UNITED STATES

~~SEC~~~~URITIES~~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 June 30, ~~2020~~2021

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

Commission File Number: 00~~1-36863~~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~~ Registrant’T~~elephone~~ N~~umber,~~ I~~ncluding~~ A~~rea~~ C~~ode)~~s Telephone Number, Including Area Code)

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

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

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

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

~~Table of Contents~~

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

Large accelerated filer	☑	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

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

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

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

Description of Class	Shares Outstanding as of August 4, 2021~~July~~ ~~31, 2020~~
Common stock, par value $0.01	~~6,020,339~~6,038,066

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	1826

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3040

Item 4.	Controls and Procedures	40

~~Item 4. Controls and Procedures~~ PART II: OTHER INFORMATION		3141

~~PART II: OTHER INFORMATION~~ Item 1.	Legal Proceedings	3141

Item ~~1. Legal Proceedings~~ 1A.	Risk Factors	3141

~~Item 1A. Risk Factors~~	31

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3443

Item 3.	Defaults Upon Senior Securities	3443

Item 4.	Mine Safety Disclosures	3543

Item 5.	Other Information	3543

Item 6. ~~Exhibits~~	Exhibits	3544

SIGNATURES		3645

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

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This document contains “forward-looking statements” that involve risks and uncertainties. These statements can be identified by the fact that they do not relate strictly to historical or current facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business, strategy, acquisitions and strategic investments, dividend policy, financial results and financial condition as well as anticipated impacts from, and our responses to, the COVID-19 ~~pandemic on the Company and future responses.~~pandemic. Forward-looking statements often include words such as “will,” “should,” “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance in connection with discussions of future operating or financial performance. As with any projection or forecast, forward-looking statements are inherently susceptible to uncertainty and changes in circumstances. Our actual results may vary materially from those expressed or implied in our forward-looking statements. Accordingly, undue reliance should not be placed on any forward-looking statement made by us or on our behalf. Important factors that could cause our actual results to differ materially from those in our forward-looking statements include government regulation, economic, strategic, political and social conditions and the following factors, which are discussed in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 (the ~~“2019~~“2020 Form 10-K”) and this Quarterly Report on Form 10-Q:

●

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

●

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

●

recent and future changes in technology;

●

our ability to continue to grow our business services products;

●

increases in programming costs and retransmission fees;

●

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

●

risks that we may fail to realize the ~~effects~~benefits anticipated as a result of ~~any acquisitions and strategic investments by us;~~our purchase of the remaining interests in Hargray Acquisition Holdings, LLC (“Hargray”) that we did not already own (the “Hargray Acquisition”);

●

risks ~~that our rebranding may not produce the benefits expected;~~

●

~~damage~~relating to ~~our reputation~~existing or ~~brand image;~~future acquisitions and strategic investments by us;

●

risks that the implementation of our new enterprise resource planning (“ERP”) system disrupts business operations;

●

~~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 (who we refer to as associates);~~

●

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

●

additional regulation of our video and voice services;

●

our ability to renew cable system franchises;

●

increases in pole attachment costs;

●

changes in local governmental franchising authority and broadcast carriage regulations;

●

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

●

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

●

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

●

risks associated with our ~~ability to incur future~~convertible indebtedness;

●

~~fluctuations in our stock price;~~

●

our ability to continue to pay dividends;

●

~~dilution from equity awards and potential stock issuances;~~

●

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

●

adverse economic conditions;

●

fluctuations in our stock price;

●

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

●

damage to our reputation or brand image;

●

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

●

our ability to incur future indebtedness;

●

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

●

the other risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), including but not limited to in our ~~2019~~2020 Form 10-K and this Quarterly Report on Form 10-Q.

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.

Table of Contents

PART I: FINANCIAL INFORMATION

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CABLE ONE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(dollars in thousands, except par values)	June 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Assets
Current Assets:
Cash and cash equivalents	$	642,552		$	125,271		$	448,965		$	574,909
Accounts receivable, net		41,351			38,452			55,185			38,768
Income taxes receivable		14,263			2,146			17,027			41,245
Prepaid and other current assets		19,638			15,619			33,031			17,891
Total Current Assets		717,804			181,488			554,208			672,813
Equity investments								697,527			807,781
Property, plant and equipment, net		1,233,419			1,201,271			1,753,563			1,265,460
Intangible assets, net		1,290,106			1,312,381			2,840,700			1,278,198
Goodwill		429,597			429,597			944,871			430,543
Other noncurrent assets		72,524			27,094			39,133			33,543
Total Assets	$	3,743,450		$	3,151,831		$	6,830,002		$	4,488,338

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities	$	152,840		$	136,993		$	240,592		$	174,139
Deferred revenue		25,333			23,640			23,572			21,051
Current portion of long-term debt		28,945			28,909			34,524			26,392
Total Current Liabilities		207,118			189,542			298,688			221,582
Long-term debt		1,699,525			1,711,937			3,816,150			2,148,798
Deferred income taxes		303,353			303,314			806,630			366,675
Interest rate swap liability		184,182			78,612			102,875			155,357
Other noncurrent liabilities		25,726			26,857			124,814			100,627
Total Liabilities		2,419,904			2,310,262			5,149,157			2,993,039

Commitments and contingencies (refer to note 14)
Commitments and contingencies (refer to note 15)

Stockholders' Equity
Preferred stock ($0.01 par value; 4,000,000 shares authorized; none issued or outstanding)		-			-			0			0
Common stock ($0.01 par value; 40,000,000 shares authorized; 6,175,399 and 5,887,899 shares issued; and 6,019,834 and 5,715,377 shares outstanding as of June 30, 2020 and December 31, 2019, respectively)		62			59
Common stock ($0.01 par value; 40,000,000 shares authorized; 6,175,399 shares issued; and 6,036,582 and 6,027,704 shares outstanding as of June 30, 2021 and December 31, 2020, respectively)								62			62
Additional paid-in capital		527,641			51,198			544,992			535,586
Retained earnings		1,085,793			980,355			1,372,724			1,228,172
Accumulated other comprehensive loss		(162,242	)		(68,158	)		(101,237	)		(140,683	)
Treasury stock, at cost (155,565 and 172,522 shares held as of June 30, 2020 and December 31, 2019, respectively)		(127,708	)		(121,885	)
Treasury stock, at cost (138,817 and 147,695 shares held as of June 30, 2021 and December 31, 2020, respectively)								(135,696	)		(127,838	)
Total Stockholders' Equity		1,323,546			841,569			1,680,845			1,495,299
Total Liabilities and Stockholders' Equity	$	3,743,450		$	3,151,831		$	6,830,002		$	4,488,338

See accompanying notes to the condensed consolidated financial statements.

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CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OFOPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended						Six Months Ended						Three Months Ended						Six Months Ended
	June 30,						June 30,						June 30, 2021						June 30,
(dollars in thousands, except per share data)	2020			2019			2020			2019			2021			2020			2021			2020
Revenues	$	328,303		$	285,650		$	649,499		$	564,255		$	401,749		$	328,303		$	743,011		$	649,499
Costs and Expenses:
Operating (excluding depreciation and amortization)		106,028			95,688			211,956			190,206			112,350			106,028			213,814			211,956
Selling, general and administrative		64,994			60,103			127,878			121,546			88,017			64,994			157,059			127,878
Depreciation and amortization		65,584			54,835			130,863			108,679			84,915			65,584			153,445			130,863
(Gain) loss on asset sales and disposals, net		988			910			(4,633	)		2,013			1,058			988			938			(4,633	)
Total Costs and Expenses		237,594			211,536			466,064			422,444			286,340			237,594			525,256			466,064
Income from operations		90,709			74,114			183,435			141,811			115,409			90,709			217,755			183,435
Interest expense		(16,615	)		(18,516	)		(35,289	)		(36,612	)		(28,947	)		(16,615	)		(52,528	)		(35,289	)
Other income (expense), net		1,655			(9,632	)		3,389			(7,830	)		12,149			1,655			20,249			3,389
Income before income taxes		75,749			45,966			151,535			97,369
Income tax provision		13,209			9,571			19,669			22,235
Income before income taxes and equity method investment income (loss), net														98,611			75,749			185,476			151,535
Income tax provision (benefit)														(8,616	)		13,209			9,099			19,669
Income before equity method investment income (loss), net														107,227			62,540			176,377			131,866
Equity method investment income (loss), net														(1,074	)		0			(1,642	)		0
Net income	$	62,540		$	36,395		$	131,866		$	75,134		$	106,153		$	62,540		$	174,735		$	131,866

Net Income per Common Share:
Basic	$	10.72		$	6.41		$	22.87		$	13.24		$	17.65		$	10.72		$	29.06		$	22.87
Diluted	$	10.63		$	6.35		$	22.66		$	13.13		$	16.68		$	10.63		$	28.00		$	22.66
Weighted Average Common Shares Outstanding:
Basic		5,831,796			5,673,669			5,764,850			5,673,893			6,014,351			5,831,796			6,013,382			5,764,850
Diluted		5,883,417			5,730,238			5,819,633			5,723,296			6,455,817			5,883,417			6,312,843			5,819,633

Unrealized loss on cash flow hedges and other, net of tax	$	(9,459	)	$	(33,970	)	$	(94,084	)	$	(63,039	)
Unrealized gain (loss) on cash flow hedges and other, net of tax													$	(16,021	)	$	(9,459	)	$	39,446		$	(94,084	)
Comprehensive income	$	53,081		$	2,425		$	37,782		$	12,095		$	90,132		$	53,081		$	214,181		$	37,782

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

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

(Unaudited)

						Additional					Accumulated Other			Treasury			Total								Additional					Accumulated Other			Treasury			Total
	Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’			Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’
(dollars in thousands, except per share data)	Shares			Amount		Capital		Earnings			Loss			at cost			Equity			Shares			Amount		Capital		Earnings			Loss			at cost			Equity
Balance at March 31, 2020		5,724,857		$	59	$	54,419	$	1,036,877		$	(152,783	)	$	(127,681	)	$	810,891
Balance at March 31, 2021																					6,034,609		$	62	$	539,713	$	1,281,667		$	(85,216	)	$	(135,579	)	$	1,600,647
Net income		-			-		-		62,540			-			-			62,540			-			0		0		106,153			0			0			106,153
Unrealized loss on cash flow hedges and other, net of tax		-			-		-		-			(9,459	)		-			(9,459	)
Unrealized gain (loss) on cash flow hedges and other, net of tax																					-			0		0		0			(16,021	)		0			(16,021	)
Equity-based compensation		-			-		3,426		-			-			-			3,426			-			0		5,279		0			0			0			5,279
Issuance of common stock		287,500			3		469,796		-			-			-			469,799
Issuance of equity awards, net of forfeitures		7,494			-		-		-			-			-			-			2,037			0		0		0			0			0			0
Withholding tax for equity awards		(17	)		-		-		-			-			(27	)		(27	)		(64	)		0		0		0			0			(117	)		(117	)
Dividends paid to stockholders ($2.25 per common share)		-			-		-		(13,624	)		-			-			(13,624	)
Balance at June 30, 2020		6,019,834		$	62	$	527,641	$	1,085,793		$	(162,242	)	$	(127,708	)	$	1,323,546
Dividends paid to stockholders ($2.50 per common share)																					-			0		0		(15,096	)		0			0			(15,096	)
Balance at June 30, 2021																					6,036,582		$	62	$	544,992	$	1,372,724		$	(101,237	)	$	(135,696	)	$	1,680,845

						Additional					Accumulated Other			Treasury			Total								Additional					Accumulated Other			Treasury			Total
	Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’			Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’
(dollars in thousands, except per share data)	Shares			Amount		Capital		Earnings			Loss			at cost			Equity			Shares			Amount		Capital		Earnings			Loss			at cost			Equity
Balance at March 31, 2019		5,699,330		$	59	$	41,919	$	877,644		$	(29,165	)	$	(121,422	)	$	769,035
Balance at March 31, 2020																					5,724,857		$	59	$	54,419	$	1,036,877		$	(152,783	)	$	(127,681	)	$	810,891
Net income		-			-		-		36,395			-			-			36,395			-			0		0		62,540			0			0			62,540
Unrealized loss on cash flow hedges and other, net of tax		-			-		-		-			(33,970	)		-			(33,970	)
Unrealized gain (loss) on cash flow hedges and other, net of tax																					-			0		0		0			(9,459	)		0			(9,459	)
Equity-based compensation		-			-		3,082		-			-			-			3,082			-			0		3,426		0			0			0			3,426
Issuance of common stock																					287,500			3		469,796		0			0			0			469,799
Issuance of equity awards, net of forfeitures		7,495			-		-		-			-			-			-			7,494			0		0		0			0			0			0
Withholding tax for equity awards		(13	)		-		-		-			-			(210	)		(210	)		(17	)		0		0		0			0			(27	)		(27	)
Dividends paid to stockholders ($2.00 per common share)		-			-		-		(11,424	)		-			-			(11,424	)
Balance at June 30, 2019		5,706,812		$	59	$	45,001	$	902,615		$	(63,135	)	$	(121,632	)	$	762,908
Dividends paid to stockholders ($2.25 per common share)																					-			0		0		(13,624	)		0			0			(13,624	)
Balance at June 30, 2020																					6,019,834		$	62	$	527,641	$	1,085,793		$	(162,242	)	$	(127,708	)	$	1,323,546

						Additional					Accumulated Other			Treasury			Total								Additional					Accumulated Other			Treasury			Total
	Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’			Common Stock					Paid-In		Retained			Comprehensive			Stock,			Stockholders’
(dollars in thousands, except per share data)	Shares			Amount		Capital		Earnings			Loss			at cost			Equity			Shares			Amount		Capital		Earnings			Loss			at cost			Equity
Balance at December 31, 2019		5,715,377		$	59	$	51,198	$	980,355		$	(68,158	)	$	(121,885	)	$	841,569
Balance at December 31, 2020																					6,027,704		$	62	$	535,586	$	1,228,172		$	(140,683	)	$	(127,838	)	$	1,495,299
Net income		-			-		-		131,866			-			-			131,866			-			0		0		174,735			0			0			174,735
Unrealized loss on cash flow hedges and other, net of tax		-			-		-		-			(94,084	)		-			(94,084	)
Unrealized gain (loss) on cash flow hedges and other, net of tax																					-			0		0		0			39,446			0			39,446
Equity-based compensation		-			-		6,647		-			-			-			6,647			-			0		9,406		0			0			0			9,406
Issuance of common stock		287,500			3		469,796		-			-			-			469,799
Issuance of equity awards, net of forfeitures		20,746			-		-		-			-			-			-			12,435			0		0		0			0			0			0
Withholding tax for equity awards		(3,789	)		-		-		-			-			(5,823	)		(5,823	)		(3,557	)		0		0		0			0			(7,858	)		(7,858	)
Dividends paid to stockholders ($4.50 per common share)		-			-		-		(26,428	)		-			-			(26,428	)
Balance at June 30, 2020		6,019,834		$	62	$	527,641	$	1,085,793		$	(162,242	)	$	(127,708	)	$	1,323,546
Dividends paid to stockholders ($5.00 per common share)																					-			0		0		(30,183	)		0			0			(30,183	)
Balance at June 30, 2021																					6,036,582		$	62	$	544,992	$	1,372,724		$	(101,237	)	$	(135,696	)	$	1,680,845

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, 2018
5,703,402 $ 59 $ 38,898 $ 850,292 $ (96 ) $ (113,795 ) $ 775,358
Lease accounting standard adoption cumulative adjustment
- - - 8 - - 8
Net income
- - - 75,134 - - 75,134
Unrealized loss on cash flow hedges and other, net of tax
- - - - (63,039 ) - (63,039 )
Equity-based compensation
- - 6,103 - - - 6,103
Issuance of equity awards, net of forfeitures
12,717 - - - - - -
Repurchases of common stock
(5,984 ) - - - - (5,073 ) (5,073 )
Withholding tax for equity awards
(3,323 ) - - - - (2,764 ) (2,764 )
Dividends paid to stockholders ($4.00 per common share)
- - - (22,819 ) - - (22,819 )
Balance at June 30, 2019
5,706,812 $ 59 $ 45,001 $ 902,615 $ (63,135 ) $ (121,632 ) $ 762,908
3
Table of Contents

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, 2019
5,715,377 $ 59 $ 51,198 $ 980,355 $ (68,158 ) $ (121,885 ) $ 841,569
Net income
- 0 0 131,866 0 0 131,866
Unrealized gain (loss) on cash flow hedges and other, net of tax
- 0 0 0 (94,084 ) 0 (94,084 )
Equity-based compensation
- 0 6,647 0 0 0 6,647
Issuance of common stock
287,500 3 469,796 0 0 0 469,799
Issuance of equity awards, net of forfeitures
20,746 0 0 0 0 0 0
Withholding tax for equity awards
(3,789 ) 0 0 0 0 (5,823 ) (5,823 )
Dividends paid to stockholders ($4.50 per common share)
- 0 0 (26,428 ) 0 0 (26,428 )
Balance at June 30, 2020
6,019,834 $ 62 $ 527,641 $ 1,085,793 $ (162,242 ) $ (127,708 ) $ 1,323,546

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

CABLE ONE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Six Months Ended June 30,						Six Months Ended June 30,
(in thousands)		2020			2019			2021			2020
Cash flows from operating activities:
Net income		$	131,866		$	75,134		$	174,735		$	131,866
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			130,863			108,679			153,445			130,863
Amortization of debt issuance costs			2,212			2,409
Non-cash interest expense									4,307			2,212
Equity-based compensation			6,647			6,103			9,406			6,647
Write-off of debt issuance costs			-			4,207			2,131			0
Increase in deferred income taxes			30,827			11,647
Change in deferred income taxes									(10,900	)		30,827
(Gain) loss on asset sales and disposals, net			(4,633	)		2,013			938			(4,633	)
Changes in operating assets and liabilities, net of effects from acquisitions:
(Increase) decrease in accounts receivable, net			(2,899	)		901
(Increase) decrease in income taxes receivable			(12,117	)		8,020
Increase in prepaid and other current assets			(4,019	)		(6,999	)
Increase (decrease) in accounts payable and accrued liabilities			(3,387	)		5,004
Increase (decrease) in deferred revenue			1,693			(198	)
Other, net			(4,858	)		(4,426	)
Equity method investment (income) loss, net									1,642			0
Fair value adjustment									15,790			0
Gain on step acquisition									(33,406	)		0
Changes in operating assets and liabilities:
Accounts receivable, net									1,574			(2,899	)
Income taxes receivable									24,218			(12,117	)
Prepaid and other current assets									(7,134	)		(4,019	)
Accounts payable and accrued liabilities									9,787			(3,387	)
Deferred revenue									2,521			1,693
Other									(1,429	)		(4,858	)
Net cash provided by operating activities			272,195			212,494			347,625			272,195

Cash flows from investing activities:
Purchase of business, net of cash acquired			-			(356,917	)		(1,953,643	)		0
Purchase of equity investment			(27,245	)		-			0			(27,245	)
Capital expenditures			(143,416	)		(110,488	)		(161,165	)		(143,416	)
Decrease in accrued expenses related to capital expenditures			(740	)		(5,410	)
Change in accrued expenses related to capital expenditures									8,616			(740	)
Proceeds from sales of property, plant and equipment			617			6,998			229			617
Issuance of note and other receivables			(7,288	)		-			0			(7,288	)
Net cash used in investing activities			(178,072	)		(465,817	)		(2,105,963	)		(178,072	)

Cash flows from financing activities:
Proceeds from equity issuance			488,750			-
Proceeds of equity issuance									0			488,750
Proceeds from long-term debt borrowings			100,000			825,000			1,695,850			100,000
Payment of equity issuance costs			(18,951	)		-			0			(18,951	)
Payment of debt issuance costs			-			(11,671	)		(13,741	)		0
Payments on long-term debt			(114,390	)		(691,180	)		(13,159	)		(114,390	)
Repurchases of common stock			-			(5,073	)
Payment of withholding tax for equity awards			(5,823	)		(2,764	)		(7,858	)		(5,823	)
Dividends paid to stockholders			(26,428	)		(22,819	)		(30,183	)		(26,428	)
Deposits received for asset construction									1,485			0
Net cash provided by financing activities			423,158			91,493			1,632,394			423,158

Increase (decrease) in cash and cash equivalents			517,281			(161,830	)
Change in cash and cash equivalents									(125,944	)		517,281
Cash and cash equivalents, beginning of period			125,271			264,113			574,909			125,271
Cash and cash equivalents, end of period		$	642,552		$	102,283		$	448,965		$	642,552

Supplemental cash flow disclosures:
Cash paid for interest, net of capitalized interest		$	32,700		$	34,687		$	46,950		$	32,700
Cash paid for income taxes, net of refunds received		$	840		$	3,001		$	(4,240	)	$	840

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

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 is a fully integrated provider of data, video and voice services to residential and business subscribers in 2124 Western, Midwestern and Southern U.S. states. ~~As of~~ ~~June 30, 2020,~~ Cable One provided service to approximately ~~962,000~~1,134,000 residential and business customers, of which approximately ~~838,000~~1,017,000 subscribed to data services, ~~290,000~~287,000 subscribed to video services and ~~133,000~~153,000 subscribed to voice ~~services.~~services as of June 30, 2021.

On ~~January 8, 2019,~~July 1, 2020, the Company acquired ~~Delta Communications, L.L.C.~~Valu-Net LLC, an all-fiber internet service provider headquartered in Kansas (“~~Clearwave”~~Valu-Net”), for a purchase price of ~~$358.8 million in cash on a debt-free basis. On~~ ~~October 1, 2019,~~ ~~the Company acquired Fidelity Communications Co.’s data, video and voice business and certain related assets (collectively, “Fidelity”) for a purchase price of $531.4~~$38.9 million in cash on a debt-free basis. Refer to note 2 for details on ~~these transactions.~~this transaction.

On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, subject to customary post-closing adjustments. The all-cash transaction was funded through a combination of cash on hand and proceeds from new indebtedness. The Hargray Acquisition expanded the Company’s presence in the Southeastern U.S. and is expected to enable the Company to capitalize on Hargray’s experience and expertise in fiber expansion. Refer to note 2 for further details on this transaction.

Refer to note 5 for information on the Company’s equity investments completed during 2020.

Basis of Presentation. The condensed consolidated financial statements and accompanying notes thereto have been prepared in accordance with: (i) generally accepted accounting principles in the United States (“GAAP”) for interim financial information; and (ii) the guidance of Rule 10-01 of Regulation S-X under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), for financial statements required to be filed with the SEC. As permitted under such guidance, certain notes and other financial information normally required by GAAP have been omitted. Management believes the condensed consolidated financial statements reflect all normal and recurring adjustments necessary for a fair statement of the Company’s financial position, results of operations and cash flows as of and for the periods presented herein. These condensed consolidated financial statements are unaudited and should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the ~~2019~~2020 Form 10-K.

The December 31, ~~2019~~2020 year-end balance sheet data presented herein was derived from the Company’s audited consolidated financial statements included in the ~~2019~~2020 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 reclassifications have been made to prior period amounts to conform to the current year presentation.~~

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~~Standards Codification ~~(“ASC”)~~ 280 - Segment Reporting requires the disclosure of factors used to identify an entity’s reportable segments. ~~Historically,~~Based on the Company’s ~~operations were organized and managed on the basis of its geographic divisions. Effective in the~~ ~~second~~ ~~quarter of~~ ~~2020,~~ as a result of progress made in the Company’s staged rebranding initiative and the further alignment of service offerings and product pricing of recently acquired operations with its legacy business, the Company reevaluated the chief operating decision maker’s review and assessment of the Company’s operating performance for purposes of performance monitoring and resource ~~allocation. The~~allocation, the Company determined that its operations, including the decisions to allocate resources and deploy capital, are organized and managed on a consolidated ~~basis and are~~ ~~not~~ ~~based on any predetermined geographic division.~~basis. Accordingly, management has identified 1one operating segment, which is its reportable segment, under this organizational and reporting structure.

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

~~Indefinite-Lived Intangible Assets.~~ The Company’s unit of account for its franchise agreements was historically established at the geographic division level. The Company reevaluates the unit of account used to test for impairment periodically or whenever events or substantive changes in circumstances occur to ensure impairment testing is performed at an appropriate level. Effective in the ~~second~~ ~~quarter of~~ ~~2020,~~ as a result of progress made in the Company’s staged rebranding initiative and the further alignment of service offerings and product pricing of recently acquired operations with its legacy business, the Company reevaluated the basis of its franchise agreements unit of account for use in impairment assessments and identified a single unit of account for its franchise agreements based on a reevaluation of the Company’s current operations and the use of its assets.

~~Table of Contents~~
~~Goodwill.~~ The Company tests goodwill for impairment at the reporting unit level, which was historically established at the geographic division level. The Company reevaluates the determination of its reporting units used to test for impairment periodically or whenever events or substantive changes in circumstances occur. Effective in the ~~second~~ ~~quarter of~~ ~~2020,~~ as a result of progress made in the Company’s staged rebranding initiative and the further alignment of service offerings and product pricing of recently acquired operations with its legacy business, the Company reevaluated the basis of its goodwill reporting units and identified ~~four~~ geographic divisions that were aggregated into a single goodwill reporting unit based on the chief operating decision maker’s current performance monitoring and resource allocation process and the economic similarity of the ~~four~~ ~~divisions.~~
Recently Adopted Accounting Pronouncements. In August ~~2018,~~2020, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. ~~2018~~2020-~~15,~~06, ~~Intangibles – Goodwill~~Debt-Debt with Conversion and Other ~~– Internal~~~~-Use Software~~Options (Subtopic ~~350~~470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): ~~Customer’s~~ Accounting for ~~Implementation Costs Incurred~~Convertible Instruments and Contracts 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 ASU 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. The Company adopted the updated guidance on ~~January 1, 2020~~ on a prospective basis. The adoption of this ASU has resulted in the capitalization of $4.6 million of costs that will be amortized over the life of the applicable hosting arrangement. Amortization of such costs will be included in operating or selling, general and administrative expenses upon implementation, rather than depreciation and amortization expense, within the consolidated financial statements.
In ~~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 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 ASU was effective ~~January 1, 2020~~ ~~and required adoption on a modified retrospective basis. The adoption of this guidance did~~ ~~not~~ ~~have a material impact on the Company’s consolidated financial statements.~~
~~Recently Issued~~ ~~But~~ ~~Not~~ ~~Yet Adopted~~ ~~Accounting Pronouncements.~~In ~~March 2020,~~ ~~the FASB issued ASU~~ ~~No.~~~~2020~~-~~04,~~Entity’~~Reference Rate Reform (Topic~~ ~~848~~~~): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~s Own Equity. ASU 2020-0406 simplifies the accounting for certain financial instruments with characteristics of both liabilities and equity by reducing the number of applicable accounting models, improving the decision usefulness and relevance of the information provided to financial statement users. As it relates to convertible instruments, this update amends existing guidance to reduce certain form-over-substance-based accounting conclusions, provides ~~optional expedients~~additional earnings per share guidance and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued at the end of ~~2021.~~ ~~The ASU~~ ~~may~~ ~~be adopted at any time through~~ ~~December 31, 2022.~~ improves disclosure effectiveness. The Company ~~currently holds certain debt and interest rate swaps that reference LIBOR. The Company plans to adopt~~early adopted ASU 2020-0406 ~~when~~on January 1, 2021 and accounted for the ~~contracts underlying such instruments are amended as a result of reference rate reform, which is expected to occur prior to~~Convertible Notes (as defined and described in note 8) issued during the ~~end~~first quarter of ~~2021.~~2021 ~~The Company is currently evaluating~~under the ~~expected impact~~updated guidance.
6
Table of ~~the adoption of this guidance on its consolidated financial statements.~~
Contents

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 removes certain exceptions related to intraperiod tax allocations, foreign subsidiaries and interim reporting that are present within existing GAAP. The ASU also provides updated guidance regarding the tax treatment of certain franchise taxes, goodwill and nontaxable entities, among other items. In addition, ASU 2019-12 clarifies that the effect of a change in tax laws or rates should be reflected in the annual effective tax rate computation during the interim period that includes the enactment date. ~~The ASU is effective for annual and interim periods beginning after~~ ~~December 15, 2020,~~ ~~with early adoption permitted.~~ Certain provisions must be adopted on prescribed retrospective, modified retrospective and prospective bases, while other provisions may be adopted on either a retrospective or modified retrospective basis. The Company adopted ASU 2019-12 on January 1, 2021 on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements upon adoption.
Recently Issued But Not Yet Adopted Accounting Pronouncements. In March 2020, the FASB issued ASU No.2020-04,Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference London Interbank Offered Rate (“LIBOR”) and other reference rates expected to be discontinued. The ASU may be adopted at any time through December 31, 2022. The Company currently holds certain debt and interest rate swaps that reference LIBOR. The Company plans to adopt ASU 2020-04 when the contracts underlying such instruments are amended as a result of reference rate reform. The Company is currently evaluating ~~its timing and method, where applicable, of adoption as well as~~ the expected impact of the adoption of this guidance on its consolidated financial statements.

2.      ACQUISITIONS
The Company accounts for certain acquisitions as business combinations pursuant to ASC 805. In accordance with ASC 805, the Company uses its best estimates and assumptions to assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date based on the information that is available as of the acquisition date. The Company believes that the information available provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed for each acquisition, however, preliminary measurements of fair value for each acquisition are subject to change during the measurement period, and such changes could be material. The Company expects to finalize the valuation after each acquisition as soon as practicable but no later than one year after the acquisition date.
Goodwill is calculated as the excess of the consideration transferred over the fair value of the identifiable net assets acquired in a business combination and represents the future economic benefits expected to arise from anticipated synergies and intangible assets that do not qualify for separate recognition, including an assembled workforce, noncontractual relationships and other agreements. As an indefinite-lived asset, goodwill is not amortized but rather is subject to impairment testing on at least an annual basis.
Acquisition costs incurred by the Company are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred $4.8 million and $1.3 million of acquisition costs during the three months ended June 30, 2021 and 2020, respectively, and $9.2 million and $3.3 million during the six months ended June 30, 2021 and 2020, respectively. These costs are included in selling, general and administrative expenses within the Company’s condensed consolidated statements of operations and comprehensive income.
The following acquisitions occurred during the periods presented:
Hargray. On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray, a data, video and voice services provider, that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, subject to customary post-closing adjustments. The all-cash transaction was funded through a combination of cash on hand and proceeds from indebtedness. The Hargray Acquisition expanded the Company’s presence in the Southeastern U.S. and is expected to enable the Company to capitalize on Hargray’s experience and expertise in fiber expansion.
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Table of Contents
The following table summarizes the allocation of the Hargray purchase price consideration as of the acquisition date (in thousands):

Preliminary
Purchase Price Allocation

Assets Acquired

Cash and cash equivalents
$ 17,652
Accounts receivable
17,991
Prepaid and other current assets
8,006
Property, plant and equipment
457,158
Intangible assets
1,592,000
Other noncurrent assets
4,636
Total Assets Acquired
2,097,443

Liabilities Assumed

Accounts payable and accrued liabilities
36,457
Deferred revenue (short-term portion)
8,462
Current portion of long-term debt (finance leases)
1,375
Long-term debt (finance leases)
2,912
Deferred income taxes
437,725
Other noncurrent liabilities
6,974
Total Liabilities Assumed
493,905

Net assets acquired
1,603,538
Purchase price consideration⁽¹⁾
2,117,866
Goodwill recognized
$ 514,328
⁽¹⁾
Consists of approximately $2.0 billion of cash for the additional approximately 85% equity interest in Hargray that the Company did not already own and the $146.6 million May 3, 2021 fair value of the Company’s existing approximately 15% equity investment in Hargray. The Company recognized a $33.4 million non-cash gain within other income in the condensed consolidated statement of operations and comprehensive income upon the acquisition, representing the difference between the existing equity investment’s fair value and $113.2 million carrying value. The fair value of the existing investment was calculated as approximately 15% of the fair value of Hargray’s total equity value (determined using the discounted cash flow method of the income approach, less debt), excluding the impact of any synergies or control premium that would be realized by a controlling interest.
Acquired identifiable intangible assets associated with the Hargray Acquisition consist of the following (dollars in thousands):

Fair Value

Useful Life (in years)

Customer relationships
$ 472,000 13.7
Trademark and trade name
$ 10,000 4.2
Franchise agreements
$ 1,110,000
Indefinite

Customer relationships and franchise agreements were valued using the multi-period excess earnings method (“MPEEM”) of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, customer attrition rates, future earnings before interest, taxes, depreciation and amortization (“EBITDA” and as adjusted, “Adjusted EBITDA”) margins, future capital expenditures and an appropriate discount rate. No residual value was assigned to the acquired customer relationships or trademark and trade name. The customer relationships are amortized on an accelerated basis commensurate with future anticipated cash flows. The trademark and trade name are amortized on a straight-line basis. The total weighted average amortization period for the acquired finite-lived intangible assets is 13.5 years.
The Hargray Acquisition resulted in the recognition of $514.3 million of goodwill, which is not deductible for tax purposes.
For the quarter ended June 30, 2021, the Company recognized revenues of $50.6 million and net income of $4.4 million from Hargray operations, which included acquired intangible assets amortization expense of $8.5 million.
8
Table of Contents
2.
~~ACQUISITIONS~~

The ~~change~~ following unaudited pro forma combined results of operations information for the three and six months ended June 30, 2021 and 2020 has been prepared as if the Hargray Acquisition had occurred on January 1, 2020 (in ~~carrying value~~thousands, except per share data):

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Revenues
$ 428,947 $ 388,609 $ 845,909 $ 771,955
Net income
$ 44,062 $ 53,177 $ 113,603 $ 111,359
Net income per common share:

Basic
$ 7.33 $ 9.12 $ 18.89 $ 19.32
Diluted
$ 7.07 $ 8.71 $ 18.08 $ 18.39
The unaudited pro forma combined results of ~~goodwill as a result of~~operations information reflects the ~~Clearwave and Fidelity acquisitions during~~ ~~2019~~ ~~was as follows (in~~following pro forma adjustments (dollars in thousands):

Goodwill

Balance at December 31, 2018
$ 172,129
Clearwave acquisition goodwill recognized
185,885
Fidelity acquisition goodwill recognized
71,583
Balance at December 31, 2019
$ 429,597

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Depreciation and amortization
$ (2,048 ) $ (2,983 ) $ (6,152 ) $ (6,495 )
Interest expense
$ (768 ) $ (1,922 ) $ (2,813 ) $ (19,629 )
Acquisition costs
$ (11,950 ) $ 0 $ (15,403 ) $ 0
Gain on step acquisition $ (33,400 ) $ 0 $ (33,400 ) $ 0
Income tax provision
$ 31,178 $ 1,226 $ 33,579 $ 6,531
Weighted average common shares outstanding - diluted
0 404,248 143,618 404,248
The unaudited pro forma combined results of operations information is provided for informational purposes only and is not necessarily intended to represent the results that would have been achieved had the Hargray acquisition been consummated on January 1, 2020 or indicative of the results that may be achieved in the future.

~~Clearwave.~~Valu-Net. On ~~January 8, 2019,~~July 1, 2020, the Company acquired ~~Clearwave, a facilities-based~~Valu-Net, an all-fiber internet service provider ~~that owns and operates a high-capacity fiber network offering dense regional coverage~~headquartered in ~~Southern Illinois~~Kansas, for a purchase price of ~~$358.8~~$38.9 million. The Clearwave 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.

~~A summary~~Acquired identifiable intangible assets associated with the Valu-Net acquisition consisted of the ~~allocation of the Clearwave purchase price consideration as of the acquisition date, reflecting all measurement period adjustments recorded~~following (dollars in~~2019,~~ ~~is as follows (in~~ thousands):

Purchase Price
Allocation

Assets Acquired

Cash and cash equivalents
$ 1,913
Accounts receivable
1,294
Prepaid and other current assets
311
Property, plant and equipment
120,472
Intangible assets
89,700
Other noncurrent assets
3,533
Total Assets Acquired
$ 217,223

Liabilities Assumed

Accounts payable and accrued liabilities
$ 2,128
Deferred revenue, short-term portion
4,322
Deferred income taxes
32,771
Other noncurrent liabilities
5,057
Total Liabilities Assumed
$ 44,278

Net assets acquired
$ 172,945
Purchase price consideration
358,830
Goodwill recognized
$ 185,885

Fair Value

Useful Life (in years)

Customer relationships
$ 7,700 13.5
Trademark and trade name
$ 800
Indefinite

Franchise agreements
$ 11,200
Indefinite

Customer relationships and franchise agreements were valued using the MPEEM of the income approach. Significant assumptions used in the valuations include projected revenue growth rates, future EBITDA margins, future capital expenditures and an appropriate discount rate. No residual value was assigned to the acquired customer relationships. The ~~measurement period ended~~customer relationships are amortized on ~~January 7, 2020,~~ ~~and~~ no ~~measurement period adjustments were recorded during~~ ~~2020.~~an accelerated basis commensurate with future anticipated cash flows.

~~Fidelity.~~ On ~~October 1, 2019,~~ the Company acquired Fidelity, a provider of data, video and voice services to residential and business customers throughout Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas for a purchase price of $531.4 million. Cable One and Fidelity share similar strategies, customer demographics and products. The Fidelity acquisition provides 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.
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Table of Contents
~~A summary of the allocation of the Fidelity purchase price consideration as of the acquisition date, reflecting all measurement period adjustments recorded in~~ ~~2019,~~ ~~was as follows (in thousands):~~

Preliminary
Purchase Price
Allocation

Assets Acquired

Cash and cash equivalents
$ 4,869
Accounts receivable
3,691
Prepaid and other current assets
1,756
Property, plant and equipment
173,904
Intangible assets
288,000
Other noncurrent assets
1,895
Total Assets Acquired
$ 474,115

Liabilities Assumed

Accounts payable and accrued liabilities
$ 8,795
Deferred revenue, short-term portion
1,796
Other noncurrent liabilities
3,715
Total Liabilities Assumed
$ 14,306

Net assets acquired
$ 459,809
Purchase price consideration
531,392
Goodwill recognized
$ 71,583
No ~~measurement period adjustments were recorded during the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020.~~ ~~The measurement period will end on~~ ~~September 30, 2020.~~

3.      REVENUES
~~REVENUES~~

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended June 30, 2021

Six Months Ended June 30,

2020

2019

2020

2019

2021

2020

2021

2020

Residential

Residential:

Data
$ 164,015 $ 132,824 $ 319,005 $ 262,635 $ 207,648 $ 164,015 $ 391,253 $ 319,005
Video
87,328 84,033 172,650 167,836 87,240 87,328 163,257 172,650
Voice
12,120 10,705 24,547 20,329 12,112 12,120 22,589 24,547
Business services
58,469 49,759 116,331 96,903 76,616 58,469 136,978 116,331
Other
6,371 8,329 16,966 16,552 18,133 6,371 28,934 16,966
Total revenues
$ 328,303 $ 285,650 $ 649,499 $ 564,255 $ 401,749 $ 328,303 $ 743,011 $ 649,499

Franchise and other regulatory fees
$ 6,615 $ 6,240 $ 12,963 $ 10,337 $ 8,110 $ 6,615 $ 14,262 $ 12,963
Deferred commission amortization
$ 1,338 $ 942 $ 2,699 $ 1,942 $ 1,265 $ 1,338 $ 2,733 $ 2,699

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

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

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

Current deferred revenue liabilities consist of refundable customer prepayments, up-front charges and installation fees. As of June 30, ~~2020,~~2021, 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 ~~$23.6~~$21.1 million of current deferred revenue at December 31, ~~2019,~~2020, ~~nearly all~~$17.6 million was recognized during the six months ended June 30, ~~2020.~~2021. Noncurrent deferred revenue liabilities consist of up-front charges and installation fees from business customers.

4.      OPERATING ASSETS AND LIABILITIES
~~OPERATING ASSETS AND LIABILITIES~~

Accounts receivable consisted of the following (in thousands):

June 30, 2020

December 31, 2019

Trade receivables
$ 46,092 $ 33,467
Other receivables
4,658 6,186
Less: Allowance for credit losses
(9,399 ) (1,201 )
Total accounts receivable, net
$ 41,351 $ 38,452
8

~~Table of Contents~~
~~Net accounts receivable from contracts with customers totaled $36.7 million and $32.3 million at~~ ~~June 30, 2020~~ ~~and~~ ~~December 31, 2019,~~ ~~respectively.~~

June 30, 2021

December 31, 2020

Trade receivables
$ 50,229 $ 32,795
Other receivables
7,799 7,225
Less: Allowance for credit losses
(2,843 ) (1,252 )
Total accounts receivable, net
$ 55,185 $ 38,768

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

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

2021

2020

2021

2020

Beginning balance
$ 2,997 $ 951 $ 1,201 $ 2,045 $ 1,374 $ 2,997 $ 1,252 $ 1,201
Additions - charged to costs and expenses(1)
5,956 1,124 8,075 2,693 1,484 5,956 2,127 8,075
Deductions - write-offs
(966 ) (2,250 ) (3,239 ) (7,003 ) �� (1,405 ) (966 ) (3,856 ) (3,239 )
Recoveries of amounts previously written off
1,412 1,341 3,362 3,431
Recoveries collected
1,390 1,412 3,320 3,362
Ending balance
$ 9,399 $ 1,166 $ 9,399 $ 1,166 $ 2,843 $ 9,399 $ 2,843 $ 9,399
⁽¹⁾
Includes $1.4 million of additional reserves assumed in the Hargray Acquisition.
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Table of Contents

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

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Prepaid repairs and maintenance
$ 5,762 $ 551 $ 7,520 $ 1,013
Software implementation costs
1,200 1,035
Prepaid insurance
31 1,548 949 2,200
Prepaid rent
2,070 1,499 2,472 1,471
Prepaid software
3,428 4,672 5,398 4,544
Deferred commissions
3,879 3,586 4,028 4,026
All other current assets
4,468 3,763 11,464 3,602
Total prepaid and other current assets
$ 19,638 $ 15,619 $ 33,031 $ 17,891

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

June 30, 2020

December 31, 2019

Operating lease right-of-use assets
$ 14,523 $ 16,924
Equity investments⁽¹⁾
34,974 206
Deferred commissions
5,339 5,042
Note and other receivables⁽²⁾
7,288 -
Software implementation costs
4,569 -
Debt issuance costs
2,149 2,427
All other noncurrent assets
3,682 2,495
Total other noncurrent assets
$ 72,524 $ 27,094

⁽¹⁾
~~Balance at~~ ~~June 30, 2020~~ ~~includes a $27.2 million equity investment in a fixed wireless provider made during the~~ ~~three~~ ~~months ended~~ ~~June 30, 2020.~~
⁽²⁾
~~Balance at~~ ~~June 30, 2020~~ ~~represents a note and other receivables issued to Wisper ISP, LLC, a wireless internet service provider (“Wisper”). In~~ ~~July 2020,~~ ~~the Company closed an equity investment in Wisper for total consideration of $25.3 million. Refer to note~~ 7 ~~for details on this transaction.~~

June 30, 2021

December 31, 2020

Operating lease right-of-use assets
$ 17,990 $ 13,408
Deferred commissions
6,713 5,798
Software implementation costs
7,485 6,879
Debt issuance costs
2,915 3,249
All other noncurrent assets
4,030 4,209
Total other noncurrent assets
$ 39,133 $ 33,543

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

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Accounts payable
$ 32,654 $ 36,351 $ 53,040 $ 22,686
Accrued programming costs
20,849 19,620 25,772 20,279
Accrued compensation and related benefits
21,768 23,189 42,570 26,467
Accrued sales and other operating taxes
11,990 9,501 11,532 7,425
Accrued franchise fees
3,904 4,201 4,301 4,021
Subscriber deposits
6,771 6,550
Deposits
12,801 6,300
Operating lease liabilities
4,031 4,601 5,763 3,772
Interest rate swap liability
30,347 11,045 30,559 30,646
Accrued insurance costs
7,074 6,174 7,104 7,292
Cash overdrafts
3,718 5,801 6,452 8,847
Equity investment payable⁽¹⁾
13,387 13,387
Interest payable
5,233 4,128
Amount due to Hargray⁽²⁾
0 6,822
All other accrued liabilities
9,734 9,960 22,078 12,067
Total accounts payable and accrued liabilities
$ 152,840 $ 136,993 $ 240,592 $ 174,139

⁽¹⁾
Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). Refer to note 5 for details on this transaction.
⁽²⁾
Consists of amounts due to Hargray in connection with transition services provided as part of the Anniston Exchange (as defined in note 5). Refer to note 5 for details on this transaction.
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Other noncurrent liabilities consisted of the following (in thousands):

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Operating lease liabilities
$ 9,533 $ 11,146 $ 11,403 $ 8,701
Accrued compensation and related benefits
6,568 7,154 14,209 10,086
Deferred revenue
5,287 5,514 6,665 4,981
MBI Net Option (as defined in note 5)⁽¹⁾
89,100 73,310
All other noncurrent liabilities
4,338 3,043 3,437 3,549
Total other noncurrent liabilities
$ 25,726 $ 26,857 $ 124,814 $ 100,627
⁽¹⁾
Consists of the net value of the Company’s call and put options associated with the remaining equity interests in MBI (as defined in note 5), valued at $0.0 million and $89.1 million, respectively, as of June 30, 2021 and $0.7 million and $74.0 million, respectively, as of December 31, 2020. Refer to notes 5 and 10 for further information on the MBI Net Option (as defined in note 5).

5.    EQUITY INVESTMENTS
On May 4, 2020, the Company made a minority equity investment for a less than 10% ownership interest in AMG Technology Investment Group, LLC, a wireless internet service provider (“Nextlink”), for $27.2 million. On July 10, 2020, the Company acquired a 40.4% minority equity interest in Wisper, a wireless internet service provider, for total consideration of $25.3 million. The Company funded $11.9 million of the total consideration for Wisper in 2020 and expects to fund the remainder within the next twelve months. On October 1, 2020, the Company contributed its Anniston, Alabama system (the “Anniston System”) to Hargray, a data, video and voice services provider, in exchange for an approximately 15% equity interest in Hargray on a fully diluted basis (the “Anniston Exchange”) and recognized an $82.6 million non-cash gain. On November 12, 2020, the Company acquired a 45.0% minority equity interest in Mega Broadband Investments Holdings LLC, a data, video and voice services provider (“MBI”), for $574.9 million in cash.
On May 3, 2021, the Company acquired the remaining approximately 85% equity interest in Hargray that it did not already own for an approximately $2.0 billion cash purchase price, which implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, subject to customary post-closing adjustments, and recognized a $33.4 million non-cash gain as a result of the fair value remeasurement of the Company’s existing equity interest on the acquisition date.
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Table of Contents
The carrying value of the Company’s equity investments without readily determinable fair values were determined based on fair valuations as of their respective acquisition dates, and consisted of the following (dollars in thousands):

Ownership
Percentage

June 30, 2021

December 31, 2020

Cost Method Investments

Hargray^{(1), (2)}
~15% $ 0 $ 113,165
Nextlink
<10% 27,245 27,245
Others
<10% 14,619 10,066
Total cost method investments
$ 41,864 $ 150,476

Equity Method Investments

MBI⁽³⁾
45.0% $ 627,058 $ 630,679
Wisper
40.4% 28,605 26,626
Total equity method investments
$ 655,663 $ 657,305

Total equity investments
$ 697,527 $ 807,781
^(5.1)
~~PROPERTY, PLANT AND EQUIPMENT~~Upon initial investment, the Company calculated the fair value of Hargray’s total enterprise value using a hybrid of both the discounted cash flow method of the income approach and the guideline public company method of the market approach. Significant assumptions used in the valuation include projected revenue growth rates, customer attrition rates, future EBITDA margins, future capital expenditures and an appropriate discount rate. The enterprise value less Hargray’s debt and unamortized debt issuance costs was multiplied by Cable One’s minority equity interest percentage to determine the Hargray investment’s carrying value. The resulting non-cash gain was calculated as the difference between this carrying value and the book value of the Anniston System’s net assets, including its proportionate share of the Company’s franchise agreement and goodwill assets. The approximately 15% equity interest in Hargray as of December 31, 2020 was on a fully diluted basis.
⁽²⁾
As a result of the Company’s May 3, 2021 acquisition of the remaining equity interests in Hargray that it did not already own, Hargray’s assets and liabilities were separately reflected within the Company’s condensed consolidated balance sheet as of June 30, 2021 and the existing cost method investment was eliminated, resulting in a $33.4 million non-cash gain recognized within other income in the condensed consolidated statement of operations and comprehensive income.
⁽³⁾
The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $630.7 million being allocated to the MBI equity investment and $19.7 million and $75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $89.1 million and $73.3 million as of June 30, 2021 and December 31, 2020, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option.
The carrying value of MBI exceeded the Company’s underlying equity in MBI’s net assets by approximately $520.5 million and $529.7 million as of June 30, 2021 and December 31, 2020, respectively.
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Table of Contents
Equity method investment income (losses), which increase (decrease) the carrying value of the respective investment, and the change in fair value of the MBI Net Option were as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

Equity Method Investment Income (Loss)

MBI⁽¹⁾
$ (2,407 ) $ 0 $ (3,621 ) $ 0
Wisper
1,333 0 1,979 0
Total
$ (1,074 ) $ 0 $ (1,642 ) $ 0

Other Income (Expense), Net

MBI Net Option change in fair value
$ (21,350 ) $ 0 $ (15,790 ) $ 0
⁽¹⁾
The Company identified a $186.6 million difference between the fair values of certain of MBI’s finite-lived intangible assets and the respective carrying values recorded by MBI, of which $84.0 million was attributable to the Company’s 45% pro rata portion. The Company is amortizing its share on an accelerated basis over the lives of the respective assets. For the three months ended June 30, 2021, the Company recognized $1.6 million of its pro rata share of MBI’s net income, which was more than offset by the Company’s $4.0 million pro rata share of basis difference amortization. For the six months ended June 30, 2021, the Company recognized $3.0 million of its pro rata share of MBI’s net income, which was more than offset by the Company’s $6.6 million pro rata share of basis difference amortization.
The Company assesses each equity investment for indicators of impairment on a quarterly basis. NaN impairments were recorded for any of the periods presented.
6.      PROPERTY, PLANT AND EQUIPMENT

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

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Cable distribution systems
$ 1,854,449 $ 1,779,964 $ 2,300,266 $ 1,916,048
Customer premise equipment
279,742 266,190 305,471 283,831
Other equipment and fixtures
458,851 444,799 458,939 463,469
Buildings and improvements
116,265 113,331 138,632 117,367
Capitalized software
103,096 99,988 85,305 107,107
Construction in progress
98,472 93,352 196,630 89,488
Land
13,371 13,361 21,018 13,293
Right-of-use assets
10,268 10,187 10,744 10,314
Property, plant and equipment, gross
2,934,514 2,821,172 3,517,005 3,000,917
Less: Accumulated depreciation and amortization
(1,701,095 ) (1,619,901 ) (1,763,442 ) (1,735,457 )
Property, plant and equipment, net
$ 1,233,419 $ 1,201,271 $ 1,753,563 $ 1,265,460

Depreciation and amortization expense for property, plant and equipment was ~~$54.5~~$65.9 million and ~~$50.6~~$54.5 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$108.6~~$123.9 million and ~~$100.3~~$108.6 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

In ~~January 2019,~~ ~~a portion of the Company’s previous headquarters building and adjoining property was sold for $6.3 million in gross proceeds and the Company recognized a related gain of $1.6 million.~~

6.
7.      GOODWILL AND INTANGIBLE ASSETS
~~GOODWILL AND INTANGIBLE ASSETS~~

The carrying amount of goodwill was ~~$429.6~~$944.9 million at ~~both~~ June 30, ~~2020~~2021 and $430.5 at December 31, ~~2019.~~2020, with the $514.3 million increase attributable to goodwill recognized in the Hargray Acquisition. The Company has not historically recorded any impairment of goodwill.

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Table of Contents

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

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Useful Life
Range
(in years)

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross Carrying Amount

Accumulated
Amortization

Net
Carrying
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

Franchise renewals
1 – 25 $ 2,927 $ 2,927 $ - $ 2,927 $ 2,895 $ 32
Customer relationships
14 – 17 362,000 59,213 302,787 362,000 37,470 324,530 13.5 – 17 $ 841,700 $ 110,430 $ 731,270 $ 369,700 $ 81,865 $ 287,835
Trademarks and trade names
2.7 – 3 4,300 2,052 2,248 4,300 1,552 2,748 2.7 – 4.2 14,300 3,452 10,848 4,300 2,552 1,748
Wireless licenses
10 – 15 1,418 48 1,370 1,418 15 1,403
Total finite-lived intangible assets
$ 369,227 $ 64,192 $ 305,035 $ 369,227 $ 41,917 $ 327,310 $ 857,418 $ 113,930 $ 743,488 $ 375,418 $ 84,432 $ 290,986

Indefinite-Lived Intangible Assets

Franchise agreements
$ 978,371 $ 978,371 $ 2,089,712 $ 979,712
Trade name
6,700 6,700
Trade names
7,500 7,500
Total indefinite-lived intangible assets
$ 985,071 $ 985,071 $ 2,097,212 $ 987,212

Total intangible assets, net
$ 1,290,106 $ 1,312,381 $ 2,840,700 $ 1,278,198

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~~Table of Contents~~
Intangible asset amortization expense was ~~$11.1~~$19.0 million and ~~$4.2~~$11.1 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$22.3~~$29.5 million and ~~$8.3~~$22.3 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The future amortization of existing finite-lived intangible assets as of June 30, ~~2020~~2021 was as follows (in thousands):

Year Ending December 31,

Amount

Amount

2020 (remaining six months)
$ 22,159
2021
39,059
2021 (remaining six months)
$ 45,020
2022
2022
34,314 87,292
2023
2023
27,845 76,065
2024
2024
23,083 69,716
2025
64,785
Thereafter
Thereafter
158,575 400,610
Total
Total
$ 305,035 $ 743,488

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

7.
8.    DEBT
~~DEBT~~

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

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Senior Credit Facilities (as defined below)
$ 1,738,884 $ 1,753,045 $ 2,328,756 $ 1,541,621
Senior Notes (as defined below)
650,000 650,000
Convertible Notes (as defined below)
920,000 0
Finance lease liabilities
5,794 5,943 5,603 5,466
Total debt
1,744,678 1,758,988 3,904,359 2,197,087
Less: Unamortized debt discount
(22,764 ) 0
Less: Unamortized debt issuance costs
(16,208 ) (18,142 ) (30,921 ) (21,897 )
Less: Current portion of long-term debt
(28,945 ) (28,909 ) (34,524 ) (26,392 )
Total long-term debt
$ 1,699,525 $ 1,711,937 $ 3,816,150 $ 2,148,798

~~The~~Senior Credit Facilities. On ~~second~~May 3, 2021, the Company amended the third amended and restated credit agreement among the Company and its lenders, dated as of October 30, 2020 (as amended, the “Third Amended and Restated Credit Agreement”), to provide for a new seven-year incremental term “B” loan in an aggregate principal amount of $800.0 million maturing in 2028(the ~~“Credit Agreement”~~“Term Loan B-4”). The Third Amended and Restated Credit Agreement also provides for senior secured term loans in original aggregate principal amounts of ~~$700~~$700.0 million maturing in 2025 (the “Term Loan A-2”), ~~$500~~$250.0 million ~~(the “Term Loan B-~~maturing in 1”2027~~), $250 million~~ (the “Term Loan B-2”) and ~~$325~~$625.0 million maturing in 2027 (the “Term Loan B-3”), as well as a ~~$350~~$500.0 million revolving credit facility ~~that will mature on~~maturing in ~~May 8, 2024 (~~2025~~the~~ (the “Revolving Credit Facility” and, together with the Term Loan A-2, the Term Loan B-1,2, the Term Loan B-23 and the Term Loan B-3,4, the “Senior Credit Facilities”). 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.
15
Table of Contents
The Term Loan B-4 was drawn in full in connection with the closing of the Hargray Acquisition. The Term Loan B-4 is an obligation of the Company and is guaranteed by the Company’s wholly owned subsidiaries that guarantee the other obligations under the Third Amended and Restated Credit Agreement. The Term Loan B-4 is secured, subject to certain exceptions, by substantially all of the assets of the Company and the guarantors under the Third Amended and Restated Credit Agreement.
The interest margin applicable to the Term Loan B-4 is, at the Company’s option, equal to either LIBOR or a base rate, plus an applicable margin equal to 2.0% for LIBOR loans and 1.0% for base rate loans. The Term Loan B-4may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions), except for any prepayment within six months of the funding date in connection with certain repricing transactions, which will be subject to a 1.0% prepayment premium. The Term Loan B-4 benefits from certain “most favored nation” pricing protections and is not subject to the financial maintenance covenants under the Third Amended and Restated Credit Agreement. The Term Loan B-4 amortizes 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 outstanding balance due upon maturity. The final maturity of the Term Loan B-4may be accelerated following an event of default under the Third Amended and Restated Credit Agreement. Other than with respect to maturity, amortization, prepayment premiums and pricing, the Term Loan B-4 contains terms that are substantially similar to the existing Term Loan B-2 and Term Loan B-3.
Refer to the table below summarizing the Company’s outstanding term loans as of June 30, 2021 and note 910 to the Company’s audited consolidated financial statements included in the ~~2019~~2020 Form 10-K for further details on the ~~Company’s~~ Senior Credit Facilities.

In ~~January 2020,~~ ~~the~~The Company has issued letters of credit totaling ~~$22.0~~$33.0 million under the Revolving Credit Facility on behalf of Wisper to guarantee its performance obligations under a Federal Communications Commission (“FCC”) broadband funding program. The fair value of the letters of credit approximates face value based on the short-term nature of the agreements. The Company would be liable for up to ~~$22.0~~ ~~million~~the total amount outstanding under the letters of credit if Wisper were to fail to satisfy all or some of its performance obligations under the FCC program. Wisper pledged certain assets in favor of the Company as collateral for issuing the letters of credit, which pledge was terminated in the third quarter of 2020 at the same time that the Company closed an equity investment in Wisper, and Wisper has ~~agreed to guarantee~~guaranteed and ~~indemnify~~indemnified the Company in connection with such letters of credit. As of June 30, ~~2020,~~2021, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, 0no liability has been accrued within the condensed consolidated balance sheet.
In ~~March 2020,~~ the Company borrowed $100 million under the Revolving Credit Facility for general corporate purposes, including for small acquisitions and strategic investments. The outstanding balance was repaid in full in ~~May 2020~~ ~~using a portion of the net proceeds from the Company’s public offering of common stock (the “Public Offering”). Refer to note~~ 10 ~~for information on the Public Offering. Letter~~ Total letter of credit issuances under the Revolving Credit Facility totaled ~~$28.7~~$41.0 million at June 30, ~~2020~~2021 ~~and were held for the benefit of performance obligations under government grant programs and certain general and liability insurance matters~~ and bore interest at a rate of ~~1.63%~~1.88% per annum.
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Table of Contents
As of June 30, ~~2020,~~2021, the Company had ~~$1.7~~$2.3 billion of aggregate outstanding term loans and ~~$321.3~~$459.0 million available for borrowing under the Revolving Credit Facility.
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~~Table of Contents~~
A summary of the Company’s outstanding term loans as of June 30, ~~2020~~2021 is as follows (dollars in thousands):

Instrument

Draw Date

Original
Principal

Amortization
Per Annum⁽¹⁾

Outstanding
Principal

Final
Maturity
Date

Balance
Due Upon
Maturity

Benchmark
Rate

Applicable
Margin⁽²⁾

Interest
Rate

Draw Date

Original Principal

Amortization Per Annum⁽¹⁾

Outstanding Principal

Final Maturity Date

Balance Due Upon Maturity

Benchmark
Rate

Applicable Margin⁽²⁾

Interest
Rate

Term Loan A-2

5/8/2019
$ 700,000

Varies⁽⁴⁾ $ 685,259
5/8/2024
$ 513,945
LIBOR
1.50% 1.68%
5/8/2019⁽³⁾
$ 700,000
Varies⁽⁴⁾
$ 668,101
10/30/2025
$ 476,607
LIBOR
1.75% 1.85%
10/1/2019⁽³⁾ 10/1/2019⁽³⁾
Term Loan B-1

5/1/2017
500,000 1.0% 485,000
5/1/2024
466,250
LIBOR
1.75% 1.93%
Term Loan B-2

1/7/2019
250,000 1.0% 246,875
1/7/2026
233,125
LIBOR
2.00% 2.18%
1/7/2019
250,000 1.0% 244,375
10/30/2027
228,750
LIBOR
2.00% 2.10%
Term Loan B-3

6/14/2019
325,000 1.0% 321,750
1/7/2026
303,875
LIBOR
2.00% 2.18%
6/14/2019⁽⁵⁾
625,000 1.0% 616,280
10/30/2027
577,472
LIBOR
2.00% 2.10%
10/30/2020⁽⁵⁾
Term Loan B-4

5/3/2021
800,000 1.0% 800,000
5/3/2028
746,000
LIBOR
2.00% 2.10%
Total
Total
$ 1,775,000 $ 1,738,884 $ 1,517,195 $ 2,375,000 $ 2,328,756 $ 2,028,829

⁽¹⁾
Payable in equal quarterly installments (expressed as a percentage of the original ~~aggregate~~ principal ~~amount)~~amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions)., except for the Term Loan B-4, which has a 1.0% prepayment premium for any prepayment within six months of the funding date of the Term Loan B-4 in connection with certain repricing transactions.
⁽²⁾
The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio (as defined in the Third Amended and Restated Credit Agreement). All other applicable margins are fixed.
⁽³⁾
On May 8, 2019, $~~250~~250.0 million was drawn. On October 1, 2019, an additional ~~$450~~$450.0 million was drawn. On October 30, 2020, the amortization schedule was reset.
⁽⁴⁾
Per annum amortization rates for years one through five following the ~~closing~~October 30, 2020 refinancing date are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively.
⁽⁵⁾
On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn.
Senior Notes. In November 2020, the Company issued $650.0 million aggregate principal amount of 4.00% senior notes due 2030 (the “Senior Notes”). The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year, beginning on May 15, 2021. The terms of the Senior Notes are governed by an indenture dated as of November 9, 2020 (the “Senior Notes Indenture”), among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A. (“BNY”), as trustee.
At any time and from time to time prior to November 15, 2025, the Company may redeem some or all of the Senior Notes for cash at a redemption price equal to 100% of their principal amount, plus the “make-whole” premium described in the Senior Notes Indenture and accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. Beginning on November 15, 2025, the Company may redeem some or all of the Senior Notes at any time and from time to time at the applicable redemption prices listed in the Senior Notes Indenture, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date. In addition, at any time and from time to time prior to November 15, 2023, the Company may redeem up to 40% of the aggregate principal amount of Senior Notes with funds in an aggregate amount not exceeding the net cash proceeds from one or more equity offerings at a redemption price equal to 104% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.
Upon the occurrence of a Change of Control and a Below Investment Grade Rating Event (each as defined in the Senior Notes Indenture), the Company is required to offer to repurchase the Senior Notes at 101% of the principal amount of such Senior Notes, plus accrued and unpaid interest, if any, to, but excluding, the date of repurchase.
Convertible Notes. In March 2021, the Company issued $575.0 million aggregate principal amount of 0.000% convertible senior notes due 2026 (the “2026 Notes”) and $345.0 million aggregate principal amount of 1.125% convertible senior notes due 2028 (the “2028 Notes” and, together with the 2026 Notes, the “Convertible Notes,” and the Convertible Notes collectively with the Senior Notes, the “Notes”). The terms of the 2026 Notes and the 2028 Notes are each governed by a separate indenture dated as of March 5, 2021 (collectively, the “Convertible Notes Indentures” and together with the Senior Notes Indenture, the “Indentures”), in each case, among the Company, the guarantors party thereto and BNY, as trustee.
The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes does not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, beginning on September 15, 2021, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of the Company’s common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock).
17
Table of Contents
The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of the Company’s common stock or a combination thereof is at the election of the Company. Prior to the close of business on the business day immediately preceding December 15, 2025, the 2026 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2025, holders may convert their 2026 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. Prior to the close of business on the business day immediately preceding December 15, 2027, the 2028 Notes will be convertible at the option of the holders only upon the satisfaction of specified conditions and during certain periods. On or after December 15, 2027, holders may convert their 2028 Notes at any time prior to the close of business on the second scheduled trading day immediately preceding the relevant maturity date. If the Company undergoes a “fundamental change” (as defined in the applicable Convertible Notes Indenture), holders of the applicable series of Convertible Notes may require the Company to repurchase for cash all or part of their Convertible Notes of such series at a purchase price equal to 100% of the principal amount of the Convertible Notes of such series to be repurchased, plus accrued and unpaid interest to, but not including, the fundamental change repurchase date.
The Company may not redeem the 2026 Notes prior to March 20, 2024 and it may not redeem the 2028 Notes prior to March 20, 2025. No “sinking fund” is provided for the Convertible Notes. On or after March 20, 2024 and prior to December 15, 2025, the Company may redeem for cash all or any portion of the 2026 Notes, at its option, and on or after March 20, 2025 and prior to December 15, 2027, the Company may redeem for cash all or any portion of the 2028 Notes, at its option, in each case, if the last reported sale price per share of common stock has been at least 130% of the conversion price for such series of Convertible Notes then in effect for at least 20 trading days (whether or not consecutive), including the trading day immediately preceding the date on which the Company provides notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption at a redemption price equal to 100% of the principal amount of the Convertible Notes of such series to be redeemed, plus accrued and unpaid interest to, but not including, the redemption date.
In addition, following a “make-whole fundamental change” (as defined in the applicable Convertible Notes Indenture) or if the Company delivers a notice of redemption in respect of any Convertible Notes of a series, in certain circumstances, the conversion rate applicable to such series of Convertible Notes will be increased for a holder who elects to convert any of such Convertible Notes in connection with such a make-whole fundamental change or convert any of such Convertible Notes called (or deemed called) for redemption during the related redemption period, as the case may be.
The carrying amounts of the Convertible Notes consisted of the following (in thousands):

June 30, 2021

2026 Notes

2028 Notes

Total

Gross carrying amount
$ 575,000 $ 345,000 $ 920,000
Less: Unamortized discount
(14,124 ) (8,640 ) (22,764 )
Less: Unamortized debt issuance costs
(386 ) (244 ) (630 )
Net carrying amount
$ 560,490 $ 336,116 $ 896,606
Interest expense on the Convertible Notes consisted of the following (dollars in thousands):

Three Months Ended June 30, 2021

Six Months Ended June 30, 2021

2026 Notes

2028 Notes

Total

2026 Notes

2028 Notes

Total

Contractual interest expense
$ 0 $ 970 $ 970 $ 0 $ 1,261 $ 1,261
Amortization of discount
748 321 1,069 970 416 1,386
Amortization of debt issuance costs
20 9 29 26 12 38
Total interest expense
$ 768 $ 1,300 $ 2,068 $ 996 $ 1,689 $ 2,685

Effective interest rate
0.5 % 1.5 % 0 0.5 % 1.5 % 0
General. The Notes are senior unsecured obligations of the Company and are guaranteed by the Company’s wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain capital market debt of the Company in an aggregate principal amount in excess of $250.0 million.
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Table of Contents
Each Indenture contains covenants that, among other things and subject to certain exceptions, limit (i) the Company’s ability to consolidate or merge with or into another person or sell or otherwise dispose of all or substantially all of the assets of the Company and its subsidiaries (taken as a whole) and (ii) the ability of the guarantors to consolidate with or merge with or into another person. The Senior Notes Indenture also contains a covenant that, subject to certain exceptions, limits the Company’s ability and the ability of its subsidiaries to incur any liens securing indebtedness for borrowed money.
Each Indenture provides for customary events of default which include (subject in certain cases to customary grace and cure periods), among others, default in payment of principal or interest, breach of other agreements or covenants in respect of the relevant Notes by the Company or any guarantors, failure to pay certain other indebtedness at final maturity, acceleration of certain indebtedness prior to final maturity, failure to pay certain final judgments, failure of certain guarantees to be enforceable and certain events of bankruptcy, insolvency or reorganization; and, in the case of each Convertible Notes Indenture, failure to comply with the Company’s obligation to convert the relevant Convertible Notes under the applicable Convertible Notes Indenture and failure to give a fundamental change notice or a notice of a make-whole fundamental change under the applicable Convertible Notes Indenture.

Unamortized debt issuance costs consisted of the following (in thousands):

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Revolving Credit Facility portion:

Revolving Credit Facility portion:

Other noncurrent assets
$ 2,149 $ 2,427 $ 2,915 $ 3,249
Term loans portion:

Term loans and Notes portion:

Long-term debt (contra account)
16,208 18,142 30,921 21,897
Total
$ 18,357 $ 20,569 $ 33,836 $ 25,146

The Company recorded debt issuance cost amortization of ~~$1.1~~$1.8 million and ~~$1.3~~$1.1 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$2.2~~$2.9 million and ~~$2.4~~$2.2 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.
The future maturities of outstanding borrowings as of June 30, ~~2020~~2021 were as follows (in thousands):

Year Ending December 31,

Amount

Amount

2020 (remaining six months)
$ 14,160
2021
37,106
2021 (remaining six months)
$ 16,866
2022
2022
54,677 37,986
2023
2023
81,033 55,008
2024
2024
1,009,158 76,285
2025
557,147
Thereafter
Thereafter
542,750 3,155,464
Total
Total
$ 1,738,884 $ 3,898,756

The Company was in compliance with all debt covenants as of June 30, ~~2020.~~2021.
In March 2021, the Company terminated $900.0 million of definitive bridge loan commitments that were originally received to finance a portion of the Hargray Acquisition purchase price.

8.
9.    INTEREST RATE SWAPS
~~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 rates on its variable rate LIBOR debt. 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.

1219

Table of Contents
A summary of the significant terms of the Company’s interest rate swap agreements is as follows (dollars in thousands):

Entry
Date

Effective
Date

Maturity
Date⁽¹⁾

Notional
Amount

Settlement Type

Settlement
Frequency

Fixed
Base Rate

Entry
Date

Effective
Date

Maturity
Date⁽¹⁾

Notional Amount

Settlement Type

Settlement Frequency

Fixed
Base Rate

Swap A

3/7/2019

3/11/2019

3/11/2029
$ 850,000
Receive one-month LIBOR, pay fixed

Monthly
2.653%
3/7/2019

3/11/2019

3/11/2029
$ 850,000
Receive one-month LIBOR, pay fixed

Monthly
2.653%
Swap B

3/6/2019

6/15/2020

2/28/2029
350,000
Receive one-month LIBOR, pay fixed

Monthly
2.739%
3/6/2019

6/15/2020

2/28/2029
350,000
Receive one-month LIBOR, pay fixed

Monthly
2.739%
Total
Total
$ 1,200,000 $ 1,200,000

⁽¹⁾
Each swap may be terminated prior to the scheduled maturity at the election of the Company or the financial institution counterparty under the terms provided in each swap agreement.

The combined fair values of the Company’s interest rate swaps are reflected within the condensed consolidated balance sheets as follows (in thousands):

June 30, 2020

December 31, 2019

June 30, 2021

December 31, 2020

Liabilities:

Current portion:

Accounts payable and accrued liabilities
$ 30,347 $ 11,045 $ 30,559 $ 30,646
Noncurrent portion:

Interest rate swap liability
$ 184,182 $ 78,612 $ 102,875 $ 155,357
Total
$ 214,529 $ 89,657 $ 133,434 $ 186,003

Stockholders’ Equity:

Stockholders’ Equity:

Accumulated other comprehensive loss
$ 161,647 $ 67,556 $ 100,651 $ 140,090

The combined effect of the Company’s interest rate swaps on the condensed consolidated statements of operations and comprehensive income iswas as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,
Three Months Ended June 30, Six Months Ended June 30,

2020

2019

2020

2019
2021 2020 2021 2020
Interest expense
$ 4,964 $ 383 $ 7,048 $ 451 $ 7,803 $ 4,964 $ 15,451 $ 7,048

Unrealized loss on cash flow hedges, gross
$ 12,558 $ 45,086 $ 124,872 $ 83,672
Unrealized (gain) loss on cash flow hedges, gross
$ 21,013 $ 12,558 $ (52,569 ) $ 124,872
Less: Tax effect
(3,095 ) (11,117 ) (30,781 ) (20,633 ) (4,989 ) (3,095 ) 13,130 (30,781 )
Unrealized loss on cash flow hedges, net of tax
$ 9,463 $ 33,969 $ 94,091 $ 63,039
Unrealized (gain) loss on cash flow hedges, net of tax
$ 16,024 $ 9,463 $ (39,439 ) $ 94,091

The Company does not hold any derivative instruments for speculative trading purposes.

9.
10.     FAIR VALUE MEASUREMENTS
~~FAIR VALUE MEASUREMENTS~~

~~Fina~~~~ncial~~Financial Assets and Liabilities. The Company has estimated the fair values of its financial instruments as of June 30, ~~2020~~2021 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 are not necessarily indicative of the amounts the Company would realize in an actual market exchange.

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Table of Contents
The carrying amounts, fair values and related fair value hierarchy levels of the Company’s financial assets and liabilities as of June 30, ~~2020~~2021 were as follows ~~(dollars in~~(in thousands):

June 30, 2020

June 30, 2021

Carrying

Fair

Fair Value

Carrying

Fair

Fair Value

Amount

Value

Hierarchy

Amount

Value

Hierarchy
Assets:

Cash and cash equivalents:

Money market investments
$ 501,949 $ 501,949
Level 1
$ 412,727 $ 412,727
Level 1
Commercial paper
$ 122,486 $ 122,426
Level 2
Liabilities:

Long-term debt (including current portion):

Long-term debt (including current portion):
Long-term debt (including current portion):

Term loans
$ 1,738,884 $ 1,712,801
Level 2
$ 2,328,756 $ 2,321,264
Level 2
Other noncurrent liabilities (including current portion):
Senior Notes
$ 650,000 $ 650,780
Level 2
Convertible Notes
$ 920,000 $ 927,636
Level 2
Interest rate swap liability (including current portion):

Interest rate swaps
$ 214,529 $ 214,529
Level 2
$ 133,434 $ 133,434
Level 2
Other noncurrent liabilities:

MBI Net Option
$ 89,100 $ 89,100
Level 3

13

~~Table of Contents~~
Money market investments are held primarily ~~held~~ in U.S. Treasury securities and registered money market funds and are valued using a market approach based on quoted market prices (level 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). 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 term loans, Senior Notes and Convertible Notes are estimated based on market prices for similar instruments in active markets (level 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 of the MBI Net Option is measured using Monte Carlo simulations that use inputs considered unobservable and significant to the fair value measurement (level 3).
The assumptions used to determine the fair value of the MBI Net Option consisted of the following:

June 30, 2021

December 31, 2020

Cable One

MBI

Cable One

MBI

Equity volatility
30.0
%
30.0
%
28.0
%
30.0
%
EBITDA volatility
10.0
%
10.0
%
10.0
%
10.0
%
EBITDA risk-adjusted discount rate
5.0
%
6.5
%
5.0
%
6.5
%
Cost of debt
4.0
%
0 4.0
%
0
The Company regularly evaluates each of the assumptions used in establishing the fair value of the MBI Net Option. Significant changes in any of these assumptions could result in a significantly lower or higher fair value measurement. A change in one of these assumptions is not necessarily accompanied by a change in another assumption. Refer to note 5 for further information on the MBI Net Option.

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

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. Assets acquired, including identifiable intangible assets and goodwill, and liabilities assumed in acquisitions are recorded at fair value on the respective acquisition dates, subject to potential future measurement period adjustments. Nonfinancial assets are subject to fair value adjustments when there is evidence that impairment may exist. No material impairments were recorded during the six months ended June 30, ~~2020~~2021 or ~~2019.~~2020.
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Table of Contents

~~10.~~
11.      STOCKHOLDERS’ EQUITY
~~STOCKHOLDERS’ EQUITY~~

~~Public~~ Equity Offering. In May 2020, the Company completed ~~the Public Offering~~a public offering of 287,500 shares of its common stock (the “Public Offering”) for total net proceeds of $469.8 million, after deducting underwriting discounts and offering expenses. The Company used a portion of the net proceeds to repay in full its ~~outstanding~~then-outstanding borrowings of ~~$100~~$100.0 million under the Revolving Credit Facility in ~~May 2020.~~ ~~The Company expects to use~~and it used the remainder ~~of the proceeds~~ for general corporate purposes, including for acquisitions and strategic investments.

Treasury Stock. Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the condensed consolidated financial statements. Treasury shares of ~~155,565~~138,817 held at June 30, ~~2020~~2021 include shares repurchased under the Company’s share repurchase program and shares withheld for withholding tax, as described below.

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 June 30, ~~2020,~~2021, the Company had repurchased 210,631 shares of its common stock at an aggregate cost of $104.9 million. ~~NaN~~No shares were repurchased during the six months ended June 30, ~~2020.~~2021.

Tax Withholding for Equity Awards. At the employee’s option, shares of common stock are withheld by the Company upon the vesting of restricted stock and exercise of stock appreciation rights (“SARs”) to cover the applicable statutory minimum amount of employee withholding taxes, which the Company then pays to the taxing authorities in cash. The amounts remitted during the ~~three~~six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were ~~less than $0.1~~$7.9 million and ~~$0.2~~$5.8 million, for which the Company withheld 173,557 and ~~13 shares of common stock, respectively. The amounts remitted during the~~ ~~six~~ ~~months ended~~ ~~June 30, 2020~~ ~~and~~ ~~2019~~ ~~were $5.8 million and $2.8 million, for which the Company withheld~~ 3,789 ~~and 3,323~~ shares of common stock, respectively.

~~11.~~
12.      EQUITY-BASED COMPENSATION
~~EQUITY-BASED COMPENSATION~~

The Amended and Restated Cable One, Inc. 2015 Omnibus Incentive Compensation Plan (the “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, together with restricted stock awards and RSUs, “Restricted Stock”) and other stock-based awards, including performance stock units and deferred stock units. Directors, officers, employees and ~~employees~~consultants of the Company ~~and its affiliates~~ are eligible for grants under the 2015 Plan as part of the Company’s approach to long-term incentive compensation. At June 30, ~~2020,~~2021, ~~136,410~~97,056 shares were available for issuance under the 2015 Plan.

14

~~Table of Contents~~
Compensation expense associated with equity-based awards is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the award, with forfeitures recognized as incurred. The Company’s equity-based compensation expense, included within selling, general and administrative expenses in the condensed consolidated statements of operations and comprehensive income, was as follows (in thousands):

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

2021

2020

2021

2020

Restricted Stock
$ 2,678 $ 1,850 $ 5,185 $ 3,679 $ 4,549 $ 2,678 $ 7,973 $ 5,185
SARs
748 1,232 1,462 2,424 730 748 1,433 1,462
Total
$ 3,426 $ 3,082 $ 6,647 $ 6,103 $ 5,279 $ 3,426 $ 9,406 $ 6,647

The Company recognized income tax benefits of ~~$2.7~~$0.9 million and ~~$1.7~~$2.7 million ~~related to equity-based compensation awards~~ during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$7.9~~$4.5 million and ~~$2.7~~$7.9 million during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The deferred tax asset related to all outstanding equity-based ~~compensation~~ awards was ~~$3.5~~$3.7 million as of June 30, ~~2020.~~2021.
22
Table of Contents

Restricted Stock. A summary of Restricted Stock activity during the six months ended June 30, ~~2020~~2021 is as follows:

Restricted
Stock

Weighted
Average Grant
Date Fair Value
Per Share

Restricted
Stock

Weighted
Average Grant
Date Fair Value
Per Share

Outstanding as of December 31, 2019
38,873 $ 728.77
Outstanding as of December 31, 2020
34,944 $ 1,037.83
Granted
11,551 $ 1,555.77 10,679 $ 2,188.72
Forfeited
(5,303 ) $ 718.63 (1,071 ) $ 1,319.94
Vested and issued
(10,606 ) $ 679.29 (10,949 ) $ 844.57
Outstanding as of June 30, 2020
34,515 $ 1,018.65
Outstanding as of June 30, 2021
33,603 $ 1,457.56

Vested and deferred as of June 30, 2020
6,655 $ 618.54
Vested and deferred as of June 30, 2021
5,947 $ 750.62

At June 30, ~~2020,~~2021, there was ~~$18.4~~$31.4 million of unrecognized compensation expense related to Restricted Stock, which is expected to be recognized over a weighted average period of ~~1.4~~1.5 years.

Stock Appreciation Rights. A summary of SARs activity during the six months ended June 30, ~~2020~~2021 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, 2019
90,410 $ 676.41 $ 153.90 $ 73,419 7.5
Outstanding as of December 31, 2020
58,365 $ 866.54 $ 204.29 $ 79,446 7.3
Granted
3,500 $ 1,540.92 $ 373.12 $ - 9.8 1,500 $ 2,227.72 $ 584.38 $ - 9.5
Exercised
(22,065 ) $ 514.41 $ 111.62 $ 25,058 - (3,674 ) $ 746.04 $ 177.22 $ 3,870 -
Forfeited
(6,891 ) $ 846.81 $ 199.27 (1,601 ) $ 834.92 $ 201.50
Outstanding as of June 30, 2020
64,954 $ 759.94 $ 175.26 $ 65,922 7.4
Outstanding as of June 30, 2021
54,590 $ 912.97 $ 216.64 $ 55,053 6.9

Exercisable as of June 30, 2020
28,573 $ 586.79 $ 131.19 $ 33,946 6.4
Exercisable as of June 30, 2021
30,037 $ 666.56 $ 152.28 $ 37,434 5.9

At June 30, ~~2020,~~2021, there was ~~$6.1~~$5.6 million of unrecognized compensation expense related to SARs, which is expected to be recognized over a weighted average period of ~~1.3~~1.2 years.

15

~~Table of Contents~~
The grant date fair value of the SARs is measured using the Black-Scholes valuation model. The weighted average inputs used in the model for grants awarded during the six months ended June 30, ~~2020~~2021 were as follows:

Inputs

Expected volatility
~~25.90~~27.37
%
Risk-free interest rate
~~0.46~~0.54
%
Expected term (in years)
6.25
Expected dividend yield
~~0.58~~0.45
%

~~12.~~
~~INCOME TAXES~~
On ~~March 27, 2020,~~ ~~the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted in response to the COVID-~~1913.      ~~pandemic. The CARES Act, among other things, permits net operating loss (“NOL”) carrybacks to offset up to~~ ~~100%~~ ~~of taxable income for taxable years beginning before~~ ~~2021.~~ ~~In addition, the CARES Act allows NOLs incurred in~~ ~~2018,~~~~2019~~ ~~and~~ ~~2020~~ ~~to be carried back to each of the~~ ~~five~~ ~~preceding taxable years to generate a refund of previously paid income taxes.~~INCOME TAXES

The Company’s effective tax rate was ~~17.4%~~-8.7% and ~~20.8%~~17.4% for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~13.0%~~4.9% and ~~22.8%~~13.0% for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decrease~~change in the effective tax rate for the three months ended June 30, ~~2020~~2021 compared to the prior year quarter was related primarily ~~related~~ to a ~~$2.8~~$35.4 million increase in income tax ~~benefits attributable to~~benefit from the ~~NOL carryback provision~~reversal of a deferred tax liability on the ~~CARES Act and~~Company’s pre-existing equity investment in Hargray, partially offset by a ~~$1.0~~$5.2 million increase in income tax ~~benefits~~expense related to a change in valuation allowance and a $2.8 million income tax benefit in the prior year attributable to ~~equity-based compensation awards.~~the net operating loss (“NOL”) carryback provision of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) that did not recur in the current year. The decrease in the effective tax rate for the six months ended June 30, ~~2020~~2021 compared to the prior year period was related primarily ~~related~~ to the aforementioned $35.4 million of income tax benefit from the deferred tax liability reversal, partially offset by a $9.8 million income tax benefit attributable to the NOL carryback provision of the CARES Act in the prior year period that did not recur in 2021, a $3.8 million increase in income tax ~~benefits attributable~~expense related to ~~the aforementioned NOL carryback,~~ a ~~$5.2 million increase~~change in ~~income tax benefits attributable to equity-based compensation awards~~valuation allowance and a ~~$1.1~~$3.5 million decrease in income tax ~~expenses~~benefit attributable to ~~state effective tax rate changes.~~equity-based compensation.
23
Table of Contents

~~13.~~
14.      NET INCOME PER COMMON SHARE
~~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. The denominator used in calculating diluted net income per common share further includes any common shares available to be issued upon vesting or exercise of outstanding equity-based compensation awards if such inclusion would be dilutive, calculated using the treasury stock method, and any common shares to be issued upon conversion of the Convertible Notes, calculated using the if-converted method.

The computation of basic and diluted net income per common share was as follows (dollars in thousands, except per share amounts) ~~was as follows:~~:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

2021

2020

2021

2020

Numerator:

Net income
$ 62,540 $ 36,395 $ 131,866 $ 75,134
Net income - basic
$ 106,153 $ 62,540 $ 174,735 $ 131,866
Add: Convertible Notes interest expense, net of tax
1,551 0 2,014 0
Net income - diluted
$ 107,704 $ 62,540 $ 176,749 $ 131,866

Denominator:

Weighted average common shares outstanding - basic
5,831,796 5,673,669 5,764,850 5,673,893 6,014,351 5,831,796 6,013,382 5,764,850
Effect of dilutive equity-based compensation awards⁽¹⁾
51,621 56,569 54,783 49,403 37,218 51,621 38,831 54,783
Effect of dilution from if-converted Convertible Notes⁽²⁾
404,248 0 260,630 0
Weighted average common shares outstanding - diluted
5,883,417 5,730,238 5,819,633 5,723,296 6,455,817 5,883,417 6,312,843 5,819,633

Net Income per Common Share:

Basic
$ 10.72 $ 6.41 $ 22.87 $ 13.24 $ 17.65 $ 10.72 $ 29.06 $ 22.87
Diluted
$ 10.63 $ 6.35 $ 22.66 $ 13.13 $ 16.68 $ 10.63 $ 28.00 $ 22.66

Supplemental Net Income per Common Share Disclosure:
Supplemental Net Income per Common Share Disclosure:

Anti-dilutive shares from equity-based compensation awards⁽¹⁾
506 87 363 3,895 8,415 506 8,415 363

⁽¹⁾
Equity-based compensation awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation.
⁽²⁾
Based on a conversion rate of 0.4394 shares of common stock per weighted $1,000 principal amount of Convertible Notes outstanding during the three and six months ended June 30, 2021.

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~~14.~~15.      COMMITMENTS AND CONTINGENCIES
~~COMMITMENTS AND CONTINGENCIES~~

Contractual Obligations. The Company has obligations to make future payments for goods and services under certain contractual arrangements. These contractual obligations secure the future rights to various goods and services to be used in the normal course of the Company’s operations. In accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as certain purchase obligations under contracts, are not reflected as assets or liabilities in the condensed consolidated balance sheets. As of June 30, ~~2020,~~2021, except for additional debt obligations disclosed in note 8,there have been no material changes to the contractual obligations previously disclosed in the ~~2019~~2020 Form 10-K.

In addition, the Company incurs recurring utility pole rental costs and fees imposed by various governmental authorities, including franchise fees, as part of its operations. However, these costs are not included in the Company’s contractual obligations as they are cancellable on short notice, in the case of pole rental costs, or are passed through on a monthly basis to the Company’s customers and are periodically remitted to authorities, in the case of fees imposed by governmental authorities. The Company also has franchise agreements requiring plant construction and the provision of services to customers within the franchise areas. In connection with these obligations under existing franchise agreements, the Company obtains surety bonds or letters of credit guaranteeing performance to municipalities and public utilities and payment of insurance premiums. Payments under these arrangements are required only in the remote event of nonperformance. The Company issued letters of credit totaling ~~$22.0~~$33.0 million in ~~January 2020~~ on behalf of Wisper to guarantee its performance obligations under an FCC broadband funding program. As of June 30, ~~2020,~~2021, the Company has assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheet. Refer to note 78 for further details on this transaction.
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Litigation and Legal Matters. The Company is subject to complaints and administrative proceedings and has 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, and violations of applicable wage and hour laws; statutory or common law claims involving current and former employees; and other matters. Although the outcomes of any legal claims and proceedings against the Company cannot be predicted with certainty, based on currently available information, the Company believes that there are no existing claims or proceedings that are likely to have a material adverse effect on its business, financial condition, results of operations or cash flows.

Regulation in the CCompany’~~ompany’s~~s Industry. The Company’s operations are extensively regulated by 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. Future legislative and regulatory changes could adversely affect the Company’s operations.

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

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, ~~2019~~2020 and the related “~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,” both of which are contained in our ~~2019~~2020 Form 10-K. Our results of operations and financial condition discussed herein may not be indicative of our future results and trends.

Throughout this “~~Management’s~~Management’s Discussion and Analysis of Financial Condition and Results of Operations,” all totals, percentages and year-over-year changes are calculated using exact numbers. Minor differences may exist due to rounding.
Any discussion of consolidated results or performance for the three and six months ended June 30, ~~2020~~2021 is inclusive of ~~Fidelity~~the Valu-Net operations, which were acquired on July 1, 2020, and approximately two months of Hargray operations, which were acquired on May 3, 2021, and excludes the Anniston System, which was divested on October 1, 2020. The Anniston System was included in the Hargray Acquisition and its operations are included in the Company’s results with the Hargray operations.

Overview

We are a fully integrated provider of data, video and voice services in 2124 Western, Midwestern and Southern states. We ~~provide~~provided these broadband services to residential and business customers in ~~more than 950~~approximately 1,050 communities as of June 30, ~~2020.~~2021. The markets we serve are primarily non-metropolitan, secondary and tertiary markets, with approximately ~~79%~~72% of our customers located in seven states as of June 30, ~~2020:~~2021: Arizona, Idaho, ~~Illinois,~~ Mississippi, Missouri, Oklahoma, South Carolina and Texas. Our biggest customer concentrations are in the Mississippi Gulf Coast region and in the greater Boise, Idaho region. We provided service to approximately ~~962,000~~1,134,000 residential and business customers out of approximately ~~2.3~~2.6 million homes passed as of June 30, ~~2020.~~2021. Of these customers, approximately ~~838,000~~1,017,000 subscribed to data services, ~~290,000~~287,000 subscribed to video services and ~~133,000~~153,000 subscribed to voice services as of June 30, ~~2020.~~2021.

We generate substantially all of our revenues through ~~four~~three primary ~~products.~~product lines. Ranked by share of our total revenues through the first six months of ~~2020,~~2021, they are residential data ~~(49.1%~~(52.7%), residential video ~~(26.6%~~(22.0%), and business services (data, voice and ~~video – 17.9%) and residential voice (3.8%~~video: 18.4%). The profit margins, growth rates ~~and~~and/or capital intensity of ~~our four~~these three primary ~~products~~product lines vary significantly due to competition, product maturity and relative costs.

~~On January 8, 2019, we 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 $358.8 million in cash~~focus on a debt-free basis. On October 1, 2019, we acquired Fidelity, a provider of connectivity services to residential and business customers throughout Arkansas, Illinois, Louisiana, Missouri, Oklahoma and Texas. We paid a purchase price of $531.4 million in cash on a debt-free basis.
In May 2020, we made a $27.2 million minority equity investment in AMG Technology Investment Group, LLC, a fixed wireless provider (“Nextlink”). In July 2020, we acquired Valu-Net LLC, an all-fiber internet service provider headquartered in Kansas (“Valu-Net”), for a base purchase price of $38.4 million, subject to customary post-closing adjustments. We also closed a minority equity investment in Wisper for total consideration of $25.3 million in July 2020. During the third quarter of 2020, we also entered into an agreement with Hargray Communications (“Hargray”) whereby we will contribute our Anniston, Alabama system in exchange for a minority equity interest in Hargray. The Hargray transaction is expected to be completed in the fall of 2020, subject to certain regulatory approvals and other customary closing conditions.
~~Beginning in 2013, we shifted our focus towards~~ growing our higher margin businesses, namely residential data and business ~~services, rather than~~services. Beginning in 2013, we began our shift away from our prior concentration on growing revenues through subscriber retention and maximizing customer primary service units (“PSUs”). We adapted our strategy to face the industry-wide trends of declining profitability of residential video services and declining revenues from residential voice services. The declining profitability of residential video services is due primarily ~~due~~ to increasing programming costs and retransmission fees and competition from other content providers, and the declining revenues from residential voice services are due primarily ~~due~~ to the increasing use of wireless voice services instead of residential voice services. Separately, we have also focused on retaining customers who are likely to produce higher relative value over the life of their service relationships with us, 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).~~
margins.
Excluding the effects of our recently completed and ~~possible~~any potential future acquisitions and divestitures, the trends described above and the COVID-19 pandemic have impacted, and are expected to further impact, our ~~four~~three primary product lines in the following ways:
●
Residential data. We have experienced growth in residential data customers and revenues every year since 2013, and that growth accelerated during the ~~three~~12 months ended June 30, ~~2020,~~2021, in part as a result of the COVID-19 pandemic and our associated ~~responses discussed below, including suspending~~responses. During 2020, we organically added over 50% more residential data customers than we did during the ~~disconnection~~four-and-a-half-year period between our July 2015 spin-off from our former corporate parent and the end of ~~data services.~~2019. We expect growth for this product line to continue over the long-term as we believe upgrades in our broadband capacity, our ability to offer higher access speeds than many of our competitors, the reliability and ~~the~~ flexibility of our data service offerings and our Wi-Fi support service will enable us to capture additional market share from both data subscribers who use other providers as well as households in our footprint that do not yet subscribe to data services from any provider.

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●
Residential ~~video~~.video. Residential video service is an increasingly costly and fragmenting business, with programming costs and retransmission fees continuing to escalate in the face of a proliferation of streaming content alternatives. We intend to continue our strategy of focusing on the higher-margin businesses of residential data and business services while de-emphasizing our residential video business. ~~We experienced a slightly accelerated decline in organic residential video customers and revenues during the three months ended June 30, 2020 as a result of our response to the COVID-19 pandemic.~~ As a result of our video strategy, we expect that residential video customers and revenues will decline further in the future. In 2021, we began the launch of Sparklight® TV, an internet protocol-based (“IPTV”) video service that allows customers to stream our video channels from the cloud through a new app. This transition from linear to IPTV video service will enable us to reclaim bandwidth, freeing up network capacity to increase data speeds and capacity across our network.

●
~~Residential voice~~. We have experienced declines in residential voice customers as a result of consumers in the United States deciding to terminate their residential voice services and exclusively use wireless voice 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.
●
Business services. We have experienced significant growth in business data customers and revenues, and we expect this growth to continue over the long-term. We attribute this growth to our strategic focus on increasing sales to business customers and our efforts to attract enterprise business customers. Margins for products sold to business customers have remained attractive, which we expect will continue. During the three months ended June 30, 2020, the COVID-19 pandemic and our associated responses, including business sales associates working from home, resulted in suppressed sales growth from small business customers while at the same time the pandemic presented additional subscriber acquisition and upgrade opportunities primarily for larger and enterprise businesses in need of faster and more reliable data and voice services.

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. In addition, a key objective of our capital allocation process is to invest in initiatives designed to drive revenue and Adjusted EBITDA expansion. ~~Over our last three fiscal years, more~~More than 50% of our total capital expenditures since 2017 were focused on infrastructure improvements that were intended to grow these measures. We continue to invest capital to, among other things, increase our plant and data capacities as well as network reliability. As of June 30, ~~2020,~~2021, we ~~offer~~offered Gigabit data service to approximately ~~97%~~98% of our homes passed. We are also deploying DOCSIS 3.1, towhich, together with Sparklight TV, will further increase our network capacity and enable future growth in our residential data and business services product lines.

We expect to continue to devote financial resources to infrastructure improvements ~~including~~ in ~~certain of~~existing and newly acquired markets as well as to expand high-speed data service in areas where our consortium was designated the ~~new markets we have acquired, because we~~winning bidder for the FCC’s Rural Digital Opportunity Fund Phase I auction. We believe these investments are necessary to continually meet our customers’ needs and to remain competitive. The capital enhancements associated with ~~acquired operations~~recent acquisitions include rebuilding low capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 3.1; converting back office functions such as billing, accounting and service provisioning; migrating products to legacy Cable One platforms; and expanding our high-capacity fiber network.

Our primary goals are to continue growing residential data and business services revenues, to increase profit margins and to deliver strong Adjusted EBITDA and Adjusted EBITDA less capital expenditures. To achieve these goals, we intend to continue our disciplined cost management approach, remain focused on customers with expected higher relative value and follow through with further planned investments in broadband plant upgrades, including the deployment of DOCSIS 3.1 capabilities and new data service offerings for residential and business ~~customers while at~~customers. At the same time, we intend to continue balancing the impact of the COVID-19 pandemic on our business, associates, customers and other stakeholders. We also plan to continue seeking broadband-related acquisition and strategic investment opportunities in rural ~~markets.~~markets in addition to pursuing organic growth through market expansion projects.

~~COVID-19 Update~~Our recent acquisitions and strategic investments include:

●
On May 4, 2020, we made a minority equity investment for a less than 10% ownership interest in Nextlink, a wireless internet service provider, for $27.2 million.
We represent a part of the United States’ critical infrastructure, and our continued operation is essential to connectivity services that are vital during the COVID‐19 pandemic. At the same time, the spread of the COVID-19 pandemic has caused us to modify our operations, including restricting our technicians from entering customer homes and businesses; closing or limiting access to local offices and our corporate headquarters for associates, customers and others; limiting non-essential travel for associates; instituting an expanded work-from-home program, including enhancing our technological capabilities to support such efforts; implementing “purpose pay” to provide a 25% premium to base pay for certain associates who are required to leave their homes to perform their essential job functions; and establishing health protocols and providing personal protective equipment to protect our associates, customers and others.
●
On July 1, 2020, we acquired Valu-Net, an all-fiber internet service provider headquartered in Kansas with approximately 5,000 residential data subscribers at the time of the acquisition. We paid a purchase price of $38.9 million in cash on a debt-free basis.
●
On July 10, 2020, we acquired an approximately 40% minority equity interest in Wisper, a wireless internet service provider, for total consideration of $25.3 million.
●
On October 1, 2020, we contributed the assets of the Anniston System to Hargray in exchange for an approximately 15% equity interest, on a fully diluted basis, in Hargray, a data, video and voice services provider. The Anniston System had approximately 19,000 residential data subscribers at the time of the transaction.

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●
On November 12, 2020, we acquired a 45% minority equity interest in MBI, a data, video and voice services provider, for $574.9 million in cash.
~~In addition, in an effort to help ease the financial burden and provide continued connectivity for our customers and communities impacted by~~
●
On May 3, 2021, we acquired the remaining approximately 85% equity interest in Hargray that we did not already own for an approximately $2.0 billion cash purchase price that implied a $2.2 billion total enterprise value for Hargray on a cash-free and debt-free basis, subject to customary post-closing adjustments. The Hargray Acquisition was financed with cash on hand and net proceeds from indebtedness. The Hargray Acquisition expanded our presence in the Southeastern U.S. and is expected to enable us to capitalize on Hargray’s experience and expertise in fiber expansion.
COVID-19 pandemic, beginning in March 2020, we initially committed to do the following for 60 days under the FCC’s Keep Americans Connected Pledge: waive late charges and suspend disconnection of data services for residential and business customers who are unable to pay their bill due to disruptions caused by the pandemic and open free public Wi-Fi hotspots in local office parking lots and other public areas across our footprint, which are in place at nearly 140 locations. These commitments were scheduled to conclude on June 30, 2020; however, we continued to waive late charges for residential and small business data and voice customers through July 31, 2020 and have extended access to our free public Wi-Fi hotspots through the end of 2020.Update

Other actions taken by us beginning in March 2020 to assist customers and the communities we serve during the COVID-19 pandemic included discontinuing charging data overage fees, which was later extended through the end of June 2020; offering a low-cost 15 Megabit per second residential data plan for $10 per month for the first three months of service to help low-income families and those most impacted by the pandemic, which is available through December 31, 2020; donating more than $300,000 for community relief efforts and supporting various other local relief efforts; and partnering with communities, hospitals, medical centers and other essential institutions to address their broadband connection needs and challenges. We also revised a majority of our residential data plans to provide 50 to 300 Gigabits of additional data based on the plan as of July 1, 2020, and we continue to work with residential and small business data and voice customers who have been harmed financially by the COVID-19 pandemic to keep them connected by offering flexible payment plans. Meanwhile, to meet the increased demand from new residential data customers, we focused on data-only connects for most of the second quarter.
In addition to the effects to our primary product lines noted above, the COVID-19 pandemic and our associated responses negatively impacted Adjusted EBITDA by $14.9 million and $16.5 million during the three and six months ended June 30, 2020, respectively, primarily driven by a decrease in revenues from the suspension of data overage fees, late charges and reconnect fees, reduced advertising revenues and diminished growth in business services revenues, coupled with higher labor costs and bad debt expense. These negative Adjusted EBITDA impacts were mostly offset during the three months ended June 30, 2020 by a greater-than-usual quarterly gain in residential data customers and the associated increase in residential data revenues as well as a largely unexpected reduction of certain expenses that resulted from shelter-in-place orders and our expanded work-from-home program.
We also delayed the planned implementation of our new ERP system because of resource challenges and inefficiencies that resulted from the COVID-19 pandemic. We are now planning to implement our new ERP system by the summer of 2021.
~~We expect the negative impacts associated with the~~The actions we took in response to the COVID-19 pandemic ~~to continue into~~did not have any notable negative impact on our results for the ~~third quarter~~first two quarters of ~~2020,~~2021, due primarily to ~~reduced~~the resumption of billing late charges, reconnect fees and data overage fees ~~late charges and reconnect fees during~~as well as the ~~early part~~normalization of ~~the third quarter and elevated~~ labor costs ~~throughout~~in the ~~third quarter. However, the increase in~~fourth quarter of 2020. We experienced a positive impact on residential data revenues ~~associated with~~for the six months ended June 30, 2021 as a result of retaining a significant number of residential data customers acquired during 2020 and continued growth of residential data customers during the ~~second quarter~~period, and we expect that there will continue to be a positive impact on 2021 residential data revenues from these factors, albeit at a slower pace during the remainder of ~~2020 is anticipated~~2021. However, we continue to ~~partially offset these reduced revenues and additional costs. In addition, we~~ face various uncertainties related to the impact of the COVID-19 pandemic on the overall economy and our business, including whether we ~~are~~will be able to sustain continued customer growth, our level of bad debt expense and ifwhether some of the ~~unexpected~~ expense reductions realized during the second ~~quarter~~half of 2020 and the first half of 2021 will continue or if those expenses will return to more normal levels ~~as certain areas of~~given the ~~country ease~~fluid situation regarding pandemic-related ~~restrictions.~~restrictions across the country.

We continue to monitor the evolving situation caused by the COVID-19 pandemic, and we may take further actions required by governmental authorities or that we determine are prudent to support the well-being of our associates, customers, suppliers, business partners and others. The degree to which the COVID-19 pandemic impacts our operations, business, financial results and financial condition will depend on future developments, which are highly uncertain, continuously evolving and in many cases cannot be predicted. This includes, but is not limited to, the duration and spread of the pandemic and its variants, its severity, the efficacy of vaccines (particularly with respect to emerging strains of the virus), the actions to contain the virus or treat its impact, potential legislative or regulatory efforts to impose new requirements on our data services and how quickly and to what extent normal social, economic and operating conditions can resume.

Refer to the section entitled “~~Risks Factors~~”“Risks Factors” in ~~this Quarterly Report on~~the 2020 Form ~~10-Q~~10-K for additional risks we face due to the COVID-19 pandemic.

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Results of Operations

PSU and Customer Counts

Selected subscriber data for the periods presented was as follows (in thousands, except percentages):

As of June 30,

Annual Net Gain/(Loss)

As of June 30,

Annual Net Gain (Loss)

2020

2019

Change

% Change

2021

2020

Change

% Change

Residential data PSUs⁽¹⁾
758 613 145 23.7 923 758 165 21.7
Residential video PSUs(1)
276 293 (17 ) (5.9 ) 272 276 (4 ) (1.3 )
Residential voice PSUs(1)
98 94 4 4.6 110 98 12 11.8
Total residential PSUs⁽¹⁾
1,132 1,000 132 13.2 1,305 1,132 173 15.3

Business data PSUs(1)
80 69 11 15.9 94 80 14 17.3
Business video PSUs(1)
14 15 (1 ) (8.2 ) 14 14 0 3.2
Business voice PSUs(1)
35 30 5 17.0 44 35 9 25.5
Total business services PSUs(1)
129 114 15 13.0 152 129 23 18.0

Total data PSUs⁽¹⁾
838 682 156 22.9 1,017 838 179 21.3
Total video PSUs
290 308 (18 ) (6.0 ) 287 290 (3 ) (1.1 )
Total voice PSUs
133 124 9 7.6 153 133 20 15.3
Total PSUs⁽¹⁾
1,261 1,114 147 13.2 1,457 1,261 196 15.5

Residential customer relationships⁽¹⁾
876 742 134 18.0 1,032 876 156 17.8
Business customer relationships(1)
86 76 9 12.1 102 86 17 19.6
Total customer relationships⁽¹⁾
962 819 143 17.5 1,134 962 172 17.9

⁽¹⁾
~~The amount~~Due to the recency of the May 3, 2021 Hargray Acquisition, certain Hargray bulk accounts are counted as business PSUs and business customer relationships, whereas we classify such accounts as residential PSUs and residential customer relationships. We are currently in the process of ~~June 30, 2020 excluded approximately 2,000 residential data customers or PSUs, as applicable, considered to be high risk for disconnection because payments have not been made since activation.~~aligning Hargray’s methodology with our methodology so that future PSU and customer relationship counts are calculated on the same basis.

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 and households continue to ~~terminate~~discontinue residential voice service. In addition, we have focused on selling data-only packages to new customers rather than cross-selling video to these customers. Meanwhile, the COVID-19 pandemic and our responses to it have accelerated this customer mix shift.

Use of Nonfinancial Metrics and Average Monthly Revenue per Unit ~~(“ARPU”~~(“ARPU”)

We use various nonfinancial metrics to measure, manage and monitor our operating performance on an ongoing basis. Such metrics include homes passed, PSUs and customer relationships. Homes passed represents the number of serviceable and marketable homes and businesses passed by our active plant. A PSU represents a single subscription to a particular service offering. Residential bulk multi-dwelling PSUs are generally classified as residential and are counted at the individual unit level. Business voice customers who have multiple voice lines are counted as a single PSU. A customer relationship represents a single customer who subscribes to one or more PSUs.

We believe homes passed, PSU and customer relationship counts are useful to investors in evaluating our operating performance. Similar measures with similar titles are common measures used by investors, analysts and peers to compare performance in our industry, although our measures of homes passed, PSUs and customer relationships may not be directly comparable to similarly titled measures reported by other companies.

We use ARPU to evaluate and monitor the amount of revenue generated by each type of service subscribed to by customers and the contribution to total revenues as well as to analyze and compare growth patterns. Residential ARPU values represent the applicable 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 the number of months in the period, except that for any ~~new~~ PSUs added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent the applicable residential service revenues (excluding installation and activation fees) divided by the pro-rated average number of PSUs during such period. Business services ARPU values represent business services revenues divided by the average of the number of business customer relationships at the beginning and end of each period, divided by the number of months in the period, except that for any ~~new~~ business customer relationships added or subtracted as a result of an acquisition or divestiture occurring during the period, the associated ARPU values represent business services revenues divided by the pro-rated average number of business customer relationships during such period.

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We believe ARPU is useful to investors in evaluating our operating performance. ARPU 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 ARPU may not be directly comparable to similarly titled measures reported by other companies.

Comparison of Three Months Ended June 30, ~~2020~~2021 to Three Months Ended June 30, ~~2019~~2020

Revenues

Revenues increased ~~$42.7~~$73.4 million, or ~~14.9%~~22.4%, due primarily to ~~increases in residential data and business services revenues of $31.2~~$50.6 million ~~and $8.7 million, respectively. The increase was primarily the result of the acquired Fidelity~~from Hargray operations ~~which contributed $33.1 million, and organic growth~~as well as increases in our higher margin product lines of residential data and business services revenues of $25.7 million and $3.3 million, respectively, and a $4.9 million increase in other revenues, partially offset by decreases in ~~organic~~ residential video and residential voice ~~and other~~ revenues. Certain actions we took in response to the COVID-19 pandemic, including temporarily discontinuing charging data overage fees, waiving late charges and suspending collection activities, which reduced reconnect fees, negatively impacted consolidated revenues by $7.9 million during the three months ended June 30, 2020. This negative impact on consolidated revenues, of which $5.0 million was associated with other revenues, was mostly offset by a larger-than-usual quarterly gain in residential data customers and the associated increase in residential data revenues related to the COVID-19 pandemic.

Revenues by service offering for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):

Three Months Ended June 30,

Three Months Ended June 30,

2020

2019

2020 vs. 2019

2021

2020

2021 vs. 2020

Revenues

% of Total

Revenues

% of Total

$ Change

% Change

Revenues

% of Total

Revenues

% of Total

$ Change

% Change

Residential data
$ 164,015 50.0 $ 132,824 46.5 $ 31,191 23.5 $ 207,648 51.7 $ 164,015 50.0 $ 43,633 26.6
Residential video
87,328 26.6 84,033 29.4 3,295 3.9 87,240 21.7 87,328 26.6 (88 ) (0.1 )
Residential voice
12,120 3.7 10,705 3.7 1,415 13.2 12,112 3.0 12,120 3.7 (8 ) (0.1 )
Business services
58,469 17.8 49,759 17.4 8,710 17.5 76,616 19.1 58,469 17.8 18,147 31.0
Other
6,371 1.9 8,329 3.0 (1,958 ) (23.5 ) 18,133 4.5 6,371 1.9 11,762 184.6
Total revenues
$ 328,303 100.0 $ 285,650 100.0 $ 42,653 14.9 $ 401,749 100.0 $ 328,303 100.0 $ 73,446 22.4

Residential data service revenues increased ~~$31.2~~$43.6 million, or ~~23.5%~~26.6%, due primarily to ~~organic~~$18.0 million from Hargray operations, as well as subscriber growth, ~~including a larger-than-usual quarterly subscriber gain as a result of the COVID-19 pandemic, the acquired Fidelity operations,~~ a reduction in package discounting and increased customer subscriptions to premium tiers.

Residential video service revenues ~~increased $3.3 million, or 3.9%,~~were flat due primarily to ~~the acquired Fidelity~~$9.0 million from Hargray operations and a rate adjustment ~~partially~~implemented in March 2021, offset by a ~~14.3% year-over-year~~ decrease in residential video ~~subscribers, excluding Fidelity.~~subscribers.

Residential voice service revenues ~~increased $1.4 million, or 13.2%,~~were flat due primarily to ~~the acquired Fidelity~~$1.9 million from Hargray operations, ~~partially~~ offset by a ~~12.7% year-over-year~~ decrease in residential voice ~~subscribers, excluding Fidelity.~~subscribers.

Business services revenues increased ~~$8.7~~$18.1 million, or ~~17.5%~~31.0%, due primarily to ~~the acquired Fidelity~~$14.9 million from Hargray operations and ~~organic~~ growth in our business data and voice services to small and medium-sized businesses and enterprise customers. Total business customer relationships increased ~~12.1%~~19.6% year-over-year.

Other revenues ~~decreased $2.0~~increased $11.8 million, or ~~23.5%~~184.6%, due primarily to $6.8 million from Hargray operations and higher advertising revenues, late charges and reconnect fees compared to the second quarter of 2020 which was negatively impacted by actions we took in response to the COVID-19 pandemic, including temporarily discontinuing charging data overage fees, waiving late charges and suspending collection ~~activities, which reduced reconnect fees, partially offset by other revenues from the acquired Fidelity operations.~~activities.

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ARPU for the indicated service offerings for the three months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:

Three Months Ended June 30,

2020 vs. 2019

Three Months Ended June 30,

2021 vs. 2020

2020

2019

$ Change

% Change

2021

2020

$ Change

% Change

Residential data(1)
$ 73.80 $ 71.80 $ 2.00 2.8 $ 78.34 $ 73.80 $ 4.54 6.2
Residential video(1)
$ 102.95 $ 93.43 $ 9.52 10.2 $ 110.32 $ 102.95 $ 7.37 7.2
Residential voice(1)
$ 40.35 $ 37.32 $ 3.03 8.1 $ 39.28 $ 40.35 $ (1.07 ) (2.7 )
Business services(1)
$ 228.11 $ 218.77 $ 9.34 4.3 $ 263.86 $ 228.11 $ 35.75 15.7

⁽¹⁾
Due to the recency of the May 3, 2021 Hargray Acquisition, certain Hargray bulk accounts are counted as business PSUs and business customer relationships, whereas we classify such accounts as residential PSUs and residential customer relationships. We are currently in the process of aligning Hargray’s methodology with our methodology so that future PSU and customer relationship counts used in ARPU calculations are determined on the same basis.

Costs and Expenses

Operating expenses (excluding depreciation and amortization) were ~~$106.0~~$112.4 million for the three months ended June 30, ~~2020~~2021 and increased ~~$10.3~~$6.3 million, or ~~10.8%~~6.0%, compared to the three months ended June 30, ~~2019. Operating expenses as a percentage of revenues were 32.3% and 33.5% for the three months ended June 30, 2020 and 2019, respectively.~~2020. The increase in operating expenses was ~~due~~ primarily attributable to ~~$10.3~~$14.8 million of additional expenses related to ~~Fidelity~~Hargray operations, ~~and a $3.6 million increase in labor costs,~~ partially offset by a ~~$2.9~~$7.3 million reduction in programming expenses and a $3.1 million decrease in ~~programming expenses. On a consolidated basis, operating~~labor and other compensation-related costs. Operating expenses for the three months ended June 30, 2020 ~~reflect~~included $3.9 million of increased labor ~~costs~~ and other operating expenses as a result of the COVID-19 pandemic. Operating expenses as a percentage of revenues were 28.0% and 32.3% for the three months ended June 30, 2021 and 2020, respectively.

Selling, general and administrative expenses were ~~$65.0~~$88.0 million for the three months ended June 30, ~~2020~~2021 and increased ~~$4.9~~$23.0 million, or ~~8.1%~~35.4%, compared to the three months ended June 30, ~~2019. Selling, general and administrative expenses as a percentage of revenues were 19.8% and 21.0% for the three months ended June 30, 2020 and 2019, respectively.~~2020. The increase in selling, general and administrative expenses was primarily attributable to ~~$6.1~~$13.6 million of additional expenses related to ~~Fidelity~~Hargray operations and ~~a $4.3~~increases of $4.9 million ~~increase~~ in ~~bad debt expense, partially offset by decreases of $3.1~~labor and other compensation-related costs, $3.5 million in acquisition-related costs, $3.2 million in health insurance costs, ~~and $2.6~~$1.6 million in ~~rebranding expenses.~~professional fees and $1.0 million in system conversion costs, partially offset by a $5.8 million decrease in bad debt expense. The ~~lower~~increase in labor and other compensation-related costs was due to higher stock-based compensation, increased headcount and higher average salary rates. The increase in acquisition-related costs was due to expenses related to the Hargray Acquisition. The increase in health insurance costs ~~were due to~~was the result of lower-than-normal costs in the prior year quarter from reduced claims activity in connection with stay-at-home orders issued during the pandemic. ~~On a consolidated basis, selling,~~Higher bad debt expense in the three months ended June 30, 2020 was the result of higher expense estimates in that period resulting from the pandemic. Selling, general and administrative expenses as a percentage of revenues were 21.9% and 19.8% for the three months ended June 30, 2021 and 2020, ~~reflect $3.0 million of additional expenses primarily attributable to higher bad debt expense estimates resulting from the COVID-19 pandemic.~~respectively.

Depreciation and amortization expense was ~~$65.6~~$84.9 million for the three months ended June 30, ~~2020,~~2021, including ~~$11.0~~$15.7 million ~~attributable to Fidelity~~from Hargray operations, and increased ~~$10.7~~$19.3 million, or ~~19.6%~~29.5%, compared to the three months ended June 30, ~~2019. As~~2020. Depreciation and amortization expense as a percentage of revenues ~~depreciation~~was 21.1% and ~~amortization expense was~~ 20.0% ~~and 19.2%~~ for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.
Interest Expense

Interest expense was ~~$16.6~~$28.9 million for the three months ended June 30, 2021 and increased $12.3 million, or 74.2%, compared to the three months ended June 30, 2020. The increase was driven primarily by additional outstanding debt and higher interest rate swap settlement expense, partially offset by lower interest rates.
Other Income (Expense), Net
Other income, net, was $12.1 million for the three months ended June 30, 2021 and consisted primarily of a $33.4 million non-cash gain on fair value adjustment associated with our existing investment in Hargray upon the Hargray Acquisition and interest and investment income, partially offset by a $21.4 million non-cash loss on fair value adjustment associated with the MBI Net Option. Other income, net, was $1.7 million for the three months ended June 30, 2020 and ~~decreased $1.9 million, or 10.3%, compared to the three months ended June 30, 2019. The decrease~~consisted of interest and investment income.
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Income Tax Provision (Benefit)
Income tax benefit was ~~driven primarily by lower interest rates, partially offset by additional outstanding debt and higher interest rate swap settlement expense.~~
~~Other~~ ~~Income (Expense)~~~~, Net~~
~~Other income of $1.7~~$8.6 million for the three months ended June 30, ~~2020 consisted of interest and investment income. Other expense of $9.6 million for the three months ended June 30, 2019 consisted of a $6.5 million call premium related~~2021 compared to ~~the redemption of our previously outstanding senior notes and $4.9 million of debt issuance cost write-offs, partially offset by interest and investment income.~~
~~Income Tax Provision~~
~~Income~~income tax provision ~~was~~of $13.2 million for the three months ended June 30, ~~2020 and increased $3.6 million, or 38.0%, compared to the three months ended June 30, 2019.~~2020. Our effective tax rate was ~~17.4%~~-8.7% and ~~20.8%~~17.4% for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The ~~decrease in the effective tax rate was~~changes were due primarily to a ~~$2.8~~$35.4 million increase in income tax ~~benefits~~benefit from the reversal of a pre-existing deferred tax liability on the investment in Hargray, partially offset by a $5.2 million increase in income tax expense related to the change in valuation allowance and a $2.8 million income tax benefit in the prior year attributable to the NOL carryback provision of the CARES Act ~~and a $1.0 million increase~~that did not recur in ~~income tax benefits attributable to equity-based compensation awards.~~the current year.

Net Income

Net income was $106.2 million for the three months ended June 30, 2021 compared to $62.5 million for the three months ended June 30, 2020, ~~compared to $36.4 million for the three months ended June 30, 2019,~~ an increase of ~~$26.1~~$43.6 million.
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Unrealized Losson C~~ash~~ F~~low~~ H~~edges~~Cash Flow Hedges and O~~ther,~~ NetOther, Net of TaxTax

Unrealized loss on cash flow hedges and other, net of tax was ~~$9.5~~$16.0 million for the three months ended June 30, ~~2020~~2021 and ~~decreased $24.5~~increased $6.6 million, or ~~72.2%~~69.4%, compared to the $9.5 million loss for three months ended June 30, ~~2019~~2020 due primarily to comparatively lower ~~unrealized losses on our~~projected future increases in interest ~~rate swaps.~~rates.

Comparison of Six Months Ended June 30, ~~2020~~2021 to Six Months Ended June 30, ~~2019~~2020

Revenues

Revenues increased ~~$85.2~~$93.5 million, or ~~15.1%~~14.4%, due primarily to ~~increases in residential data and business services revenues of $56.4~~$50.6 million ~~and $19.4 million, respectively. The increase was primarily the result of the acquired Fidelity~~from Hargray operations ~~which contributed $65.3 million, and organic growth~~as well as increases in our higher margin product lines of residential data and business services revenues of $54.3 million and $5.8 million, respectively, and a $5.1 million increase in other revenues, partially offset by decreases in ~~organic~~ residential video and ~~other~~residential voice revenues. Certain actions we took in response to the COVID-19 pandemic, including temporarily discontinuing charging data overage fees, waiving late charges and suspending collection activities, which reduced reconnect fees, negatively impacted consolidated revenues by $8.6 million during the six months ended June 30, 2020. This negative impact on consolidated revenues, of which $5.4 million was associated with other revenues, was mostly offset by a larger-than-usual gain in residential data customers and the associated increase in residential data revenues related to the COVID-19 pandemic.

Revenues by service offering for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, together with the percentages of total revenues that each item represented for the periods presented, were as follows (dollars in thousands):

Six Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020 vs. 2019

2021

2020

2021 vs. 2020

Revenues

% of Total

Revenues

% of Total

$ Change

% Change

Revenues

% of Total

Revenues

% of Total

$ Change

% Change

Residential data
$ 319,005 49.1 $ 262,635 46.5 $ 56,370 21.5 $ 391,253 52.7 $ 319,005 49.1 $ 72,248 22.6
Residential video
172,650 26.6 167,836 29.7 4,814 2.9 163,257 22.0 172,650 26.6 (9,393 ) (5.4 )
Residential voice
24,547 3.8 20,329 3.6 4,218 20.7 22,589 3.0 24,547 3.8 (1,958 ) (8.0 )
Business services
116,331 17.9 96,903 17.2 19,428 20.0 136,978 18.4 116,331 17.9 20,647 17.7
Other
16,966 2.6 16,552 3.0 414 2.5 28,934 3.9 16,966 2.6 11,968 70.5
Total revenues
$ 649,499 100.0 $ 564,255 100.0 $ 85,244 15.1 $ 743,011 100.0 $ 649,499 100.0 $ 93,512 14.4

Residential data service revenues increased ~~$56.4~~$72.2 million, or ~~21.5%~~22.6%, due primarily to ~~the acquired Fidelity~~$18.0 million from Hargray operations ~~organic~~as well as subscriber growth, ~~including a larger-than-usual subscriber gain in the second quarter of 2020 as a result of the COVID-19 pandemic,~~ a reduction in package discounting and increased customer subscriptions to premium tiers.

Residential video service revenues ~~increased $4.8~~decreased $9.4 million, or ~~2.9%~~5.4%, due primarily to ~~the acquired Fidelity~~a decrease in residential video subscribers, partially offset by $9.0 million from Hargray operations and a rate adjustment ~~partially offset by a 14.3% year-over-year decrease~~implemented in ~~residential video subscribers, excluding Fidelity.~~March 2021.

Residential voice service revenues ~~increased $4.2~~decreased $2.0 million, or ~~20.7%~~8.0%, due primarily to ~~the acquired Fidelity operations and the recognition of certain passthrough fees that were historically reported on~~ a ~~net basis, partially offset by a 12.7% year-over-year~~ decrease in residential voice subscribers, ~~excluding Fidelity.~~partially offset by $1.9 million from Hargray operations.

Business services revenues increased ~~$19.4~~$20.6 million, or ~~20.0%~~17.7%, due primarily to ~~the acquired Fidelity~~$14.9 million from Hargray operations and ~~organic~~ growth in our business data and voice services to small and medium-sized businesses and enterprise customers. Total business customer relationships increased ~~12.1%~~19.6% year-over-year.
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Table of Contents
Other revenues increased $12.0 million, or 70.5%, due primarily to $6.8 million from Hargray operations and higher advertising revenues, late charges and reconnect fees compared to the prior year period which was negatively impacted by actions we took in response to the COVID-19 pandemic, including temporarily discontinuing charging data overage fees, waiving late charges and suspending collection activities.

ARPU for the indicated service offerings for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:

Six Months Ended June 30,

2020 vs. 2019

Six Months Ended June 30,

2021 vs. 2020

2020

2019

$ Change

% Change

2021

2020

$ Change

% Change

Residential data(1)
$ 72.68 $ 71.58 $ 1.10 1.5 $ 78.03 $ 72.68 $ 5.35 7.4
Residential video(1)
$ 99.97 $ 92.44 $ 7.53 8.1 $ 107.15 $ 99.97 $ 7.18 7.2
Residential voice⁽¹⁾
$ 40.22 $ 34.91 $ 5.31 15.2 $ 39.32 $ 40.22 $ (0.90 ) (2.2 )
Business services⁽¹⁾
$ 227.39 $ 217.11 $ 10.28 4.7 $ 250.30 $ 227.39 $ 22.91 10.1

⁽¹⁾
~~The increases in residential voice~~Due to the recency of the May 3, 2021 Hargray Acquisition, certain Hargray bulk accounts are counted as business PSUs and business ~~services~~customer relationships, whereas we classify such accounts as residential PSUs and residential customer relationships. We are currently in the process of aligning Hargray’s methodology with our methodology so that future PSU and customer relationship counts used in ARPU ~~from~~calculations are determined on the prior year were partially a result of certain passthrough fees that were reported on a net basis prior to the second quarter of 2019. Residential voice and business services ARPU for the six months ended June 30, 2020 would have been $34.91 and $223.66, respectively, and for the six months ended June 30, 2019 would have been $32.85 and $215.00, respectively, if reported on a comparablesame basis.
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Costs and Expenses

Operating expenses (excluding depreciation and amortization) were ~~$212.0~~$213.8 million for the six months ended June 30, ~~2020~~2021 and increased ~~$21.8~~$1.9 million, or ~~11.4%~~0.9%, compared to the six months ended June 30, ~~2019. Operating expenses as a percentage of revenues were 32.6% and 33.7% for the six months ended June 30, 2020 and 2019, respectively.~~2020. The increase in operating expenses was ~~due~~ primarily attributable to ~~$21.3~~$14.8 million of additional expenses related to ~~Fidelity~~Hargray operations, ~~a $5.2 million increase in labor costs and $2.4 million of higher repairs and maintenance costs,~~ partially offset by a ~~$7.8~~$12.7 million reduction in programming expenses and a $3.0 million decrease in ~~programming expenses. On a consolidated basis, operating~~labor and other compensation-related costs. Operating expenses for the six months ended June 30, 2020 ~~reflect~~included $4.1 million of increased labor ~~costs~~ and other operating expenses as a result of the COVID-19 pandemic. Operating expenses as a percentage of revenues were 28.8% and 32.6% for the six months ended June 30, 2021 and 2020, respectively.

Selling, general and administrative expenses were ~~$127.9~~$157.1 million for the six months ended June 30, ~~2020~~2021 and increased ~~$6.3~~$29.2 million, or ~~5.2%~~22.8%, compared to the six months ended June 30, ~~2019. Selling, general and administrative expenses as a percentage of revenues were 19.7% and 21.5% for the six months ended June 30, 2020 and 2019, respectively.~~2020. The increase in selling, general and administrative expenses was primarily attributable to ~~$12.4~~$13.6 million of additional expenses related to ~~Fidelity~~Hargray operations ~~a $5.7~~and increases of $6.6 million ~~increase~~ in labor and other compensation-related costs, ~~and a $4.4~~$5.9 million ~~increase~~ in ~~bad debt expense, partially offset by decreases of $4.7~~acquisition-related costs, $5.0 million in health insurance costs, ~~$2.8~~$2.5 million in ~~rebranding expenses, $2.8 million in acquisition-related~~professional services costs ~~$1.7 million in repairs~~ and ~~maintenance costs, $1.5~~$2.0 million in system conversion costs, partially offset by a $7.3 million decrease in bad debt expense. The increase in labor and ~~$1.4 million~~other compensation-related costs was due to higher stock-based compensation, increased headcount and higher average salary rates. The increase in ~~professional services costs. As discussed above,~~acquisition-related costs was due to expenses related to the ~~lower~~Hargray Acquisition. The increase in health insurance costs ~~were due to~~was the result of lower-than-normal costs in the prior year period from reduced claims activity in connection with stay-at-home orders issued during the pandemic. ~~On a consolidated basis, selling, general and administrative expenses for~~Higher bad debt expense in the six months ended June 30, 2020 ~~reflect $3.8 million~~was the result of ~~additional expenses primarily attributable to~~ higher ~~bad debt~~ expense estimates in that period resulting from the ~~COVID-19~~ pandemic. Selling, general and administrative expenses as a percentage of revenues were 21.1% and 19.7% for the six months ended June 30, 2021 and 2020, respectively.

Depreciation and amortization expense was ~~$130.9~~$153.4 million for the six months ended June 30, ~~2020,~~2021, including ~~$21.8~~$15.7 million ~~attributable to Fidelity~~from Hargray operations, and increased ~~$22.2~~$22.6 million, or ~~20.4%~~17.3%, compared to the six months ended June 30, ~~2019. As~~2020. Depreciation and amortization expense as a percentage of revenues ~~depreciation~~was 20.7% and ~~amortization expense was~~ 20.1% ~~and 19.3%~~ for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

We recognized a net loss on asset sales and disposals of $0.9 million for the six months ended June 30, 2021 and a net gain on asset sales and disposals of $4.6 million ~~during~~for the for the six months ended June 30, ~~2020 compared to a net loss on asset sales and disposals of $2.0 million during the six months ended June 30, 2019.~~2020. The six months ended June 30, 2020 included a $6.6 million non-cash gain on the sale of certain tower properties. ~~The six months ended June 30, 2019 included a $1.6 million gain on the sale of a non-operating property that housed our former headquarters.~~

Interest Expense

Interest expense was ~~$35.3~~$52.5 million for the six months ended June 30, 2021 and increased $17.2 million, or 48.9%, compared to the six months ended June 30, 2020, driven primarily by additional outstanding debt and higher interest rate swap settlement expense, partially offset by lower interest rates.
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Table of Contents
Other Income (Expense), Net
Other income, net, was $20.2 million for the six months ended June 30, 2021 and consisted primarily of a $33.4 million non-cash gain on fair value adjustment associated with our existing investment in Hargray upon the Hargray Acquisition and interest and investment income, partially offset by a $15.8 million non-cash loss on fair value adjustment associated with the MBI Net Option. Other income, net, was $3.4 million for the six months ended June 30, 2020 and consisted of interest and investment income.
Income Tax Provision
Income tax provision was $9.1 million for the six months ended June 30, 2021 and decreased ~~$1.3~~$10.6 million, or ~~3.6%~~53.7%, compared to the six months ended June 30, ~~2019. The decrease~~2020. Our effective tax rate was ~~driven primarily by lower interest rates, partially offset by additional outstanding debt~~4.9% and ~~higher interest rate swap settlement expense.~~
~~Other~~ ~~Income (Expense)~~
~~Other income of $3.4 million~~13.0% for the six months ended June 30, 2021 and 2020, ~~consisted of interest and investment income. Other expense of $7.8 million for~~respectively. The decreases in the six months ended June 30, 2019 consisted of a $6.5 million call premium related to the redemption of our previously outstanding senior notes and $4.9 million of debt issuance cost write-offs, partially offset by interest and investment income.
~~Income~~ ~~Tax~~ ~~Provision~~
~~Income~~income tax provision ~~was $19.7 million for the six months ended June 30, 2020~~ and decreased $2.6 million, or 11.5%, compared to the six months ended June 30, 2019. Our effective tax rate was 13.0% and 22.8% for the six months ended June 30, 2020 and 2019, respectively. The decrease in the effective tax rate ~~was~~were due primarily to a ~~$9.8~~$35.4 million increase in income tax ~~benefits~~benefit from the reversal of a pre-existing deferred tax liability on the investment in Hargray, partially offset by a $9.8 million income tax benefit attributable to the NOL carryback provision of the CARES Act in the prior year period that did not recur in 2021, a ~~$5.2~~$3.8 million increase in income tax ~~benefits attributable~~expense related to ~~equity-based compensation awards~~a change in valuation allowance and a ~~$1.1~~$3.5 million decrease in income tax ~~expenses~~benefit attributable to ~~state effective tax rate changes.~~equity-based compensation.
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~~Table of Contents~~

Net Income

Net income was $174.7 million for the six months ended June 30, 2021 compared to $131.9 million for the six months ended June 30, 2020, ~~compared to $75.1 million for the six months ended June 30, 2019,~~ an increase of ~~$56.7~~$42.9 million.

Unrealized ~~Loss~~Gain (Loss) onC~~ash~~ F~~low~~ H~~edges~~ Cash Flow Hedges and O~~ther,~~ NetOther, Net of TaxTax

Unrealized ~~loss~~gain on cash flow hedges and other, net of tax was $39.4 million for the six months ended June 30, 2021 compared to an unrealized loss of $94.1 million for the six months ended June 30, 2020 ~~and increased $31.0 million, or 49.2%, compared to the six months ended June 30, 2019~~ due primarily to higher ~~unrealized losses on our~~projected future increases in interest ~~rate swaps.~~rates.

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.~~below, the most directly comparable GAAP financial measure.

Adjusted EBITDA is defined as net income plus interest expense, income tax provision (benefit), depreciation and amortization, equity-based compensation, ~~severance expense,~~ (gain) loss on deferred compensation, acquisition-related costs, (gain) loss on asset sales and disposals, system conversion costs, rebranding costs, equity method investment (income) loss, other (income) expense and other unusual ~~expenses,~~items, as provided in the following table. 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.

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We use Adjusted EBITDA to assess our performance. In addition, Adjusted EBITDA generally correlates to the measure used in the leverage ratio calculations under ~~our~~the Third Amended and Restated Credit Agreement and the Senior ~~Credit Facilities~~Notes Indenture to determine compliance with the covenants contained in the Third Amended and Restated Credit ~~Agreement.~~Agreement and the ability to take certain actions under the Senior Notes Indenture. 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 June 30,

2020 vs. 2019

Three Months Ended June 30,

2021 vs. 2020

(dollars in thousands)

2020

2019

$ Change

% Change

2021

2020

$ Change

% Change

Net income
$ 62,540 $ 36,395 $ 26,145 71.8 $ 106,153 $ 62,540 $ 43,613 69.7

Plus: Interest expense
16,615 18,516 (1,901 ) (10.3 ) 28,947 16,615 12,332 74.2
Income tax provision
13,209 9,571 3,638 38.0
Income tax provision (benefit)
(8,616 ) 13,209 (21,825 ) (165.2 )
Depreciation and amortization
65,584 54,835 10,749 19.6 84,915 65,584 19,331 29.5
Equity-based compensation
3,426 3,082 344 11.2 5,279 3,426 1,853 54.1
Severance expense
- 15 (15 ) (100.0 )
Loss on deferred compensation
206 78 128 164.1
(Gain) loss on deferred compensation
78 206 (128 ) (62.1 )
Acquisition-related costs
1,293 871 422 48.5 4,835 1,293 3,542 NM
Loss on asset sales and disposals, net
988 910 78 8.6
(Gain) loss on asset sales and disposals, net
1,058 988 70 7.1
System conversion costs
647 777 (130 ) (16.7 ) 1,618 647 971 150.1
Rebranding costs
311 2,902 (2,591 ) (89.3 ) 26 311 (285 ) (91.6 )
Equity method investment (income) loss, net
1,074 - 1,074 NM
Other (income) expense, net
(1,655 ) 9,632 (11,287 ) (117.2 ) (12,149 ) (1,655 ) (10,494 ) NM

Adjusted EBITDA
$ 163,164 $ 137,584 $ 25,580 18.6 $ 213,218 $ 163,164 $ 50,054 30.7

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Six Months Ended June 30,

2020 vs. 2019

(dollars in thousands)

2020

2019

$ Change

% Change

Net income
$ 131,866 $ 75,134 $ 56,732 75.5

Plus: Interest expense
35,289 36,612 (1,323 ) (3.6 )
Income tax provision
19,669 22,235 (2,566 ) (11.5 )
Depreciation and amortization
130,863 108,679 22,184 20.4
Equity-based compensation
6,647 6,103 544 8.9
Severance expense
- 178 (178 ) (100.0 )
(Gain) loss on deferred compensation
(21 ) 253 (274 ) (108.3 )
Acquisition-related costs
3,310 6,094 (2,784 ) (45.7 )
(Gain) loss on asset sales and disposals, net
(4,633 ) 2,013 (6,646 ) NM
System conversion costs
696 2,173 (1,477 ) (68.0 )
Rebranding costs
578 3,412 (2,834 ) (83.1 )
Other (income) expense, net
(3,389 ) 7,830 (11,219 ) (143.3 )

Adjusted EBITDA
$ 320,875 $ 270,716 $ 50,159 18.5

NM = Not meaningful.
Six Months Ended June 30, 2021 vs. 2020
(dollars in thousands) 2021 2020 Change Change
Net income
$ 174,735 $ 131,866 $ 42,869 32.5 %

Plus: Interest expense
52,528 35,289 17,239 48.9
Income tax provision
9,099 19,669 (10,570 ) (53.7 )
Depreciation and amortization
153,445 130,863 22,582 17.3
Equity-based compensation
9,406 6,647 2,759 41.5
(Gain) loss on deferred compensation
105 (21 ) 126 NM
Acquisition-related costs
9,205 3,310 5,895 178.1
(Gain) loss on asset sales and disposals, net
938 (4,633 ) 5,571 (120.2 )
System conversion costs
2,669 696 1,973 NM
Rebranding costs
70 578 (508 ) (87.9 )
Equity method investment (income) loss, net
1,642 - 1,642 NM
Other (income) expense, net
(20,249 ) (3,389 ) (16,860 ) NM

Adjusted EBITDA
$ 393,593 $ 320,875 $ 72,718 22.7
NM = Not meaningful.

We believe that 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.

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Table of Contents
Financial Condition: Liquidity and Capital Resources

Liquidity

Our primary funding requirements are for our ongoing operations, ~~planned~~ capital expenditures, potential acquisitions and strategic investments, payments of quarterly dividends and share repurchases. 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, make ~~planned~~ capital expenditures, make future acquisitions and strategic investments, 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, including the impact of the COVID-19 pandemic, some of which are beyond our control.

In light of the volatility in the debt markets resulting from the COVID-19 pandemic as well as our desire to enhance our flexibility in pursuing acquisitions and strategic investments, in May 2020, we completed the Public Offering and raised $469.8 million, after deducting underwriting discounts and offering expenses. See below for further details on the Public Offering.
A summary of our net cash flows for the periods indicated was as follows (dollars in thousands):

Six Months Ended June 30,

2020 vs. 2019

Six Months Ended June 30,

2021 vs. 2020

2020

2019

$ Change

% Change

2021

2020

$ Change

% Change

Net cash provided by operating activities
$ 272,195 $ 212,494 $ 59,701 28.1 $ 347,625 $ 272,195 $ 75,430 27.7
Net cash used in investing activities
(178,072 ) (465,817 ) 287,745 (61.8 ) (2,105,963 ) (178,072 ) (1,927,891 ) NM
Net cash provided by financing activities
423,158 91,493 331,665 NM 1,632,394 423,158 1,209,236 NM
Increase (decrease) in cash and cash equivalents
517,281 (161,830 ) 679,111 NM
Change in cash and cash equivalents
(125,944 ) 517,281 (643,225 ) (124.3 )
Cash and cash equivalents, beginning of period
125,271 264,113 (138,842 ) (52.6 ) 574,909 125,271 449,638 NM
Cash and cash equivalents, end of period
$ 642,552 $ 102,283 $ 540,269 NM $ 448,965 $ 642,552 $ (193,587 ) (30.1 )

NM = Not meaningful.

The ~~$59.7~~$75.4 million year-over-year increase in net cash provided by operating activities was primarily attributable to an increase in Adjusted EBITDA of ~~$50.2~~$72.7 million, ~~and lower cash paid for acquisition costs, rebranding costs, taxes and interest and~~ a ~~notes redemption call premium paid in the second quarter of 2019, partially offset by an unfavorable~~favorable change in accounts payable and accrued ~~liabilities.~~liabilities, an increase in tax refunds received and a favorable change in accounts receivable, partially offset by an increase in cash paid for interest and acquisition-related costs.

The ~~$287.7 million decrease~~$1.9 billion increase in net cash used in investing activities from the prior year period was due primarily to ~~$356.9 million of~~approximately $2.0 billion in net cash ~~outflows related to~~paid for the ~~Clearwave acquisition~~Hargray Acquisition in the ~~first~~second quarter of ~~2019, partially offset by~~2021 and a ~~$28.3~~$8.4 million increase in cash paid for capital expenditures, partially offset by the $27.2 million equity investment in Nextlink ~~the~~and $7.3 million issuance of a note and other receivables to Wisper ~~that did not occur~~ in the prior year ~~period and lower proceeds from sales of property, plant and equipment during the first six months of 2020.~~that did not recur.
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The ~~$331.7 million~~$1.2 billion increase in net cash provided by financing activities from the prior year period was due primarily to net proceeds of $895.2 million and $789.8 million from the offering of the Convertible Notes (the “Convertible Notes Offering”) and Term Loan B-4 issuance, respectively, during the first half of 2021, partially offset by $469.8 million of net proceeds from the Public Offering in the ~~second quarter of 2020, partially offset by a $148.3 million reduction in net debt borrowings compared to the~~ prior year ~~quarter.~~period that did not recur.

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 second quarter of ~~2020,~~2021, we have repurchased 210,631 shares of our common stock at an aggregate cost of $104.9 million. No shares were repurchased during the six months ended June 30, ~~2020.~~2021.

We currently expect to continue to pay quarterly cash dividends on shares of our common stock, subject to approval of the Board. During the second quarter of ~~2020,~~2021, the Board approved a quarterly dividend of ~~$2.25~~$2.50 per share of common stock, which was paid on June ~~12, 2020.~~ 18, 2021.
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Table of Contents
Financing Activity
Credit Facility
On ~~August 4, 2020,~~May 3, 2021, we amended the ~~Board approved~~Third Amended and Restated Credit Agreement to provide for the new seven-year Term Loan B-4 in an aggregate principal amount of $800.0 million. The interest margin applicable to the Term Loan B-4 is, at our option, equal to either LIBOR or a ~~$0.25~~base rate, plus an applicable margin equal to 2.0% for LIBOR loans and 1.0% for base rate loans. The Term Loan B-4 may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions), except for any prepayment within six months of the funding date in connection with certain repricing transactions, which will be subject to a 1.0% prepayment premium. The Term Loan B-4 benefits from certain “most favored nation” pricing protections and is not subject to the financial maintenance covenants under the Third Amended and Restated Credit Agreement. The Term Loan B-4 amortizes in equal quarterly installments at a rate (expressed as a percentage of the original principal amount) of 1.0% per ~~share increase~~annum (subject to customary adjustments in the ~~Company’s quarterly dividend to $2.50 per share~~event of ~~common stock to be paid on September 4, 2020 to holders~~any prepayment), with the outstanding balance due upon maturity. The Term Loan B-4 was drawn in full in connection with the closing of ~~record as of August 18, 2020.~~
~~Financing Activity~~the Hargray Acquisition.

The Third Amended and Restated Credit Agreement also provides for the Term Loan A-2, ~~the Term Loan B-1,~~ the Term Loan B-2, the Term Loan B-3, and the Revolving Credit Facility. ~~The~~Additionally, 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.

~~In January 2020, we~~We have issued letters of credit totaling ~~$22.0~~$33.0 million under the Revolving Credit Facility on behalf of Wisper to guarantee its performance obligations under an FCC broadband funding program. The fair value of the letters of credit approximates face value based on the short-term nature of the agreements. We would be liable for up to ~~$22.0 million~~the total amount outstanding under the letters of credit if Wisper were to fail to satisfy all or some of its performance obligations under the FCC program. Wisper pledged certain assets in favor of us as collateral for issuing the letters of credit, which pledge was terminated in the third quarter of 2020 at the same time that we closed an equity investment in Wisper, and Wisper has ~~agreed to guarantee~~guaranteed and ~~indemnify~~indemnified us in connection with such letters of credit. As of June 30, ~~2020,~~2021, we have assessed the likelihood of non-performance associated with the guarantee to be remote, and therefore, no liability has been accrued within the condensed consolidated balance sheet.
In March 2020, we borrowed $100 million under the Revolving Credit Facility for general corporate purposes, including for small acquisitions and investments. The outstanding balance was repaid in full in May 2020 using a portion of the net proceeds from the Public Offering. Letter Total letter of credit issuances under the Revolving Credit Facility totaled ~~$28.7~~$41.0 million ~~and were held for the benefit of performance obligations under government grant programs and certain general and liability insurance matters~~ and bore interest at a rate of ~~1.63%~~1.88% per annum.
As of June 30, ~~2020,~~2021, we had ~~$1.7~~$2.3 billion of aggregate outstanding term loans and ~~$321.3~~$459.0 million available for borrowing under the Revolving Credit Facility.
A summary of our outstanding term loans as of June 30, ~~2020~~2021 is as follows (dollars in thousands):

Instrument

Draw Date

Original
Principal

Amortization
Per Annum⁽¹⁾

Outstanding
Principal

Final
Maturity
Date

Balance
Due Upon
Maturity

Benchmark
Rate

Applicable
Margin⁽²⁾

Interest
Rate

Draw Date

Original Principal

Amortization Per Annum⁽¹⁾

Outstanding Principal

Final
Maturity
Date

Balance Due Upon Maturity

Benchmark Rate

Applicable Margin⁽²⁾

Interest
Rate

Term Loan A-2

5/8/2019
$ 700,000

Varies⁽⁴⁾ $ 685,259
5/8/2024
$ 513,945
LIBOR
1.50% 1.68%
5/8/2019⁽³⁾
$ 700,000
Varies⁽⁴⁾
$ 668,101
10/30/2025
$ 476,607
LIBOR
1.75% 1.85%
10/1/2019⁽³⁾ 10/1/2019⁽³⁾
Term Loan B-1

5/1/2017
500,000 1.0% 485,000
5/1/2024
466,250
LIBOR
1.75% 1.93%
Term Loan B-2

1/7/2019
250,000 1.0% 246,875
1/7/2026
233,125
LIBOR
2.00% 2.18%
1/7/2019
250,000 1.0% 244,375
10/30/2027
228,750
LIBOR
2.00% 2.10%
Term Loan B-3

6/14/2019
325,000 1.0% 321,750
1/7/2026
303,875
LIBOR
2.00% 2.18%
6/14/2019⁽⁵⁾
625,000 1.0% 616,280
10/30/2027
577,472
LIBOR
2.00% 2.10%
10/30/2020⁽⁵⁾
Term Loan B-4

5/3/2021
800,000 1.0% 800,000
5/3/2028
746,000
LIBOR
2.00% 2.10%
Total
Total
$ 1,775,000 $ 1,738,884 $ 1,517,195 $ 2,375,000 $ 2,328,756 $ 2,028,829

⁽¹⁾
Payable in equal quarterly installments (expressed as a percentage of the original ~~aggregate~~ principal ~~amount)~~amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions)., except for the Term Loan B-4, which has a 1.0% prepayment premium for any prepayment within six months of the funding date of the Term Loan B-4 in connection with certain repricing transactions.
⁽²⁾
The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on our Total Net Leverage ~~Ratio.~~Ratio (as defined in the Third Amended and Restated Credit Agreement). All other applicable margins are fixed.
⁽³⁾
On May 8, 2019, ~~$250~~$250.0 million was drawn. On October 1, 2019, an additional ~~$450~~$450.0 million was drawn. On October 30, 2020, the amortization schedule was reset.
⁽⁴⁾
Per annum amortization rates for years one through five following the ~~closing~~October 30, 2020 refinancing date are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively.
⁽⁵⁾
On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn.

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Table of Contents

~~Unamortized~~Senior Notes
In November 2020, we completed the offering of $650.0 million aggregate principal amount of Senior Notes due 2030. The Senior Notes bear interest at a rate of 4.00% per annum payable semi-annually in arrears on May 15th and November 15th of each year, beginning on May 15, 2021. The Senior Notes are required to be guaranteed on a senior unsecured basis by each of our existing and future wholly owned domestic subsidiaries that guarantees our obligations under our Senior Credit Facilities or that guarantees certain capital markets debt ~~issuance~~of ours or a guarantor in an aggregate principal amount in excess of $250.0 million.
Convertible Notes
In March 2021, we completed the Convertible Notes Offering of $575.0 million aggregate principal amount of 2026 Notes and $345.0 million aggregate principal amount of 2028 Notes. The net proceeds from the Convertible Notes Offering were $895.2 million after deducting initial purchaser discounts and other offering costs ~~consisted~~and expenses. We used the net proceeds from the Convertible Notes Offering for general corporate purposes, including to finance a portion of the ~~following (in thousands):~~purchase price in connection with the Hargray Acquisition. The Convertible Notes are senior unsecured obligations of ours and are guaranteed by our wholly owned domestic subsidiaries that guarantee the Senior Credit Facilities or that guarantee certain of our Notes in an aggregate principal amount in excess of $250.0 million. The 2026 Notes do not bear regular interest, and the principal amount of the 2026 Notes do not accrete. The 2028 Notes bear interest at a rate of 1.125% per annum. Interest on the 2028 Notes is payable semiannually in arrears on March 15th and September 15th of each year, beginning on September 15, 2021, unless earlier repurchased, converted or redeemed. The 2026 Notes are scheduled to mature on March 15, 2026, and the 2028 Notes are scheduled to mature on March 15, 2028. The initial conversion rate for each of the 2026 Notes and the 2028 Notes is 0.4394 shares of our common stock per $1,000 principal amount of 2026 Notes and 2028 Notes, as applicable (equivalent to an initial conversion price of $2,275.83 per share of common stock). The initial conversion price of each of the 2026 Notes and the 2028 Notes represents a premium of 25.0% over the last reported sale price of $1,820.83 per share of our common stock on March 2, 2021. The Convertible Notes are convertible at the option of the holders. The method of conversion into cash, shares of our common stock or a combination thereof is at our election.

June 30, 2020

December 31, 2019

Revolving Credit Facility portion:

Other noncurrent assets
$ 2,149 $ 2,427
Term loans portion:

Long-term debt (contra account)
16,208 18,142
Total
$ 18,357 $ 20,569
Other Debt-Related Information
We were in compliance with all debt covenants as of June 30, 2021.

We recorded debt issuance cost amortization of ~~$1.1~~$1.8 million and ~~$1.3~~$1.1 million for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$2.2~~$2.9 million and ~~$2.4~~$2.2 million for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, within interest expense in the condensed consolidated statements of operations and comprehensive income.

~~We were in compliance~~Unamortized debt issuance costs consisted of the following (in thousands):

June 30, 2021

December 31, 2020

Revolving Credit Facility portion:

Other noncurrent assets
$ 2,915 $ 3,249
Term loans and Notes portion:

Long-term debt (contra account)
30,921 21,897
Total
$ 33,836 $ 25,146
Unamortized debt discount associated with ~~all debt covenants~~the Convertible Notes was $22.8 million as of June 30, ~~2020.~~ 2021. The Company recorded debt discount amortization of $1.1 million and $1.4 million for the three and six months ended June 30, 2021 within interest expense in the condensed consolidated statements of operations and comprehensive income.

~~During the first quarter of 2019, we entered into~~We are party to two interest rate swap agreements ~~in order~~ to convert our 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, ~~effective in March 2019,~~ with respect to a notional amount of ~~$850~~$850.0 million, our monthly payment obligation is determined at a fixed base rate of 2.653%. Under the second swap agreement, ~~effective in June 2020,~~ with respect to a notional amount of ~~$350~~$350.0 million, our monthly payment obligation 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 each may be terminated prior to the scheduled maturity at our election or that of the financial institution counterparty under the terms provided in each swap agreement. We recognized losses of ~~$5.0~~$7.8 million and ~~$0.4~~$5.0 million on interest rate swaps during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~$7.0~~$15.5 million and ~~$0.5~~$7.0 million during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, which were reflected inwithin interest expense ~~within~~in the condensed consolidated statements of operations and comprehensive income.

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Table of Contents
In ~~May 2020,~~March 2021, we ~~completed the Public Offering~~terminated $900.0 million of ~~287,500 shares of our common stock for total net proceeds of $469.8 million, after deducting underwriting discounts and offering expenses. We used~~definitive bridge loan commitments that were originally received to finance a portion of the net proceeds to repay in full our outstanding borrowings of $100 million under the Revolving Credit Facility in May 2020 and for the Valu-Net and Wisper transactions. We expect to use the remainder of the proceeds for general corporate purposes, including for acquisitions and strategic investments.Hargray Acquisition purchase price.

Refer to notes 910 and 1112 to our audited consolidated financial statements included in the ~~2019~~2020 Form 10-K and notes 78 and 89 to the condensed consolidated financial statements in this Quarterly Report on Form 10-Q for further details regarding our financing activity, outstanding debt and interest rate swaps.

Capital Expenditures

We have significant ongoing capital expenditure requirements as well as capital enhancements associated with acquired operations, including rebuilding low capacity markets; reclaiming bandwidth from analog video services; implementing 32-channel bonding; deploying DOCSIS 3.1; converting back office functions such as billing, accounting and service provisioning; migrating products to legacy Cable One platforms; and expanding our high-capacity fiber network. Capital expenditures are funded primarily by cash on hand and cash flows from operating activities.

Our capital expenditures by category for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows (in thousands):

Six Months Ended June 30,

Six Months Ended June 30,

2020

2019

2021

2020

Customer premise equipment(1)
$ 34,227 $ 24,854 $ 36,856 $ 34,227
Commercial(2)
22,457 11,519 21,233 22,457
Scalable infrastructure(3)
23,093 21,715 25,398 23,093
Line extensions(4)
9,522 11,964 18,904 9,522
Upgrade/rebuild(5)
27,789 13,394 36,898 27,789
Support capital(6)
26,328 27,042 21,876 26,328
Total
$ 143,416 $ 110,488 $ 161,165 $ 143,416
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⁽¹⁾
Customer premise equipment includes costs incurred at customer locations, including installation costs and customer premise equipment (e.g., modems and set-top boxes).
⁽²⁾
Commercial includes costs related to securing business services customers and PSUs, including small and medium-sized businesses and enterprise customers.
⁽³⁾
Scalable infrastructure includes costs not related to customer premise equipment to secure growth of new customers and PSUs or provide service enhancements (e.g., headend equipment).
⁽⁴⁾
Line extensions include network costs associated with entering new service areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment, make-ready and design engineering).
⁽⁵⁾
Upgrade/rebuild includes costs to modify or replace existing fiber/coaxial cable networks, including betterments.
⁽⁶⁾
Support capital includes costs associated with the replacement or enhancement of non-network assets due to technological and physical obsolescence (e.g., non-network equipment, land, buildings and vehicles) and capitalized internal labor costs not associated with customer installation activities.

Contractual Obligations and Contingent Commitments

As of June 30, ~~2020,~~2021, except for the $11.0 million increase to the letters of credit ~~totaling $22.0 million~~ issued on behalf of Wisper to guarantee its performance obligations under an FCC broadband funding program and additional debt obligations disclosed above, there have been no material changes to the contractual obligations and contingent commitments previously disclosed in the ~~2019~~2020 Form 10-K.

Off-Balance Sheet Arrangements

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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Table of Contents
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.

~~Changes in Critical Accounting Policies and Estimates~~
~~Goodwill.~~ We test goodwill for impairment at the reporting unit level, which was historically established at the geographic division level. We reevaluate the determination of our reporting units used to test for impairment periodically or whenever events or substantive changes in circumstances occur. Effective in the second quarter of 2020, as a result of progress made in our staged rebranding initiative and the further alignment of service offerings and product pricing of recently acquired operations with our legacy business, we reevaluated the basis of our goodwill reporting units and identified a single goodwill reporting unit based on the chief operating decision maker’s current performance monitoring and resource allocation process and the similarity of our geographic divisions.
~~Indefinite~~~~-Lived Intangible Assets.~~ The unit of account for our franchise agreements was historically established at the geographic division level. We reevaluate the unit of account used to test for impairment periodically or whenever events or substantive changes in circumstances occur to ensure impairment testing is performed at an appropriate level. Effective in the second quarter of 2020, as a result of progress made in our staged rebranding initiative and the further alignment of service offerings and product pricing of recently acquired operations with our legacy business, we reevaluated the basis of our franchise agreements unit of account for use in impairment assessments and identified a single unit of account for franchise agreements based on a reevaluation of our current operations and the use of our assets.
~~Except as disclosed above, there~~There have been no material changes to our critical accounting policy and estimate disclosures described in our ~~2019~~2020 Form 10-K.

ITEM 3.     ~~QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK~~
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential loss arising from changes in market rates and prices. There have been no material changes to the market risk disclosures described in the ~~2019~~2020 Form ~~10-K.~~
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~~Table of Contents~~
~~ITEM 4.     CONTROLS AND PROCEDURES~~10-K other than as set forth below.

On May 3, 2021, we obtained the $800.0 million aggregate principal amount Term Loan B-4 in connection with the closing of the Hargray Acquisition. Based on the principal outstanding under the Senior Credit Facilities with exposure to LIBOR at June 30, 2021 and December 31, 2020, assuming, hypothetically, that the LIBOR applicable to the Senior Credit Facilities was 100 basis points higher, our annual interest expense would have increased $11.3 million and $3.4 million, respectively.
As of June 30, 2021, we had $575.0 million aggregate principal amount of 2026 Notes outstanding and $345.0 million aggregate principal amount of 2028 Notes outstanding. Although the Convertible Notes are based on a fixed rate, changes in interest rates could impact the fair market value of such notes. As of June 30, 2021, the fair market value of the Convertible Notes was $927.6 million.
ITEM 4.
CONTROLS AND PROCEDURES
Disclosure Controls and ~~Pro~~~~cedures~~Procedures

The Company’s management is responsible for establishing and maintaining adequate disclosure controls and ~~procedures.~~procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed or 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 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 June 30, ~~2020~~2021 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 June 30, ~~2020.~~2021.

Changes in Internal Control Over Financial Reporting

~~There~~As a result of the Hargray Acquisition on May 3, 2021, the Company has implemented internal controls over financial reporting to include consolidation of Hargray and acquisition-related accounting and disclosures. The Hargray 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 Hargray operations.
The Company implemented a new ERP system in the second quarter of 2021. The implementation has required significant investments of time, money and resources. Furthermore, the implementation has resulted in changes to many of the Company’s existing operational, financial and administrative business processes, including, but not limited to, the Company’s budgeting, purchasing, receiving, provisioning, servicing, accounting and reporting processes. The new ERP system has required both the implementation of new internal controls and changes to existing internal control frameworks and procedures.
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 June 30, ~~2020~~2021 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Table of Contents

PART II: OTHER INFORMATION

ITEM 1.     ~~LEGAL PROCEEDINGS~~
LEGAL PROCEEDINGS

None.

ITEM 1A.  ~~RISK FACTORS~~
RISK FACTORS

Except as set forth below, there have been no material changes to the risk factors previously disclosed in the ~~2019~~2020 Form 10-K.

Risks Relating to Our Business

~~The COVID-19 pandemic has impacted~~Implementation of our ~~operations and adversely affect~~ed ~~our~~new ERP system could disrupt business ~~financial results and financial condition,~~ operations.~~and~~ ~~the~~ ~~duration and~~ ~~extent~~ to ~~which~~ ~~it will continue to do so~~ ~~is uncertain and difficult to predict.~~
The COVID-19 pandemic has significantly impacted the United States and other countries, which has resulted in international, Federal, state and local governments implementing numerous measures to try to reduce the spread of the virus that causes COVID-19, including travel restrictions, quarantines, shelter in place or total lock-down orders and business limitations and shutdowns.

We represent a part of the United States’ critical infrastructure, and our continued operation is essential to connectivity services that are vital during the COVID‐19 pandemic. At the same time, the spread of the COVID-19 pandemic has caused us to modify our operations, including restricting our technicians from entering customer homes and businesses; closing or limiting access to local offices and our corporate headquarters for associates, customers and others; limiting non-essential travel for associates; instituting an expanded work-from-home program, including enhancing our technological capabilities to support such efforts; implementing “purpose pay” to provide a 25% premium to base pay for certain associates who are required to leave their homes to perform their essential job functions; establishing health protocols and providing personal protective equipment to protect our associates, customers and others; temporarily discontinuing charging data overage fees, waiving late charges and suspending disconnection of data services for residential and business customers who are unable to pay due to disruptions caused by the pandemic; and introducingimplemented a new ~~lower-cost residential data plan. We have taken and may take further actions~~ERP system in the second quarter of 2021. The implementation has required ~~by governmental authorities or that we determine are prudent to support the well-being of our associates, customers, suppliers, business partners and others.~~
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As a result of the COVID-19 outbreak and the related responses by us and from governmental authorities, our operations have been impacted as described above, which has resulted, and we anticipate will continue to result, in various negative impacts associated with the pandemic, such as reduced revenues from data overage fees, late charges, reconnect fees, and advertising and business services as well as increased expenses, which have combined to suppress Adjusted EBITDA for the quarter ended June 30, 2020. See “~~Management’s Discussion and Analysis of Financial Condition and Results of Operation~~~~s — COVID-19 Update~~” in this Quarterly Report on Form 10-Q for additional information. Additionally, our business, financial results and financial condition have been and could be further adversely affected in a number of ways, which may include, but is not limited to, the following:
●
~~further disruptions to our regular, ongoing operations and restrictions on our sales and marketing efforts, especially related to business services;~~
●
~~interruptions to our engineering, design and implementation of plant and infrastructure as well as other important business activities;~~
●
limitations on associate resources and availability, including in our call centers and among our technicians, due to health protocols, sickness, government restrictions, the desire of associates to avoid contact with large groups of people, school closures or other factors, which may further constrain capacity to respond to the increased demand for our products and services;
●
~~the potential further diversion of senior management’s attention in the event that key associates contract COVID-19 and, consequently, have limited ability or become unable to work;~~
●
~~interruptions or delays receiving and limited availability of necessary hardware, software and operational supplies, equipment and support;~~
●
possible further reductions of revenues, Adjusted EBITDA, and/or Adjusted EBITDA margin and increased expenses as well as greater difficulty in collecting customer receivables resulting from, among other things, our actions to assist customers and support our associates during the COVID-19 crisis;
●
~~a fluctuation in interest rates that could result from market uncertainties;~~
●
an increase in the cost of or the difficulty to obtain debt or equity financing, which could affect our financial condition or our ability to fund operations or future acquisition or investment opportunities;
●
~~a further delay in the implementation of our new ERP system;~~
●
~~potential legislative or regulatory efforts to impose new requirements on our data services;~~
●
~~changes to the carrying value of our goodwill and intangible assets; and~~
●
an increase in regulatory restrictions or continued market volatility that could hinder our ability to execute our business strategies, including acquisitions and strategic investments, as well as negatively impact our stock price.
Additionally, the COVID-19 pandemic could negatively affect our internal control over financial reporting, including as a result of a portion of our personnel working from home. Accordingly, new processes, procedures and controls have been and may continue to ~~be required to respond to changes in our business environment.~~
The potential effects of the COVID-19 pandemic may also impact many of our other risk factors previously disclosed in the 2019 Form 10-K and/or the other risk factors included in this Quarterly Report on Form 10-Q. The degree to which the pandemic impacts our operations, business, financial results and financial condition will depend on future developments, which are highly uncertain, continuously evolving and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume.
32

~~Table of Contents~~
~~Implementation of o~~ur ~~new ERP~~ ~~system could disrupt business operations.~~
~~We are planning to implement our new ERP system by the summer of 2021. The implementation requires~~require significant investments of time, money and resources and may result in the diversion of senior management’s attention from our ongoing operations. Furthermore, the implementation ~~will~~has resulted and may continue to result in changes to many of our existing operational, financial and administrative business processes, including, but not limited to, our budgeting, purchasing, receiving, provisioning, servicing, accounting and reporting processes. The new ERP system ~~will~~has required and may continue to require both the implementation of new internal controls and changes to existing internal control frameworks and procedures. If ~~additional unexpected delays,~~ technical problems or other significant issues arise in connection with the implementation ~~including as a result~~or operation of the ~~COVID-19 pandemic,~~new ERP system, it could have a material negative impact on our operations, business, financial results and financial condition.

Risks Relating to Our ~~Common Stock~~Indebtedness
We have incurred substantial indebtedness, including in connection with various acquisitions, and the ~~Securities Market~~degree to which we are now leveraged may have a material adverse effect on our business, financial condition or results of operations and cash flows.

~~Certain provisions~~We currently have a substantial amount of indebtedness. This substantial amount of indebtedness could limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, strategic investments, debt service requirements, stock repurchases or other purposes. It may also increase our vulnerability to adverse economic, market and industry conditions (including the impact of the COVID-19 pandemic), limit our flexibility in planning for, or reacting to, changes in our ~~Amended~~business operations or to our industry overall, and ~~Restated Certificate of Incorporation and Amended and Restated By-laws and Delaware law may discourage takeovers and the concentration of ownership of~~place us at a disadvantage in relation to our ~~common stock will affect the voting results of matters submitted for stockholder approval.~~competitors that have lower debt levels.

~~Several provisions~~Our ability to make payments on and to refinance our indebtedness, including the debt incurred in connection with acquisitions, as well as any future debt that we may incur, will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors, some of which are beyond our ~~Amended and Restated Certificate~~control.
Our inability to raise funds necessary to repurchase, or settle conversions of, Incorporation, Amended and Restated By-laws and Delaware law may discourage, delay or prevent a merger or acquisition that is opposed by our Board or certain stockholders holding a significant percentageeither series of the ~~voting power of~~Convertible Notes, upon a fundamental change as described in the applicable Convertible Notes Indenture, may lead to defaults under such indenture and under agreements governing our ~~outstanding voting stock. These include provisions that:~~existing or future indebtedness.

●
prior to the full declassification of our board following our annual meeting of stockholders to be held in 2023, divide our Board into three classes of directors, standing for election on a staggered basis, such that only approximately one-third of the directors constituting our Board may change each year;
●
~~do not permit our stockholders to act~~If we repurchase the Convertible Notes for cash, which holders may require upon a fundamental change as described in the applicable Convertible Note Indenture, or settle such Convertible Notes by cash or by ~~written consent and require that stockholder action must take place at an annual or special meeting of our stockholders;~~
●
~~provide that only our Chief Executive Officer and~~ a ~~majority of our directors, and not our stockholders, may call a special meeting of our stockholders;~~
●
~~require the approval of our Board or the affirmative vote of stockholders holding at least 66 2/3% of the voting power of our capital stock to amend our Amended and Restated By-laws; and~~
●
~~limit our ability to enter into business~~ combination ~~transactions with certain stockholders.~~
~~These and other provisions~~ of ~~our Amended~~cash and Restated Certificate of Incorporation, Amended and Restated By-laws and Delaware law may discourage, delay or prevent certain types of transactions involving an actual or a threatened acquisition or change in control of our Company, including unsolicited takeover attempts, even though the transaction may offer our stockholders the opportunity to sell their shares of our common stock atin the event a ~~price above the prevailing market price.~~
Our Amended and Restated Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ abilityholder elects to ~~obtain~~convert their Convertible Notes following a ~~favorable judicial forum for disputes with us or our directors, officers, associates or stockholders.~~
~~Our Amended and Restated Certificate of Incorporation provides that, subject to limited exceptions, the Court of Chancery of the State of Delaware~~fundamental change, we will be the sole and exclusive forum for any (i) derivative action or proceeding brought on behalf of our Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer or associate of the Companyrequired to make cash payments with respect to the ~~Company~~Convertible Notes being converted or the Company’s stockholders, (iii) action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law (the “DGCL”) or (iv) action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of our capital stock shall be deemed to have notice of and to have consented to the provisions of our Amended and Restated Certificate of Incorporation described above. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other associates, which may discourage such lawsuits against us and our directors, officers and associates. Alternatively, if a court were to find these provisions of our Amended and Restated Certificate of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business and financial condition.repurchased.

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However, we may not have enough available cash or be able to obtain financing at the time we are required to make purchases of the Convertible Notes being surrendered or converted. In addition, our ability to repurchase the Convertible Notes or to pay cash upon conversion of Convertible Notes is limited by the agreements governing our existing indebtedness and may also be limited by law, by regulatory authority or by agreements that will govern our future indebtedness. Our failure to repurchase Convertible Notes at a time when the repurchase is required by the applicable Convertible Notes Indenture or to pay cash payable on future conversions of the Convertible Notes as required by such indenture would constitute a default under such indenture. A default under the applicable Convertible Notes Indenture or the fundamental change itself could also lead to a default under agreements governing our existing or future indebtedness (including the Third Amended and Restated ~~Certificate~~Credit Agreement and the Senior Notes Indenture).
The conditional conversion feature of ~~Incorporation includes provisions limiting~~either series of the ~~personal liability~~Convertible Notes, if triggered, may adversely affect our financial condition and operating results.
In the event the conditional conversion feature of either series of the Convertible Notes is triggered, holders of the applicable Convertible Notes will be entitled to convert such Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, we initially elect to satisfy our conversion obligations by combination settlement. In addition, in the future, we may elect to settle all of our ~~directors for breaches~~conversion obligation through the payment of ~~fiduciary duty~~cash, which could adversely affect our liquidity. In addition, even if holders do not elect to convert the Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the ~~DGCL.~~outstanding principal of the Convertible Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.
~~Our Amended and Restated Certificate~~Conversion of ~~Incorporation contains a provision permitted under~~either series of the ~~DGCL relating~~Convertible Notes will dilute the ownership interest of existing stockholders or may otherwise depress the price of our common stock.
The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the ~~liability~~extent we deliver shares of ~~directors. This provision eliminates a director’s personal liability~~our common stock upon conversion of any of the Convertible Notes. The Convertible Notes may from time to time in the ~~fullest extent permitted~~future be convertible at the option of their holders prior to their scheduled terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by market participants because the ~~DGCL for monetary damages resulting from a breach~~conversion of ~~fiduciary duty; provided that such provision will not eliminate~~the Convertible Notes could be used to satisfy short positions or ~~limit a director’s liability:~~anticipated conversion of the Convertible Notes into shares of our common stock could depress the price of our common stock.
42

Table of Contents

●ITEM 2.
~~for any breach of the director’s duty of loyalty;~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
●
~~for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law;~~
●
~~under Section 174 of the DGCL (including for unlawful dividends); or~~
●
~~for any transaction from which the director derives an improper personal benefit.~~
The principal effect of the limitation on liability provision is that a stockholder will be unable to prosecute an action for monetary damages against a director unless the stockholder can demonstrate a basis for liability for which indemnification is not available under the DGCL. This provision, however, should not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director’s fiduciary duty. This provision will not alter a director’s liability under federal securities laws. The inclusion of this provision in our Amended and Restated Certificate of Incorporation may discourage or deter stockholders or management from bringing a lawsuit against directors for a breach of their fiduciary duties, even though such an action, if successful, might otherwise have benefited us and our stockholders.
~~ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~

Certain information relating to common stock repurchases by the Company and any affiliated purchasers within the meaning of Rule 10b-18(a)(3) under the Exchange Act during the three months ended June 30, ~~2020~~2021 were as follows (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⁾

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

April 1 to 30, 2020⁽²⁾
17 $ 1,574.06 - $ 145,081
May 1 to 31, 2020
- $ - - $ 145,081
June 1 to 30, 2020
- $ - - $ 145,081
Total
17 $ 1,574.06 -
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⁾

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

April 1 to 30, 2021⁽²⁾
64 $ 1,829.28 - $ 145,081
May 1 to 31, 2021
- $ - - $ 145,081
June 1 to 30, 2021
- $ - - $ 145,081
Total
64 $ 1,829.28 -

⁽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 are based on a number of factors, including share price and business and market conditions.
⁽²⁾
Represents shares withheld from associates to satisfy estimated tax withholding obligations in connection with the vesting of restricted stock and/or 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 the Company’s common stock on the applicable vesting or exercise measurement date.

ITEM 3.     ~~DEFAULTS UPON SENIOR SECURITIES~~
DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5.
OTHER INFORMATION
Not applicable.
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Table of Contents

~~ITEM 4.     MINE SAFETY DISCLOSURES~~
~~Not applicable.~~
~~ITEM 5.     OTHER INFORMATION~~
~~Not applicable.~~
ITEM 6.     ~~EXHIBITS~~
EXHIBITS

Exhibit
NNumber~~umber~~
Description

~~3.1~~4.1
First Supplemental Indenture, dated as of June 30, 2021, to that certain Indenture, dated as of November 9, 2020, by and among Cable One, Inc., the guarantors from time to time party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 4.00% Senior Notes due 2030.*
4.2
First Supplemental Indenture, dated as of June 30, 2021, to that certain Indenture, dated as of March 5, 2021, by and among Cable One, Inc., the guarantors from time to time party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 0.000% Convertible Senior Notes due 2026.*
4.3
First Supplemental Indenture, dated as of June 30, 2021, to that certain Indenture, dated as of March 5, 2021, by and among Cable One, Inc., the guarantors from time to time party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee, relating to the 1.125% Convertible Senior Notes due 2028.*
10.1
Amendment No. 2, dated as of May 3, 2021, to the Third Amended and Restated ~~Certificate~~Credit Agreement, dated as of ~~Incorporation of~~October 30, 2020, among Cable One, Inc., certain of its wholly owned subsidiaries party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto (incorporated herein by reference to Exhibit ~~3.1~~10.1 to the Current Report on Form 8-K of Cable One, Inc. filed on May ~~18, 2020)~~3, 2021).
~~10.1~~
Form of Non-Employee Director Restricted Stock Unit Award Agreement for annual equity grants beginning in 2020.*
~~10.2~~
Form of Non-Employee Director Restricted Stock Unit Award Agreement for grants in lieu of annual cash fees beginning in 2020.*

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
Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH
Inline XBRL Taxonomy Extension Schema Document.*
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document.*
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document.*
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document.*
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document.*

104
The cover page of this Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2020,~~2021, formatted in Inline XBRL (included within the Exhibit 101 attachments).
__________
* Filed herewith.
** Furnished herewith.

3544

Table of Contents

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: August ~~6, 2020~~9, 2021

By:
/s/ Steven S. Cochran
Name:
Steven S. Cochran
Title:
~~Senior Vice President and~~
Chief Financial Officer

Date: August ~~6, 2020~~9, 2021

3645

	Preliminary Purchase Price Allocation
Assets Acquired
Cash and cash equivalents	$	17,652
Accounts receivable		17,991
Prepaid and other current assets		8,006
Property, plant and equipment		457,158
Intangible assets		1,592,000
Other noncurrent assets		4,636
Total Assets Acquired		2,097,443

Liabilities Assumed
Accounts payable and accrued liabilities		36,457
Deferred revenue (short-term portion)		8,462
Current portion of long-term debt (finance leases)		1,375
Long-term debt (finance leases)		2,912
Deferred income taxes		437,725
Other noncurrent liabilities		6,974
Total Liabilities Assumed		493,905

Net assets acquired		1,603,538
Purchase price consideration⁽¹⁾		2,117,866
Goodwill recognized	$	514,328

	Fair Value		Useful Life (in years)
Customer relationships	$	472,000		13.7
Trademark and trade name	$	10,000		4.2
Franchise agreements	$	1,110,000	Indefinite

	(Unaudited)
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues	$	428,947	$	388,609	$	845,909	$	771,955
Net income	$	44,062	$	53,177	$	113,603	$	111,359
Net income per common share:
Basic	$	7.33	$	9.12	$	18.89	$	19.32
Diluted	$	7.07	$	8.71	$	18.08	$	18.39

	Goodwill
Balance at December 31, 2018	$	172,129
Clearwave acquisition goodwill recognized		185,885
Fidelity acquisition goodwill recognized		71,583
Balance at December 31, 2019	$	429,597

	Purchase Price Allocation
Assets Acquired
Cash and cash equivalents	$	1,913
Accounts receivable		1,294
Prepaid and other current assets		311
Property, plant and equipment		120,472
Intangible assets		89,700
Other noncurrent assets		3,533
Total Assets Acquired	$	217,223

Liabilities Assumed
Accounts payable and accrued liabilities	$	2,128
Deferred revenue, short-term portion		4,322
Deferred income taxes		32,771
Other noncurrent liabilities		5,057
Total Liabilities Assumed	$	44,278

Net assets acquired	$	172,945
Purchase price consideration		358,830
Goodwill recognized	$	185,885

	Preliminary Purchase Price Allocation
Assets Acquired
Cash and cash equivalents	$	4,869
Accounts receivable		3,691
Prepaid and other current assets		1,756
Property, plant and equipment		173,904
Intangible assets		288,000
Other noncurrent assets		1,895
Total Assets Acquired	$	474,115

Liabilities Assumed
Accounts payable and accrued liabilities	$	8,795
Deferred revenue, short-term portion		1,796
Other noncurrent liabilities		3,715
Total Liabilities Assumed	$	14,306

Net assets acquired	$	459,809
Purchase price consideration		531,392
Goodwill recognized	$	71,583

	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30, 2021				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Residential
Residential:
Data	$	164,015	$	132,824	$	319,005	$	262,635	$	207,648	$	164,015	$	391,253	$	319,005
Video		87,328		84,033		172,650		167,836		87,240		87,328		163,257		172,650
Voice		12,120		10,705		24,547		20,329		12,112		12,120		22,589		24,547
Business services		58,469		49,759		116,331		96,903		76,616		58,469		136,978		116,331
Other		6,371		8,329		16,966		16,552		18,133		6,371		28,934		16,966
Total revenues	$	328,303	$	285,650	$	649,499	$	564,255	$	401,749	$	328,303	$	743,011	$	649,499

Franchise and other regulatory fees	$	6,615	$	6,240	$	12,963	$	10,337	$	8,110	$	6,615	$	14,262	$	12,963
Deferred commission amortization	$	1,338	$	942	$	2,699	$	1,942	$	1,265	$	1,338	$	2,733	$	2,699

	June 30, 2020			December 31, 2019
Trade receivables	$	46,092		$	33,467
Other receivables		4,658			6,186
Less: Allowance for credit losses		(9,399	)		(1,201	)
Total accounts receivable, net	$	41,351		$	38,452

	June 30, 2020		December 31, 2019
Operating lease right-of-use assets	$	14,523	$	16,924
Equity investments⁽¹⁾		34,974		206
Deferred commissions		5,339		5,042
Note and other receivables⁽²⁾		7,288		-
Software implementation costs		4,569		-
Debt issuance costs		2,149		2,427
All other noncurrent assets		3,682		2,495
Total other noncurrent assets	$	72,524	$	27,094

⁽¹⁾	~~Balance at~~ ~~June 30, 2020~~ ~~includes a $27.2 million equity investment in a fixed wireless provider made during the~~ ~~three~~ ~~months ended~~ ~~June 30, 2020.~~
⁽²⁾	~~Balance at~~ ~~June 30, 2020~~ ~~represents a note and other receivables issued to Wisper ISP, LLC, a wireless internet service provider (“Wisper”). In~~ ~~July 2020,~~ ~~the Company closed an equity investment in Wisper for total consideration of $25.3 million. Refer to note~~ 7 ~~for details on this transaction.~~

⁽¹⁾	Consists of the unfunded portion of the Company’s equity investment in Wisper ISP, LLC (“Wisper”). Refer to note 5 for details on this transaction.
⁽²⁾	Consists of amounts due to Hargray in connection with transition services provided as part of the Anniston Exchange (as defined in note 5). Refer to note 5 for details on this transaction.

	Ownership Percentage		June 30, 2021		December 31, 2020
Cost Method Investments
Hargray^{(1), (2)}		~15%	$	0	$	113,165
Nextlink		<10%		27,245		27,245
Others		<10%		14,619		10,066
Total cost method investments			$	41,864	$	150,476

Equity Method Investments
MBI⁽³⁾		45.0%	$	627,058	$	630,679
Wisper		40.4%		28,605		26,626
Total equity method investments			$	655,663	$	657,305

Total equity investments			$	697,527	$	807,781

^(5.1)	~~PROPERTY, PLANT AND EQUIPMENT~~Upon initial investment, the Company calculated the fair value of Hargray’s total enterprise value using a hybrid of both the discounted cash flow method of the income approach and the guideline public company method of the market approach. Significant assumptions used in the valuation include projected revenue growth rates, customer attrition rates, future EBITDA margins, future capital expenditures and an appropriate discount rate. The enterprise value less Hargray’s debt and unamortized debt issuance costs was multiplied by Cable One’s minority equity interest percentage to determine the Hargray investment’s carrying value. The resulting non-cash gain was calculated as the difference between this carrying value and the book value of the Anniston System’s net assets, including its proportionate share of the Company’s franchise agreement and goodwill assets. The approximately 15% equity interest in Hargray as of December 31, 2020 was on a fully diluted basis.
⁽²⁾	As a result of the Company’s May 3, 2021 acquisition of the remaining equity interests in Hargray that it did not already own, Hargray’s assets and liabilities were separately reflected within the Company’s condensed consolidated balance sheet as of June 30, 2021 and the existing cost method investment was eliminated, resulting in a $33.4 million non-cash gain recognized within other income in the condensed consolidated statement of operations and comprehensive income.
⁽³⁾	The Company holds a call option to purchase all but not less than all of the remaining equity interests in MBI that the Company does not already own between January 1, 2023 and June 30, 2024. If the call option is not exercised, certain investors in MBI hold a put option to sell (and to cause all members of MBI other than the Company to sell) to the Company all but not less than all of the remaining equity interests in MBI that the Company does not already own between July 1, 2025 and September 30, 2025. The call and put options (collectively referred to as the “MBI Net Option”) are measured at fair value using Monte Carlo simulations that rely on assumptions around MBI’s equity value, MBI’s and the Company’s equity volatility, MBI’s and the Company’s EBITDA volatility, risk adjusted discount rates and the Company’s cost of debt, among others. The final MBI purchase price allocation resulted in $630.7 million being allocated to the MBI equity investment and $19.7 million and $75.5 million being allocated to the call and put options, respectively. The MBI Net Option is remeasured at fair value on a quarterly basis. The carrying value of the MBI Net Option liability was $89.1 million and $73.3 million as of June 30, 2021 and December 31, 2020, respectively, and was included within other noncurrent liabilities in the condensed consolidated balance sheets. Refer to note 10 for further information on the MBI Net Option.

Year Ending December 31,		Amount		Amount
2020 (remaining six months)		$	22,159
2021			39,059
2021 (remaining six months)				$	45,020
2022	2022		34,314		87,292
2023	2023		27,845		76,065
2024	2024		23,083		69,716
2025					64,785
Thereafter	Thereafter		158,575		400,610
Total	Total	$	305,035	$	743,488

Instrument		Draw Date	Original Principal		Amortization Per Annum⁽¹⁾		Outstanding Principal		Final Maturity Date	Balance Due Upon Maturity		Benchmark Rate	Applicable Margin⁽²⁾		Interest Rate		Draw Date	Original Principal		Amortization Per Annum⁽¹⁾		Outstanding Principal		Final Maturity Date	Balance Due Upon Maturity		Benchmark Rate	Applicable Margin⁽²⁾		Interest Rate
Term Loan A-2		5/8/2019	$	700,000		Varies⁽⁴⁾	$	685,259	5/8/2024	$	513,945	LIBOR		1.50%		1.68%	5/8/2019⁽³⁾	$	700,000	Varies⁽⁴⁾		$	668,101	10/30/2025	$	476,607	LIBOR		1.75%		1.85%
		10/1/2019⁽³⁾															10/1/2019⁽³⁾
Term Loan B-1		5/1/2017		500,000		1.0%		485,000	5/1/2024		466,250	LIBOR		1.75%		1.93%
Term Loan B-2		1/7/2019		250,000		1.0%		246,875	1/7/2026		233,125	LIBOR		2.00%		2.18%	1/7/2019		250,000		1.0%		244,375	10/30/2027		228,750	LIBOR		2.00%		2.10%
Term Loan B-3		6/14/2019		325,000		1.0%		321,750	1/7/2026		303,875	LIBOR		2.00%		2.18%	6/14/2019⁽⁵⁾		625,000		1.0%		616,280	10/30/2027		577,472	LIBOR		2.00%		2.10%
																	10/30/2020⁽⁵⁾
Term Loan B-4																	5/3/2021		800,000		1.0%		800,000	5/3/2028		746,000	LIBOR		2.00%		2.10%
Total	Total		$	1,775,000			$	1,738,884		$	1,517,195							$	2,375,000			$	2,328,756		$	2,028,829

⁽¹⁾	Payable in equal quarterly installments (expressed as a percentage of the original ~~aggregate~~ principal ~~amount)~~amount and subject to customary adjustments in the event of any prepayment). All loans may be prepaid at any time without penalty or premium (subject to customary LIBOR breakage provisions)., except for the Term Loan B-4, which has a 1.0% prepayment premium for any prepayment within six months of the funding date of the Term Loan B-4 in connection with certain repricing transactions.
⁽²⁾	The Term Loan A-2 interest rate spread can vary between 1.25% and 1.75%, determined on a quarterly basis by reference to a pricing grid based on the Company’s Total Net Leverage Ratio (as defined in the Third Amended and Restated Credit Agreement). All other applicable margins are fixed.
⁽³⁾	On May 8, 2019, $~~250~~250.0 million was drawn. On October 1, 2019, an additional ~~$450~~$450.0 million was drawn. On October 30, 2020, the amortization schedule was reset.
⁽⁴⁾	Per annum amortization rates for years one through five following the ~~closing~~October 30, 2020 refinancing date are 2.5%, 2.5%, 5.0%, 7.5% and 12.5%, respectively.
⁽⁵⁾	On June 14, 2019, $325.0 million was drawn. On October 30, 2020, an additional $300.0 million was drawn.

	June 30, 2021
	2026 Notes			2028 Notes			Total
Gross carrying amount	$	575,000		$	345,000		$	920,000
Less: Unamortized discount		(14,124	)		(8,640	)		(22,764	)
Less: Unamortized debt issuance costs		(386	)		(244	)		(630	)
Net carrying amount	$	560,490		$	336,116		$	896,606

	Three Months Ended June 30, 2021								Six Months Ended June 30, 2021
	2026 Notes			2028 Notes			Total		2026 Notes			2028 Notes			Total
Contractual interest expense	$	0		$	970		$	970	$	0		$	1,261		$	1,261
Amortization of discount		748			321			1,069		970			416			1,386
Amortization of debt issuance costs		20			9			29		26			12			38
Total interest expense	$	768		$	1,300		$	2,068	$	996		$	1,689		$	2,685

Effective interest rate		0.5	%		1.5	%		0		0.5	%		1.5	%		0

	June 30, 2020						June 30, 2021
	Carrying		Fair		Fair Value		Carrying		Fair		Fair Value
	Amount		Value		Hierarchy		Amount		Value		Hierarchy
Assets:
Cash and cash equivalents:
Money market investments	$	501,949	$	501,949	Level 1		$	412,727	$	412,727	Level 1
Commercial paper	$	122,486	$	122,426	Level 2
Liabilities:
Long-term debt (including current portion):
*Long-term debt (including current portion):*						*Long-term debt (including current portion):*
Term loans	$	1,738,884	$	1,712,801	Level 2		$	2,328,756	$	2,321,264	Level 2
Other noncurrent liabilities (including current portion):
Senior Notes							$	650,000	$	650,780	Level 2
Convertible Notes							$	920,000	$	927,636	Level 2
Interest rate swap liability (including current portion):
Interest rate swaps	$	214,529	$	214,529	Level 2		$	133,434	$	133,434	Level 2
Other noncurrent liabilities:
MBI Net Option							$	89,100	$	89,100	Level 3

	June 30, 2021						December 31, 2020
	Cable One			MBI			Cable One			MBI
Equity volatility		30.0	%		30.0	%		28.0	%		30.0	%
EBITDA volatility		10.0	%		10.0	%		10.0	%		10.0	%
EBITDA risk-adjusted discount rate		5.0	%		6.5	%		5.0	%		6.5	%
Cost of debt		4.0	%		0			4.0	%		0

	Restricted Stock			Weighted Average Grant Date Fair Value Per Share		Restricted Stock			Weighted Average Grant Date Fair Value Per Share
Outstanding as of December 31, 2019		38,873		$	728.77
Outstanding as of December 31, 2020							34,944		$	1,037.83
Granted		11,551		$	1,555.77		10,679		$	2,188.72
Forfeited		(5,303	)	$	718.63		(1,071	)	$	1,319.94
Vested and issued		(10,606	)	$	679.29		(10,949	)	$	844.57
Outstanding as of June 30, 2020		34,515		$	1,018.65
Outstanding as of June 30, 2021							33,603		$	1,457.56

Vested and deferred as of June 30, 2020		6,655		$	618.54
Vested and deferred as of June 30, 2021							5,947		$	750.62

	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, 2019		90,410		$	676.41	$	153.90	$	73,419		7.5
Outstanding as of December 31, 2020													58,365		$	866.54	$	204.29	$	79,446		7.3
Granted		3,500		$	1,540.92	$	373.12	$	-		9.8		1,500		$	2,227.72	$	584.38	$	-		9.5
Exercised		(22,065	)	$	514.41	$	111.62	$	25,058		-		(3,674	)	$	746.04	$	177.22	$	3,870		-
Forfeited		(6,891	)	$	846.81	$	199.27						(1,601	)	$	834.92	$	201.50
Outstanding as of June 30, 2020		64,954		$	759.94	$	175.26	$	65,922		7.4
Outstanding as of June 30, 2021													54,590		$	912.97	$	216.64	$	55,053		6.9

Exercisable as of June 30, 2020		28,573		$	586.79	$	131.19	$	33,946		6.4
Exercisable as of June 30, 2021													30,037		$	666.56	$	152.28	$	37,434		5.9

	Inputs
Expected volatility		~~25.90~~27.37	%
Risk-free interest rate		~~0.46~~0.54	%
Expected term (in years)		6.25
Expected dividend yield		~~0.58~~0.45	%

		Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended June 30,				Six Months Ended June 30,
		2020		2019		2020		2019		2021		2020		2021		2020
Numerator:
Net income		$	62,540	$	36,395	$	131,866	$	75,134
Net income - basic										$	106,153	$	62,540	$	174,735	$	131,866
Add: Convertible Notes interest expense, net of tax											1,551		0		2,014		0
Net income - diluted										$	107,704	$	62,540	$	176,749	$	131,866

Denominator:
Weighted average common shares outstanding - basic			5,831,796		5,673,669		5,764,850		5,673,893		6,014,351		5,831,796		6,013,382		5,764,850
Effect of dilutive equity-based compensation awards⁽¹⁾			51,621		56,569		54,783		49,403		37,218		51,621		38,831		54,783
Effect of dilution from if-converted Convertible Notes⁽²⁾											404,248		0		260,630		0
Weighted average common shares outstanding - diluted			5,883,417		5,730,238		5,819,633		5,723,296		6,455,817		5,883,417		6,312,843		5,819,633

Net Income per Common Share:
Basic		$	10.72	$	6.41	$	22.87	$	13.24	$	17.65	$	10.72	$	29.06	$	22.87
Diluted		$	10.63	$	6.35	$	22.66	$	13.13	$	16.68	$	10.63	$	28.00	$	22.66

*Supplemental Net Income per Common Share Disclosure:*	*Supplemental Net Income per Common Share Disclosure:*
Anti-dilutive shares from equity-based compensation awards⁽¹⁾			506		87		363		3,895		8,415		506		8,415		363

⁽¹⁾	Equity-based compensation awards whose impact is considered to be anti-dilutive under the treasury stock method were excluded from the diluted net income per common share calculation.
⁽²⁾	Based on a conversion rate of 0.4394 shares of common stock per weighted $1,000 principal amount of Convertible Notes outstanding during the three and six months ended June 30, 2021.

	As of June 30,				Annual Net Gain/(Loss)						As of June 30,				Annual Net Gain (Loss)
	2020		2019		Change			% Change			2021		2020		Change			% Change
Residential data PSUs⁽¹⁾		758		613		145			23.7			923		758		165			21.7
Residential video PSUs(1)		276		293		(17	)		(5.9	)		272		276		(4	)		(1.3	)
Residential voice PSUs(1)		98		94		4			4.6			110		98		12			11.8
Total residential PSUs⁽¹⁾		1,132		1,000		132			13.2			1,305		1,132		173			15.3

Business data PSUs(1)		80		69		11			15.9			94		80		14			17.3
Business video PSUs(1)		14		15		(1	)		(8.2	)		14		14		0			3.2
Business voice PSUs(1)		35		30		5			17.0			44		35		9			25.5
Total business services PSUs(1)		129		114		15			13.0			152		129		23			18.0

Total data PSUs⁽¹⁾		838		682		156			22.9			1,017		838		179			21.3
Total video PSUs		290		308		(18	)		(6.0	)		287		290		(3	)		(1.1	)
Total voice PSUs		133		124		9			7.6			153		133		20			15.3
Total PSUs⁽¹⁾		1,261		1,114		147			13.2			1,457		1,261		196			15.5

Residential customer relationships⁽¹⁾		876		742		134			18.0			1,032		876		156			17.8
Business customer relationships(1)		86		76		9			12.1			102		86		17			19.6
Total customer relationships⁽¹⁾		962		819		143			17.5			1,134		962		172			17.9

	Three Months Ended June 30,				2020 vs. 2019				Three Months Ended June 30,				2021 vs. 2020
	2020		2019		$ Change		% Change		2021		2020		$ Change			% Change
Residential data(1)	$	73.80	$	71.80	$	2.00		2.8	$	78.34	$	73.80	$	4.54			6.2
Residential video(1)	$	102.95	$	93.43	$	9.52		10.2	$	110.32	$	102.95	$	7.37			7.2
Residential voice(1)	$	40.35	$	37.32	$	3.03		8.1	$	39.28	$	40.35	$	(1.07	)		(2.7	)
Business services(1)	$	228.11	$	218.77	$	9.34		4.3	$	263.86	$	228.11	$	35.75			15.7

	Six Months Ended June 30,					2020 vs. 2019
(dollars in thousands)	2020			2019		$ Change			% Change
Net income	$	131,866		$	75,134	$	56,732			75.5

Plus: Interest expense		35,289			36,612		(1,323	)		(3.6	)
Income tax provision		19,669			22,235		(2,566	)		(11.5	)
Depreciation and amortization		130,863			108,679		22,184			20.4
Equity-based compensation		6,647			6,103		544			8.9
Severance expense		-			178		(178	)		(100.0	)
(Gain) loss on deferred compensation		(21	)		253		(274	)		(108.3	)
Acquisition-related costs		3,310			6,094		(2,784	)		(45.7	)
(Gain) loss on asset sales and disposals, net		(4,633	)		2,013		(6,646	)		NM
System conversion costs		696			2,173		(1,477	)		(68.0	)
Rebranding costs		578			3,412		(2,834	)		(83.1	)
Other (income) expense, net		(3,389	)		7,830		(11,219	)		(143.3	)

Adjusted EBITDA	$	320,875		$	270,716	$	50,159			18.5

	June 30, 2020		December 31, 2019
Revolving Credit Facility portion:
Other noncurrent assets	$	2,149	$	2,427
Term loans portion:
Long-term debt (contra account)		16,208		18,142
Total	$	18,357	$	20,569

	June 30, 2021		December 31, 2020
Revolving Credit Facility portion:
Other noncurrent assets	$	2,915	$	3,249
Term loans and Notes portion:
Long-term debt (contra account)		30,921		21,897
Total	$	33,836	$	25,146