Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

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

For the quarterly period ended SeptemberJune 30, 20172022

OR

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

For the transition period from to

Commission File Number 001-36713

LIBERTY BROADBAND CORPORATION

(Exact name of Registrant as specified in its charter)

State of Delaware

47-1211994

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

12300 Liberty Boulevard
Englewood, Colorado

80112

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: (720) (720875-5700

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Series A common stock

LBRDA

The Nasdaq Stock Market LLC

Series C common stock

LBRDK

The Nasdaq Stock Market LLC

Series A Cumulative Redeemable preferred stock

LBRDP

The Nasdaq Stock Market LLC

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  No 

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

Large accelerated filer Accelerated Filer 

Accelerated filer Filer 

Non-accelerated filer Filer 
(do not check if smaller
reporting company)

Smaller reporting company Reporting Company 

Emerging growth company 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 

The number of outstanding shares of Liberty Broadband Corporation'sCorporation’s common stock as of October 16, 2017July 31, 2022 was:

Series A

Series B

Series C

Liberty Broadband Corporation common stock

19,840,246

2,117,646

131,826,791

Series A common stock

26,301,479

Series B common stock

2,455,179

Series C common stock

153,089,705


Table of Contents

Table of Contents

Part I - Financial Information

f

Page No

Item 1. Financial Statements

LIBERTY BROADBAND CORPORATION Condensed Consolidated Balance Sheets (unaudited)

I-2

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Operations (unaudited)

I-3I-4

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Comprehensive Earnings (Loss) (unaudited)

I-4I-5

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Cash Flows (unaudited)

I-5

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statement of Equity (unaudited)

I-6

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Equity (unaudited)

I-7

LIBERTY BROADBAND CORPORATION Notes to Condensed Consolidated Financial Statements (unaudited)

I-7I-9

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

I-23I-27

Item 3.  3. Quantitative and Qualitative Disclosures about Market Risk

I-32I-40

Item 4.  4. Controls and Procedures

I-32I-41

Part II - Other Information

Item 1.  1. Legal Proceedings

II-1

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

II-1

Item 6.  6. Exhibits

II-2

SIGNATURES

II-3

I-1


Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

June 30,

December 31,

2022

2021

 

amounts in millions

 

Assets

    

    

    

    

Current assets:

Cash and cash equivalents

$

301

 

191

Trade and other receivables, net of allowance for credit losses of $4 and $4, respectively

179

206

Prepaid and other current assets

 

71

 

62

Total current assets

 

551

 

459

Investment in Charter, accounted for using the equity method (note 4)

 

12,051

 

13,260

Property and equipment, net

1,013

1,031

Intangible assets not subject to amortization

Goodwill

755

762

Cable certificates

550

550

Other

37

37

Intangible assets subject to amortization, net (note 5)

546

573

Tax sharing receivable

44

86

Other assets, net

 

191

 

210

Total assets

$

15,738

 

16,968

See accompanying notes to the condensed consolidated financial statements.

I-2

Table of Contents

LIBERTY BROADBAND CORPORATION

(unaudited)Condensed Consolidated Balance Sheets (Continued)

(unaudited)

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2017

 

2016

 

 

 

(amounts in thousands)

 

Assets

    

 

    

    

    

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

135,425

 

205,728

 

Trade and other receivables, net

 

 

2,233

 

878

 

Derivative instruments

 

 

 —

 

49,019

 

Other current assets

 

 

4,319

 

2,794

 

Total current assets

 

 

141,977

 

258,419

 

Investment in Charter, accounted for using the equity method (note 4)

 

 

9,326,871

 

9,315,253

 

Property and equipment, net

 

 

425

 

710

 

Goodwill (note 5)

 

 

6,497

 

6,497

 

Intangible assets subject to amortization, net (note 5)

 

 

6,063

 

8,596

 

Other assets, at cost, net of accumulated amortization

 

 

61

 

1,485

 

Total assets

 

$

9,481,894

 

9,590,960

 

Liabilities and Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

4,963

 

7,931

 

Deferred revenue

 

 

6,684

 

2,171

 

Current portion of debt (note 6)

 

 

 —

 

400,000

 

Other current liabilities

 

 

553

 

2,014

 

Total current liabilities

 

 

12,200

 

412,116

 

Debt (note 6)

 

 

496,975

 

198,512

 

Deferred income tax liabilities

 

 

497,414

 

504,644

 

Deferred revenue

 

 

3,765

 

2,596

 

Other liabilities

 

 

1,305

 

 —

 

Total liabilities

 

 

1,011,659

 

1,117,868

 

Equity

 

 

 

 

 

 

Preferred stock, $.01 par value. Authorized 50,000,000 shares; no shares issued

 

 

 —

 

 —

 

Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 26,301,387 shares at September 30, 2017 and 26,251,533 shares at December 31, 2016

 

 

262

 

262

 

Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,455,179 shares at September 30, 2017 and 2,467,509 shares at December 31, 2016

 

 

25

 

25

 

Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 153,089,705 shares at September 30, 2017 and 153,019,547 shares at December 31, 2016

 

 

1,531

 

1,530

 

Additional paid-in capital

 

 

7,952,316

 

7,945,883

 

Accumulated other comprehensive earnings, net of taxes

 

 

8,290

 

7,656

 

Retained earnings

 

 

507,811

 

517,736

 

Total equity

 

 

8,470,235

 

8,473,092

 

Commitments and contingencies (note 8)

 

 

 

 

 

 

Total liabilities and equity

 

$

9,481,894

 

9,590,960

 

June 30,

December 31,

2022

2021

 

amounts in millions,

 

except share amounts

Liabilities and Equity

Current liabilities:

Accounts payable and accrued liabilities

$

100

 

99

Deferred revenue

 

21

 

25

Current portion of debt, including 0 and $25 measured at fair value, respectively (note 6)

3

28

Indemnification obligation (note 3)

175

324

Other current liabilities

149

106

Total current liabilities

 

448

 

582

Long-term debt, net, including $1,342 and $1,403 measured at fair value, respectively (note 6)

3,770

3,733

Obligations under finance leases and tower obligations, excluding current portion

88

89

Long-term deferred revenue

36

35

Deferred income tax liabilities

1,999

1,998

Preferred stock (note 7)

203

203

Other liabilities

166

189

Total liabilities

 

6,710

 

6,829

Equity

Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 21,633,055 and 23,232,342 at June 30, 2022 and December 31, 2021, respectively

Series B common stock, $.01 par value. Authorized 18,750,000 shares; issued and outstanding 2,328,901 and 2,544,548 at June 30, 2022 and December 31, 2021, respectively

Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 132,311,691 and 144,854,780 at June 30, 2022 and December 31, 2021, respectively

1

1

Additional paid-in capital

4,319

6,214

Accumulated other comprehensive earnings, net of taxes

 

30

 

14

Retained earnings

 

4,662

 

3,898

Total stockholders' equity

9,012

10,127

Non-controlling interests

16

12

Total equity

 

9,028

 

10,139

Commitments and contingencies (note 9)

 

 

Total liabilities and equity

$

15,738

 

16,968

See accompanying notes to the condensed consolidated financial statements.

I-2I-3


LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended 

Six months ended

 

June 30,

June 30,

 

2022

    

2021

    

2022

2021

 

amounts in millions, except per share amounts

Revenue

$

239

242

477

489

Operating costs and expenses:

Operating expense (exclusive of depreciation and amortization shown separately below)

60

67

126

 

136

Selling, general and administrative, including stock-based compensation (note 8)

105

110

206

 

215

Depreciation and amortization

65

67

129

 

131

Litigation settlement, net of recoveries (note 9)

10

10

110

240

244

471

 

592

Operating income (loss)

(1)

(2)

6

 

(103)

Other income (expense):

Interest expense (including amortization of deferred loan fees)

(30)

(29)

(56)

(62)

Share of earnings (losses) of affiliate (note 4)

386

249

689

 

438

Gain (loss) on dilution of investment in affiliate (note 4)

(11)

(15)

(67)

 

(97)

Realized and unrealized gains (losses) on financial instruments, net (note 3)

77

(125)

214

 

(26)

Gain (loss) on dispositions, net (note 1)

179

179

Other, net

(18)

23

(39)

 

15

Earnings (loss) before income taxes

582

101

926

 

165

Income tax benefit (expense)

(117)

(45)

(162)

 

(57)

Net earnings (loss)

465

56

764

108

Less net earnings (loss) attributable to the non-controlling interests

Net earnings (loss) attributable to Liberty Broadband shareholders

$

465

56

764

 

108

Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

$

2.89

0.30

4.66

0.57

Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

$

2.87

0.30

4.63

0.56

(unaudited)See accompanying notes to the condensed consolidated financial statements.

I-4

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

    

2021

    

2022

2021

 

amounts in millions

 

Net earnings (loss)

    

$

465

56

764

    

108

Other comprehensive earnings (loss), net of taxes:

Comprehensive earnings (loss) attributable to debt credit risk adjustments

20

(4)

16

 

(4)

Other comprehensive earnings (loss), net of taxes

20

(4)

16

(4)

Comprehensive earnings (loss)

485

52

780

 

104

Less comprehensive earnings (loss) attributable to the non-controlling interests

Comprehensive earnings (loss) attributable to Liberty Broadband shareholders

$

485

52

780

 

104

See accompanying notes to the condensed consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

    

2016

    

2017

 

2016

 

 

 

(amounts in thousands, except per share amounts)

 

Revenue

 

$

3,430

 

20,616

 

9,643

 

27,413

 

Operating costs and expenses

 

 

 

 

 

 

 

 

 

 

Operating, including stock-based compensation (note 7)

 

 

646

 

782

 

1,968

 

2,099

 

Selling, general and administrative, including stock-based compensation (note 7)

 

 

6,189

 

9,855

 

18,099

 

27,792

 

Research and development, including stock-based compensation (note 7)

 

 

1,440

 

2,384

 

6,214

 

8,040

 

Depreciation and amortization

 

 

942

 

971

 

2,844

 

2,935

 

 

 

 

9,217

 

13,992

 

29,125

 

40,866

 

Operating income (loss)

 

 

(5,787)

 

6,624

 

(19,482)

 

(13,453)

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(5,518)

 

(4,090)

 

(14,899)

 

(10,547)

 

Dividend and interest income

 

 

422

 

190

 

1,219

 

4,697

 

Share of earnings (losses) of affiliates (note 4)

 

 

(5,280)

 

19,046

 

25,109

 

570,178

 

Realized and unrealized gains (losses) on financial instruments, net (note 3)

 

 

2,675

 

 —

 

5,026

 

92,990

 

Gain (loss) on dilution of investment in affiliate (note 4)

 

 

(3,718)

 

(16,331)

 

(42,515)

 

760,074

 

Other, net

 

 

 9

 

 5

 

11

 

112

 

Net earnings (loss) before income taxes

 

 

(17,197)

 

5,444

 

(45,531)

 

1,404,051

 

Income tax benefit (expense)

 

 

7,333

 

(1,655)

 

18,245

 

(532,349)

 

Net earnings (loss) attributable to Liberty Broadband shareholders

 

$

(9,864)

 

3,789

 

(27,286)

 

871,702

 

Basic net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

 

$

(0.05)

 

0.02

 

(0.15)

 

6.13

 

Diluted net earnings (loss) attributable to Series A, Series B and Series C Liberty Broadband shareholders per common share (note 2)

 

$

(0.05)

 

0.02

 

(0.15)

 

6.10

 

I-5

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

Six months ended

June 30,

 

2022

2021

 

amounts in millions

 

Cash flows from operating activities:

    

    

    

    

Net earnings (loss)

$

764

 

108

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

Depreciation and amortization

 

129

 

131

Stock-based compensation

 

18

 

20

Litigation settlement, net of recoveries

10

110

Share of (earnings) losses of affiliate, net

 

(689)

 

(438)

(Gain) loss on dilution of investment in affiliate

 

67

 

97

Realized and unrealized (gains) losses on financial instruments, net

 

(214)

 

26

Deferred income tax expense (benefit)

 

1

 

(18)

(Gain) loss on dispositions, net

(179)

Other, net

 

(3)

 

(2)

Changes in operating assets and liabilities:

Current and other assets

 

113

 

137

Payables and other liabilities

 

1

 

(60)

Net cash provided by (used in) operating activities

 

18

 

111

Cash flows from investing activities:

Capital expenditures

(78)

(50)

Cash received for Charter shares repurchased by Charter

1,806

1,762

Cash proceeds from dispositions, net

163

Other investing activities, net

4

2

Net cash provided by (used in) investing activities

1,895

1,714

Cash flows from financing activities:

Borrowings of debt

300

717

Repayments of debt, finance leases and tower obligations

(203)

(1,781)

Repurchases of Liberty Broadband common stock

(1,890)

(1,957)

Other financing activities, net

 

(3)

 

(2)

Net cash provided by (used in) financing activities

 

(1,796)

 

(3,023)

Net increase (decrease) in cash, cash equivalents and restricted cash

117

 

(1,198)

Cash, cash equivalents and restricted cash, beginning of period

206

1,433

Cash, cash equivalents and restricted cash, end of period

$

323

235

The following table reconciles cash and cash equivalents and restricted cash reported in the accompanying condensed consolidated balance sheets to the total amount presented in the accompanying condensed consolidated statement of cash flows:

June 30,

December 31,

2022

2021

amounts in millions

Cash and cash equivalents

$

301

191

Restricted cash included in other current assets

22

15

Total cash and cash equivalents and restricted cash at end of period

$

323

206

See accompanying notes to the condensed consolidated financial statements.

I-6

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Equity

(unaudited)

Accumulated

Noncontrolling

Additional

other

interest in

Common stock

paid-in

comprehensive

Retained

equity of

Series A

  

Series B

  

Series C

  

capital

earnings

earnings

subsidiaries

Total equity

amounts in millions

Balance at January 1, 2022

    

$

1

6,214

    

14

    

3,898

12

    

10,139

Net earnings (loss)

 

 

764

 

764

Other comprehensive earnings (loss), net of taxes

16

16

Stock-based compensation

18

18

Withholding taxes on net share settlements of stock-based compensation

(3)

(3)

Liberty Broadband stock repurchases

(1,890)

(1,890)

Noncontrolling interest activity at Charter and other

(20)

4

(16)

Balance at June 30, 2022

$

1

4,319

 

30

 

4,662

16

 

9,028

Accumulated

Noncontrolling

 

Additional

other

interest in

 

Common stock

paid-in

comprehensive

Retained

equity of

 

Series A

  

Series B

  

Series C

  

capital

earnings

earnings

subsidiaries

Total equity

 

amounts in millions

 

Balance at March 31, 2022

$

1

5,375

 

10

 

4,197

16

 

9,599

Net earnings (loss)

465

465

Other comprehensive earnings (loss), net of taxes

20

20

Stock-based compensation

9

9

Liberty Broadband stock repurchases

(1,047)

(1,047)

Noncontrolling interest activity at Charter and other

(18)

(18)

Balance at June 30, 2022

$

1

4,319

30

4,662

16

9,028

See accompanying notes to the condensed consolidated financial statements.

I-3I-7


LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Comprehensive Earnings (Loss)Equity (continued)

(unaudited)

Accumulated

Noncontrolling

Additional

other

interest in

Common stock

paid-in

comprehensive

Retained

equity of

Series A

  

Series B

  

Series C

  

capital

earnings

earnings

subsidiaries

Total equity

amounts in millions

Balance at January 1, 2021

$

2

10,320

15

3,166

12

13,515

Net earnings (loss)

108

108

Other comprehensive earnings (loss), net of taxes

(4)

(4)

Stock-based compensation

20

20

Issuance of common stock upon exercise of stock options

1

1

Withholding taxes on net share settlements of stock-based compensation

(3)

(3)

Liberty Broadband stock repurchases

(1,957)

(1,957)

Noncontrolling interest activity at Charter and other

150

150

Balance at June 30, 2021

$

2

8,531

11

3,274

12

11,830

Accumulated

Noncontrolling

 

Additional

other

interest in

 

Common stock

paid-in

comprehensive

Retained

equity of

 

Series A

  

Series B

  

Series C

  

capital

earnings

earnings

subsidiaries

Total equity

 

amounts in millions

 

Balance at March 31, 2021

    

$

2

9,563

15

3,218

12

12,810

Net earnings (loss)

 

56

56

Other comprehensive earnings (loss), net of taxes

(4)

(4)

Stock-based compensation

10

10

Issuance of common stock upon exercise of stock options

1

1

Liberty Broadband stock repurchases

(1,219)

(1,219)

Noncontrolling interest activity at Charter and other

176

176

Balance at June 30, 2021

$

2

8,531

11

3,274

12

11,830

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended 

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

    

2016

    

2017

 

2016

 

 

 

(amounts in thousands)

 

Net earnings (loss)

    

$

(9,864)

 

3,789

 

(27,286)

    

871,702

 

Other comprehensive earnings (loss), net of taxes:

 

 

 

 

 

 

 

 

 

 

Unrealized holding gains (losses) arising during the period

 

 

 —

 

 —

 

 —

 

(221)

 

Share of other comprehensive earnings (loss) of equity method affiliates

 

 

260

 

247

 

634

 

811

 

Other

 

 

 —

 

 —

 

 —

 

(1,839)

 

Other comprehensive earnings (loss), net of taxes

 

 

260

 

247

 

634

 

(1,249)

 

Comprehensive earnings (loss) attributable to Liberty Broadband shareholders

 

$

(9,604)

 

4,036

 

(26,652)

 

870,453

 

See accompanying notes to the condensed consolidated financial statements.

I-4I-8


LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

 

 

 

 

 

 

 

 

 

Nine months ended

 

 

 

September 30,

 

 

 

2017

 

2016

 

 

 

(amounts in thousands)

 

Cash flows from operating activities:

    

 

    

    

    

 

Net earnings (loss)

 

$

(27,286)

 

871,702

 

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

2,844

 

2,935

 

Stock-based compensation

 

 

4,376

 

4,582

 

Share of (earnings) losses of affiliates

 

 

(25,109)

 

(570,178)

 

(Gain) loss on dilution of investment in affiliate

 

 

42,515

 

(760,074)

 

Realized and unrealized (gains) losses on financial instruments, net

 

 

(5,026)

 

(92,990)

 

Deferred income tax expense (benefit)

 

 

(18,259)

 

533,626

 

Other, net

 

 

1,080

 

112

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Current and other assets

 

 

(1,455)

 

7,954

 

Payables and other liabilities

 

 

2,724

 

(2,702)

 

Net cash provided (used) by operating activities

 

 

(23,596)

 

(5,033)

 

Cash flows from investing activities:

 

 

 

 

 

 

Capital expended for property and equipment

 

 

(27)

 

(154)

 

Purchases of short term investments and other marketable securities

 

 

 —

 

(155,444)

 

Sales of short term investments and other marketable securities

 

 

 —

 

164,458

 

Investment in equity method affiliate

 

 

 —

 

(5,000,000)

 

Other investing activities, net

 

 

14

 

453

 

Net cash provided (used) by investing activities

 

 

(13)

 

(4,990,687)

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings of debt

 

 

500,000

 

200,000

 

Repayments of debt

 

 

(600,000)

 

 —

 

Cash received from issuance of Series C Liberty Broadband common stock

 

 

 —

 

4,400,000

 

Payments from issuances of financial instruments

 

 

(101,638)

 

 —

 

Proceeds from settlements of financial instruments

 

 

155,683

 

 —

 

Other financing activities, net

 

 

(739)

 

(318)

 

Net cash provided (used) by financing activities

 

 

(46,694)

 

4,599,682

 

Net decrease in cash

 

 

(70,303)

 

(396,038)

 

Cash and cash equivalents, beginning of period

 

 

205,728

 

655,079

 

Cash and cash equivalents, end of period

 

$

135,425

 

259,041

 

See accompanying notes to the condensed consolidated financial statements.

I-5


LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statement of Equity

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

other

 

 

 

 

 

 

 

Preferred

 

Common stock

 

paid-in

 

comprehensive

 

Retained

 

 

 

 

 

Stock

 

Series A

  

Series B

  

Series C

  

capital

 

earnings

 

earnings

 

Total equity

 

 

 

(amounts in thousands)

 

Balance at January 1, 2017

    

$

 —

 

262

 

25

 

1,530

 

7,945,883

    

7,656

    

517,736

    

8,473,092

 

Net earnings (loss)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

(27,286)

 

(27,286)

 

Other comprehensive earnings

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

634

 

 —

 

634

 

Stock-based compensation

 

 

 —

 

 —

 

 —

 

 —

 

4,017

 

 —

 

 —

 

4,017

 

Issuance of common stock upon exercise of stock options

 

 

 —

 

 —

 

 —

 

 1

 

2,416

 

 —

 

 —

 

2,417

 

Cumulative effect of accounting change at Charter (note 4)

 

 

 —

 

 —

 

 —

 

 —

 

 —

 

 —

 

17,361

 

17,361

 

Balance at September 30, 2017

 

$

 —

 

262

 

25

 

1,531

 

7,952,316

 

8,290

 

507,811

 

8,470,235

 

See accompanying notes to the condensed consolidated financial statements.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

During May 2014,The accompanying condensed consolidated financial statements include the board of directorsaccounts of Liberty MediaBroadband Corporation and its controlled subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary,(collectively, "Liberty Broadband," the "Company," “us,” “we,” or “our” unless the context otherwise requires). Liberty Broadband Corporation (“Liberty Broadband” or the “Company”), and to distribute subscription rights to acquire shares of Liberty Broadband Series C common stock (the “Broadband Spin-Off”). At the time of the Broadband Spin-Off, Liberty Broadband wasis primarily comprised of (i) Liberty’s former interestGCI Holdings, LLC (“GCI Holdings”), a wholly owned subsidiary, and an equity method investment in Charter Communications, Inc. (“Legacy Charter”), (ii) Liberty’s former wholly-owned subsidiary TruePosition, Inc., (iii) Liberty’s former minority equity investment in Time Warner Cable,.

On December 18, 2020, GCI Liberty, Inc. (“Time Warner Cable”GCI Liberty”), (iv) certain deferred tax liabilities, as well as liabilities related to Time Warner Cable written call options and (v) initial indebtedness, pursuant to margin loans entered into prior to the completion of the Broadband Spin-Off. These financial statements refer to the combination of the aforementioned subsidiary, investments, and financial instruments as “Liberty Broadband,” “the Company,” “us,” “we” and “our” in the notes to the condensed consolidated financial statements.

On May 18, 2016, Time Warner Cable was merged with Legacy Charter (the “Time Warner Cable Merger”). In connection with the Time Warner Cable Merger, Legacy Charter underwent a corporate reorganization, resulting in CCH I, LLC (“Charter”), a former subsidiary of Legacy Charter, becoming the new publicly traded parent company. Also on May 18, 2016, the previously announced acquisition of Bright House Networks, LLC from Advance/Newhouse Partnership (“A/N”) by Charter (the “Bright House Transaction”) was completed. In connection with the Time Warner Cable Merger and Bright House Transaction, Liberty Broadband entered into certain agreements with Legacy Charter, Charter (for accounting purposes a related party of the Company), Liberty Interactive Corporation (“Liberty Interactive,” for accounting purposes a related party of the Company)(the “Combination”) and Time Warner Cable. As a result of the Time Warner Cable Merger and Bright House Transaction (collectively, the “Transactions”), Liberty Broadband exchanged its shares of Time Warner Cableacquired GCI Holdings, as further described in Liberty Broadband's Annual Reports on Form 10-K for shares of Charter and purchased additional shares of Charter. As a result, and pursuant to proxy agreements entered into with Liberty Interactive and A/N, Liberty Broadband controls 25.01% of the aggregate voting power of Charter. See note 4 for additional detail regarding these transactions and corresponding agreements.

The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (formerly known as TruePosition, Inc.), was originally incorporated to provide technology for locating wireless phones and other mobile devices through a passive network overlay system using its patented U-TDOA technology (“U-TDOA service”). In February 2014, Skyhook Holding, Inc. acquired 100% of the outstanding common shares of Skyhook Wireless, Inc., which operates a global location network containing billions of geolocated Wi-Fi access points and cell towers that serve as the reference infrastructure for providing location services. In 2015, one of Skyhook Holding, Inc.’s customers, a wireless carrier utilizing the legacy U-TDOA service which accounted for approximately 80% - 90% of consolidated revenue at the time, gave notice that it planned to discontinue use of the U-TDOA service and did not intend to renew its contract, which expired onyears ended December 31, 2015. The loss of this customer had a material adverse effect on Skyhook Holding, Inc.’s business. As a result of the loss of this wireless carrier customer, further changes in the regulatory environment2021 and a shift in the overall market for the legacy U-TDOA service, Skyhook Holding, Inc. ceased making further investment in its U-TDOA products. In 2016, Skyhook Holding, Inc. and Skyhook Wireless, Inc. combined operations in order to focus on the development and sale of the suite of location and context products, and are referred to collectively herein as “Skyhook.”2020.

The accompanying (a) condensed consolidated balance sheet as of December 31, 2016,2021, which has been derived from audited financial statements, and (b) interim unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the results for such periods have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Additionally, certain prior period amounts have been reclassified for comparability with current period presentation. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in Liberty Broadband's Annual Report on

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Form 10-K for the year ended December 31, 2016.2021. All significant intercompany accounts and transactions have been eliminated in the condensed consolidated financial statements.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. The Company considers (i) the application of the equity method of accounting for investments in affiliates,its affiliate, (ii) thenon-recurring fair value measurements of non-financial instruments (iii) the fair value of financial instruments, (iv) revenue recognition and (v)(iii) accounting for income taxes to be its most significant estimates.

In February 2016,December 2019, Chinese officials reported a novel coronavirus outbreak (“COVID-19”). COVID-19 has since spread through China and internationally. On March 11, 2020, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance on lease accounting. This guidance requiresWorld Health Organization assessed COVID-19 as a companyglobal pandemic, causing many countries throughout the world to recognize lease assetstake aggressive actions, including imposing travel restrictions and lease liabilitiesstay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices, which caused a significant disruption to most sectors of the economy at varying levels during the periods covered by the financial statements.

We are not presently aware of any events or circumstances arising from operating leasesthe COVID-19 pandemic that would require us to update our estimates or judgments or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur and additional information is obtained, and any such changes will be recognized in the statement of financial position. The new guidance also simplifies the accounting for sale and leaseback transactions. The amendments in this update are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted.  We plan to adopt this guidance on January 1, 2019.  Companies are required to use a modified retrospective approach to adopt this guidance.  The Company is currently working with its consolidated subsidiary, Skyhook, to evaluate the impact of the adoption of this new guidance on ourcondensed consolidated financial statements,statements. Actual results could differ from estimates, and any such differences may be material to our financial statements.

Through a number of prior years’ transactions, including identifying the population of leases, evaluating technology solutions and collecting lease data.

In May 2014, the FASB issued new accounting guidance on revenue from contracts with customers. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This new guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In March 2016, the FASB issued additional guidance which clarifies principal versus agent considerations, and in April 2016, the FASB issued further guidance which clarifies the identification of performance obligations and the implementation guidance for licensing. The updated guidance will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or modified retrospective transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company anticipates adopting this guidance under the modified retrospective transition method. Skyhook has substantially completed the review of its revenue arrangements and does not currently expect that the adoption of the new standard will have a material impact on its financial position or results of operations. Additionally, Charter, which is accounted for as an equity method investment, has substantially completed its review of its revenue arrangements and does not currently expect that the adoption of the new standard will have a material impact on its financial position or results of operations.

Combination, Liberty Broadband holdshas acquired an interest in Charter. The investment in Charter that is accounted for using the equity method. Liberty Broadband does not control the decision making process or business management practices of this affiliate. Accordingly, Liberty Broadband relies on the management of this affiliate to provide it with accurate financial information prepared in accordance with GAAP that the Company uses in the application of the equity method. In addition, Liberty Broadband relies on audit reports that are provided by the affiliate's independent auditor on the financial statements of such affiliate. The Company is not aware, however, of any errors in or possible misstatements of the financial information provided by its equity affiliate that would have a material effect on Liberty Broadband's condensed consolidated financial statements.

Spin-Off ArrangementsI-9

Table of Contents

Following the Broadband Spin-Off, Liberty andLIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Skyhook Holdings, Inc. (“Skyhook”) was a wholly owned subsidiary of Liberty Broadband operate as separate, publicly traded companies, and neither has any stock ownership, beneficial or otherwise,until its sale on May 2, 2022 for aggregate consideration of approximately $194 million, including amounts held in escrow of approximately $23 million. Liberty Broadband recognized a gain on the sale of $179 million, net of fees contingent upon closing, in the other.second quarter of 2022, which is recorded in Gain (loss) on dispositions, net in the accompanying condensed consolidated statement of operations. Skyhook is included in Corporate and other through April 30, 2022 and is not presented as a discontinued operation as the sale did not represent a strategic shift that had a major effect on Liberty Broadband’s operations and financial results. Included in Revenue in the accompanying condensed consolidated statements of operations is $1 million and $5 million for the three months ended June 30, 2022 and 2021, respectively, and $6 million and $9 million for the six months ended June 30, 2022 and 2021, respectively, related to Skyhook. Included in Net earnings (loss) in the accompanying condensed consolidated statement of operations are earnings of $1 million and losses of $1 million for the three months ended June 30, 2022 and 2021, respectively, and earnings of $4 million and losses of $1 million for the six months ended June 30, 2022 and 2021, respectively, related to Skyhook. Included in Total assets in the accompanying condensed consolidated balance sheets as of December 31, 2021 is $18 million related to Skyhook.

As described in note 4, we are currently participating in Charter’s share buyback program in order to maintain our fully diluted ownership percentage of 26%. The primary use of those proceeds has been to repurchase Liberty Broadband Series A and Series C common stock pursuant to our authorized share repurchase programs. On February 23, 2021, a duly authorized committee of the board of directors authorized the repurchase of $2.23 billion of Liberty Broadband common stock. Additionally, on August 5, 2021, a duly authorized committee of the board of directors authorized the repurchase of an additional $2.105 billion of Liberty Broadband common stock. Further, on January 26, 2022, a duly authorized committee of the board of directors authorized the repurchase of an additional $2.215 billion of Liberty Broadband common stock.

During the six months ended June 30, 2022, we repurchased 14.4 million shares of Liberty Broadband Series A and Series C common stock for a total purchase price of $1,890 million. During the six months ended June 30, 2021, we repurchased 12.5 million shares of Liberty Broadband Series C common stock for a total purchase price of $1,957 million. As of June 30, 2022, the amount authorized remaining under the authorized repurchase program is approximately $994 million.

Exchange Agreement with Chairman

On June 13, 2022, Liberty Broadband entered into an Exchange Agreement with its Chairman of the board of directors, John C. Malone, and a revocable trust of which Mr. Malone is the sole trustee and beneficiary (the “JM Trust”) (the “Exchange Agreement”), whereby, among other things, Mr. Malone agreed to an arrangement under which his aggregate voting power in the Company would not exceed 49% (the “Target Voting Power”) plus 0.5% (under certain circumstances).

The Exchange Agreement provides for exchanges by the Company and Mr. Malone or the JM Trust of shares of Liberty Broadband Series B common stock for shares of Liberty Broadband Series C common stock in connection with certain events, including (i) any event that would result in a reduction in the outstanding votes that may be cast by holders of the Company’s voting securities or an increase of Mr. Malone’s beneficially-owned voting power in the Company (an “Accretive Event”), in each case, such that Mr. Malone’s voting power in the Company would exceed the Target Voting Power plus 0.5%; or (ii) from and after the occurrence of any Accretive Event, in connection with any event that would result in an increase in the outstanding votes that may be cast by holders of the Company’s voting securities or a decrease of Mr. Malone’s beneficially-owned voting power in the Company (a “Dilutive Event”), in each case, such that Mr. Malone’s voting power in the Company falls below the Target Voting Power less 0.5%. Additionally, the Exchange Agreement contains certain provisions with respect to fundamental events at the Company, meaning any combination, consolidation, merger, exchange offer, split-off, spin-off, rights offering or dividend, in each case, as a result of which holders of Liberty Broadband Series B common stock are entitled to receive securities of the Company, securities of another person, property or cash, or a combination thereof.

In connection with an Accretive Event, Mr. Malone or the JM Trust will be required to exchange with the Company shares of Liberty Broadband Series B common stock (as exchanged, the “Exchanged Series B Shares”) for an equal number

I-10

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

of shares of Liberty Broadband Series C common stock (as exchanged, the “Exchanged Series C Shares”) so as to maintain Mr. Malone’s voting power as close as possible to, without exceeding, the Target Voting Power, on the terms and subject to the conditions of the Exchange Agreement.

In connection with a Dilutive Event, Mr. Malone and the JM Trust may exchange the Exchanged Series C Shares with the Company for an equal number of shares of Liberty Broadband Series B common stock equal to the lesser of (i) the number of shares of Liberty Broadband Series B common stock which would maintain Mr. Malone’s voting power as close as possible to, without exceeding, the Target Voting Power and (ii) the number of Exchanged Series B Shares at such time, on the terms and subject to the conditions of the Exchange Agreement.

Under the Exchange Agreement, the JM trust exchanged 215,647 shares of Liberty Broadband Series B common stock for the same number of Liberty Broadband Series C common stock on June 13, 2022, and exchanged 211,255 shares of Liberty Broadband Series B common stock for the same number of Liberty Broadband Series C common stock on July 19, 2022.

Spin-Off Arrangements

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly owned subsidiary, Liberty Broadband, and to distribute subscription rights to acquire shares of Liberty Broadband’s common stock (the “Broadband Spin-Off”). In connection with the Broadband Spin-Off, Liberty (for accounting purposes a related party of the Company) and Liberty Broadband entered into certain agreements in order to govern certain of the ongoing relationships between the two companies after the Broadband Spin-Off and to provide for an orderly transition. These agreements include a reorganization agreement,transition, including a services agreement and a facilities sharing agreement and a tax sharing agreement.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The reorganization agreement provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Broadband Spin-Off, certain conditions to the Broadband Spin-Off and provisions governing the relationship between Liberty Broadband and Liberty with respect to and resulting from the Broadband Spin-Off. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Liberty and Liberty Broadband and other agreements related to tax matters. Among other things, pursuant to the tax sharing agreement, Liberty Broadband has agreed to indemnify Liberty, subject to certain limited exceptions, for losses and taxes resulting from the Broadband Spin-Off to the extent such losses or taxes result primarily from, individually or in the aggregate, the breach of certain restrictive covenants made by Liberty Broadband (applicable to actions or failures to act by Liberty Broadband and its subsidiaries following the completion of the Broadband Spin-Off). Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. Under the facilities sharing agreement, Liberty Broadband shares office space with Liberty and related amenities at Liberty’s corporate headquarters. Liberty Broadband will reimburse Liberty for direct, out-of-pocket expenses incurred by Liberty in providing these services and for costs thatwhich will be negotiated semi-annually.

Pursuant to the services agreement, Liberty provides Liberty Broadband with general and administrative services including legal, tax, accounting, treasury and investor relations support. In December 2019, the Company entered into an amendment to the services agreement with Liberty in connection with Liberty’s entry into a new employment arrangement with Gregory B. Maffei, the Company’s President and Chief Executive Officer. Under the amended services agreement, components of his compensation would either be paid directly to him by each of the Company, Liberty TripAdvisor Holdings, Inc. and Qurate Retail, Inc. (“Qurate Retail”) (collectively, the “Service Companies”) or reimbursed to Liberty, in each case, based on allocations among Liberty and the Service Companies set forth in the amended services agreement, currently set at 33% for the Company but subject to adjustment on an annual basis upon the occurrence of certain events.

Additionally, in connection with a prior transaction, GCI Liberty and Qurate Retail (for accounting purposes a related party of the Company) entered into a tax sharing agreement, which was assumed by Liberty Broadband as a result of the Combination. The tax sharing agreement provides for the allocation and indemnification of tax liabilities and benefits between Qurate Retail and Liberty Broadband and other agreements related to tax matters.

Under these various agreements, approximately $814 thousand and $661 thousand wasamounts reimbursable to Liberty were approximately $2 million and $3 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $2.4$5 million was reimbursableand $7 million for the six months ended June 30, 2022 and 2021, respectively. Liberty Broadband had a tax sharing receivable with Qurate Retail of $44 million and $86 million as of June 30, 2022 and December 31, 2021, respectively.

Recently Announced Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board issued new accounting guidance which will require annual disclosures about certain government transactions that are accounted for by applying a grant or contribution accounting

I-11

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

model by analogy, including information about the nature of the transactions, the related policy used to account for the transactions, the amounts applicable to each financial statement line item and any significant terms and conditions of the transactions, including commitments and contingencies. This guidance is effective for annual financial statements issued for periods beginning after December 15, 2021, with early adoption permitted. The Company does not expect a significant impact from the adoption of the standard but is currently evaluating the effect that the updated standard will have on its financial disclosures.

(2) Earnings Attributable to Liberty for the nine months ended September 30, 2017 and 2016, respectively.

(2) Earnings (Loss) perBroadband Stockholders Per Common Share

Basic earnings (loss) per common share (“EPS”) is computed by dividing net earnings (loss) attributable to Liberty Broadband shareholders by the weighted average number of common shares outstanding (“WASO”) for the period. Diluted EPS presents the dilutive effect on a per share basis of potential common shares as if they had been converted at the beginning of the periods presented. The basic andExcluded from diluted EPS calculationsfor the three months ended June 30, 2022 and 2021 are based on2 million and 1 million potential common shares, respectively, because their inclusion would have been antidilutive. Excluded from diluted EPS for both the following weighted average number ofsix months ended June 30, 2022 and 2021 are 1 million potential common shares of outstanding common stock.because their inclusion would have been antidilutive.

Liberty Broadband Common Stock

Three months

Three months

Six months

Six months

 

ended

ended

ended

ended

June 30, 2022

June 30, 2021

June 30, 2022

June 30, 2021

 

(numbers of shares in millions)

Basic WASO

 

161

 

188

 

164

 

191

Potentially dilutive shares (1)

 

1

 

2

 

1

 

2

Diluted WASO

 

162

 

190

 

165

 

193

 

 

 

 

 

 

 

 

 

 

 

 

Liberty Broadband Common Stock

 

 

 

Three months

 

Three months

 

Nine months

 

Nine months

 

 

 

ended

 

ended

 

ended

 

ended

 

 

    

September 30, 2017

    

September 30, 2016

    

September 30, 2017

    

September 30, 2016

 

 

 

(numbers of shares in thousands)

 

Basic WASO

 

181,846

 

181,621

 

181,795

 

142,170

 

Potentially dilutive shares (1)

 

1,485

 

970

 

1,369

 

666

 

Diluted WASO

 

183,331

 

182,591

 

183,164

 

142,836

 

________

(1) Potentially dilutive shares are excluded from the computation of diluted EPS during periods in which losses are reported since the result would be antidilutive.

(3) Assets and Liabilities Measured at Fair Value

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. As of September 30, 2017, theThe Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

The Company’s assets and (liabilities) measured at fair value are as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

December 31, 2016

 

 

 

 

 

Quoted prices

 

Significant

 

 

 

Quoted prices

 

Significant

 

 

 

 

 

in active

 

other

 

 

 

in active

 

other

 

 

 

 

 

markets for

 

observable

 

 

 

markets for

 

observable

 

 

 

 

 

identical assets

 

inputs

 

 

 

identical assets

 

inputs

 

June 30, 2022

December 31, 2021

 

Quoted prices

Significant

Quoted prices

Significant

 

in active

other

in active

other

 

markets for

observable

markets for

observable

 

identical assets

inputs

identical assets

inputs

 

Description

 

Total

 

(Level 1)

 

(Level 2)

 

Total

 

(Level 1)

 

(Level 2)

 

Total

(Level 1)

(Level 2)

Total

(Level 1)

(Level 2)

 

 

(amounts in thousands)

 

amounts in millions

 

Cash equivalents

 

$

134,574

 

134,574

 

 —

 

198,011

 

198,011

 

 —

 

$

204

204

118

118

Derivative instruments (1)

 

$

 —

 

 —

 

 —

 

49,019

 

 —

 

49,019

 

Indemnification obligation

$

175

175

324

324

Exchangeable senior debentures

$

1,342

1,342

1,428

1,428

_________________________

(1)

As of December 31, 2016,Pursuant to an indemnification agreement initially entered into by GCI Liberty and assumed by Liberty Broadband in connection with the Combination, Liberty Broadband has agreed to indemnify Liberty Interactive LLC (“LI LLC”), a subsidiary of Qurate Retail, for certain payments made to holders of LI LLC’s 1.75% exchangeable debentures due 2046 (the "LI LLC 1.75% Exchangeable Debentures"). The indemnification liability due to LI LLC pertains to the holders’ ability to exercise their exchange right according to the terms of the LI LLC 1.75% Exchangeable Debentures on or before October 5, 2023. Such amount will equal the difference between the exchange value and par value of the LI LLC 1.75% Exchangeable Debentures at the time the exchange occurs. The indemnification obligation recorded in the condensed consolidated balance sheets as of June 30, 2022 represents the Company had an outstanding zero-strike call option on 704,908 shares of Liberty Broadband Series C common stock which expired in March 2017. The Company prepaid a premium of $47.9 million in December 2016. Liberty Broadband exercised its option to settle the contract in cash in March 2017 for cash proceeds of $50.0 million. The Company accounted for the zero-strike call option as a financial instrument asset due to its settlement provisions. Subsequent to September 30, 2017, the Company entered into another zero-strike call option on 527,156 shares of Liberty Broadband Series C common stock. The Company prepaid a premium of $47.7 million in October 2017.    

The fair value of Level 2 derivative instruments were derived from a Black-Scholes model usingthe estimated exchange feature included in the LI LLC 1.75% Exchangeable Debentures primarily based on observable market data as significant inputs (Level 2). As of June 30, 2022, a holder of the significant inputs. The inputs usedLI LLC 1.75% Exchangeable Debentures has the ability to exchange and, accordingly, such indemnification obligation is included as a current liability in the model duringCompany’s condensed consolidated balance sheets.

The Company’s exchangeable senior debentures are debt instruments with quoted market value prices that are not considered to be traded on “active markets”, as defined in GAAP, and are reported in the period outstanding (exclusive of the applicable trading price of Liberty Broadband Series C common stock and the strike prices associated with the call options) wereforegoing table as follows:Level 2 fair value.

Volatility

21.1%

Interest rate

1.3%

Dividend yield

0.0%

Other Financial Instruments

Other financial instruments not measured at fair value on a recurring basis include trade receivables, trade payables, accrued and other current liabilities, current portion of debt and long-term debt.debt (with the exception of the 1.25% Debentures, the 2.75% Debentures and the 1.75% Debentures (defined in note 6)). With the exception of long-term debt, the carrying amount approximates fair value due to the short maturity of these instruments as reported on our condensed consolidated balance sheets. The carrying value of our long-term debt bearsMargin Loan Facility, the Term Loan A and revolving credit facility borrowings under the Senior Credit Facility and the Wells Fargo Note Payable (each as defined in note 6) all bear interest at a variable rate and therefore isare also considered to approximate fair value.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Realized and Unrealized Gains (Losses) on Financial Instruments

Realized and unrealized gains (losses) on financial instruments are comprised of changes in the fair value of the following:

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

2021

2022

2021

 

amounts in millions

 

Indemnification obligation

$

64

(93)

149

(41)

Exchangeable senior debentures (1)

13

(32)

65

15

$

77

(125)

214

 

(26)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(amounts in thousands)

 

Time Warner Cable investment (1)

 

$

 —

 

 —

 

 

 —

 

92,990

 

Derivative instruments (2)

 

 

2,675

 

 —

 

 

5,026

 

 —

 

 

 

$

2,675

 

 —

 

 

5,026

 

92,990

 


(1)

As discussedThe Company has elected to account for its exchangeable senior debentures using the fair value option. Changes in note 4, Time Warner Cable merged with Charter on May 18, 2016.  Therefore the fair value of the exchangeable senior debentures recognized in the condensed consolidated statements of operations are primarily due to market factors driven by changes in the fair value of the underlying shares into which the debt is exchangeable. The Company no longer has an investment in Time Warner Cable asisolates the portion of May 18, 2016, and the unrealized gain (loss) relatedattributable to our investmentthe change in Time Warner Cable is recorded through this date. In connection with the merger,instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the Company exchanged,fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a tax-free transaction, its sharesgain of Time Warner Cable$26 million and a loss of $5 million for shares of Charter Class A common stock.

(2)

As of December 31, 2016, the Company had an outstanding zero-strike call option on 704,908 shares of Liberty Broadband Series C common stock which the Company exercised in March 2017. In April 2017, the Company entered into another zero-strike call option on 600,242 shares of Liberty Broadband Series C common stock. The Company prepaid a premium of $50.0 million in April 2017. Upon expiration in June 2017, the call option was rolled into a new zero-strike call option on 600,242 shares of Liberty Broadband Series C common stock.  Liberty Broadband exercised its option to settle the contract in cash in August 2017 for cash proceeds of $53.8 million.  The Company realized gains on the options outstanding and settled during the three and nine months ended SeptemberJune 30, 2017. 

2022 and 2021, respectively, and a gain of $20 million and a loss of $5 million for the six months ended June 30, 2022 and 2021, respectively. The cumulative change was a gain of $27 million as of June 30, 2022.

(4) Investment in Charter Accounted for Using the Equity Method

In May 2013, Liberty acquired approximately 26.9 million sharesThrough a number of Legacy Charter common stock and approximately 1.1 million warrants to purchase shares of Legacy Charter common stock for approximately $2.6 billion, which represented an approximate 27% beneficial ownership (including the warrants on an as if converted basis) in Legacy Charter at the time of purchase and price per share of $95.50. Liberty funded the purchase with a combination of cash on hand of approximately $1.2 billion and new margin loan arrangements. Liberty allocated the purchase price between the shares of common stockprior years’ transactions and the warrantsCombination, Liberty Broadband has acquired an interest in the transaction by determining the fair value of the publicly traded warrants and allocating the remaining balance to the shares acquired, which resulted in an initial excess basis in the investment of $2,532 million.Charter. The investment in Legacy Charter is accounted for as an equity method affiliate based on theour voting and ownership interest obtained and the board seats held by individuals appointed by Liberty.

During May 2014, Liberty purchased 897 thousand Legacy Charter shares for approximately $124.5 million. During November 2014, subsequent to the Broadband Spin-Off, Liberty Broadband exercised all of its outstanding warrants to purchase shares of Legacy Charter common stock for approximately $52 million.

On May 18, 2016, the Time Warner Cable Merger was completed, which resulted in Legacy Charter and Time Warner Cable becoming wholly owned subsidiaries of Charter. Also on May 18, 2016, the previously announced Bright House Transaction was completed. In connection with these transactions, Legacy Charter underwent a corporate reorganization, resulting in Charter, a former subsidiary of Legacy Charter, becoming the new publicly traded parent company. In connection with the Time Warner Cable Merger and the Bright House Transaction, Liberty Broadband completed the previously announced transactions described below:

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Transactions Completed in Connection with the Time Warner Cable Merger

Charter Investment Agreement

On May 18, 2016, Liberty Broadband completed its previously announced investment in Charter in accordance with the investment agreement dated May 23, 2015 by and among Liberty Broadband, Legacy Charter and Charter (the “Charter Investment Agreement”). Pursuant to the Charter Investment Agreement, immediately following the consummation of the Time Warner Cable Merger, Liberty Broadband purchased from Charter $4.3 billion of shares of Charter Class A common stock, par value $0.001 per share, at a price per share of $195.70 following adjustment by the applicable exchange ratio. As a result, Liberty Broadband received approximately 22.0 million shares of Charter Class A common stock. Liberty Broadband funded its purchase of these shares of Charter Class A common stock with proceeds from the issuance of Liberty Broadband Series C common stock.  

Charter Contribution Agreement

Also on May 18, 2016, shares of Time Warner Cable common stock held by Liberty Broadband and Liberty Interactive were exchanged, in a tax-free transaction, for shares of Charter Class A common stock which resulted in each of Liberty Broadband and Liberty Interactive receiving one share of Charter Class A common stock for each share of Time Warner Cable common stock so exchanged. In the exchange, Liberty Broadband received approximately 2.4 million shares of Charter Class A common stock, with a fair value of $531.9 million.

Liberty Interactive Proxy Agreement

Pursuant to the Proxy and Right of First Refusal Agreement, dated May 23, 2015, as amended (the “Liberty Interactive Proxy Agreement”), by and between Liberty Broadband and Liberty Interactive, Liberty Interactive granted Liberty Broadband an irrevocable proxy to vote all shares of Charter common stock owned beneficially or of record by Liberty Interactive following the closing of the Time Warner Cable Merger, for a five year term subject to extension upon the mutual agreement of both parties, subject to certain limitations. So long as the Liberty Interactive Proxy Agreement is in effect, Liberty Broadband also has a right of first refusal (“ROFR”) to purchase all or a portion of any shares of Charter common stock which Liberty Interactive proposes to transfer, subject to certain limitations.

Transactions Completed in Connection with the Bright House Transaction

Second Amended and Restated Stockholders Agreement

On May 18, 2016, pursuant to the Stockholders Agreement, upon the closing of the Bright House Transaction, Liberty Broadband purchased from Charter approximately 3.7 million additional shares of Charter Class A common stock at a price per share of $191.33 following adjustment by the applicable exchange ratios, for an aggregate purchase price of $700 million. Liberty Broadband funded its $700 million purchase in shares of Charter through cash on hand and margin loan draws, as discussed in note 6.

Proxy and Right of First Refusal Agreement

In connection with the Bright House Transaction, on May 18, 2016, A/N and Liberty Broadband entered into a proxy and right of first refusal agreement, as amended (“A/N Proxy”), pursuant to which A/N granted Liberty Broadband a five-year proxy to vote shares of Charter held by A/N, capped at a number of shares representing 7% of the voting power of Charter’s outstanding shares. As a result of the A/N Proxy and the Liberty Interactive Proxy Agreement, Liberty Broadband controls 25.01% of the aggregate voting power of Charter following the completion of the Time Warner Cable Merger and the Bright House Transaction and is Charter’s largest stockholder.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

So long as the A/N Proxy is in effect, if A/N proposes to transfer common units of Charter Communications Holdings, LLC (which units are exchangeable into Charter shares and which will, under certain circumstances, result in the conversion of certain shares of Class B Common Stock into Charter shares) or Charter shares, in each case, constituting either (i) shares representing the first 7.0% of the outstanding voting power of Charter held by A/N or (ii) shares representing the last 7.0% of the outstanding voting power of Charter held by A/N, Liberty Broadband will have a ROFR to purchase all or a portion of any such securities A/N proposes to transfer.  The purchase price per share for any securities sold to Liberty Broadband pursuant to the ROFR will be the volume-weighted average price of Charter shares for the two trading day period before the notice of a proposed sale by A/N, payable in cash.  Certain transfers are permitted to affiliates of A/N, subject to the transferee entity entering into an agreement assuming the transferor’s obligations under the A/N Proxy.

Investment in Charter

For discussion purposes the term “Charter” will be used to discuss both our previous and current holdings in Legacy Charter and Charter.  It is noted that the ticker symbol for the Class A common stock of each of Legacy Charter and Charter are the same, and that in connection with the Time Warner Cable Merger, Legacy Charter underwent a corporate reorganization, resulting in Charter, a former subsidiary of Legacy Charter, becoming the new publicly traded parent company. 

Broadband. As of SeptemberJune 30, 2017,2022, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately $9,327 million. The market value$12.1 billion and $23.5 billion, respectively. We own an approximate 31.2% economic ownership interest in Charter, based on shares of Charter’s Class A common stock issued and outstanding as of June 30, 2022.

Upon the closing of the Time Warner Cable merger, the Second Amended and Restated Stockholders Agreement, dated as of May 23, 2015, by and among Charter, Liberty Broadband and Advance/Newhouse Partnership, as amended (the “Stockholders Agreement”), became fully effective. Pursuant to the Stockholders Agreement, Liberty Broadband’s equity ownership in Charter as(on a fully diluted basis) is capped at the greater of September26% or the voting cap (“Equity Cap”). As of June 30, 2017 was approximately $19,651 million, which represented an approximate economic ownership2022, due to Liberty Broadband’s voting interest exceeding the current voting cap of 22%25.01%, our voting control of the outstanding equityaggregate voting power of Charter is 25.01%. Under the Stockholders Agreement, Liberty Broadband has agreed to vote (subject to certain exceptions) all voting securities beneficially owned by it, or over which it has voting discretion or control that are in excess of the voting cap, in the same proportion as all other votes cast by public stockholders of Charter with respect to the applicable matter.

In February 2021, Liberty Broadband was notified that date.its ownership interest, on a fully diluted basis, had exceeded the Equity Cap set forth in the Stockholders Agreement. On February 23, 2021, Charter and Liberty Broadband entered into a letter agreement in order to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the Equity Cap. Pursuant to this letter agreement, following any month during which Charter purchases, redeems or buys back shares of its Class A common stock, and prior to certain meetings of Charter’s stockholders, Liberty Broadband will be obligated to sell to Charter, and Charter will be obligated to purchase, such number of shares of Class A common stock as is necessary (if any) to reduce Liberty Broadband’s percentage equity interest, on a fully diluted basis, to the Equity Cap (such transaction, a “Charter Repurchase”). The per share sale price for each share of Charter will be equal to the volume weighted

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

average price paid by Charter in its repurchases, redemptions and buybacks of its common stock (subject to certain exceptions) during the month prior to the Charter Repurchase (or, if applicable, during the relevant period prior to the relevant meeting of Charter stockholders). Under the terms of the letter agreement, Liberty Broadband sold 3,227,684 and 2,761,608 shares of Charter Class A common stock to Charter for $1,806 million and $1,762 million during the six months ended June 30, 2022 and 2021, respectively, to maintain our fully diluted ownership percentage at 26%. Subsequent to June 30, 2022, Liberty Broadband sold 783,807 shares of Charter Class A common stock to Charter for $363 million in July 2022.

Investment in Charter

The excess basis is $2,100in our investment in Charter of $8,967 million as of SeptemberJune 30, 2017 and has been2022 is allocated within memo accounts used for equity method accounting purposes as follows (amounts in millions):

June 30,

December 31,

2022

2021

Property and equipment

    

$

627

661

Customer relationships

 

2,437

2,537

Franchise fees

 

3,897

3,828

Trademarks

 

29

29

Goodwill

 

4,105

4,024

Debt

 

(512)

(535)

Deferred income tax liability

 

(1,616)

(1,626)

$

8,967

8,918

 

 

 

 

 

Property and equipment

    

$

174

 

Customer relationships

 

 

346

 

Franchise fees

 

 

1,170

 

Trademarks

 

 

29

 

Goodwill

 

 

1,046

 

Debt

 

 

(20)

 

Deferred income tax liability

 

 

(645)

 

 

 

$

2,100

 

Upon acquisition, Liberty Broadband ascribed remaining useful lives of 7 years and 13 years to propertyProperty and equipment and customer relationships have weighted average remaining useful lives of approximately 5 years and 9 years, respectively, and indefinite lives to franchise fees, trademarks and goodwill.goodwill have indefinite lives. The excess basis of outstanding debt is amortized over the contractual period using the effective interest ratestraight-line method. The increase in excess basis for the ninesix months ended SeptemberJune 30, 2017,2022 was primarily due to Charter’s share buyback program, partially offset by Liberty Broadband’s participation in Charter’s share buyback program. The Company’s Shareshare of earnings (losses) of affiliatesaffiliate line item in the accompanying condensed consolidated statements of operations includes expenses of $15.3$67 million and $18.5$64 million, net of related taxes, for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and expenses of $44.0$134 million and $23.2$122 million, net of related taxes, for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.

The Company had a dilution losslosses of $3.7$11 million and $16.3$15 million during the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and a dilution losslosses of $42.5$67 million and a dilution gain of $760.1$97 million during the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The dilution gainlosses for the nine months ended September 30, 2016 is primarily attributable to Liberty Broadband’s investment basis in Charter at a price per share below the new equity issued in the Time Warner Cable Merger. The dilution losses during the other periods presented arewere primarily attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per share.

share, partially offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during both the six months ended June 30, 2022 and 2021.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Accounting Change

Charter adopted Accounting Standards Update (“ASU”) 2016-09 on January 1, 2017. Upon adoption of ASU 2016-09, Charter recognized excess tax benefits of approximately $136 million in deferred tax assets that were previously not recognized in a cumulative-effect adjustment to retained earnings. The impact of this entry on the Company’s equity is reflected in the line item Cumulative effect of accounting change at Charter in the accompanying condensed consolidated statement of equity.

Summarized unaudited financial information for Charter is as follows (amounts in millions):follows:

Charter condensed consolidated balance sheets

    

June 30, 2022

December 31, 2021

 

amounts in millions

Current assets

$

3,738

3,566

Property and equipment, net

 

34,472

34,310

Goodwill

 

29,563

29,562

Intangible assets, net

 

70,727

71,406

Other assets

 

4,758

3,647

Total assets

$

143,258

142,491

Current liabilities

$

11,395

12,458

Deferred income taxes

 

19,123

19,096

Long-term debt

 

94,468

88,564

Other liabilities

 

4,759

4,217

Equity

 

13,513

18,156

Total liabilities and shareholders’ equity

$

143,258

142,491

 

 

 

 

 

 

 

 

    

September 30, 2017

 

December 31, 2016

 

Current assets

 

$

4,132

 

3,300

 

Property and equipment, net

 

 

33,300

 

32,963

 

Goodwill

 

 

29,554

 

29,509

 

Intangible assets, net

 

 

79,905

 

81,924

 

Other assets

 

 

1,337

 

1,371

 

Total assets

 

$

148,228

 

149,067

 

Current liabilities

 

 

10,419

 

9,572

 

Deferred income taxes

 

 

26,576

 

26,665

 

Long-term debt

 

 

66,064

 

59,719

 

Other liabilities

 

 

2,591

 

2,745

 

Equity

 

 

42,578

 

50,366

 

Total liabilities and shareholders’ equity

 

$

148,228

 

149,067

 

Charter condensed consolidated statements of operations

Three months ended

    

Six months ended

 

June 30,

June 30,

2022

2021

2022

2021

 

amounts in millions

Revenue

$

13,598

12,802

26,798

25,324

Cost and expenses:

Operating costs and expenses (excluding depreciation and amortization)

 

8,193

7,882

16,327

15,593

Depreciation and amortization

 

2,240

2,354

4,534

4,795

Other operating expenses, net

 

(62)

(9)

(61)

293

10,371

10,227

20,800

20,681

Operating income

3,227

2,575

5,998

4,643

Interest expense, net

 

(1,109)

(1,004)

(2,169)

(1,987)

Other income (expense), net

79

(132)

102

(80)

Income tax (expense) benefit

 

(489)

(281)

(834)

(497)

Net income (loss)

1,708

1,158

3,097

2,079

Less: Net income attributable to noncontrolling interests

(237)

(138)

(423)

(252)

Net income (loss) attributable to Charter shareholders

$

1,471

1,020

2,674

1,827

 

 

 

 

 

 

 

 

 

 

Three months ended 

    

Nine months ended

 

September 30,

 

September 30,

 

2017

 

2016

 

2017

 

2016

Revenue

$

10,458

 

10,037

 

30,979

 

18,728

Cost and expenses:

 

 

 

 

 

 

 

 

Operating costs and expenses (excluding depreciation and amortization)

 

(6,703)

 

(6,482)

 

(19,857)

 

(12,157)

Depreciation and amortization

 

(2,701)

 

(2,437)

 

(7,846)

 

(4,412)

Other operating expenses, net

 

(145)

 

(207)

 

(374)

 

(776)

 

 

(9,549)

 

(9,126)

 

(28,077)

 

(17,345)

Operating income

 

909

 

911

 

2,902

 

1,383

Interest expense, net

 

(788)

 

(724)

 

(2,250)

 

(1,771)

Other income (expense), net

 

(3)

 

79

 

(55)

 

429

Income tax benefit (expense)

 

(26)

 

(16)

 

(99)

 

3,135

Net income (loss)

 

92

 

250

 

498

 

3,176

Less: Net income attributable to noncontrolling interests

 

(44)

 

(61)

 

(156)

 

(108)

Net income (loss) attributable to Charter shareholders

$

48

 

189

 

342

 

3,068

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(5) Goodwill and Other (5) Intangible Assets

There were no  changes in the carrying amount of goodwill during the nine months ended September 30, 2017.Intangible Assets Subject to Amortization, net

    

June 30, 2022

    

December 31, 2021

 

Gross

Net

Gross

Net

carrying

Accumulated

carrying

carrying

Accumulated

carrying

 

  �� 

amount

    

amortization

    

amount

    

amount

    

amortization

    

amount

 

amounts in millions

 

Customer relationships

$

515

(70)

445

515

(49)

466

Other amortizable intangibles

 

144

(43)

101

138

(31)

107

Total

$

659

(113)

546

653

(80)

573

Intangible assets subject to amortization are comprised of the following (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

December 31, 2016

 

 

 

Gross

 

 

 

Net

 

Gross

 

 

 

Net

 

 

 

Carrying

 

Accumulated

 

Carrying

 

Carrying

 

Accumulated

 

Carrying

 

 

 

Amount

 

Amortization

 

Amount

 

Amount

 

Amortization

 

Amount

 

Acquired patents

    

$

10,823

    

(9,633)

    

1,190

    

10,823

    

(8,450)

    

2,373

 

Customer relationships

 

 

10,213

 

(6,463)

 

3,750

 

10,213

 

(5,440)

 

4,773

 

Tradename

 

 

2,838

 

(1,809)

 

1,029

 

2,838

 

(1,528)

 

1,310

 

Capitalized software

 

 

857

 

(763)

 

94

 

850

 

(710)

 

140

 

 

 

$

24,731

 

(18,668)

 

6,063

 

24,724

 

(16,128)

 

8,596

 

Skyhook’s patents are amortized straight-line over three and a half years and Skyhook’s tradename and customer relationship are amortized straight-line over five and a half years. Capitalized softwareAmortization expense for intangible assets are amortized over three to five years. Amortization expensewith finite useful lives was $842 thousand$16 million and $850 thousand$18 million for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and $2.5$33 million and $2.6$37 million for the ninesix months ended SeptemberJune 30, 2017 and 2016,2022, respectively.

The estimated future amortizationAmortization expense for the next five years related toamortizable intangible assets with definite lives asfor each of September 30, 2017the five succeeding fiscal years is as followsestimated to be (amounts in thousands)millions):

 

 

 

 

 

Remainder of 2017

    

$

841

 

2018

 

$

2,575

 

2019

 

$

1,776

 

2020

 

$

871

 

2021

 

$

 —

 

Remainder of 2022

$

33

2023

$

60

2024

$

54

2025

$

51

2026

$

49

(6) Debt

Outstanding debt at September 30, 2017 and December 31, 2016Debt is summarized as follows:

 

 

 

 

 

 

 

September 30, 2017

 

December 31, 2016

 

 

(amounts in thousands)

2014 Margin Loans

$

 —

 

400,000

2016 Margin Loans

 

 —

 

200,000

2017 Margin Loans

 

500,000

 

 —

Deferred loan costs

 

(3,025)

 

(1,488)

 

$

496,975

 

598,512

Less debt classified as current

 

 —

 

(400,000)

Total long-term debt

$

496,975

 

198,512

    

Outstanding

    

    

    

    

 

principal

Carrying value

 

June 30,

June 30,

December 31,

 

        

2022

    

2022

        

2021

 

 

amounts in millions

Margin Loan Facility

$

1,400

 

1,400

 

1,300

2.75% Exchangeable Senior Debentures due 2050

 

575

 

548

 

585

1.25% Exchangeable Senior Debentures due 2050

825

775

818

1.75% Exchangeable Senior Debentures due 2046

15

19

25

Senior notes

 

600

 

630

 

632

Senior credit facility

 

398

 

398

 

399

Wells Fargo note payable

 

5

 

5

 

6

Deferred financing costs

 

 

(2)

 

(4)

Total debt

$

3,818

 

3,773

 

3,761

Debt classified as current

 

 

(3)

 

(28)

Total long-term debt

$

3,770

 

3,733

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

2014 Margin Loans

On October 30, 2014, in connection with and prior to the effectiveness of the Broadband Spin-Off, a wholly-owned special purpose subsidiary of the Company (“BroadbandSPV”) entered into two margin loan agreements (the “2014 Margin Loan Agreements”) with each of the lenders party thereto. The 2014 Margin Loan Agreements permitted BroadbandSPV, subject to certain funding conditions, to borrow term loans up to an aggregate principal amount equal to $400 million (the “2014 Margin Loans”). The maximum borrowing capacity of $400 million under the 2014 Margin Loan Agreements was outstanding at December 31, 2016. The maturity date of the 2014 Margin Loans was October 30, 2017, accordingly the debt was classified as current as of December 31, 2016. Borrowings under the 2014 Margin Loan Agreements bore interest at the three-month LIBOR rate plus a per annum spread of 1.55%, and had an unused commitment fee of 0.25% per annum based on the average daily unused portion of the 2014 Margin Loans. Interest was payable quarterly in arrears beginning on December 31, 2014. On August 31, 2017, the outstanding borrowings of $400 million were repaid, as discussed below.

2016 Margin Loans

On March 21, 2016, a wholly-owned special purpose subsidiary of the Company (“Cheetah 5”), entered into two margin loan agreements (the “2016 Margin Loan Agreements” and together with the 2014 Margin Loan Agreements, the “Margin Loan Agreements”) with each of the lenders party thereto. The 2016 Margin Loan Agreements permitted Cheetah 5, subject to certain funding conditions, to borrow initial term loans up to an aggregate principal amount equal to $200 million and delayed draw loans (the “Draw Loans”) up to an aggregate principal amount equal to $100 million, for an aggregate total of $300 million (collectively the “2016 Margin Loans”). Cheetah 5 had borrowed $200 million as of December 31, 2016 and had $100 million available to be drawn until September 21, 2017. The maturity date of the 2016 Margin Loans was March 21, 2018, accordingly the debt was classified as noncurrent as of December 31, 2016. Borrowings under the 2016 Margin Loans bore interest at the applicable LIBOR rate plus 2.10% per annum and had an unused commitment fee of 0.5% per annum based on the average daily unused portion of the Draw Loans. Interest was payable quarterly in arrears beginning on March 31, 2016. The proceeds of the 2016 Margin Loans were used for the Company’s additional investment in Charter during May 2016, as discussed in note 4. On August 31, 2017, the outstanding borrowings of $200 million were repaid, as discussed below.

2017 Margin Loan Facility

On August 31, 2017,May 12, 2021, a bankruptcy remote wholly owned subsidiary of the Company (“SPV”SPV), entered into Amendment No. 4 to Margin Loan Agreement and Amendment No. 4 to Collateral Account Control Agreement (the “Fourth Amendment”), which amends SPV’s margin loan agreement, dated as of August 31, 2017 (as amended by the Fourth

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Amendment, the “Margin Loan Agreement”), with a multi-draw margingroup of lenders. Upon the effectiveness of the Fourth Amendment (the date on which such effectiveness occurred, the “Fourth Amendment Effective Date”), the Margin Loan Agreement provided for (x) a term loan credit facility (the “2017 Margin Loan Facility” and, the credit agreement governing such facility, the “2017 Margin Loan Agreement”) with Bank of America, N.A and the lenders thereunder. SPV is permitted, subject to certain funding conditions, to borrow term loans up toin an aggregate principal amount equal to $1.0 billion. SPV will also haveof $1.15 billion (the “Term Loan Facility” and proceeds of such facility, the ability from time to time to request additional loansTerm Loans”), (y) a revolving credit facility in an aggregate principal amount of $1.15 billion (the “Revolving Loan Facility” and proceeds of such facility, the “Revolving Loans”; the Revolving Loans, collectively with the Term Loans, the “Loans”) and (z) an uncommitted incremental term loan facility in an aggregate principal amount of up to $1.0$200 million (collectively, the “Margin Loan Facility”). No additional borrowings under the Margin Loan Agreement were made on the Fourth Amendment Effective Date and, after giving effect to the transactions occurring on such date, there were (i) $1.15 billion in Term Loans outstanding under the Term Loan Facility and (ii) $0.00 of Revolving Loans outstanding. SPV’s obligations under the Margin Loan Facility are secured by first priority liens on the shares of Charter owned by SPV.

On the Fourth Amendment Effective Date, substantially simultaneously but after the effectiveness of the Fourth Amendment, SPV repaid $850 million of outstanding Revolving Loans.

In the six months ended June 30, 2022, SPV drew down $300 million on the Revolving Loans and repaid $200 million.

Outstanding borrowings under the Margin Loan Agreement were $1.4 billion and $1.3 billion at June 30, 2022 and December 31, 2021, respectively. As of June 30, 2022, SPV was permitted to borrow an uncommitted basisadditional $900 million under the Margin Loan Agreement, subject to certain conditions. SPV had borrowed $500 million as of September 30, 2017 and had $500 million available tofunding conditions, which may be drawn until August 31, 2018.five business days prior to the maturity date. The maturity date of the loans under the 2017 Margin Loan Agreement is August 30, 2019May 12, 2024 (except for any incrementaladditional loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). Accordingly,Prior to the debt is classified as noncurrent ascompletion of September 30, 2017. Borrowingsthe Combination, borrowings under the 2017 Margin Loan Agreement bearbore interest at the three-month LIBOR rate plus a per annum spread of 1.5%, unless it is unlawful forwhich increased to a per annum spread of 1.85% from and after the applicable lendercompletion of the Combination until the Fourth Amendment Effective Date, when the per annum spread decreased to fund or maintain loans based on LIBOR or there are material restrictions on the applicable lender to do so, in which case borrowings under the 20171.5%. The Margin Loan Agreement will either (a) bear interest at 0.5% plus the higher of (i) the federal funds rate plus ½ of 1%, (ii) the prime rate and (iii)also provides for customary LIBOR plus 1% for each day during such period or (b) be prepaid. Borrowings outstanding under these margin loans bore interest at a rate of 2.74% per annum at September 30, 2017. Interest is payable quarterly in arrears beginning on September 29, 2017. SPV used available cash and a portion of the proceeds of the loans under the 2017 Margin Loan Facility to repay the Margin Loan Agreements. Borrowings may also be used for distribution as a dividend or a return of capital, for the purchase of margin stock and for general corporate purposes.  

replacement provisions.

The 2017 Margin Loan Agreement contains various affirmative and negative covenants that restrict the activities of SPV (and, in some cases, the Company and its subsidiaries with respect to shares of Charter owned by the Company and its

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

subsidiaries). The 2017 Margin Loan Agreement does not include any financial covenants. The 2017 Margin Loan Agreement also containsdoes contain restrictions related to additional indebtedness and events of default customary for margin loans of this type.

SPV’s obligations under the 2017 Margin Loan Agreement are secured by first priority liens on a portion of the Company’s ownership interest in Charter, sufficient for SPV to meet the loan to value requirements under the 2017 Margin Loan Agreement. The 2017 Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares transferred,pledged as collateral, except to the extent that a lender party buys any shares in a sale or other disposition made pursuant to the terms of the loan agreements.agreement.As of SeptemberJune 30, 2017, approximately 6.82022, 12.3 million shares of Charter with a value of $2.5$5.7 billion were pledged as collateral pursuant to the 2017 Margin Loan Agreement.

Exchangeable Senior Debentures

The Company has elected to account for all of its exchangeable senior debentures at fair value in its condensed consolidated financial statements. Accordingly, changes in the fair value of these instruments are recognized in unrealized gains (losses) in the accompanying condensed consolidated statements of operations. See note 3 for information related to unrealized gains (losses) on debt measured at fair value. As of June 30, 2022, a holder of the Company’s 2.75% Exchangeable Senior Debentures due 2050 (the “2.75% Debentures”), a holder of the Company’s 1.25% Exchangeable Senior Debentures due 2050 (the “1.25% Debentures) or a holder of the 1.75% exchangeable senior debentures due 2046 (the “1.75% Debentures) does not have the ability to exchange and, accordingly, the 2.75% Debentures, 1.25% Debentures and 1.75% Debentures are classified as long-term debt in the condensed consolidated balance sheet as of June 30, 2022. The Company

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

reviews the terms of all the debentures on a quarterly basis to determine whether an event has occurred to require current classification on the condensed consolidated balance sheets.

Senior Notes

In connection with the closing of the Combination on December 18, 2020, GCI, LLC became an indirect wholly owned subsidiary of the Company. GCI, LLC is the issuer of $600 million 4.75% senior notes due 2028 (the “Senior Notes”). The Senior Notes were issued by GCI, LLC on October 7, 2020 and are unsecured. Interest on the Senior Notes is payable semi-annually in arrears. The Senior Notes are redeemable at the Company’s option, in whole or in part, at a redemption price defined in the indenture, and accrued and unpaid interest (if any) to the date of redemption. The Senior Notes are stated net of an aggregate unamortized premium of $30 million at June 30, 2022. Such premium is being amortized to interest expense in the accompanying condensed consolidated statements of operations.

Senior Credit Facility

In connection with the closing of the Combination on December 18, 2020, GCI, LLC became an indirect wholly owned subsidiary of the Company. GCI, LLC is the borrower under the Senior Credit Facility (as defined below).

On October 15, 2021, GCI, LLC entered into an Eighth Amended and Restated Credit Agreement (the “Senior Credit Facility”), which includes a $550 million revolving credit facility, with a $25 million sublimit for standby letters of credit, that matures on October 15, 2026 and a $250 million Term Loan A that matures on October 15, 2027. Additionally, the $400 million Term Loan B which existed prior to the amendment, was repaid in full using the proceeds from the new Term Loan A together with $150 million in borrowings under the revolving credit facility. The revolving credit facility borrowings under the Senior Credit Facility that are alternate base rate loans bear interest at a per annum rate equal to the alternate base rate plus a margin that varies between 0.50% and 1.75% depending on GCI, LLC’s total leverage ratio. The revolving credit facility borrowings under the Senior Credit Facility that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 1.50% and 2.75% depending on GCI, LLC’s total leverage ratio. Term Loan A borrowings that are alternate base rate loans bear interest at a per annum rate equal to the alternate base rate plus a margin that varies between 1.00% and 2.25% depending on GCI, LLC’s total leverage ratio. Term Loan A borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 2.00% and 3.25% depending on GCI, LLC’s total leverage ratio. Principal payments are due quarterly on the Term Loan A equal to 0.25% of the original principal amount, which may step up to 1.25% of the original principal amount of the Term Loan A depending on GCI, LLC’s secured leverage ratio. Each loan may be prepaid at any time and from time to time without penalty other than customary breakage costs. Any amounts prepaid on the revolving credit facility may be reborrowed. The Senior Credit Facility also provides for customary LIBOR replacement provisions.

Prior to the amendment, the borrowings under the Senior Credit Facility bore interest at either the alternate base rate or LIBOR (based on an interest period selected by GCI, LLC of one month, two months, three months or six months) at the election of GCI, LLC in each case plus a margin. The revolving credit facility borrowings that were alternate base rate loans bore interest at a per annum rate equal to the alternate base rate plus a margin that varied between 0.50% and 1.75% depending on GCI, LLC’s total leverage ratio. The revolving credit facility borrowings that were LIBOR loans bore interest at a per annum rate equal to the applicable LIBOR plus a margin that varied between 1.50% and 2.75% depending on GCI, LLC’s total leverage ratio. Term Loan B borrowings that were alternate base rate loans bore interest at a per annum rate equal to the alternate base rate plus a margin of 1.75%. Term Loan B borrowings that were LIBOR loans bore interest at a per annum rate equal to the applicable LIBOR plus a margin of 2.75% with a LIBOR floor of 0.75%.

GCI, LLC’s First Lien Leverage Ratio (as defined in the Senior Credit Facility) may not exceed 4.00 to 1.00.

The terms of the Senior Credit Facility include customary representations and warranties, customary affirmative and negative covenants and customary events of default. At any time after the occurrence of an event of default under the Senior

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Credit Facility, the lenders may, among other options, declare any amounts outstanding under the Senior Credit Facility immediately due and payable and terminate any commitment to make further loans under the Senior Credit Facility. The obligations under the Senior Credit Facility are secured by a security interest on substantially all of the assets of GCI, LLC and the subsidiary guarantors, as defined in the Senior Credit Facility, and on the stock of GCI Holdings.

As of June 30, 2022, there was $248 million outstanding under the Term Loan A, $150 million outstanding under the revolving portion of the Senior Credit Facility and $3 million in letters of credit under the Senior Credit Facility, leaving $397 million available for borrowing.

During the six months ended June 30, 2021, GCI, LLC repaid $210 million on its revolving credit facility.

Wells Fargo Note Payable

In connection with the closing of the Combination on December 18, 2020, the Company assumed GCI Holdings’ outstanding $6 million under its Wells Fargo Note Payable (as defined below).

GCI Holdings issued a note to Wells Fargo that matures on July 15, 2029 and is payable in monthly installments of principal and interest (the "Wells Fargo Note Payable"). The interest rate is variable at one month LIBOR plus 2.25%. The note also provides for customary LIBOR replacement provisions.

The note is subject to similar affirmative and negative covenants as the Senior Credit Facility. The obligations under the note are secured by a security interest and lien on the building purchased with the note.

Debt Covenants

GCI, LLC is subject to covenants and restrictions under its Senior Notes and Senior Credit Facility. The Company and GCI, LLC are in compliance with all debt maintenance covenants as of June 30, 2022.

Fair Value of Debt

The fair value of the Senior Notes was $520 million at June 30, 2022.

Due to the variable rate nature of the Margin Loan, Senior Credit Facility and Wells Fargo Note Payable, the Company believes that the carrying amount approximates fair value at June 30, 2022.

(7) Preferred Stock

Liberty Broadband's preferred stock is issuable, from time to time, with such designations, preferences and relative participating, optional or other rights, qualifications, limitations or restrictions thereof, as shall be stated and expressed in a resolution or resolutions providing for the issue of such preferred stock adopted by Liberty Broadband’s board of directors.

Liberty Broadband Series A Cumulative Redeemable Preferred Stock (“Liberty Broadband Preferred Stock”) was issued as a result of the Combination on December 18, 2020. Each share of Series A Cumulative Redeemable Preferred Stock of GCI Liberty outstanding immediately prior to the closing of the Combination was converted into 1 share of newly issued Liberty Broadband Preferred Stock. The Company is required to redeem all outstanding shares of Liberty Broadband Preferred Stock out of funds legally available, at the liquidation price plus all unpaid dividends (whether or not declared) accrued from the most recent dividend payment date through the redemption date, on the first business day following March 8, 2039. There were 7,300,000 shares of Liberty Broadband Preferred Stock authorized and 7,183,962 shares issued and outstanding at June 30, 2022. An additional 42,700,000 shares of preferred stock of the Company are authorized and are undesignated as to series. The Liberty Broadband Preferred Stock is accounted for as a liability on the Company’s condensed

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

consolidated balance sheets because it is mandatorily redeemable. As a result, all dividends paid on the Liberty Broadband Preferred Stock are recorded as interest expense in the Company’s condensed consolidated statements of operations. Liberty Broadband Preferred Stock has one-third of a vote per share.

The liquidation price is measured per share and shall mean the sum of (i) $25, plus (ii) an amount equal to all unpaid dividends (whether or not declared) accrued with respect to such share have been added to and then remain part of the liquidation price as of such date. The fair value of Liberty Broadband Preferred Stock of $203 million was recorded at the time of the Combination.

The holders of shares of Liberty Broadband Preferred Stock are entitled to receive, when and as declared by the Liberty Broadband board of directors, out of legally available funds, preferential dividends that accrue and cumulate as provided in the certificate of designations for the Liberty Broadband Preferred Stock.

Dividends on each share of Liberty Broadband Preferred Stock accrue on a daily basis at a rate of 7.00% per annum of the liquidation price.

Accrued dividends are payable quarterly on each dividend payment date, which is January 15, April 15, July 15, and October 15 of each year, commencing January 15, 2021. If Liberty Broadband fails to pay cash dividends on the Liberty Broadband Preferred Stock in full for any 4 consecutive or non-consecutive dividend periods then the dividend rate shall increase by 2.00% per annum of the liquidation price until cured. On May 26, 2022, the Company announced that its board of directors had declared a quarterly cash dividend of approximately $0.44 per share of Liberty Broadband Preferred Stock which was paid on July 15, 2022 to shareholders of record of the Liberty Broadband Preferred Stock at the close of business on June 30, 2022.

(8) Stock-Based Compensation

Liberty Broadband grants, to certain of its directors, employees and employees of its subsidiaries, restricted stock units and stock options to purchase shares of its common stock (collectively, "Awards"). The Company measures the cost of employee services received in exchange for an equity classified Award (such as stock options and restricted stock) based on the grant-date fair value (“GDFV”) of the Award, and recognizes that cost over the period during which the employee is required to provide service (usually the vesting period of the Award). The Company measures the cost of employee services received in exchange for a liability classified Award based on the current fair value of the Award, and remeasuresre-measures the fair value of the Award at each reporting date.

Included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations are the following amounts$9 million and $18 million of stock-based compensation forduring the three and ninesix months ended SeptemberJune 30, 20172022, respectively, and 2016 (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

 

ended

 

ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

Operating expense

    

$

 3

    

 4

    

 5

    

 2

 

Selling, general and administrative

 

 

1,429

 

1,596

 

4,032

 

4,363

 

Research and development

 

 

67

 

136

 

339

 

217

 

 

 

$

1,499

 

1,736

 

4,376

 

4,582

 

$10 million and $20 million of stock-based compensation during the three and six months ended June 30, 2021, respectively.

Liberty Broadband – Grants of Stock OptionsAwards

There were noDuring the six months ended June 30, 2022, Liberty Broadband granted 136 thousand options to purchase shares of Liberty Broadband Series C common stock to our CEO in connection with his employment agreement. Such options had a GDFV of $39.10 per share and vest on December 30, 2022.

There were 0 options to purchase shares of Liberty Broadband Series A or Series B or Series C common stock granted during the ninesix months ended SeptemberJune 30, 2017.  2022.

The Company calculateshas calculated the GDFV for all of its equity classified awards and any subsequent remeasurementre-measurement of its liability classified awards using the Black-Scholes Model. The Company estimates the expected term of the Awards

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

based on historical exercise and forfeiture data. Since Liberty Broadband common stock has not traded on the stock market for a significant length of time, theThe volatility used in the calculation for Awards is based on a blend of the historical volatility of Liberty Broadband and Charter common stock and the implied volatility of publicly traded Liberty Broadband and Charter options; as the most significant asset within Liberty Broadband, the volatility of Charter was considered in the overall volatility of Liberty Broadband.stock. The Company uses a zero0 dividend rate and the risk-free rate for Treasury Bonds with a term similar to that of the subject option.options.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liberty Broadband – Outstanding Awards

The following tables presenttable presents the number and weighted average exercise price (“WAEP”) of Awards to purchase Liberty Broadband common stock granted to certain officers, employees and directors of the Company, as well as the weighted average remaining life and aggregate intrinsic value of the Awards.

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Weighted

    

    

 

 

 

 

 

 

average

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

contractual

 

intrinsic

 

Series A

 

WAEP

 

life

 

value

 

(in thousands)

 

 

 

(in years)

 

(in millions)

Outstanding at January 1, 2017

 

454

 

$

32.47

 

 

 

 

    

    

    

    

    

Weighted

    

    

 

average

 

remaining

Aggregate

 

contractual

intrinsic

 

Series C

WAEP

life

value

 

(in thousands)

(in years)

(in millions)

 

Outstanding at January 1, 2022

 

3,483

$

96.61

 

Granted

 

 —

 

$

 —

 

 

 

 

 

136

$

138.26

 

Exercised

 

(49)

 

$

26.85

 

 

 

 

 

(11)

$

64.08

 

Forfeited/cancelled

 

 —

 

$

 —

 

 

 

 

$

Outstanding at September 30, 2017

 

405

 

$

33.15

 

2.2

 

$

25

Exercisable at September 30, 2017

 

402

 

$

33.06

 

2.2

 

$

25

Outstanding at June 30, 2022

 

3,608

$

98.28

 

3.8

$

112

Exercisable at June 30, 2022

 

2,168

$

67.10

 

2.9

$

112

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

    

 

    

Weighted

    

    

 

 

 

 

 

 

 

 

average

 

 

 

 

 

 

 

 

 

 

remaining

 

Aggregate

 

 

 

 

 

 

 

contractual

 

intrinsic

 

 

Series C

 

WAEP

 

life

 

value

 

 

(in thousands)

 

 

 

 

(in years)

 

(in millions)

Outstanding at January 1, 2017

 

2,467

 

$

42.45

 

 

 

 

 

Granted

 

 —

 

$

 —

 

 

 

 

 

Exercised

 

(94)

 

$

27.08

 

 

 

 

 

Forfeited/cancelled

 

 —

 

$

 —

 

 

 

 

 

Outstanding at September 30, 2017

 

2,373

 

$

43.06

 

5.4

 

$

124

Exercisable at September 30, 2017

 

851

 

$

33.59

 

2.3

 

$

52

As of SeptemberJune 30, 2017,2022, Liberty Broadband also had 1 thousand Series A options and 315 thousand Series B options outstanding and exercisable at a WAEP of $35.81 and $96.25, respectively, and a weighted average remaining contractual life of 0.5 years and 1.9 years, respectively.

As of June 30, 2022, the total unrecognized compensation cost related to unvested Awards was approximately $11 million.$55 million. Such amount will be recognized in the Company's condensed consolidated statements of operations over a weighted average period of approximately 21.8 years.

As of SeptemberJune 30, 2017,2022, Liberty Broadband reserved 2.83.9 million shares of Liberty Broadband Series A, Series B and Series C common stock for issuance under exercise privileges of outstanding stock Awards.

Skyhook Equity Incentive Plans

Skyhook issued 3.3 million phantom stock appreciation rights (“PARs”) and no phantom stock units (“PSUs”) during the nine months ended September 30, 2017. As of September 30, 2017, the fair value of outstanding PARs and PSUs was approximately $2.4 million. As of September 30, 2017,  $1.6 million (Level 3) is included in Other current liabilities in the accompanying condensed consolidated balance sheet for the fair value of Skyhook’s vested long-term incentive plan obligations.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(8)(9) Commitments and Contingencies

Leases

Skyhook leases various properties under operating leases expiring at various times through 2018. Skyhook’s two principal facilities are under lease through December 2017 and December 2019, respectively. Including amounts due to Liberty under the facilities sharing agreement, the Company’s total rental expense was $368 thousand and $452 thousand for each of the three months ended September 30, 2017 and 2016, respectively, and $890 thousand and $1.0 million for each of the nine months ended September 30, 2017 and 2016, respectively.

General Litigation

InThe Company has contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business, the Company and its consolidated subsidiary are parties to legal proceedings and claims involving alleged infringement of third-party intellectual property rights, defamation, and other claims, including infringement of the intellectual property rights of the Company and its consolidated subsidiary by third parties.business. Although it is reasonably possible that the Company may incur losses upon conclusion of such matters, an estimate of any loss or range of loss cannot be made. In the opinion of management, it is expected that amounts, if any, which may be required to satisfy such contingencies will not be material in relation to the accompanying condensed consolidated financial statements.

Indemnification ClaimsHollywood Firefighters’ Pension Fund, et al. v. GCI Liberty, Inc., et al. In October 2020, a putative class action complaint was filed by 2 purported GCI Liberty stockholders which named as defendants GCI Liberty, as well as the members of the GCI Liberty board of directors. The complaint alleged, among other things, that Mr. Gregory B. Maffei, a director and the President and Chief Executive Officer of Liberty Broadband and, prior to the Combination, GCI Liberty, and Mr. John C. Malone, the Chairman of the board of directors of Liberty Broadband and, prior to the Combination, GCI Liberty, in their purported capacities as controlling stockholders and directors of GCI Liberty, and the other directors of GCI Liberty,

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

breached their fiduciary duties by approving the Combination. The complaint also alleged that various prior and current relationships among members of the GCI Liberty special committee, Mr. Malone and Mr. Maffei rendered the members of the GCI Liberty special committee not independent.

During March 2021 and in advance of the expenditure of significant time and costs to conduct the depositions proposed to have been taken in this action, the parties began negotiations with the class of plaintiffs for a potential settlement of this action. On May 5, 2021, the plaintiffs (on behalf of themselves and other members of a proposed settlement class) and defendants entered into an agreement in principle to settle the litigation pursuant to which the parties agreed that the plaintiffs will dismiss their claims with prejudice, with customary releases, in return for a settlement payment of $110 million to be paid by a wholly owned subsidiary of Liberty Broadband (as successor by merger to GCI Liberty) and/or insurers for the defendants and for GCI Liberty, which was recorded as a litigation settlement expense within operating income in the condensed consolidated statements of operations during the first quarter of 2021. This litigation was subsequently settled and paid in accordance with the agreement settlement during 2021. Liberty Broadband also agreed to final settlement amounts with its insurance carriers in the third quarter of 2021.

Rural Health Care (“RHC”) Program. GCI Holdings received a letter of inquiry and request for information from the Enforcement Bureau (the “Enforcement Bureau”) of the Federal Communications Commission (the "FCC"), in March 2018 relating to the period beginning January 1, 2015 and including all future periods. In the normal coursefourth quarter of business, Skyhook provides indemnification2019, GCI Holdings became aware of potential RHC Program compliance issues related to certain customers against specified claims that might arise against those customersof its currently active and expired contracts with certain of its RHC customers. On December 17, 2020, GCI Holdings received a Subpoena Duces Tecum from the useFCC’s Office of Skyhook’s products. To date, Skyhook hasthe Inspector General requiring production of documents from January 1, 2009 to the present related to a single RHC customer and related contracts, information regarding GCI Holdings’ determination of rural rates for a single customer, and to provide information regarding persons with knowledge of pricing practices generally.  With respect to the ongoing inquiries from the FCC’s Enforcement Bureau and the FCC’s Office of the Inspector General, GCI Holdings recognized a liability of approximately $12 million in 2019 for contracts that were deemed probable of not complying with the RHC Program rules. GCI Holdings also identified certain contracts where additional loss was reasonably possible and such loss could range from 0 to $44 million. An accrual was not made any significant reimbursementsfor the amount of the reasonably possible loss in accordance with the applicable accounting guidance. GCI Holdings could also be assessed fines and penalties but such amounts could not be reasonably estimated.

In 2021, GCI Holdings was informed that a qui tam action has been filed in the Western District of Washington arising from the subject matter under review by the Enforcement Bureau. The Department of Justice (the “DOJ”) is investigating whether GCI Holdings submitted false claims and/or statements in connection with GCI’s participation in the FCC’s RHC Program. Additionally in 2021, the DOJ issued a Civil Investigative Demand with regard to any ofthe qui tam action.  With respect to the qui tam action, the DOJ and GCI Holdings held discussions whereby the DOJ clarified that its customers for any lossesinvestigation relates to the years from 2010 through 2019 and alleged that GCI Holdings had submitted false claims under the RHC Program during this time period. GCI Holdings continues to work with the DOJ related to these indemnification provisions.this matter and has recorded a $10 million settlement expense to reflect a settlement offer that GCI Holdings made to the DOJ in June 2022. However, four such claims are currently pending. Skyhookthe Company is unable to assess the ultimate outcome of this action and is unable to reasonably estimate any range of additional possible loss beyond the maximum potential impact$10 million settlement offer, including any type of these indemnification provisions on its future results of operations, although Skyhook’s liabilities in certain of those arrangements are customarily limited in various respects, including monetarily. Accordingly, no accrual was recorded related to indemnification claimsfine or penalty that may ultimately be assessed as of September 30, 2017 or December 31, 2016.permitted under the applicable law.

Certain Risks and Concentrations

The Skyhook business is subject to certain risks and concentrations including dependence on relationships with its customers. The Company’s largest customers, that accounted for greater than 10% of revenue, aggregated 57% and 85% of total revenue for the three months ended September 30, 2017 and 2016, respectively, and 57% and 64% of total revenue for the nine months ended September 30, 2017 and 2016, respectively.

Off-Balance Sheet Arrangements

Liberty Broadband did not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures or capital resources.

(9)(10) Segment Information

Liberty Broadband identifies its reportable segments as (A) those consolidated companies that represent 10% or more of its consolidated annual revenue, annual Adjusted OIBDA or total assets and (B) those equity method affiliates whose share of earnings or losses represent 10% or more of Liberty Broadband’s annual pre-tax earnings.earnings (losses).

Liberty Broadband evaluates performance and makes decisions about allocating resources to its operating segments based on financial measures such as revenue and Adjusted OIBDA. In addition, Liberty Broadband reviews nonfinancial measures such as subscriber growth.

I-19I-23


Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

For the six months ended June 30, 2022, Liberty Broadband has identified the following consolidated company and equity method investment as its reportable segments:

GCI Holdings – a wholly owned subsidiary of the Company that provides a full range of wireless, data, video, voice, and managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska.
Charter – an equity method investment that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers.

Liberty Broadband’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segment that is also a consolidated company are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter, 100% of the Charter amounts are included in the tables below and subsequently eliminated in order to reconcile the account totals to the Liberty Broadband condensed consolidated financial statements.

Performance Measures

Revenue by segment from contracts with customers, classified by customer type and significant service offerings follows:

Three months ended

Six months ended

June 30,

June 30,

2022

    

2021

2022

    

2021

amounts in millions

GCI Holdings

  

 

  

  

 

  

Consumer Revenue

  

 

  

  

 

  

Wireless

$

34

32

68

64

Data

 

57

53

115

105

Other

 

14

23

28

46

Business Revenue

 

Wireless

 

11

18

24

37

Data

 

96

86

185

176

Other

 

6

7

12

14

Lease, grant, and revenue from subsidies

 

20

19

39

38

Total GCI Holdings

238

238

471

480

Corporate and other

1

4

6

9

Total

$

239

 

242

477

 

489

Charter revenue totaled $13,598 million and $12,802 million for the three months ended June 30, 2022 and 2021, respectively, and $26,798 million and $25,324 million for the six months ended June 30, 2022 and 2021, respectively.

The Company had receivables of $166 million and $217 million at June 30, 2022 and December 31, 2021, respectively, the long-term portion of which are included in Other assets, net. The Company had deferred revenue of $30 million and $32 million at June 30, 2022 and December 31, 2021, respectively. The receivables and deferred revenue are only from contracts with customers, which amounts exclude receivables and deferred revenue arising from leases, grants, and

I-24

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

subsidies. GCI Holdings’ customers generally pay for services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in the accompanying condensed consolidated statements of operations as the services are provided. Changes in the contract liability balance for the Company during the three and six months ended June 30, 2022 were not materially impacted by other factors.

The Company expects to recognize revenue in the future related to performance obligations that are unsatisfied (or partially unsatisfied) of approximately $174 million in the remainder of 2022, $229 million in 2023, $92 million in 2024, $64 million in 2025 and $70 million in 2026 and thereafter.

For segment reporting purposes, Liberty Broadband defines Adjusted OIBDA as revenue less operating expenses and selling, general and administrative expenses (excludingexcluding stock-based compensation).compensation. Liberty Broadband believes this measure is an important indicator of the operational strength and performance of its businesses includingby identifying those items that are not directly a reflection of each business’s ability to service debt and fund capital expenditures.business’ performance or indicative of ongoing business trends. In addition, this measure allows management to view operating results and perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes depreciation and amortization, stock-based compensation, transaction costs, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to GAAP. Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net earnings, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. Liberty Broadband generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties, that is, at current prices.

For the nine months ended September 30, 2017, Liberty Broadband has identified the following consolidated subsidiary and equity method investmentAdjusted OIBDA is summarized as its reportable segments:

·

Skyhook—a wholly owned subsidiary of the Company that provides a Wi-Fi based location platform focused on providing positioning technology and contextual location intelligence solutions. 

·

Charter—an equity method investment of the Company that is one of the largest providers of cable services in the United States, offering a variety of entertainment, information and communications solutions to residential and commercial customers.

follows:

Three months ended

Six months ended

June 30,

June 30,

2022

2021

2022

2021

amounts in millions

GCI Holdings

    

$

90

    

89

177

185

Charter

 

5,571

5,029

 

10,783

9,672

Corporate and other

 

(7)

(14)

 

(14)

(27)

 

5,654

5,104

 

10,946

9,830

Eliminate equity method affiliate

 

(5,571)

(5,029)

 

(10,783)

(9,672)

Consolidated Liberty Broadband

$

83

75

163

158

Other Information

June 30, 2022

 

Total

Investments

Capital

 

assets

in affiliate

expenditures

 

amounts in millions

 

GCI Holdings

$

3,397

78

Charter

 

143,258

 

 

4,050

Corporate and other

 

12,341

 

12,052

 

 

158,996

 

12,052

 

4,128

Eliminate equity method affiliate

 

(143,258)

 

 

(4,050)

Consolidated Liberty Broadband

$

15,738

 

12,052

 

78

I-20I-25


Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Liberty Broadband’s operating segments are strategic business units that offer different products and services. They are managed separately because each segment requires different technologies, distribution channels and marketing strategies. The accounting policies of the segments that are also consolidated companies are the same as those described in the Company’s summary of significant accounting policies in the Company’s annual financial statements. We have included amounts attributable to Charter in the tables below. Although Liberty Broadband owns less than 100% of the outstanding shares of Charter, 100% of the Charter amounts are included in the schedule below and subsequently eliminated in order to reconcile the account totals to the Liberty Broadband condensed consolidated financial statements.

Performance Measures

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  September 30,

 

 

 

2017

 

2016

 

 

 

 

 

 

Adjusted

 

 

 

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

 

(amounts in thousands)

 

Skyhook

    

$

3,430

    

(980)

    

20,616

    

11,422

 

Charter

 

 

10,458,000

 

3,674,000

 

10,037,000

 

3,429,000

 

Corporate and other

 

 

 —

 

(2,366)

 

 —

 

(2,091)

 

 

 

 

10,461,430

 

3,670,654

 

10,057,616

 

3,438,331

 

Eliminate equity method affiliate

 

 

(10,458,000)

 

(3,674,000)

 

(10,037,000)

 

(3,429,000)

 

Consolidated Liberty Broadband

 

$

3,430

 

(3,346)

 

20,616

 

9,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

 

2017

 

2016

 

 

 

 

 

Adjusted

 

 

 

Adjusted

 

 

 

Revenue

 

OIBDA

 

Revenue

 

OIBDA

 

 

 

(amounts in thousands)

 

Skyhook

    

$

9,643

    

(6,839)

    

27,413

    

1,234

 

Charter

 

 

30,979,000

 

10,946,000

 

18,728,000

 

5,963,000

 

Corporate and other

 

 

 

(5,423)

 

 

(7,170)

 

 

 

 

30,988,643

 

10,933,738

 

18,755,413

 

5,957,064

 

Eliminate equity method affiliate

 

 

(30,979,000)

 

(10,946,000)

 

(18,728,000)

 

(5,963,000)

 

Consolidated Liberty Broadband

 

$

9,643

 

(12,262)

 

27,413

 

(5,936)

 

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Other Information

 

 

 

 

 

 

 

 

 

 

 

September 30, 2017

 

 

 

Total

 

Investments

 

Capital

 

 

 

assets

 

in affiliates

 

expenditures

 

 

 

(amounts in thousands)

 

Skyhook

    

$

26,136

    

    

27

 

Charter

 

 

148,228,000

 

 

6,096,000

 

Corporate and other

 

 

9,455,758

 

9,326,871

 

 

 

 

 

157,709,894

 

9,326,871

 

6,096,027

 

Eliminate equity method affiliate

 

 

(148,228,000)

 

 —

 

(6,096,000)

 

Consolidated Liberty Broadband

 

$

9,481,894

 

9,326,871

 

27

 

The following table provides a reconciliation of consolidated segment Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes:

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

2021

2022

    

2021

 

 

 

 

 

 

 

 

 

 

 

 

Three months

 

Nine months

 

 

ended September 30,

 

ended September 30,

 

 

2017

 

2016

 

2017

    

2016

 

 

 

(amounts in thousands)

 

Consolidated segment Adjusted OIBDA

    

$

(3,346)

    

9,331

    

(12,262)

    

(5,936)

 

amounts in millions

 

Adjusted OIBDA

    

$

83

    

75

 ��  

163

    

158

Stock-based compensation

 

 

(1,499)

 

(1,736)

 

(4,376)

 

(4,582)

 

 

(9)

(10)

(18)

 

(20)

Depreciation and amortization

 

 

(942)

 

(971)

 

(2,844)

 

(2,935)

 

 

(65)

(67)

(129)

 

(131)

Litigation settlement, net of recoveries

(10)

(10)

(110)

Operating income (loss)

 

 

(5,787)

 

6,624

 

(19,482)

 

(13,453)

 

(1)

(2)

6

(103)

Interest expense

 

 

(5,518)

 

(4,090)

 

(14,899)

 

(10,547)

 

(30)

(29)

(56)

 

(62)

Dividend and interest income

 

 

422

 

190

 

1,219

 

4,697

 

Share of earnings (loss) of affiliates

 

 

(5,280)

 

19,046

 

25,109

 

570,178

 

Share of earnings (loss) of affiliate, net

 

386

249

689

 

438

Gain (loss) on dilution of investment in affiliate

 

(11)

(15)

(67)

 

(97)

Realized and unrealized gains (losses) on financial instruments, net

 

 

2,675

 

 —

 

5,026

 

92,990

 

 

77

(125)

214

 

(26)

Gain (loss) on dilution of investment in affiliate

 

 

(3,718)

 

(16,331)

 

(42,515)

 

760,074

 

Gain (loss) on dispositions, net

179

179

 

Other, net

 

 

 9

 

 5

 

11

 

112

 

 

(18)

23

(39)

 

15

Earnings (loss) before income taxes

 

$

(17,197)

 

5,444

 

(45,531)

 

1,404,051

 

$

582

101

926

 

165

I-22I-26


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

Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our business, product and marketing strategies; new service and product offerings; revenue growth; future expenses; anticipated changes to regulations; the return onrecognition of deferred revenue; competition; the performance, results of operations and cash flows of our investment in, and performance of,equity affiliate, Charter Communications, Inc. (“Charter”); the expansion of Charter’s ongoing integration of its acquired operations; the recoverability of our goodwill and other long-lived assets; ournetwork; projected sources and uses of cash; the effects of regulatory developments; the impact of COVID-19 (as defined below); the Rural Healthcare Program; indebtedness and the anticipated non-material impact of certain contingent liabilities related to legal and tax proceedings and other matters arising in the ordinary course of business. Forward-looking statements inherently involve many risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but such statements necessarily involve risks and uncertainties and there can be no assurance that the expectation or belief will result or be achieved or accomplished. The following include some but not all of the factors (as they relate to our consolidated subsidiary and equity affiliate) that could cause actual results or events to differ materially from those anticipated:

·

our, GCI Holdings, LLC (“GCI Holdings”), GCI, LLC, and Charter’s ability to promptly, efficientlyobtain cash in sufficient amounts to service financial obligations and effectively integrate acquired operations;

meet other commitments;

·

theour ability of Charter to sustainuse net operating loss carryforwards and grow revenue and cash flow from operations by offering video, Internet, voice, advertising and other services to residential and commercial customers, to adequately meet the customer experience demands in its markets and to maintain and grow its customer base, particularly in the face of increasingly aggressive competition, the need for innovation and the related capital expenditures;

disallowed business interest carryforwards;

·

our, GCI Holdings, GCI, LLC and Charter’s ability to obtain additional financing, or refinance existing indebtedness, on acceptable terms;

the impact of competition from other market participants, including but not limitedour, GCI Holdings, GCI, LLC and Charter’s significant indebtedness and the ability to incumbent telephone companies, direct broadcast satellite operators, wireless broadbandcomply with any covenants in our and telephone providers, digital subscriber line providers, fiber to the home providers, video provided over the Internet by (i) market participants that have not historically competed in the multichannel video business, (ii) traditional multichannel video distributors, and (iii) content providers that have historically licensed cable networks to multichannel video distributors, and providers of advertising over the Internet;

their respective debt instruments;

·

general business conditions, economic uncertainty or downturn, high unemployment levels and the level of activity in the housing sector;

sector and economic uncertainty or downturn, including the impact of the novel coronavirus (“COVID-19”) pandemic to sales opportunities from residential move activity, GCI Holdings and Charter’s customers and vendors and local, state and federal governmental responses to the pandemic;

·

Charter’s ability to obtain programming at reasonable prices or to raise prices to offset, in whole or in part, the effects of higher programming costs (including retransmission consents);

competition faced by GCI Holdings and Charter;

·

the developmentability of GCI Holdings and deployment of new productsCharter to acquire and technologies, including wireless products, Charter’s cloud-based user interface, Spectrum Guide®, and downloadable security for set top boxes and any other cloud-based consumer services and service platforms;

retain subscribers;

·

failure to protect the securityimpact of personal information about the customers of our operating subsidiarygovernmental legislation and equity affiliate, subjecting us to costly government enforcement actions or private litigation and reputational damage;

·

changes in, or failure or inability to comply with, government regulations,regulation including, without limitation, regulations of the Federal Communications Commission (the "FCC"), on GCI Holdings and Charter, their ability to comply with regulations, and adverse outcomes from regulatory proceedings;

·

changes in the effectscost of governmental regulation on our business or potential business combination transactions including costs, disruptionsprogramming expenses and possible limitations on Charter’s operating flexibility related to,equipment and its ability to comply with, regulatory conditions applicable to Charter as a result of the Time Warner Cable Merger and the Bright House Transaction (each as defined below and collectively, the “Transactions”);

·

any events that disrupt Charter’s networks, information systems or properties and impair its operating activities and negatively impact its reputation;

·

the ability of suppliersGCI Holdings and vendorsCharter to deliverpass on related costs to their customers;

changes in the amount of data used on the networks of GCI Holdings and Charter;
the ability of third-party providers to supply equipment, services, software or licenses;
the ability of GCI Holdings and Charter to respond to new technology and meet customer demands for new products equipment, software and services;

changes in customer demand for the products and services of GCI Holdings and Charter and their ability to adapt to changes in demand;
the ability of GCI Holdings and Charter to license or enforce intellectual property rights;
natural or man-made disasters, terrorist attacks, armed conflicts, pandemics, cyberattacks, network disruptions, service interruptions and system failures and the impact of related uninsured liabilities;
the ability to hire and retain key personnel;

I-27

·

the ability to procure necessary services and equipment from GCI Holdings’ and Charter’s vendors in a timely manner and at reasonable costs;

risks related to the Investment Company Act of 1940;
the outcome of any pending or threatened litigation;

and

I-23


·

changes to general economic conditions, including economic conditions in the nature of key strategic relationships with partners,Alaska, and their impact on potential customers, vendors and joint venturers;

third parties.

·

the availability and access, in general, of funds to meet debt obligations prior to or when they become due and to fund operations and necessary capital expenditures, either through (i) cash on hand, (ii) free cash flow, or (iii) access to the capital or credit markets;

·

the ability of Charter and our company to comply with all covenants in our respective debt instruments, any violation of which, if not cured in a timely manner, could trigger a default of other obligations under cross-default provisions;

·

our ability to successfully monetize certain of our assets; and

·

the ability to retain and hire key personnel.

For additional risk factors, please see Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016.2021. These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Quarterly Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

The following discussion and analysis provides information concerning our results of operations and financial condition. This discussion should be read in conjunction with our accompanying condensed consolidated financial statements and the notes thereto. Additionally, see note 1 tothereto and our Annual Report on Form 10-K for the accompanying condensed consolidated financial statements for an overview of new accounting standards that we have adopted or that we plan to adopt that have had or may have an impact on our financial statements.year ended December 31, 2021.

Overview

During May 2014, the board of directors of Liberty Media Corporation and its subsidiaries (“Liberty”) authorized management to pursue a plan to spin-off to its stockholders common stock of a wholly-owned subsidiary, Liberty Broadband Corporation (“Liberty Broadband”Broadband,” “the Company,” “us,” “we,” or the “Company”“our”), is primarily comprised of GCI Holdings, a wholly owned subsidiary, and to distribute subscription rights to acquire shares ofan equity method investment in Charter.

On December 18, 2020, GCI Liberty, Broadband’s Series C common stock (the “Broadband Spin-Off”Inc. (“GCI Liberty”). At the time of the Broadband Spin-Off, was merged with Liberty Broadband was comprised(the “Combination”) and Liberty Broadband acquired GCI Holdings, as further described in Liberty Broadband's Annual Reports on Form 10-K for the years ended December 31, 2021 and 2020.

Through a number of (i) Liberty’s formerprior years’ transactions, including the Combination, Liberty Broadband has acquired an interest in Charter Communications, Inc. (“Legacy Charter”), (ii) Liberty’s former wholly-owned subsidiary TruePosition, Inc., (iii) Liberty’s former minority equity investment in Time Warner Cable, Inc. (“Time Warner Cable”, “TWC”, or “Legacy TWC”), (iv) certain deferred tax liabilities, as well as liabilities related to the Time Warner Cable written call options and (v) initial indebtedness, pursuant to margin loans entered into prior to the completion of the Broadband Spin-Off. The Broadband Spin-Off was accounted for at historical cost due to the pro rata nature of the distribution to holders of Liberty common stock.

On May 18, 2016, Time Warner Cable merged with Legacy Charter (the “Time Warner Cable Merger”). In connection with the Time Warner Cable Merger, Legacy Charter underwent a corporate reorganization, resulting in CCH I, LLC, a former subsidiary of Legacy Charter (“Charter”), becoming the new publicly traded parent company. Also on May 18, 2016, the previously announced acquisition of Bright House Networks, LLC (“Bright House”) from Advance/Newhouse Partnership (“A/N”) by Charter (the “Bright House Transaction”) was completed. In connection with the Time Warner Cable Merger and Bright House Transaction, Liberty Broadband entered into certain agreements with Legacy Charter, Charter, Liberty Interactive Corporation (“Liberty Interactive”) and Time Warner Cable. In connection with the Time Warner Cable Merger and Bright House Transaction, Liberty Broadband exchanged its shares of Time Warner Cable for shares of Charter and purchased additional shares of Charter. As a result, and pursuant to proxy agreements entered into with Liberty Interactive and A/N, Liberty Broadband controls 25.01% of the aggregate voting power of Charter.

Update on Economic Conditions

GCI Holdings

GCI Holdings offers wireless and wireline telecommunication services, data services, video services, and managed services to customers primarily throughout Alaska. Because of this geographic concentration, growth of GCI Holdings’ business and operations depends upon economic conditions in Alaska. In addition,December 2019, Chinese officials reported a novel coronavirus outbreak. COVID-19 has since spread through China and internationally. On March 11, 2020, the World Health Organization assessed COVID-19 as a global pandemic, causing many countries throughout the world to take aggressive actions, including imposing travel restrictions and stay-at-home orders, closing public attractions and restaurants, and mandating social distancing practices, which caused a significant disruption to most sectors of the economy at varying levels during the periods covered by the financial statements.

Although the COVID-19 pandemic has significantly impacted Alaska, GCI Holdings has continued to deliver services uninterrupted by the pandemic and expects to be able to continue to respond to the increase in connection withnetwork activity. As a major provider of Internet services in Alaska, GCI Holdings believes it plays an instrumental role in enabling social distancing through telecommuting and e-learning across the Time Warner Cable Merger, Liberty Broadband fundedstate and remains focused on its purchaseservice to customers, as well as the health and safety of sharesits employees and customers.

GCI Holdings cannot predict the ultimate impact of Charter Class A common stock using proceedsCOVID-19 on its business, including the depth and duration of $4.4 billion relatedthe economic impact to subscriptionsits customers’ ability to pay for approximately 78.3 million newly issued sharesproducts and services including the impact of Liberty Broadband Series C common stock.

The Company’s wholly owned subsidiary, Skyhook Holding, Inc. (formerly known as TruePosition, Inc.), was originally incorporated to provide technology for locating wireless phonesextended unemployment benefits and other mobile devices throughstimulus packages and what assistance may be provided to its customers. There is a passive network overlay system using its patented U-TDOA technology (“U-TDOA service”). In February 2014, Skyhook Holding, Inc. acquired 100%risk that GCI Holdings’ accounts receivable and bad debt expense will increase substantially due to the economic impact of the outstanding common shares of Skyhook Wireless, Inc., which operates a global location network containing billions of geolocated Wi-Fi access points and cell towers that serve as the reference infrastructure for providingCOVID-19 pandemic.

I-24I-28


locationIn addition, there is uncertainty regarding the impact of government emergency declarations, the ability of suppliers and vendors to provide products and services to GCI Holdings and the risk of limitations on the deployment and maintenance of its services. In 2015, one

The Alaska economy is dependent upon the oil industry, state and federal spending, investment earnings and tourism. A decline in oil prices would put significant pressure on the Alaska state government budget. The Alaska state government has significant reserves that GCI Holdings believes will help fund the state government for the next couple of Skyhook Holding, Inc.’s customers, a wireless carrier utilizing the legacy U-TDOA service which accounted for approximately 80% - 90% of consolidated revenue at the time, gave notice that it plannedyears. The Alaska economy is subject to discontinue use of the U-TDOA service and did not intend to renew its contract, which expired on December 31, 2015. The loss of this customer had a material adverse effect on Skyhook Holding, Inc.’s business. Asrecessionary pressures as a result of the COVID-19 pandemic, volatility in oil prices, inflation, and other causes that could result in a decrease in economic activity. While it is difficult for GCI Holdings to predict the future impact of a recession on its business, these conditions have had an adverse impact on its business and could adversely affect the affordability of and demand for some of its products and services and cause customers to shift to lower priced products and services or to delay or forgo purchases of its products and services. If a recession occurs, it could negatively affect GCI Holdings’ business including its financial position, results of operations, or liquidity, as well as its ability to service debt, pay other obligations and enhance shareholder returns.

Rural Health Care (“RHC”) Program

GCI Holdings receives support from various Universal Service Fund ("USF") programs including the RHC Program. The USF programs are subject to change by regulatory actions taken by the FCC, interpretations of or compliance with USF program rules, or legislative actions. Changes to any of the USF programs that GCI Holdings participates in could result in a material decrease in revenue and accounts receivable, which could have an adverse effect on GCI Holdings’ business and the Company’s financial position, results of operations or liquidity. The following paragraphs describe certain separate matters related to the RHC Program that impact or could impact the revenue earned by the Company. As of June 30, 2022, the Company had net accounts receivable from the RHC Program of approximately $63 million, which is included within Trade and other receivables in the condensed consolidated balance sheets.

The Company disclosed, in additional detail, the following items related to GCI Holdings’ involvement in the RHC Program in its Annual Report on Form 10-K for the year ended December 31, 2021:

FCC Rate Reduction

The FCC reduced the rates charged to RHC customers by approximately 26% for the funding year that ended June 30, 2018. An Application for Review is currently with the FCC.
The FCC approved the cost-based rural rates GCI Holdings historically applied for the funding years that ended on June 30, 2019 and June 30, 2020. GCI Holdings collected $175 million in accounts receivable relating to these two funding years during 2021. GCI Holdings also filed an Application for Review of these determinations. GCI Holdings identified rates for similar services provided by a competitor that would justify higher rates for certain GCI Holdings satellite services in the funding years that ended on June 30, 2018, June 30, 2019, and June 30, 2020. GCI Holdings submitted that information to the Bureau on September 7, 2021. The Applications for Review remain pending.
On May 24, 2021, the FCC approved the cost studies submitted by GCI Holdings for the funding year ended June 30, 2021. Subsequently, on August 16, 2021, GCI Holdings submitted a request for approval of rates for 17 additional sites, which remains pending.

RHC Program Funding Cap

The RHC Program has a funding cap for each individual funding year that is annually adjusted for inflation, and which the FCC can increase by carrying forward unused funds from prior funding years. In recent years, including the current year, this funding cap has not limited the amount of funding received by participants; however, management continues to monitor the funding cap and its potential impact on funding in future years.

I-29

Enforcement Bureau and Related Inquiries

GCI Holdings received a letter of inquiry and request for information from the Enforcement Bureau of the FCC (the “Enforcement Bureau”) in March 2018 relating to the period beginning January 1, 2015 and including all future periods.
GCI Holdings became aware of potential RHC Program compliance issues in the fourth quarter of 2019 related to certain of its currently active and expired contracts with certain of its RHC customers.
On December 17, 2020, GCI Holdings received a Subpoena Duces Tecum from the FCC’s Office of the Inspector General requiring production of documents from January 1, 2009 to the present related to a single RHC customer and related contracts, information regarding GCI Holdings’ determination of rural rates for a single customer, and to provide information regarding persons with knowledge of pricing practices generally.
GCI Holdings was informed in 2021 that a qui tam action has been filed in the Western District of Washington arising from the subject matter under review by the Enforcement Bureau. The Department of Justice (the “DOJ”) is investigating whether GCI Holdings submitted false claims and/or statements in connection with GCI’s participation in the FCC’s RHC Program. Additionally in 2021, the DOJ issued a Civil Investigative Demand with regard to the qui tam action.
With respect to the ongoing inquiries from the FCC’s Enforcement Bureau and the FCC’s Office of the Inspector General, GCI Holdings recognized a liability of approximately $12 million in 2019 for contracts that were deemed probable of not complying with the RHC Program rules. GCI Holdings also identified certain contracts where additional loss was reasonably possible and such loss could range from zero to $44 million. An accrual was not made for the amount of the reasonably possible loss in accordance with the applicable accounting guidance. GCI Holdings could also be assessed fines and penalties but such amounts could not be reasonably estimated.

Revision of Support Calculations

The FCC released an order adopting changes to the RHC Program that will revise the manner in which support issued under the RHC Program will be calculated and approved. On January 19, 2021 and April 12, 2022, the Wireline Competition Bureau of the FCC issued Orders that waive the requirement to use the database for health care providers in Alaska for the two funding years ending June 30, 2022 and June 30, 2023. The Orders require GCI Holdings to determine its rural rates based on previously approved rates or under reinstitution of the rules currently in effect through the funding year ended on June 30, 2021. On April 8, 2021 and May 25, 2022, the Wireline Competition Bureau issued Orders further extending the January 19, 2021 waiver to carriers nationwide and eliminating the ability or requirement to use the database to establish the healthcare provider payments for services subsidized by the RHC Telecom Program.

The Company does not have any significant updates regarding the items noted above except as discussed in the remainder of this wireless carrierparagraph. The Wireline Competition Bureau issued Orders further extending the January 19, 2021 waiver regarding use of the database by health care providers seeking support under the RHC Program through the funding year ending June 30, 2024. The DOJ and GCI Holdings held discussions regarding the qui tam action whereby the DOJ clarified that its investigation relates to the years from 2010 through 2019 and alleged that GCI Holdings had submitted false claims under the RHC Program during this time period. GCI Holdings continues to work with the DOJ related to this matter and has recorded a $10 million settlement expense to reflect a settlement offer that GCI Holdings made to the DOJ in June 2022. However, the Company is unable to assess the ultimate outcome of this action and is unable to reasonably estimate any range of additional possible loss beyond the $10 million settlement offer, including any type of fine or penalty that may ultimately be assessed as permitted under the applicable law.

Charter

Charter is a leading broadband connectivity company and cable operator serving more than 32 million customers in 41 states through its Spectrum brand.

In 2022, Charter remains focused on driving customer relationship growth. For the quarter ended June 30, 2022, Charter had a decline of 74,000 residential and small and medium business (“SMB”) customer relationships and an increase of 360,000 residential and SMB customer relationships from June 30, 2021 to June 30, 2022, which excludes mobile only

I-30

customers. Charter continues to see lower customer move rates and switching behavior among providers, which has reduced its selling opportunities. In addition, Charter had approximately 59,000 Internet customer disconnects during the second quarter of 2022 related to the discontinuation of the Emergency Broadband Benefit program and additional requirements of the Affordable Connectivity Program. Charter’s rural construction initiative is underway which it expects will expand its footprint by approximately 1 million homes and businesses over the next six years, and Charter expects to participate in additional government subsidy programs that would further changesexpand its footprint. Charter continues to evolve its network to provide increased Internet speeds and reliability, including recently increasing the minimum speed offered to new customers from 200 megabits per second to 300 megabits per second in 100% of its footprint, and continued investment in products and customer service platforms. Charter continues to invest in its ability to provide a differentiated Internet connectivity experience for mobile and fixed Internet customers with the availability of Advanced Home WiFi and over 500,000 out of home WiFi access points across its footprint. In addition, Charter continues to work towards the construction of its own 5G mobile data-only network leveraging the Citizens Broadband Radio Service Priority Access Licenses purchased in 2020. By continually improving its product set and offering consumers the opportunity to save money by switching to Charter’s services, Charter believes it can continue to penetrate its expanding footprint and attract more spend on additional products for its existing customers.

Other

Skyhook Holdings, Inc. (“Skyhook”) was a wholly owned subsidiary of Liberty Broadband until its sale on May 2, 2022 for aggregate consideration of approximately $194 million, including amounts held in escrow of approximately $23 million. Liberty Broadband recognized a gain on the sale of $179 million, net of fees contingent upon closing, in the regulatory environment and a shiftsecond quarter of 2022, which is recorded in Gain (loss) on dispositions, net in the overall market foraccompanying condensed consolidated statement of operations. Skyhook is included in Corporate and other through April 30, 2022 and is not presented as a discontinued operation as the legacy U-TDOA service, Skyhook Holding, Inc. ceased making further investment in its U-TDOA products. In 2016, Skyhook Holding, Inc. and Skyhook Wireless, Inc. combined operations in order to focussale did not represent a strategic shift that had a major effect on the development and sale of the suite of location and context products, and are referred to collectively herein as “Skyhook.”

The financial information represents a consolidation of the historical financial information of Skyhook, Liberty Broadband’s interest in Charter, Liberty Broadband’s former minority equity investment in Time Warner Cable and certain deferred tax liabilities. This financial information refers to the consolidation of the aforementioned subsidiary, investments,operations and financial instruments,results.

Results of Operations — Consolidated — June 30, 2022 and 2021

General. We provide information regarding our consolidated operating results and other income and expenses, as “Liberty Broadband,” “the Company,” “us,” “we” and “our” here andwell as information regarding the contribution to those items from our reportable segments in the notestables below. The "Corporate and other" category consists of those assets or businesses which do not qualify as a separate reportable segment. See note 10 to the accompanying condensed consolidated financial statements.

statements for more discussion regarding our reportable segments. For a more detailed discussion and analysis of GCI Holdings’ results, see "Results of Operations-GCI Holdings" below.

I-25I-31


Results of Operations—Consolidated—September 30, 2017 and 2016

Consolidated operating results:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(amounts in thousands)

 

Revenue

    

$

3,430

    

20,616

    

9,643

    

27,413

 

Operating expense

 

 

643

 

778

 

1,963

 

2,097

 

Research and development

 

 

1,373

 

2,248

 

5,875

 

7,823

 

Selling, general and administrative

 

 

4,760

 

8,259

 

14,067

 

23,429

 

Stock-based compensation

 

 

1,499

 

1,736

 

4,376

 

4,582

 

Depreciation and amortization

 

 

942

 

971

 

2,844

 

2,935

 

Operating income (loss)

 

 

(5,787)

 

6,624

 

(19,482)

 

(13,453)

 

Less impact of stock-based compensation and depreciation and amortization

 

 

2,441

 

2,707

 

7,220

 

7,517

 

Adjusted OIBDA

 

$

(3,346)

 

9,331

 

(12,262)

 

(5,936)

 

Three months ended

Six months ended

June 30,

June 30,

    

2022

2021

2022

    

2021

amounts in millions

Revenue

 

  

 

  

 

  

  

GCI Holdings

$

238

238

471

480

Corporate and other

 

1

4

6

9

Consolidated

$

239

 

242

 

477

489

Operating Income (Loss)

 

  

 

  

 

  

  

GCI Holdings

$

10

18

31

47

Corporate and other

 

(11)

(20)

(25)

(150)

Consolidated

$

(1)

 

(2)

 

6

(103)

Adjusted OIBDA

 

  

 

  

 

  

  

GCI Holdings

$

90

89

177

185

Corporate and other

 

(7)

(14)

(14)

(27)

Consolidated

$

83

 

75

 

163

158

Revenue

Revenue decreased $17.2$3 million and $17.8$12 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the same periods in thecorresponding prior year.year periods. The decrease in revenue for the six month period was primarily due to decreased revenue from GCI Holdings. See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Revenue for Corporate and other decreased for both the three and ninesix months ended SeptemberJune 30, 2017, as compared to2022. With the same periodssale of Skyhook in the prior year,May 2022, Corporate and other revenue was due to a new license agreement entered into during 2016 with no similar event occurring in 2017. On September 1, 2016, Skyhook entered into a license agreement pursuant to which Skyhook agreed to grant to the licensee a perpetual, non-exclusive, non-transferable, worldwide license to patents and patent applications owned by the companies. In exchange for this grant, the licensee agreed to pay a one-time lump sum payment of $17.5 million that was recognized as revenueminimal during the three months ended September 30, 2016.second quarter of 2022 and will be zero in future periods as all Corporate and other revenue was generated by Skyhook.

Operating expense, researchIncome (Loss)

Consolidated operating income (loss) improved $1 million and development, and selling, general and administrative expenses

Operating expense decreased by $135 thousand and $134 thousand$109 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the samecorresponding prior year periods. Operating loss for Corporate and other for the six months ended June 30, 2022 and 2021 included $10 million and $110 million in litigation settlement expense, respectively. The additional decrease in operating loss for Corporate and other for the three and six months ended June 30, 2022, as compared to the corresponding prior year periods, inwas due to decreased professional service fees.

Operating income decreased $8 million and $16 million at GCI Holdings for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year.  Research and developmentyear periods. See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Stock-based compensation

Stock-based compensation expense decreased by $875 thousand$1 million and $1.9$2 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the same periods in thecorresponding prior year primarily as a result of headcount reductions and other cost containment measures taken by Skyhook related to the run-off of the U-TDOA business. Selling, general, and administrative expense decreased by $3.5 million and $9.4 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year, primarily as a result of headcount reductions and other cost containment measures taken by Skyhook related to the run-off of the U-TDOA business coupled with reduced legal expenses of $1.3 million and $3.5 million, respectively, compared to the same periods in the prior year. Legal expenses in the current year have not been as significant due to a decrease in activity associated with license sales in the current period. 

Stock-based compensation

periods. The decrease in stock-based compensation expense of $237 thousand and $206 thousand for the three and nine months ended September 30, 2017, respectively, as compared to the corresponding periods in the prior year, werewas primarily due to adjustments made to certain outstanding awardsa decrease in 2016 which increased their value, partially offset by additional grants of awards, andLiberty Broadband’s allocation rate per the ongoing vesting of outstanding grants. 

Depreciation and amortization

Depreciation and amortization expense decreased by $29 thousand and $91 thousand during the three and nine months ended September 30, 2017, respectively,services agreement arrangement as compareddescribed in note 1 to the corresponding periods in the prior year, due to certain assets becoming fully depreciated.

accompanying condensed consolidated financial statements.

I-26I-32


Operating income (loss)

Operating loss increased $12.4 million and $6.0 million for the three and nine months ended September 30, 2017, respectively, as compared to the same periods in the prior year due to the items discussed above.

Adjusted OIBDA

To provide investors with additional information regarding our financial results, we also disclose Adjusted OIBDA, which is a non-GAAP financial measure. We define Adjusted OIBDA as revenue less operating expensesincome (loss) plus depreciation and selling, generalamortization, stock-based compensation, transaction costs, separately reported litigation settlements, restructuring, and administrative expenses (excluding stock-based compensation).impairment charges. Our chief operating decision maker and management team use this measure of performance in conjunction with other measures to evaluate our businesses and make decisions about allocating resources among our businesses. We believe this is an important indicator of the operational strength and performance of our businesses includingby identifying those items that are not directly a reflection of each business’s ability to service debt and fund capital expenditures.business’ performance or indicative of ongoing business trends. In addition, this measure allows us to view operating results, perform analytical comparisons and benchmarking between businesses and identify strategies to improve performance. This measure of performance excludes such costs as depreciation and amortization, stock-based compensation, separately reported litigation settlements and restructuring and impairment charges that are included in the measurement of operating income pursuant to generally accepted accounting principles in the United States (“GAAP”). Accordingly, Adjusted OIBDA should be considered in addition to, but not as a substitute for, operating income, net income, cash flow provided by operating activities and other measures of financial performance prepared in accordance with GAAP. See note 9 to the accompanying condensed consolidated financial statements forU.S. generally accepted accounting principles. The following table provides a reconciliation of Adjusted OIBDA to Operating income (loss) and Earnings (loss) before income taxes.to Adjusted OIBDA.

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

2021

2022

    

2021

 

amounts in millions

 

Operating income (loss)

    

$

(1)

    

(2)

    

6

    

(103)

Depreciation and amortization

 

65

67

129

 

131

Stock-based compensation

 

9

10

18

 

20

Litigation settlement, net of recoveries

10

10

110

Adjusted OIBDA

$

83

75

163

158

Adjusted OIBDA decreased $12.7improved $8 million and $6.3$5 million duringfor the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the same periods in thecorresponding prior year.year periods. Adjusted OIBDA for the three months ended September 30, 2017 and 2016, includes $2.4improved $1 million and $2.1declined $8 million of corporate selling, general and administrative costs, respectively. Adjusted OIBDA for the nine months ended September 30, 2017 and 2016, includes $5.4 million and $7.2 million of corporate selling, general and administrative costs, respectively. The decrease in corporate selling, general and administrative costs for the nine months ended September 30, 2017, as compared to same periods in the prior year, was primarily due to decreased legal expenses. Legal expenses decreased in the current year due to legal expenses associated with the Transactions in 2016. The decrease in Skyhook Adjusted OIBDA for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, for the results of operations of GCI Holdings. See “Results of Operations – GCI Holdings, LLC” below for a more complete discussion of the results of operations of GCI Holdings.

Corporate and other Adjusted OIBDA improved for the three and six months ended June 30, 2022, as compared to the corresponding periods in the prior year wasperiods, due to the new license agreement entered into during the three months ended September 30, 2016, partially offset by lowerfluctuations in operating expensesincome (loss) as discussed above.

Other Income and Expense

Components of Other income (expense) are presented in the table below.

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

2021

2022

2021

 

amounts in millions

 

Other income (expense):

    

    

    

    

    

    

    

Interest expense

$

(30)

(29)

(56)

 

(62)

Share of earnings (losses) of affiliate

 

386

249

689

 

438

Gain (loss) on dilution of investment in affiliate

 

(11)

(15)

(67)

 

(97)

Realized and unrealized gains (losses) on financial instruments, net

 

77

(125)

214

 

(26)

Gain (loss) on dispositions, net

179

179

Other, net

 

(18)

23

(39)

 

15

$

583

103

920

 

268

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Nine months ended

 

 

 

September 30,

 

September 30,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

(amounts in thousands)

 

Other income (expense):

    

 

    

    

 

    

    

    

    

 

Interest expense

 

$

(5,518)

 

(4,090)

 

(14,899)

 

(10,547)

 

Dividend and interest income

 

 

422

 

190

 

1,219

 

4,697

 

Share of earnings (losses) of affiliates

 

 

(5,280)

 

19,046

 

25,109

 

570,178

 

Realized and unrealized gains (losses) on financial instruments, net

 

 

2,675

 

 —

 

5,026

 

92,990

 

Gain (loss) on dilution of investment in affiliate

 

 

(3,718)

 

(16,331)

 

(42,515)

 

760,074

 

Other, net

 

 

 9

 

 5

 

11

 

112

 

 

 

$

(11,410)

 

(1,180)

 

(26,049)

 

1,417,504

 

I-27


Interest expense

Interest expense increased $1.4$1 million and $4.4decreased $6 million during the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year. The increase for the three month period was primarily duedriven

I-33

by higher interest rates on our variable rate debt. The decrease for the six month period was driven by lower amounts outstanding on the Senior Credit Facility (as defined in note 6 to an increasethe accompanying condensed consolidated financial statements) and also by the timing of repayments on the Margin Loan Facility (as defined in LIBORnote 6 to the accompanying condensed consolidated financial statements) during the current periods as compared to corresponding periods in the prior year.six months ended June 30, 2021.

DividendShare of earnings (losses) of affiliate

Share of earnings of affiliate increased $137 million and interest income

Dividend and interest income increased $232 thousand and decreased $3.5$251 million during the three and ninesix months ended SeptemberJune 30, 2017, respectively, as compared to the corresponding periods in the prior year. The increase in dividend and interest income for the three months ended September 30, 2017, as compared to the same period in the prior year, was the result of increased interest income due to higher short-term marketable securities rates during the third quarter of 2017, partially offset by lower cash balances. The decrease in dividend and interest income for the nine months ended September 30, 2017, as compared to the same period in the prior year, was the result of a loss of dividend income due to the Time Warner Cable Merger during May 2016. 

Share of earnings (losses) of affiliates

Share of earnings of affiliates decreased $24.3 million and $545.1 million during the three and nine months ended September 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year. The Company’s Share of earnings (losses) of affiliatesaffiliate line item in the accompanying condensed consolidated statements of operations includes expenses of $15.3$67 million and $18.5$64 million, net of related taxes, for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, and expenses of $44.0$134 million and $23.2$122 million, net of related taxes, for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively, due to the increase in amortization related toof the excess basis of assets with identifiable useful lives and debt.debt, which was primarily due to Charter’s share buyback program. The decreasechange in the share of earnings of affiliatesaffiliate in the three and ninesix months ended SeptemberJune 30, 2017,2022, as compared to the samecorresponding periods in the prior year, was primarily the result of the Time Warner Cable Merger and related transactions during May 2016 (see note 4 to the accompanying condensed consolidated financial statements).corresponding change in net income at Charter.

The following is a discussion of Charter’s results of operations. In order to provide a better understanding of Charter’s operations, we have included a summarized presentation of Charter’s results from operations, as well as pro forma information for the period ended September 30, 2016 as if the Transactions had been completed on January 1, 2015. operations.

Three months ended

Six months ended

June 30,

June 30,

2022

2021

2022

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

Three months ended

 

 

 

Nine months ended

 

 

 

Nine months ended

 

 

September 30,

 

 

 

September 30,

 

 

 

September 30,

 

 

2017

 

2016

 

 

 

2017

 

2016

 

 

 

2016

 

 

(amounts in millions)

 

 

 

 

 

amounts in millions

Revenue

    

$

10,458

    

10,037

 

 

    

30,979

    

18,728

 

 

 

29,748

 

    

$

13,598

    

12,802

26,798

    

25,324

Operating expenses, excluding stock-based compensation

 

 

(6,784)

 

(6,608)

 

 

 

(20,033)

 

(12,765)

 

 

 

 

 

 

(8,027)

(7,773)

(16,015)

 

(15,652)

Adjusted OIBDA

 

 

3,674

 

3,429

 

 

 

10,946

 

5,963

 

 

 

10,092

 

 

5,571

5,029

10,783

 

9,672

Depreciation and amortization

 

 

(2,701)

 

(2,437)

 

 

 

(7,846)

 

(4,412)

 

 

 

 

 

 

(2,240)

(2,354)

(4,534)

 

(4,795)

Stock-based compensation

 

 

(64)

 

(81)

 

 

 

(198)

 

(168)

 

 

 

 

 

 

(104)

(100)

(251)

 

(234)

Operating income

 

 

909

 

911

 

 

 

2,902

 

1,383

 

 

 

2,813

 

 

3,227

2,575

5,998

 

4,643

Other expenses, net

 

 

(791)

 

(645)

 

 

 

(2,305)

 

(1,342)

 

 

 

 

 

 

(1,030)

(1,136)

(2,067)

 

(2,067)

Net earnings (loss) before income taxes

 

 

118

 

266

 

 

 

597

 

41

 

 

 

 

 

Income tax benefit (expense)

 

 

(26)

 

(16)

 

 

 

(99)

 

3,135

 

 

 

 

 

Net earnings (loss)

 

$

92

 

250

 

 

 

498

 

3,176

 

 

 

 

 

Net income (loss) before income taxes

 

2,197

1,439

3,931

 

2,576

Income tax (expense) benefit

 

(489)

(281)

(834)

 

(497)

Net income (loss)

1,708

1,158

3,097

 

2,079

Less: Net income attributable to noncontrolling interests

(237)

(138)

(423)

(252)

Net income (loss) attributable to Charter shareholders

$

1,471

1,020

2,674

1,827

Charter net earnings decreased  $158income increased $550 million and $2,678$1,018 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year.

Charter’s revenue increased $421$796 million and $12,251$1,474 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year, primarily due to increases in the number of residential Internet, mobile and commercial business customers as well as price adjustments, offset by a decrease in basic video

I-28


customers and advertising sales, and in the nine month period due to the Transactions which increased total revenue by approximately $11.4 billion. On a pro forma basis, assuming the Transactions occurred as of January 1, 2015, total revenue growth was 4.1% for the nine months ended September 30, 2017, compared to the corresponding period in 2016.price adjustments.

The increase in revenue duringDuring the three and ninesix months ended SeptemberJune 30, 2017 was partially offset by the net impact of an increase in2022, operating expenses, excluding stock-based compensation, of $176increased $254 million and $7,268$363 million, respectively.respectively, as compared to the corresponding periods in the prior year. Operating costs increased primarily due to increased mobile costs, costs to service customers and marketing costs, as well as other corporate operating costs, slightly offset by decreased regulatory, connectivity and produced content costs.

Mobile costs were comprised of mobile device costs and mobile service, customer acquisition and operating costs. The increase in operating expenses was primarilyis attributable to the Transactions. Operating costs also increased due to an increase in programmingthe number of mobile lines.

I-34

Costs to service customers increased during the three and six months ended June 30, 2022 compared to the corresponding periods in 2021 primarily due to higher bad debt and higher fuel costs offset by lower labor costs, as a result of contractual rate adjustments, including renewalsproductivity improvements driven by improved network performance and increasesdigital self-service platforms.

Marketing costs increased during the three and six months ended June 30, 2022 compared to the corresponding periods in amounts paid for retransmission consents,2021 primarily due to higher expanded basic package customerslabor costs associated with Charter’s commitment to a minimum $20 per hour wage in 2022 and insourcing of inbound sales and retention call centers.

Other corporate operating costs increased during the three and six months ended June 30, 2022 compared to the corresponding periods in 2021 primarily due to higher pay-per-view events, offset by synergieslabor costs and computer and software expense.

Regulatory, connectivity and produced content decreased during the three and six months ended June 30, 2022 compared to the corresponding periods in 2021 primarily due to lower sports rights costs as a result of more basketball games during the Transactions.  Charter expects programming expensesfirst half of 2021 as compared to continue to increase in future periods 2022 as the prior period had additional games due to a varietythe delayed start of factors, including annual increases imposed by programmers with additional selling powerthe 2020 - 2021 NBA season as a result of media consolidation, increased demands by ownersCOVID-19 as well as lower costs of broadcast stations for payment for retransmission consent or linking carriage of other servicesvideo devices sold to retransmission consent,customers and additional programming, particularly new services. Charter does not expect to be able to fully pass the cost increases on to its customers without a potential loss of customers.

regulatory pass-through fees.

Charter’s Adjusted OIBDA for both the three and ninesix months ended SeptemberJune 30, 20172022 increased as a result of the discussion above. On a pro forma basis, Charter’s Adjusted OIBDA increased by $854 million for the nine months ended September 30, 2017, as a result of the discussion above, offset by increases in programming, marketing and transition costs which was offset by decreases in all other operating expense categories.

reasons described above.

Depreciation and amortization expense increased $264decreased $114 million and $3,434$261 million during the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the same periods in the prior year. The increase in depreciation and amortization expense was primarily the result of higher capital expenditures in the current year, as well as additional depreciation and amortization related to the Transactions, inclusive of the incremental amounts as a result of the higher fair values recorded in acquisition accounting. Stock-based compensation expense decreased $17 million and increased $30 million during the three and nine months ended September 30, 2017, respectively, compared to the samecorresponding periods in the prior year, primarily due to certain assets acquired in acquisitions becoming fully depreciated offset by an increase in depreciation as a result of more recent capital expenditures.

For the Transactions. 

three months ended June 30, 2022, Charter’s results were also impacted by an increase in other expenses, net of $146which decreased $106 million, and $963 million for the three and nine months ended September 30, 2017, respectively. The increase in other expenses, net was primarily due to (i) decreases of $30 million and $524 million in other pension benefits for the three months and nine months ended September 30, 2017 and 2016, respectively, and (ii) $64 million and $479 million of additional interest expense that was recognized during the three and nine months ended September 30, 2017, respectively, in each case, as compared to the same periodcorresponding periods in the prior year. The decrease in other pension benefits during the three months ended September 30, 2017, as compared to the corresponding period in the prior year,expenses, net was primarily due to a third quarter 2017 remeasurement as a result of significant lump sum settlement payments to participants. The decrease in other pension benefits during the nine months ended September 30, 2017, as compared to the corresponding period in the prior year, was primarily as a result of a $675 million pension curtailment gaindriven by increased gains on equity investments, partially offset by an $157 million net remeasurement loss recognized in 2016 that resulted from an amendment to the plans made subsequent to the Time Warner Cable Merger. The increase inhigher interest expense, that was recognized during the three and nine months ended September 30, 2017, respectively, as compared to the same period in the prior year, was associated with debt assumed from Legacy TWC and an increase in weighted average debt outstanding primarily due to the issuance of notes in 2017. 

net.

Income tax expense increased $10$208 million and $3,234$337 million for the three and ninesix months ended SeptemberJune 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year. Income tax expense forincreased primarily as a result of higher pretax income.

Gain (loss) on dilution of investment in affiliate

The loss on dilution of investment in affiliate decreased by $4 million and $30 million during the three and ninesix months ended SeptemberJune 30, 2017, was reduced by approximately $17 million and $88 million, respectively, due to the recognition of excess tax benefits resulting from share based compensation as a component of the provision for income taxes following the prospective application of Accounting Standard Update 2016-09. Income tax expense for the three months ended September 30, 2016 was also impacted by a change in a state tax law that resulted in approximately $44 million of tax benefit. Income tax benefit for the nine months ended September 30, 2017 was a result of a reduction of substantially all of Legacy Charter’s preexisting valuation allowance associated with its deferred tax assets of approximately $3.3 billion as certain of the deferred tax liabilities that were assumed in connection with the closing of the Time Warner Cable Merger will reverse and provide a source of future taxable income.

I-29


Realized and unrealized gains (losses) on financial instruments, net

Realized and unrealized gains on financial instruments, net declined $2.7 million and $88.0 million for the three and nine months ended September 30, 2017,2022, respectively, as compared to the corresponding periods in the prior year.  The realized gains during the three and nine months ended September 30, 2017 were related to the zero-strike call options (see discussion in note 3 to the accompanying condensed consolidated financial statements). During the three months ended September 30, 2016, there were no net realized or unrealized gains (losses) as we exited the derivative and Time Warner Cable shares were exchanged for Charter shares during the second quarter of 2016. The net realized and unrealized gain of $93.0 million for the nine months ended September 30, 2016, was attributable to gains in the fair value of our investment in Time Warner Cable, due to increases in the Time Warner Cable stock price during the period. 

Gain (loss) on dilution of investment in affiliate

The loss on dilution of investment in affiliate improved $12.6 million during the three months ended September 30, 2017, as compared to the same period in the prior year, primarily due to a decrease of issuances of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share. The loss on dilution of investment in affiliate declined $802.6 million during the nine months ended September 30, 2017, as compared to the same period in the prior year, primarily due to the Company’s increased basis in Charter as a result of the Transactions during 2016, along with an increase in issuance of Charter common stock from the exercise of stock options held by employees and other third parties, at prices below Liberty Broadband’s book basis per share. As Liberty Broadband’s ownership in Charter changes due to exercises of Charter warrants and stock options, a loss is recorded with the effective sale of common stock, because the exercise price of Charter warrants or stock options is typically lower than the book value of the Charter shares held by Liberty Broadband.

Other,I-35

Realized and unrealized gains (losses) on financial instruments, net

Other,Realized and unrealized gains (losses) on financial instruments, net duringare comprised of changes in the fair value of the following:

Three months ended

Six months ended

 

June 30,

June 30,

 

2022

2021

2022

2021

 

amounts in millions

 

Indemnification obligation

$

64

(93)

149

(41)

Exchangeable senior debentures

13

(32)

65

15

$

77

(125)

214

 

(26)

The changes in these accounts are primarily due to market factors and changes in the fair value of the underlying stocks or financial instruments to which these related. These increases in realized and unrealized gains for the three and ninesix months ended SeptemberJune 30, 2017 is2022, compared to the corresponding periods in the prior year, were primarily attributabledue to an increase in unrealized gains on the indemnification obligation (see note 3 in the accompanying condensed consolidated financial statements for additional discussion), as well as the changes in fair value of the 2.75% Exchangeable Senior Debentures due 2050, the 1.25% Exchangeable Senior Debentures due 2050 and the 1.75% Exchangeable Senior Debentures due 2046 related to changes in market price of underlying Charter stock (see notes 3 and 6 in the accompanying condensed consolidated financial statements for additional discussion).

Gain (loss) on dispositions, net

Liberty Broadband recognized a gain on the sale of certain fixed assets at Skyhook duringof $179 million, net of fees contingent upon closing, in the year, partially offset by tax penalties. second quarter of 2022, which is recorded in Gain (loss) on dispositions, net in the accompanying condensed consolidated statement of operations.

Other, net

Other, net duringdecreased $41 million and $54 million for the three and ninesix months ended SeptemberJune 30, 2016 was attributable2022, respectively, as compared to the corresponding periods in the prior year. These decreases were primarily due to a gain on the saletax sharing receivable with Qurate Retail that resulted in an increased loss of shares of a certain Skyhook cost investment.

Income tax benefit (expense)

During$41 million and $55 million for the three and ninesix months ended SeptemberJune 30, 2017, we had an2022, respectively. See more discussion about the tax sharing agreement with Qurate Retail in note 1 to the accompanying condensed consolidated financial statements.

Income taxes

Earnings (losses) before income taxes and income tax (expense) benefit of $7.3 million and $18.2 million, respectively, and the effective rate was approximately 42.6% and 40.1%, respectively.  For the three and nine months ended September 30, 2016, we had an income tax expense of $1.7 million and $532.3 million, respectively, and the effective tax rate was approximately 30.4% and 37.9%,  respectively. are as follows:

Three months ended

Six months ended

June 30,

June 30,

    

2022

    

2021

2022

    

2021

amounts in millions

Earnings (loss) before income taxes

$

582

 

101

$

926

 

165

Income tax (expense) benefit

 

(117)

 

(45)

 

(162)

 

(57)

Effective income tax rate

 

20%

45%

 

17%

35%

The difference between the effective income tax rate of 42.6%20% and the U.S. Federal income tax rate of 35%21% for the three months ended SeptemberJune 30, 2017 is2022 was primarily due to non-taxable income from a decrease in the effectfair value of state income taxes and unrealized gain attributablethe indemnification payable owed to the Company’s own stock which is not recognized for tax purposes.Qurate Retail. The difference between the effective income tax rate of 40.1%17% and the U.S. Federal income tax rate of 35%21% for the ninesix months ended SeptemberJune 30, 2017, is2022 was primarily due to non-taxable income from a decrease in the effectfair value of state income taxesthe indemnification payable owed to Qurate Retail and unrealized gain attributable totax benefits from the Company’s ownsale of stock which is not recognized for tax purposes. of a subsidiary.

I-36

The difference between the effective income tax rate of 30.4%45% and the U.S. Federal income tax rate of 35%21% for the three months ended SeptemberJune 30, 2016 is2021 was primarily due to the effectaccrual of state income taxes.non-taxable equity contributions related to the indemnification agreement between Liberty Broadband and Qurate Retail. The difference between the effective income tax rate of 37.9%35% and the U.S. Federal income tax rate of 35%21% for the ninesix months ended SeptemberJune 30, 2016 is2021 was primarily due to a non-deductible litigation settlement and the effectaccrual of statenon-deductible equity distributions related to the indemnification agreement between Liberty Broadband and Qurate Retail, partially offset by tax benefits from a change in effective tax rate used to measure deferred taxes on certain Charter shares.

Net earnings (loss)

The Company had net earnings of $465 million and $56 million for the three months ended June 30, 2022 and 2021, respectively, and net earnings of $764 million and $108 million for the six months ended June 30, 2022 and 2021, respectively. The change in net earnings (loss) was the result of the above-described fluctuations in our revenue, expenses and other income taxes.and expenses.

Liquidity and Capital Resources

As of SeptemberJune 30, 2017,2022, substantially all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government guaranteed funds, AAA rated money market funds and other highly rated financial and corporate debt instruments.

The following are potential sources of liquidity: available cash balances, cash generated by the operating activities of our privately-owned subsidiaries (to the extent such cash exceeds the working capital needs of the subsidiaries)subsidiaries and is not otherwise restricted), proceeds from asset sales, monetization of our investments (including Charter Repurchases (as defined in note 4 to the accompanying condensed consolidated financial statement and discussed below)), outstanding or anticipated debt borrowings,facilities (as defined in note 6 to the accompanying condensed consolidated financial statements), debt and equity issuances, and dividend and interest receipts.

I-30


As of SeptemberJune 30, 2017,2022, Liberty Broadband had a cash and cash equivalents balance of $135$301 million.

Six months ended June 30,

 

2022

2021

 

 

 

 

 

 

 

 

Nine months ended September 30,

 

 

2017

 

2016

 

 

(amounts in thousands)

 

amounts in millions

 

Cash flow information

    

 

    

    

    

 

Net cash provided (used) by operating activities

 

$

(23,596)

 

(5,033)

 

$

18

 

111

Net cash provided (used) by investing activities

 

$

(13)

 

(4,990,687)

 

$

1,895

 

1,714

Net cash provided (used) by financing activities

 

$

(46,694)

 

4,599,682

 

$

(1,796)

 

(3,023)

The increasedecrease in cash usedprovided by operating activities in the ninesix months ended SeptemberJune 30, 2017,2022, as compared to the samecorresponding period in the prior year, was primarily driven by the increase in operating loss, as well asnon-recurring favorable collection of accounts receivable during the timingfirst quarter of differences in cash receipts2021 from the RHC Program for the funding years that ended on June 30, 2019 and payments.June 30, 2020.

During the ninesix months ended SeptemberJune 30, 2016,2022 and 2021, net cash flows fromprovided by investing activities were primarily related to transactionsthe sale of 3,227,684 and 2,761,608 shares of Charter Class A common stock to Charter for $1,806 million and $1,762 million, respectively, to maintain our fully diluted ownership percentage of Charter at 26%. In February 2021, Liberty Broadband entered into a letter agreement in connectionorder to implement, facilitate and satisfy the terms of the Stockholders Agreement with respect to the Time Warner Cable Merger and the Bright House Transaction, as discussedEquity Cap (see more information in note 4 ofto the accompanying condensed consolidated financial statements.statements). The Company expects the Charter Repurchases to be a significant source of liquidity in future periods. Additionally, the Company received $163 million of cash proceeds, net of fees contingent upon closing, from the sale of Skyhook. These net inflows of cash were partially offset by capital expenditures of $78 million and $50 million during the six months ended June 30, 2022 and 2021, respectively.

During the ninesix months ended SeptemberJune 30, 2017,2022, net cash flows fromused in financing activities were primarily related to therepurchases of Series A and Series C Liberty Broadband common stock of $1,890 million, partially offset by net borrowings of debt repaymentsof

I-37

approximately $100 million and settlement of the zero-strike call options (see notes  3 andoutstanding Revolving Loans (as defined in note 6 to the accompanying condensed consolidated financial statements).

under the Margin Loan Facility. During the ninesix months ended SeptemberJune 30, 2016,2021, net cash flows fromused in financing activities were primarily related to the Company’s issuancerepurchases of $4.4 billion in additional shares ofSeries C Liberty Broadband Series C common stock to purchase $4.3 billion in shares of New Charter, in addition to$1,957 million, as well as net borrowingsdebt repayments of $200.0$850 million of outstanding Revolving Loans under two margin loan agreements, entered intothe Margin Loan Facility and repayment of $210 million by GCI, LLC on March 21, 2016, between a subsidiary of the Company and the lenders thereto. its revolving credit facility.

The projected useuses of our cash will be primarily to fundfor the remainder of 2022 are the potential buyback of common stock under the approved share buyback program, capital expenditures of approximately $75 million, approximately $65 million for interest payments on outstanding debt, approximately $5 million for preferred stock dividends, funding of any operational needs of our subsidiary,subsidiaries, to service debt,reimburse Liberty Media Corporation for amounts due under various agreements and to fund potential investment opportunities, and refinance Liberty Broadband’s margin loans that come due in 2019.opportunities. We expect our potentialcorporate cash and other available sources of liquidity (discussed above) and corporate cash to cover corporate expenses for the foreseeable future.

Results of Operations—GCI Holdings, LLC

GCI Holdings provides a full range of wireless, data, video, voice, and future obligations. managed services to residential, businesses, governmental entities, and educational and medical institutions primarily in Alaska. The following table highlights selected key performance indicators used in evaluating GCI Holdings.

June 30,

 

2022

    

2021

 

Consumer

  

 

  

Wireless:

  

 

  

Wireless lines in service1

194,000

 

189,100

Data:

  

 

  

Cable modem subscribers2

154,500

145,400

1A wireless line in service is defined as a wireless device with a monthly fee for services.

2 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber.

GCI Holdings’ operating results for the three and six months ended June 30, 2022 and 2021 are as follows:

Three months ended

Six months ended

June 30,

June 30,

 

    

2022

    

2021

    

2022

2021

 

amounts in millions

Revenue

$

238

 

238

 

471

480

Operating expenses (excluding stock-based compensation included below):

 

  

 

  

 

  

  

Operating expense

 

(60)

 

(65)

 

(123)

(132)

Selling, general and administrative expenses

 

(88)

 

(84)

 

(171)

(163)

Adjusted OIBDA

 

90

 

89

 

177

185

Stock-based compensation

 

(4)

 

(4)

 

(7)

(7)

Litigation settlement

 

(10)

 

 

(10)

Depreciation and amortization

 

(66)

 

(67)

 

(129)

(131)

Operating income (loss)

$

10

 

18

 

31

47

I-31I-38


Revenue

The components of revenue are as follows:

Three months ended

Six months ended

June 30,

June 30,

    

2022

    

2021

    

2022

 

2021

amounts in millions

Consumer

 

  

 

  

 

  

Wireless

$

47

 

45

 

93

89

Data

 

57

 

53

 

115

105

Other

 

13

 

22

 

28

45

Business

 

  

 

  

 

  

  

Wireless

 

13

 

20

 

27

40

Data

 

97

 

87

 

187

178

Other

 

11

 

11

 

21

23

Total revenue

$

238

 

238

 

471

480

Consumer wireless revenue increased $2 million and $4 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods. The increases were primarily due to increased plan service fee revenue driven by an increase in the number of subscribers and subscribers’ selection of plans with higher recurring monthly charges that offer higher usage limits.

Consumer data revenue increased $4 million and $10 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods. The increases were primarily driven by an increase in the number of subscribers and the subscribers' selection of plans with higher recurring monthly charges that offer higher speeds and higher usage limits.

Consumer other revenue decreased $9 million and $17 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods. Consumer other revenue consists of consumer video and voice revenue. The decreases were due to a decrease in video revenue primarily driven by decreased video subscribers. This was the result of both the transition from traditional linear video delivery to IP delivery and GCI Holdings’ decision to discontinue selling bulk video packages for multi-dwelling units. Historically, GCI Holdings has seen declines in video and voice subscribers and revenue and expects a continued decrease as customers potentially choose alternative services.

Business wireless revenue decreased $7 million and $13 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods. The decreases were primarily due to decreases in roaming revenue. The decreases in roaming revenue were driven by a contract amendment signed in the fourth quarter of 2021. Although the contract amendment will result in lower annual roaming revenue, GCI Holdings will benefit from the extension of the agreement for several years as well as continued backhaul revenue.

Business data revenue increased $10 million and $9 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods, primarily due to increased sales to school and medical customers due to service upgrades as well as new customer growth. Additionally, revenue for all other business customers increased for the six month period, driven by business customers upgrading to services that offer higher speeds and higher usage limits.

Business other revenue was relatively flat and decreased $2 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods. Business other revenue consists of business video and voice revenue. The decrease for the six month period was primarily due to decreased business video and long distance revenue. Historically, GCI Holdings has seen declines in video and voice subscribers and revenue and has not focused business efforts on growth in these areas.

I-39

Operating expenses decreased $5 million and $9 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods, due to a decrease in video costs, primarily due to a decrease in costs paid to content producers driven by reduced video subscribers. This decrease in both the three and six month periods was partially offset by an increase in costs to operate GCI Holdings’ network driven by the increase in demand for data service.

Selling, general and administrative expenses increased $4 million and $8 million for the three and six months ended June 30, 2022, respectively, as compared to the corresponding prior year periods, primarily due to increases in labor related costs driven by an increase in contract labor costs, as well as increases in software costs driven by an increase in software as service arrangements.

Stock-based compensation was relatively flat for the three and six months ended June 30, 2022, as compared to the corresponding prior year periods.

Litigation settlement increased $10 million for the three and six months ended June 30, 2022, as compared to the corresponding prior year periods. This was due to an increase in the estimated liability relating to compliance with RHC program rules which reflects a settlement offer that GCI Holdings made to the DOJ in June 2022.

Depreciation and amortization was relatively flat for the three and six months ended June 30, 2022, as compared to the corresponding prior year periods.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risk in the normal course of business due to our ongoing investing and financial activities. Market risk refers to the risk of loss arising from adverse changes in stock prices and interest rates. The risk of loss can be assessed from the perspective of adverse changes in fair values, cash flows and future earnings. We have established policies, procedures and internal processes governing our management of market risks and the use of financial instruments to manage our exposure to such risks.

We are exposed to changes in interest rates primarily as a result of our borrowing and investment activities, which could include investments in fixed and floating rate debt instruments and borrowings used to maintain liquidity and to fund business operations. The nature and amount of our long-term and short-term debt are expected to vary as a result of future requirements, market conditions and other factors. We expect to manage our exposure to interest rates by achievingmaintaining what we believe is an appropriate mix of fixed and variable rate debt. We believe this best protects us from interest rate risk. We anticipate achievingcould achieve this mix by (i) issuing fixed rate debt that we believe has a low stated interest rate and significant term to maturity, (ii) issuing variable rate debt with appropriate maturities and interest rates and/orand (iii) entering into interest rate swap arrangements when we deem appropriate.

Liberty Broadband’s borrowings under the Margin Loan Agreement (as defined in note 6 of the accompanying condensed consolidated financial statements) and the Senior Credit Facility (as defined in note 6 of the accompanying condensed consolidated financial statements) carry a variable interest rate based on LIBOR as a benchmark for establishing the rate of interest. LIBOR is the subject of national, international and other regulatory guidance and proposals for reform. In 2017, the United Kingdom's Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that it intends to phase out LIBOR. On March 5, 2021, the FCA announced that all LIBOR settings will either cease to be provided by any administrator or no longer be representative: (a) immediately after December 31, 2021, in the case of the one week and two month U.S. dollar settings; and (b) immediately after June 30, 2023, in the case of the remaining U.S. dollar settings. The United States Federal Reserve has also advised banks to cease entering into new contracts that use USD LIBOR as a reference rate. The Alternative Reference Rate Committee, a committee convened by the Federal Reserve that includes major market participants, has identified the Secured Overnight Financing Rate, or SOFR, a new index calculated by short-term repurchase agreements, backed by Treasury securities, as its preferred alternative rate for LIBOR. Our Margin Loan Agreement and Senior Credit Facility provide for a transition to a SOFR based rate or to other alternative reference rates depending on acceptance in the market of these rates. At this time, it is not possible to predict how markets will respond to SOFR or other alternative reference rates as the transition away from the LIBOR benchmarks is anticipated in coming years. Accordingly, the outcome of these reforms is uncertain and any changes in the methods by which LIBOR is determined or regulatory

I-40

activity related to LIBOR’s phaseout could cause LIBOR to perform differently than in the past or cease to exist. The consequences of these developments cannot be entirely predicted, but could include an increase in the cost of borrowings under the aforementioned debt instruments.

As of SeptemberJune 30, 2017,2022, our debt is comprised of the following amounts:

Variable rate debt

Fixed rate debt

 

Principal

    

Weighted avg

    

Principal

    

Weighted avg

 

amount

interest rate

amount

interest rate

 

dollar amounts in millions

 

GCI Holdings

$

403

3.1

%

$

600

4.8

%

Corporate and other

$

1,400

3.8

%

$

1,415

1.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Variable rate debt

 

Fixed rate debt

 

Principal

    

Weighted avg

    

Principal

    

Weighted avg

 

amount

 

interest rate

 

amount

 

interest rate

 

(dollar amounts in millions)

 

$

500

 

2.7%

 

$

 —

 

NA

 

Our stockinvestment in Charter (our equity method affiliate) is publicly traded and not reflected at fair value in our balance sheet. Our investment in Charter is also subject to market risk that is not directly reflected in our financial statements.

We are exposed to changes in stock prices primarily as a result of our significant holdings in publicly traded securities. We continually monitor changes in stock markets, in general, and changes in the stock prices of our holdings, specifically. We believe that changes in stock prices can be expected to vary as a result of general market conditions, technological changes, specific industry changes and other factors. We periodically use equity collars and other financial instruments to manage market risk associated with certain investment positions. These instruments are recorded at fair value based on option pricing models.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company carried out an evaluation, under the supervision and with the participation of management, including its chief executive officer and its principal accounting and financial officer (the "Executives"), of the effectiveness of its disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Executives concluded that the Company's disclosure controls and procedures were effective as of SeptemberJune 30, 20172022 to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission'sCommission’s rules and forms.

Changes in Internal Control Over Financial Reporting

There has been no change in the Company's internal control over financial reporting that occurred during the three and nine months ended SeptemberJune 30, 20172022 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

I-32I-41


PART II—OTHER INFORMATION

Item 1. Legal Proceedings

Our Annual Report on Form 10-K for the year ended December 31, 20162021 includes "Legal Proceedings" under Item 3 of Part I. Other than as described below and in Part II, Item 1. Legal Proceedings of our Quarterly Report on Form 10-Q for the quarter ended June 30, 2017,March 31, 2022, there have been no material changes from the legal proceedings described in our Form 10-K.

Charter Proceedings

In March 2020, Charter Communications, LLC (“CC, LLC”), an indirect subsidiary of Charter, was named as a defendant in a lawsuit filed in Dallas, Texas related to the fatal stabbing of an individual in her home by an off duty CC, LLC technician: William Goff, as Personal Representative of Betty Jo McClain Thomas, deceased, et al. v. Roy James Holden, Jr. and Charter Communications, LLC, Case No. CC-20-01579-E, pending in County Court at Law No. 5 for Dallas County, Texas. The complaint alleged that CC, LLC was responsible for the plaintiff’s death. Following a two phase trial, the jury returned a verdict finding CC, LLC at fault for plaintiff’s death, and awarded compensatory damages of $375 million to plaintiff’s estate and then awarded $7.0 billion in punitive damages to plaintiff’s estate on July 26, 2022. Charter will continue to vigorously defend this lawsuit including pursuing all available appeals.

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

Share Repurchase Programs

On February 23, 2021, a duly authorized committee of the board of directors authorized the repurchase of $2.23 billion of Liberty Broadband common stock. Additionally, on August 5, 2021, a duly authorized committee of the board of directors authorized the repurchase of an additional $2.105 billion of Liberty Broadband common stock. Further, on January 26, 2022, a duly authorized committee of the board of directors authorized the repurchase of an additional $2.215 billion of Liberty Broadband common stock.

A summary of the repurchase activity for the three months ended June 30, 2022 is as follows:

Series A Common Stock

Series C Common Stock

 

    

    

    

(c) Total Number

    

(d) Maximum Number

 

of Shares

(or Approximate Dollar

 

Purchased as

Value) of Shares that

 

(a) Total Number

(b) Average

(a) Total Number

(b) Average

Part of Publicly

May Yet Be Purchased

 

of Shares

Price Paid per

of Shares

Price Paid per

Announced Plans or

Under the Plans or

 

Period

Purchased

Share

Purchased

Share

Programs

Programs

 

April 1 - 30, 2022

$

-

2,189,116

$

134.15

2,189,116

$1,748

million

May 1 - 31, 2022

 

$

-

3,612,810

$

115.70

3,612,810

$1,330

million

June 1 - 30, 2022

 

926,177

$

108.92

1,963,486

$

119.85

2,889,663

$994

million

Total

 

926,177

7,765,412

 

8,691,589

There were no repurchases of Liberty Broadband Series A, B or C common stock or Liberty Broadband Preferred Stock during the period.three months ended June 30, 2022.

During the three months ended SeptemberJune 30, 2017, no2022, zero shares of Liberty Broadband Series A orcommon stock, zero shares of Liberty Broadband Series B common stock, 270 shares of Liberty Broadband Series C common stock and 162 shares of Liberty Broadband Preferred Stock were surrendered by certain of our officers and employees to pay withholding taxes and other deductions in connection with the vesting of their restricted stock.

stock, restricted stock units and options.

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Item 6. Exhibits

(a)

Exhibits

Listed below are the exhibits which are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):

10.1

Margin LoanExchange Agreement, dated as of August 31, 2017,June 13, 2022, by and among LBC Cheetah 6, LLC, as Borrower, various lendersJohn C. Malone, the John C. Malone 1995 Revocable Trust U/A DTD 3/6/1995 and Bank of America, N.A., as Calculation Agent and Bank of America, N.A., as Administrative Agent.*Liberty Broadband Corporation (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on June 13, 2022 (File No. 001-36713)).

31.1

Rule 13a-14(a)/15d-14(a) Certification*

31.2

Rule 13a-14(a)/15d-14(a) Certification*

32

Section 1350 Certification**

101.INS

XBRL Instance Document* - The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document*

101.CAL

Inline XBRL Taxonomy Calculation Linkbase Document*

101.LAB

Inline XBRL Taxonomy Label Linkbase Document*

101.PRE

Inline XBRL Taxonomy Presentation Linkbase Document*

101.DEF

Inline XBRL Taxonomy Definition Document*

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)*


*Filed herewith

**Furnished herewith

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SIGNATURES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LIBERTY BROADBAND CORPORATION

Date: November 1, 2017August 5, 2022

By:

/s/ GREGORY B. MAFFEI

Gregory B. Maffei

President and Chief Executive Officer

Date: November 1, 2017August 5, 2022

By:

/s/ MARK D. CARLETONBRIAN J. WENDLING

Mark D. CarletonBrian J. Wendling

Chief Financial Officer

(Principal FinancialAccounting Officer and Principal Accounting Officer)Financial Officer

II-3