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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 March 31, 2022

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: (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 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 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer 

Accelerated Filer 

Non-accelerated Filer 

Smaller Reporting Company 

Emerging Growth Company

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

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

The number of outstanding shares of Liberty Broadband Corporation’s common stock as of April 30, 2022 was:

Series A

Series B

Series C

Liberty Broadband Corporation common stock

22,558,925

2,544,548

137,670,912

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-4

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

I-5

LIBERTY BROADBAND CORPORATION Condensed Consolidated Statements of Cash Flows (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-8

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

I-24

Item 3. Quantitative and Qualitative Disclosures about Market Risk

I-36

Item 4. Controls and Procedures

I-37

Part II - Other Information

Item 1. Legal Proceedings

II-1

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

II-1

Item 6. Exhibits

II-2

SIGNATURES

II-3

I-1

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets

(unaudited)

March 31,

December 31,

2022

2021

 

amounts in millions

 

Assets

    

    

    

    

Current assets:

Cash and cash equivalents

$

300

 

191

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

169

206

Prepaid and other current assets

 

77

 

62

Total current assets

 

546

 

459

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

 

12,902

 

13,260

Property and equipment, net

1,010

1,031

Intangible assets not subject to amortization

Goodwill

762

762

Cable certificates

550

550

Other

37

37

Intangible assets subject to amortization, net (note 5)

559

573

Tax sharing receivable

63

86

Other assets, net

 

201

 

210

Total assets

$

16,630

 

16,968

See accompanying notes to the condensed consolidated financial statements.

I-2

Table of Contents

LIBERTY BROADBAND CORPORATION

Condensed Consolidated Balance Sheets (Continued)

(unaudited)

March 31,

December 31,

2022

2021

 

amounts in millions,

 

except share amounts

Liabilities and Equity

Current liabilities:

Accounts payable and accrued liabilities

$

97

 

99

Deferred revenue

 

22

 

25

Current portion of debt, including $22 and $25 measured at fair value, respectively (note 6)

25

28

Indemnification obligation (note 3)

239

324

Other current liabilities

154

106

Total current liabilities

 

537

 

582

Long-term debt, net, including $1,359 and $1,403 measured at fair value, respectively (note 6)

3,989

3,733

Obligations under finance leases and tower obligations, excluding current portion

88

89

Long-term deferred revenue

35

35

Deferred income tax liabilities

2,002

1,998

Preferred stock (note 7)

203

203

Other liabilities

177

189

Total liabilities

 

7,031

 

6,829

Equity

Series A common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 22,558,925 and 23,232,342 at March 31, 2022 and December 31, 2021, respectively

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

Series C common stock, $.01 par value. Authorized 500,000,000 shares; issued and outstanding 139,860,028 and 144,854,780 at March 31, 2022 and December 31, 2021, respectively

1

1

Additional paid-in capital

5,375

6,214

Accumulated other comprehensive earnings, net of taxes

 

10

 

14

Retained earnings

 

4,197

 

3,898

Total stockholders' equity

9,583

10,127

Non-controlling interests

16

12

Total equity

 

9,599

 

10,139

Commitments and contingencies (note 9)

 

 

Total liabilities and equity

$

16,630

 

16,968

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Operations

(unaudited)

Three months ended 

 

March 31,

 

2022

    

2021

 

amounts in millions, except per share amounts

Revenue

$

238

247

Operating costs and expenses:

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

66

69

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

101

105

Depreciation and amortization

64

64

Litigation settlement, net of recoveries (note 9)

110

231

348

Operating income (loss)

7

(101)

Other income (expense):

Interest expense (including amortization of deferred loan fees)

(26)

(33)

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

303

189

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

(56)

(82)

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

137

99

Other, net

(21)

(8)

Earnings (loss) before income taxes

344

64

Income tax benefit (expense)

(45)

(12)

Net earnings (loss)

299

52

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

Net earnings (loss) attributable to Liberty Broadband shareholders

$

299

52

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

$

1.79

0.27

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

$

1.77

0.27

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Comprehensive Earnings (Loss)

(unaudited)

Three months ended 

 

March 31,

 

2022

    

2021

 

amounts in millions

 

Net earnings (loss)

    

$

299

52

Other comprehensive earnings (loss), net of taxes:

Comprehensive earnings (loss) attributable to debt credit risk adjustments

(4)

Other comprehensive earnings (loss), net of taxes

(4)

Comprehensive earnings (loss)

295

52

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

Comprehensive earnings (loss) attributable to Liberty Broadband shareholders

$

295

52

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Condensed Consolidated Statements of Cash Flows

(unaudited)

Three months ended

March 31,

 

2022

2021

 

amounts in millions

 

Cash flows from operating activities:

    

    

    

    

Net earnings (loss)

$

299

 

52

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

Depreciation and amortization

 

64

 

64

Stock-based compensation

 

9

 

10

Litigation settlement, net of recoveries

110

Share of (earnings) losses of affiliate, net

 

(303)

 

(189)

(Gain) loss on dilution of investment in affiliate

 

56

 

82

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

 

(137)

 

(99)

Deferred income tax expense (benefit)

 

6

 

11

Other, net

 

(1)

 

(2)

Changes in operating assets and liabilities:

Current and other assets

 

65

 

165

Payables and other liabilities

 

32

 

(11)

Net cash provided by (used in) operating activities

 

90

 

193

Cash flows from investing activities:

Capital expenditures

(32)

(28)

Cash received for Charter shares repurchased by Charter

602

518

Other investing activities, net

4

Net cash provided by (used in) investing activities

574

490

Cash flows from financing activities:

Borrowings of debt

300

Repayments of debt, finance leases and tower obligations

(2)

(183)

Repurchases of Liberty Broadband common stock

(843)

(738)

Other financing activities, net

 

(3)

 

(2)

Net cash provided by (used in) financing activities

 

(548)

 

(923)

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

116

 

(240)

Cash, cash equivalents and restricted cash, beginning of period

206

1,433

Cash, cash equivalents and restricted cash, end of period

$

322

1,193

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:

March 31,

December 31,

2022

2021

amounts in millions

Cash and cash equivalents

$

300

191

Restricted cash included in other current assets

22

15

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

$

322

206

See accompanying notes to the condensed consolidated financial statements.

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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)

 

 

299

 

299

Other comprehensive earnings (loss), net of taxes

(4)

(4)

Stock-based compensation

9

9

Withholding taxes on net share settlements of stock-based compensation

(3)

(3)

Liberty Broadband stock repurchases

(843)

(843)

Noncontrolling interest activity at Charter and other

(2)

4

2

Balance at March 31, 2022

$

1

5,375

 

10

 

4,197

16

 

9,599

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)

52

52

Stock-based compensation

10

10

Withholding taxes on net share settlements of stock-based compensation

(3)

(3)

Liberty Broadband stock repurchases

(738)

(738)

Noncontrolling interest activity at Charter and other

(26)

(26)

Balance at March 31, 2021

$

2

9,563

15

3,218

12

12,810

See accompanying notes to the condensed consolidated financial statements.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1) Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of Liberty Broadband Corporation and its controlled subsidiaries (collectively, "Liberty Broadband," the "Company," “us,” “we,” or “our” unless the context otherwise requires). Liberty Broadband Corporation is primarily comprised of GCI Holdings, LLC (“GCI Holdings”), a wholly owned subsidiary, and an equity method investment in Charter Communications, Inc. (“Charter”).

On December 18, 2020, GCI Liberty, Inc. (“GCI Liberty”) was merged with Liberty Broadband (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.

The accompanying (a) condensed consolidated balance sheet as of December 31, 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 Form 10-K for the year ended December 31, 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 its affiliate, (ii) non-recurring fair value measurements of non-financial instruments and (iii) accounting for income taxes to be its most significant estimates.

In 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 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.

We are not presently aware of any events or circumstances arising from the 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 condensed consolidated financial 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 the Combination, Liberty Broadband has acquired an interest in Charter. The investment in Charter 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.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Skyhook Holdings, Inc. (“Skyhook”) was a wholly owned subsidiary of Liberty Broadband until its sale on May 2, 2022 for net proceeds of approximately $170 million. Skyhook is not presented as held-for-sale as of March 31, 2022 as it is not material to Liberty Broadband’s consolidated financial statements and Skyhook will not be presented as a discontinued operation upon closing of the sale as the sale did not represent a strategic shift that had a major effect on Liberty Broadband’s operations and financial results.

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, the board of directors authorized the repurchase of $2.23 billion of Liberty Broadband Series A and Series C common stock. Additionally, on August 5, 2021, the board of directors authorized the repurchase of an additional $2.105 billion of Liberty Broadband Series A and Series C 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 Series A and Series C common stock.

During the three months ended March 31, 2022, we repurchased 5.7 million shares of Series A and Series C common stock for a total purchase price of $843 million. During the three months ended March 31, 2021, we repurchased 4.9 million shares of Series C common stock for a total purchase price of $738 million. As of March 31, 2022, the amount authorized remaining under the authorized repurchase program is approximately $2.0 billion.

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 and to provide for an orderly transition, including a services agreement and a facilities sharing agreement. 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 which 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, amounts reimbursable to Liberty were approximately $3 million and $4 million for the three months ended March 31, 2022 and 2021, respectively. Liberty Broadband had a tax sharing receivable with Qurate Retail of $63 million and $86 million as of March 31, 2022 and December 31, 2021, respectively.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 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 financial statements issued for annual 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 Broadband 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. Excluded from diluted EPS for both the three months ended March 31, 2022 and 2021 are 1 million potential common shares because their inclusion would have been antidilutive.

Liberty Broadband Common Stock

Three months

Three months

 

ended

ended

March 31, 2022

March 31, 2021

 

(numbers of shares in millions)

Basic WASO

 

167

 

194

Potentially dilutive shares (1)

 

2

 

2

Diluted WASO

 

169

 

196

(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. The Company does not have any recurring assets or liabilities measured at fair value that would be considered Level 3.

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LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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

March 31, 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)

 

amounts in millions

 

Cash equivalents

$

152

152

118

118

Indemnification obligation

$

239

239

324

324

Exchangeable senior debentures

$

1,381

1,381

1,428

1,428

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"). An indemnity obligation in the amount of $336 million was recorded upon completion of the Combination. 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 March 31, 2022 represents the fair value of the 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 March 31, 2022, a holder of the LI LLC 1.75% Exchangeable Debentures has the ability to exchange and, accordingly, such indemnification obligation is included as a current liability in the Company’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 foregoing table as Level 2 fair value.

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 (with the exception of the 1.75% Debentures (defined in note 6)) and long-term debt (with the exception of the 1.25% Debentures and the 2.75% 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 Margin 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 are 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

 

March 31,

 

2022

2021

 

amounts in millions

 

Indemnification obligation

$

85

52

Exchangeable senior debentures (1)

52

47

$

137

99

(1)The Company has elected to account for its exchangeable senior debentures using the fair value option. Changes in 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 isolates the portion of the unrealized gain (loss) attributable to the change in the instrument specific credit risk and recognizes such amount in other comprehensive income. The change in the fair value of the exchangeable senior debentures attributable to changes in the instrument specific credit risk before tax was a loss of $6 million and a gain of less than $1 million for the three months ended March 31, 2022 and 2021, respectively. The cumulative change was a gain of $1 million as of March 31, 2022.

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

Through a number of prior years’ transactions and the Combination, Liberty Broadband has acquired an interest in Charter. The investment in Charter is accounted for as an equity method affiliate based on our voting and ownership interest and the board seats held by individuals appointed by Liberty Broadband. As of March 31, 2022, the carrying and market value of Liberty Broadband’s ownership in Charter was approximately $12.9 billion and $28.6 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 March 31, 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 (on a fully diluted basis) is capped at the greater of 26% or the voting cap (“Equity Cap”). As of March 31, 2022, due to Liberty Broadband’s voting interest exceeding the current voting cap of 25.01%, our voting control of the aggregate 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 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 average price paid by Charter in its repurchases, redemptions and buybacks of its common stock (subject to certain

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 970,241 and 834,576 shares of Charter Class A common stock to Charter for $602 million and $518 million during the three months ended March 31, 2022 and 2021, respectively, to maintain our fully diluted ownership percentage at 26%. Subsequent to March 31, 2022, Liberty Broadband sold 863,719 shares of Charter Class A common stock to Charter for $491 million in April 2022.

Investment in Charter

The excess basis in our investment in Charter of $9,136 million as of March 31, 2022 is allocated within memo accounts used for equity method accounting purposes as follows (amounts in millions):

March 31,

December 31,

2022

2021

Property and equipment

    

$

676

661

Customer relationships

 

2,537

2,537

Franchise fees

 

3,935

3,828

Trademarks

 

29

29

Goodwill

 

4,150

4,024

Debt

 

(534)

(535)

Deferred income tax liability

 

(1,657)

(1,626)

$

9,136

8,918

Property and equipment and customer relationships have weighted average remaining useful lives of approximately 5 years and 9 years, respectively, and franchise fees, trademarks and goodwill have indefinite lives. The excess basis of outstanding debt is amortized over the contractual period using the straight-line method. The increase in excess basis for the three months ended March 31, 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 share of earnings (losses) of affiliate line item in the accompanying condensed consolidated statements of operations includes expenses of $67 million and $58 million, net of related taxes, for the three months ended March 31, 2022 and 2021, respectively, due to the amortization of the excess basis related to assets with identifiable useful lives and debt.

The Company had dilution losses of $56 million and $82 million during the three months ended March 31, 2022 and 2021, respectively. The dilution losses for the periods presented were attributable to stock option exercises by employees and other third parties at prices below Liberty Broadband’s book basis per share, partially offset by a gain on dilution related to Charter’s repurchase of Liberty Broadband’s Charter shares during both the three months ended March 31, 2022 and 2021.

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

Summarized unaudited financial information for Charter is as follows:

Charter condensed consolidated balance sheets

    

March 31, 2022

December 31, 2021

 

amounts in millions

Current assets

$

5,516

3,566

Property and equipment, net

 

34,173

34,310

Goodwill

 

29,563

29,562

Intangible assets, net

 

71,046

71,406

Other assets

 

3,650

3,647

Total assets

$

143,948

142,491

Current liabilities

$

13,929

12,458

Deferred income taxes

 

19,070

19,096

Long-term debt

 

90,679

88,564

Other liabilities

 

4,326

4,217

Equity

 

15,944

18,156

Total liabilities and shareholders’ equity

$

143,948

142,491

Charter condensed consolidated statements of operations

Three months ended

March 31,

2022

2021

amounts in millions

Revenue

$

13,200

12,522

Cost and expenses:

Operating costs and expenses (excluding depreciation and amortization)

 

8,134

7,711

Depreciation and amortization

 

2,294

2,441

Other operating expenses, net

 

1

302

10,429

10,454

Operating income

2,771

2,068

Interest expense, net

 

(1,060)

(983)

Other income (expense), net

23

52

Income tax (expense) benefit

 

(345)

(216)

Net income (loss)

1,389

921

Less: Net income attributable to noncontrolling interests

(186)

(114)

Net income (loss) attributable to Charter shareholders

$

1,203

807

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Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

(5) Intangible Assets

Intangible Assets Subject to Amortization, net

    

March 31, 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

(59)

456

515

(49)

466

Other amortizable intangibles

 

140

(37)

103

 

138

(31)

107

Total

$

655

(96)

559

653

(80)

573

Amortization expense for intangible assets with finite useful lives was $17 million and $19 million for the three months ended March 31, 2022 and 2021, respectively. Amortization expense for amortizable intangible assets for each of the five succeeding fiscal years is estimated to be (amounts in millions):

Remainder of 2022

$

49

2023

$

59

2024

$

53

2025

$

51

2026

$

48

(6) Debt

Debt is summarized as follows:

    

Outstanding

    

    

    

    

 

principal

Carrying value

 

March 31,

March 31,

December 31,

 

        

2022

    

2022

        

2021

 

 

amounts in millions

Margin Loan Facility

$

1,600

 

1,600

 

1,300

2.75% Exchangeable Senior Debentures due 2050

 

575

 

569

 

585

1.25% Exchangeable Senior Debentures due 2050

825

790

818

1.75% Exchangeable Senior Debentures due 2046

15

22

25

Senior notes

 

600

 

631

 

632

Senior credit facility

 

399

 

399

 

399

Wells Fargo note payable

 

6

 

6

 

6

Deferred financing costs

 

 

(3)

 

(4)

Total debt

$

4,020

 

4,014

 

3,761

Debt classified as current

 

 

(25)

 

(28)

Total long-term debt

$

3,989

 

3,733

Margin Loan Facility

On May 12, 2021, a bankruptcy remote wholly owned subsidiary of the Company (“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 Amendment, the “Margin Loan Agreement”), with a group 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

I-15

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

for (x) a term loan credit facility in an aggregate principal amount of $1.15 billion (the “Term Loan Facility” and proceeds of such facility, the “Term 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 $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.

In the three months ended March 31, 2022, SPV drew down $300 million on the Revolving Loans.

Outstanding borrowings under the Margin Loan Agreement were $1.6 billion and $1.3 billion at March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, SPV was permitted to borrow an additional $700 million under the Margin Loan Agreement, subject to certain funding conditions, which may be drawn until five business days prior to the maturity date. The maturity date of the loans under the Margin Loan Agreement is May 12, 2024 (except for any additional loans incurred thereunder to the extent SPV and the incremental lenders agree to a later maturity date). Prior to the completion of the Combination, borrowings under the Margin Loan Agreement bore interest at the three-month LIBOR rate plus a per annum spread of 1.5%, which increased to a per annum spread of 1.85% from and after the completion of the Combination until the Fourth Amendment Effective Date, when the per annum spread decreased to 1.5%. The Margin Loan Agreement also provides for customary LIBOR replacement provisions.

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

SPV’s obligations under the 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 Margin Loan Agreement. The Margin Loan Agreement indicates that no lender party shall have any voting rights with respect to the shares 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 agreement. As of March 31, 2022, 12.3 million shares of Charter with a value of $6.7 billion were pledged as collateral pursuant to the 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 March 31, 2022, a holder of the Company’s 2.75% Exchangeable Senior Debentures due 2050 (the “2.75% Debentures”) or a holder of the Company’s 1.25% Exchangeable Senior Debentures due 2050 (the “1.25% Debentures) does not have the ability to exchange and, accordingly, the 2.75% Debentures and 1.25% Debentures are classified as long-term debt in the condensed consolidated balance sheets. As of March 31, 2022, the holders of the 1.75% exchangeable senior debentures due 2046 (the “1.75% Debentures), which were issued by GCI Liberty and assumed in connection with the closing of the Combination, will have the ability to exchange their debentures for the period from April 1, 2022 to June 30, 2022 given that the trading value of the reference shares exceeded 130% of the par value for twenty of the last thirty trading days in the first quarter of 2022. Given the holders’ ability to exchange the debentures within a one-year period from the balance sheet date and the Company’s option to settle any exchange in cash, shares of Charter Class A common stock, or a combination of cash and shares of Charter Class A common stock, the 1.75% Debentures have been classified as current within the condensed consolidated balance sheets as of March 31, 2022. The Company 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.

I-16

Table of Contents

LIBERTY BROADBAND CORPORATION

Notes to Condensed Consolidated Financial Statements

(unaudited)

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 $31 million at March 31, 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