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 June 30, 2023
☐
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: 001-38101
WideOpenWest, Inc.
(Exact name of registrant as specified in its charter)
Delaware(State or Other Jurisdiction of Incorporation or Organization)
46-0552948(IRS Employer Identification No.)
7887 East Belleview Avenue, Suite 1000Englewood, Colorado(Address of Principal Executive Offices)
80111(Zip Code)
(720) 479-3500
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock
WOW
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒
Accelerated filer ☐
Non-accelerated filer ☐
Smaller reporting company ☐
Emerging Growth Company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of outstanding shares of the registrant’s common stock as of August 4, 2023 was 83,693,578.
WIDEOPENWEST, INC. AND SUBSIDIARIES
FOR THE PERIOD ENDED JUNE 30, 2023
TABLE OF CONTENTS
Page
PART I. Financial Information
Item 1:
Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Operations
2
Condensed Consolidated Statements of Stockholders’ Equity
3
Condensed Consolidated Statements of Cash Flows
4
Notes to the Condensed Consolidated Financial Statements
5
Item 2:
Management’s Discussion and Analysis of Financial Condition and Results of Operations
15
Item 3:
Quantitative and Qualitative Disclosures about Market Risk
23
Item 4:
Controls and Procedures
PART II. Other Information
24
Legal Proceedings
Item 1A:
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
Defaults Upon Senior Securities
Mine Safety Disclosures
Item 5:
Other Information
Item 6:
Exhibits
25
This Quarterly Report on Form 10-Q is for the three and six months ended June 30, 2023. Any statement contained in a prior periodic report shall be deemed to be modified or superseded for purposes of this Quarterly Report to the extent that a statement contained herein modifies or supersedes such statement. The Securities and Exchange Commission allows us to “incorporate by reference” information that we file with them, which means that we can disclose important information by referring you directly to those documents. Information incorporated by reference is considered to be part of this Quarterly Report. References in this Quarterly Report to “WOW,” “we,” “us,” “our,” or “the Company” are to WideOpenWest, Inc. and its direct and indirect subsidiaries, unless the context specifies or requires otherwise.
i
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this Quarterly Report that are not historical facts contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements represent our goals, beliefs, plans and expectations about our prospects for the future and other future events. Such statements involve certain risks, uncertainties and assumptions. Forward-looking statements include all statements that are not historical fact and can be identified by terms such as “may,” “intend,” “might,” “will,” “should,” “could,” “would,” “anticipate,” “expect,” “believe,” “estimate,” “plan,” “project,” “predict,” “potential,” or the negative of these terms. Although these forward-looking statements reflect our good-faith belief and reasonable judgment based on current information, these statements are qualified by important factors, many of which are beyond our control, that could cause our actual results to differ materially from those in the forward-looking statements, including, but not limited to:
other factors described from time to time in our reports filed or furnished with the SEC, and in particular those factors set forth in the section entitled “Risk Factors” in our annual report filed on Form 10-K with the SEC on February 27, 2023 and other reports subsequently filed with the SEC. Given these uncertainties, you should not place undue reliance on any such forward-looking statements. The forward-looking statements included in this report are made as of the date hereof or the date specified herein, based on information available to us as of such date. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.
ii
PART I-FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
June 30,
December 31,
2023
2022
(in millions, except share data)
Assets
Current assets
Cash and cash equivalents
$
23.0
31.0
Accounts receivable—trade, net of allowance for doubtful accounts of $5.9 and $4.3, respectively
39.7
39.9
Accounts receivable—other, net
13.5
12.2
Prepaid expenses and other
43.3
37.8
Total current assets
119.5
120.9
Right-of-use lease assets—operating
13.4
15.0
Property, plant and equipment, net
759.4
725.8
Franchise operating rights
457.0
585.1
Goodwill
225.1
Intangible assets subject to amortization, net
1.2
1.3
Other non-current assets
45.8
44.2
Total assets
1,621.4
1,717.4
Liabilities and stockholders’ equity
Current liabilities
Accounts payable—trade
44.9
46.1
Accrued interest
0.1
Current portion of long-term lease liability—operating
4.8
4.9
Accrued liabilities and other
63.1
68.7
Current portion of long-term debt and finance lease obligations
16.7
17.7
Current portion of unearned service revenue
27.1
27.2
Total current liabilities
157.8
164.7
Long-term debt and finance lease obligations, net of debt issuance costs —less current portion
851.4
725.0
Long-term lease liability—operating
10.1
11.6
Deferred income taxes, net
175.8
225.3
Other non-current liabilities
26.1
15.7
Total liabilities
1,221.2
1,142.3
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized; 0 shares issued and outstanding
—
Common stock, $0.01 par value, 700,000,000 shares authorized; 98,605,784 and 96,830,312 issued as of June 30, 2023 and December 31, 2022, respectively; 83,684,981 and 86,417,733 outstanding as of June 30, 2023 and December 31, 2022, respectively
1.0
Additional paid-in capital
385.4
374.7
Accumulated income
168.3
308.0
Treasury stock at cost, 14,920,803 and 10,412,579 shares as of June 30, 2023 and December 31, 2022, respectively
(154.5)
(108.6)
Total stockholders’ equity
400.2
575.1
Total liabilities and stockholders’ equity
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended
Six months ended
Revenue
172.6
176.1
344.8
350.7
Costs and expenses:
Operating (excluding depreciation and amortization)
75.6
83.0
153.7
170.3
Selling, general and administrative
43.6
39.3
129.1
77.6
Depreciation and amortization
46.7
43.9
92.2
87.9
Impairment losses on intangibles
128.1
294.0
166.2
503.1
335.8
(Loss) income from operations
(121.4)
9.9
(158.3)
14.9
Other income (expense):
Interest expense
(17.3)
(7.9)
(32.2)
(15.3)
Other income, net
0.8
6.3
2.0
14.2
(Loss) income from operations before provision for income tax
(137.9)
8.3
(188.5)
13.8
Income tax benefit (expense)
36.2
(4.3)
48.8
(4.1)
Net (loss) income
(101.7)
4.0
(139.7)
9.7
Basic and diluted (loss) earnings per common share
Basic
(1.25)
0.05
(1.70)
0.12
Diluted
0.11
Weighted-average common shares outstanding
81,502,527
84,148,917
82,262,724
83,722,315
86,793,139
86,642,849
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common
Treasury
Additional
Total
Stock
Stock at
Paid-in
Accumulated
Stockholders'
Par Value
Cost
Capital
Income
Equity
Balances at January 1, 2023
86,417,733
Stock-based compensation
5.6
Issuance of restricted stock, net
1,783,965
Purchase of shares
(2,642,178)
(28.4)
Net loss
(38.0)
Balances at March 31, 2023(1)
85,559,520
(137.0)
380.3
270.0
514.3
5.1
(8,493)
(1,866,046)
(17.5)
Balances at June 30, 2023(1)
83,684,981
Balances at January 1, 2022
87,392,088
(89.2)
348.5
310.5
570.8
704,864
(298,386)
(5.3)
Net income
5.7
Balances at March 31, 2022(1)
87,798,566
(94.5)
354.1
316.2
576.8
(31,332)
(35,149)
(0.7)
Balances at June 30, 2022(1)
87,732,085
(95.2)
360.4
320.2
586.4
(1)
Included in outstanding shares as of March 31, 2022 and June 30, 2022 are 3,721,638 and 3,523,316, respectively, of non-vested shares of restricted stock awards granted to employees and directors.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
(in millions)
Cash flows from operating activities:
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
92.3
88.9
Deferred income taxes
(49.5)
(3.9)
Provision for doubtful accounts
5.5
0.7
Gain on sale of operating assets, net
(0.1)
(1.0)
Amortization of debt issuance costs and discount
Non-cash compensation
10.4
12.1
Other non-cash items
Changes in operating assets and liabilities:
Receivables and other operating assets
(13.7)
(8.4)
Payables and accruals
7.1
(150.7)
Net cash provided by (used in) operating activities
41.2
(51.7)
Cash flows from investing activities:
Capital expenditures
(123.8)
(76.8)
Other investing activities
0.2
1.1
Net cash used in investing activities
(123.6)
(75.7)
Cash flows from financing activities:
Proceeds from issuance of long-term debt, net
130.0
Payments on long-term debt and finance lease obligations
(9.7)
(9.9)
(45.9)
(6.0)
Net cash provided by (used in) financing activities
74.4
(15.9)
Decrease in cash and cash equivalents
(8.0)
(143.3)
Cash and cash equivalents, beginning of period
193.2
Cash and cash equivalents, end of period
49.9
Supplemental disclosures of cash flow information:
Cash paid during the periods for interest
30.2
14.4
Cash paid during the periods for income taxes
9.8
141.0
Cash received during the periods for refunds of income taxes
Non-cash operating activities:
Operating lease additions
0.9
1.5
Non-cash financing activities:
Finance lease additions
4.3
6.2
Capital expenditures within accounts payable and accruals
29.8
22.3
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
Note 1. General Information
WideOpenWest, Inc. (“WOW” or the “Company”) is one of the nation’s leading broadband providers offering an expansive portfolio of advanced services, including high-speed data (“HSD”), cable television (“Video”), and digital telephony (“Telephony”) services to residential and business customers. The Company serves customers in 15 markets in the United States which consist of Detroit and Lansing, Michigan; Augusta, Columbus, Newnan and West Point, Georgia; Charleston, South Carolina; Dothan, Auburn, Huntsville and Montgomery, Alabama; Knoxville, Tennessee; and Panama City, Pinellas County and Seminole County, Florida.
The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company operates as one reportable segment.
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation and Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”); however, in the opinion of management, the disclosures made are adequate to ensure the information presented is not misleading. The year-end consolidated balance sheet was derived from audited financial statements.
In the opinion of management, all normally recurring adjustments considered necessary for the fair presentation of the financial statements have been included, and the financial statements present fairly the financial position and results of operations for the interim periods presented. The results of operations for any interim period are not necessarily indicative of results expected for the full year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the 2022 Annual Report filed with the SEC on February 27, 2023.
All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in accordance with GAAP requires management to make assumptions and estimates that affect the reported amounts and disclosures of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts and disclosures of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. To the extent there are differences between those estimates and actual results, the unaudited condensed consolidated financial statements may be materially affected.
Note 3. Revenue from Contracts with Customers
Revenue by Service Offering
The following table presents revenue by service offering:
Residential subscription
HSD
88.0
84.6
174.8
166.9
Video
38.7
44.7
77.9
90.4
Telephony
6.1
11.1
12.4
Total residential subscription
132.2
135.4
263.8
269.7
Business subscription
18.7
18.0
37.1
35.8
2.9
3.0
5.8
5.9
6.6
6.8
13.1
Total business subscription
28.2
27.8
56.0
55.5
Total subscription services revenue
160.4
163.2
319.8
325.2
Other business services revenue(1)
5.4
10.3
10.7
Other revenue
7.5
14.7
14.8
Total revenue
Costs of Obtaining Contracts with Customers
The following table summarizes the activity of costs of obtaining contracts with customers:
Balance at beginning of period
37.7
39.5
37.3
Deferral
9.3
7.8
Amortization
(4.0)
(3.5)
(6.9)
Balance at end of period
40.8
38.2
The following table presents the current and non-current portion of costs of obtaining contracts with customers as of the end of the corresponding periods:
June 30, 2023
December 31, 2022
Current costs of obtaining contracts with customers
16.0
15.6
Non-current costs of obtaining contracts with customers
24.8
23.9
Total costs of obtaining contracts with customers
The current portion and the non-current portion of costs of obtaining contracts with customers are included in prepaid expenses and other and other non-current assets, respectively, in the Company’s unaudited condensed consolidated balance sheets. Amortization of costs of obtaining contracts with customers is included in selling, general and administrative expense in the Company’s unaudited condensed consolidated statements of operations.
6
Contract Liabilities
The following table summarizes the activity of current and non-current contract liabilities:
2.5
3.1
2.7
3.3
5.2
Revenue recognized
(2.7)
(3.2)
(5.4)
(6.6)
The following table presents the current and non-current portion of contract liabilities as of the end of the corresponding periods:
Current contract liabilities
2.2
2.4
Non-current contract liabilities
0.3
Total contract liabilities
The current portion and the non-current portion of contract liabilities are included in the current portion of unearned service revenue and other non-current liabilities, respectively, in the Company’s unaudited condensed consolidated balance sheets.
Unsatisfied Performance Obligations
Revenue from month-to-month residential subscription service contracts have historically represented a significant portion of the Company’s revenue and the Company expects that this will continue to be the case in future periods. All residential subscription service performance obligations will be satisfied within one year.
A summary of expected business subscription and other business services revenue to be recognized in future periods related to performance obligations which have not been satisfied or are partially unsatisfied as of June 30, 2023 is set forth in the table below:
2024
2025
Thereafter
Subscription services
29.1
43.0
20.5
100.9
Other business services
Total expected revenue
30.6
45.4
21.4
8.6
106.0
Provision for Doubtful Accounts
The provision for doubtful accounts and the allowance for doubtful accounts are based on the aging of the individual receivables, historical trends and current and anticipated future economic conditions. The Company manages credit risk by disconnecting services to customers who are delinquent, generally after 100 days of delinquency. The individual receivables are written-off after all reasonable efforts to collect the funds have been made. Actual write-offs may differ from the amounts reserved.
7
The following table presents the change in the allowance for doubtful accounts for trade accounts receivable:
2.8
Provision charged to expense(1)
Accounts written off, net of recoveries
(1.8)
(2.6)
Note 4. Plant, Property and Equipment, Net
Plant, property and equipment consists of the following:
Distribution facilities
1,407.5
1,341.1
Customer premise equipment
268.7
272.3
Head-end equipment
274.1
256.7
Computer equipment and software
168.5
156.4
Telephony infrastructure
49.4
52.4
Buildings and leasehold improvements
32.6
33.4
Vehicles
22.9
Office and technical equipment
19.4
19.1
Land
4.4
Construction in progress (including material inventory and other)
58.5
43.5
Total property, plant and equipment
2,307.9
2,202.2
Less accumulated depreciation
(1,548.5)
(1,476.4)
Depreciation expense for the three months ended June 30, 2023 and 2022 was $46.7 million and $44.4 million, respectively. Included in depreciation and amortization expense in the condensed consolidated statement of operations for the three months ended June 30, 2023 and 2022 were net gains on sales of operating assets of $0.1 million and $0.6 million, respectively.
Depreciation expense for the six months ended June 30, 2023 and 2022 was $92.1 million and $88.8 million, respectively. Included in depreciation and amortization expense in the condensed consolidated statement of operations for the six months ended June 30, 2023 and 2022 were net gains on sales of operating assets of $0.1 million and $1.0 million, respectively.
Note 5. Franchising Operating Rights and Goodwill
Changes in the carrying amounts of the Company’s franchise operating rights and goodwill during the three and six months ended June 30, 2023 are set forth below:
January 1,
Impairment
(128.1)
810.2
682.1
8
Due to the decline in the Company’s stock price, which represented a triggering event during the three months ended June 30, 2023, the Company performed an interim impairment analysis of its franchise operating rights and goodwill.
Franchise Operating Rights
Franchise operating rights are evaluated for impairment by comparing the carrying value of the intangible asset to its estimated fair value, utilizing both quantitative and qualitative methods, at the lowest level of identifiable cash flows, which generally represent the markets in which the Company operates. Qualitative analysis is performed for franchise assets in the event the previous analysis indicates that there is a significant margin between the estimated fair value of franchise operating rights and the carrying value of those rights, and that it is more likely than not that the estimated fair value equals or exceeds its carrying value.
For the interim impairment analysis, all franchise operating rights were evaluated using quantitative analysis. The Company calculates the estimated fair value of franchise operating rights using the multi-period excess earnings method, an income approach, which calculates the estimated fair value of an intangible asset by discounting its future cash flows. The estimated fair value is determined based on discrete discounted future cash flows attributable to each franchise operating right intangible asset using assumptions consistent with internal forecasts. Assumptions key in estimating fair value under this method include, but are not limited to, revenue and subscriber growth rates (less anticipated customer churn), operating expenditures, capital expenditures (including any build out), market share achieved or market multiples, contributory asset charge rates, tax rates and a discount rate. The discount rate used in the model represents a weighted average cost of capital and the perceived risk associated with an intangible asset such as the Company’s franchise operating rights. If the fair value of the franchise operating right asset was less than its carrying value, the Company recognizes an impairment charge for the difference between the fair value and the carrying value of the asset.
As a result of the interim impairment analysis, the estimated fair value of certain franchise operating right assets was determined to be below the carrying value, which resulted in the recognition of non-cash impairment losses in the following markets:
Huntsville, AL
60.0
Augusta, GA
24.4
Panama City, FL
Montgomery, AL
13.0
Newnan, GA
9.5
Valley, AL
Columbus, GA
3.7
The primary driver of the impairment charge was a decline in the estimated fair market value of indefinite-lived intangible assets in certain markets. The decline is primarily due to declining cash flows, which results in an increase in the discount rate, combined with the decline in the Company’s common stock price. The impairment charges do not have an impact on the Company’s intent and/or ability to renew or extend existing franchise operating rights.
For the interim impairment analysis, the Company quantitatively evaluated goodwill at the consolidated reporting unit level. The Company determined the estimated fair value utilizing a market approach that incorporated the approximate market capitalization as of the interim testing date, increased by the quoted market price of the Company’s debt and adjusted for a control premium.
Based on the interim analysis, the estimated fair value of goodwill exceeded the carrying value, as such, no impairment charge related to goodwill was recognized during the three and six months ended June 30, 2023.
9
Note 6. Accrued Liabilities and Other
Accrued liabilities and other consists of the following:
Payroll and employee benefits
22.2
Programming costs
12.8
15.9
Patent litigation settlement
Restructuring related to employee severance
4.1
Franchise and revenue sharing fees
Other accrued liabilities
Property, income, sales and use taxes
Customer cash collections (Transition Services Agreements)
3.6
Utility pole costs
1.9
1.6
Note 7. Long-Term Debt and Finance Leases
The following table summarizes the Company’s long-term debt and finance leases:
Available
borrowing
Effective
Outstanding
capacity
interest rate(1)
balance
Long-term debt:
Term B Loans, net(2)
8.24
%
714.5
717.7
Revolving Credit Facility(3)
106.4
7.90
139.0
9.0
Total long-term debt
853.5
726.7
Finance lease obligations
18.8
20.6
Total long-term debt and finance lease obligations
872.3
747.3
Debt issuance costs, net(4)
(4.2)
(4.6)
Sub-total
868.1
742.7
Less current portion
(16.7)
(17.7)
Long-term portion
10
Refinancing of the Term B Loans and Revolving Credit Facility
On December 20, 2021, the Company entered into a new secured credit agreement with Morgan Stanley Senior Funding, Inc., as administrative agent, collateral agent and issuing bank (the “Credit Agreement”). The Credit Agreement consists of (i) a new Term Loan B in an aggregate principal amount of $730.0 million and (ii) a $250.0 million revolving credit commitment. The Term Loan B matures in December 2028 and bears interest at a rate equal to the Secured Overnight Financing Rate (“SOFR”) plus 3.00%, subject to a 50 basis point floor, and the revolving credit commitment bears interest at a rate equal to SOFR plus 2.75%, subject to a 50 basis point commitment fee rate for unused commitments, and matures in December 2026. The Senior Secured Term B loans and Revolving Credit Facility are secured on a first-priority basis by a lien on substantially all of the Company’s assets, subject to certain exceptions and permitted liens.
As of June 30, 2023, the Company was in compliance with all debt covenants.
Note 8. Stock-Based Compensation
The Company’s stock incentive plan, the 2017 Omnibus Incentive Plan, provides for grants of stock options, restricted stock and performance awards. The Company’s directors, officers and other employees and persons who engage in services for the Company are eligible for grants under the plan. The stock incentive plan has authorized 15,924,128 shares of the Company’s common stock to be available for issuance, subject to adjustment in the event of a reorganization, stock split, merger or similar change in the Company’s corporate structure or the outstanding shares of common stock.
Restricted stock awards generally vest ratably over a four year period based on the date of grant. For restricted stock awards that contain only service conditions for vesting, the Company calculates the award fair value based on the closing stock price on the accounting grant date.
The Company recorded $5.0 million and $6.4 million of total non-cash compensation expense for the three months ended June 30, 2023 and 2022, respectively, and recorded $10.4 million and $12.1 million for the six months ended June 30, 2023 and 2022, respectively. Certain awards were modified during the year ended December 31, 2021 and were classified as liabilities. During the six months ended June 30, 2023, the remainder of these liability-based awards were settled with shares of restricted stock for approximately $0.3 million. The non-cash compensation expense associated with these awards was nil and $0.4 million for the six months ended June 30, 2023 and 2022, respectively and is included in total non-cash compensation expense.
The following table presents restricted stock activity during the six months ended June 30, 2023:
Number of
Unvested
Restricted Stock
Shares
Outstanding, beginning of period
3,223,995
Granted
2,033,514
Vested
(2,152,461)
Forfeited
(258,042)
Outstanding, end of period(1)
2,847,006
11
Grants of Performance Shares
On March 3, 2023, the Company granted 264,028 performance shares which will vest based on the Company’s achievement level relative to the following performance measures at December 31, 2025: 50% based upon the Company’s Total Shareholder Return (“TSR”) relative to the TSRs of the Company’s peer group and 50% based on the Company’s three-year cumulative EBITDA metric. EBITDA is defined as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), impairment losses on intangibles and goodwill, the write-off of any asset, loss on early extinguishment of debt, integration and restructuring expenses and all non-cash charges and expenses (including stock compensation expense) and certain other income and expenses. Upon achievement of the minimum threshold performance metric, the grantee may earn 50% to 200% of their respective target shares based on the performance goal.
The performance shares based on relative TSR performance have a market condition and are valued using a Monte Carlo simulation model on the grant date, which resulted in a grant date fair value of $16.19 per share. The estimated fair value is amortized to expense over the requisite service period, which ends on December 31, 2025. The following assumptions were used in the Monte Carlo simulation for computing the grant date fair value of the performance shares with a market condition: risk-free interest rate of 4.62%, volatility factors in the expected market price of the Company's common shares of 51.61% and an expected life of three years.
The performance shares based on three-year cumulative EBITDA have a performance condition. The probability of achieving the performance condition is assessed at each reporting period. If it is deemed probable that the performance condition will be met, compensation cost will be recognized based on the closing price per share of the Company's common stock on the date of the grant multiplied by the number of awards expected to be earned. If it is deemed that it is not probable that the performance condition will be met, the Company will discontinue the recognition of compensation cost and any compensation cost previously recorded will be reversed. At June 30, 2023, achievement of the performance conditions associated with the 2023, 2022 and 2021 performance shares was deemed probable.
Note 9. Equity
On October 4, 2022, the Company’s Board of Directors authorized the Company to repurchase up to $50.0 million of its outstanding common stock. As of June 30, 2023, we have completed our Share Repurchase Program with approximately 4.9 million shares purchased for $50.4 million (including commissions).
The following table summarizes the Company’s purchases of WOW common stock during the three and six months ended June 30, 2023 and 2022, respectively. These shares are reflected as treasury stock in the Company’s consolidated balance sheets.
(shares)
Share buybacks
1,810,770
3,751,803
Income tax withholding(1)
55,276
35,149
756,421
333,535
1,866,046
4,508,224
12
Note 10. Earnings per Common Share
Basic earnings or loss per share attributable to the Company’s common stockholders is computed by dividing net income or loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings or loss per share attributable to common stockholders presents the dilutive effect, if any, on a per share basis of potential common shares (such as restricted stock units) as if they had been vested or converted during the periods presented. No such items were included in the computation of diluted loss or earnings per share for the three and six months ended June 30, 2023 because the Company incurred a net loss and the effect of inclusion would have been anti-dilutive.
Basic weighted-average shares
Effect of dilutive securities:
Restricted stock awards
2,644,222
2,920,534
Diluted weighted-average shares
The dilutive effect of the potential common shares from the performance shares is included in diluted earnings per share upon the satisfaction of certain performance and market conditions. These conditions are evaluated at each reporting period and if the conditions have been satisfied during the reporting period, the number of contingently issuable shares are included in the computation of diluted earnings per share. As of June 30, 2022, the Company determined the performance conditions were not yet achieved; however, the market conditions indicated a certain level of achievement within the payout range. Therefore, the contingently issuable performance shares associated with the market condition are included in the computation of diluted earnings per share, if they have a dilutive effect on earnings per share.
Note 11. Fair Value Measurements
The fair values of cash and cash equivalents, receivables and trade payables approximate their carrying values due to the short-term nature of these instruments. For assets and liabilities of a long-term nature, the Company determines fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. Market or observable inputs are the preferred source of values, followed by unobservable inputs or assumptions based on hypothetical transactions in the absence of market inputs. The Company applies the following hierarchy in determining fair value:
13
The estimated fair value of the Company’s long-term debt is based on dealer quotes considering current market rates for the Company’s credit facility and is classified as Level 2. The ratio of the Company’s aggregate debt balance has trended from quoted market prices in active markets to quoted prices in non-active markets. The fair value of the Company’s long-term debt was valued at $709.2 million and $699.2 million as of June 30, 2023 and December 31, 2022, respectively. Long-term debt fair value does not include debt issuance costs and discounts. There were no transfers into or out of Level 1, 2 or 3 during the periods ended June 30, 2023 and December 31, 2022.
The Company’s nonfinancial assets such as franchise operating rights, property, plant, and equipment, and other intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that an impairment may exist. When such impairments are recorded, fair values are generally classified within Level 3 of the valuation hierarchy.
Note 12. Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the difference is expected to reverse. Additionally, the impact on deferred tax assets and liabilities of changes in tax rates is reflected in the financial statements in the period that includes the date of enactment.
The Company reported income tax benefit of $36.2 million and income tax expense of $4.3 million for the three months ended June 30, 2023 and 2022, respectively, and income tax benefit of $48.8 million and income tax expense of $4.1 million for the six months ended June 30, 2023 and 2022, respectively.
Note 13. Commitments and Contingencies
Sprint Patent Infringement Claim. On March 7, 2018, Sprint Communications Company LP (“Sprint”) filed a complaint in the U.S. District Court for the District of Delaware alleging that the Company infringed a set of patents directed to the provision of Voice over Internet Protocol (“VoIP”) services. This lawsuit was part of a larger, decade long patent enforcement campaign by Sprint aimed at numerous service providers in the broadband and telecommunications industry. In April 2023, prior to the commencement of the Company’s jury trial on April 24, 2023, the Company and Sprint entered into settlement discussions and also conducted a formal mediation. Those discussions culminated in a negotiated resolution of the pending litigation, for which the parties executed a binding term sheet on April 19, 2023, and a Confidential Settlement and License Agreement on April 28, 2023. The terms of the settlement are confidential, but the agreement does obligate the Company to make payments to Sprint over the course of three years in exchange for a full release of all liability.
The Company intends to pursue funding contributions for that settlement from third parties implicated by Sprint’s claims and the Company’s defense, including indemnification claims against the Company’s various affected equipment providers. As a result of the settlement, the Company accrued $46.8 million as of March 31, 2023, and the associated expense is included in selling, general and administrative expenses. The Company does not believe that the settlement will have a material impact on the Company’s capital expenditures.
The Company is also party to various legal proceedings (including individual, class and putative class actions) arising in the normal course of its business covering a wide range of matters and types of claims including, but not limited to, general contracts, billing disputes, rights of access, programming, taxes, fees and surcharges, consumer protection, trademark and patent infringement, employment, regulatory, tort, claims of competitors and disputes with other carriers.
In accordance with GAAP, the Company accrues an expense for pending litigation when it determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. Legal defense costs are expensed as incurred. None of the Company’s existing accruals for pending matters are material. The Company consistently monitors its pending litigation for the purpose of adjusting its accruals and revising its disclosures accordingly, in accordance with GAAP, when required. However, litigation is subject to uncertainty, and the outcome of any particular matter is not predictable. The Company will vigorously defend its interests in pending litigation, and the Company believes that the ultimate resolution of all such matters, after considering insurance coverage or other indemnities to which it is entitled, will not have a material adverse effect on its consolidated financial position, results of operations, or cash flows.
14
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are one of the nation’s leading broadband providers offering an expansive portfolio of advanced services, including high-speed data (“HSD”), cable television (“Video”), and digital telephony (“Telephony”) services to residential customers and offer a full range of products and services to business customers. Our services are delivered across 15 markets via our efficient, advanced hybrid fiber-coax (“HFC”) network. Our footprint covers certain suburban areas within the states of Alabama, Florida, Georgia, Michigan, South Carolina and Tennessee. At June 30, 2023, our broadband networks passed 1.9 million homes and businesses and served 522,400 customers.
Our core strategy is to provide outstanding service at affordable prices. We execute this strategy by managing our operations to focus on the customer. We believe that the customer experience should be reliable, easy and pleasantly surprising, every time. To achieve this customer experience, we operate one of the most technically advanced and high-performing networks in the industry.
We operate under a broadband first strategy. Our advanced network offers HSD speeds up to 1.2 GIG (1200 Mbps) in approximately 99% of our footprint and HSD speeds of 5 GIG (5000 Mbps) in our Greenfield expansion markets. Led by our robust HSD offering, our products are available either as an individual service or a bundle to residential and business service customers. Based on our per subscriber economics, we believe that HSD represents the greatest opportunity to enhance profitability across our residential and business markets.
We continue to experience strong demand for our HSD service. For the three and six months ended June 30, 2023, the average percentage of HSD only new connections was approximately 87%, consistent with the corresponding periods in 2022. Customers also connected at higher speeds with approximately 80% of HSD only new connections purchasing 500MB or higher speeds during the three and six months ended June 30, 2023, representing an approximate 10% increase compared to the corresponding periods in 2022.
During the first half of 2023, WOW focused on its market expansion strategy by building out its network in locations adjacent and nonadjacent to its existing network and bringing its state-of-the-art all IP fiber technology and award-winning customer service to those markets. During the first quarter of 2023, we launched services in Altamonte Springs, Florida, and Headland, Alabama. During the second quarter of 2023, we launched services in Wekiwa Springs, Florida. As of June 30, 2023, we had widespread construction underway across the Central Florida communities of Casselberry, Fern Park, Forest City, Lake Mary, Longwood, Ocoee, Sanlando Springs, and Winter Springs.
Key Transactions Impacting Operating Results and Financial Condition
Share Repurchase Program
On October 4, 2022, our Board of Directors authorized us to repurchase up to $50.0 million of our outstanding common stock. As of June 30, 2023, we have completed our Share Repurchase Program with approximately 4.9 million shares purchased for $50.4 million (including commissions).
Critical Accounting Estimates
For a discussion of our critical accounting estimates and the means by which we develop estimates refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2022 Annual Report on Form 10-K. There have been no material changes from the critical estimates described in our Form 10-K.
Homes Passed and Subscribers
We report homes passed as the number of serviceable addresses, such as single residence homes, apartments and condominium units, and businesses passed by our broadband network and listed in our database. We report total subscribers as the number of subscribers who receive at least one of our HSD, Video or Telephony services, without regard to which or how many services they subscribe. We define each of the individual HSD subscribers, Video subscribers and Telephony subscribers as a revenue generating unit (“RGU”). The following table summarizes homes passed, total subscribers and total RGUs for our services as of each respective date and for comparability purposes, presents subscribers associated with the Company’s operations as of each specified date:
Jun. 30,
Sep. 30,
Dec. 31,
Mar. 31,
Homes passed
1,886,000
1,885,700
1,892,600
Total subscribers
536,600
538,100
530,600
527,300
522,400
HSD RGUs
517,200
518,600
511,600
508,700
507,800
Video RGUs
135,500
129,900
123,200
117,100
110,000
Telephony RGUs
95,200
92,900
89,900
87,700
85,300
Total RGUs
747,900
741,400
724,700
713,500
703,100
The following table displays the homes passed and subscribers related to the Company’s market expansion activities, which includes edge-outs and Greenfield expansion:
78,900
79,100
81,100
85,600
92,800
19,700
19,800
20,300
21,200
23,200
19,600
20,200
21,100
22,900
6,900
7,000
2,800
2,900
3,100
29,300
29,400
30,000
30,900
33,000
While we take appropriate steps to ensure subscriber information is presented on a consistent and accurate basis at any given balance sheet date, we periodically review our policies in light of the variability we may encounter across our different markets due to the nature and pricing of products, services, and billing systems. Accordingly, we may from time to time make appropriate adjustments to our subscriber information based on such reviews.
Financial Statement Presentation
Our operating revenue is primarily derived from monthly recurring charges for HSD, Video, Telephony and other business services to residential and business customers, in addition to other revenues.
16
Revenues attributable to monthly subscription fees charged to customers for our HSD, Video and Telephony services provided by our broadband networks were 93% of total revenue for both the six months ended June 30, 2023 and 2022. The remaining percentage of total revenue represents non-subscription revenue primarily from other business services, line assurance warranty services and advertising placement.
Costs and Expenses
Our expenses primarily consist of operating, selling, general and administrative expenses, depreciation and amortization expense, and interest expense.
Operating expenses primarily include programming costs, data costs, transport costs and network access fees related to our HSD, Video and Telephony services, hardware/software expenses, network operations and maintenance services, customer service and call center expenses, bad debt, billing and collection expenses and franchise and other regulatory fees.
Selling, general and administrative expenses primarily include salaries and benefits of corporate and field management, sales and marketing personnel, human resources and related administrative costs.
Depreciation and amortization includes depreciation of our network infrastructure, including associated equipment, hardware and software, buildings and leasehold improvements, and finance lease obligations. Amortization is recognized on other intangible assets with definite lives primarily related to acquisitions. Depreciation and amortization expense is presented separately from operating and selling, general and administrative expenses in the accompanying unaudited condensed consolidated statements of operations.
We control our costs of operations by maintaining strict controls on expenditures. More specifically, we are focused on managing our cost structure by improving workforce productivity, increasing the effectiveness of our purchasing activities and maintaining discipline in customer acquisition. We expect programming expenses to continue to increase per Video subscriber due to a variety of factors, including increased demands by owners of some broadcast stations for carriage of other services or payments to those broadcasters for retransmission consent and annual increases imposed by programmers with additional selling power as a result of media consolidation. We have not been able to fully pass these increases on to our customers without the loss of customers, nor do we expect to be able to do so in the future.
17
Results of Operations
The following table summarizes our results of operations for the periods presented:
(Loss) income before provision for income tax
Total revenue for the three and six months ended June 30, 2023 and 2022 decreased $3.5 million, or 2%, and $5.9 million, or 2%, as compared to the corresponding periods in 2022 as follows:
Business services subscription
Total subscription
Other
Subscription Revenue
Total subscription revenue decreased $2.8 million, or 2%, and $5.4 million, or 2%, during the three and six months ended June 30, 2023, respectively, as compared to the corresponding periods in 2022. The decreases were primarily driven by a $9.0 million and $19.1 million shift in service offering mix, respectively, as we continue to experience a reduction in Video and Telephony RGUs, and a $4.8 million and $6.1 million decrease in volume across all services. These decreases were partially offset by a $11.0 million and $19.8 million increase in average revenue per unit (“ARPU”), respectively, as HSD customers continue to purchase higher speed tiers; coupled with rate increases issued in the first quarter of 2023. ARPU is calculated as subscription revenue for each of the HSD, Video and Telephony services divided by the average total RGUs for each service category for the respective period.
Other Business Services
Other business services revenue decreased $0.3 million, or 6%, and $0.4 million, or 4%, during the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022. The decreases in each period are primarily due to decreases in data center revenue.
18
Other Revenue
Other revenue decreased $0.4 million, or 5%, and $0.1 million, or 1%, during the three and six months ended June 30, 2023, as compared to the corresponding period in 2022. The decreases are primarily due to decreases in advertising and line assurance revenue, partially offset by increases in paper statement revenue.
Operating expenses (excluding depreciation and amortization)
Operating expenses (excluding depreciation and amortization) decreased $7.4 million, or 9%, and $16.6 million, or 10%, during the three and six months ended June 30, 2023, as compared to the corresponding periods in 2022. The decreases are primarily driven by decreases in direct operating expenses, specifically programming expenses of $5.7 million and $11.0 million, respectively which aligns with the reduction in Video RGUs between periods and lower operating expenses related to the transition services agreements, in which WOW was providing post-transaction continuity of service to the two different buyers of our sold service areas during the transition periods (“Transition Services Agreements”), that are offset in Other Income, partially offset by an increase in bad debt expense. The transition service agreements with both buyers expired during the second quarter of 2023.
Incremental contribution
Incremental contribution is defined as subscription services revenue less costs directly incurred from third parties in connection with the provision of such services to our customers (service direct expense). Incremental contribution increased $2.2 million, or 2%, during the three months ended June 30, 2023 compared to the three months ended June 30, 2022 and $4.9 million, or 2%, during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $4.3 million, or 11%, and $51.5 million, or 66%, during the three and six months ended June 30, 2023, respectively, compared to the corresponding periods in 2022. For the three months ended, the increase is primarily attributable to increases in restructuring costs related to employee severance charges. For the six months ended, the increase is primarily attributable to the patent litigation settlement combined with increases in restructuring costs.
Depreciation and amortization expenses
Depreciation and amortization expenses increased $2.8 million, or 6%, and $4.3 million, or 5%, during the three and six months ended June 30, 2023, respectively, compared to the corresponding periods in 2022. The increases are primarily due to increases of equipment placed into service as we continue to expand our network.
The Company recognized a non-cash impairment charge related to its franchise operating rights of $128.1 million for the three and six months ended June 30, 2023. The decline is primarily due to declining cash flows, which results in an increase in the discount rate, combined with the decline in the Company’s common stock price. See Note 5 – Franchising Operating Rights and Goodwill for discussion of non-cash impairment charge.
Interest expense increased $9.4 million, or 119%, and $16.9 million, or 110%, during the three and six months ended June 30, 2023, respectively, compared to the corresponding periods in 2022. The increases are primarily due to higher interest rates and additional borrowings on the revolving credit facility during the three and six months ended June 30, 2023.
19
Other income
Other income decreased $5.5 million and $12.2 million during the three and six months ended June 30, 2023, respectively, compared to the corresponding periods in 2022. The decreases are primarily due to the decline in services provided under the Transition Services Agreements.
Income Tax Expense
We reported income tax benefit of $36.2 million and income tax expense of $4.3 million for the three months ended June 30, 2023 and 2022, respectively, and income tax benefit of $48.8 million and income tax expense of $4.1 million for the six months ended June 30, 2023 and 2022, respectively. The change in income tax benefit is primarily related to a decrease in income from operations.
Use of Incremental Contribution
Incremental contribution is included herein because we believe that it is a key metric used by our management to assess the financial performance of the business by showing how the relative relationship of the various components of subscription services contributes to our overall consolidated historical results. Our management further believes that it provides useful information to investors in evaluating our financial condition and results of operations because the additional detail illustrates how an incremental dollar of revenue generates cash, before any unallocated costs are considered, which we believe is a key component of our overall strategy and important for understanding what drives our cash flow position relative to our historical results. Incremental contribution is defined by us as the components of subscription revenue, less costs directly incurred from third parties in connection with the provision of such services to our customers.
Incremental contribution is not made in accordance with GAAP and our use of the term incremental contribution varies from others in our industry. Incremental contribution should be considered in addition to, not as a substitute for, consolidated net income (loss) and operating income (loss) or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as measures of liquidity. Incremental contribution has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP as it does not identify or allocate any other operating costs and expenses that are components of our income from operations to specific subscription revenues as we do not measure or record such costs and expenses in a manner that would allow attribution to a specific component of subscription revenue. Accordingly, incremental contribution should not be considered as an alternative to operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows, or as a measure of liquidity.
The following tables provide a reconciliation of incremental contribution to income from operations, which is the most directly comparable GAAP measure, for the periods presented:
Revenue (excluding subscription revenue)
(12.2)
(12.9)
(25.0)
(25.5)
Other non-allocated operating expense (excluding depreciation and amortization)
41.9
79.4
85.7
124.3
122.1
245.5
240.6
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Liquidity and Capital Resources
Our primary funding requirements are for our ongoing operations, capital expenditures, outstanding debt obligations, including lease agreements, and strategic investments. At June 30, 2023, the principal amount of our outstanding consolidated debt aggregated to $868.1 million, of which $16.7 million is classified as current in our unaudited condensed consolidated balance sheet as of such date. As of June 30, 2023, we had borrowing capacity of $106.4 million under our Revolving Credit Facility.
We are required to prepay principal amounts if we generate excess cash flow, as defined in the Credit Agreement. As of June 30, 2023, we had $23.0 million of cash and cash equivalents. We believe that our existing cash balances, available borrowing capacity under our Revolving Credit Facility, and operating cash flows will provide sufficient resources to fund our obligations and anticipated liquidity requirements over the next 12 months.
We expect to utilize cash flow from operations and cash on hand as funding sources, as well as potentially engage in future refinancing transactions to further extend the maturities of our debt obligations. The timing and terms of any refinancing transactions will be subject to market conditions among other considerations.
As potential acquisitions or dispositions arise, we actively review such transactions against our objectives including, among other considerations, improving our operational efficiency, geographic clustering of assets, product development or technology capabilities of our business and achieving appropriate strategic objectives, and we may participate in such transactions to the extent we believe these possibilities present attractive opportunities. However, there can be no assurance that we will actually complete any acquisitions or dispositions, or that any such transactions will be material to our operations or results.
Our ability to fund operations, make capital expenditures, repay debt obligations and make future acquisitions and strategic investments depends on future operating performance and cash flows, which are subject to prevailing economic conditions and to financial, business and other factors, some of which are beyond our control.
Historical Operating, Investing, and Financing Activities
Operating Activities
Net cash used in operating activities was $51.7 million for the six months ended June 30, 2022 compared to net cash provided by operating activities of $41.2 million for the six months ended June 30, 2023. The change is primarily due to the income tax payment associated with the sale of the Chicago, Illinois, Evansville, Indiana, and Baltimore, Maryland markets, which the Company paid during the second quarter of 2022.
Investing Activities
Net cash used in investing activities was $75.7 million for six months ended June 30, 2022 compared $123.6 million for the six months ended June 30, 2023. We have ongoing capital expenditure requirements related to the maintenance, expansion and technological upgrades of our network. Capital expenditures are funded primarily through a combination of cash on hand and cash flow from operations. Our capital expenditures were $123.8 million and $76.8 million for the six months ended June 30, 2023 and 2022, respectively. The $47.0 million increase from the six months ended June 30, 2022 to the six months ended June 30, 2023 is related to increases in line extensions as we focus on market expansion in locations adjacent and non-adjacent to our existing network.
21
The following table sets forth additional information regarding our capital expenditures for the periods presented:
Capital Expenditures
Scalable infrastructure(1)
29.6
18.1
Customer premise equipment(2)
32.0
33.6
Line extensions(3)
10.2
Support capital and other(4)
23.5
123.8
76.8
Capital expenditures included in total related to:
Greenfields(5)
43.2
5.0
Edge-outs(6)
7.9
Business services(7)
7.6
Financing Activities
Net cash used in financing activities was $15.9 million for the six months ended June 30, 2022 compared to net cash provided by financing activities of $74.4 million for six months ended June 30, 2023. The change is primarily due to an increase in net borrowings of $130.2 million during the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
22
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is limited and primarily related to fluctuating interest rates associated with our variable rate indebtedness under our Senior Secured Credit Facility. As of June 30, 2023, borrowings under our Term B Loans and Revolving Credit Facility bear interest at SOFR plus 3.00% and SOFR plus 2.75%, respectively. As of June 30, 2023, our Senior Secured Credit Facility is still variable rate debt. A hypothetical 100 basis point (1%) change in SOFR interest rates (based on the interest rates in effect under our Senior Secured Credit Facility as of June 30, 2023) would result in an annual interest expense change of up to approximately $8.6 million on our Senior Secured Credit Facility.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer (together, the “Certifying Officers”), as appropriate, to allow for timely decisions regarding required disclosure.
In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Our management, with the participation of the Certifying Officers, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2023. Based on these evaluations, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures required by paragraph (b) of Rule 13a-15 or 15d-15 were effective as of June 30, 2023.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the second quarter of 2023.
PART II
Item 1. Legal Proceedings
Refer to Note 13 – Commitments and Contingencies for a discussion of the Company’s legal proceedings.
Item 1A. Risk Factors
Our Annual Report on Form 10-K for the year ended December 31, 2022 includes “Risk Factors” under Item 1A of Part 1. There have been no material changes to the risk factors set forth therein.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer
The following table presents WOW’s purchases of equity securities completed during the second quarter of 2023:
Approximate Dollar Value of
Total Number of Shares
Shares that May Yet be
Number of Shares
Average Price
Purchased as Part of Publicly
Purchased Under the Plans
Period
Purchased (1)
Paid per Share
Announced Plans or Programs
or Programs (in millions)
April 1 - 30, 2023
637,896
10.82
630,062
9.4
May 1 - 31, 2023
1,022,505
8.78
1,008,988
0.6
June 1 - 30, 2023
205,645
7.81
171,720
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Rule 10b5-1 Trading Arrangements
The adoption or termination of contracts, instructions or written plans for the purchase or sale of our securities by our Section 16 officers and directors for the three months ended June 30, 2023, each of which is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act, were as follows:
Trading Arrangement
Rule
Non-Rule
Total Shares
Expiration
Name and Title
Action
Date
10b5-1(1)
10b5-1(2)
to be Sold
Donald P. Schena, Chief Customer Experience Officer
Terminated(3)
May 9, 2023
X
95,000
3/29/2024
Adopted
100,000
3/31/2025
Henry Hryckiewicz, Chief Technology Officer
Terminated(4)
46,256
8/15/2023
44,000
8/30/2024
Item 6. Exhibits
ExhibitNumber
Exhibit Description
Amended and Restated Certificate of Incorporation of WideOpenWest, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-1/A (File No. 333-216894) filed on May 15, 2017)
3.2
Amended and Restated Bylaws of WideOpenWest, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1/A (File No. 333-216894) filed on May 15, 2017)
31.1*
Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101
The following financial information from WideOpenWest, Inc.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2023, filed with the Securities and Exchange Commission on August 8, 2023, formatted in iXBRL (inline eXtensible Business Reporting Language) includes: (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Changes in Stockholders’ Equity; (iv) the Condensed Consolidated Statements of Cash Flows; and (v) the Notes to the Condensed Consolidated Financial Statements.
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Cover Page, formatted in iXBRL and contained in Exhibit 101.
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Filed herewith.
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.
WIDEOPENWEST, INC.
August 8, 2023
By:
/s/ TERESA ELDER
Teresa Elder
Chief Executive Officer
/s/ JOHN REGO
John Rego
Chief Financial Officer
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