State of Delaware
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26-2735737
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(State or other jurisdiction of
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(I.R.S. Employer Identification No.)
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incorporation or organization)
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5251 DTC Parkway, Suite 1000
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Greenwood Village, Colorado
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80111
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
o
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Accelerated filer
x
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Non-accelerated filer
o
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Smaller reporting company
o
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(Do not check if a smaller reporting company)
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Emerging growth company
o
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Page
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PART I — FINANCIAL INFORMATION
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September 30,
2017 |
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December 31,
2016 |
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Assets
|
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|
||||
Current assets:
|
|
|
|
|
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Cash and cash equivalents
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$
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34,920
|
|
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$
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12,319
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Marketable securities, at fair value
|
100,498
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|
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77,825
|
|
||
Trade receivables, net of allowance for doubtful accounts of $3,381 in 2017 and $3,043 in 2016
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13,206
|
|
|
13,869
|
|
||
Prepaid and other current assets
|
11,759
|
|
|
10,347
|
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Assets held for sale
|
—
|
|
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10,673
|
|
||
Total current assets
|
160,383
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|
125,033
|
|
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Property and equipment, net of accumulated depreciation of $35,506 in 2017 and $29,071 in 2016
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30,993
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28,331
|
|
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Subscriber accounts, net of accumulated amortization of $1,383,804 in 2017 and $1,212,468 in 2016
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1,333,627
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1,386,760
|
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Dealer network and other intangible assets, net of accumulated amortization of $40,348 in 2017 and $32,976 in 2016
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9,452
|
|
|
16,824
|
|
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Goodwill
|
563,549
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563,549
|
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Other assets
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6,875
|
|
|
11,935
|
|
||
Total assets
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$
|
2,104,879
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|
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$
|
2,132,432
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||
Current liabilities:
|
|
|
|
|
|
||
Accounts payable
|
$
|
10,521
|
|
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$
|
11,516
|
|
Accrued payroll and related liabilities
|
6,345
|
|
|
5,067
|
|
||
Other accrued liabilities
|
66,873
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|
|
34,970
|
|
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Deferred revenue
|
14,191
|
|
|
15,147
|
|
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Holdback liability
|
10,706
|
|
|
13,916
|
|
||
Current portion of long-term debt
|
11,000
|
|
|
11,000
|
|
||
Liabilities of discontinued operations
|
—
|
|
|
3,500
|
|
||
Total current liabilities
|
119,636
|
|
|
95,116
|
|
||
Non-current liabilities:
|
|
|
|
|
|
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Long-term debt
|
1,789,810
|
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1,754,233
|
|
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Long-term holdback liability
|
1,982
|
|
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2,645
|
|
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Derivative financial instruments
|
16,122
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16,948
|
|
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Deferred income tax liability, net
|
20,959
|
|
|
17,769
|
|
||
Other liabilities
|
6,671
|
|
|
7,076
|
|
||
Total liabilities
|
1,955,180
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1,893,787
|
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Commitments and contingencies
|
|
|
|
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|
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Stockholders’ equity:
|
|
|
|
|
|
||
Preferred stock, $0.01 par value. Authorized 5,000,000 shares; no shares issued
|
—
|
|
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—
|
|
||
Series A common stock, $.01 par value. Authorized 45,000,000 shares; issued and outstanding 11,947,767 and 11,969,152 shares at September 30, 2017 and December 31, 2016, respectively
|
119
|
|
|
120
|
|
||
Series B common stock, $.01 par value. Authorized 5,000,000 shares; issued and outstanding 381,528 and 381,859 shares at September 30, 2017 and December 31, 2016, respectively
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4
|
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4
|
|
||
Series C common stock, $0.01 par value. Authorized 45,000,000 shares; no shares issued
|
—
|
|
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—
|
|
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Additional paid-in capital
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1,422,608
|
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1,417,505
|
|
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Accumulated deficit
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(1,261,098
|
)
|
|
(1,169,559
|
)
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Accumulated other comprehensive loss, net
|
(11,934
|
)
|
|
(9,425
|
)
|
||
Total stockholders’ equity
|
149,699
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|
|
238,645
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,104,879
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|
|
$
|
2,132,432
|
|
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Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||||
|
2017
|
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2016
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2017
|
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2016
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|||||||
Net revenue
|
$
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138,211
|
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142,765
|
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$
|
419,909
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429,689
|
|
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Operating expenses:
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|
|
|
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|||||
Cost of services
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30,213
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29,049
|
|
|
89,799
|
|
|
86,161
|
|
|||
Selling, general and administrative, including stock-based compensation
|
35,793
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32,897
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136,809
|
|
|
97,148
|
|
|||
Radio conversion costs
|
74
|
|
|
1,263
|
|
|
383
|
|
|
17,938
|
|
|||
Amortization of subscriber accounts, dealer network and other intangible assets
|
59,384
|
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62,156
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|
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178,896
|
|
|
185,415
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|
|||
Depreciation
|
2,176
|
|
|
2,152
|
|
|
6,435
|
|
|
6,329
|
|
|||
Gain on disposal of operating assets
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—
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|
|
—
|
|
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(21,217
|
)
|
|
—
|
|
|||
|
127,640
|
|
|
127,517
|
|
|
391,105
|
|
|
392,991
|
|
|||
Operating income
|
10,571
|
|
|
15,248
|
|
|
28,804
|
|
|
36,698
|
|
|||
Other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|||||
Interest income
|
617
|
|
|
548
|
|
|
1,575
|
|
|
1,593
|
|
|||
Interest expense
|
(38,360
|
)
|
|
(31,794
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)
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(114,011
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)
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|
(94,805
|
)
|
|||
Refinancing expense
|
—
|
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|
(9,348
|
)
|
|
—
|
|
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(9,348
|
)
|
|||
Other income (expense), net
|
(222
|
)
|
|
240
|
|
|
242
|
|
|
(1,079
|
)
|
|||
|
(37,965
|
)
|
|
(40,354
|
)
|
|
(112,194
|
)
|
|
(103,639
|
)
|
|||
Loss from continuing operations before income taxes
|
(27,394
|
)
|
|
(25,106
|
)
|
|
(83,390
|
)
|
|
(66,941
|
)
|
|||
Income tax expense from continuing operations
|
(1,766
|
)
|
|
(1,927
|
)
|
|
(8,241
|
)
|
|
(5,514
|
)
|
|||
Net loss from continuing operations
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(29,160
|
)
|
|
(27,033
|
)
|
|
(91,631
|
)
|
|
(72,455
|
)
|
|||
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|||||
Income from discontinued operations, net of income tax of $0
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|||
Net loss
|
(29,160
|
)
|
|
(27,033
|
)
|
|
(91,539
|
)
|
|
(72,455
|
)
|
|||
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|||||
Foreign currency translation adjustments
|
(16
|
)
|
|
(224
|
)
|
|
626
|
|
|
(780
|
)
|
|||
Unrealized holding gain on marketable securities, net
|
279
|
|
|
301
|
|
|
1,366
|
|
|
3,164
|
|
|||
Unrealized gain (loss) on derivative contracts, net
|
227
|
|
|
(2,459
|
)
|
|
(4,501
|
)
|
|
(19,001
|
)
|
|||
Total other comprehensive income (loss), net of tax
|
490
|
|
|
(2,382
|
)
|
|
(2,509
|
)
|
|
(16,617
|
)
|
|||
Comprehensive loss
|
$
|
(28,670
|
)
|
|
(29,415
|
)
|
|
$
|
(94,048
|
)
|
|
$
|
(89,072
|
)
|
|
|
|
|
|
|
|
|
|||||||
Basic and diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|||||
Continuing operations
|
$
|
(2.39
|
)
|
|
(2.23
|
)
|
|
$
|
(7.53
|
)
|
|
(5.89
|
)
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
—
|
|
|||
Net loss
|
$
|
(2.39
|
)
|
|
(2.23
|
)
|
|
$
|
(7.52
|
)
|
|
(5.89
|
)
|
|
Nine Months Ended
September 30, |
|||||
|
2017
|
|
2016
|
|||
Cash flows from operating activities:
|
|
|
|
|||
Net loss
|
$
|
(91,539
|
)
|
|
(72,455
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
|
|
|
Income from discontinued operations, net of income tax
|
(92
|
)
|
|
—
|
|
|
Amortization of subscriber accounts, dealer network and other intangible assets
|
178,896
|
|
|
185,415
|
|
|
Depreciation
|
6,435
|
|
|
6,329
|
|
|
Stock-based compensation
|
5,968
|
|
|
5,205
|
|
|
Deferred income tax expense
|
3,158
|
|
|
3,158
|
|
|
Gain on disposal of operating assets
|
(21,217
|
)
|
|
—
|
|
|
Legal settlement reserve, net of cash payments
|
23,000
|
|
|
—
|
|
|
Amortization of debt discount and deferred debt costs
|
8,227
|
|
|
8,063
|
|
|
Refinancing expense
|
—
|
|
|
9,348
|
|
|
Bad debt expense
|
7,888
|
|
|
7,855
|
|
|
Other non-cash activity, net
|
4,887
|
|
|
4,231
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
Trade receivables
|
(7,225
|
)
|
|
(7,906
|
)
|
|
Prepaid expenses and other assets
|
(3,535
|
)
|
|
717
|
|
|
Subscriber accounts - deferred contract costs
|
(2,299
|
)
|
|
(2,080
|
)
|
|
Payables and other liabilities
|
4,770
|
|
|
10,667
|
|
|
Operating activities from discontinued operations, net
|
(3,408
|
)
|
|
—
|
|
|
Net cash provided by operating activities
|
113,914
|
|
|
158,547
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
Capital expenditures
|
(9,999
|
)
|
|
(5,071
|
)
|
|
Cost of subscriber accounts acquired
|
(119,081
|
)
|
|
(160,117
|
)
|
|
Purchases of marketable securities
|
(22,633
|
)
|
|
(5,036
|
)
|
|
Proceeds from sale of marketable securities
|
1,108
|
|
|
12,909
|
|
|
Decrease in restricted cash
|
—
|
|
|
55
|
|
|
Proceeds from the disposal of operating assets
|
32,612
|
|
|
—
|
|
|
Net cash used in investing activities
|
(117,993
|
)
|
|
(157,260
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
Proceeds from long-term debt
|
159,850
|
|
|
1,249,000
|
|
|
Payments on long-term debt
|
(132,500
|
)
|
|
(1,200,009
|
)
|
|
Value of shares withheld for share-based compensation
|
(670
|
)
|
|
(347
|
)
|
|
Payments of financing costs
|
—
|
|
|
(16,711
|
)
|
|
Purchases and retirement of common stock
|
—
|
|
|
(7,140
|
)
|
|
Net cash provided by financing activities
|
26,680
|
|
|
24,793
|
|
|
Net increase in cash and cash equivalents
|
22,601
|
|
|
26,080
|
|
|
Cash and cash equivalents at beginning of period
|
12,319
|
|
|
5,577
|
|
|
Cash and cash equivalents at end of period
|
$
|
34,920
|
|
|
31,657
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
State taxes paid, net
|
$
|
3,107
|
|
|
2,759
|
|
Interest paid
|
93,753
|
|
|
73,521
|
|
|
Accrued capital expenditures
|
386
|
|
|
638
|
|
|
|
|
|
|
|
|
|
|
Additional Paid-in Capital
|
|
|
|
Accumulated Other Comprehensive Loss
|
|
Total Stockholders' Equity
|
|||||||||
|
Preferred Stock
|
|
Common Stock
|
|
|
Accumulated Deficit
|
|
|
||||||||||||||||
|
|
Series A
|
|
Series B
|
|
Series C
|
|
|
|
|
||||||||||||||
Balance at December 31, 2016
|
$
|
—
|
|
|
120
|
|
|
4
|
|
|
—
|
|
|
1,417,505
|
|
|
(1,169,559
|
)
|
|
(9,425
|
)
|
|
238,645
|
|
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(91,539
|
)
|
|
—
|
|
|
(91,539
|
)
|
|
Other comprehensive loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,509
|
)
|
|
(2,509
|
)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,772
|
|
|
—
|
|
|
—
|
|
|
5,772
|
|
|
Value of shares withheld for minimum tax liability
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
(669
|
)
|
|
—
|
|
|
—
|
|
|
(670
|
)
|
|
Balance at September 30, 2017
|
$
|
—
|
|
|
119
|
|
|
4
|
|
|
—
|
|
|
1,422,608
|
|
|
(1,261,098
|
)
|
|
(11,934
|
)
|
|
149,699
|
|
|
|
As of September 30, 2017
|
||||||||||||||
|
|
Cost Basis (b)
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Total
|
||||||||
Equity securities
|
|
$
|
3,432
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,432
|
|
Mutual funds (a)
|
|
94,628
|
|
|
2,438
|
|
|
—
|
|
|
97,066
|
|
||||
Ending balance
|
|
$
|
98,060
|
|
|
$
|
2,438
|
|
|
$
|
—
|
|
|
$
|
100,498
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
As of December 31, 2016
|
||||||||||||||
|
|
Cost Basis (b)
|
|
Unrealized Gains
|
|
Unrealized Losses
|
|
Total
|
||||||||
Equity securities
|
|
$
|
3,767
|
|
|
$
|
—
|
|
|
$
|
(396
|
)
|
|
$
|
3,371
|
|
Mutual funds (a)
|
|
72,986
|
|
|
1,483
|
|
|
(15
|
)
|
|
74,454
|
|
||||
Ending balance
|
|
$
|
76,753
|
|
|
$
|
1,483
|
|
|
$
|
(411
|
)
|
|
$
|
77,825
|
|
|
(a)
|
Primarily consists of corporate bond funds.
|
(b)
|
When an other-than-temporary impairment occurs, the Company reduces the cost basis of the marketable security involved. In the third quarter of 2017, the Company recognized a non-cash charge for an other-than-temporary impairment of
$220,000
on its equity securities. In the second quarter of 2016, the Company recognized non-cash charges for an other-than-temporary impairment of
$1,068,000
on its mutual funds and
$836,000
on its equity
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Gross realized gains
|
$
|
—
|
|
|
—
|
|
|
$
|
6
|
|
|
244
|
|
Gross realized losses
|
$
|
2
|
|
|
26
|
|
|
$
|
5
|
|
|
236
|
|
Total proceeds
|
$
|
51
|
|
|
959
|
|
|
$
|
1,108
|
|
|
12,909
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Interest payable
|
$
|
28,048
|
|
|
$
|
15,675
|
|
Income taxes payable
|
5,149
|
|
|
2,989
|
|
||
Legal accrual, including settlement reserve
|
23,534
|
|
(a)
|
476
|
|
||
LiveWatch acquisition retention bonus
|
—
|
|
|
4,990
|
|
||
Derivative financial instruments
|
1,631
|
|
|
—
|
|
||
Other
|
8,511
|
|
|
10,840
|
|
||
Total Other accrued liabilities
|
$
|
66,873
|
|
|
$
|
34,970
|
|
|
|
September 30,
2017 |
|
December 31,
2016 |
||||
Ascent Capital 4.00% Convertible Senior Notes due July 15, 2020 with an effective rate of 8.4%
|
$
|
81,473
|
|
|
$
|
78,279
|
|
MONI 9.125% Senior Notes due April 1, 2020 with an effective rate of 9.4%
|
579,669
|
|
|
578,254
|
|
||
MONI term loan, matures September 30, 2022, LIBOR plus 5.50%, subject to a LIBOR floor of 1.00% with an effective rate of 7.2%
|
1,061,199
|
|
|
1,066,130
|
|
||
MONI $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 5.1%
|
78,469
|
|
|
42,570
|
|
||
|
1,800,810
|
|
|
1,765,233
|
|
||
Less current portion of long-term debt
|
(11,000
|
)
|
|
(11,000
|
)
|
||
Long-term debt
|
$
|
1,789,810
|
|
|
$
|
1,754,233
|
|
|
As of
September 30, 2017 |
|
As of
December 31, 2016 |
||||
Principal
|
$
|
96,775
|
|
|
$
|
96,775
|
|
Unamortized discount
|
(14,332
|
)
|
|
(17,324
|
)
|
||
Deferred debt costs
|
(970
|
)
|
|
(1,172
|
)
|
||
Carrying value
|
$
|
81,473
|
|
|
$
|
78,279
|
|
Remainder of 2017
|
$
|
2,750
|
|
2018
|
11,000
|
|
|
2019
|
11,000
|
|
|
2020
|
692,775
|
|
|
2021
|
91,400
|
|
|
2022
|
1,042,250
|
|
|
Thereafter
|
—
|
|
|
Total principal payments
|
$
|
1,851,175
|
|
Less:
|
|
|
|
Unamortized deferred debt costs, discounts and premium, net
|
50,365
|
|
|
Total debt on condensed consolidated balance sheet
|
$
|
1,800,810
|
|
Notional
|
|
Effective Date
|
|
Maturity Date
|
|
Fixed
Rate Paid
|
|
Variable Rate Received
|
||
$
|
519,750,000
|
|
|
March 28, 2013
|
|
March 23, 2018
|
|
1.884%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
|
137,750,000
|
|
|
March 28, 2013
|
|
March 23, 2018
|
|
1.384%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
|
|
107,694,723
|
|
|
September 30, 2013
|
|
March 23, 2018
|
|
1.959%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
|
|
107,694,723
|
|
|
September 30, 2013
|
|
March 23, 2018
|
|
1.850%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
|
|
191,475,002
|
|
|
March 23, 2018
|
|
April 9, 2022
|
|
3.110%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
|
|
250,000,000
|
|
|
March 23, 2018
|
|
April 9, 2022
|
|
3.110%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor (a)
|
|
50,000,000
|
|
|
March 23, 2018
|
|
April 9, 2022
|
|
2.504%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
|
|
377,000,000
|
|
|
March 23, 2018
|
|
September 30, 2022
|
|
1.833%
|
|
3 mo. USD-LIBOR-BBA, subject to a 1.00% floor
|
|
(a)
|
On March 25, 2013 and September 30, 2016, MONI negotiated amendments to the terms of these interest rate swap agreements (the "Existing Swap Agreements," as amended, the "Amended Swaps"). The Amended Swaps are held with the same counterparties as the Existing Swap Agreements. Upon entering into the Amended Swaps, MONI simultaneously dedesignated the Existing Swap Agreements and redesignated the Amended Swaps as cash flow hedges for the underlying change in the swap terms. The amounts previously recognized in Accumulated other comprehensive loss relating to the dedesignation are recognized in Interest expense over the remaining life of the Amended Swaps.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Effective portion of loss recognized in Accumulated other comprehensive loss
|
$
|
(914
|
)
|
|
(4,284
|
)
|
|
$
|
(8,890
|
)
|
|
(24,447
|
)
|
Effective portion of loss reclassified from Accumulated other comprehensive loss into Net loss (a)
|
$
|
(1,141
|
)
|
|
(1,825
|
)
|
|
$
|
(4,389
|
)
|
|
(5,446
|
)
|
Ineffective portion of amount of loss recognized into Net loss (a)
|
$
|
(65
|
)
|
|
16
|
|
|
$
|
(157
|
)
|
|
(61
|
)
|
|
•
|
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, 2017
|
|
|
|
|
|
|
|
|
|
|
|
||
Investments in marketable securities (a)
|
100,498
|
|
|
—
|
|
|
—
|
|
|
100,498
|
|
||
Interest rate swap agreement - assets (b)
|
—
|
|
|
4,664
|
|
|
—
|
|
|
4,664
|
|
||
Interest rate swap agreements - liabilities (b)
|
—
|
|
|
(17,753
|
)
|
|
—
|
|
|
(17,753
|
)
|
||
Total
|
$
|
100,498
|
|
|
(13,089
|
)
|
|
—
|
|
|
$
|
87,409
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
||
Investments in marketable securities (a)
|
77,825
|
|
|
—
|
|
|
—
|
|
|
77,825
|
|
||
Interest rate swap agreement - assets (b)
|
—
|
|
|
8,521
|
|
|
—
|
|
|
8,521
|
|
||
Interest rate swap agreements - liabilities (b)
|
—
|
|
|
(16,948
|
)
|
|
—
|
|
|
(16,948
|
)
|
||
Total
|
$
|
77,825
|
|
|
(8,427
|
)
|
|
—
|
|
|
$
|
69,398
|
|
|
(a)
|
Level 1 investments primarily consist of diversified corporate bond funds.
|
(b)
|
Interest rate swap agreement asset values are included in Other assets and interest rate swap agreement liability values are included in current Other accrued liabilities or non-current Derivative financial instruments on the consolidated balance sheets depending on the maturity date of the swap.
|
|
September 30, 2017
|
|
December 31, 2016
|
||||
Long term debt, including current portion:
|
|
|
|
|
|
||
Carrying value
|
$
|
1,800,810
|
|
|
$
|
1,765,233
|
|
Fair value (a)
|
1,756,742
|
|
|
1,770,694
|
|
|
(a)
|
The fair value is based on market quotations from third party financial institutions and is classified as Level 2 in the hierarchy.
|
|
Series A
Common Stock
|
|
Series B
Common Stock
|
||
Outstanding balance at December 31, 2016
|
11,969,152
|
|
|
381,859
|
|
Conversion from Series B to Series A Shares
|
331
|
|
|
(331
|
)
|
Issuance of stock awards
|
37,805
|
|
|
—
|
|
Restricted stock forfeitures and tax withholding
|
(59,521
|
)
|
|
—
|
|
Outstanding balance at September 30, 2017
|
11,947,767
|
|
|
381,528
|
|
|
Foreign
currency
translation
adjustments
|
|
Unrealized
holding
gains
and losses on
marketable
securities, net (a)
|
|
Unrealized
gains and
losses on
derivative
instruments,
net (b)
|
|
Accumulated
other
comprehensive
loss
|
||||||
As of December 31, 2016
|
$
|
(1,540
|
)
|
|
1,072
|
|
|
(8,957
|
)
|
|
$
|
(9,425
|
)
|
Gain (loss) through Accumulated other comprehensive loss, net of income tax of $0
|
626
|
|
|
1,147
|
|
|
(8,890
|
)
|
|
(7,117
|
)
|
||
Reclassifications of loss (gain) into Net loss, net of income tax of $0
|
—
|
|
|
219
|
|
|
4,389
|
|
|
4,608
|
|
||
Net current period other comprehensive income (loss)
|
626
|
|
|
1,366
|
|
|
(4,501
|
)
|
|
(2,509
|
)
|
||
As of September 30, 2017
|
$
|
(914
|
)
|
|
2,438
|
|
|
(13,458
|
)
|
|
$
|
(11,934
|
)
|
|
(a)
|
Amounts reclassified into net loss are included in Other income, net on the condensed consolidated statement of operations. See note 3, Investments in Marketable Securities, for further information.
|
(b)
|
Amounts reclassified into net loss are included in Interest expense on the condensed consolidated statement of operations. See note 7, Derivatives, for further information.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Weighted average Series A and Series B shares — basic and diluted
|
12,207,649
|
|
|
12,101,214
|
|
|
12,170,367
|
|
|
12,304,879
|
|
|
|
MONI
|
|
LiveWatch
|
|
Other
|
|
Consolidated
|
||||||||
|
|
Three Months Ended September 30, 2017
|
||||||||||||||
Net revenue
|
|
$
|
130,963
|
|
|
$
|
7,248
|
|
|
$
|
—
|
|
|
$
|
138,211
|
|
Depreciation and amortization
|
|
$
|
60,390
|
|
|
$
|
1,164
|
|
|
$
|
6
|
|
|
$
|
61,560
|
|
Net loss from continuing operations before income taxes
|
|
$
|
(17,943
|
)
|
|
$
|
(5,826
|
)
|
|
$
|
(3,625
|
)
|
|
$
|
(27,394
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Three Months Ended September 30, 2016
|
||||||||||||||
Net revenue
|
|
$
|
136,910
|
|
|
$
|
5,855
|
|
|
$
|
—
|
|
|
$
|
142,765
|
|
Depreciation and amortization
|
|
$
|
63,117
|
|
|
$
|
1,123
|
|
|
$
|
68
|
|
|
$
|
64,308
|
|
Net loss from continuing operations before income taxes
|
|
$
|
(15,238
|
)
|
|
$
|
(5,835
|
)
|
|
$
|
(4,033
|
)
|
|
$
|
(25,106
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Nine Months Ended September 30, 2017
|
||||||||||||||
Net revenue
|
|
$
|
398,907
|
|
|
$
|
21,002
|
|
|
$
|
—
|
|
|
$
|
419,909
|
|
Depreciation and amortization
|
|
$
|
181,873
|
|
|
$
|
3,438
|
|
|
$
|
20
|
|
|
$
|
185,331
|
|
Net income (loss) from continuing operations before income taxes
|
|
$
|
(74,722
|
)
|
|
$
|
(16,601
|
)
|
|
$
|
7,933
|
|
|
$
|
(83,390
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Nine Months Ended September 30, 2016
|
||||||||||||||
Net revenue
|
|
$
|
413,180
|
|
|
$
|
16,509
|
|
|
$
|
—
|
|
|
$
|
429,689
|
|
Depreciation and amortization
|
|
$
|
188,146
|
|
|
$
|
3,353
|
|
|
$
|
245
|
|
|
$
|
191,744
|
|
Net loss from continuing operations before income taxes
|
|
$
|
(38,092
|
)
|
|
$
|
(16,167
|
)
|
|
$
|
(12,682
|
)
|
|
$
|
(66,941
|
)
|
|
|
MONI
|
|
LiveWatch
|
|
Other
|
|
Consolidated
|
||||||||
|
|
Balance at September 30, 2017
|
||||||||||||||
Subscriber accounts, net of amortization
|
|
$
|
1,312,214
|
|
|
$
|
21,413
|
|
|
$
|
—
|
|
|
$
|
1,333,627
|
|
Goodwill
|
|
$
|
527,502
|
|
|
$
|
36,047
|
|
|
$
|
—
|
|
|
$
|
563,549
|
|
Total assets
|
|
$
|
2,044,106
|
|
|
$
|
62,830
|
|
|
$
|
(2,057
|
)
|
|
$
|
2,104,879
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Balance at December 31, 2016
|
||||||||||||||
Subscriber accounts, net of amortization
|
|
$
|
1,364,804
|
|
|
$
|
21,956
|
|
|
$
|
—
|
|
|
$
|
1,386,760
|
|
Goodwill
|
|
$
|
527,502
|
|
|
$
|
36,047
|
|
|
$
|
—
|
|
|
$
|
563,549
|
|
Total assets
|
|
$
|
2,062,838
|
|
|
$
|
63,916
|
|
|
$
|
5,678
|
|
|
$
|
2,132,432
|
|
•
|
general business conditions and industry trends;
|
•
|
macroeconomic conditions and their effect on the general economy and on the U.S. housing market, in particular single family homes which represent MONI's largest demographic;
|
•
|
uncertainties in the development of our business strategies, including MONI's increased direct marketing efforts 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 telecommunications and cable companies;
|
•
|
the development of new services or service innovations by competitors;
|
•
|
MONI's 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;
|
•
|
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 MONI and/or its dealers are subject and the risk of new regulations, such as the increasing adoption of "false alarm" ordinances;
|
•
|
technological changes which could result in the obsolescence of currently utilized technology and the need for significant upgrade expenditures, including the phase-out of 2G networks by cellular carriers;
|
•
|
the trend away from the use of public switched telephone network lines and resultant increase in servicing costs associated with alternative methods of communication;
|
•
|
the operating performance of MONI's 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 MONI business partners;
|
•
|
the reliability and creditworthiness of MONI's independent alarm systems dealers and subscribers;
|
•
|
changes in MONI's expected rate of subscriber attrition;
|
•
|
the availability and terms of capital, including the ability of MONI to obtain future financing to grow its business;
|
•
|
MONI's high degree of leverage and the restrictive covenants governing its indebtedness; and
|
•
|
availability of qualified personnel.
|
|
|
Twelve Months Ended
September 30, |
|
||||
|
|
2017
|
|
2016
|
|
||
Beginning balance of accounts
|
|
1,059,634
|
|
|
1,091,627
|
|
|
Accounts acquired
|
|
103,650
|
|
|
136,414
|
|
|
Accounts canceled
|
|
(152,951
|
)
|
|
(150,091
|
)
|
|
Canceled accounts guaranteed by dealer and other adjustments (a) (b)
|
|
(12,246
|
)
|
|
(18,316
|
)
|
|
Ending balance of accounts
|
|
998,087
|
|
|
1,059,634
|
|
|
Monthly weighted average accounts
|
|
1,033,150
|
|
|
1,079,100
|
|
|
Attrition rate - Unit
|
|
14.8
|
%
|
|
13.9
|
%
|
|
Attrition rate - RMR (c)
|
|
13.5
|
%
|
|
12.2
|
%
|
|
|
(a)
|
Includes canceled accounts that are contractually guaranteed to be refunded from holdback.
|
(b)
|
Includes an estimated 4,945 and 10,488 accounts included in our Radio Conversion Program that primarily canceled in excess of their expected attrition for the twelve months ending
September 30, 2017
and
2016
, respectively.
|
(c)
|
The recurring monthly revenue ("RMR") of canceled accounts follows the same definition as subscriber unit attrition as noted above. RMR attrition is defined as the RMR of canceled 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.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Net revenue
|
$
|
138,211
|
|
|
142,765
|
|
|
$
|
419,909
|
|
|
429,689
|
|
Cost of services
|
30,213
|
|
|
29,049
|
|
|
89,799
|
|
|
86,161
|
|
||
Selling, general, and administrative
|
35,793
|
|
|
32,897
|
|
|
136,809
|
|
|
97,148
|
|
||
Amortization of subscriber accounts, dealer network and other intangible assets
|
59,384
|
|
|
62,156
|
|
|
178,896
|
|
|
185,415
|
|
||
Interest expense
|
(38,360
|
)
|
|
(31,794
|
)
|
|
(114,011
|
)
|
|
(94,805
|
)
|
||
Income tax expense from continuing operations
|
(1,766
|
)
|
|
(1,927
|
)
|
|
(8,241
|
)
|
|
(5,514
|
)
|
||
Net loss from continuing operations
|
(29,160
|
)
|
|
(27,033
|
)
|
|
(91,631
|
)
|
|
(72,455
|
)
|
||
Net loss
|
(29,160
|
)
|
|
(27,033
|
)
|
|
(91,539
|
)
|
|
(72,455
|
)
|
||
|
|
|
|
|
|
|
|
||||||
Adjusted EBITDA
(a)
|
|
|
|
|
|
|
|
|
|
||||
MONI business Adjusted EBITDA
|
$
|
76,910
|
|
|
86,795
|
|
|
$
|
239,786
|
|
|
262,454
|
|
Corporate Adjusted EBITDA
|
(1,239
|
)
|
|
(1,852
|
)
|
|
(6,379
|
)
|
|
(5,446
|
)
|
||
Total Adjusted EBITDA
|
$
|
75,671
|
|
|
84,943
|
|
|
$
|
233,407
|
|
|
257,008
|
|
Adjusted EBITDA as a percentage of Net revenue
|
|
|
|
|
|
|
|
|
|
||||
MONI business
|
55.6
|
%
|
|
60.8
|
%
|
|
57.1
|
%
|
|
61.1
|
%
|
||
Corporate
|
(0.9
|
)%
|
|
(1.3
|
)%
|
|
(1.5
|
)%
|
|
(1.3
|
)%
|
||
|
|
|
|
|
|
|
|
||||||
Pre-SAC Adjusted EBITDA
(b)
|
|
|
|
|
|
|
|
||||||
MONI business Pre-SAC Adjusted EBITDA
|
$
|
87,134
|
|
|
92,776
|
|
|
$
|
265,850
|
|
|
279,044
|
|
Corporate Pre-SAC Adjusted EBITDA
|
(1,239
|
)
|
|
(1,852
|
)
|
|
(6,379
|
)
|
|
(5,446
|
)
|
||
Total Pre-SAC Adjusted EBITDA
|
$
|
85,895
|
|
|
90,924
|
|
|
$
|
259,471
|
|
|
273,598
|
|
Pre-SAC Adjusted EBITDA as a percentage of Pre-SAC net revenue
(c)
|
|
|
|
|
|
|
|
||||||
MONI business
|
63.5
|
%
|
|
65.6
|
%
|
|
63.9
|
%
|
|
65.5
|
%
|
||
Corporate
|
(0.9
|
)%
|
|
(1.3
|
)%
|
|
(1.5
|
)%
|
|
(1.3
|
)%
|
|
(a)
|
See reconciliation of net loss from continuing operations to Adjusted EBITDA below.
|
(b)
|
See reconciliation of Adjusted EBITDA to Pre-SAC Adjusted EBITDA below.
|
(c)
|
Presented below is the reconciliation of Net revenue to Pre-SAC net revenue (amounts in thousands):
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Net revenue, as reported
|
$
|
138,211
|
|
|
142,765
|
|
|
$
|
419,909
|
|
|
429,689
|
|
Revenue associated with subscriber acquisition cost
|
(1,051
|
)
|
|
(1,332
|
)
|
|
(3,694
|
)
|
|
(3,884
|
)
|
||
Pre-SAC net revenue
|
$
|
137,160
|
|
|
141,433
|
|
|
$
|
416,215
|
|
|
425,805
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|||||
Net loss from continuing operations
|
(29,160
|
)
|
|
(27,033
|
)
|
|
(91,631
|
)
|
|
(72,455
|
)
|
|
Amortization of subscriber accounts, dealer network and other intangible assets
|
59,384
|
|
|
62,156
|
|
|
178,896
|
|
|
185,415
|
|
|
Depreciation
|
2,176
|
|
|
2,152
|
|
|
6,435
|
|
|
6,329
|
|
|
Stock-based compensation
|
2,393
|
|
|
1,760
|
|
|
5,968
|
|
|
5,205
|
|
|
Radio conversion costs
|
74
|
|
|
1,263
|
|
|
383
|
|
|
17,938
|
|
|
Rebranding marketing program
|
—
|
|
|
602
|
|
|
880
|
|
|
839
|
|
|
LiveWatch acquisition contingent bonus charges
|
391
|
|
|
1,104
|
|
|
1,746
|
|
|
3,096
|
|
|
Integration / implementation of company initiatives
|
390
|
|
|
—
|
|
|
2,420
|
|
|
—
|
|
|
Severance expense (a)
|
1,248
|
|
|
—
|
|
|
1,275
|
|
|
245
|
|
|
Impairment of capitalized software
|
—
|
|
|
—
|
|
|
713
|
|
|
—
|
|
|
Gain on revaluation of acquisition dealer liabilities
|
(954
|
)
|
|
—
|
|
|
(1,358
|
)
|
|
—
|
|
|
Gain on disposal of operating assets
|
—
|
|
|
—
|
|
|
(21,217
|
)
|
|
—
|
|
|
Legal settlement reserve
|
—
|
|
|
—
|
|
|
28,000
|
|
|
—
|
|
|
Software implementation/integration
|
—
|
|
|
418
|
|
|
—
|
|
|
418
|
|
|
Other-than-temporary impairment losses on marketable securities
|
220
|
|
|
—
|
|
|
220
|
|
|
1,904
|
|
|
Interest income
|
(617
|
)
|
|
(548
|
)
|
|
(1,575
|
)
|
|
(1,593
|
)
|
|
Interest expense
|
38,360
|
|
|
31,794
|
|
|
114,011
|
|
|
94,805
|
|
|
Refinancing expense
|
—
|
|
|
9,348
|
|
|
—
|
|
|
9,348
|
|
|
Income tax expense from continuing operations
|
1,766
|
|
|
1,927
|
|
|
8,241
|
|
|
5,514
|
|
|
Adjusted EBITDA
|
75,671
|
|
|
84,943
|
|
|
233,407
|
|
|
257,008
|
|
|
Gross subscriber acquisition costs (b)
|
11,275
|
|
|
7,313
|
|
|
29,758
|
|
|
20,474
|
|
|
Revenue associated with subscriber acquisition costs (b)
|
(1,051
|
)
|
|
(1,332
|
)
|
|
(3,694
|
)
|
|
(3,884
|
)
|
|
Pre-SAC Adjusted EBITDA
|
$
|
85,895
|
|
|
90,924
|
|
|
259,471
|
|
|
273,598
|
|
|
(a)
|
Severance expense related to a reduction in headcount event and transitioning executive leadership at MONI.
|
(b)
|
Gross subscriber acquisition costs and Revenue associated with subscriber acquisition costs for the
three and nine
months ended
September 30, 2016
has been restated to include $665,000 and $2,006,000 of costs, respectively, and $207,000 and $584,000 of revenue, respectively, related to MONI's direct-to-consumer sales channel activities for the period.
|
Year of Maturity
|
|
Fixed Rate
Derivative
Instruments, net (a)
|
|
Variable Rate
Debt
|
|
Fixed Rate
Debt
|
|
Total
|
||||||||
|
|
(Amounts in thousands)
|
||||||||||||||
Remainder of 2017
|
|
$
|
—
|
|
|
$
|
2,750
|
|
|
$
|
—
|
|
|
$
|
2,750
|
|
2018
|
|
1,631
|
|
|
11,000
|
|
|
—
|
|
|
12,631
|
|
||||
2019
|
|
—
|
|
|
11,000
|
|
|
—
|
|
|
11,000
|
|
||||
2020
|
|
—
|
|
|
11,000
|
|
|
681,775
|
|
|
692,775
|
|
||||
2021
|
|
—
|
|
|
91,400
|
|
|
—
|
|
|
91,400
|
|
||||
2022
|
|
11,458
|
|
|
1,042,250
|
|
|
—
|
|
|
1,053,708
|
|
||||
Thereafter
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Total
|
|
$
|
13,089
|
|
|
$
|
1,169,400
|
|
|
$
|
681,775
|
|
|
$
|
1,864,264
|
|
|
(a)
|
The derivative financial instruments reflected in this column include four interest rate swaps with a maturity date in 2018 and four interest rate swaps with a maturity date in 2022. As a result of these interest rate swaps, MONI's current effective weighted average interest rate on the borrowings under the Credit Facility term loans is
7.18%
. See notes 6, 7 and 8 to our condensed consolidated financial statements included in this Quarterly Report for further information.
|
Period
|
|
Total number of
shares
purchased
(surrendered) (1)
|
|
|
|
Average price
paid per share
|
|
Total Number of
Shares (or Units)
Purchased as Part
of Publicly
Announced Plans
or Programs
|
|
Maximum Number (or
Approximate Dollar
Value) or Shares (or
Units) that May Yet Be
Purchased Under the
Plans or Programs (1)
|
|
|
||||
7/1/2017 - 7/31/2017
|
|
98
|
|
|
(2)
|
|
$
|
15.43
|
|
|
—
|
|
|
|
|
|
8/1/2017 - 8/31/2017
|
|
1,978
|
|
|
(2)
|
|
11.28
|
|
|
—
|
|
|
|
|
|
|
9/1/2017 - 9/30/2017
|
|
22,134
|
|
|
(2)
|
|
9.74
|
|
|
—
|
|
|
|
|
|
|
Total
|
|
24,210
|
|
|
|
|
$
|
9.88
|
|
|
—
|
|
|
|
|
|
|
(1)
|
On June 16, 2011, the Company announced that it received authorization to implement a share repurchase program, pursuant to which it could purchase up to $25,000,000 of its shares of Series A Common Stock, par value $0.01, from time to time. On November 14, 2013, November 10, 2014 and September 4, 2015, the Company’s Board of Directors authorized, at each date, the repurchase of an incremental $25,000,000 of its Series A Common Stock. As of
September 30, 2017
, 2,391,604 shares of Series A Common Stock had been purchased, at an average price paid of $40.65 per share, pursuant to these authorizations. As of
September 30, 2017
, the remaining availability under the Company's existing share repurchase program will enable the Company to purchase up to an aggregate of approximately $2,771,000 of Series A Common Stock. The Company may also purchase shares of its Series B Common Stock, par value $0.01 per share, under the remaining availability of the program.
|
(2)
|
Represents shares withheld in payment of withholding taxes upon vesting of employees' restricted share awards.
|
10.1
|
|
|
10.2
|
|
|
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.
|
|
|
|
|
ASCENT CAPITAL GROUP, INC.
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 2, 2017
|
|
By:
|
/s/ William R. Fitzgerald
|
|
|
|
|
William R. Fitzgerald
|
|
|
|
|
Chairman, Chief Executive Officer, and President
|
|
|
|
|
|
|
|
|
|
|
Date:
|
November 2, 2017
|
|
By:
|
/s/ Fred A. Graffam
|
|
|
|
|
Fred A. Graffam
|
|
|
|
|
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
|
|
|
"COMPANY"
|
|
|
|
|
ASCENT CAPITAL GROUP, INC.
|
|
|
|
By:
|
/s/ William E. Niles
|
|
|
|
|
William E. Niles
|
|
|
|
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
"EXECUTIVE"
|
|
|
|
By:
|
/s/ Michael R. Meyers
|
|
|
|
|
Michael R. Meyers
|
|
|
|
|
|
|
|
|
|
AGREED TO AND ACCEPTED this
|
|
|
|
|
15th day of September, 2017
|
|
|
|
|
|
|
|
|
By:
|
/s/ Michael R. Meyers
|
|
|
|
|
Michael R. Meyers
|
|
|
|
|
|
|
|
|
|
"COMPANY"
|
|
|
|
|
ASCENT CAPITAL GROUP, INC.
|
|
|
|
By:
|
/s/ William E. Niles
|
|
|
|
|
William E. Niles
|
|
|
|
|
Executive Vice President and General Counsel
|
|
|
|
|
|
|
|
|
|
"EXECUTIVE"
|
|
|
|
By:
|
/s/ Fred A. Graffam
|
|
|
|
|
Fred A. Graffam
|
|
|
|
|
|
|
|
|
|
AGREED TO AND ACCEPTED this
|
|
|
|
|
14th day of July, 2017
|
|
|
|
|
|
|
|
|
By:
|
/s/ Fred A. Graffam
|
|
|
|
|
Fred A. Graffam
|
|
|
|
|
|
Date:
|
November 2, 2017
|
|
|
|
|
|
|
|
/s/ William R. Fitzgerald
|
|
|
William R. Fitzgerald
|
|
|
Chairman of the Board, Chief Executive Officer and President
|
|
Date:
|
November 2, 2017
|
|
|
|
|
|
|
|
/s/ Fred A. Graffam
|
|
|
Fred A. Graffam
|
|
|
Senior Vice President and Chief Financial Officer
|
|
Dated:
|
November 2, 2017
|
|
/s/ William R. Fitzgerald
|
|
|
|
William R. Fitzgerald
|
|
|
|
Chairman of the Board, Chief Executive Officer,
|
|
|
|
and President
|
|
|
|
|
Dated:
|
November 2, 2017
|
|
/s/ Fred A. Graffam
|
|
|
|
Fred A. Graffam
|
|
|
|
Senior Vice President and Chief Financial Officer
|
|
|
|
(Principal Financial and Accounting Officer)
|