State of Delaware
|
|
74-2719343
|
(State or other jurisdiction of
|
|
(I.R.S. Employer Identification No.)
|
incorporation or organization)
|
|
|
1990 Wittington Place
|
|
|
Farmers Branch, Texas
|
|
75234
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class
|
|
Trading Symbol(s)
|
|
Name of each exchange on which registered
|
None
|
|
None
|
|
None
|
Large accelerated filer o
|
|
Accelerated filer o
|
Non-accelerated filer x
|
|
Smaller reporting company o
|
|
|
Emerging growth company o
|
|
|
Page
|
|
|
|
PART I — FINANCIAL INFORMATION
|
||
|
|
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|
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||
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||
|
|
|
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||
|
|
|
|
||
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||
|
September 30,
2019 |
|
|
December 31,
2018 |
|||
Assets
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
28,589
|
|
|
|
2,188
|
|
Restricted cash
|
86
|
|
|
|
189
|
|
|
Trade receivables, net of allowance for doubtful accounts of $912 in 2019 and $3,759 in 2018
|
12,105
|
|
|
|
13,121
|
|
|
Prepaid and other current assets
|
24,966
|
|
|
|
28,178
|
|
|
Total current assets
|
65,746
|
|
|
|
43,676
|
|
|
Property and equipment, net of accumulated depreciation of $925 in 2019 and $40,531 in 2018
|
41,215
|
|
|
|
36,539
|
|
|
Subscriber accounts and deferred contract acquisition costs, net of accumulated amortization of $15,322 in 2019 and $1,621,242 in 2018
|
1,089,135
|
|
|
|
1,195,463
|
|
|
Dealer network and other intangible assets, net of accumulated amortization of $1,980 in 2019 and $0 in 2018
|
142,719
|
|
|
|
—
|
|
|
Goodwill
|
81,943
|
|
|
|
—
|
|
|
Deferred income tax asset, net
|
783
|
|
|
|
783
|
|
|
Operating lease right-of-use asset
|
19,153
|
|
|
|
—
|
|
|
Other assets
|
16,694
|
|
|
|
29,307
|
|
|
Total assets
|
$
|
1,457,388
|
|
|
|
1,305,768
|
|
Liabilities and Stockholder's Equity (Deficit)
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
14,416
|
|
|
|
12,099
|
|
Other accrued liabilities
|
35,035
|
|
|
|
31,085
|
|
|
Deferred revenue
|
13,309
|
|
|
|
13,060
|
|
|
Holdback liability
|
6,148
|
|
|
|
11,513
|
|
|
Current portion of long-term debt
|
8,225
|
|
|
|
1,816,450
|
|
|
Total current liabilities
|
77,133
|
|
|
|
1,884,207
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
Long-term debt
|
985,775
|
|
|
|
—
|
|
|
Long-term holdback liability
|
2,207
|
|
|
|
1,770
|
|
|
Derivative financial instruments
|
—
|
|
|
|
6,039
|
|
|
Operating lease liabilities
|
15,929
|
|
|
|
—
|
|
|
Other liabilities
|
7,751
|
|
|
|
2,727
|
|
|
Total liabilities
|
1,088,795
|
|
|
|
1,894,743
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Stockholder's equity (deficit):
|
|
|
|
|
|||
Predecessor common stock, $.01 par value. 1,000 shares authorized, issued and outstanding at December 31, 2018
|
—
|
|
|
|
—
|
|
|
Predecessor additional paid-in capital
|
—
|
|
|
|
439,711
|
|
|
Predecessor accumulated deficit
|
—
|
|
|
|
(1,036,294
|
)
|
|
Predecessor accumulated other comprehensive income, net
|
—
|
|
|
|
7,608
|
|
|
Successor preferred stock, $.01 par value. Authorized 5,000,000 shares; no shares issued
|
—
|
|
|
|
—
|
|
|
Successor common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 22,500,000 shares at September 30, 2019
|
225
|
|
|
|
—
|
|
|
Successor additional paid-in capital
|
379,175
|
|
|
|
—
|
|
|
Successor accumulated deficit
|
(10,807
|
)
|
|
|
—
|
|
|
Total stockholder's equity (deficit)
|
368,593
|
|
|
|
(588,975
|
)
|
|
Total liabilities and stockholder's equity (deficit)
|
$
|
1,457,388
|
|
|
|
1,305,768
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
|
Three Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Net revenue
|
$
|
36,289
|
|
|
|
$
|
84,589
|
|
|
137,156
|
|
Operating expenses:
|
|
|
|
|
|
|
|||||
Cost of services
|
8,976
|
|
|
|
19,986
|
|
|
35,059
|
|
||
Selling, general and administrative, including stock-based and long-term incentive compensation
|
11,390
|
|
|
|
20,980
|
|
|
34,266
|
|
||
Radio conversion costs
|
825
|
|
|
|
931
|
|
|
—
|
|
||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
17,302
|
|
|
|
32,508
|
|
|
52,671
|
|
||
Depreciation
|
925
|
|
|
|
1,073
|
|
|
2,880
|
|
||
|
39,418
|
|
|
|
75,478
|
|
|
124,876
|
|
||
Operating (loss) income
|
(3,129
|
)
|
|
|
9,111
|
|
|
12,280
|
|
||
Other (income) expense:
|
|
|
|
|
|
|
|||||
Gain on restructuring and reorganization, net
|
—
|
|
|
|
(702,824
|
)
|
|
—
|
|
||
Interest expense
|
7,474
|
|
|
|
27,112
|
|
|
39,077
|
|
||
Refinancing expense
|
—
|
|
|
|
—
|
|
|
5,697
|
|
||
|
7,474
|
|
|
|
(675,712
|
)
|
|
44,774
|
|
||
(Loss) income before income taxes
|
(10,603
|
)
|
|
|
684,823
|
|
|
(32,494
|
)
|
||
Income tax expense
|
204
|
|
|
|
438
|
|
|
1,346
|
|
||
Net (loss) income
|
(10,807
|
)
|
|
|
684,385
|
|
|
(33,840
|
)
|
||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|||||
Unrealized gain on derivative contracts, net
|
—
|
|
|
|
—
|
|
|
3,269
|
|
||
Total other comprehensive income, net of tax
|
—
|
|
|
|
—
|
|
|
3,269
|
|
||
Comprehensive (loss) income
|
$
|
(10,807
|
)
|
|
|
$
|
684,385
|
|
|
(30,571
|
)
|
|
|
|
|
|
|
|
|||||
Basic and diluted income per share:
|
|
|
|
|
|
|
|||||
Net loss
|
$
|
(0.48
|
)
|
|
|
$
|
—
|
|
|
—
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Net revenue
|
$
|
36,289
|
|
|
|
$
|
342,286
|
|
|
405,922
|
|
Operating expenses:
|
|
|
|
|
|
|
|||||
Cost of services
|
8,976
|
|
|
|
75,286
|
|
|
100,807
|
|
||
Selling, general and administrative, including stock-based and long-term incentive compensation
|
11,390
|
|
|
|
80,365
|
|
|
98,935
|
|
||
Radio conversion costs
|
825
|
|
|
|
931
|
|
|
—
|
|
||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
17,302
|
|
|
|
130,791
|
|
|
160,973
|
|
||
Depreciation
|
925
|
|
|
|
7,348
|
|
|
8,360
|
|
||
Loss on goodwill impairment
|
—
|
|
|
|
—
|
|
|
214,400
|
|
||
|
39,418
|
|
|
|
294,721
|
|
|
583,475
|
|
||
Operating (loss) income
|
(3,129
|
)
|
|
|
47,565
|
|
|
(177,553
|
)
|
||
Other (income) expense:
|
|
|
|
|
|
|
|||||
Gain on restructuring and reorganization, net
|
—
|
|
|
|
(669,722
|
)
|
|
—
|
|
||
Interest expense
|
7,474
|
|
|
|
105,081
|
|
|
114,550
|
|
||
Realized and unrealized loss, net on derivative financial instruments
|
—
|
|
|
|
6,804
|
|
|
—
|
|
||
Refinancing expense
|
—
|
|
|
|
5,214
|
|
|
5,697
|
|
||
|
7,474
|
|
|
|
(552,623
|
)
|
|
120,247
|
|
||
(Loss) income before income taxes
|
(10,603
|
)
|
|
|
600,188
|
|
|
(297,800
|
)
|
||
Income tax expense
|
204
|
|
|
|
1,775
|
|
|
4,039
|
|
||
Net (loss) income
|
(10,807
|
)
|
|
|
598,413
|
|
|
(301,839
|
)
|
||
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|||||
Unrealized (loss) gain on derivative contracts, net
|
—
|
|
|
|
(940
|
)
|
|
23,196
|
|
||
Total other comprehensive (loss) income, net of tax
|
—
|
|
|
|
(940
|
)
|
|
23,196
|
|
||
Comprehensive (loss) income
|
$
|
(10,807
|
)
|
|
|
$
|
597,473
|
|
|
(278,643
|
)
|
|
|
|
|
|
|
|
|||||
Basic and diluted income per share:
|
|
|
|
|
|
|
|||||
Net loss
|
$
|
(0.48
|
)
|
|
|
$
|
—
|
|
|
—
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Cash flows from operating activities:
|
|
|
|
|
|
|
|||||
Net (loss) income
|
$
|
(10,807
|
)
|
|
|
$
|
598,413
|
|
|
(301,839
|
)
|
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
|
|
|
|
|
|
|
|||||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
17,302
|
|
|
|
130,791
|
|
|
160,973
|
|
||
Depreciation
|
925
|
|
|
|
7,348
|
|
|
8,360
|
|
||
Stock-based and long-term incentive compensation
|
26
|
|
|
|
912
|
|
|
751
|
|
||
Deferred income tax expense
|
—
|
|
|
|
—
|
|
|
1,987
|
|
||
Amortization of debt discount and deferred debt costs
|
—
|
|
|
|
—
|
|
|
5,472
|
|
||
Gain on restructuring and reorganization, net
|
—
|
|
|
|
(669,722
|
)
|
|
—
|
|
||
Unrealized loss on derivative financial instruments, net
|
—
|
|
|
|
4,577
|
|
|
—
|
|
||
Refinancing expense
|
—
|
|
|
|
5,214
|
|
|
5,697
|
|
||
Bad debt expense
|
912
|
|
|
|
7,558
|
|
|
8,511
|
|
||
Loss on goodwill impairment
|
—
|
|
|
|
—
|
|
|
214,400
|
|
||
Other non-cash activity, net
|
117
|
|
|
|
(462
|
)
|
|
2,040
|
|
||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|||||
Trade receivables
|
(1,183
|
)
|
|
|
(6,271
|
)
|
|
(9,028
|
)
|
||
Prepaid expenses and other assets
|
(736
|
)
|
|
|
2,760
|
|
|
(9,769
|
)
|
||
Subscriber accounts - deferred contract acquisition costs
|
(162
|
)
|
|
|
(2,193
|
)
|
|
(4,529
|
)
|
||
Payables and other liabilities
|
6,776
|
|
|
|
36,690
|
|
|
(8,568
|
)
|
||
Net cash provided by operating activities
|
13,170
|
|
|
|
115,615
|
|
|
74,458
|
|
||
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|||
Capital expenditures
|
(1,123
|
)
|
|
|
(7,100
|
)
|
|
(11,513
|
)
|
||
Cost of subscriber accounts acquired
|
(8,012
|
)
|
|
|
(83,814
|
)
|
|
(111,531
|
)
|
||
Net cash used in investing activities
|
(9,135
|
)
|
|
|
(90,914
|
)
|
|
(123,044
|
)
|
||
Cash flows from financing activities:
|
|
|
|
|
|
|
|||||
Proceeds from long-term debt
|
5,000
|
|
|
|
253,100
|
|
|
218,950
|
|
||
Payments on long-term debt
|
(5,000
|
)
|
|
|
(379,666
|
)
|
|
(136,600
|
)
|
||
Proceeds from equity rights offering
|
—
|
|
|
|
166,300
|
|
|
—
|
|
||
Cash contributed by Ascent Capital
|
—
|
|
|
|
24,139
|
|
|
—
|
|
||
Payments of restructuring and reorganization costs
|
—
|
|
|
|
(53,889
|
)
|
|
—
|
|
||
Payments of refinancing costs
|
—
|
|
|
|
(7,404
|
)
|
|
(5,015
|
)
|
||
Value of shares withheld for share-based compensation
|
—
|
|
|
|
(18
|
)
|
|
(83
|
)
|
||
Dividend to Ascent Capital
|
—
|
|
|
|
(5,000
|
)
|
|
(5,000
|
)
|
||
Net cash (used in) provided by financing activities
|
—
|
|
|
|
(2,438
|
)
|
|
72,252
|
|
||
Net increase in cash, cash equivalents and restricted cash
|
4,035
|
|
|
|
22,263
|
|
|
23,666
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
24,640
|
|
|
|
2,377
|
|
|
3,302
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
28,675
|
|
|
|
$
|
24,640
|
|
|
26,968
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive
Income (Loss)
|
|
Total Stockholder’s Deficit
|
||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||
Balance at December 31, 2018 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
439,711
|
|
|
(1,036,294
|
)
|
|
7,608
|
|
|
$
|
(588,975
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(31,770
|
)
|
|
—
|
|
|
(31,770
|
)
|
||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(468
|
)
|
|
(468
|
)
|
||
Dividend paid to Ascent Capital
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
||
Contribution from Ascent Capital
|
—
|
|
|
—
|
|
|
2,250
|
|
|
—
|
|
|
—
|
|
|
2,250
|
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
189
|
|
|
—
|
|
|
—
|
|
|
189
|
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||
Balance at March 31, 2019 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
437,149
|
|
|
(1,068,064
|
)
|
|
7,140
|
|
|
$
|
(623,775
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(54,202
|
)
|
|
—
|
|
|
(54,202
|
)
|
||
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(472
|
)
|
|
(472
|
)
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
(413
|
)
|
|
—
|
|
|
—
|
|
|
(413
|
)
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||
Balance at June 30, 2019 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
436,734
|
|
|
(1,122,266
|
)
|
|
6,668
|
|
|
$
|
(678,864
|
)
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
684,385
|
|
|
—
|
|
|
684,385
|
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
267
|
|
|
—
|
|
|
—
|
|
|
267
|
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
||
Cancellation of Predecessor equity
|
(1,000
|
)
|
|
—
|
|
|
(436,986
|
)
|
|
437,881
|
|
|
(6,668
|
)
|
|
(5,773
|
)
|
||
Issuance of Successor common stock
|
22,500,000
|
|
|
225
|
|
|
379,175
|
|
|
—
|
|
|
—
|
|
|
379,400
|
|
||
Balance at August 31, 2019 (Predecessor)
|
22,500,000
|
|
|
$
|
225
|
|
|
379,175
|
|
|
—
|
|
|
—
|
|
|
$
|
379,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 1, 2019 (Successor)
|
22,500,000
|
|
|
$
|
225
|
|
|
379,175
|
|
|
—
|
|
|
—
|
|
|
$
|
379,400
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,807
|
)
|
|
—
|
|
|
(10,807
|
)
|
||
Balance at September 30, 2019 (Successor)
|
22,500,000
|
|
|
$
|
225
|
|
|
379,175
|
|
|
(10,807
|
)
|
|
—
|
|
|
$
|
368,593
|
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Accumulated Deficit
|
|
Accumulated Other Comprehensive
Income (Loss)
|
|
Total Stockholder’s Equity (Deficit)
|
||||||||||
|
Shares
|
|
Amount
|
|
|
|
|
||||||||||||
Balance at December 31, 2017 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
444,330
|
|
|
(334,219
|
)
|
|
(7,375
|
)
|
|
$
|
102,736
|
|
Impact of adoption of Topic 606
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,720
|
)
|
|
—
|
|
|
(22,720
|
)
|
||
Impact of adoption of ASU 2017-12
|
—
|
|
|
—
|
|
|
—
|
|
|
(605
|
)
|
|
605
|
|
|
—
|
|
||
Adjusted balance at January 1, 2018 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
444,330
|
|
|
(357,544
|
)
|
|
(6,770
|
)
|
|
$
|
80,016
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(26,207
|
)
|
|
—
|
|
|
(26,207
|
)
|
||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14,406
|
|
|
14,406
|
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
47
|
|
|
—
|
|
|
—
|
|
|
47
|
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
||
Balance at March 31, 2018 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
444,335
|
|
|
(383,751
|
)
|
|
7,636
|
|
|
$
|
68,220
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(241,792
|
)
|
|
—
|
|
|
(241,792
|
)
|
||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,521
|
|
|
5,521
|
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
383
|
|
|
—
|
|
|
—
|
|
|
383
|
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
||
Balance at June 30, 2018 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
444,691
|
|
|
(625,543
|
)
|
|
13,157
|
|
|
$
|
(167,695
|
)
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(33,840
|
)
|
|
—
|
|
|
(33,840
|
)
|
||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,269
|
|
|
3,269
|
|
||
Dividend to Ascent Capital
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
|
—
|
|
|
—
|
|
|
(5,000
|
)
|
||
Stock-based compensation
|
—
|
|
|
—
|
|
|
373
|
|
|
—
|
|
|
—
|
|
|
373
|
|
||
Value of shares withheld for minimum tax liability
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
||
Balance at September 30, 2018 (Predecessor)
|
1,000
|
|
|
$
|
—
|
|
|
440,050
|
|
|
(659,383
|
)
|
|
16,426
|
|
|
$
|
(202,907
|
)
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
State taxes paid, net
|
$
|
—
|
|
|
|
$
|
2,637
|
|
|
2,710
|
|
Interest paid
|
7,238
|
|
|
|
72,710
|
|
|
95,889
|
|
||
Accrued capital expenditures
|
1,471
|
|
|
|
1,405
|
|
|
882
|
|
Enterprise value
|
$
|
1,373,400
|
|
Plus: Fair value of non-interest bearing current liabilities
|
61,188
|
|
|
Plus: Fair value of non-interest bearing long-term liabilities
|
26,060
|
|
|
Reorganization value
|
$
|
1,460,648
|
|
|
|
As of August 31, 2019
|
||||||||||||||
|
|
Predecessor
Company
|
|
Reorganization
Adjustments
|
|
Ascent Capital
Merger
|
|
Fresh Start
Adjustments
|
|
Successor
Company
|
||||||
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents
|
|
$
|
19,862
|
|
|
3,604
|
|
(1)
|
1,139
|
|
(9)
|
—
|
|
|
24,605
|
|
Restricted cash
|
|
35
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
Trade receivables, net
|
|
11,834
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11,834
|
|
|
Prepaid and other current assets
|
|
23,825
|
|
|
—
|
|
|
27
|
|
(9)
|
—
|
|
|
23,852
|
|
|
Total current assets
|
|
55,556
|
|
|
3,604
|
|
|
1,166
|
|
|
—
|
|
|
60,326
|
|
|
Property and equipment, net
|
|
37,143
|
|
|
—
|
|
|
—
|
|
|
3,808
|
|
(10)
|
40,951
|
|
|
Subscriber accounts and deferred contract acquisition costs, net
|
|
1,151,322
|
|
|
—
|
|
|
—
|
|
|
(55,936
|
)
|
(11)
|
1,095,386
|
|
|
Dealer network and other intangible assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
144,700
|
|
(12)
|
144,700
|
|
|
Goodwill
|
|
—
|
|
|
—
|
|
|
—
|
|
|
81,943
|
|
(13)
|
81,943
|
|
|
Deferred income tax asset, net
|
|
783
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
783
|
|
|
Operating lease right-of-use asset
|
|
19,222
|
|
|
—
|
|
|
90
|
|
(9)
|
—
|
|
|
19,312
|
|
|
Other assets
|
|
17,932
|
|
|
—
|
|
|
—
|
|
|
(685
|
)
|
(14)
|
17,247
|
|
|
Total assets
|
|
$
|
1,281,958
|
|
|
3,604
|
|
|
1,256
|
|
|
173,830
|
|
|
1,460,648
|
|
Liabilities and Stockholder's Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Accounts payable
|
|
$
|
13,713
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,713
|
|
Other accrued liabilities
|
|
30,571
|
|
|
(1,070
|
)
|
(2)
|
241
|
|
(9)
|
4,427
|
|
(15)
|
34,169
|
|
|
Deferred revenue
|
|
12,646
|
|
|
—
|
|
|
—
|
|
|
(5,331
|
)
|
(16)
|
7,315
|
|
|
Holdback liability
|
|
12,516
|
|
|
—
|
|
|
—
|
|
|
(6,525
|
)
|
(17)
|
5,991
|
|
|
Current portion of long-term debt
|
|
—
|
|
|
8,225
|
|
(3)
|
—
|
|
|
—
|
|
|
8,225
|
|
|
Total current liabilities
|
|
69,446
|
|
|
7,155
|
|
|
241
|
|
|
(7,429
|
)
|
|
69,413
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt
|
|
199,000
|
|
|
786,775
|
|
(4)
|
—
|
|
|
—
|
|
|
985,775
|
|
|
Long-term holdback liability
|
|
1,817
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,817
|
|
|
Operating lease liabilities
|
|
16,055
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,055
|
|
|
Other liabilities
|
|
2,175
|
|
|
—
|
|
|
—
|
|
|
6,013
|
|
(15)
|
8,188
|
|
|
Total non-current liabilities
|
|
219,047
|
|
|
786,775
|
|
|
—
|
|
|
6,013
|
|
|
1,011,835
|
|
|
Liabilities subject to compromise
|
|
1,722,052
|
|
|
(1,722,052
|
)
|
(5)
|
—
|
|
|
—
|
|
|
—
|
|
|
Total liabilities
|
|
2,010,545
|
|
|
(928,122
|
)
|
|
241
|
|
|
(1,416
|
)
|
|
1,081,248
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholder's equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
||||||
Predecessor additional paid-in capital
|
|
436,986
|
|
|
(436,986
|
)
|
(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
Predecessor accumulated other comprehensive income, net
|
|
6,668
|
|
|
—
|
|
|
—
|
|
|
(6,668
|
)
|
(18)
|
—
|
|
|
Successor common stock
|
|
—
|
|
|
225
|
|
(7)
|
—
|
|
|
—
|
|
|
225
|
|
|
Successor additional paid-in capital
|
|
—
|
|
|
379,175
|
|
(7)
|
—
|
|
|
—
|
|
|
379,175
|
|
|
(Accumulated deficit) retained earnings
|
|
(1,172,241
|
)
|
|
989,312
|
|
(8)
|
1,015
|
|
(9)
|
181,914
|
|
(18)
|
—
|
|
|
Total stockholder's equity (deficit)
|
|
(728,587
|
)
|
|
931,726
|
|
|
1,015
|
|
|
175,246
|
|
|
379,400
|
|
|
Total liabilities and stockholder's equity (deficit)
|
|
$
|
1,281,958
|
|
|
3,604
|
|
|
1,256
|
|
|
173,830
|
|
|
1,460,648
|
|
Equity rights offering proceeds from Noteholders
|
$
|
177,000
|
|
Equity rights offering proceeds from Ascent Capital
|
23,000
|
|
|
Payment of Predecessor Credit Facility principal and interest
|
(165,619
|
)
|
|
Payment of Predecessor DIP Facility principal and interest
|
(28,570
|
)
|
|
Payment of Predecessor Senior Notes principal and interest
|
(2,207
|
)
|
|
Net cash contribution
|
$
|
3,604
|
|
Long-term portion of Successor Takeback Term Loan
|
$
|
814,275
|
|
Payment of Predecessor DIP Facility principal
|
(27,500
|
)
|
|
Net increase in Long-term Debt
|
$
|
786,775
|
|
Predecessor Term Loan
|
$
|
1,072,500
|
|
Predecessor Senior Notes
|
585,000
|
|
|
Predecessor Term Loan accrued interest
|
15,619
|
|
|
Predecessor Senior Notes accrued interest
|
48,933
|
|
|
Total Liabilities subject to compromise
|
$
|
1,722,052
|
|
Liabilities subject to compromise
|
$
|
1,722,052
|
|
Payment of Predecessor Term Loan principal and interest
|
(165,619
|
)
|
|
Payment of Predecessor Senior Notes principal and interest
|
(2,207
|
)
|
|
Issue Successor Takeback Term Loan
|
(822,500
|
)
|
|
Fair value of common stock issued to Predecessor Term Loan and Predecessor Senior Notes holders
|
(171,989
|
)
|
|
Gain on settlement of Liabilities subject to compromise
|
$
|
559,737
|
|
Cancellation of Predecessor additional paid-in capital
|
$
|
436,986
|
|
Loss on equity rights offering discount, net
|
(7,411
|
)
|
|
Gain on settlement of Liabilities subject to compromise
|
559,737
|
|
|
Total adjustment to Retained earnings (accumulated deficit)
|
$
|
989,312
|
|
|
Estimated Useful Life
|
|
Successor Company
|
|
|
Predecessor Company
|
||||
Leasehold improvements
|
9 years
|
|
$
|
353
|
|
|
|
$
|
771
|
|
Computer systems and software
|
2 to 4 years
|
|
39,320
|
|
|
|
83,238
|
|
||
Furniture and fixtures
|
5 years
|
|
1,278
|
|
|
|
2,009
|
|
||
|
|
|
40,951
|
|
|
|
86,018
|
|
||
Accumulated depreciation
|
|
|
—
|
|
|
|
(48,875
|
)
|
||
Property and equipment, net
|
|
|
$
|
40,951
|
|
|
|
$
|
37,143
|
|
Dealer network
|
$
|
140,000
|
|
Leasehold interest
|
4,700
|
|
|
Total Dealer network and other intangible assets
|
$
|
144,700
|
|
Property and equipment fair value adjustment
|
$
|
3,808
|
|
Subscriber accounts fair value adjustment
|
(55,936
|
)
|
|
Dealer network and other intangible assets fair value adjustment
|
144,700
|
|
|
Goodwill
|
81,943
|
|
|
Other assets and liabilities fair value adjustments
|
731
|
|
|
Predecessor accumulated other comprehensive income, net
|
6,668
|
|
|
Net gain on fresh start adjustments
|
$
|
181,914
|
|
|
Predecessor Company
|
|||||
|
Period from July 1, 2019 through
August 31, 2019
|
|
Period from January 1, 2019 through
August 31, 2019
|
|||
Gain on settlement of Liabilities subject to compromise (a)
|
$
|
559,737
|
|
|
559,737
|
|
Gain on fresh start adjustments (b)
|
181,914
|
|
|
181,914
|
|
|
Loss on equity rights offering discount (c)
|
(8,325
|
)
|
|
(8,325
|
)
|
|
Restructuring and reorganization expense (d)
|
(30,502
|
)
|
|
(63,604
|
)
|
|
Gain on restructuring and reorganization, net
|
$
|
702,824
|
|
|
669,722
|
|
|
|
Successor Company
|
|
Predecessor Company
|
||||
|
September 30,
2019 |
|
December 31,
2018 |
||||
Accrued payroll and related liabilities
|
$
|
6,075
|
|
|
$
|
4,459
|
|
Interest payable
|
283
|
|
|
14,446
|
|
||
Income taxes payable
|
2,080
|
|
|
2,742
|
|
||
Operating lease liabilities
|
3,836
|
|
|
—
|
|
||
Contingent dealer liabilities
|
4,630
|
|
|
—
|
|
||
Accrued reorganization costs
|
9,715
|
|
|
—
|
|
||
Other
|
8,416
|
|
|
9,438
|
|
||
Total Other accrued liabilities
|
$
|
35,035
|
|
|
$
|
31,085
|
|
|
Successor Company
|
|
|
Predecessor Company
|
||||
|
September 30,
2019 |
|
|
December 31,
2018 |
||||
Successor Takeback Loan Facility, matures March 29, 2024, LIBOR plus 6.50%, subject to a LIBOR floor of 1.25%, with an effective rate of 9.2%
|
$
|
822,500
|
|
|
|
$
|
—
|
|
Successor Term Loan Facility, matures July 3, 2024, LIBOR plus 5.00%, subject to a LIBOR floor of 1.50%, with an effective rate of 7.6%
|
150,000
|
|
|
|
—
|
|
||
Successor Revolving Credit Facility, matures July 3, 2024, LIBOR plus 5.00%, subject to a LIBOR floor of 1.50%, or base rate (with a floor of 4.5%) plus 4.0%, with an effective rate of 12.7%
|
21,500
|
|
|
|
—
|
|
||
9.125% Senior Notes due April 1, 2020 with an effective interest rate of 9.1%
|
—
|
|
|
|
585,000
|
|
||
Ascent Intercompany Loan due October 1, 2020 with an effective rate of 12.5%
|
—
|
|
|
|
12,000
|
|
||
Term loan, matures September 30, 2022, LIBOR plus 5.50%, subject to a LIBOR floor of 1.00%, with an effective rate of 8.6%
|
—
|
|
|
|
1,075,250
|
|
||
$295 million revolving credit facility, matures September 30, 2021, LIBOR plus 4.00%, subject to a LIBOR floor of 1.00%, with an effective rate of 7.5%
|
—
|
|
|
|
144,200
|
|
||
|
$
|
994,000
|
|
|
|
$
|
1,816,450
|
|
Less: Current portion of long-term debt
|
(8,225
|
)
|
|
|
(1,816,450
|
)
|
||
Long-term debt
|
$
|
985,775
|
|
|
|
$
|
—
|
|
Remainder of 2019
|
$
|
2,056
|
|
2020
|
8,225
|
|
|
2021
|
8,225
|
|
|
2022
|
8,225
|
|
|
2023
|
8,225
|
|
|
2024
|
959,044
|
|
|
Thereafter
|
—
|
|
|
Total debt principal payments
|
$
|
994,000
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
|
Three Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Effective portion of gain recognized in Accumulated other comprehensive income (loss)
|
$
|
—
|
|
|
|
$
|
—
|
|
|
3,165
|
|
Effective portion of loss reclassified from Accumulated other comprehensive income (loss) into Net income (loss) (a)
|
—
|
|
|
|
—
|
|
|
(104
|
)
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Effective portion of gain recognized in Accumulated other comprehensive income (loss)
|
$
|
—
|
|
|
|
$
|
—
|
|
|
21,929
|
|
Effective portion of loss reclassified from Accumulated other comprehensive income (loss) into Net income (loss) (a)
|
—
|
|
|
|
(940
|
)
|
|
(1,267
|
)
|
|
•
|
Level 1 - Quoted prices for identical instruments in active markets.
|
•
|
Level 2 - Quoted prices for similar instruments in active or inactive markets and valuations derived from models where all significant inputs are observable in active markets.
|
•
|
Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable in any market.
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|||||
September 30, 2019 (Successor)
|
|
|
|
|
|
|
|
|||||
Interest rate swap agreements - assets (a)
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest rate swap agreements - liabilities (a)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
December 31, 2018 (Predecessor)
|
|
|
|
|
|
|
|
|||||
Interest rate swap agreements - assets (a)
|
$
|
—
|
|
|
10,552
|
|
|
—
|
|
|
10,552
|
|
Interest rate swap agreements - liabilities (a)
|
—
|
|
|
(6,039
|
)
|
|
—
|
|
|
(6,039
|
)
|
|
Total
|
$
|
—
|
|
|
4,513
|
|
|
—
|
|
|
4,513
|
|
|
(a)
|
Swap asset values are included in non-current Other assets and Swap liability values are included in non-current Derivative financial instruments on the condensed consolidated balance sheets.
|
|
Successor Company
|
|
|
Predecessor Company
|
||
|
September 30, 2019
|
|
|
December 31, 2018
|
||
Long term debt, including current portion:
|
|
|
|
|
||
Carrying value
|
994,000
|
|
|
|
1,816,450
|
|
Fair value (a)
|
925,660
|
|
|
|
1,218,606
|
|
|
(a)
|
The fair value is based on market quotations from third party financial institutions and is classified as Level 2 in the hierarchy.
|
|
Predecessor Company
|
||
|
Accumulated Other Comprehensive Income (Loss)
|
||
Balance at December 31, 2018
|
$
|
7,608
|
|
Reclassifications of unrealized loss on derivatives into Net loss, net of income tax of $0 (a)
|
(468
|
)
|
|
Balance at March 31, 2019
|
$
|
7,140
|
|
Reclassifications of unrealized loss on derivatives into Net loss, net of income tax of $0 (a)
|
(472
|
)
|
|
Balance at June 30, 2019
|
$
|
6,668
|
|
Fresh start adjustment (b)
|
(6,668
|
)
|
|
Balance at August 31, 2019
|
$
|
—
|
|
|
(a)
|
Amounts reclassified into Net loss are included in Interest expense on the condensed consolidated statements of operations. See note 7, Derivatives for further information.
|
(b)
|
The remaining amount recognized in Accumulated other comprehensive income (loss) was evaluated to have no fair value upon the application of fresh start accounting pursuant to the Plan. See note 3, Fresh Start Accounting for further information.
|
|
Predecessor Company
|
||
|
Accumulated Other Comprehensive Income (Loss)
|
||
Balance at December 31, 2017
|
$
|
(7,375
|
)
|
Impact of adoption of ASU 2017-12
|
605
|
|
|
Adjusted balance at January 1, 2018
|
(6,770
|
)
|
|
Unrealized gain on derivatives recognized through Accumulated other comprehensive income (loss), net of income tax of $0
|
13,668
|
|
|
Reclassifications of unrealized loss on derivatives into Net loss, net of income tax of $0 (a)
|
738
|
|
|
Net period Other comprehensive income
|
14,406
|
|
|
Balance at March 31, 2018
|
$
|
7,636
|
|
Unrealized gain on derivatives recognized through Accumulated other comprehensive income (loss), net of income tax of $0
|
5,096
|
|
|
Reclassifications of unrealized loss on derivatives into Net loss, net of income tax of $0 (a)
|
425
|
|
|
Net period Other comprehensive income
|
5,521
|
|
|
Balance at June 30, 2018
|
$
|
13,157
|
|
Unrealized gain on derivatives recognized through Accumulated other comprehensive income (loss), net of income tax of $0
|
3,165
|
|
|
Reclassifications of unrealized loss on derivatives into Net loss, net of income tax of $0 (a)
|
104
|
|
|
Net period Other comprehensive income
|
3,269
|
|
|
Balance at September 30, 2018
|
$
|
16,426
|
|
|
(a)
|
Amounts reclassified into Net loss are included in Interest expense on the condensed consolidated statements of operations.
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
|
Three Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Alarm monitoring revenue
|
$
|
33,594
|
|
|
|
$
|
78,608
|
|
|
125,004
|
|
Product and installation revenue
|
2,224
|
|
|
|
4,993
|
|
|
11,360
|
|
||
Other revenue
|
471
|
|
|
|
988
|
|
|
792
|
|
||
Total Net revenue
|
$
|
36,289
|
|
|
|
$
|
84,589
|
|
|
137,156
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended September 30,
|
|||||
|
2019
|
|
|
2019
|
|
2018
|
|||||
Alarm monitoring revenue
|
$
|
33,594
|
|
|
|
$
|
319,172
|
|
|
374,689
|
|
Product and installation revenue
|
2,224
|
|
|
|
19,111
|
|
|
28,984
|
|
||
Other revenue
|
471
|
|
|
|
4,003
|
|
|
2,249
|
|
||
Total Net revenue
|
$
|
36,289
|
|
|
|
$
|
342,286
|
|
|
405,922
|
|
|
Successor Company
|
|
Predecessor Company
|
|||
|
September 30,
2019 |
|
December 31,
2018 |
|||
Trade receivables, net
|
$
|
12,105
|
|
|
13,121
|
|
Contract assets, net - current portion (a)
|
10,952
|
|
|
13,452
|
|
|
Contract assets, net - long-term portion (b)
|
12,600
|
|
|
16,154
|
|
|
Deferred revenue
|
13,309
|
|
|
13,060
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
||||
Operating lease cost (a)
|
$
|
34
|
|
|
|
$
|
70
|
|
Operating lease cost (b)
|
320
|
|
|
|
624
|
|
||
Total operating lease cost
|
$
|
354
|
|
|
|
$
|
694
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
||||
Operating lease cost (a)
|
$
|
34
|
|
|
|
$
|
321
|
|
Operating lease cost (b)
|
320
|
|
|
|
2,595
|
|
||
Total operating lease cost
|
$
|
354
|
|
|
|
$
|
2,916
|
|
|
|
As of September 30, 2019
|
|
Weighted-average remaining lease term for operating leases (in years)
|
9.9
|
|
Weighted-average discount rate for operating leases
|
11.8
|
%
|
|
Successor Company
|
|
|
Predecessor Company
|
||||
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
||||
|
2019
|
|
|
2019
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
345
|
|
|
|
$
|
2,804
|
|
Remainder of 2019
|
$
|
758
|
|
2020
|
3,980
|
|
|
2021
|
3,195
|
|
|
2022
|
3,069
|
|
|
2023
|
3,087
|
|
|
Thereafter
|
20,329
|
|
|
Total lease payments
|
$
|
34,418
|
|
Less: Interest
|
(14,653
|
)
|
|
Total lease obligations
|
$
|
19,765
|
|
Year Ended December 31:
|
|
||
2019
|
$
|
4,628
|
|
2020
|
4,207
|
|
|
2021
|
3,093
|
|
|
2022
|
3,068
|
|
|
2023
|
3,087
|
|
|
Thereafter
|
20,329
|
|
|
Minimum lease commitments
|
$
|
38,412
|
|
•
|
macroeconomic conditions and their effect on the general economy and on the U.S. housing market, in particular single family homes, which represent our largest demographic;
|
•
|
uncertainties in the development of our business strategies, including the rebranding to Brinks Home Security and market acceptance of new products and services;
|
•
|
the competitive environment in which we operate, in particular, increasing competition in the alarm monitoring industry from larger existing competitors and new market entrants, including well-financed technology, telecommunications and cable companies;
|
•
|
the development of new services or service innovations by competitors;
|
•
|
our ability to acquire and integrate additional accounts, including competition for dealers with other alarm monitoring companies which could cause an increase in expected subscriber acquisition costs;
|
•
|
technological changes which could result in the obsolescence of currently utilized technology with the need for significant upgrade expenditures, including the phase out of 2G, 3G and CDMA networks by cellular carriers;
|
•
|
the trend away from the use of public switched telephone network lines and the resultant increase in servicing costs associated with alternative methods of communication;
|
•
|
our high degree of leverage and the restrictive covenants governing its indebtedness;
|
•
|
the operating performance of our network, including the potential for service disruptions at both the main monitoring facility and back-up monitoring facility due to acts of nature or technology deficiencies, and the potential of security breaches related to network or customer information;
|
•
|
the outcome of any pending, threatened, or future litigation, including potential liability for failure to respond adequately to alarm activations;
|
•
|
the ability to continue to obtain insurance coverage sufficient to hedge our risk exposures, including as a result of acts of third parties and/or alleged regulatory violations;
|
•
|
changes in the nature of strategic relationships with original equipment manufacturers, dealers and other of our business partners;
|
•
|
the reliability and creditworthiness of our independent alarm systems dealers and subscribers;
|
•
|
changes in our expected rate of subscriber attrition;
|
•
|
availability of, and our ability to retain, qualified personnel;
|
•
|
integration of acquired assets and businesses;
|
•
|
the regulatory environment in which we operate, including the multiplicity of jurisdictions, state and federal consumer protection laws and licensing requirements to which we and/or our dealers are subject and the risk of new regulations, such as the increasing adoption of "false alarm" ordinances; and
|
•
|
general business conditions and industry trends.
|
•
|
Enhancing our brand recognition with consumers, which we believe is bolstered by the rebranding to Brinks Home Security,
|
•
|
Differentiating and profitably growing our Direct to Consumer Channel under the Brinks Home Security brand,
|
•
|
Recruiting and retaining high quality dealers into the Monitronics Authorized Dealer Program,
|
•
|
Assisting new and existing dealers with training and marketing initiatives to increase productivity,
|
•
|
Offering third party equipment financing to consumers, which is expected to assist in driving account growth at lower creation costs.
|
•
|
Improving performance in our Direct to Consumer Channel including generating higher quality leads at favorable cost, increasing sales close rates and enhancing our customer activation process,
|
•
|
Negotiating lower subscriber account purchase price multiples in our Dealer Channel, and
|
•
|
Expanding the use and availability of third party financing, which will drive down net creation costs.
|
•
|
Maintaining high customer service levels,
|
•
|
Effectively managing the credit quality of new customers,
|
•
|
Expanding our efforts to both retain customers who have indicated a desire to cancel service and win-back previous customers,
|
•
|
Using predictive modeling to identify subscribers with a higher risk of cancellation and engaging with these subscribers to obtain contract extensions on terms favorable to the Company, and
|
•
|
Implementing effective pricing strategies.
|
•
|
Reducing our operating costs by right sizing the cost structure to the business and leveraging our scale,
|
•
|
Increasing use of automation, and
|
•
|
Implementing more sophisticated purchasing techniques.
|
|
|
Twelve Months Ended
September 30, |
||||
|
|
2019
|
|
2018
|
||
Beginning balance of accounts
|
|
942,157
|
|
|
998,087
|
|
Accounts acquired
|
|
84,899
|
|
|
110,358
|
|
Accounts cancelled
|
|
(156,047
|
)
|
|
(161,657
|
)
|
Cancelled accounts guaranteed by dealer and other adjustments (a)
|
|
(5,161
|
)
|
|
(4,631
|
)
|
Ending balance of accounts
|
|
865,848
|
|
|
942,157
|
|
Monthly weighted average accounts
|
|
903,424
|
|
|
965,026
|
|
Attrition rate - Unit
|
|
17.3
|
%
|
|
16.8
|
%
|
Attrition rate - RMR (b)
|
|
17.6
|
%
|
|
14.1
|
%
|
|
(a)
|
Includes cancelled accounts that are contractually guaranteed to be refunded from holdback.
|
(b)
|
The RMR of cancelled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of cancelled accounts in a given period, adjusted for the impact of price increases or decreases in that period, divided by the weighted average of RMR for that period.
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||||
|
Non-GAAP Combined Three Months Ended September 30,
|
|
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
|
Three Months Ended
September 30, |
|||||||
|
2019
|
|
|
2019
|
|
|
2019
|
|
2018
|
|||||||
Net revenue
|
$
|
120,878
|
|
|
|
$
|
36,289
|
|
|
|
$
|
84,589
|
|
|
137,156
|
|
Cost of services
|
28,962
|
|
|
|
8,976
|
|
|
|
19,986
|
|
|
35,059
|
|
|||
Selling, general and administrative, including stock-based and long-term incentive compensation
|
32,370
|
|
|
|
11,390
|
|
|
|
20,980
|
|
|
34,266
|
|
|||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
49,810
|
|
|
|
17,302
|
|
|
|
32,508
|
|
|
52,671
|
|
|||
Interest expense
|
34,586
|
|
|
|
7,474
|
|
|
|
27,112
|
|
|
39,077
|
|
|||
Income (loss) before income taxes
|
674,220
|
|
|
|
(10,603
|
)
|
|
|
684,823
|
|
|
(32,494
|
)
|
|||
Income tax expense
|
642
|
|
|
|
204
|
|
|
|
438
|
|
|
1,346
|
|
|||
Net income (loss)
|
673,578
|
|
|
|
(10,807
|
)
|
|
|
684,385
|
|
|
(33,840
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA (a)
|
62,502
|
|
|
|
17,144
|
|
|
|
45,358
|
|
|
71,282
|
|
|||
Adjusted EBITDA as a percentage of Net revenue
|
51.7
|
%
|
|
|
47.2
|
%
|
|
|
53.6
|
%
|
|
52.0
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Expensed Subscriber acquisition costs, net
|
|
|
|
|
|
|
|
|
|
|||||||
Gross subscriber acquisition costs
|
$
|
9,710
|
|
|
|
$
|
2,958
|
|
|
|
$
|
6,752
|
|
|
14,098
|
|
Revenue associated with subscriber acquisition costs
|
(1,925
|
)
|
|
|
(534
|
)
|
|
|
(1,391
|
)
|
|
(722
|
)
|
|||
Expensed Subscriber acquisition costs, net
|
$
|
7,785
|
|
|
|
$
|
2,424
|
|
|
|
$
|
5,361
|
|
|
13,376
|
|
|
(a)
|
See reconciliation of Net income (loss) to Adjusted EBITDA below.
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||||
|
Non-GAAP Combined Nine Months Ended September 30,
|
|
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended
September 30, |
|||||||
|
2019
|
|
|
2019
|
|
|
2019
|
|
2018
|
|||||||
Net revenue
|
$
|
378,575
|
|
|
|
$
|
36,289
|
|
|
|
$
|
342,286
|
|
|
405,922
|
|
Cost of services
|
84,262
|
|
|
|
8,976
|
|
|
|
75,286
|
|
|
100,807
|
|
|||
Selling, general and administrative, including stock-based and long-term incentive compensation
|
91,755
|
|
|
|
11,390
|
|
|
|
80,365
|
|
|
98,935
|
|
|||
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
148,093
|
|
|
|
17,302
|
|
|
|
130,791
|
|
|
160,973
|
|
|||
Interest expense
|
112,555
|
|
|
|
7,474
|
|
|
|
105,081
|
|
|
114,550
|
|
|||
Income (loss) before income taxes
|
589,585
|
|
|
|
(10,603
|
)
|
|
|
600,188
|
|
|
(297,800
|
)
|
|||
Income tax expense
|
1,979
|
|
|
|
204
|
|
|
|
1,775
|
|
|
4,039
|
|
|||
Net income (loss)
|
587,606
|
|
|
|
(10,807
|
)
|
|
|
598,413
|
|
|
(301,839
|
)
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA (a)
|
$
|
204,517
|
|
|
|
$
|
17,144
|
|
|
|
$
|
187,373
|
|
|
213,480
|
|
Adjusted EBITDA as a percentage of Net revenue
|
54.0
|
%
|
|
|
47.2
|
%
|
|
|
54.7
|
%
|
|
52.6
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|||||||
Expensed Subscriber acquisition costs, net
|
|
|
|
|
|
|
|
|
|
|||||||
Gross subscriber acquisition costs
|
$
|
27,902
|
|
|
|
$
|
2,958
|
|
|
|
$
|
24,944
|
|
|
38,923
|
|
Revenue associated with subscriber acquisition costs
|
(6,021
|
)
|
|
|
(534
|
)
|
|
|
(5,487
|
)
|
|
(3,489
|
)
|
|||
Expensed Subscriber acquisition costs, net
|
$
|
21,881
|
|
|
|
$
|
2,424
|
|
|
|
$
|
19,457
|
|
|
35,434
|
|
|
(a)
|
See reconciliation of Net income (loss) to Adjusted EBITDA below.
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||||
|
Non-GAAP Combined Three Months Ended September 30,
|
|
|
Period from September 1, 2019 through September 30,
|
|
|
Period from July 1, 2019 through August 31,
|
|
Three Months Ended
September 30, |
|||||||
|
2019
|
|
|
2019
|
|
|
2019
|
|
2018
|
|||||||
Net income (loss)
|
$
|
673,578
|
|
|
|
$
|
(10,807
|
)
|
|
|
$
|
684,385
|
|
|
(33,840
|
)
|
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
49,810
|
|
|
|
17,302
|
|
|
|
32,508
|
|
|
52,671
|
|
|||
Depreciation
|
1,998
|
|
|
|
925
|
|
|
|
1,073
|
|
|
2,880
|
|
|||
Radio conversion costs
|
1,756
|
|
|
|
825
|
|
|
|
931
|
|
|
—
|
|
|||
Stock-based compensation
|
266
|
|
|
|
—
|
|
|
|
266
|
|
|
373
|
|
|||
Long-term incentive compensation
|
107
|
|
|
|
67
|
|
|
|
40
|
|
|
—
|
|
|||
LiveWatch acquisition contingent bonus charges
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
63
|
|
|||
Rebranding marketing program
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
3,060
|
|
|||
Integration / implementation of company initiatives
|
2,583
|
|
|
|
1,154
|
|
|
|
1,429
|
|
|
195
|
|
|||
Gain on revaluation of acquisition dealer liabilities
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(240
|
)
|
|||
Gain on restructuring and reorganization, net
|
(702,824
|
)
|
|
|
—
|
|
|
|
(702,824
|
)
|
|
—
|
|
|||
Interest expense
|
34,586
|
|
|
|
7,474
|
|
|
|
27,112
|
|
|
39,077
|
|
|||
Refinancing expense
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
5,697
|
|
|||
Income tax expense
|
642
|
|
|
|
204
|
|
|
|
438
|
|
|
1,346
|
|
|||
Adjusted EBITDA
|
$
|
62,502
|
|
|
|
$
|
17,144
|
|
|
|
$
|
45,358
|
|
|
71,282
|
|
|
|
|
|
Successor Company
|
|
|
Predecessor Company
|
|||||||||
|
Non-GAAP Combined Nine Months Ended September 30,
|
|
|
Period from September 1, 2019 through September 30,
|
|
|
Period from January 1, 2019 through August 31,
|
|
Nine Months Ended
September 30, |
|||||||
|
2019
|
|
|
2019
|
|
|
2019
|
|
2018
|
|||||||
Net income (loss)
|
$
|
587,606
|
|
|
|
$
|
(10,807
|
)
|
|
|
$
|
598,413
|
|
|
(301,839
|
)
|
Amortization of subscriber accounts, deferred contract acquisition costs and other intangible assets
|
148,093
|
|
|
|
17,302
|
|
|
|
130,791
|
|
|
160,973
|
|
|||
Depreciation
|
8,273
|
|
|
|
925
|
|
|
|
7,348
|
|
|
8,360
|
|
|||
Radio conversion costs
|
1,756
|
|
|
|
825
|
|
|
|
931
|
|
|
—
|
|
|||
Stock-based compensation
|
42
|
|
|
|
—
|
|
|
|
42
|
|
|
803
|
|
|||
Long-term incentive compensation
|
657
|
|
|
|
67
|
|
|
|
590
|
|
|
—
|
|
|||
LiveWatch acquisition contingent bonus charges
|
63
|
|
|
|
—
|
|
|
|
63
|
|
|
187
|
|
|||
Legal settlement reserve (related insurance recovery)
|
(4,800
|
)
|
|
|
—
|
|
|
|
(4,800
|
)
|
|
—
|
|
|||
Rebranding marketing program
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
6,355
|
|
|||
Integration / implementation of company initiatives
|
5,997
|
|
|
|
1,154
|
|
|
|
4,843
|
|
|
195
|
|
|||
Gain on revaluation of acquisition dealer liabilities
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
(240
|
)
|
|||
Loss on goodwill impairment
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
214,400
|
|
|||
Gain on restructuring and reorganization, net
|
(669,722
|
)
|
|
|
—
|
|
|
|
(669,722
|
)
|
|
—
|
|
|||
Interest expense
|
112,555
|
|
|
|
7,474
|
|
|
|
105,081
|
|
|
114,550
|
|
|||
Realized and unrealized (gain) loss, net on derivative financial instruments
|
6,804
|
|
|
|
—
|
|
|
|
6,804
|
|
|
—
|
|
|||
Refinancing expense
|
5,214
|
|
|
|
—
|
|
|
|
5,214
|
|
|
5,697
|
|
|||
Income tax expense
|
1,979
|
|
|
|
204
|
|
|
|
1,775
|
|
|
4,039
|
|
|||
Adjusted EBITDA
|
$
|
204,517
|
|
|
|
$
|
17,144
|
|
|
|
$
|
187,373
|
|
|
213,480
|
|
Year of Maturity
|
|
Variable Rate Debt
|
||
Remainder of 2019
|
|
$
|
2,056
|
|
2020
|
|
8,225
|
|
|
2021
|
|
8,225
|
|
|
2022
|
|
8,225
|
|
|
2023
|
|
8,225
|
|
|
2024
|
|
959,044
|
|
|
Thereafter
|
|
—
|
|
|
Total
|
|
$
|
994,000
|
|
•
|
make it more difficult for Reorganized Monitronics to satisfy its obligations with respect to its existing and future indebtedness, and any failure to comply with the obligations under any of the agreements governing its indebtedness could result in an event of default under such agreements;
|
•
|
require Reorganized Monitronics to dedicate a substantial portion of any cash flow from operations (which also constitutes substantially all of our cash flow) to the payment of interest and principal due under its indebtedness, which will reduce funds available to fund future subscriber account acquisitions, working capital, capital expenditures and other general corporate requirements;
|
•
|
increase its vulnerability to general adverse economic and industry conditions;
|
•
|
limit its flexibility in planning for, or reacting to, changes in its business and the markets in which it operates;
|
•
|
limit Reorganized Monitronics' ability to obtain additional financing required to fund future subscriber account acquisitions, working capital, capital expenditures and other general corporate requirements;
|
•
|
expose Reorganized Monitronics to market fluctuations in interest rates;
|
•
|
place Reorganized Monitronics at a competitive disadvantage compared to some of its competitors that are less leveraged;
|
•
|
reduce or delay investments and capital expenditures; and
|
•
|
cause any refinancing of Reorganized Monitronics' indebtedness to be at higher interest rates and require Reorganized Monitronics to comply with more onerous covenants, which could further restrict its business operations.
|
•
|
incur additional indebtedness;
|
•
|
make certain dividends or distributions with respect to any of its capital stock;
|
•
|
make certain loans and investments;
|
•
|
create liens;
|
•
|
enter into transactions with affiliates, including Ascent Capital;
|
•
|
restrict subsidiary distributions;
|
•
|
dissolve, merge or consolidate;
|
•
|
make capital expenditures in excess of certain annual limits;
|
•
|
transfer, sell or dispose of assets;
|
•
|
enter into or acquire certain types of AMAs;
|
•
|
make certain amendments to its organizational documents;
|
•
|
make changes in the nature of its business;
|
•
|
enter into certain burdensome agreements;
|
•
|
make accounting changes; and
|
•
|
use proceeds of loans to purchase or carry margin stock.
|
2.1
|
|
|
2.2
|
|
|
2.3
|
|
|
3.1
|
|
|
3.2
|
|
|
10.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
101.INS
|
|
XBRL Instance Document. *
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document. *
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document. *
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document. *
|
101.LAB
|
|
XBRL Taxonomy Extension Labels Linkbase Document. *
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document. *
|
*
|
Filed herewith.
|
**
|
Furnished herewith.
|
|
|
|
|
MONITRONICS INTERNATIONAL, INC.
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 13, 2019
|
|
By:
|
/s/ Jeffery R. Gardner
|
|
|
|
|
Jeffery R. Gardner
|
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 13, 2019
|
|
By:
|
/s/ Fred A. Graffam
|
|
|
|
|
Fred A. Graffam
|
|
|
|
|
Chief Financial Officer, Executive Vice President and Assistant Secretary
|
|
|
|
|
(Principal Financial and Accounting Officer)
|
•
|
Position Title: Executive Vice President and General Counsel
|
•
|
Pay Basis & FLSA Status: Salary Exempt
|
•
|
Pay Rate: $385,000 ($14,807.70 per pay period)
|
•
|
Pay Frequency: Biweekly (every other Friday)
|
•
|
2019 MIP Target: 60% of payroll base earnings
|
•
|
Equity/LTIP: Eligible to participate. Awards to be determined in good faith by the Compensation Committee of the Board, and treated no less favorably than similarly situated senior executives (excluding the President/CEO).
|
•
|
Severance Eligibility: If terminated without cause by the Company or by you with Good Reason (as defined on Exhibit A), then you shall receive a lump sum payment equal to base salary plus target bonus multiplied by 1.5, and 12 months of COBRA reimbursement for the full premium. If terminated after a change of control (without cause or by you for Good Reason), then you shall receive a lump sum payment equal to base salary plus target bonus multiplied by 2.0, and 12 months of COBRA reimbursement for the full premium. Any severance payment will be paid to you within 30 days following the termination date, and will be subject to your timely execution and non-revocation of a general release of claims in a form prescribed by the Company.
|
•
|
Vacation: Accrue up to 160 hours per year, with the ability to carry over accrued and unused time up to a total maximum balance of 240 hours
|
•
|
Medical: Company subsidy for bi-weekly premiums for standard plan
|
•
|
Work Location: Farmers Branch, TX
|
◦
|
Farmers Branch Office Monday through Friday, unless travelling for business purposes. The company will provide an apartment lease in the DFW area as needed through December 31, 2019. Reasonable air travel to and from Colorado during commuting time will also be reimbursed, as needed. Since the apartment lease and air travel for commuting are taxable, the company will provide you with a tax gross up for these items. All meals and car needs while in Farmers Branch will be at personal cost.
|
◦
|
By January 2020, relocation to DFW area will be required. The company will pay for any temporary living needed during transition, household packing and transportation expense from Colorado residence to DFW residence. Normal and customary real estate sales commission for the sale of your Colorado residence will be reimbursed.
|
•
|
Non-Solicitation of Employees: While actively employed and during the 12 months following your employment, you agree and covenant not to directly or indirectly solicit, hire, recruit, or attempt to hire or recruit, any employee of Brinks Home Security or any employee who has been employed by Brinks Home Security.
|
•
|
Non-Solicitation of Authorized Dealers: The Company has expended and continues to expend significant time and expense in developing dealer relationships, dealer information and goodwill, and that because of your experience with and relationship to the Company, you have access to and learned about much or all of the Company’s information regarding its authorized dealers (“Dealer Information”). Dealer Information includes, but is not limited to, names, phone numbers, addresses, e-mail addresses, account production, purchase multiples, dealer program requirements and other information identifying facts and circumstances specific to the dealer and relevant to dealer’s sales/services. You hereby understand and acknowledge that loss of this dealer relationship and/or goodwill will cause significant and irreparable harm to the Company. You also agree that during the term of two (2) years, to run consecutively, beginning on the last day of your employment with the Company, not to directly or indirectly solicit, contact (including but not limited to e-mail, regular mail, express mail, telephone, fax, instant message or social media, including but not limited to Facebook, LinkedIn, Instagram or Twitter, or any other social media platform, whether or not in existence at the time of entering into this agreement), attempt to contact or meet with the Company’s current, former or prospective authorized dealers for purposes of offering, recruiting or accepting goods or services similar to or competitive with those offered by the Company.
|
•
|
Non-Competition: While actively employed and during the 12 months following your employment, you agree and covenant not to directly a.) compete with the Company; b.) have an interest in, be employed by, be engaged in or participate in the ownership, management, operation or control of, or act in an advisory or other capacity for any competing entity (except for passive investments in which ownership is less than 1%); c.) solicit or divert any business or any customer from the Company or assist any person, firm or corporation in doing so or attempting to do so; or d.) cause or seek to cause any person, firm or corporation to refrain from dealing or doing business with the Company or assist any person, firm or corporation in doing so or attempting to do so.
|
•
|
Confidential Information: You understand that the nature of your position gives you access to and knowledge of Confidential Information and places you in a position of trust and confidence with the Company. You understand and acknowledge that the intellectual or artistic services you provide are unique, special, or extraordinary. You further understand and acknowledge that the Company’s ability to reserve these for the exclusive knowledge and use of the Company is of great competitive importance and commercial value to the Company, and that improper use or disclosure by you is likely to result in unfair or unlawful competitive activity.
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Date:
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November 13, 2019
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/s/ Jeffery R. Gardner
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Jeffery R. Gardner
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President and Chief Executive Officer
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Date:
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November 13, 2019
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/s/ Fred A. Graffam
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Fred A. Graffam
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Chief Financial Officer, Executive Vice President and Assistant Secretary
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Dated:
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November 13, 2019
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/s/ Jeffery R. Gardner
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Jeffery R. Gardner
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President and Chief Executive Officer
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Dated:
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November 13, 2019
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/s/ Fred A. Graffam
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Fred A. Graffam
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Chief Financial Officer, Executive Vice President and Assistant Secretary
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(Principal Financial and Accounting Officer)
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