prices charged to customers with unbundled service agreements. Business revenues are generated through subscriptions for data, video and voice services which are also sold individually and through bundles with varying contract terms ranging from ~~one~~ ~~month to several years.~~

~~Table of Contents~~

The Company generally receives an allocation of scheduled advertising time as part of its distribution agreement with cable networks, which the Company sells to local, regional and national advertisers with terms that are generally less than ~~one~~ year. In most cases, the available advertising time is sold by the Company’s internal sales force. Since the Company is acting as principal in these arrangements, the advertising that is sold is reported as revenue on a gross basis. In cases where advertising time is sold by agencies, the Company is ~~not~~ ~~acting as a principal and the advertising sold is reported net of agency fees. Advertising revenues are recognized when the commercials are aired.~~

~~The unit of account for ASC~~ ~~606~~ is a performance obligation, which is a requirement within a contract to transfer a distinct good or service to a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, performance is satisfied. Our residential and business portfolio ~~may~~ include a single performance obligation or multiple performance obligations that are delivered in a similar pattern of transfer. Customers are billed for various services to which they subscribe based upon published or contracted rates for each service. For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation based on the published or contracted rate. These performance obligations are generally satisfied over time as customers simultaneously receive and consume the benefits of the Company’s defined performance obligations. Advertising revenues are recognized at a point in time when the underlying performance obligation is complete.

~~The Company also incurs incremental internal costs to acquire residential and business customers, such as commission costs, and~~ ~~third~~-party costs to service specific contracts. These costs are capitalized as contract assets and amortized over the applicable period. For commissions, the amortization period is the average customer tenure, which was approximately ~~five~~ ~~years for both residential and business customers. All other costs are amortized over the contract period.~~

Recently Adopted Accounting Pronouncements. In ~~May 2017,~~ June 2018, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No.~~2017~~-~~09,~~ 2018-07, Compensation – Stock Compensation (Topic ~~718~~)718): ~~Scope of Modification~~Improvements to Nonemployee Share-Based Payment Accounting. ASU ~~2017~~-09 ~~provides guidance about which changes~~2018-07 expands the scope of ASC 718 to ~~the terms or conditions of a~~include share-based payment ~~award require an entity to apply modification accounting in accordance with Topic~~ ~~718.~~transactions for acquiring goods and services from nonemployees. The ASU was effective January 1, ~~2018.~~ 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial ~~statements, but~~ ~~may~~ ~~have an impact in the future.~~statements.

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In ~~January~~August 2017, the FASB issued ASU No.~~2017~~-~~04,~~ 2017-12, ~~Intangibles~~~~- Goodwill~~Derivatives and ~~Other~~Hedging (Topic ~~350~~)815): ~~Simplifying the Test~~Targeted Improvements to Accounting for ~~Goodwill Impairment.~~Hedging Activities. ASU ~~2017~~-04 ~~removes Step~~ ~~two~~2017-12 improves the financial reporting of hedging relationships to better portray the ~~previous goodwill impairment test~~economic results of an entity’s risk management activities in its financial statements and also simplifies the application of hedge accounting under ~~ASC~~ ~~350~~ ~~and replaces it with a simplified model. Under the simplified model, goodwill impairment will be calculated as the difference between the carrying amount of a reporting unit and its fair value, but~~ ~~not~~ ~~to exceed the carrying amount of goodwill. The amount of any impairment under the simplified model~~ ~~may~~ ~~differ from what would have been recognized under the previous~~ ~~two~~~~-step test.~~GAAP. The ASU iswas effective ~~for annual and any interim impairment tests performed for periods beginning after~~ ~~December 15, 2019,~~ ~~with early adoption permitted. The Company elected to early adopt the standard on~~ January 1, ~~2018.~~ 2019. The adoption of this guidance did not have a material impact on the Company’s consolidated financial ~~statements, but~~ ~~may~~ ~~have an impact in the future.~~statements.

In ~~January 2017,~~ February 2016, the FASB issued ASU No.~~2017~~-~~01,~~~~Business Combinations (Topic~~ ~~805~~~~): Clarifying the Definition of a Business~~. The purpose of the amendment is to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The ASU was effective ~~January 1, 2018.~~ ~~The adoption of this guidance did~~ ~~not~~ ~~have an impact on the Company’s consolidated financial statements as~~ no ~~asset acquisitions or business combinations have occurred since the effective date, but~~ ~~may~~ ~~have an impact in the future.~~

In ~~August 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~15,~~~~Statement of Cash Flows (Topic~~ ~~230~~): ~~Classification of Certain Cash Receipts and Cash Payments~~. The guidance clarifies the way in which certain cash receipts and cash payments should be classified within the consolidated statements of cash flows and also how the predominance principle should be applied when cash receipts and cash payments have aspects of more than ~~one~~ ~~class of cash flows. ASU~~ ~~2016~~-15 ~~was effective~~ ~~January 1, 2018.~~ ~~The adoption of this guidance did~~ ~~not~~ ~~have a material impact on the classification of any cash flows within the Company’s consolidated statements of cash flows, but~~ ~~may~~ ~~have an impact in the future.~~

In ~~May 2014,~~ ~~the FASB issued ASU~~ ~~No.~~~~2014~~-~~09,~~~~Revenue from Contracts with Customers~~ ~~(Topic~~ ~~606~~~~). ASU~~ ~~2014~~-09 provides new guidance related to how an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard provides a single principles-based, ~~five~~ step model to be applied to all contracts with customers: (i) identify the contract(s) with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract and (v) recognize revenue when each performance obligation is satisfied. The updated guidance also requires additional disclosures regarding the nature, timing and any uncertainty regarding potential revenue recognition.

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~~We adopted the updated guidance on~~ ~~January 1, 2018~~ on a full retrospective basis, which required us to reflect the impact of the updated guidance for all periods presented. Upon adoption, we also implemented changes in our presentation of certain revenues and expenses, which resulted in the deferral of all business installation revenues and residential and business commission expenses over a period of time instead of immediate recognition. The adoption of the new standard did ~~not~~ ~~have a material impact on our consolidated results of operations or financial position for any period presented. Refer to note~~ 3 ~~for further details of the impact on the Company’s~~ ~~2017~~ ~~condensed consolidated financial statements and the requisite disclosures regarding the nature, timing and any uncertainty regarding potential revenue recognition.~~

~~Recently Issued~~ ~~But~~ ~~Not~~ ~~Yet Adopted~~ ~~Accounting Pronouncements.~~ In ~~February 2016,~~ ~~the FASB issued ASU~~ ~~No.~~~~2016~~-~~02,~~ 2016-02, Leases (Topic ~~842~~)842). ASU ~~2016~~-022016-02 requires lessees to record ~~most~~substantially all of their leases on the balance sheet as a right-of-use (“ROU”) asset and a corresponding lease ~~liability.~~liability with the exception of short-term leases. The Company ~~will be~~is required to classify each separate lease component as an operating or a finance lease at the lease commencement date. Initial measurement of the ~~right-of-use~~ROU asset and lease liability is the same for both operating and finance leases, however, expense recognition and amortization of the ~~right-of-use~~ROU asset differs. Operating leases ~~will~~ reflect lease expense on a straight-line basis similar to ~~current~~previous operating leases while finance leases ~~will~~ reflect a front-loaded expense pattern similar to ~~current~~previous capital leases. The Company adopted the updated guidance on January 1, 2019.

With respect to the adoption of ASU ~~2016~~-022016-02, the Company elected the “Comparatives Under 840 Option” approach to transition. Under this method, financial information related to periods prior to adoption is ~~effective for~~as originally reported under ASC 840 - Leases. Upon adoption on January 1, 2019, the ~~first~~ ~~quarter~~Company recorded ROU assets of ~~2019,~~ ~~with early adoption permitted.~~$14.9 million and lease liabilities of $13.3 million. The adoption of this ~~update will result~~guidance did not have a material impact on Company’s consolidated financial statements.

The new standard provides several optional practical expedients in transition. The Company elected the lessee and lessor transition package of three practical expedients permitted within the standard, which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and initial direct costs.

The Company also made certain lessee accounting policy elections, including a short-term lease exception policy, permitting the exclusion of short-term leases (leases with terms of 12 months or less) from the recognition requirements of the standard, and an ~~increase~~accounting policy to account for lease and non-lease components as a single component for all classes of assets. The portfolio approach, which allows a lessee to account for its leases at a portfolio level, was elected for certain equipment and fiber leases in which the ~~Company’s~~difference in accounting for each asset separately would not have been materially different from accounting for the assets as a combined unit. As a lessee, the Company also elected the practical expedient not to reevaluate whether any expired or existing land easements are, or contain, leases.

The Company provides residential and ~~liability balances due~~business customers with certain hardware to deliver data, video and voice services. As a lessor, the Company elected the practical expedient not to separate lease components from the associated non-lease component for all classes of assets. The Company concluded the non-lease components would otherwise be accounted for under the new revenue recognition standard and ~~existing operating leases being recorded~~both the timing and pattern of transfer are the same for the non-lease components and associated lease component based on the ~~balance sheet.~~interrelated nature of the services provided and the underlying leased hardware and, if accounted for separately, the lease component would be classified as an operating lease.

Refer to note 6 for the requisite disclosures regarding the amount, timing and any uncertainty regarding lease-related cash flows.

Recently Issued But Not Yet Adopted Accounting Pronouncements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. ASU 2018-15 aligns the requirements for capitalizing implementation, setup and other upfront costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing such costs incurred to develop or obtain internal-use software. The update specifies which costs are to be expensed and which are to be capitalized, the period over which capitalized costs are to be amortized, the process for identifying and recognizing impairment and the proper presentation of such costs within the consolidated financial statements. ASU 2018-15 is effective for annual and interim periods beginning after December 15, 2019 and may be adopted either retrospectively or prospectively. The Company ~~continues to evaluate~~is currently evaluating its method of adoption as well as the expected impact ~~of adopting this guidance~~on its consolidated financial statements.

2.	~~REVISION OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS~~

~~As previously disclosed in note~~ 2In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires companies to recognize an allowance for expected lifetime credit losses through earnings concurrent with the ~~Company’s~~recognition of a financial asset measured at amortized cost. The estimate of expected credit losses is required to be adjusted each reporting period over the life of the financial asset. The update is effective for annual and interim periods beginning after December 15, 2019 and requires a modified retrospective adoption approach. The Company does not expect ASU 2016-13 to have a material impact on its consolidated financial statements ~~included~~upon adoption, but it may have an impact in the ~~2017~~ ~~Form~~ 10~~-K, the Company changed its accounting for the capitalization of certain internal labor and related costs associated with construction and customer installation activities commencing in the~~ ~~first~~ ~~quarter of~~ ~~2017.~~ ~~The Company initially classified the entire change as a change in accounting estimate. During the~~ ~~fourth~~ ~~quarter of~~ ~~2017,~~ the Company determined that a portion of what had previously been reflected as a change in estimate should have been categorized as a change in accounting principle, a portion was determined to be the correction of an error and a portion remained a change in estimate. The changes determined to be a change in estimate or change in accounting principle were applied prospectively for all of ~~2017.~~ The Company estimates that the change in principle resulted in a decrease in operating expenses (excluding depreciation and amortization) of approximately $3.8 million and $3.9 million, a decrease in selling, general and administrative expenses of approximately $0.1 million and $0.1 million and an increase in depreciation and amortization expense of $0.2 million and $0.7 million for the three months ended March 31, 2017 and March 31, 2018, respectively, compared to the results under the prior principle. Although the Company determined the error to be immaterial to its previously issued financial statements, the cumulative effect of the error would have been material if corrected in ~~2017.~~ ~~Therefore, as disclosed in the~~ ~~2017~~ ~~Form~~ 10-K, the Company revised its historical financial statements to properly reflect the impact of the labor capitalization, including the related impact to depreciation expense and income taxes. In connection with this revision, the Company also corrected for other previously identified immaterial errors. The financial statements for the ~~three~~ ~~months ended~~ ~~March 31, 2017~~ ~~included in this Quarterly Report on Form~~ 10~~-Q have been similarly revised to reflect the correction of these errors and should be read in conjunction with note~~ 2 ~~and note~~ 17 ~~in the~~ ~~2017~~ ~~Form~~ 10~~-K.~~

~~The following tables present the effect of the revision on the condensed consolidated financial statements for the~~ ~~three~~ ~~months ended~~ ~~March 31, 2017 (~~~~in thousands, except per share data):~~future.

Three Months Ended March 31, 2017

As Reported

Adjustment

As Revised

Condensed Consolidated Statement of Operations and Comprehensive Income Information

Selling, general and administrative
$ 45,733 $ 523 $ 46,256
Depreciation and amortization
38,404 1,132 39,536
Total costs and expenses
147,074 1,655 148,729
Income from operations
60,353 (1,655 ) 58,698
Income before income taxes
53,034 (1,655 ) 51,379
Income tax provision
19,819 (629 ) 19,190
Net income
33,215 (1,026 ) 32,189
Comprehensive income
$ 33,217 $ (1,026 ) $ 32,191

Net income per common share:

Basic
$ 5.86 $ (0.18 ) $ 5.68
Diluted
$ 5.80 $ (0.18 ) $ 5.62

Condensed Consolidated Statement of Cash Flows Information

Net income
$ 33,215 $ (1,026 ) $ 32,189
Depreciation and amortization
38,404 1,132 39,536
Accounts receivable, net
6,034 523 6,557
Change in deferred income taxes
472 (629 ) (157 )
Net cash provided by operating activities
$ 78,260 $ - $ 78,260

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3.2.	~~ADOPTION OF NEW REVENUE RECOGNITION STANDARD~~

~~The Company adopted ASC~~ ~~606~~ on ~~January 1, 2018,~~ ~~using the full retrospective method, resulting in a recasting of prior period consolidated financial statements. The impact of the ASC~~ ~~606~~ ~~adoption on the~~ ~~2017~~ ~~condensed consolidated financial statements was as follows (in thousands, except per share data):~~

Condensed Consolidated Balance Sheet Information

December 31, 2017

As Reported

ASC 606
Adjustment

As Recasted

Assets

Current Assets:

Accounts receivable, net $ 51,141 $ (21,211 ) $ 29,930
Prepaid and other current assets
8,160 2,738 10,898
Total Current Assets
242,384 (18,473 ) 223,911
Other assets
6,179 4,776 10,955
Total Assets
$ 2,218,329 $ (13,697 ) $ 2,204,632

Liabilities and Stockholders' Equity

Current Liabilities:

Accounts payable and accrued liabilities
$ 117,963 $ (108 ) $ 117,855
Deferred revenue
38,266 (23,258 ) 15,008
Total Current Liabilities
170,604 (23,366 ) 147,238
Deferred income taxes
205,636 1,518 207,154
Other liabilities
9,991 3,120 13,111
Total Liabilities
1,546,913 (18,728 ) 1,528,185

Stockholders' Equity

Retained earnings
723,354 5,032 728,386
Total Stockholders' Equity
671,416 5,031 676,447
Total Liabilities and Stockholders' Equity
$ 2,218,329 $ (13,697 ) $ 2,204,632

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Three Months Ended March 31, 2017

As Reported/
Revised ⁽¹⁾

ASC 606
Adjustment

As Recasted

Condensed Consolidated Statement of Operations and Comprehensive Income Information
Revenues
$ 207,427 $ 7 $ 207,434
Costs and expenses

Selling, general and administrative
46,256 129 46,385
Total costs and expenses
148,729 129 148,858
Income from operations
58,698 (122 ) 58,576
Income before income taxes
51,379 (122 ) 51,257
Income tax provision
19,190 (46 ) 19,144
Net income
$ 32,189 $ (76 ) $ 32,113

Net income per common share:

Basic
$ 5.68 $ (0.02 ) $ 5.66
Diluted
$ 5.62 $ (0.02 ) $ 5.60

Comprehensive income
$ 32,191 $ (76 ) $ 32,115

Condensed Consolidated Statement of Cash Flows Information
Net income $ 32,189 $ (76 ) $ 32,113
Change in deferred income taxes (157 ) (46 ) (203 )
Deferred revenue 425 102 527
Other assets and liabilities, net (415 ) 20 (395 )
Net cash provided by operating activities $ 78,260 $ - $ 78,260

⁽¹⁾~~Refer to note~~ 2 ~~for details regarding this revision.~~

~~The adoption of ASC~~ ~~606~~ ~~did~~ ~~not~~ ~~result in any changes to previously reported total cash flows from operations, financing or investing activities.~~

~~A summary of changes in timing and presentation to historical financials is presented below:~~

•

~~The decrease to total assets reflects a decrease in accounts receivable to remove amounts billed to customers for which the performance obligation has~~ ~~not~~ ~~been satisfied partially offset by the deferral of incremental costs (commissions paid) to obtain a contract which had been historically expensed immediately.~~

•

~~The net decrease in total liabilities reflects a decrease in deferred revenue to remove amounts billed to customers for which the performance obligation has~~ ~~not~~ been satisified partially offset by the recognition of deferred revenue related to certain up-front fees collected from our business services customers which had been historically recognized when billed in addition to the tax effect of establishing deferred commissions and deferred revenue.

The change in revenues and expenses is due to the deferral of all business installation revenues and certain upfront fees and all residential and business commission expenses over a period of time, instead of immediate recognition.

4.	~~NEWWAVE~~CLEARWAVE ACQUISITION

On ~~May 1, 2017,~~ November 9, 2018, the Company ~~acquired all~~entered into an agreement to acquire Clearwave, a facilities-based service provider that owns and operates a high-capacity fiber network offering dense regional coverage in Southern Illinois. The acquisition provides the Company with a premier fiber network within its existing footprint, further enables the Company to supply its customers with enhanced business services solutions and provides a platform to allow the Company to replicate Clearwave’s strategy in several of its other markets. The transaction closed on January 8, 2019 and was funded with cash on hand and the ~~outstanding equity interests~~additional seven-year incremental term “B” loan borrowings described in ~~NewWave for~~ ~~$740.2~~note 7. The Company paid a purchase price of $358.8 million in cash on a debt-free basis. ~~Refer~~

The Company accounted for the Clearwave acquisition as a business combination pursuant to ~~note~~ 8ASC 805 - Business Combinations. Accordingly, acquisition costs are not included as components of consideration transferred and instead are accounted for ~~details regarding~~as expenses in the ~~financing~~period in which the costs are incurred. During the three months ended March 31, 2019, the Company incurred acquisition-related costs of $5.2 million, including $3.3 million associated with the Clearwave acquisition. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statement of operations and comprehensive income.

In accordance with ASC 805, the Company uses its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that was available as of the ~~transaction. NewWave was~~acquisition date. The Company believes that the information available provides a ~~cable operator providing data, video~~reasonable basis for estimating the fair values of assets acquired and ~~voice services~~liabilities assumed. The preliminary measurements of fair value set forth herein are subject to ~~residential~~change and business customers throughout non-urban areas of Arkansas, Illinois, Indiana, Louisiana, Mississippi, Missouri and Texas. Cable One and NewWave shared similar strategies, customer demographics, and products. Accordingly,such changes could be material. The Company expects to finalize the valuation as soon as practicable but no later than one year from the acquisition of NewWave offers the Company opportunities for revenue growth and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) margin expansion as well as the potential to realize cost synergies.

date. The following table summarizes the current allocation of the purchase price consideration as of the acquisition date ~~reflecting all measurement period adjustments recorded in~~ ~~2017~~(in thousands):

	Purchase Price Allocation		Preliminary Purchase Price Allocation
Assets Acquired
Assets Acquired
Cash and cash equivalents	$	12,220	$	1,913
Accounts receivable		15,027		1,294
Prepaid assets		2,286
Prepaid and other current assets				311
Property, plant and equipment		192,234		120,472
Intangibles		476,300
Other assets		1,184
Intangible assets				89,700
Other noncurrent assets				3,533
Total Assets Acquired		699,251	$	217,223

Liabilities Assumed
Liabilities Assumed
Accounts payable and accrued liabilities		25,125	$	2,128
Deferred revenue		14,516		4,322
Deferred income taxes		6,644		30,104
Other noncurrent liabilities				5,057
Total Liabilities Assumed		46,285	$	41,611

Net Assets Acquired		652,966
Net assets acquired			$	175,612
Purchase price consideration		740,166		358,830
Goodwill Recognized	$	87,200
Goodwill recognized			$	183,218

Acquired identifiable intangible assets consist of the following (dollars in thousands):

Preliminary Fair

Value

Preliminary Useful Life

(in years)

Customer relationships

83,000

Trademark and trade name

6,700

Indefinite

No residual value was assigned to the acquired customer relationships.

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No ~~measurement period adjustments were recorded during~~The acquisition produced $183.2 million of goodwill, increasing the ~~three~~ ~~months ended~~ Company’s goodwill balance from $172.1 million at December 31, 2018 to $355.3 million at March 31, ~~2018.~~2019. Goodwill represents the excess of the purchase price consideration over the fair value of the underlying net assets acquired and largely results from expected future synergies from combining operations as well as an assembled workforce, which does not qualify for separate recognition. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis. Goodwill arising from the Clearwave acquisition is not deductible for tax purposes.

For the period from January 8, 2019 to March 31, 2019, the Company recognized revenue of $6.1 million and net income of $1.0 million from Clearwave operations, which included acquired intangible assets amortization expense of $1.1 million.

5.3.

REVENUES

The Company’s revenues by product line were as follows (in thousands):

	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Residential
Data	$	118,487	$	90,201	$	129,812	$	119,859
Video		88,757		72,454		83,802		88,760
Voice		10,671		9,867		9,624		10,671
Business services		37,691		26,968		47,143		37,688
Advertising sales		5,241		5,622		4,729		5,241
Other		4,914		2,322		3,495		3,542
Total revenues	$	265,761	$	207,434	$	278,605	$	265,761

Fees imposed on the Company by various governmental authorities are passed through monthly to the Company’s customers and are periodically remitted to authorities. These fees were ~~$4.1~~ ~~million and~~ ~~$3.5~~$4.1 million for both the three months ended March 31, ~~2018~~ 2019 and ~~2017,~~ ~~respectively, and were~~2018. As the Company acts as principal, these fees are reported in ~~residential data,~~ video ~~and voice~~ revenues on a gross basis with a corresponding expenses included within operating ~~expense because the Company is acting as a principal.~~

~~Other is comprised primarily of customer late charges, activation fees and reconnect fees.~~

A significant portion of our revenue is derived from customers who may cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customers. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of the underlying contract, which generally ranges from one to five years.

~~Contract Liabilities~~. ~~Timing of revenue recognition~~ ~~may~~ ~~differ from the timing of invoicing to customers. Residential and business services customers are invoiced for subscription services~~expenses in ~~advance of the service period. Deferred revenue liabilities, or contract liabilities, are recorded when the Company collects payments in advance of performing the services.~~

~~Current deferred revenue liabilities consisting primarily of refundable customer prepayments were~~ ~~$17.8~~ ~~million and~~ ~~$15.0~~ ~~million as of~~ ~~March 31, 2018~~ ~~and~~ ~~December 31, 2017.~~ ~~Long-term deferred revenue liabilities consisting primarily of installation charges or up-front fees from business services customers, were~~ ~~$2.2~~ ~~million and~~ ~~$3.1~~ ~~million as of~~ ~~March 31, 2018~~ ~~and~~ ~~December 31, 2017,~~ ~~respectively, and were included in other liabilities in the condensed consolidated balance sheet.~~

~~Contract Costs~~. The Company recognizes an asset for incremental costs of obtaining a contract with a customer. Accordingly, deferred commissions paid to obtain residential customers are recognized using a portfolio approach over a calculated average customer life. Deferred commissions were included in prepaid and other current assets and other assets in the condensed consolidated balance sheet and totaled ~~$7.7~~ ~~million and~~ ~~$7.5~~ ~~million as of~~ ~~March 31, 2018~~ ~~and~~ ~~December 31, 2017,~~ ~~respectively. Approximately~~ ~~$2.8~~ ~~million of currently deferred commissions are expected to be amortized to selling, general and administrative expenses over the next~~ 12 ~~months.~~

~~Significant Judgments~~. ~~The Company often provides multiple services to a customer. Provision of customer premise equipment, installation services, and additional service tiers~~ ~~may~~ have a significant level of integration and interdependency with the subscription of data, video, voice, or connectivity services provided. Judgment is required to determine whether provision of customer premise equipment, installation services, and additional service tiers are considered distinct and accounted for separately, or ~~not~~ ~~distinct and accounted for together with the subscription services.~~

The transaction price for a bundle of residential services is frequently less than the sum of the standalone selling prices of each individual service. The Company allocates these bundled services amongst the services to which the discount relates based on the relative standalone selling prices of those services. Standalone selling prices of the Company’s residential data and video services are directly observable, while standalone selling prices for the Company’s residential voice services are estimated using the adjusted market assessment approach which relies upon information from peers and competitors who sell residential voice services individually.

~~The Company also incurs incremental internal costs to acquire residential and business customers, such as commission costs, and~~ ~~third~~ party costs to service specific contracts. These costs are capitalized as contract assets and amortized over the applicable period. For commissions, the amortization period is the average customer tenure. Amortized commission expense was ~~$0.8~~ ~~million and~~ ~~$0.7~~ ~~million for the~~ ~~three~~ ~~months ended~~ ~~March 31, 2018~~ ~~and~~ ~~2017,~~ ~~respectively, and was included in selling, general and administrative expenses within~~ the condensed consolidated statements of operations and comprehensive income.

Other revenues are comprised primarily of customer late charges and reconnect fees.

Net accounts receivable from contracts with customers totaled $27.9 million and $29.8 million at March 31, 2019 and December 31, 2018, respectively.

Deferred commissions totaled $7.5 million and $7.8 million at March 31, 2019 and December 31, 2018, respectively, and were included within prepaid and other current assets and other noncurrent assets in the condensed consolidated balance sheets. Commission amortization expense was $1.0 million and $0.8 million for the three months ended March 31, 2019 and 2018, respectively, and was included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. Deferred commissions of $2.7 million included within prepaid and other current assets in the condensed consolidated balance sheet as of March 31, 2019 are expected to be amortized over the next 12 months.

Current deferred revenue liabilities, consisting of refundable customer prepayments, up-front charges and installation fees, were $24.1 million and $19.0 million at March 31, 2019 and December 31, 2018, respectively. As of March 31, 2019, the Company’s remaining performance obligations pertain to the refundable customer prepayments and consist of providing future data, video and voice services to customers. Of the $19.0 million of current deferred revenue at December 31, 2018, $18.1 million was recognized during the three months ended March 31, 2019. Noncurrent deferred revenue liabilities, consisting of up-front charges and installation fees from business customers, were $5.1 million and $2.8 million as of March 31, 2019 and December 31, 2018, respectively, and were included within other noncurrent liabilities in the condensed consolidated balance sheets.

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6.4.	PROPERTY, PLANT AND EQUIPMENT

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

	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Cable distribution systems	$	1,347,100		$	1,329,451		$	1,565,103		$	1,421,820
Customer premise equipment		200,859			200,175			223,665			220,571
Other equipment and fixtures		382,017			378,968			410,134			406,011
Buildings and leasehold improvements		95,985			95,314			102,942			100,625
Capitalized software		94,852			89,773			97,097			94,801
Construction in progress		60,293			67,564			61,645			69,163
Land		11,565			11,585			12,228			11,946
Right-of-use assets								5,069			-
Property, plant and equipment, gross		2,192,671			2,172,830			2,477,883			2,324,937
Less: Accumulated depreciation		(1,372,662	)		(1,340,938	)
Less accumulated depreciation								(1,512,487	)		(1,476,958	)
Property, plant and equipment, net	$	820,009		$	831,892		$	965,396		$	847,979

Depreciation expense was ~~$46.0~~$49.7 million and ~~$39.5~~$46.0 million for the three months ended March 31, ~~2018~~ 2019 and ~~2017,~~2018, respectively.

~~The~~In January 2019, the remaining portion of the Company's previous headquarters building and adjoining property ~~were held~~was sold for ~~sale at~~ ~~December 31, 2016.~~ In ~~January 2017,~~ ~~the Company sold a portion of this property for~~ ~~$10.1~~$6.3 million in gross proceeds and the Company recognized a related gain of ~~$6.6~~$1.6 million. The ~~remaining~~ property’s carrying value of ~~$4.6~~$4.6 million iswas included inwithin other noncurrent assets in the condensed consolidated balance ~~sheets~~sheet as assets held for sale at ~~both~~ ~~March 31, 2018~~ ~~and~~ December 31, ~~2017.~~2018.

7.5.	GOODWILL AND INTANGIBLE ASSETS

The carrying amount of goodwill was $355.3 million and $172.1 million at ~~both~~ March 31, ~~2018~~ 2019 and December 31, ~~2017~~ ~~was~~ ~~$172.1~~ ~~million and reflected~~ ~~$87.2~~ ~~million~~2018, respectively. The increase related to goodwill recognized upon the acquisition of ~~goodwill associated with the NewWave acquisition.~~Clearwave in January 2019. The Company has not historically recorded any impairment of goodwill.

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

March 31, 2018

Useful

Gross

Net

Life

Carrying

Accumulated

Carrying

Range (years)

Amount

Amortization

Amount

Finite-Lived Intangible Assets

Cable franchise renewals and access rights
1 - 25 $ 3,828 $ 3,643 $ 185
Customer relationships
14 $ 160,000 $ 10,476 $ 149,524
Trademarks and trade names
2.7 $ 1,300 $ 447 $ 853
Indefinite-Lived Intangible Assets

Franchise agreements
$ 812,371

					December 31, 2017
	Useful				Gross				Net
	Life				Carrying		Accumulated		Carrying						March 31, 2019						December 31, 2018
	Range (years)				Amount		Amortization		Amount			Useful Life Range (in years)			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Finite-Lived Intangible Assets											Finite-Lived Intangible Assets
Cable franchise renewals and access rights		1	-	25	$	4,138	$	3,886	$	252
Franchise renewals												1	–	25	$	2,927	$	2,889	$	38	$	2,927	$	2,887	$	40
Customer relationships			14		$	160,000	$	7,619	$	152,381		14	–	17		243,000		23,048		219,952		160,000		19,047		140,953
Trademarks and trade names			2.7		$	1,300	$	325	$	975
Trademark and trade name													2.7			1,300		934		366		1,300		813		487
Total Finite-Lived Intangible Assets											Total Finite-Lived Intangible Assets				$	247,227	$	26,871	$	220,356	$	164,227	$	22,747	$	141,480

Indefinite-Lived Intangible Assets											Indefinite-Lived Intangible Assets
Franchise agreements					$	812,137									$	812,371					$	812,371
Trademark and trade name																6,700						-
Total Indefinite-Lived Intangible Assets											Total Indefinite-Lived Intangible Assets				$	819,071					$	812,371

~~Amortization~~Intangible asset amortization expense was ~~$2.8~~$4.1 million and ~~less than~~ ~~$0.1~~$2.8 million for the three months ended March 31, 2019 and 2018, ~~and~~ ~~2017,~~respectively.

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As of March 31, ~~2018,~~ 2019, the future amortization of intangible assets was as follows (in thousands):

Year Ending December 31,	Amount		Amount
2018 (remaining nine months)	$	8,984
2019		11,994
2019 (remaining nine months)			$	12,574
2020		11,477		16,319
2021		11,448		16,318
2022		11,437		16,315
2023				16,313
Thereafter		95,222		142,517
Total	$	150,562	$	220,356

Actual amortization expense in future periods may differ from ~~these estimates~~the amounts above as a result of new intangible asset acquisitions or divestitures, changes in useful ~~lives,~~life estimates, impairments or other relevant factors.

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6. LEASES

As a lessee, the Company has operating leases for buildings, equipment, data centers, fiber optic networks and towers and finance leases for certain buildings and fiber optic networks. These leases have remaining lease terms ranging from under 1 year to 24 years, with some including an option to extend the lease for up to 15 additional years and some including an option to terminate the lease within 1 year.

As a lessor, the Company has operating leases for the use of its fiber optic networks, towers and customer premise equipment. These leases have remaining lease terms ranging from under one year to eight years, with some including a lessee option to extend the leases for up to five additional years and some including an option to terminate the lease within one year.

Significant judgment is required when determining whether a fiber optic contract contains a lease, defining the duration of the lease term and selecting the discount rate.

●

The Company concluded it was the lessee or lessor for fiber arrangements only when the asset is specifically identifiable and both substantially all the economic benefit is obtained and the right to direct the use of the asset exists.

●

The Company’s lease terms are only for periods in which there are enforceable rights. A lease is no longer enforceable when both the lessee and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty. The Company’s lease terms are impacted by options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

●

Most of the Company’s leases do not contain an implicit interest rate. Therefore, the Company held discussions with lenders, evaluated its published credit score and incorporated interest rates on currently-held debt in determining discount rates that reflect what the Company would pay to borrow on a collateralized basis over similar terms for its lease obligations.

As of March 31, 2019, additional operating leases that have not yet commenced were not material.

Lessee Financial Information. The Company’s ROU assets and lease liabilities consisted of the following (in thousands):

	March 31, 2019
ROU Assets
Property, plant and equipment, net:
Financing leases	$	4,961
Other noncurrent assets:
Operating leases	$	14,654

Lease Liabilities
Accounts payable and accrued liabilities:
Operating leases	$	3,913
Current portion of long-term debt:
Financing leases	$	205
Long-term debt:
Financing leases	$	3,398
Other noncurrent liabilities:
Operating leases	$	10,493
Total:
Financing leases	$	3,603
Operating leases	$	14,406

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The components of the Company’s lease expense were as follows (in thousands):

	Three Months Ended March 31,
	2019
Finance lease expense:
Amortization of ROU assets	$	109
Interest on lease liabilities		68
Operating lease expense		1,178
Short-term lease expense		244
Variable lease expense		67
Total lease expense	$	1,666

Finance lease expense is included within depreciation and amortization expense and interest expense, and operating lease expense is included within operating expenses and selling, general and administrative expenses in the condensed consolidated statement of operations and comprehensive income.

Supplemental lessee financial information is as follows (dollars in thousands):

	Three Months Ended March 31,
	2019
Cash paid for amounts included in the measurement of lease liabilities:
Finance leases - financing cash flows	$	156
Finance leases - operating cash flows	$	68
Operating leases - operating cash flows	$	1,229
ROU assets obtained in exchange for new lease liabilities:
Finance leases	$	577
Operating leases ⁽¹⁾	$	4,982
Weighted average remaining lease term:
Finance leases (years)		12.7
Operating leases (years)		4.7
Weighted average discount rate:
Finance leases		7.96	%
Operating leases		5.14	%

__________

⁽¹⁾	Includes $3.3 million of ROU assets acquired in the Clearwave transaction.

As of March 31, 2019, the future maturities of existing lease liabilities were as follows (in thousands):

Year Ending December 31,	Finance Leases			Operating Leases
2019 (remaining nine months)	$	250		$	3,497
2020		477			3,979
2021		490			2,975
2022		501			1,967
2023		508			1,668
Thereafter		3,599			2,019
Total		5,825			16,105
Less present value discount		(2,222	)		(1,699	)
Lease liability	$	3,603		$	14,406

As of December 31, 2018, the Company’s outstanding operating lease obligations under the previous accounting guidance were as follows (in thousands):

Year Ending December 31,	Operating Leases
2019	$	1,767
2020		1,219
2021		911
2022		398
2023		204
Thereafter		299
Total	$	4,798

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Lessor Financial Information.The Company’s lease income was as follows (in thousands):

Three Months

Ended March 31,

2019

Lease income relating to lease payments

119

As of March 31, 2019, the future maturities of existing lease receivables were as follows (in thousands):

Year Ending December 31,	Operating Leases
2019 (remaining nine months)	$	325
2020		374
2021		245
2022		42
2023		30
Thereafter		77
Total	$	1,093

As of March 31, 2019, the current and noncurrent portions of operating lease receivables were $0.4 million and $0.7 million, respectively, and were included within accounts receivable and other noncurrent assets in the condensed consolidated balance sheet, respectively.

8.7.	~~LONG-TERM~~ DEBT

The carrying amount of long-term debt consisted of the following (in thousands):

	March 31, 2018			December 31, 2017			March 31, 2019			December 31, 2018
Notes	$	450,000		$	450,000
Senior Credit Facilities		741,563			744,375
Capital lease obligation		263			267
Notes (as defined below)							$	450,000		$	450,000
Senior Credit Facilities (as defined below)								975,625			730,000
Lease liabilities								3,603			251
Total debt		1,191,826			1,194,642			1,429,228			1,180,251
Less unamortized debt issuance costs		(18,615	)		(19,585	)		(18,861	)		(17,570	)
Less current portion		(15,938	)		(14,375	)		(24,892	)		(20,625	)
Total long-term debt	$	1,157,273		$	1,160,682		$	1,385,475		$	1,142,056

~~Notes.~~Notes. On June 17, 2015, the Company issued ~~$450~~$450 million aggregate principal amount of 5.75% senior unsecured notes due 2022 (the “Notes”). The Notes are jointly and severally guaranteed on a senior unsecured basis by each of the subsidiaries that guarantee the Senior Credit Facilities (as defined below). The Notes mature on June 15, 2022 and interest is payable on June 15th and December 15th of each year.

The ~~Notes were issued pursuant to an~~ indenture ~~dated as of~~ ~~June 17, 2015 (~~governing the ~~“Indenture”). The Indenture~~Notes provides for early redemption of the Notes, at the option of the Company, at the prices and subject to the terms specified in the Indenture. The Indenture includes certain covenants relating to debt incurrence, liens, restricted payments, asset sales and transactions with affiliates, changes in control and mergers or sales of all or substantially all of the Company’s assets. The Indenture also provides for customary events of default (subject, in certain cases, to customary grace periods).indenture.

Senior Credit Facilities. On June 30, 2015, the Company entered into a Credit Agreement (the “Credit Agreement”) among the Company, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, and the other agents party ~~thereto. The Credit Agreement~~thereto, which provided for a ~~five~~~~-year~~five-year revolving credit facility in an aggregate principal amount of ~~$200~~$200 million (the “Revolving Credit Facility”) ~~and a~~ ~~five~~~~-year term loan facility in an aggregate principal amount of~~ ~~$100~~ ~~million (the “Term Loan Facility”)~~. Concurrently with its entry into the Credit Agreement, the Company borrowed the full amount of the Term Loan Facility. The Revolving Credit Facility also gives the Company the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

On May 1, 2017, the Company and the lenders amended and restated the Credit Agreement (the “Amended and Restated Credit Agreement”) and the Company incurred ~~$750~~$750 million of senior secured loans (the ~~“New~~“2017 New Loans”), the proceeds of which were used, together with cash on hand, to finance the acquisition of NewWave ~~acquisition,~~Communications (“NewWave”), repay in full the ~~Term Loan Facility~~existing term loans and pay related fees and expenses.

The 2017 New Loans consist of a ~~five~~~~-year~~five-year term “A” loan in an original aggregate principal amount of ~~$250~~$250 million (the “Term Loan A”) and a ~~seven~~~~-year~~seven-year term “B” loan in an original aggregate principal amount of $500 million (the “Term Loan B”).

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On January 7, 2019, the Company entered into Amendment No. 2 to the Amended and Restated Credit Agreement (“Amendment No. 2”) with CoBank, ACB (“CoBank”), as lender, and JPMorgan, as administrative agent, and incurred a new seven-year incremental term “B” loan in an aggregate principal amount of ~~$500~~$250 million (the “Term Loan B”B-2” and, together with the Revolving Credit Facility, the Term Loan A and the ~~Revolving Credit Facility,~~Term Loan B, the “Senior Credit Facilities”). , the proceeds of which were used to finance, in part, the Clearwave acquisition.

The ~~obligations under the Amended and Restated~~Senior Credit ~~Agreement~~Facilities are guaranteed by the Company’s wholly owned ~~domestic~~ subsidiaries (the “Guarantors”) and are secured, subject to certain exceptions, by substantially all of the assets of the Company and the ~~guarantors.~~Guarantors.

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The Term Loan A, Term Loan B and Term Loan B-2 may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions).

The interest margins applicable to the Senior Credit Facilities are, at the Company’s option, equal to either ~~the London Interbank Offered Rate (“LIBOR”)~~LIBOR or a base rate, plus an applicable margin equal to, (i) with respect to the Term Loan A and the Revolving Credit Facility, 1.50% to 2.25% for LIBOR loans and 0.50% to 1.25% for base rate loans, determined on a quarterly basis by reference to a pricing grid based on the Company’s total net leverage ratio, ~~and~~ (ii) with respect to the Term Loan B, (x)(x) for any day on or prior to April 22, 2018, 2.25% for LIBOR loans and 1.25% for base rate loans and (y) for any ~~date after~~ ~~April 22, 2018,~~ day thereafter, 1.75% for LIBOR loans and 0.75% for base rate ~~loans. The~~loans, and (iii) with respect to the Term Loan A ~~may~~ ~~be prepaid at any time without premium~~B-2, 2.00% for LIBOR loans and ~~amortizes quarterly at a~~1.00% for base rate ~~(expressed as a percentage of the original principal amount) of~~ ~~2.5%~~ ~~per annum for the~~ ~~first~~ ~~year after funding,~~ ~~5.0%~~ ~~per annum for the~~ ~~second~~ ~~year after funding,~~ ~~7.5%~~ ~~per annum for the~~ ~~third~~ ~~year after funding and~~ ~~10.0%~~ ~~per annum for the~~ ~~fourth~~ ~~and~~ ~~fifth~~ ~~years after funding, with the outstanding balance due upon maturity. The Term Loan B amortizes quarterly at a rate (expressed as a percentage of the original principal amount) of~~ ~~1.0%~~ ~~per annum, with the outstanding balance due upon maturity. The Term Loan B is subject to a~~ ~~1.0%~~ ~~prepayment premium if prepaid in connection with a “Repricing Transaction” (as defined in the Amended and Restated Credit Agreement) within~~ ~~six~~ ~~months of the effective date of the Repricing Amendment (as defined below), benefits from certain “most favored nation” pricing protections and is~~ ~~not~~ subject to the financial maintenance covenants under the Amended and Restated Credit Agreement. Other than as set forth above, the New Loans are subject to terms substantially similar to those under the Credit Agreement.loans.

The Company may, subject to certain specified terms and provisions, obtain additional credit facilities of up to ~~$425~~$425.0 million under the Amended and Restated Credit Agreement plus an unlimited amount so long as, on a pro forma basis, the Company’s First Lien Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) is no greater than 1.80 to 1.00. The Amended and Restated Credit Agreement contains customary representations, warranties and affirmative and negative covenants as well as customary events of default. The Amended and Restated Credit Agreement also requires the Company to maintain specified ratios of total net indebtedness and ~~first~~ ~~lien net indebtedness to consolidated operating cash flow. Refer to note~~ 8 ~~to the Company’s consolidated financial statements included in the~~ ~~2017~~ ~~Form~~ 10~~-K for additional information.~~

The Company was in compliance with all debt covenants as of March 31, ~~2018.~~ 2019.

As of March 31, ~~2018,~~ 2019, outstanding borrowings under the Term Loan A, Term Loan B and Term Loan BB-2 were ~~$245.3~~$234.4 million, $491.3 million and ~~$496.3~~$250.0 million, respectively, and bore interest at ~~a rate~~rates of ~~4.06%~~ ~~per annum~~4.25%, 4.25% and ~~4.56%~~4.49% per annum, respectively. Letter of credit issuances under the Revolving Credit Facility totaled ~~$3.1~~$4.1 million and the Company had ~~$196.9~~$195.9 million available for borrowing under the Revolving Credit Facility at March 31, ~~2018.~~2019.

In connection with Amendment No. 2, the Company incurred capitalizable debt issuance costs of $2.4 million. The Company recorded ~~$1.0~~$1.1 million and ~~$0.4~~$1.0 million of debt issuance cost amortization for the three months ended March 31, ~~2018~~ 2019 and ~~2017,~~2018, respectively. These amounts ~~were~~are reflected inwithin interest expense in the condensed consolidated statements of operations and comprehensive income. Unamortized debt issuance costs totaled $18.9 million and $17.6 million at March 31, 2019 and December 31, 2018, respectively. These amounts are reflected as a reduction to long-term debt in the condensed consolidated balance sheets.

As of March 31, ~~2018,~~ 2019, the future maturities of ~~long-term~~outstanding debt, excluding lease liability payment obligations, were as follows (in thousands):

Year Ending December 31,	Amount		Amount
2018 (remaining nine months)	$	11,575
2019		20,642
2019 (remaining nine months)			$	18,125
2020		26,892		29,375
2021		30,017		32,500
2022		180,017		632,500
2023				7,500
Thereafter		922,683		705,625
Total	$	1,191,826	$	1,425,625

On ~~April 23, 2018,~~ ~~the Company amended the Amended and Restated Credit Agreement. Debt issuance costs incurred for the repricing in connection with this amendment totaled~~ ~~$2.0~~ ~~million. Refer to note~~ 15 ~~for further discussion of this amendment.~~

9.	~~FAIR VALUE MEASUREMENTS~~

A ~~three~~~~-level hierarchy is established by GAAP for disclosure of fair value measurements, based on the reliability of inputs used in the valuation of an instrument as of the measurement date, as follows:~~

●	~~Level~~ 1 ~~– inputs to the valuation methodology are quoted prices for identical instruments in active markets.~~

●

~~Level~~ 2 ~~– inputs to the valuation methodology include quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are~~ ~~not~~ ~~active and inputs that are observable for the instrument, either directly or indirectly, and are significant to the fair value measurement.~~

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●8.	~~Level~~ 3 ~~– inputs to the valuation methodology are unobservable and significant to the fair value measurement.~~INTEREST RATE SWAPS

The Company is party to two interest rate swap agreements, designated as cash flow hedges, to manage the risk of fluctuations in interest expense on its variable rate LIBOR debt. Under the first swap agreement, with respect to a notional amount of $850.0 million, the Company’s monthly payment obligation is determined at a fixed base rate of 2.653% beginning in March 2019. Under the second swap agreement, which is a forward-starting interest rate swap with respect to a notional amount of $350.0 million, the Company’s monthly payment obligation beginning in June 2020 is determined at a fixed base rate of 2.739%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but may be terminated prior to their scheduled maturity at the election of the Company or the financial institution counterparty as provided in each swap agreement. The Company does not hold any derivative instruments for speculative trading purposes. As of March 31, 2019, the Company’s interest rate swap liabilities were recorded at their combined fair value of $38.6 million, with the current and noncurrent portions reflected in accounts payable and accrued expenses and other noncurrent liabilities, respectively, within the condensed consolidated balance sheet.

Changes in the fair values of the interest rate swaps are reported through other comprehensive income until the underlying hedged debt’s interest expense impacts net income, at which point the corresponding change in fair value is reclassified from accumulated other comprehensive income to interest expense. A $38.6 million, or $29.1 million net of tax, loss was recorded through other comprehensive income within the condensed consolidated statement of operations and comprehensive income for the three months ended March 31, 2019. The Company expects that $2.3 million of this loss in accumulated other comprehensive income within the condensed consolidated balance sheet will be reclassified to interest expense within the condensed consolidated statement of operations and comprehensive income within the next 12 months. The Company recognized a $0.1 million loss on interest rate swaps during the three months ended March 31, 2019, which was reflected in interest expense within the condensed consolidated statement of operations and comprehensive income.

9.	FAIR VALUE MEASUREMENTS

~~Financial~~Financial Assets and Liabilities. The Company has estimated the fair ~~value~~values of its financial instruments as of March 31, ~~2018~~ 2019 using available market information or other appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value. Accordingly, the following fair value estimates ~~presented in the condensed consolidated financial statements~~ are not necessarily indicative of the amounts the Company would realize in ~~a current~~an actual market exchange.

The carrying amounts, fair values and related fair value ~~hierarchies~~hierarchy levels of the Company’s financial assets and liabilities as of March 31, 2019 were as follows ~~(in~~(dollars in thousands):

	March 31, 2018						March 31, 2019
	Carrying		Fair		Fair Value		Carrying		Fair		Fair Value
	Amount		Value		Hierarchy		Amount		Value		Hierarchy
Assets:
Cash and cash equivalents:
Cash and cash equivalents:
Money market investments	$	21,508	$	21,508		Level 1	$	49,579	$	49,579	Level 1
Commercial paper	$	144,699	$	144,612		Level 2	$	119,729	$	119,553	Level 2
Liabilities:
Long-term debt, including current portion:
Liabilities:
Long-term debt, including current portion, excluding debt issuance costs:
Notes	$	450,000	$	459,000		Level 2	$	450,000	$	458,438	Level 2
Senior Credit Facilities	$	741,563	$	741,563		-	$	975,625	$	973,828	Level 2
Other noncurrent liabilities, including current portion:
Interest rate swaps							$	38,585	$	38,585	Level 2

Money market ~~investments are included in cash and cash equivalents in the condensed consolidated balance sheets. Commercial paper investments with original maturities of~~ 90 ~~days or less are also included in cash and cash equivalents. These~~ investments are primarily held in U.S. Treasury securities and registered money market ~~funds. These investments were~~funds and are valued using a market approach based on ~~the~~ quoted market prices ~~of the money market investments~~ (Level 1~~) or inputs that include~~1). Commercial paper is primarily held with high-quality companies and is valued using quoted market prices for investments similar to the commercial paper (Level 2)2). Money market investments and commercial paper with original maturities of three months or less are included within cash and cash equivalents in the condensed consolidated balance sheets. The fair value of the Notes ~~was~~and Senior Credit Facilities are estimated based on market prices for similar instruments in active markets (Level 2)2). Interest rate swaps are measured at fair value within the condensed consolidated balance sheets on a recurring basis, with fair value determined using standard valuation models with assumptions about interest rates being based on those observed in underlying markets (Level 2). The ~~fair value~~current portion of the ~~Senior Credit Facilities~~Company’s interest rate swaps is ~~equal to~~included within accounts payable and accrued expenses while the ~~carrying value.~~long-term portion is included within other noncurrent liabilities in the condensed consolidated balance sheet.

The Company’s deferred compensation ~~liabilities were~~ ~~$17.6~~liability was $2.5 million and ~~$20.2~~$3.0 million at March 31, ~~2018~~ 2019 and December 31, ~~2017,~~ 2018, respectively. The current ~~portions~~portion of ~~these liabilities are~~this liability is included within accounts payable and accrued liabilities and the noncurrent ~~portions are~~portion is included within other noncurrent liabilities in the condensed consolidated balance sheets. ~~These liabilities represent~~This liability represents the market value of ~~participants’~~participant balances in a notional investment account that is comprised primarily of mutual funds, ~~which~~whose value is based on observable market prices. However, since the deferred compensation ~~obligations are~~ liability is not exchanged in an active market, ~~they are~~it is classified as Level 2 in the fair value hierarchy.

The carrying amounts of accounts receivable, accounts payable and other ~~current~~financial assets and liabilities approximate fair value because of the short-term nature of these instruments.

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Nonfinancial Assets and Liabilities. The Company’s nonfinancial assets, such as property, plant and equipment, intangible assets and goodwill, are not measured at fair value on a recurring basis. ~~However, such~~The assets acquired, including identifiable intangible assets and goodwill, and liabilities assumed in the Clearwave acquisition were recorded at fair value on the acquisition date of January 8, 2019, subject to potential future measurement period adjustments discussed in note 2. Nonfinancial assets are subject to fair value adjustments when there is evidence that impairment may exist. No material impairments were recorded during the three months ended March 31, ~~2018~~ ~~and~~ ~~2017.~~2019 or 2018.

10.

TREASURY STOCK

Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the condensed consolidated financial statements.

Share Repurchase Program. On July 1, 2015, the Company’s board of directors (the “Board”) authorized up to ~~$250~~$250.0 million of share repurchases (subject to a total cap of 600,000 shares of common stock). Purchases under the share repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the share repurchase program through March 31, ~~2018,~~ 2019, the Company had repurchased ~~169,144~~210,631 shares of its common stock at an aggregate cost of $104.9 million. During the three months ended March 31, 2019, the Company repurchased 5,984 shares at an aggregate cost of ~~$75.6~~$5.1 million. ~~During the~~ ~~three~~ ~~months ended~~ ~~March 31, 2018,~~ ~~the Company repurchased~~ ~~3,311~~ ~~shares at an aggregate cost of~~ ~~$2.3~~ ~~million.~~

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Tax Withholding for Equity Awards. ~~Shares~~At the employee’s option, shares of common stock ~~with a fair market value equal to the applicable statutory minimum amount of the employee withholding taxes due~~ are withheld by the Company upon vesting of restricted stock and ~~exercises~~exercise of stock appreciation rights (“SARs”) to pay the applicable statutory minimum amount of employee withholding ~~taxes and are considered common stock repurchases.~~taxes. The Company then pays the applicable statutory minimum amount of withholding taxes in cash. The ~~amount~~Company remitted $2.6 million during the three months ended March 31, ~~2018~~ ~~was~~ ~~$7.2~~ ~~million,~~2019, for which the Company withheld ~~9,767~~3,310 shares of common stock. Treasury shares of ~~155,458~~188,569 held at March 31, ~~2018~~ 2019 include such shares withheld for withholding tax.

11.

EQUITY-BASED COMPENSATION

The Amended and Restated Cable One, Inc. 2015 Omnibus Incentive Compensation Plan (the ~~“2015~~“2015 Plan”) provides for grants of incentive stock options, non-qualified stock options, restricted stock awards, SARs, restricted stock units (“RSUs”), cash-based awards, performance-based awards, dividend equivalent units (“DEUs”), and other stock-based awards, including performance stock units and deferred stock units. Directors, officers and employees of the Company and its affiliates are eligible for grants under the 2015 Plan as part of the Company’s approach onto long-term incentive compensation.

~~Restricted stock awards granted to employees are subject to service-based vesting and certain awards are also subject to performance-based vesting and generally cliff-vest on the~~ ~~three~~~~-year anniversary of the grant date or, for certain service-based awards, in~~ ~~four~~ ~~equal ratable installments beginning on the~~ ~~first~~ ~~anniversary of the grant date. SARs granted to employees vest in~~ ~~four~~ ~~equal ratable installments beginning on the~~ ~~first~~ ~~anniversary of the grant date. RSUs are generally granted to non-employee directors on the date of the Company’s annual stockholders’ meeting and vest on the earlier of the~~ ~~first~~ ~~anniversary of the grant date or the annual stockholders’ meeting date immediately following the grant date. In~~ ~~January 2018,~~ certain non-employee directors who elected to defer all or a portion of their annual cash fees were granted RSU awards in lieu of such fees, and such RSUs will vest in full on the date immediately preceding the date of the ~~2018~~ annual stockholders’ meeting. The settlement of these RSUs will follow vesting, unless the director has previously elected to defer such settlement until the earliest of his or her separation from service from the Board, a date specified by the director or a change in control of the Company.

~~The~~ ~~2015~~ ~~Plan provides, that, subject to certain adjustments for specified corporate events, the maximum number of shares of common stock that~~ ~~may~~ ~~be issued under the~~ ~~2015~~ ~~Plan is~~ ~~334,870.~~ At March 31, ~~2018,~~ ~~266,731~~2019, 202,753 shares were available for issuance under the 2015 Plan.

Compensation expense associated with ~~equity based~~equity-based awards is recognized on a straight-line basis over the vesting period, with forfeitures recognized as incurred. Equity-based compensation expense of ~~$2.3~~was $3.0 million and ~~$2.4~~$2.3 million for the three months ended March 31, 2019 and 2018, respectively, and~~2017,~~ ~~respectively,~~ was included inwithin selling, general and administrative expenses ~~within~~in the condensed consolidated statements of operations and comprehensive income. The Company recognized an income tax benefit of ~~$2.4~~$1.0 million related to equity-based awards during the three months ended March 31, ~~2018.~~ 2019. The deferred tax asset related to all outstanding equity-based awards was ~~$2.7~~$3.5 million as of March 31, ~~2018.~~ 2019.

Restricted Stock Awards. Restricted shares, RSUs and DEUs are collectively referred to as “restricted stock.” A summary of restricted stock activity during the three months ended March 31, ~~2018~~ 2019 is as follows:

Weighted Average

Grant Date

Restricted

Fair Value

Stock

Per Share

Outstanding as of December 31, 2017
51,290 $ 472.89
Granted
11,039 $ 707.20
Forfeited
(818 ) $ 595.99
Vested
(24,171 ) $ 391.19
Outstanding as of March 31, 2018
37,340 $ 592.42

Vested and unissued as of March 31, 2018
3,185 $ 436.93

	Restricted Stock			Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2018		40,876		$	610.88
Granted		10,710		$	811.98
Forfeited		(3,122	)	$	687.64
Vested and issued		(10,656	)	$	483.60
Outstanding as of March 31, 2019		37,808		$	697.38

Vested and unissued as of March 31, 2019		4,146		$	494.17

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Equity-based compensation expense for restricted stock was ~~$1.4~~$1.8 million and ~~$1.7~~$1.4 million for the three months ended March 31, 2019 and 2018, ~~and~~ ~~2017.~~respectively. At March 31, ~~2018,~~ 2019, there was ~~$10.2~~$13.4 million of unrecognized compensation expense related to restricted stock, which is expected to be recognized over a weighted average period of 1.7 years.

Stock Appreciation Rights. A summary of SAR activity during the three months ended March 31, ~~2018~~ 2019 is as follows:

	Stock Appreciation Rights			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)		Weighted Average Remaining Contractual Term (in years)		Stock Appreciation Rights			Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value (in thousands)		Weighted Average Remaining Contractual Term (in years)
Outstanding as of December 31, 2017		102,458		$	477.62	$	100.91	$	23,173		8.1
Outstanding as of December 31, 2018													90,605		$	550.60	$	122.29	$	24,673		7.2
Granted		12,500		$	707.17	$	169.54	$	-		9.8		22,500		$	811.96	$	191.42	$	-		9.8
Exercised		(11,157	)	$	432.23	$	89.73						(521	)	$	422.31	$	87.22
Forfeited		(2,249	)	$	422.31	$	87.22						(979	)	$	422.31	$	87.22
Outstanding as of March 31, 2018		101,552		$	512.09	$	110.89	$	18,116		8.1
Outstanding as of March 31, 2019													111,605		$	605.02	$	136.70	$	42,004		7.9

Vested and exercisable as of March 31, 2018		15,795		$	482.94	$	102.51	$	3,225		7.8
Vested and exercisable as of March 31, 2019													34,873		$	508.15	$	109.83	$	16,503		7.0

The grant date fair value of the Company’s SARs is measured using the Black-Scholes valuation model. The weighted average inputs used in the model for grants awarded during the three months ended March 31, ~~2018~~ 2019 were as follows:

	~~2018~~2019
Expected volatility		~~22.53~~21.82	%
Risk-free interest rate		~~2.31~~2.39	%
Expected term (in years)		6.25
Expected dividend yield		0.98	%

Equity-based compensation expense for SARs was ~~$0.9~~$1.2 million and ~~$0.7~~$0.9 million for the three months ended March 31, ~~2018.~~ 2019 and 2018, respectively. At March 31, ~~2018,~~ 2019, there was ~~$7.9~~$9.3 million of unrecognized compensation expense related to SARs, which is expected to be recognized over a weighted average period of ~~1.3~~1.4 years.

12.

INCOME TAXES

The Company’s effective tax rate was ~~19.6%~~24.6% and ~~37.3%~~19.6% for the three months ended March 31, ~~2018~~ 2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in the effective tax rate ~~for the~~ ~~three~~ ~~months ended~~ ~~March 31, 2018~~ ~~compared to the same quarter in the prior year~~ primarily ~~relates~~related to a ~~reduction~~$1.4 million decrease in ~~the Federal corporate income tax rate from~~ ~~35%~~ to ~~21%~~ ~~as a result of the~~ ~~2017~~ ~~Federal tax reform legislation and~~ ~~$2.4~~ ~~million of~~ income tax benefits attributable to equity-based compensation awards and a $0.9 million increase in income tax expenses attributable to state effective tax rate changes recorded during the three months ended March 31, ~~2018.~~2019.

~~The Company recognized the income tax effects of the~~ ~~2017~~ ~~Federal tax reform legislation in its consolidated financial statements included in the~~ ~~2017~~ ~~Form~~ 10~~-K in accordance with Staff Accounting Bulletin~~ ~~No.~~~~118,~~ ~~which provides SEC staff guidance for the application of ASC~~ ~~740~~ – ~~Income Taxes~~~~. As such, the Company’s financial results for~~ ~~2017~~ ~~reflected the income tax effects of the~~ ~~2017~~ ~~Federal tax reform legislation for which the accounting under ASC~~ ~~740~~ ~~was complete as well as provisional amounts for those specific income tax effects of the~~ ~~2017~~ ~~Federal tax reform legislation for which the accounting under ASC~~ ~~740~~ was incomplete but a reasonable estimate could be determined. The Company has recognized the provisional tax impacts related to acceleration of depreciation and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements included in the ~~2017~~ ~~Form~~ 10~~-K. The ultimate impact~~ ~~may~~ differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that ~~may~~ ~~be issued and actions the Company~~ ~~may~~ ~~take as a result of the~~ ~~2017~~ ~~Federal tax reform legislation. The accounting is expected to be complete when the Company’s~~ ~~2017~~ ~~Federal corporate income tax return is filed later in~~ ~~2018.~~

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13.

NET INCOME PER COMMON SHARE

Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted net income per common share further includes any common shares available to be issued upon vesting or exercise of outstanding equity awards if such inclusion would be dilutive, calculated using the treasury stock method.

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The following table sets forth the computation of basic and diluted net income per common share (in thousands, except share and per share amounts):

	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Numerator:
Net income	$	40,653	$	32,113	$	38,739	$	40,653
Denominator:
Weighted average common shares outstanding - basic		5,702,539		5,671,838		5,674,120		5,702,539
Effect of dilutive equity awards⁽¹⁾		40,109		59,063
Effect of dilutive equity-based awards⁽¹⁾						42,465		40,109
Weighted average common shares outstanding - diluted		5,742,648		5,730,901		5,716,585		5,742,648

Net income per common share:
Basic	$	7.13	$	5.66	$	6.83	$	7.13
Diluted	$	7.08	$	5.60	$	6.78	$	7.08

__________

⁽¹⁾⁽¹⁾

Equity-based awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation. The excluded number of anti-dilutive equity-based awards totaled ~~5,355~~2,739 and ~~443~~5,355 for the three months ended March 31, ~~2018~~ 2019 and ~~2017,~~2018, respectively.

14.

COMMITMENTS AND CONTINGENCIES

Litigation and Legal Matters. The Company is subject to complaints and administrative proceedings and ishas been a defendant in various civil lawsuits that have arisen in the ordinary course of its business. Such matters include contract disputes; actions alleging negligence; invasion of privacy; trademark, copyright and patent infringement; violations of applicable wage and hour laws; statutory or common law claims involving current and former employees; and other matters. Although the outcomes of ~~the~~any legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, ~~management~~the Company believes that there are no existing claims or proceedings that are likely to have a material adverse effect on ~~the Company’s~~its business, financial condition, results of operations or cash flows. ~~Also, based on currently available information, management is of the opinion that either future material losses from existing legal proceedings are~~ ~~not~~ ~~reasonably possible or that future material losses in excess of the amounts accrued are~~ ~~not~~ ~~reasonably possible.~~

Regulation in the ~~Cable~~Company’s Industry. The operation of a cable system is extensively regulated by the Federal Communications Commission (the “FCC”), some state governments and most local governments. The FCC has the authority to enforce its regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities used in connection with cable operations. ~~The Telecommunications Act of~~ ~~1996~~ altered the regulatory structure governing the nation’s communications providers. It removed barriers to competition in both the cable television market and the voice services market. Among other things, it reduced the scope of cable rate regulation and encouraged additional competition in the video programming industry by allowing telephone companies to provide video programming in their own telephone service areas. Future legislative and regulatory changes could adversely affect the Company’s operations.

15.

SUBSEQUENT EVENT

Fidelity Acquisition.On April ~~23, 2018,~~ 1, 2019, the Company entered into a definitive agreement with Fidelity Communications Co. to acquire its data, video and voice business and certain related assets (collectively, “Fidelity”) for $525.9 million in cash, subject to customary post-closing adjustments. Fidelity is a cable operator that provides residential and business services to customers throughout greater Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas. Cable One and Fidelity share similar strategies, customer demographics and products. Accordingly, the acquisition of Fidelity offers the Company opportunities for revenue growth and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) margin expansion as well as the potential to realize cost synergies. The all-cash transaction is expected to be funded through a combination of cash on hand, revolving credit facility capacity and the proceeds of the new indebtedness described below. The transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to be completed during the fourth quarter of 2019.

Delayed Draw Incremental Term Loan B-3. On April 12, 2019, the Company and certain of its subsidiaries entered into Amendment No.1 ~~(the “Repricing Amendment”)~~ 3 to the Amended and Restated Credit ~~Agreement.~~ Agreement (“Amendment No. 3”) with CoBank, as lender, and JPMorgan, as administrative agent, to provide for a new delayed draw incremental term “B-3” loan facility in an aggregate principal amount of $325.0 million (the “Term Loan B-3”). Subject to the satisfaction of certain conditions, the Company may borrow under the Term Loan B-3 in a single drawing at any time prior to October 9, 2019. No amounts have been drawn under the Term Loan B-3 as of May 9, 2019.

The ~~Repricing Amendment amended~~Term Loan B-3 will mature on January 7, 2026 and may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions). The interest rate applicable to the Term Loan B-3 will be, at the Company’s option, equal to LIBOR or a base rate, plus an applicable margin equal to 2.0% for LIBOR loans and 1.0% for base rate loans. The principal amount of the Term Loan B-3 will amortize in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 1.0% per annum (subject to customary adjustments in the event of any prepayment), with the balance due upon maturity.

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The Company will be required to pay a ticking fee, which will accrue at a per annum rate that will range between 0.375% and 0.625%, on the daily average unused amount of the aggregate commitments of the lender under the Term Loan B-3, accruing during the period commencing on May 28, 2019 up to, but excluding, the date on which the lender’s commitments under the Term Loan B-3 terminate.

Second Restatement Agreement to Amended and Restated Credit Agreement. On May 8, 2019, the Company and its wholly owned subsidiaries entered into a Second Restatement Agreement with JPMorgan, as administrative agent, and the lenders party thereto, to amend and restate the Amended and Restated Credit Agreement ~~to, among other things, (i) decrease~~(the “Second Restatement Agreement”).

The Second Restatement Agreement provides for a new senior secured term “A” loan facility in an aggregate principal amount of $250.0 million (the “New Term Loan A”), a new senior secured delayed draw term “A” loan facility in an aggregate principal amount of $450.0 million (the “Delayed Draw Term Loan A”) and a new $350.0 million senior secured revolving credit facility (the “New Revolving Credit Facility”). The Second Restatement Agreement did not alter the ~~applicable margin for~~principal terms of the Company’s previously established Term Loan B, Term Loan B-2 and Term Loan B-3.

A portion of the proceeds from the new credit facilities were used to ~~1.75%~~ ~~for LIBOR borrowings~~refinance the Company's existing Revolving Credit Facility and ~~0.75%~~ ~~for base rate borrowings, (ii) reset~~Term Loan A, and the ~~period during which a prepayment premium in respect~~Company intends to use the remaining proceeds, together with the proceeds of the Term Loan B ~~may~~ B-3 and cash on hand, to redeem the Notes on or after June 15, 2019, to finance the acquisition of Fidelity and for other general corporate purposes. This Quarterly Report on Form 10-Q is not, and shall not be ~~required for~~deemed to be, a ~~Repricing Transaction until~~ ~~six~~ ~~months~~notice of optional redemption of the Notes.

The New Term Loan A and New Revolving Credit Facility will mature on May 8, 2024 (unless certain of the Company’s existing indebtedness remains outstanding after certain specified dates, in which case the ~~effective~~final maturity date of both facilities will be an earlier date as specified in the ~~Repricing Amendment and (iii) reset~~documentation for the ~~period during which the~~new credit facilities). The New Term Loan ~~B benefits from certain “most favored nation”~~A and New Revolving Credit Facility will bear interest, at the Company’s option, at a rate per annum determined by reference to either LIBOR or an adjusted base rate, in each case plus an applicable interest rate margin. The applicable interest rate margin with respect to LIBOR borrowings will be a rate per annum between 1.25% and 1.75% and with respect to adjusted base rate borrowings will be a rate per annum between 0.25% and 0.75%, in each case determined on a quarterly basis by reference to a pricing ~~protections until~~ 12 ~~months after~~grid based upon the ~~effective date~~Company’s total net leverage ratio.

The principal amount of the ~~Repricing Amendment. Other than~~New Term Loan A will amortize in equal quarterly installments at a rate (expressed as ~~set forth above, all other material terms and provisions~~a percentage of the ~~Senior Credit Facilities remain substantially the same. Debt issuance costs incurred~~original principal amount) of 2.5% per annum for the ~~repricing totaled~~ ~~$2.0~~ ~~million.~~first year following the closing date, 2.5% per annum for the second year following the closing date, 5.0% per annum for the third year following the closing date, 7.5% per annum for the fourth year following the closing date and 12.5% per annum for the fifth year following the closing date (in each case subject to customary adjustments in the event of any prepayment or in the event the Delayed Draw Term Loan A is drawn), with the balance due upon maturity.

The Delayed Draw Term Loan A will be available in a single drawing until February 8, 2020. Any loans under this Delayed Draw Term Loan A will have the same terms as, and will constitute one class of term loans with, the loans under the New Term Loan A described above.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Statements

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

●

uncertainties as to the timing of the anticipated acquisition of Fidelity and the risk that the transaction may not be completed in a timely manner or at all;

●

the possibility that any or all of the various conditions to the consummation of the anticipated acquisition of Fidelity may not be satisfied or waived, including failure to receive any required regulatory approvals (or any conditions, limitations or restrictions placed in connection with such approvals);

●

the effect of the announcement or pendency of the Fidelity transaction on our and Fidelity’s ability to retain and hire key personnel and to maintain relationships with customers, suppliers and other business partners;

●

risks related to management’s attention being diverted from our ongoing business operations;

●

uncertainties as to our ability and the amount of time necessary to realize the expected synergies and other benefits of the ~~acquisition of NewWave;~~Fidelity transaction;

●

our ability to integrate ~~NewWave’s~~Fidelity’s operations into our own ~~in an efficient and effective manner;~~

●

rising levels of competition from historical and new entrants in our markets;

●

recent and future changes in technology;

●

our ability to continue to grow our business services ~~product;~~products;

●

increases in programming costs and retransmission fees;

●

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

●

the effects of any new significant acquisitions by us;

●

risks that our rebranding may not produce the benefits expected;

●

adverse economic conditions;

●

the integrity and security of our network and information systems;

●

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

●

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

●

our ability to retain key employees;

●

~~changing~~legislative or regulatory efforts to impose network neutrality (“net neutrality”) and other new requirements on our data services;

●

additional regulation of our ~~data,~~ video and voice ~~services, including legislative and regulatory efforts to impose new legal requirements on our data~~ services;

●

our ability to renew cable system franchises;

●

increases in pole attachment costs;

●

changes in local governmental franchising authority and broadcast carriage regulations;

●

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

●

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

●

our ability to incur future indebtedness;

●

fluctuations in our stock price;

●

our ability to continue to pay dividends;

●

dilution from equity awards and potential stock issuances in connection with acquisitions;

●

provisions in our charter, by-laws and Delaware law that could discourage takeovers;

●

~~changes in our estimates of the impact of the 2017 Federal tax reform legislation;~~

●

~~changes in GAAP or other applicable accounting policies;~~ and

●

the other risks and uncertainties detailed ~~in the section titled “~~~~Risk Factors~~”from time to time in our ~~2017~~filings with the SEC, including but not limited to in our 2018 Form 10-K.

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

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The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2017~~2018 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our ~~2017~~2018 Form 10-K. Our results of operations for the three months ended March 31, ~~2018~~2019 may not be indicative of our future results.

Overview

We are a fully integrated provider of data, video and voice services in 21 Western, Midwestern and Southern states. We provide these broadband services to residential and business customers in more than 750 communities. The markets we serve are primarily non-metropolitan, secondary markets, with ~~77%~~78% of our customers located in seven states: Arizona, Idaho, Illinois, Mississippi, Missouri, Oklahoma and Texas. Our biggest customer concentrations are in the Mississippi Gulf Coast region and in the greater Boise, Idaho region. We ~~are among the 10 largest cable system operators in the United States based on customers and revenues in 2017, providing~~provided service to ~~801,136~~818,330 residential and business customers out of approximately 2.1 million homes passed as of March 31, ~~2018.~~2019. Of these customers, ~~651,550~~678,385 subscribed to data services, ~~350,874~~320,611 subscribed to video services and ~~131,920~~125,486 subscribed to voice services.

We generate substantially all of our revenues through five primary products. Ranked by share of our total revenues through the first three months of ~~2018,~~2019, they are residential data ~~(44.6%~~(46.6%), residential video ~~(33.4%~~(30.1%), business services (data, voice and video – ~~14.2%~~16.9%), residential voice ~~(4.0%~~(3.5%) and advertising sales ~~(2.0%~~(1.7%). The profit margins, growth rates and capital intensity of our five primary products vary significantly due to differences in competition, product maturity and relative costs.

On ~~May 1, 2017,~~January 8, 2019, we ~~completed the acquisition of all of the outstanding equity interests of NewWave.~~acquired Clearwave, a facilities-based service provider that owns and operates a high-capacity fiber network offering dense regional coverage in Southern Illinois. We paid a purchase price of ~~$740.2~~$358.8 million in cash on a debt-free ~~basis,~~basis. The acquisition provides us with a premier fiber network within our existing footprint, further enables us to supply our customers with enhanced business services solutions and provides a platform to allow us to replicate Clearwave’s strategy in several of our other markets.

On April 1, 2019, we entered into a definitive agreement with Fidelity Communications Co. to acquire its data, video and voice business and certain related assets for $525.9 million in cash, subject to customary post-closing adjustments. ~~Our results~~Fidelity is a cable operator that provides residential and business services to customers throughout greater Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas. Cable One and Fidelity share similar strategies, customer demographics and products. Accordingly, the acquisition of ~~operations~~Fidelity offers us opportunities for ~~the three months ended March 31, 2018 include the impact of NewWave operations while our comparable results for 2017 do not,~~revenue growth and Adjusted EBITDA margin expansion as well as the ~~acquisition was not~~potential to realize cost synergies. The all-cash transaction is expected to be funded through a combination of cash on hand, revolving credit facility capacity and the proceeds of new indebtedness. The transaction is subject to certain regulatory approvals and other customary closing conditions and is expected to be completed ~~until~~during the ~~second~~fourth quarter of ~~2017.~~2019.

Prior to 2012, we were focused on growing revenues through subscriber retention and growth in overall primary service units (“PSUs”). Accordingly, our strategies consisted of, among others, offering promotional discounts to new and existing subscribers adding new services and to subscribers purchasing more than one service offering. Since 2012, we have adapted our strategy to face the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. We believe the declining profitability of residential video services is primarily due to increasing programming costs and retransmission fees and competition from other content providers, and the declining revenues from residential voice services isare primarily due to the increasing use of wireless voice services ~~in addition to, or~~ instead of residential voice ~~service.~~services. Beginning in 2013, we shifted our focus away from maximizing customer PSUs and towards growing ~~and maintaining~~ our higher margin businesses, namely residential data and business services. Separately, we have also focused on retaining customers with a high expected lifetime value (“LTV”), who are less attracted by discounting, require less support and churn less. This strategy focuses on increasing Adjusted EBITDA, Adjusted EBITDA less capital expenditures and margins (refer to the section entitled “Use of Adjusted EBITDA” for the definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, which is the most directly comparable GAAP measure).

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The trends described above have impacted our four largest product lines in the following ways:

●

Residential data. We experienced growth in the number of, and revenues from, our residential data customers every year since 2013. We expect this growth to continue due to projected increases in the number of potential customers for us to serve, as there are still a number of households in our markets that do not subscribe to data services from any provider. We expect to capture a portion of these customers and anticipate capturing additional market share from existing data subscribers due to our continued upgrades in broadband capacity, our ability to offer higher access speeds than many of our competitors and our Wi-Fi support service.

●

Residential video. Residential video service is a ~~competitive and~~ highly ~~penetrated~~competitive business. As we focus on the higher-margin businesses of residential data and business services, we ~~are de-emphasizing~~have de-emphasized our residential video business and, as a result, expect residential video revenues to continue to decline in the future.

●

Residential voice. We have experienced declines in residential voice customers as a result of homes in the United States deciding to terminate their residential voice ~~service~~services and exclusively use wireless voice ~~service.~~services. We believe this trend will continue because of competition from wireless voice service providers. Revenues from residential voice customers have declined over recent years, and we expect this decline will continue.

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●

Business services. We have experienced significant growth in business data and voice customers and revenues, and we expect this growth to continue. We attribute this growth to our strategic focus ~~shift~~ on increasing sales to business customers and our ~~recently expanded~~ efforts to attract enterprise business customers. Margins in products sold to business customers have remained attractive, and we expect this trend to continue.

We continue to experience increased competition, particularly from telephone companies, cable and municipal overbuilders, over-the-top (“OTT”) video providers and direct broadcast satellite (“DBS”) television providers. Because of the levels of competition we face, we believe it is important to make investments in our infrastructure. We ~~made~~ elevated ~~levels of~~our capital investments between 2012 and ~~2017~~2018 to increase our ~~cable~~ plant capacities and reliability, launch all-digital video services ~~which~~(which has ~~freed up~~made available approximately half of average plant bandwidth for data ~~services,~~services) and increase data capacity by moving from four-channel bonding to 32-channel ~~bonding.~~bonding (to enable our 1 Gigabit per second download speed data service, GigaONE®). We expect to continue devoting financial resources to infrastructure improvements, including in the new markets we acquired in the NewWave ~~transaction,~~and Clearwave transactions, because we believe these investments are necessary to remain competitive. We expect to spend up to ~~$50~~$35 million ~~in 2018 and~~during 2019 ~~in addition to the $10 million spent in 2017,~~ to enhance ~~the~~those acquired ~~NewWave systems~~operations by rebuilding low capacity markets, launching all-digital video services, implementing 32-channel bonding, ~~to enable a 1 gigabit-per-second (“Gbps”) download speed product launch,~~ converting back office functions such as billing, accounting and service provisioning, ~~and~~ migrating products to ~~legacy~~ Cable One ~~platforms.~~platforms and expanding our high-capacity fiber network.

Our primary goals are to continue ~~to grow~~growing residential data and business services, ~~and~~ to ~~maintain~~increase profit margins and to deliver strong Adjusted ~~EBITDA.~~EBITDA and Adjusted EBITDA less capital expenditures. To achieve these goals, we intend to continue our industrial engineering-driven cost management, remain focused on customers with high LTV and follow through with further planned investments in broadband plant upgrades and new data ~~services~~service offerings for residential and business customers.

Our business is subject to extensive governmental regulation. Such regulation has led to increases in our operational and administrative expenses. In addition, we could be significantly impacted by changes to the existing regulatory framework, whether triggered by legislative, administrative or judicial rulings. In 2015, the FCC used its Title II authority to regulate broadband internet access services through the Open Internet Order (the “Order”), which imposed on all providers of broadband internet access service, including us, obligations that limit the ways certain types of traffic can be managed and prescribes certain additional disclosure requirements. The Order was upheld in the courts, but in September 2017, several parties, including the American Cable Association and NCTA – The Internet & Television Association (the “NCTA”), filed petitions for ~~certiorari~~ with the U.S. Supreme Court. Responses to the petitions were due May 4, 2018. However, in December 2017, the FCC rescinded the majority of the open internet rules previously adopted in the Order, with the exception of the disclosure requirements. Several parties have challenged the FCC’s new rules in Federal courts, and those appeals are pending. Congress and numerous states also have proposed legislation regarding net neutrality. Several states have adopted legislation that requires entities providing broadband internet access service in the state to comply with net neutrality requirements or prohibits state and local government agencies from contracting with internet service providers that engage in certain network management activities based on paid prioritization, content blocking or other discrimination. We cannot predict whether or when future changes to the regulatory framework will occur at the FCC, in Congress, at the state level or in the courts. We also cannot predict whether or to what extent the rules as revised by the FCC, Congress, the states or the courts may affect our operations or impose costs on our business.

Results of Operations

~~Revision~~Adoption of ~~Previously Issued Financial Statements and Adoption of Revenue Recognition~~New Lease Accounting Standard

~~In conjunction with~~We adopted the ~~error correction~~new lease accounting standard, ASC 842 - Leases, effective January 1, 2019, using the “Comparatives Under 840 Option” approach to transition. The adoption resulted in the ~~fourth quarter~~recognition of ~~2017 associated with our historical accounting~~ROU assets and lease liabilities for ~~certain categories of internal labor and related costs, we revised our historical financial statements to properly reflect~~substantially all leases within the ~~impact~~condensed consolidated balance sheet. No prior period amounts were retroactively adjusted as a result of the labor capitalization, including the related impact to depreciation expense and income taxes. As a result, the financial statements for the three months ended March 31, 2017 have been revised to reflect the error correction.adoption. Refer to ~~note 2~~notes 1 and 6 to the condensed consolidated financial statements for additional details.

~~Further, we adopted the revenue recognition standard, ASC 606 -~~ ~~Revenue from Contracts with Customers~~, effective January 1, 2018, using the full retrospective method. The adoption resulted in the deferral of all business installation revenues and all residential and business commission expenses over a period of time, instead of immediate recognition. The financial statements for the three months ended March 31, 2017 have been recasted to reflect the impact of the revenue recognition standard adoption. Refer to note 3 to the condensed consolidated financial statements for additional details.

~~Table of Contents~~

PSU and Customer Counts

During the 12 months ended March 31, ~~2018,~~2019, our total PSUs ~~increased 190,462,~~decreased 9,862, or ~~20.2%~~0.9%, compared to our total PSUs as of March 31, ~~2017, with increases in~~2018. Residential data PSUs and business services PSUs increased 19,355 and 9,492, respectively, while residential ~~data,~~ video PSUs and residential voice PSUs ~~of 114,623, 40,309,~~decreased 29,005 and ~~11,867, respectively, and an increase in business PSUs of 23,663.~~9,704, respectively. Our total customer relationships increased ~~140,168,~~17,194, or ~~21.2%~~2.1%, ~~year-over-year. The~~ year-over-year, ~~increases were primarily attributable to new customers acquired as~~with a ~~result~~9,565 increase in residential customer relationships and a 7,629 increase in business customer relationships.

Table of ~~the NewWave acquisition.~~

Contents

The following table provides an overview of selected customer data for the time periods specified:

	As of March 31,				Annual Net Gain/(Loss)				As of March 31,				Annual Net Gain/(Loss)
	2018		2017		Change		% Change		2019		2018		Change			% Change
Residential data PSUs		592,062		477,439		114,623		24.0		611,417		592,062		19,355			3.3
Residential video PSUs ⁽¹⁾		334,035		293,726		40,309		13.7
Residential video PSUs ⁽¹⁾⁽²⁾										305,030		334,035		(29,005	)		(8.7	)
Residential voice PSUs		106,608		94,741		11,867		12.5		96,904		106,608		(9,704	)		(9.1	)
Total residential PSUs		1,032,705		865,906		166,799		19.3		1,013,351		1,032,705		(19,354	)		(1.9	)

Business data PSUs ⁽²⁾		59,488		45,888		13,600		29.6
Business data PSUs ⁽³⁾										66,968		59,488		7,480			12.6
Business video PSUs		16,839		13,461		3,378		25.1		15,581		16,839		(1,258	)		(7.5	)
Business voice PSUs ⁽³⁾		25,312		18,627		6,685		35.9
Total business PSUs		101,639		77,976		23,663		30.3
Business voice PSUs ⁽⁴⁾										28,582		25,312		3,270			12.9
Total business services PSUs										111,131		101,639		9,492			9.3

Total data PSUs										678,385		651,550		26,835			4.1
Total video PSUs										320,611		350,874		(30,263	)		(8.6	)
Total voice PSUs										125,486		131,920		(6,434	)		(4.9	)
Total PSUs		1,134,344		943,882		190,462		20.2		1,124,482		1,134,344		(9,862	)		(0.9	)

Total residential customer relationships		733,576		608,515		125,061		20.6
Total business customer relationships		67,560		52,453		15,107		28.8
Residential customer relationships										743,141		733,576		9,565			1.3
Business customer relationships										75,189		67,560		7,629			11.3
Total customer relationships		801,136		660,968		140,168		21.2		818,330		801,136		17,194			2.1

__________

⁽¹⁾	Residential video PSUs include all basic residential customers who receive video services and may have one or more digital set-top boxes or cable cards deployed. Residential bulk multi-dwelling accounts are included in our video PSUs at the individual unit level.
⁽²⁾	During the first quarter of 2019, the number of residential video PSUs increased by approximately 7,150 as a result of conforming the methodology for counting residential video PSUs following the NewWave billing system conversion. NewWave’s legacy billing system counted residential bulk multi-dwelling accounts at the property level, while our billing system counts residential bulk multi-dwelling accounts for video PSUs at the individual unit level.
⁽³⁾	Business data PSUs include commercial accounts that receive data ~~service~~services via a cable modem and commercial accounts that receive ~~broadband service~~data services optically via fiber connections.
⁽³⁾⁽⁴⁾	Business voice customers who have multiple voice lines are only counted once in the PSU total.

The following table provides an overview of selected customer data for our legacy Cable One cable systems excluding the impact of PSUs and customers from legacy NewWave cable systems for the time periods specified:

As of March 31,

Annual Net Gain/(Loss)

2018

2017

Change

% Change

Residential data PSUs
482,251 477,439 4,812 1.0
Residential video PSUs ⁽¹⁾
260,686 293,726 (33,040 ) (11.2 )
Residential voice PSUs
85,644 94,741 (9,097 ) (9.6 )
Total residential PSUs
828,581 865,906 (37,325 ) (4.3 )

Business data PSUs ⁽²⁾
49,976 45,888 4,088 8.9
Business video PSUs
12,756 13,461 (705 ) (5.2 )
Business voice PSUs ⁽³⁾
20,351 18,627 1,724 9.3
Total business PSUs
83,083 77,976 5,107 6.5

Total PSUs
911,664 943,882 (32,218 ) (3.4 )

Total residential customer relationships
599,006 608,515 (9,509 ) (1.6 )
Total business customer relationships
56,313 52,453 3,860 7.4
Total customer relationships
655,319 660,968 (5,649 ) (0.9 )

⁽¹⁾	Residential video PSUs include all basic residential customers who receive video services and may have one or more digital set-top boxes or cable cards deployed. Residential bulk multi-dwelling accounts are included in our video PSUs at the individual unit level.
⁽²⁾	~~Business data PSUs include commercial accounts that receive data service via a cable modem and commercial accounts that receive broadband service optically via fiber connections.~~
⁽³⁾	~~Business voice customers who have multiple voice lines are only counted once in the PSU total.~~

~~Table of Contents~~

In recent years, our customer mix has shifted, causing subscribers to move from triple-play packages combining data, video and voice services to single and double-play packages. This is largely because some residential video customers have defected to DBS services and OTT offerings ~~in lieu of video~~ and more households have discontinued residential voice service. In addition, we have focused on selling data-only packages to new customers rather than cross-selling video to these customers.

Comparison of Three Months Ended March 31, ~~2018~~2019 to Three Months Ended March 31, ~~2017~~2018

Revenues

Revenues increased ~~$58.3~~$12.8 million, or ~~28.1%~~4.8%, due primarily to increases in residential data ~~residential video~~ and business services revenues of ~~$28.3 million, $16.3~~$10.0 million and ~~$10.7~~$9.5 million, respectively. The increase was the result of ~~the NewWave operations and~~ organic growth in our higher margin product lines of residential data and business ~~services.~~services, the acquired Clearwave operations, a residential video rate adjustment and the implementation of modem rental charges to certain business customers, partially offset by decreases in residential video and voice and advertising sales revenues.

Table of Contents

Revenues by service offering were as follows for the three months ended March 31, ~~2018~~2019 and ~~2017,~~2018, together with the percentages of total revenues that each item represented for the periods presented (dollars in thousands):

	Three Months Ended March 31,
	2018				2017				2018 vs. 2017						Three Months Ended March 31,
			% of				% of		$			%			2019				2018				2019 vs. 2018
	Revenues		Revenues		Revenues		Revenues		Change			Change			Revenues		% of Total		Revenues		% of Total		$ Change			% Change
Residential data	$	118,487		44.6	$	90,201		43.5	$	28,286			31.4		$	129,812		46.6	$	119,859		45.1	$	9,953			8.3
Residential video		88,757		33.4		72,454		34.9		16,303			22.5			83,802		30.1		88,760		33.4		(4,958	)		(5.6	)
Residential voice		10,671		4.0		9,867		4.8		804			8.1			9,624		3.5		10,671		4.0		(1,047	)		(9.8	)
Business services		37,691		14.2		26,968		13.0		10,723			39.8			47,143		16.9		37,688		14.2		9,455			25.1
Advertising sales		5,241		2.0		5,622		2.7		(381	)		(6.8	)		4,729		1.7		5,241		2.0		(512	)		(9.8	)
Other		4,914		1.8		2,322		1.1		2,592			111.6			3,495		1.2		3,542		1.3		(47	)		(1.3	)
Total revenues	$	265,761		100.0	$	207,434		100.0	$	58,327			28.1		$	278,605		100.0	$	265,761		100.0	$	12,844			4.8

Average monthly revenue per unit for the indicated service offerings were as follows for the three months ended March 31, ~~2018~~2019 and ~~2017:~~2018:

	Three Months Ended March 31,				2018 vs. 2017						Three Months Ended March 31,				2019 vs. 2018
	2018		2017		$ Change			% Change			2019		2018		$ Change			% Change
Residential data ⁽¹⁾	$	67.12	$	63.53	$	3.59			5.7		$	70.80	$	67.12	$	3.68			5.5
Residential video ⁽¹⁾	$	86.92	$	80.47	$	6.45			8.0		$	90.54	$	86.92	$	3.62			4.2
Residential voice ⁽¹⁾	$	32.84	$	34.18	$	(1.34	)		(3.9	)	$	32.54	$	32.84	$	(0.30	)		(0.9	)
Business services ⁽²⁾	$	187.40	$	172.87	$	14.53			8.4		$	213.04	$	187.38	$	25.66			13.7

_________

⁽¹⁾

Average monthly revenue per unit values represent the applicable quarterly residential service revenues (excluding installation and activation fees) divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by ~~three.~~three, except that for any new PSUs added as a result of an acquisition occurring during the reporting period, the associated average monthly revenue per unit values represent residential services revenues (excluding installation and activation fees) divided by the pro-rated number of PSUs during such period.

⁽²⁾

Average monthly revenue per unit values represent quarterly business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by ~~three.~~

Revenues by service offering, excluding the impact of revenues related to legacy NewWave cable systems, were as follows for the three months ended March 31, 2018 and 2017, together with the percentages of total revenues that each item represented for the periods presented (dollars in thousands):

Three Months Ended March 31,

2018

2017

2018 vs. 2017

% of

% of

$

%

Revenues

Revenues

Revenues

Revenues

Change

Change

Residential data
$ 99,835 46.0 $ 90,201 43.5 $ 9,634 10.7
Residential video
69,457 32.0 72,454 34.9 (2,997 ) (4.1 )
Residential voice
8,993 4.1 9,867 4.8 (874 ) (8.9 )
Business services
30,283 13.9 26,968 13.0 3,315 12.3
Advertising sales
4,907 2.3 5,622 2.7 (715 ) (12.7 )
Other
3,674 1.7 2,322 1.1 1,352 58.2
Total revenues
$ 217,149 100.0 $ 207,434 100.0 $ 9,715 4.7

~~Table of Contents~~

~~Average monthly revenue per unit, excluding the impact of revenues and customers related to legacy NewWave cable systems, were as follows for the three months ended March 31, 2018 and 2017:~~

Three Months Ended March 31,

2018 vs. 2017

2018

2017

$ Change

% Change

Residential data ⁽¹⁾
$ 69.45 $ 63.53 $ 5.92 9.3
Residential video ⁽¹⁾
$ 87.25 $ 80.47 $ 6.78 8.4
Residential voice ⁽¹⁾
$ 34.44 $ 34.18 $ 0.26 0.8
Business services ⁽²⁾
$ 180.79 $ 172.87 $ 7.92 4.6

⁽¹⁾	~~Average~~three, except that for any new business customer relationships added as a result of an acquisition occurring during the reporting period, the associated average monthly revenue per unit values represent ~~the applicable quarterly residential service revenues divided by the corresponding average of the number of PSUs at the beginning and end of each period, divided by three.~~
⁽²⁾	~~Average monthly revenue per unit values represent quarterly~~ business services revenues divided by the ~~average of the~~pro-rated number of business customer relationships ~~at the beginning and end of each period, divided by three.~~during such period.

Residential data service revenues increased ~~$28.3~~$10.0 million, or ~~31.4%~~8.3%, ~~due primarily to an increase in residential data customers of 24.0% year-over-year~~ as a result of ~~the NewWave operations and~~ organic subscriber growth, ~~a modem rental rate adjustment in the first quarter of 2018,~~ a reduction in package discounting and increased customer subscriptions to premium tiers.

Residential video service revenues ~~increased $16.3~~decreased $5.0 million, or ~~22.5%~~5.6%, due primarily to an ~~increase~~8.7% year-over-year decrease in residential video ~~customers of 13.7% as~~subscribers, partially offset by a ~~result of the NewWave operations and a broadcast television surcharge increase~~rate adjustment beginning in ~~the first quarter of 2018.~~February 2019.

Residential voice service revenues ~~increased $0.8~~decreased $1.0 million, or ~~8.1%~~9.8%, due primarily to ~~an increase~~a 9.1% year-over-year decrease in residential voice ~~customers of 12.5% as a result of the NewWave operations.~~subscribers.

Business services revenues increased ~~$10.7~~$9.5 million, or ~~39.8%~~25.1%, due primarily to ~~the NewWave operations,~~ growth in our business data and voice services to small and medium-sized businesses and enterprise customers, the acquired Clearwave operations and ~~a rate adjustment for~~implementation of modem rental charges to certain business ~~video~~ customers induring the first quarter of ~~2018.~~2019. Total business customer relationships increased ~~28.8%~~11.3% year-over-year. ~~Overall, business services comprised 14.2% of our total revenues for the first quarter of 2018 compared to 13.0% of our total revenues for the first quarter of 2017.~~

~~Advertising sales revenues decreased $0.4 million, or 6.8%, due primarily to fewer legacy Cable One video customers to be reached by advertising spots.~~

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were ~~$94.7~~$94.5 million in the first quarter of ~~2018~~2019 and ~~increased $25.7~~decreased $0.2 million, or ~~37.1%~~0.2%, compared to the first quarter of ~~2017.~~2018. Operating expenses as a percentage of revenues were ~~35.6%~~33.9% for the first quarter of ~~2018~~2019 compared to ~~33.3%~~35.6% for the year-ago quarter. Additional operating expenses attributable to the NewWave operations were $24.3 million for the first quarter of 2018. The remaining increase was due primarily to higher repairs and maintenance costs of $0.8 million, group insurance costs of $0.3 million and contract labor costs of $0.3 million. Excluding the impact of the NewWave operations, operating expenses would have been $70.4 million in the first quarter of 2018, an increase of $1.4 million, or 2.0%, compared to the first quarter of 2017. Operating expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 32.4% in the first quarter of 2018 compared to 33.3% in the first quarter of 2017.

Selling, general and administrative expenses were ~~$51.0~~$61.4 million for the first quarter of ~~2018~~2019 and increased ~~$4.6~~$10.5 million, or ~~9.8%~~20.6%, compared to the first quarter of ~~2017.~~2018. The increase was primarily attributable to acquisition-related costs incurred during the first quarter of 2019, an increase in marketing costs and additional expenses related to Clearwave operations. Selling, general and administrative expenses as a percentage of revenues were ~~19.2%~~22.1% and ~~22.4%~~19.2% for the first quarter of 2019 and 2018, ~~and 2017,~~ respectively. Additional selling, general and administrative expenses attributable to the NewWave operations were $6.4 million for the first quarter of 2018. Excluding incremental expenses associated with the NewWave operations, selling, general and administrative expenses would have decreased $1.9 million, or 4.0%, to $44.5 million due to $1.5 million of acquisition-related costs and $1.3 million of severance costs incurred in the first quarter of 2017 that did not recur in 2018, partially offset by a $0.9 million increase in group insurance costs. Selling, general and administrative expenses as a percentage of revenues, excluding the impact of the NewWave operations, would have been 20.5% in the first quarter of 2018 compared to 22.4% in the first quarter of 2017.

~~Table of Contents~~

Depreciation and amortization expense was ~~$48.8~~$53.8 million for the first quarter of ~~2018~~2019 and increased ~~$9.2~~$5.1 million, or ~~23.4%~~10.4%, compared to the first quarter of ~~2017.~~2018. The increase was due primarily to new assets placed in service since the first quarter of ~~2017, including property, plant~~2018 and ~~equipment~~additional depreciation and ~~finite-lived intangible assets~~amortization related to the acquired ~~as part of the NewWave acquisition,~~Clearwave operations, partially offset by assets that became fully depreciated since ~~the first quarter of 2017. Depreciation and amortization expense related to the NewWave operations was $12.5 million for~~ the first quarter of 2018. As a percentage of revenues, depreciation and amortization expense was 19.3% for the first quarter of 2019 compared to 18.4% for the first quarter of ~~2018 compared to 19.1% for~~2018.

Table of Contents

We recognized a $1.1 million net loss on asset disposals during the first quarter of ~~2017.~~

~~We recognized~~2019 compared to a $6.6 million net loss on ~~disposal of assets during~~asset disposals in the first quarter of 2018. ~~In the~~The first quarter of ~~2017, we recognized~~2019 included a ~~$6.1 million net~~ gain on ~~disposal of assets, which primarily related to~~ the sale of a non-operating ~~property.~~property that housed our former headquarters, while the prior year quarter included more asset disposals.

Interest Expense

Interest expense increased ~~$7.1~~$3.4 million, or ~~93.6%~~22.9%, to ~~$14.7~~$18.1 million, ~~due primarily to~~driven by additional outstanding debt ~~that was incurred~~and an increase in ~~the second quarter of 2017 to finance the NewWave acquisition.~~interest rates year-over-year.

Income Tax Provision

The income tax provision ~~decreased $9.2~~increased $2.8 million, or ~~48.3%~~27.9%. Our effective tax rate was ~~19.6%~~24.6% and ~~37.3%~~19.6% for the first quarter of ~~2018~~2019 and ~~2017,~~2018, respectively. The ~~decrease~~increase in the effective tax rate ~~was due~~ primarily related to a ~~reduction~~$1.4 million decrease in ~~the Federal corporate income tax rate from 35% to 21% as a result of the 2017 Federal tax reform legislation and $2.4 million of~~ income tax benefits attributable to equity-based compensation ~~awards recorded~~and a $0.9 million increase in income tax expenses attributable to state effective tax rate changes during the first quarter of ~~2018.~~2019.

Use of Adjusted EBITDA

We use certain measures that are not defined by GAAP to evaluate various aspects of our business. Adjusted EBITDA is a non-GAAP financial measure and should be considered in addition to, not as superior to, or as a substitute for, net income reported in accordance with GAAP. Adjusted EBITDA is reconciled to net income below.

Adjusted EBITDA is defined as net income plus interest expense, income tax provision, depreciation and amortization, equity-based compensation, severance expense, (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on ~~disposal of assets, billing~~asset disposals, system conversion costs, rebranding costs, other (income) expense and other unusual operating expenses, as provided in the table below. As such, it eliminates the significant non-cash depreciation and amortization expense that results from the capital-intensive nature of our business as well as other non-cash or special items and is unaffected by our 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 our cash cost of debt financing. These costs are evaluated through other financial measures.

We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio ~~calculation~~calculations under our outstanding Senior Credit Facilities and Notes to determine compliance with the covenants contained in the ~~Senior~~Amended and Restated Credit ~~Facilities~~Agreement, as amended and restated, and the ability to take certain actions under the ~~Indenture~~indenture governing the Notes. Adjusted EBITDA is also a significant performance measure used by us in our 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.

	Three Months Ended March 31,						2018 vs. 2017						Three Months Ended March 31,						2019 vs. 2018
(dollars in thousands)	2018			2017			$ Change			% Change
(dollars in thousands)													2019			2018			$ Change			% Change
Net income ⁽¹⁾	$	40,653		$	32,113		$	8,540			26.6		$	38,739		$	40,653		$	(1,914	)		(4.7	)

Plus: Interest expense		14,723			7,606			7,117			93.6			18,096			14,723			3,373			22.9
Income tax provision		9,902			19,144			(9,242	)		(48.3	)		12,664			9,902			2,762			27.9
Depreciation and amortization		48,778			39,536			9,242			23.4			53,844			48,778			5,066			10.4
Equity-based compensation		2,338			2,427			(89	)		(3.7	)		3,021			2,338			683			29.2
Severance expense		-			1,254			(1,254	)		(100.0	)		163			130			33			25.4
(Gain) loss on deferred compensation		(84	)		90			(174	)		(193.3	)		175			(84	)		259			NM
Acquisition-related costs		-			1,482			(1,482	)		(100.0	)		5,223			-			5,223			NM
(Gain) loss on disposal of assets, net		6,634			(6,146	)		12,780			(207.9	)
Billing system conversion costs		840			-			840			NM
Other (income) expense, net		(617	)		(287	)		(330	)		115.0
Loss on asset disposals, net														1,103			6,634			(5,531	)		(83.4	)
System conversion costs ⁽¹⁾														1,396			840			556			66.2
Rebranding costs														510			-			510			NM
Other income, net														(1,802	)		(617	)		(1,185	)		192.1

Adjusted EBITDA ⁽¹⁾	$	123,167		$	97,219		$	25,948			26.7
Adjusted EBITDA													$	133,132		$	123,297		$	9,835			8.0

__________

NM = Not meaningful.

⁽¹⁾ ~~Net income and Adjusted EBITDA~~(1) Comprised of $1.0 million of enterprise resource planning system implementation costs for the ~~three months ended March 31, 2018 include NewWave operations. Without the contribution from NewWave operations, net income would have increased 17.7% to $37.8~~first quarter of 2019 and $0.4 million and ~~Adjusted EBITDA would have increased 7.4% to $104.4~~$0.8 million of NewWave billing system conversion costs for the ~~three months ended March 31,~~first quarter of 2019 and 2018, ~~compared to the prior year period.~~respectively.

Table of Contents

We believe Adjusted EBITDA is useful to investors in evaluating our operating performance. Adjusted EBITDA and similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measure of Adjusted EBITDA may not be directly comparable to similarly titled measures reported by other companies.

Financial Condition: Liquidity and Capital Resources

Liquidity

Our primary funding requirements are for our ongoing operations, planned capital expenditures, payments of quarterly dividends, share repurchases and ~~share repurchases.~~to fund the Fidelity acquisition. We believe that existing cash balances, our Senior Credit Facilities and operating cash flows will provide adequate support for these funding requirements over the next 12 months. However, our ability to fund operations and acquisitions, make planned capital expenditures, pay quarterly dividends and make share repurchases depends on future operating performance and cash flows, which, in turn, are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control. ~~As a result of the 2017 Federal tax reform legislation, we expect to realize approximately $38 million to $42 million of cash tax savings during 2018.~~

During the first quarter of ~~2018,~~2019, our cash and cash equivalents ~~increased $23.7~~decreased $76.6 million. At March 31, ~~2018,~~2019, we had ~~$185.5~~$187.6 million of cash on hand compared to ~~$161.8~~$264.1 million at December 31, ~~2017.~~2018. Our working capital was ~~$115.1~~$101.2 million and ~~$76.7~~$184.2 million at March 31, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.

The following table shows a summary of our net cash flows for the periods indicated (dollars in thousands):

	Three Months Ended March 31,						2018 vs. 2017						Three Months Ended March 31,						2019 vs. 2018
	2018			2017			$ Change			% Change			2019			2018			$ Change			% Change
Net cash provided by operating activities	$	94,692		$	78,260		$	16,432			21.0		$	104,378		$	94,692		$	9,686			10.2
Net cash used in investing activities		(45,619	)		(26,985	)		(18,634	)		69.1			(404,969	)		(45,619	)		(359,350	)		NM
Net cash used in financing activities		(25,332	)		(15,848	)		(9,484	)		59.8
Change in cash and cash equivalents		23,741			35,427			(11,686	)		(33.0	)
Net cash provided by (used in) financing activities														224,037			(25,332	)		249,369			NM
Increase (decrease) in cash and cash equivalents														(76,554	)		23,741			(100,295	)		NM
Cash and cash equivalents, beginning of period		161,752			138,040			23,712			17.1			264,113			161,752			102,361			63.3
Cash and cash equivalents, end of period	$	185,493		$	173,467		$	12,026			6.9		$	187,559		$	185,493		$	2,066			1.1

__________

NM = Not meaningful.

Net cash provided by operating activities was ~~$94.7~~$104.4 million and ~~$78.3~~$94.7 million for the first quarter of ~~2018~~2019 and ~~2017,~~2018, respectively. The $9.7 million year-over-year increase ~~of $16.4 million~~ was primarily attributable to an increase in Adjusted EBITDA of ~~$25.9~~$9.8 million and a $12.1 million difference in the change in accounts payable and accrued liabilities, partially offset by ~~an unfavorable change in net operating assets~~higher interest and liabilities and a $6.5 million increase in cash paid for interest. The unfavorable change in net operating assets and liabilities primarily reflects changes to income taxes payable and prepaid and other assets as a result of the timing of payments compared to the first quarter of 2017.acquisition-related costs.

Net cash used in investing activities was ~~$45.6~~$405.0 million and ~~$27.0~~$45.6 million for the first quarter of ~~2018~~2019 and ~~2017,~~2018, respectively. The $359.4 million increase ~~of $18.6 million~~in cash used from the prior year period was due primarily to ~~an $8.8 million increase~~the Clearwave acquisition in ~~cash paid for capital expenditures,~~the first quarter of ~~which $6.7 million related to NewWave operations, and $10.1 million of sales proceeds received from the sale of a non-operating property in 2017 that did not recur in 2018.~~2019.

~~Table of Contents~~

Net cash provided by financing activities was $224.0 million for the first quarter of 2019 compared to net cash used in financing activities ~~was~~of $25.3 million for the first quarter of ~~2018 compared to $15.8~~2018. The $249.4 million ~~for the first quarter of 2017. The $9.5 million increase~~change in net cash flows from the prior year period was ~~due~~ primarily to a ~~$6.9 million increase in withholding tax payments for equity award vesting and exercise activities, a $1.9 million increase in share repurchases, a $1.6 million increase in~~result of new debt ~~principal repayments and a $1.5 million increase in dividend payments, partially offset by a decrease~~incurred in the ~~change~~first quarter of 2019 to finance, in ~~cash overdrafts due to~~part, the ~~timing of payments.~~Clearwave acquisition.

On July 1, 2015, the Board authorized up to ~~$250~~$250.0 million of share repurchases (subject to a total cap of 600,000 shares of our common stock). Purchases under the share repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases are based on a number of factors, including share price and business and market conditions. Since the inception of the share repurchase program through the end of the first quarter of ~~2018,~~2019, we have repurchased ~~169,144~~210,631 shares of our common stock at an aggregate cost of $104.9 million. During the first quarter of 2019, we repurchased 5,984 shares at an aggregate cost of ~~$75.6~~$5.1 million. ~~In first quarter~~

Table of ~~2018, we repurchased 3,311 shares at an aggregate cost of $2.3 million.~~

Contents

We currently expect to continue to pay quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the first quarter of ~~2018,~~2019, the Board approved a quarterly dividend of ~~$1.75~~$2.00 per share of common stock, which was paid on March ~~9, 2018.~~8, 2019.

Financing Activity

On June 17, 2015, we issued ~~$450~~$450.0 million aggregate principal amount of 5.75% senior unsecured notes due 2022. The Notes are jointly and severally guaranteed on a senior unsecured basis by each of our subsidiaries that guarantee the Senior Credit Facilities. The Notes mature on June 15, 2022 and interest is payable on June 15th and December 15th of each year. The Notes are jointly and severally guaranteed on a senior unsecured basis (the “Notes Guarantees”) by each of our subsidiaries that guarantee the Senior Credit Facilities (the “Notes Guarantors”). In addition, if one of our subsidiaries becomes a guarantor in respect of the Senior Credit Facilities or certain other indebtedness, it is required to provide (subject to customary exceptions) a Notes Guarantee. The Notes are unsecured and senior obligations of the Company. The Notes Guarantees are unsecured and senior obligations of the Notes Guarantors.

The ~~Notes were issued pursuant to~~indenture governing the ~~Indenture. The Indenture~~Notes provides for early redemption of the Notes, at our option, at the prices and subject to the terms specified in the Indenture. The Indenture includes certain covenants relating to debt incurrence, liens, restricted payments, asset sales and transactions with affiliates, changes in control and mergers or sales of all or substantially all of our assets. The Indenture also provides for customary events of default (subject, in certain cases, to customary grace periods).indenture.

On June 30, 2015, we entered into the Credit Agreement with the lenders party thereto, JPMorgan, as administrative agent, and the other agents party ~~thereto. The Credit Agreement~~thereto, which provided for a five-year Revolving Credit Facility in an aggregate principal amount of ~~$200 million and a five-year Term Loan Facility in an aggregate principal amount of $100~~$200.0 million. Concurrently with the entry into the Credit Agreement, we borrowed the full amount of the Term Loan Facility. The Revolving Credit Facility also gives us the ability to issue letters of credit, which reduce the amount available for borrowing under the Revolving Credit Facility.

On May 1, 2017, we ~~entered into~~and the ~~Amended~~lenders amended and ~~Restated~~restated the Credit Agreement and we incurred ~~$750~~$750.0 million of 2017 New Loans, the proceeds of which were used, together with cash on hand, to finance the NewWave acquisition, repay in full the ~~Term Loan Facility~~then-existing term loans and pay related fees and expenses.

The 2017 New Loans consist of the five-year Term Loan A in an original aggregate principal amount of ~~$250~~$250.0 million and the seven-year Term Loan B in an original aggregate principal amount of ~~$500~~$500.0 million.

On January 7, 2019, we entered into Amendment No. 2 with CoBank, as lender, and JPMorgan, as administrative agent, and incurred the new seven-year incremental Term Loan B-2 in an aggregate principal amount of $250.0 million, the proceeds of which were used to finance, in part, the Clearwave acquisition.

The ~~obligations under the Amended and Restated~~Senior Credit ~~Agreement~~Facilities are guaranteed by ~~our wholly owned domestic subsidiaries~~the Guarantors and are secured, subject to certain exceptions, by substantially all ~~assets~~ of ~~the Company~~our and the ~~guarantors.~~Guarantors’ assets.

~~On April 23, 2018, we entered into the Repricing Amendment to the Amended and Restated Credit Agreement to, among other things, (i) decrease the applicable margin for the~~The Term Loan A, Term Loan B ~~to 1.75% for LIBOR borrowings~~ and ~~0.75% for base rate borrowings, (ii) reset the period during which a prepayment premium in respect of the~~ Term Loan BB-2 may be required for a Repricing Transaction until six months after the effective date of the Repricing Amendment and (iii) reset the period during which the Term Loan B benefits from certain “most favored nation” pricing protections until 12 months after the effective date of the Repricing Amendment. Other than as set forth above, all other material terms and provisions of the Senior Credit Facilities remain substantially the same. Excluding the costs of the transaction, the interest rate reduction is expectedprepaid at any time without penalty or premium (subject to ~~save the Company approximately $2.5 million annually in interest costs. Debt issuance costs incurred for the repricing totaled $2.0 million.~~customary LIBOR breakage provisions).

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The interest margins applicable to the Senior Credit Facilities are, at our option, equal to either LIBOR or a base rate, plus an applicable margin equal to, (i) with respect to the Term Loan A and the Revolving Credit Facility, 1.50% to 2.25% for LIBOR loans and 0.50% to 1.25% for base rate loans, determined on a quarterly basis by reference to a pricing grid based on our total net leverage ratio, ~~and~~ (ii) with respect to the Term Loan B, (x) for any day on or prior to April 22, 2018, 2.25% for LIBOR loans and 1.25% for base rate loans and (y) for any ~~date after April 22, 2018,~~day thereafter, 1.75% for LIBOR loans and 0.75% for base rate ~~loans. The~~loans, and (iii) with respect to the Term Loan ~~A may be prepaid at any time without premium~~B-2, 2.00% for LIBOR loans and ~~amortizes quarterly at a~~1.00% for base rate (expressed as a percentage of the original principal amount) of 2.5% per annum for the first year after funding, 5.0% per annum for the second year after funding, 7.5% per annum for the third year after funding and 10.0% per annum for the fourth and fifth years after funding, with the outstanding balance due upon maturity. The Term Loan B amortizes quarterly at a rate (expressed as a percentage of the original principal amount) of 1.0% per annum, with the outstanding balance due upon maturity. The Term Loan B is subject to a 1.0% prepayment premium if prepaid in connection with a Repricing Transaction within six months of the effective date of the Repricing Amendment, benefits from certain “most favored nation” pricing protections and is not subject to the financial maintenance covenants under the Amended and Restated Credit Agreement. Other than as set forth above, the New Loans are subject to terms substantially similar to those under the Credit Agreement.loans.

We may, subject to certain specified terms and provisions, obtain additional credit facilities of up to ~~$425~~$425.0 million under the Amended and Restated Credit Agreement plus an unlimited amount so long as, on a pro forma basis, our First Lien Net Leverage Ratio (as defined in the Amended and Restated Credit Agreement) is no greater than 1.80 to 1.00. The Amended and Restated Credit Agreement contains customary representations, warranties and affirmative and negative covenants as well as customary events of default. The Amended and Restated Credit Agreement also requires us to maintain specified ratios of total net indebtedness and first lien net indebtedness to consolidated operating cash flow. Refer to note 8 to the consolidated financial statements included in our 2017 Form 10-K for additional information.

We were in compliance with all debt covenants as of March 31, ~~2018.~~2019.

As of March 31, ~~2018,~~2019, outstanding borrowings under the Term Loan A, Term Loan B and Term Loan BB-2 were ~~$245.3~~$234.4 million, $491.3 million and ~~$496.3~~$250.0 million, respectively, and bore interest at ~~a rate~~rates of ~~4.06% per annum~~4.25%, 4.25% and ~~4.56%~~4.49% per annum, respectively. Letter of credit issuances under the Revolving Credit Facility totaled ~~$3.1~~$4.1 million and we had ~~$196.9~~$195.9 million available for borrowing under the Revolving Credit Facility at March 31, ~~2018.~~2019.

In connection with Amendment No. 2, we incurred capitalizable debt issuance costs of $2.4 million. We recorded $1.1 million and $1.0 million of debt issuance cost amortization for the three months ended March 31, 2019 and 2018, respectively. These amounts are reflected within interest expense in the condensed consolidated statements of operations and comprehensive income. Unamortized debt issuance costs totaled $18.9 million and $17.6 million at March 31, 2019 and December 31, 2018, respectively. These amounts are reflected as a reduction to long-term debt in the condensed consolidated balance sheets.

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During the first quarter of 2019, we entered into two interest rate swap agreements in order to convert the Company’s interest payment obligations with respect to an aggregate of $1.2 billion of our variable rate LIBOR indebtedness to a fixed rate. Under the first swap agreement, with respect to a notional amount of $850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.653%. Under the second swap agreement, which is a forward-starting swap with respect to a notional amount of $350.0 million, our monthly payment obligation beginning in June 2020 is determined at a fixed base rate of 2.739%. Both interest rate swap agreements are scheduled to mature in the first quarter of 2029 but may be terminated prior to their scheduled maturity at the election of the Company or the financial institution counterparty as provided in each swap agreement.

On April 12, 2019, we and certain of our subsidiaries entered into Amendment No. 3 with CoBank, as lender, and JPMorgan, as administrative agent, to provide for the new delayed draw incremental Term Loan B-3 in an aggregate principal amount of $325.0 million. Subject to the satisfaction of certain conditions, we may borrow under the Term Loan B-3 in a single drawing at any time prior to October 9, 2019. No amounts have been drawn under the Term Loan B-3 as of May 9, 2019.

The Term Loan B-3 will mature on January 7, 2026 and may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions). The interest rate applicable to the Term Loan B-3 will be, at our option, equal to LIBOR or a base rate, plus an applicable margin equal to 2.0% for LIBOR loans and 1.0% for base rate loans. The principal amount of the Term Loan B-3 will amortize in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 1.0% per annum (subject to customary adjustments in the event of any prepayment), with the balance due upon maturity.

We will be required to pay a ticking fee, which will accrue at a per annum rate that will range between 0.375% and 0.625%, on the daily average unused amount of the aggregate commitments of the lender under the Term Loan B-3, accruing during the period commencing on May 28, 2019 up to, but excluding, the date on which the lender’s commitments under the Term Loan B-3 terminate.

On May 8, 2019, we and our wholly owned subsidiaries entered into the Second Restatement Agreement with JPMorgan, as administrative agent, and the lenders party thereto, to amend and restate the Amended and Restated Credit Agreement.

The Second Restatement Agreement provides for the New Term Loan A in an aggregate principal amount of $250.0 million, the Delayed Draw Term Loan A in an aggregate principal amount of $450.0 million and the $350.0 million New Revolving Credit Facility. The Second Restatement Agreement did not alter the principal terms of our previously established Term Loan B, Term Loan B-2 and Term Loan B-3.

A portion of the proceeds from the new credit facilities were used to refinance our existing Revolving Credit Facility and Term Loan A, and we intend to use the remaining proceeds, together with the proceeds of the Term Loan B-3 and cash on hand, to redeem the Notes on or after June 15, 2019, to finance the acquisition of Fidelity and for other general corporate purposes.

The New Term Loan A and New Revolving Credit Facility will mature on May 8, 2024 (unless certain of our existing indebtedness remains outstanding after certain specified dates, in which case the final maturity date of both facilities will be an earlier date as specified in the documentation for the new credit facilities). The New Term Loan A and New Revolving Credit Facility will bear interest, at our option, at a rate per annum determined by reference to either LIBOR or an adjusted base rate, in each case plus an applicable interest rate margin. The applicable interest rate margin with respect to LIBOR borrowings will be a rate per annum between 1.25% and 1.75% and with respect to adjusted base rate borrowings will be a rate per annum between 0.25% and 0.75%, in each case determined on a quarterly basis by reference to a pricing grid based upon our total net leverage ratio.

The principal amount of the New Term Loan A will amortize in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 2.5% per annum for the first year following the closing date, 2.5% per annum for the second year following the closing date, 5.0% per annum for the third year following the closing date, 7.5% per annum for the fourth year following the closing date and 12.5% per annum for the fifth year following the closing date (in each case subject to customary adjustments in the event of any prepayment or in the event the Delayed Draw Term Loan A is drawn), with the balance due upon maturity.

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Capital Expenditures

We have significant ongoing capital expenditure requirements. In addition, we expect to spend up to ~~$50~~$35 million ~~in 2018 and~~during 2019 ~~in addition to the $10 million spent in 2017,~~ to enhance ~~the~~ acquired ~~NewWave systems~~operations by rebuilding low capacity markets, launching all-digital video services, implementing 32-channel bonding, ~~to enable a 1 Gbps download speed product launch,~~ converting back office functions such as billing, accounting and service provisioning, ~~and~~ migrating products to ~~legacy~~ Cable One ~~platforms.~~platforms and expanding our high-capacity fiber network. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.

We have adopted capital expenditure disclosure guidance as supported by the NCTA. These disclosures are not required under GAAP, nor do they impact our accounting for capital expenditures under GAAP. The amounts of capital expenditures reported in this Quarterly Report on Form 10-Q are calculated in accordance with NCTA disclosure ~~guidelines, which include assets acquired during the relevant periods.~~guidelines.

The following table presents our ~~major~~ capital ~~expenditure categories~~expenditures by category in accordance with NCTA disclosure guidelines for the three months ended March 31, ~~2018~~2019 and ~~2017~~2018 (in thousands):

	Three Months Ended March 31,				Three Months Ended March 31,
	2018		2017		2019		2018
Customer premise equipment	$	12,000	$	6,161	$	10,811	$	12,000
Commercial		1,593		1,637		4,215		1,593
Scalable infrastructure		9,759		7,416		11,233		9,759
Line extensions		3,501		2,338		4,817		3,501
Upgrade/rebuild		4,474		5,493		5,177		4,474
Support capital		9,692		12,872		10,374		9,692
Total	$	41,019	$	35,917	$	46,627	$	41,019

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Contractual Obligations and Contingent Commitments

~~The following is~~As described in the section entitled “Financing Activity,” on January 7, 2019, we incurred $250.0 million of new indebtedness under the seven-year Term Loan B-2, which amortizes in equal quarterly installments at a ~~summary~~rate of ~~our~~1.0% per annum, with the outstanding ~~contractual obligations~~balance due upon maturity.

Except as disclosed above, as of March 31, ~~2018 (in thousands):~~

Year ending December 31,

Programming
Purchase
Commitments ⁽¹⁾

Operating
Lease
Payments

Debt
Payments ⁽²⁾

Other
Purchase
Obligations ⁽³⁾

Total

2018 (remaining nine months)
$ 167,736 $ 1,363 $ 11,575 $ 18,226 $ 198,900
2019
167,707 1,392 20,642 15,947 205,688
2020
100,976 984 26,892 10,636 139,488
2021
32,739 720 30,017 5,823 69,299
2022
410 334 180,017 1,042 181,803
Thereafter
- 422 922,683 4,096 927,201
Total
$ 469,568 $ 5,215 $ 1,191,826 $ 55,770 $ 1,722,379

⁽¹⁾	~~Programming purchase commitments represent contracts that we have with cable television networks and broadcast stations~~2019, there have been no material changes to provide programming services to our subscribers. The amounts included represent estimates of the future programming costs for these purchase commitments based on tier placement as of March 31, 2018 and the estimated subscriber numbers applied to the per-subscriber rates contained in these contracts. Actual amounts due under such contracts may differ from the amounts above based on the actual subscriber numbers and tier placements. In addition, programming purchases sometimes occur pursuant to non-binding commitments, which are not reflected in the amounts shown.
⁽²⁾	~~Debt payments include principal repayment obligations as defined by the agreements described in the~~ ~~Financing Activity section~~ ~~and for capital lease payment obligations.~~
⁽³⁾	Other purchase obligations includes purchase obligations related to capital projects and other legally binding commitments. Other purchase orders made in the ordinary course of business are excluded from the amounts shown. Any amounts for which we are liable under purchase orders are reflected in our condensed consolidated balance sheet within accounts payable and accrued liabilities.

~~We incur the following costs as part of our operations, however, they are not included within~~ the contractual obligations ~~table above for~~and contingent commitments previously disclosed in the ~~reasons discussed below:~~2018 Form 10-K.

●

We rent space on utility poles in order to provide our services to certain subscribers. Generally, pole rentals are cancellable on short notice, but we anticipate that such rentals will recur. Rent expense for pole attachments was $2.2 million and $1.5 million for the three months ended March 31, 2018 and 2017, respectively.

●

We pay fees to franchise authorities under multi-year franchise agreements based on a percentage of revenues generated from video service each year. Franchise fees and other franchise-related costs included in both revenues and operating expenses within the condensed consolidated statements of operations and comprehensive income were $4.1 million and $3.5 million for the three months ended March 31, 2018 and 2017, respectively.

●

We have cable franchise agreements requiring the construction of cable plant and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, we obtain surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Such surety bonds and letters of credit as of March 31, 2018 and December 31, 2017 totaled $12.1 million and $12.0 million, respectively. Payments under these arrangements are required only in the remote event of nonperformance. We do not expect that these contingent commitments will result in any amounts being paid.

Off-Balance Sheet Arrangements

~~With the exception of the items discussed within the preceding “~~~~Contractual Obligations and Contingent Commitments~~~~” section, we~~We do not have any off-balance sheet arrangements or financing arrangements with special-purpose entities.

Critical Accounting Policies and Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the amounts reported in the consolidated financial statements. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

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An accounting policy is considered to be critical if it is important to our results of operations and financial condition and if it requires management’s most difficult, subjective and complex judgments in its application. With the exception of changes ~~to our revenue recognition accounting policy~~ due to the adoption of the new ~~revenue recognition~~lease accounting standard effective January 1, ~~2018~~2019 and the entry into interest rate swaps in the first quarter of 2019 discussed in ~~note~~notes 1 and 8, respectively, of the notes to our condensed consolidated financial statements within this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policy and estimate disclosures ~~included~~described in our ~~2017~~2018 Form 10-K.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential ~~gain or~~ loss arising from changes in market rates and ~~prices, such as interest rates. There have been no material changes to our~~prices. As of March 31, 2019, the Company’s market risk ~~disclosures included~~sensitive instruments consisted of the Senior Credit Facilities, the Notes and the interest rate swaps, as each described within the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition: Liquidity and Capital Resources—Financing Activity.” None of these instruments were entered into for trading purposes and all instruments relate to the interest rate risk exposure category.

Outstanding borrowings under the Senior Credit Facilities, which bear interest, at the Company’s option, at a rate per annum determined by reference to either LIBOR or an adjusted base rate, in each case plus an applicable interest rate margin, were $975.6 million at March 31, 2019. In the first quarter of 2019, the Company entered into interest rate swap agreements to effectively convert the variable rate interest to a fixed rate for $850.0 million, or 87.1%, of such outstanding debt. Based on the principal outstanding under the Senior Credit Facilities with exposure to LIBOR at March 31, 2019 and December 31, 2018, assuming, hypothetically, that the LIBOR applicable to the Senior Credit Facilities was 100 basis points higher, the Company’s annual interest expense would have increased $1.3 million and $7.3 million, respectively.

Outstanding borrowings under the Notes, which bear interest at a fixed 5.75% rate, were $450.0 million at March 31, 2019. An increase in the ~~2017 Form 10-K.~~market rate of interest applicable to the Notes would not increase interest expense with respect to the Notes since the rate of interest the Company is required to pay on the Notes is fixed.

ITEM 4. CONTROLS AND ~~PROCEDURES~~PROCEDURES.

Disclosure Controls and Procedures

The Company’s management ~~with the participation of the Company’s Chief Executive Officer~~is responsible for establishing and ~~Chief Financial Officer, has evaluated the effectiveness of the Company’s~~maintaining adequate disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosureprocedures. Disclosure controls and procedures ~~were effective in recording, processing, summarizing~~are those controls and ~~reporting, on a timely basis, information required~~procedures that are designed to ~~be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring~~ensure that information required to be disclosed ~~by the Company~~ in the Company’s reports ~~it files~~filed or ~~submits~~submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the Company’s reports filed or submitted under the Exchange Act is accumulated and communicated to ~~the Company’s~~ management, including the Company’s Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the Company carried out an evaluation as of March 31, 2019, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). Based on the Company’s evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2019.

Changes in Internal Control Over Financial Reporting

As a result of the NewWave acquisition on May 1, 2017, the Company has incorporated internal controls over significant processes specific to the acquisition and to post-acquisition activities necessary for the integration of the combined company, including controls associated with acquisition-related accounting and related disclosures as well as the adoption of common financial reporting and internal control practices for the combined company. The NewWave operations utilize a different billing system and processes, for which the Company has designed and implemented new internal controls effective in the first quarter of 2018.

~~Further, due~~Due to the adoption of the new ~~revenue recognition~~lease accounting standard effective January 1, ~~2018,~~2019, the Company has designed and implemented additional internal controls over significant processes specific to the initial transition to the standard and to the ongoing recording, processing and reporting requirements underlying the new ~~revenue recognition~~lease accounting requirements.

As a result of the Clearwave acquisition on January 8, 2019, the Company has implemented internal controls over financial reporting to include consolidation of Clearwave and acquisition-related accounting and disclosures. The Clearwave operations utilize separate information and accounting systems and processes. The Company is in the process of reviewing and evaluating the design and operating effectiveness of internal control over financial reporting relating to the Clearwave operations.

Except as disclosed above, there has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

~~Table of Contents~~

ITEM 1A. RISK FACTORS

There have been no material changes to ~~our~~the risk factors previously disclosed in ~~our 2017~~the 2018 Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table sets forth certain information relating to ~~the purchases of our~~ common stock repurchases by usthe Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended March 31, ~~2018~~2019 (dollars in thousands, except per share data):

Period

Total Number
of Shares
Purchased

Average Price
Paid Per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs ⁽¹⁾

Maximum Dollar
Value of Shares
that May Yet Be
Purchased Under
the Plans or
Programs

January 1 to 31, 2018 ⁽²⁾
8,442 $ 706.20 - $ 176,728
February 1 to 28, 2018 ⁽²⁾
152 $ 706.03 - $ 176,728
March 1 to 31, 2018 ⁽³⁾
4,484 $ 694.02 3,311 $ 174,433
Total
13,078 $ 699.47 3,311 $ 174,433

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽¹⁾		Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1 to 31, 2019 ⁽²⁾		8,210	$	808.53		4,900	$	145,244
February 1 to 28, 2019		1,084	$	891.43		1,084	$	144,160
March 1 to 31, 2019		-	$	-		-	$	144,160
Total		9,294	$	842.47		5,984	$	144,160

__________

⁽¹⁾⁽¹⁾	On July 1, 2015, the Board authorized up to ~~$250~~$250.0 million of share repurchases (subject to a total cap of 600,000 shares of common stock), which was announced on August 7, 2015. The authorization does not have an expiration date. Purchases under the share repurchase program may be made from time to time on the open market and in privately negotiated transactions. The size and timing of these purchases isare based on a number of factors, including share price and business and market conditions.
⁽²⁾	~~Represents~~Includes 3,310 shares withheld from employees to satisfy estimated tax withholding obligations in connection with ~~the~~ vesting of restricted ~~shares and/or exercises of SARs~~stock under the 2015 Plan. The average price paid per share for the common stock withheld was based on the closing price of ~~our~~the Company’s common stock on the ~~applicable~~ vesting ~~or exercise~~ date.
⁽³⁾	Includes 1,173 shares withheld from employees to satisfy estimated tax withholding obligations in connection with exercises of SARs under the 2015 Plan. The average price paid per share for the common stock withheld was based on the closing price of our common stock on the applicable exercise date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

Exhibit

Number

Description

2.1	Stock Purchase Agreement, dated as of March 31, 2019, by and among Cable One, Inc. and Fidelity Communications Co.*+

10.1	Form of Stock Appreciation Right ~~Award~~ Agreement for grants beginning in ~~2018~~2019 (incorporated herein by reference to Exhibit ~~10.17~~10.22 to the Annual Report on Form 10-K of Cable One, Inc. filed on ~~March 1, 2018)~~February 28, 2019).

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10.2	Form of Restricted Stock Award Agreement for performance-based restricted stock grants beginning in ~~2018~~2019 (incorporated herein by reference to Exhibit ~~10.18~~10.23 to the Annual Report on Form 10-K of Cable One, Inc. filed on ~~March 1, 2018)~~February 28, 2019).

10.3	Form of Restricted Stock Award Agreement for time-based proportional-vest restricted stock grants beginning in ~~2018~~2019 (incorporated herein by reference to Exhibit ~~10.19~~10.24 to the Annual Report on Form 10-K of Cable One, Inc. filed on ~~March 1, 2018)~~February 28, 2019).

10.4	~~Form~~Amendment No. 2, dated as of ~~Non-Employee Director Restricted Stock Unit Award~~January 7, 2019, to the Amended and Restated Credit Agreement ~~for grants in lieu of annual cash fees beginning in 2018~~among Cable One, Inc., the lenders or other financial institutions party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit ~~10.20~~10.1 to the ~~Annual~~Current Report on Form ~~10-K~~8-K of Cable One, Inc. filed on ~~March 1, 2018)~~January 8, 2019).

10.5	Amendment No. 1,3, dated as of April ~~23, 2018,~~12, 2019, to the Amended and Restated Credit Agreement among Cable One, Inc., the lenders or other financial institutions party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Cable One, Inc. filed on April ~~23, 2018)~~15, 2019).

10.6	Second Restatement Agreement, dated as of May 8, 2019, among Cable One, Inc., its wholly owned subsidiaries, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit 10.1 to the Current Report on Form 8-K of Cable One, Inc. filed on May 9, 2019).

10.7	Peter N. Witty Offer Letter dated February 12, 2018.*

31.1	Principal Executive Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

31.2	Principal Financial Officer Certification required by Rules 13a-14 and 15d-14 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*

32	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**

101.INS	XBRL Instance Document.*

101.SCH	XBRL Taxonomy Extension Schema Document.*

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.*

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.*

101.LAB	XBRL Taxonomy Extension Label Linkbase Document.*

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.*

__________

* Filed herewith.

** Furnished herewith.

+ Pursuant to Item 601(b)(2) of Regulation S-K, certain exhibits and schedules have been omitted. The Company hereby agrees to furnish supplementally a copy of any omitted attachment to the SEC upon request.

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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.

Cable One, Inc. (Registrant)

By:	/s/ Julia M. Laulis
	Name:	Julia M. Laulis
	Title:	Chair of the Board, President and Chief Executive Officer

Date: May 9, ~~2018~~2019

By:

/s/ ~~Kevin P. Coyle~~Steven S. Cochran

Name:

~~Kevin P. Coyle~~Steven S. Cochran

Title:

Senior Vice President and

Chief Financial Officer

Date: May 9, ~~2018~~2019


	Three Months Ended March 31, 2017
	As Reported/ Revised ⁽¹⁾			ASC 606 Adjustment			As Recasted
Condensed Consolidated Statement of Operations and Comprehensive Income Information
Revenues	$	207,427		$	7		$	207,434
Costs and expenses
Selling, general and administrative		46,256			129			46,385
Total costs and expenses		148,729			129			148,858
Income from operations		58,698			(122	)		58,576
Income before income taxes		51,379			(122	)		51,257
Income tax provision		19,190			(46	)		19,144
Net income	$	32,189		$	(76	)	$	32,113

Net income per common share:
Basic	$	5.68		$	(0.02	)	$	5.66
Diluted	$	5.62		$	(0.02	)	$	5.60

Comprehensive income	$	32,191		$	(76	)	$	32,115

Condensed Consolidated Statement of Cash Flows Information
Net income	$	32,189		$	(76	)	$	32,113
Change in deferred income taxes		(157	)		(46	)		(203	)
Deferred revenue		425			102			527
Other assets and liabilities, net		(415	)		20			(395	)
Net cash provided by operating activities	$	78,260		$	-		$	78,260

				Weighted Average
				Grant Date
	Restricted			Fair Value
	Stock			Per Share
Outstanding as of December 31, 2017		51,290		$	472.89
Granted		11,039		$	707.20
Forfeited		(818	)	$	595.99
Vested		(24,171	)	$	391.19
Outstanding as of March 31, 2018		37,340		$	592.42

Vested and unissued as of March 31, 2018		3,185		$	436.93

Year ending December 31,	Programming Purchase Commitments ⁽¹⁾		Operating Lease Payments		Debt Payments ⁽²⁾		Other Purchase Obligations ⁽³⁾		Total
2018 (remaining nine months)	$	167,736	$	1,363	$	11,575	$	18,226	$	198,900
2019		167,707		1,392		20,642		15,947		205,688
2020		100,976		984		26,892		10,636		139,488
2021		32,739		720		30,017		5,823		69,299
2022		410		334		180,017		1,042		181,803
Thereafter		-		422		922,683		4,096		927,201
Total	$	469,568	$	5,215	$	1,191,826	$	55,770	$	1,722,379