GCI Liberty, Inc.

GCI 401(k) Plan

Statements of Changes in Net Assets Available for Benefits

Years Ended December 31, 2019 and 2018

(Amounts in thousands)						2019						2018
Additions to net assets attributed to:
Contributions:
Participant						$	13,997					15,496
Employer						10,717						10,745
Total contributions						24,714						26,241
Investment income (loss):
Net appreciation (depreciation) in fair value of investments						79,156						(40,058)
Dividend income						9,304						9,689
Total investment income (loss)						88,460						(30,369)
Interest income on notes receivable from participants						282						251
Total additions						113,456						(3,877)
Deductions to net assets attributed to:
Participant withdrawals						(55,857)						(26,073)
Corrective distribution of excess contributions						(2)						(5)
Administrative expenses						(209)						(210)
Total deductions						(56,068)						(26,288)
Net increase (decrease) in net assets available for benefits						57,388						(30,165)
Net assets available for benefits at beginning of period						330,780						360,945
Net assets available for benefits at end of period						$	388,168					330,780
See accompanying notes to financial statements.

        

Notes to Financial Statements

(1) Description of Plan

        The following description of the GCI 401(k) Plan ("Plan") provides general information only. Participants should refer to the Plan document for a more complete description of the Plan's provisions.

General

        The Plan is a defined contribution plan sponsored by GCI Liberty, Inc.("GCI Liberty"and "Plan Sponsor"), formerly General Communication, Inc. ("GCI"), and covers employees of the following affiliated companies - GCI Communication Corp. ("GCICC"), United Utilities, Inc. (“UUI”), Unicom, Inc. ("Unicom") and Denali Media Holdings, Corp. ("DMH") (collectively, the "Company"). Employees of participating employers are eligible to make employee deferral contributions immediately after their date of hire, and are eligible to share in Company matching contributions, if any, on the first entry date after completing one year of service, as defined in the Plan document. The entry dates are the first day of each quarter during the year. GCI Liberty and affiliated companies are parties-in-interest to the Plan.

        On April 4, 2017, Liberty Interactive Corporation, now known as Qurate Retail, Inc. ("Qurate Retail"), entered into an Agreement and Plan of Reorganization (as amended, the "reorganization agreement" and the transactions contemplated thereby, the "Transactions") with GCI and Liberty Interactive LLC, a direct wholly-owned subsidiary of Qurate Retail ("LI LLC"). Pursuant to the reorganization agreement, GCI amended and restated its articles of incorporation (which resulted in General Communication, Inc. being renamed GCI Liberty, Inc.) and effected a reclassification and auto conversion of its common stock and Qurate Retail acquired GCI Liberty on March 9, 2018 through a reorganization in which certain Qurate Retail interests, assets and liabilities attributed to its Ventures Group (following the reattribution by Qurate Retail of certain assets and liabilities from its Ventures Group to its QVC Group) were contributed to GCI Liberty in exchange for a controlling interest in GCI Liberty. Qurate Retail and LI LLC contributed to GCI Liberty their entire equity interests in Liberty Broadband Corporation, Charter Communications, Inc., and LendingTree, Inc., the Evite, Inc. operating business and other assets and liabilities, in exchange for (a) the issuance to LI LLC of a number of shares of GCI Liberty Class A common stock and a number of shares of GCI Liberty Class B common stock equal to the number of outstanding shares of Qurate Retail's Series A Liberty Ventures common stock and Qurate Retail's Series B Liberty Ventures common stock on March 9, 2018, respectively, (b) cash and (c) the assumption of certain liabilities by GCI Liberty.

        Pursuant to the Transactions, the GCI Class A and GCI Class B stock in the Plan were redeemed for shares of GCI Liberty Class A common stock and preferred stock. Once GCI Liberty was reincorporated in Delaware, the GCI Liberty Class A common stock and preferred stock were converted to GCI Liberty Series A common stock and GCI Liberty Redeemable Preferred Stock ("GCI Liberty Preferred Stock"), respectively.

Contributions

        The Plan provides for a qualified cash or deferred arrangement as defined in Section 401(k) of the Internal Revenue Code of 1986 ("Code"). A participant may elect the following methods to make employee contributions:

1. Salary Reduction Contributions, which will not be included in the participant's current earnings for federal income tax purposes but rather are taxable upon distribution, or

2. Roth 401(k) Contributions, which will be included in the participant's current earnings for federal income tax purposes and are not taxable upon distribution.

        Eligible employees of the Company may elect, if certain requirements are met, to reduce their compensation in any amount up to 50% of such compensation subject to a maximum of $19,000 and $18,500 in 2019 and 2018, respectively. Contributions may be made as salary reduction or Roth 401(k) contributions or a combination of both.

        Compensation considered for all Plan purposes is subject to a compensation ceiling of $280,000 and $275,000 in 2019 and 2018, respectively. Participants who have attained age 50 before the end of the plan year are eligible to make catch-up contributions of no more than $6,000 per year for each of the years ended December 31, 2019 and 2018. Participant catch-up contributions are not eligible for Company matching contributions.

        The Plan allows up to 100% matching of employee contributions. Company matching contributions made to the Plan may be invested in any Plan investment at any time by the participant. For the years ended December 31, 2019 and 2018, the Company matched 100% of participant's contributions, up to a maximum match of 10% of each participant's eligible compensation, for employees of GCICC, UUI, and Unicom, while employees of DMH received matching contributions equal to 50% of the participants' contributions, up to a maximum match of 3% of eligible compensation.

        Matching amounts contributed to the Plan by the Company are not taxed to the participant until distribution upon retirement, hardship, disability, death or termination of employment. Plan earnings on Company matching contributions are taxable to the employee either upon distribution or, in the case of certain qualifying GCI Liberty common stock distributions, upon eventual disposition of the stock.

Participant Accounts

        Each participant account is credited with the participant's contributions, employer matching contributions and allocations of Plan earnings and losses. Plan earnings and losses are allocated on a daily basis, based upon the number of shares in each investment held by each participant account. Participants may change their investment allocation on a daily basis.

        Any portion of a participant's account which is forfeitable shall be forfeited on the earlier of the date a terminated participant receives a distribution or the date on which the participant experiences five consecutive one-year breaks in service (as defined in the Plan document).

        A participant's interest in their Matching Account fully vests without regard to the number of years of service when the participant, while still employed: (i) attains Normal Retirement Age (as defined in the Plan document); (ii) dies; or (iii) becomes totally and permanently disabled. A participant's interest in their Matching Account fully vests upon termination or partial termination of the Plan or upon complete discontinuance of Company contributions.

        If a participant terminates participation for any reason other than attainment of Normal Retirement Age and retirement, death or disability while any portion of his or her account in the Plan is forfeitable, receives a distribution of his or her vested account balance attributable to Company matching contributions, and again becomes an eligible employee, the participant may repay that entire distribution before the earlier of five consecutive one-year breaks in service or five years from his reemployment date. Upon such repayment, the value of that participating employee's account previously forfeited will be restored.

Payment of Benefits

        A participant or beneficiary may elect to receive a lump-sum distribution equal to the value of the participant’s vested interest in his or her account upon termination due to death, disability or retirement, or any other termination of employment.

        Participants who terminate with vested benefits less than $1,000 will automatically receive the value of the vested balance in their account as a lump-sum distribution. Participants who terminate with vested benefits greater than $1,000 and less than $5,000 will automatically receive the value of the vested balance in their account as a rollover into an Individual Retirement Account.

Forfeitures

        If a participating employee terminates employment for any reason other than attainment of Normal Retirement Age and retirement, death or disability, that portion of his or her account attributable to Company matching contributions which has not vested will be forfeited. All forfeited amounts are used to pay Plan administrative expenses or to reduce future Company matching contributions. During 2019 and 2018, employer contributions were reduced by $171,000 and $437,000, respectively, from forfeited nonvested accounts. At December 31, 2019 and 2018, $447,000 and $204,000, respectively, had been forfeited but had not yet been used to pay Plan administrative expenses or reduce the Company’s matching contributions.

Notes Receivable from Participants

        Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of the portion of their vested account. Loan transactions are treated as a transfer to/(from) the appropriate investment fund (from)/to the participant’s loan. Loan terms range from one to five years. Loans are secured by the vested balance in the participant’s account and accrue interest at a fixed rate calculated at the loan date. Participant loans have interest rates bearing 4.25% to 6.50% due through December 2024. In 2019 and 2018, the fixed rate was calculated using the bank prime loan rate reported at www.federalreserve.gov on the loan date plus two percent. Principal and interest are paid ratably through semi-monthly payroll deductions.

(2) Summary of Significant Accounting Policies

Basis of Accounting

        The Plan financial statements are based on the accrual method of accounting.

        

Use of Estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires the Plan to make estimates and assumptions, such as those regarding the fair value of investments, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of changes in net assets available for benefits during the reporting period. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results could differ from those estimates.

Investment Valuation and Income Recognition

        Investments are reported at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. See Note 6 for discussion of fair value measurements.

        Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Net appreciation (depreciation) includes the Plan’s gains and losses on investments bought and sold as well as held during the year.

Notes Receivable from Participants

        Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. Delinquent participant loans are reclassified as distributions based upon the terms of the Plan document and reported to the Internal Revenue Service as ordinary income.

Excess Contributions Payable

        Amounts payable to participants for contributions in excess of amounts allowed by the IRS are recorded as a liability with a corresponding reduction to contributions. The Plan distributed the 2019 excess contributions to the applicable participants prior to March 15, 2020.

Contributions

        Employee and Company matching contributions are recorded in the period in which the Company makes the payroll deductions from the participants' earnings.

Payment of Benefits

        Benefits are recorded when paid.

(3) Administration of Plan Assets

        Fidelity Investments is the Plan's recordkeeper and asset trustee. Administrative expenses related to the Plan are reported on the Statement of Changes in Net Assets Available for Benefits for the years ended December 31, 2019 and 2018, and were paid by the Plan to the recordkeeper and asset trustee. The asset trustee charges trade fees for all transactions in common stock investments. Trade fees for mutual fund investments, if any, are described in each fund’s prospectus. Company employees provide administrative support to the Plan, but no employee receives compensation from the Plan and the Company is not reimbursed for these expenses.

(4) Amendment or Termination

        The Plan Sponsor's Board of Directors has reserved the right to amend or terminate the Plan. No amendment may reduce the accrued benefits of any participant or give the Company any interest in the trust assets of the Plan. In the event of termination of the Plan, a participant in the Plan becomes fully vested in his or her Matching Account.

(5) Investments

        The following investment choices were offered to Plan participants during the year ended December 31, 2019 (GCI Liberty Preferred Stock not available for future investment):

Common Stock:

•GCI Liberty Series A common stock

Preferred Stock:

•GCI Liberty Preferred Stock

Mutual Funds:

•American Funds EuroPacific Growth Fund R-6

•DFA US Targeted Value I

•Dodge & Cox Income Fund

•Fidelity Total Market Index Fund

•Harbor Capital Appreciation Fund

•JPMorgan Equity Income Fund

•Vanguard Small Cap Growth Index

•Vanguard Target Retirement 2020

•Vanguard Target Retirement 2030

•Vanguard Target Retirement 2040

•Vanguard Target Retirement 2050

•Vanguard Target Retirement 2060

•Vanguard Target Retirement Income

Collective Trust

•Morley Stable Value Fund

        Participants have the option of having self-directed brokerage accounts within the Plan, through which they may choose to buy any publicly traded securities or mutual funds.

        Stock of the Plan Sponsor investment prices per share at December 31, 2019 and 2018, were as follows:

        The percentage of Plan assets invested in stock of the Plan Sponsor at December 31, 2019 and 2018 is 16% and 14%, respectively.

(6) Fair Value Measurements

        Following are descriptions of the valuation methodologies used for assets measured at fair value.

 

        Mutual funds: Valued at the quoted Net Asset Value ("NAV") of shares held by the Plan at year-end. Mutual funds held by the Plan are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily NAV and to transact at that price. The mutual funds held by the Plan are deemed to be actively traded.

        Common and preferred stocks: The fair value of common and preferred stocks are based on quoted market prices.

        Collective trust: Valued at the daily closing price as reported by the collective trust. The collective trust is required to publish its daily NAV and to transact at that price. The collective trust held by the Plan is deemed to be actively traded.