Lumos Networks Corp. (“Lumos Networks” or the “Company”) LMOS, a fiber-based service provider of data, voice and IP-based telecommunication services in the Mid-Atlantic region, today announced financial results for the third quarter of 2014.
Total revenue for the third quarter of 2014 was $50.5 million, compared to $51.6 million for the third quarter of 2013 and $50.2 million in the second quarter of 2014. Total Adjusted EBITDA in the third quarter of 2014 was $32.9 million, which includes a one-time, non-cash gain of $10.2 million related to a reduction in our liability for certain postretirement medical benefits (the “OPEBs gain”), compared to $23.0 million in the third quarter of 2013 and $22.7 million in the second quarter of 2014. Excluding the OPEBs gain, Adjusted EBITDA was $22.7 million for the third quarter of 2014.
Total Data segment revenue in the third quarter of 2014 was $26.5 million, down approximately 1% sequentially, and constituted 52% of total revenue as compared to 51% in the prior year period. Total Adjusted EBITDA for the Data segment was approximately $13.0 million in the third quarter of 2014, and Adjusted EBITDA margin for the Data segment was 49% in the third quarter.
Lumos Networks President and CEO Timothy G. Biltz said, “I am pleased that Lumos Networks delivered results in the third quarter that slightly exceeded our expectations and maintained its 2014 revenue guidance of $200 million. Our 2014 Adjusted EBITDA guidance is now $100 million; however, this includes $10.2 million in a one-time gain due to the elimination of certain OPEB benefits. On a normalized basis, guidance remains approximately $90 million. We expect to finish 2014 with strong momentum to put us in position to begin delivering year-over- year revenue and Adjusted EBITDA growth starting in early 2015.”
“While our quarterly FTTC revenue grew 23% year-over-year, it declined sequentially due to a combination of several factors that we view as temporary events,” Mr. Biltz continued. “Therefore, we maintain our target for $20 million in total FTTC revenue in 2014, up around 40% year-over-year and expect strong sequential growth in the fourth quarter within that segment. Our combined FTTC sales pipeline and backlog of booked but not yet installed revenue is the highest in the company's history and we believe we can accelerate FTTC growth in 2015 versus 2014.”
“Our Enterprise momentum continues to build, largely as the result of the growing success of our Enterprise renewal program and our continued sales growth of our Carrier End user business,” Mr. Biltz added. “Therefore, we believe that our Enterprise revenue will grow both on a sequential and a year-over-year basis in the fourth quarter, and I continue to believe our Enterprise revenue will grow in 2015 versus 2014.”
Mr. Biltz said, “Revenue within our Transport business grew slightly sequentially but declined 3% versus the prior year period. While we did not see any upticks in our TDM churn pattern within this business, we continue to expect revenue in this segment to decline in the range of 8-10% for the full year 2014.”
“We continue to remain singularly focused on expanding our fiber infrastructure, underpinned by long-term fiber contracts with large Carrier and Enterprise customers,” finished Mr. Biltz. “To that end, we added 97 route miles in the third quarter, the most since the third quarter of 2013. We also added 35 FTTC installations and 36 on-net lit buildings. In the last two years, we have increased the combination of on-net locations, including FTTC installation and lit buildings, by almost 55%, from over 1,400 to nearly 2,200.”
Highlights
- The Company ended the third quarter of 2014 with 708 Fiber to the Cell (“FTTC”) sites connected, up 35 sequentially, which represents a year-over-year increase in total FTTC sites of approximately 31%. Lumos Networks reiterates its guidance of reaching 825 unique FTTC sites by year end 2014 and maintains its guidance for selling 500 to 700 unique and second FTTC circuits during 2014.
- Project Ark, the Company's MEF certified Carrier Ethernet MPLS/IP network overlay designed primarily for FTTC traffic, became operational in September. The Company has already begun migrating traffic onto the Ark and expects that approximately 20% of total FTTC sites will be converted by year-end 2014. It is expected that the vast majority of all of Lumos' FTTC traffic will be routed onto the Ark by the middle of 2015.
- The Company renewed over $206,000 of Enterprise MRC in the third quarter, a nearly 30% increase from the prior quarter. Year to date, Lumos has renewed 15% of its entire Enterprise revenue base with an average contract length of over three years.
- On October 29, 2014, the Board of Directors of Lumos Networks declared a dividend on its common stock in the amount of $0.14 per share to be paid on January 8, 2015 to stockholders of record on December 11, 2014.
Business Outlook
For the full year 2014, the Company maintains its financial guidance for revenue of approximately $200 million and increased its guidance for Adjusted EBITDA to approximately $100 million, including the approximate $10 million of OPEBs gain recorded in the third quarter. Excluding the impact of this OPEBs gain, the Company maintains its guidance for Adjusted EBITDA of approximately $90 million.
Please see the schedules accompanying this release for additional financial guidance, including reconciliations of non-GAAP measures to GAAP results.
Statements made are based on management's current expectations. These statements are forward-looking and actual results may differ materially. Please see “Special Note from the Company Regarding Forward-Looking Statements.”
Conference Call
A conference call and simultaneous webcast, hosted by Timothy G. Biltz, CEO, Johan Broekhuysen, CFO, and Will Davis, Vice President of Investor Relations and Chief of Staff, to review these financial and operational results and financial guidance will be held at 8:30 A.M. (ET) on November 7, 2014.
The webcast may be accessed via the Internet at http://ir.lumosnetworks.com/ and the live call (“Lumos Networks Third Quarter Earnings Conference Call”) may be accessed with the following numbers:
Domestic: 1-877-510-3772
International: 1-412-902-4135
Canada:
1-855-669-9657
The conference call will be archived and available for replay through November 21, 2014 and may be accessed with the following numbers:
Domestic: 1-877-344-7529
International: 1-412-317-0088
Canada:
1-855-669-9658
Replay pass codes: Conference ID: 10054554
The
webcast will also be archived and the replay may be accessed at http://ir.lumosnetworks.com/.
About Lumos Networks
Lumos Networks is a fiber-based service provider in the Mid-Atlantic region serving carrier, business and residential customers over a dense fiber network offering data, voice and IP services. With headquarters in Waynesboro, VA, Lumos Networks serves Virginia, West Virginia and portions of Pennsylvania, Kentucky, Ohio, and Maryland over a fiber network of approximately 7,645 fiber route miles. Detailed information about Lumos Networks is available at www.lumosnetworks.com.
Non-GAAP Measures
Adjusted EBITDA is defined as net income attributable to Lumos Networks before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, net income or loss attributable to noncontrolling interests, other income or expenses, equity-based compensation charges, acquisition-related charges, amortization of actuarial losses on retirement plans, employee separation charges, restructuring-related charges, gain or loss on settlements and gain or loss on interest rate swap derivatives. Adjusted EBITDA margin is calculated as the ratio of Adjusted EBITDA, as defined, to operating revenues.
Adjusted EBITDA is a non-GAAP financial performance measure. It should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the schedules herein and our SEC filings for a reconciliation of these non-GAAP financial performance measures to the most comparable measures reported in accordance with GAAP and for a discussion of the presentation, comparability and use of such financial performance measures.
SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS
Any statements contained in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “targets,” “projects,” “should,” “may,” “will” and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include, but are not limited to: rapid development and intense competition in the telecommunications and high speed data transport industry; our ability to offset expected revenue declines in legacy voice and access products related to the recent regulatory actions, wireless substitution, technology changes and other factors; our ability to effectively allocate capital and implement our “edge-out” expansion plans in a timely manner; our ability to complete customer installations in a timely manner; adverse economic conditions; operating and financial restrictions imposed by our senior credit facility; our cash and capital requirements; declining prices for our services; our ability to maintain and enhance our network; the potential to experience a high rate of customer turnover; federal and state regulatory fees, requirements and developments; our reliance on certain suppliers and vendors; and other unforeseen difficulties that may occur. These risks and uncertainties are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our SEC filings, including our Annual Report filed on Form 10-K for the year ended December 31, 2013.
Exhibits:
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Income
- Condensed Consolidated Statements of Cash Flows
- Summary of Operating Results, Customer and Network Statistics
- Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating Income
- Reconciliation of Operating Income to Adjusted EBITDA
- Business Outlook
| Lumos Networks Corp. | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| September 30, 2014 | December 31, 2013 | |||||
| (In thousands) | ||||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash and cash equivalents | $ | 18,271 | $ | 14,114 | ||
| Marketable securities | 18,251 | 38,480 | ||||
| Restricted cash 1 | 4,208 | 4,324 | ||||
| Accounts receivable, net | 23,909 | 22,917 | ||||
| Other receivables | 387 | 1,588 | ||||
| Income tax receivable | 433 | 1,116 | ||||
| Prepaid expenses and other | 4,466 | 3,960 | ||||
| Deferred income taxes | 748 | 7,289 | ||||
| Total Current Assets | 70,673 | 93,788 | ||||
| Securities and investments | 849 | 699 | ||||
| Property, plant and equipment, net | 419,106 | 378,723 | ||||
| Other Assets | ||||||
| Goodwill | 100,297 | 100,297 | ||||
| Other intangibles, net | 18,181 | 25,071 | ||||
| Deferred charges and other assets | 8,021 | 7,722 | ||||
| Total Other Assets | 126,499 | 133,090 | ||||
| Total Assets | $ | 617,127 | $ | 606,300 | ||
| LIABILITIES AND EQUITY | ||||||
| Current Liabilities | ||||||
| Current portion of long-term debt | $ | 10,315 | $ | 6,688 | ||
| Accounts payable | 20,571 | 13,076 | ||||
| Dividends payable | 3,134 | 3,091 | ||||
| Advance billings and customer deposits | 14,078 | 13,502 | ||||
| Accrued compensation | 1,108 | 2,185 | ||||
| Accrued operating taxes | 4,293 | 4,375 | ||||
| Other accrued liabilities | 3,232 | 3,992 | ||||
| Total Current Liabilities | 56,731 | 46,909 | ||||
| Long-Term Liabilities | ||||||
| Long-term debt, excluding current portion | 365,161 | 373,290 | ||||
| Retirement benefits | 6,095 | 16,848 | ||||
| Deferred income taxes | 84,923 | 79,087 | ||||
| Other long-term liabilities | 2,489 | 2,832 | ||||
| Income tax payable | 103 | 328 | ||||
| Total Long-term Liabilities | 458,771 | 472,385 | ||||
| Stockholders' Equity | 100,894 | 86,333 | ||||
| Noncontrolling Interests | 731 | 673 | ||||
| Total Equity | 101,625 | 87,006 | ||||
| Total Liabilities and Equity | $ | 617,127 | $ | 606,300 | ||
| 1 | During 2010, the Company received a Federal stimulus award providing 50% funding to bring broadband services and infrastructure to Alleghany County, Virginia. The Company was required to deposit 100% of its grant ($8.1 million) into pledged accounts in advance of any reimbursements, to be drawn down ratably following reimbursement approvals. |
| Lumos Networks Corp. | ||||||||||||||||
| Condensed Consolidated Statements of Income | Three months ended September 30, | Nine months ended September 30, | ||||||||||||||
| (In thousands, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
| Operating Revenues | $ | 50,516 | $ | 51,627 | $ | 150,771 | $ | 156,472 | ||||||||
| Operating Expenses | ||||||||||||||||
| Network access costs | 10,250 | 10,342 | 31,154 | 31,997 | ||||||||||||
| Selling, general and administrative 1,2 | 8,545 | 21,731 | 44,964 | 58,647 | ||||||||||||
| Depreciation and amortization | 11,272 | 11,169 | 33,141 | 31,528 | ||||||||||||
| Accretion of asset retirement obligations | 38 | 31 | 95 | 95 | ||||||||||||
| Restructuring charges | - | 10 | - | 50 | ||||||||||||
| Total Operating Expenses | 30,105 | 43,283 | 109,354 | 122,317 | ||||||||||||
| Operating Income | 20,411 | 8,344 | 41,417 | 34,155 | ||||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | (3,969 | ) | (3,841 | ) | (11,755 | ) | (10,375 | ) | ||||||||
| Gain (loss) on interest rate swap derivatives | 302 | (564 | ) | 395 | (110 | ) | ||||||||||
| Other income (expense), net | 179 | 78 | 529 | (804 | ) | |||||||||||
| Income Before Income Tax Expense | 16,923 | 4,017 | 30,586 | 22,866 | ||||||||||||
| Income Tax Expense | 6,713 | 1,464 | 12,402 | 9,037 | ||||||||||||
| Net Income | 10,210 | 2,553 | 18,184 | 13,829 | ||||||||||||
| Net Income Attributable to Noncontrolling Interests | (3 | ) | (16 | ) | (69 | ) | (121 | ) | ||||||||
| Net Income Attributable to Lumos Networks Corp. | $ | 10,207 | $ | 2,537 | $ | 18,115 | $ | 13,708 | ||||||||
| Basic and Diluted Earnings per Common Share Attributable to Lumos Networks Corp. Stockholders: | ||||||||||||||||
| Earnings per share - basic | $ | 0.46 | $ | 0.12 | $ | 0.81 | $ | 0.63 | ||||||||
| Earnings per share - diluted | $ | 0.45 | $ | 0.11 | $ | 0.80 | $ | 0.62 | ||||||||
| Cash Dividends Declared per Share - Common Stock | $ | 0.14 | $ | 0.14 | $ | 0.42 | $ | 0.42 | ||||||||
| 1 | Includes equity-based compensation expense related to all of the Company's share-based awards and the Company's 401(k) matching contributions of $1.1 million and $3.2 million for the three months ended September 30, 2014 and 2013, respectively, and $3.1 million and $5.5 million for the nine months ended September 30, 2014 and 2013, respectively. | |
| 2 | Selling, general and administrative expenses for the three and nine months ended September 30, 2014 includes a $10.2 million curtailment gain related to the elimination of certain medical benefits under the Company's postretirement plan. |
| Lumos Networks Corp. | ||||||||
| Condensed Consolidated Statements of Cash Flows | Nine Months Ended September 30, | |||||||
| (In thousands) | 2014 | 2013 | ||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income | $ | 18,184 | $ | 13,829 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation | 26,251 | 24,160 | ||||||
| Amortization | 6,890 | 7,368 | ||||||
| Accretion of asset retirement obligations | 95 | 95 | ||||||
| Deferred income taxes | 12,045 | 9,006 | ||||||
| (Gain) loss on interest rate swap derivatives | (395 | ) | 110 | |||||
| Equity-based compensation expense | 3,109 | 5,536 | ||||||
| Amortization of debt issuance costs | 1,102 | 907 | ||||||
| Write off of unamortized debt issuance costs | - | 890 | ||||||
| Retirement benefits, net of cash contributions and distributions | (11,352 | ) | (289 | ) | ||||
| Excess tax benefits from share-based compensation | (201 | ) | (622 | ) | ||||
| Other | 206 | (172 | ) | |||||
| Changes in operating assets and liabilities, net | 4,619 | (6,523 | ) | |||||
| Net Cash Provided by Operating Activities | 60,553 | 54,295 | ||||||
| Cash Flows from Investing Activities: | ||||||||
| Purchases of property, plant and equipment | (64,151 | ) | (45,721 | ) | ||||
| Broadband network expansion funded by stimulus grant | (284 | ) | (29 | ) | ||||
| Purchases of available-for-sale marketable securities | (17,010 | ) | - | |||||
| Proceeds from sale or maturity of available-for-sale marketable securities | 36,856 | - | ||||||
| Change in restricted cash | 116 | 979 | ||||||
| Cash reimbursement received from broadband stimulus grant | 116 | 979 | ||||||
| Other | 106 | - | ||||||
| Net Cash Used in Investing Activities | (44,251 | ) | (43,792 | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from issuance of long-term debt | - | 375,000 | ||||||
| Payment of debt issuance costs | - | (4,872 | ) | |||||
| Principal payments on senior secured term loans | (3,313 | ) | (308,188 | ) | ||||
| Borrowings from revolving credit facility | - | 15,000 | ||||||
| Principal payments on revolving credit facility | - | (18,521 | ) | |||||
| Termination payments of interest rate swap derivatives | - | (858 | ) | |||||
| Cash dividends paid on common stock | (9,323 | ) | (9,133 | ) | ||||
| Principal payments under capital lease obligations | (1,312 | ) | (1,337 | ) | ||||
| Proceeds from stock option exercises and employee stock purchase plan | 1,668 | 349 | ||||||
| Excess tax benefits from share-based compensation | 201 | 622 | ||||||
| Other | (66 | ) | (495 | ) | ||||
| Net Cash (Used in) Provided by Financing Activities | (12,145 | ) | 47,567 | |||||
| Increase in cash and cash equivalents | 4,157 | 58,070 | ||||||
| Cash and cash equivalents: | ||||||||
| Beginning of Period | 14,114 | 2 | ||||||
| End of Period | $ | 18,271 | $ | 58,072 | ||||
| Lumos Networks Corp. | |||||||||||||||||||||
| Operating Results, Customer and Network Statistics | |||||||||||||||||||||
| (Dollars in thousands) | Three months ended: | Nine months ended: | |||||||||||||||||||
| September 30, 2014 | June 30, 2014 | March 31, 2014 | December 31, 2013 | September 30, 2013 | September 30, 2014 | September 30, 2013 | |||||||||||||||
| Revenue, Gross Margin and Adjusted EBITDA | |||||||||||||||||||||
| Revenue | |||||||||||||||||||||
| Enterprise Data | 10,470 | 10,445 | 10,586 | 10,617 | 10,600 | 31,501 | 31,758 | ||||||||||||||
| Transport | 11,279 | 11,225 | 10,907 | 11,927 | 11,644 | 33,411 | 35,537 | ||||||||||||||
| FTTC | 4,739 | 5,037 | 4,644 | 4,399 | 3,850 | 14,420 | 9,874 | ||||||||||||||
|
Total Data |
26,488 | 26,707 | 26,137 | 26,943 | 26,094 | 79,332 | 77,169 | ||||||||||||||
| Residential and Small Business | 17,668 | 18,290 | 18,647 | 19,094 | 20,055 | 54,605 | 61,565 | ||||||||||||||
| RLEC Access | 6,360 | 5,168 | 5,306 | 4,966 | 5,478 | 16,834 | 17,738 | ||||||||||||||
| Total Revenue | 50,516 | 50,165 | 50,090 | 51,003 | 51,627 | 150,771 | 156,472 | ||||||||||||||
| Gross Margin | |||||||||||||||||||||
| Data | 85.1 | % | 85.3 | % | 84.0 | % | 85.1 | % | 85.1 | % | 84.8 | % | 84.7 | % | |||||||
| Residential and Small Business | 64.3 | % | 65.7 | % | 64.9 | % | 66.4 | % | 67.8 | % | 65.0 | % | 67.2 | % | |||||||
| Adjusted EBITDA1 | |||||||||||||||||||||
| Data | 12,984 | 13,395 | 12,717 | 14,012 | 13,013 | 39,096 | 39,492 | ||||||||||||||
| Residential and Small Business | 4,503 | 5,230 | 5,544 | 5,916 | 5,690 | 15,277 | 18,743 | ||||||||||||||
| RLEC Access | 5,214 | 4,098 | 4,306 | 4,104 | 4,343 | 13,618 | 14,057 | ||||||||||||||
| Adjusted EBITDA before Curtailment Gain | 22,701 | 22,723 | 22,567 | 24,032 | 23,046 | 67,991 | 72,292 | ||||||||||||||
| Curtailment Gain2 | 10,207 | - | - | - | - | 10,207 | - | ||||||||||||||
| Total Adjusted EBITDA | 32,908 | 22,723 | 22,567 | 24,032 | 23,046 | 78,198 | 72,292 | ||||||||||||||
| Adjusted EBITDA Margin1 | |||||||||||||||||||||
| Data | 49.0 | % | 50.2 | % | 48.7 | % | 52.0 | % | 49.9 | % | 49.3 | % | 51.2 | % | |||||||
| Residential and Small Business | 25.5 | % | 28.6 | % | 29.7 | % | 31.0 | % | 28.4 | % | 28.0 | % | 30.4 | % | |||||||
| RLEC Access | 82.0 | % | 79.3 | % | 81.2 | % | 82.6 | % | 79.3 | % | 80.9 | % | 79.2 | % | |||||||
| Total Adjusted EBITDA Margin | 65.1 | % | 45.3 | % | 45.1 | % | 47.1 | % | 44.6 | % | 51.9 | % | 46.2 | % | |||||||
| Capital Expenditures | 26,863 | 19,171 | 18,117 | 22,613 | 18,997 | 64,151 | 45,721 | ||||||||||||||
| Adjusted EBITDA less Capital Expenditures | 6,045 | 3,552 | 4,450 | 1,419 | 4,049 | 14,047 | 26,571 | ||||||||||||||
| Fiber Network Statistics | |||||||||||||||||||||
| Fiber Route-Miles3 | 7,645 | 7,548 | 7,467 | 7,414 | ---- | 7,645 | ---- | ||||||||||||||
| Fiber Miles4 | 352,347 | ---- | ---- | ---- | ---- | 352,347 | ---- | ||||||||||||||
| Fiber Markets | 23 | 23 | 23 | 23 | 23 | 23 | 23 | ||||||||||||||
| FTTC Unique Towers | 708 | 673 | 633 | 608 | 540 | 708 | 540 | ||||||||||||||
| FTTC Total Connections | 961 | 876 | 824 | 778 | 680 | 961 | 680 | ||||||||||||||
| On-Network Buildings | 1,456 | 1,420 | 1,387 | 1,344 | 1,303 | 1,456 | 1,303 | ||||||||||||||
| Data Centers5 | 28 | 26 | 25 | 24 | 24 | 28 | 24 | ||||||||||||||
| R&SB Statistics | |||||||||||||||||||||
| Competitive Voice Connections | 85,683 | 88,941 | 92,440 | 95,730 | 98,296 | 85,683 | 98,296 | ||||||||||||||
| Video Subscribers | 5,309 | 5,155 | 5,073 | 5,034 | 4,975 | 5,309 | 4,975 | ||||||||||||||
| RLEC Access Lines | 27,716 | 28,081 | 28,381 | 28,886 | 29,518 | 27,716 | 29,518 | ||||||||||||||
| 1 | Adjusted EBITDA is a non-GAAP measure. See definition on page 2 of this earnings release. Adjusted EBITDA margin is calculated as the ratio of Adjusted EBITDA, as defined, to Total Revenue. | |
| 2 | The Company recorded a gain of $10.2 million in the third quarter of 2014 related to the curtailment of medical benefits under the Company's postretirement plan, which was not allocated to the operating segments. | |
| 3 | The Company updated its total fiber route miles as of December 31, 2013 to include both long-haul and metro route miles. Previously, the Company had only disclosed long-haul miles. Quarterly trend information prior to December 31, 2013 is not comparable and is therefore not being presented herein. | |
| 4 | Fiber miles are calculated as the fiber route miles multiplied by the number of fiber strands within each cable (represents an average of 46 fibers per route as of September 30, 2014) and are based on the results of the Company's conversion of its fiber records to a centralized fiber management system in the third quarter of 2014. | |
| 5 | During the third quarter of 2014, the Company revised its connected data center disclosures to include both commercial and private data centers and Company-owned facilities offering commercial data center services. Previously, the Company had only disclosed connections to third-party commercial data centers. Historical data center total for prior quarters have been revised to reflect the new measurement approach. | |
| Note: Certain prior period revenue and Adjusted EBITDA amounts have been reclassified to conform with the current year presentation. | ||
| Lumos Networks Corp. | |||||||||||||||||
| Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating Income | |||||||||||||||||
| (In thousands) | |||||||||||||||||
| Three months ended September 30, | Nine months ended September 30, | ||||||||||||||||
| 2014 | 2013 | 2014 | 2013 | ||||||||||||||
| Net Income Attributable to Lumos Networks Corp. | $ | 10,207 | $ | 2,537 | $ | 18,115 | $ | 13,708 | |||||||||
| Net Income Attributable to Noncontrolling Interests | 3 | 16 | 69 | 121 | |||||||||||||
| Net Income | 10,210 | 2,553 | 18,184 | 13,829 | |||||||||||||
| Interest expense | 3,969 | 3,841 | 11,755 | 10,375 | |||||||||||||
| (Gain) loss on interest rate swap derivatives | (302 | ) | 564 | (395 | ) | 110 | |||||||||||
| Income tax expense | 6,713 | 1,464 | 12,402 | 9,037 | |||||||||||||
| Other (income) expenses, net | (179 | ) | (78 | ) | (529 | ) | 804 | ||||||||||
| Operating Income | $ | 20,411 | $ | 8,344 | $ | 41,417 | $ | 34,155 | |||||||||
| Lumos Networks Corp. | ||||||||||
| Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||
| (Dollars in thousands) | 2014 | 2013 | ||||||||
| For The Three Months Ended September 30, | ||||||||||
| Operating Income | $ | 20,411 | $ | 8,344 | ||||||
| Depreciation and amortization and accretion of asset retirement obligations | 11,310 | 11,200 | ||||||||
| Sub-total: | 31,721 | 19,544 | ||||||||
| Amortization of actuarial losses | 64 | 309 | ||||||||
| Equity-based compensation | 1,123 | 3,183 | ||||||||
| Restructuring charges | - | 10 | ||||||||
| Adjusted EBITDA | $ | 32,908 | $ | 23,046 | ||||||
| Adjusted EBITDA Margin | 65.1 | % | 44.6 | % | ||||||
| For The Nine Months Ended September 30, | ||||||||||
| Operating Income | $ | 41,417 | $ | 34,155 | ||||||
| Depreciation and amortization and accretion of asset retirement obligations | 33,236 | 31,623 | ||||||||
| Sub-total: | 74,653 | 65,778 | ||||||||
| Amortization of actuarial losses | 192 | 928 | ||||||||
| Equity-based compensation | 3,109 | 5,536 | ||||||||
| Restructuring charges | - | 50 | ||||||||
| Employee separation charges | 244 | - | ||||||||
| Adjusted EBITDA | $ | 78,198 | $ | 72,292 | ||||||
| Adjusted EBITDA Margin | 51.9 | % | 46.2 | % | ||||||
| Lumos Networks Corp. | ||||||||
| Business Outlook 1 (as of November 6, 2014) | ||||||||
|
(In millions) |
2014 Annual | |||||||
|
Guidance 1 |
||||||||
| Operating Revenues | approximately $200 | |||||||
| Adjusted EBITDA2 | approximately $100 | |||||||
| Capital Expenditures | approximately $85 | |||||||
| Cash, Cash Equivalents and Marketable Securities (at end of period) | $ 25 | to | $ 30 | |||||
| Reconciliation of Operating Income to Adjusted EBITDA: | ||||||||
| Operating Income | approximately $48 | |||||||
| Depreciation and amortization | approximately $47 | |||||||
| Equity based compensation charges | approximately $4 | |||||||
| Amortization of actuarial losses | approximately $1 | |||||||
| Adjusted EBITDA | approximately $100 | |||||||
|
1 |
These estimates are based on management's current expectations. These estimates are forward-looking and actual results may differ materially. Please see "Special Note from the Company Regarding Forward-Looking Statements" in the Lumos Networks Corp. third quarter 2014 earnings release dated November 6, 2014. |
|
| 2 | Includes a one-time curtailment gain of $10.2 million recognized in the third quarter of 2014 related to the elimination of certain medical benefits under the Company's postretirement plan; normalized guidance remains at $90 million. | |
Lumos Networks Corp.
Will Davis
Vice President of Investor
Relations and Chief of Staff
(c) 917-519-6994
davisw@lumosnet.com
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