Sure statements on this Quarterly Report on Type 10-Q represent
forward-looking statements inside the that means of the Personal Securities
Litigation Reform Act of 1995, together with statements concerning enterprise, product
and advertising methods; new service and product choices; income development;
future bills; anticipated modifications to rules; the popularity of deferred
income; competitors; the efficiency, outcomes of operations and money flows of
our fairness affiliate, Constitution Communications, Inc. (“Constitution”); the enlargement of
Constitution’s community; projected sources and makes use of of money; the results of regulatory
developments; the affect of COVID-19 (as outlined beneath); the Rural Healthcare
Program; indebtedness and the anticipated affect of sure contingent
liabilities associated to authorized and tax proceedings and different issues arising in
the unusual course of enterprise. Ahead-looking statements inherently contain
many dangers and uncertainties that would trigger precise outcomes to vary
materially from these projected in these statements. The place, in any
forward-looking assertion, we specific an expectation or perception as to future
outcomes or occasions, such expectation or perception is expressed in good religion and
believed to have an inexpensive foundation, however such statements essentially contain
dangers and uncertainties and there could be no assurance that the expectation or
perception will consequence or be achieved or completed. The next embody some
however not the entire elements that would trigger precise outcomes or occasions to vary
materially from these anticipated:
our, GCI Holdings, LLC (“GCI Holdings”), GCI, LLC, and Constitution’s capacity to
? receive money in ample quantities to service monetary obligations and meet
different commitments;
? our capacity to make use of internet working loss carryforwards and disallowed enterprise
curiosity carryforwards;
? our, GCI Holdings, GCI, LLC and Constitution’s capacity to acquire further
financing, or refinance present indebtedness, on acceptable phrases;
the affect of our, GCI Holdings, GCI, LLC and Constitution’s vital
? indebtedness and the flexibility to adjust to any covenants in our and their
respective debt devices;
normal enterprise circumstances, unemployment ranges and the extent of exercise in
the housing sector and financial uncertainty or downturn, together with the affect
? of the novel coronavirus (“COVID-19”) pandemic to gross sales alternatives from
residential transfer exercise, GCI Holdings and Constitution’s clients and distributors and
native, state and federal governmental responses to the pandemic;
? competitors confronted by GCI Holdings and Constitution;
? the flexibility of GCI Holdings and Constitution to amass and retain subscribers;
the affect of governmental laws and regulation together with, with out
? limitation, rules of the Federal Communications Fee (the “FCC”),
on GCI Holdings and Constitution, their capacity to adjust to rules, and
hostile outcomes from regulatory proceedings;
? modifications in the price of programming bills and gear and the flexibility of
GCI Holdings and Constitution to move on associated prices to their clients;
? modifications within the quantity of information used on the networks of GCI Holdings and Constitution;
? the flexibility of third-party suppliers to provide gear, providers, software program or
licenses;
? the flexibility of GCI Holdings and Constitution to reply to new expertise and meet
buyer calls for for brand new services;
? modifications in buyer demand for the services of GCI Holdings and
Constitution and their capacity to adapt to modifications in demand;
? the flexibility of GCI Holdings and Constitution to license or implement mental
property rights;
pure or man-made disasters, terrorist assaults, armed conflicts, pandemics,
? cyberattacks, community disruptions, service interruptions and system failures
and the affect of associated uninsured liabilities;
? the flexibility to rent and retain key personnel;
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? the flexibility to obtain mandatory providers and gear from GCI Holdings’ and
Constitution’s distributors in a well timed method and at affordable prices;
? dangers associated to the Funding Firm Act of 1940;
? the result of any pending or threatened litigation; and
? modifications to normal financial circumstances, together with financial circumstances in
Alaska, and their affect on potential clients, distributors and third events.
For added danger elements, please see Half I, Merchandise 1A of our Annual Report on
Type 10-Ok for the yr ended December 31, 2021. These forward-looking statements
and such dangers, uncertainties and different elements converse solely as of the date of
this Quarterly Report, and we expressly disclaim any obligation or endeavor
to disseminate any updates or revisions to any forward-looking assertion
contained herein, to replicate any change in our expectations with regard thereto,
or some other change in occasions, circumstances or circumstances on which any such
assertion relies.
The next dialogue and evaluation supplies info regarding our
outcomes of operations and monetary situation. This dialogue needs to be learn in
conjunction with our accompanying condensed consolidated monetary statements
and the notes thereto and our Annual Report on Type 10-Ok for the yr ended
December 31, 2021.
Overview
Liberty Broadband Company (“Liberty Broadband,” “the Firm,” “us,” “we,”
or “our”) is primarily comprised of GCI Holdings, LLC (“GCI Holdings”), a completely
owned subsidiary, and an fairness technique funding in Constitution Communications,
Inc. (“Constitution”).
On December 18, 2020, GCI Liberty, Inc. (“GCI Liberty”) was merged with Liberty
Broadband (the “Mixture”) and Liberty Broadband acquired GCI Holdings, as
additional described in Liberty Broadband’s Annual Experiences on Type 10-Ok for the
years ended December 31, 2021 and 2020.
By way of a variety of prior years’ transactions, together with the Mixture,
Liberty Broadband has acquired an curiosity in Constitution. Liberty Broadband
controls 25.01% of the combination voting energy of Constitution.
Replace on Financial Situations
GCI Holdings
GCI Holdings presents wi-fi and wireline telecommunication providers, information
providers, video providers, and managed providers to clients primarily all through
Alaska. Due to this geographic focus, development of GCI Holdings’
enterprise and operations relies upon upon financial circumstances in Alaska. In December
2019, Chinese language officers reported a novel coronavirus outbreak. COVID-19 has
since unfold by China and internationally. On March 11, 2020, the World
Well being Group assessed COVID-19 as a worldwide pandemic, inflicting many
international locations all through the world to take aggressive actions, together with imposing
journey restrictions and stay-at-home orders, closing public points of interest and
eating places, and mandating social distancing practices, which prompted a
vital disruption to most sectors of the financial system at various ranges throughout
the intervals coated by the monetary statements.
Though the COVID-19 pandemic has considerably impacted Alaska, GCI Holdings
has continued to ship providers uninterrupted by the pandemic and expects to
be capable of proceed to reply to the rise in community exercise. As a significant
supplier of Web providers in Alaska, GCI Holdings believes it performs an
instrumental position in enabling social distancing by telecommuting and
e-learning throughout the state and stays targeted on its service to clients, as
properly because the well being and security of its staff and clients.
GCI Holdings can not predict the last word affect of COVID-19 on its enterprise,
together with the depth and length of the financial affect to its clients’
capacity to pay for services together with the affect of prolonged
unemployment advantages and different stimulus packages and what help could also be
supplied to its clients. There’s a danger that GCI Holdings’ accounts
receivable and dangerous debt expense will enhance considerably because of the financial
affect of the COVID-19 pandemic.
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As well as, there may be uncertainty concerning the affect of presidency emergency
declarations, the flexibility of suppliers and distributors to offer merchandise and
providers to GCI Holdings and the chance of limitations on the deployment and
upkeep of its providers.
The Alaska financial system relies upon the oil business, state and federal
spending, funding earnings and tourism. A decline in oil costs would put
vital strain on the Alaska state authorities price range. The Alaska state
authorities has vital reserves that GCI Holdings believes will assist fund
the state authorities for the following couple of years. The Alaska financial system is in a
recession that began in late 2015 and has continued because of the
COVID-19 pandemic. Whereas it’s tough for GCI Holdings to foretell the longer term
affect of a renewed or persevering with recession on its enterprise, these circumstances
have had an hostile affect on its enterprise and will adversely have an effect on the
affordability of and demand for a few of its services and trigger
clients to shift to decrease priced services or to delay or forgo
purchases of its services. If the recession continues, it might
negatively have an effect on GCI Holdings’ enterprise together with its monetary place,
outcomes of operations, or liquidity, in addition to its capacity to service debt, pay
different obligations and improve shareholder returns.
Rural Well being Care (“RHC”) Program
GCI Holdings receives help from varied Common Service Fund (“USF”)
applications together with the RHC Program. The USF applications are topic to alter by
regulatory actions taken by the FCC, interpretations of or compliance with USF
program guidelines, or legislative actions. Modifications to any of the USF applications that
GCI Holdings participates in might lead to a fabric lower in income and
accounts receivable, which might have an hostile impact on GCI Holdings’
enterprise and the Firm’s monetary place, outcomes of operations or
liquidity. The next paragraphs describe sure separate issues associated to
the RHC Program that affect or might affect the income earned by the Firm.
As of March 31, 2022, the Firm had internet accounts receivable from the RHC
Program of roughly $73 million, which is included inside Commerce and different
receivables within the condensed consolidated stability sheets.
The Firm disclosed, in further element, the next objects associated to GCI
Holdings’ involvement within the RHC Program in its Annual Report on Type 10-Ok for
the yr ended December 31, 2021:
FCC Charge Discount
The FCC lowered the charges charged to RHC clients by roughly 26% for the
? funding yr that ended June 30, 2018. An Utility for Evaluation is at present
with the FCC.
The FCC authorized the cost-based rural charges GCI Holdings traditionally utilized
for the funding years that ended on June 30, 2019 and June 30, 2020. GCI
Holdings collected $175 million in accounts receivable relating to those two
funding years throughout 2021. GCI Holdings additionally filed an Utility for Evaluation of
? these determinations. GCI Holdings recognized charges for comparable providers
supplied by a competitor that may justify larger charges for sure GCI
Holdings satellite tv for pc providers within the funding years that ended on June 30, 2018,
June 30, 2019, and June 30, 2020. GCI Holdings submitted that info to
the Bureau on September 7, 2021. The Functions for Evaluation stay pending.
On Could 24, 2021, the FCC authorized the fee research submitted by GCI Holdings
? for the funding yr ended June 30, 2021. Subsequently, on August 16, 2021, GCI
Holdings submitted a request for approval of charges for 17 further websites,
which stays pending.
RHC Program Funding Cap
The RHC Program has a funding cap for every particular person funding yr that’s
yearly adjusted for inflation, and which the FCC can enhance by carrying
? ahead unused funds from prior funding years. In recent times, together with the
present yr, this funding cap has not restricted the quantity of funding obtained
by members; nevertheless, administration continues to observe the funding cap and
its potential affect on funding in future years.
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Enforcement Bureau and Associated Inquiries
GCI Holdings obtained a letter of inquiry and request for info from the
? Enforcement Bureau of the FCC (the “Enforcement Bureau”) in March 2018 relating
to the interval starting January 1, 2015 and together with all future intervals.
GCI Holdings turned conscious of potential RHC Program compliance points within the
? fourth quarter of 2019 associated to sure of its at present energetic and expired
contracts with sure of its RHC clients.
On December 17, 2020, GCI Holdings obtained a Subpoena Duces Tecum from the
FCC’s Workplace of the Inspector Common requiring manufacturing of paperwork from
? January 1, 2009 to the current associated to a single RHC buyer and associated
contracts, info concerning GCI Holdings’ willpower of rural charges for
a single buyer, and to offer info concerning individuals with data
of pricing practices usually.
With respect to the continued inquiries from the FCC’s Enforcement Bureau and the
FCC’s Workplace of the Inspector Common, GCI Holdings acknowledged a legal responsibility of
roughly $12 million in 2019 for contracts that have been deemed possible of
not complying with the RHC Program guidelines. GCI Holdings additionally recognized sure
? contracts the place further loss was moderately attainable and such loss might
vary from zero to $44 million. An accrual was not made for the quantity of the
moderately attainable loss in accordance with the relevant accounting steering.
GCI Holdings may be assessed fines and penalties however such quantities might
not be moderately estimated.
GCI Holdings was knowledgeable in 2021 {that a} qui tam motion has been filed within the
Western District of Washington arising from the subject material beneath evaluation by
? the Enforcement Bureau. The Division of Justice (the “DOJ”) is investigating
whether or not GCI Holdings submitted false claims and/or statements in connection
with GCI’s participation within the FCC’s RHC Program. Moreover in 2021, the
DOJ issued a Civil Investigative Demand with regard to the qui tam motion.
Revision of Assist Calculations
The FCC launched an order adopting modifications to the RHC Program that can revise
the way wherein help issued beneath the RHC Program will likely be calculated and
authorized. On January 19, 2021, the Wireline Competitors Bureau of the FCC
issued an Order that waives the requirement to make use of the database for well being care
suppliers in Alaska for the 2 funding years ending June 30, 2022 and June 30,
? 2023. The Order requires GCI Holdings to find out its rural charges based mostly on
beforehand authorized charges or beneath reinstitution of the principles at present in
impact by the funding yr ended on June 30, 2021. On April 8, 2021, the
Wireline Competitors Bureau issued an Order additional extending the January 19,
2021 waiver to carriers nationwide and eliminating the flexibility or requirement
to make use of the database to determine the healthcare supplier funds for providers
sponsored by the RHC Telecom Program.
The Firm doesn’t have any vital updates concerning the objects famous
above besides as mentioned within the the rest of this paragraph. Subsequent to
March 31, 2022, the Wireline Competitors Bureau issued an Order additional
extending the January 19, 2021 waiver concerning use of the database by well being
care suppliers in search of help beneath the RHC Program by the funding yr
ending June 30, 2024. Additionally subsequent to March 31, 2022, the DOJ and GCI
Holdings held discussions concerning the qui tam motion whereby the DOJ clarified
that its investigation pertains to the years from 2010 by 2019 and alleged
that GCI Holdings had submitted false claims beneath the RHC Program throughout this
time interval. GCI Holdings continues to work with the DOJ associated to this matter;
nevertheless, the Firm is unable to evaluate the last word final result of this motion and
is unable to moderately estimate a spread of attainable loss, together with any sort of
tremendous or penalty that will in the end be assessed as permitted beneath the
relevant legislation.
Constitution
Constitution is a number one broadband connectivity firm and cable operator serving
greater than 32 million clients in 41 states by its Spectrum model.
In 2022, Constitution stays targeted on driving buyer relationship development.
Constitution continues to see decrease buyer transfer charges and switching behaviors amongst
suppliers, which has lowered its promoting alternatives. Constitution’s rural
development initiative is underway which it expects to increase its footprint by
roughly 1 million houses and companies over the following six years. Constitution
continues to evolve its community to offer elevated Web speeds and
reliability with a minimal pace
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of 200 megabits per second now supplied to new clients in 100% of its footprint
with continued funding in merchandise and customer support platforms. Constitution
continues to spend money on its capacity to offer a differentiated Web
connectivity expertise for cell and glued Web clients with the
availability of Superior House WiFi and over 500,000 out of residence WiFi entry
factors throughout its footprint. As well as, Constitution continues to work in direction of the
development of its personal 5G cell data-only community leveraging the Residents
Broadband Radio Service Precedence Entry Licenses bought in 2020. By
frequently bettering its product set and providing shoppers the chance to
get monetary savings by switching to Constitution’s providers, Constitution believes it might proceed
to penetrate its increasing footprint and appeal to extra spend on further
merchandise for its present clients.
Different
Skyhook Holdings, Inc. (“Skyhook”) was a completely owned subsidiary of Liberty
Broadband till its sale on Could 2, 2022 for internet proceeds of roughly $170
million. Skyhook will not be offered as held-for-sale as of March 31, 2022 as it’s
not materials to Liberty Broadband’s consolidated monetary statements and
Skyhook is not going to be offered as a discontinued operation upon closing of the
sale because the sale didn’t signify a strategic shift that had a significant impact on
Liberty Broadband’s operations and monetary outcomes.
Outcomes of Operations-Consolidated-March 31, 2022 and 2021
Common. We offer info concerning our consolidated working outcomes and
different earnings and bills, in addition to info concerning the contribution to
these objects from our reportable segments within the tables beneath. The “Company and
different” class consists of these property or companies which don’t qualify as a
separate reportable section. See observe 10 to the accompanying condensed
consolidated monetary statements for extra dialogue concerning our reportable
segments. For a extra detailed dialogue and evaluation of GCI Holding’s outcomes,
see “Outcomes of Operations-GCI Holdings” beneath.
Consolidated working outcomes:
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