Market Overview

Consolidated Communications Reports Second Quarter 2018 Results

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  • Grew commercial and carrier data and transport revenue 3 percent year over year
  • Ethernet revenues increased 9 percent year over year
  • Completed divestiture of Virginia properties
  • Integration of FairPoint on track to achieve $55 million in synergies
  • Declared 53rd consecutive quarterly dividend

MATTOON, Ill., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) (the "Company") reported results for the second quarter 2018 and will hold a conference call and simultaneous webcast to discuss its results and developments with respect to the Company today at 10 a.m. ET.

Second quarter 2018 Consolidated Communications financial summary:

  • Revenue totaled $350.2 million
  • Net cash from operating activities was $103.5 million
  • Adjusted EBITDA was $136.2 million
  • Dividend payout ratio was 70 percent, impacted by increased capital expenditures during the quarter

"As we pass the one year milestone following our FairPoint acquisition, we are on track with the integration, fast start network, customer service and branding initiatives which will allow us to achieve at least $55 million in synergies." said Bob Udell, president and chief executive officer of Consolidated Communications. "I am also pleased with the continued growth in our commercial and carrier data and transport revenues.  Our commercial sales team continues to gain good traction in both legacy and Northern New England markets as we experienced sequential quarterly growth of data and transport revenues."

"We have declared our 53rd consecutive dividend and our year-to-date payout of 66 percent is right on plan given the increased construction activities during the second quarter of 2018," added Udell. "We are focused on turning up the new fiber connections for wireless carriers we sold this year and we have increased broadband speeds available to 214,000 homes and small businesses in Northern New England with a plan to complete a half million upgrades by year end."

Pro Forma Financial Results for the Second Quarter   

The pro forma results (below) give effect to the FairPoint acquisition as if it had occurred as of Jan. 1, 2017.

  • Revenues were $350.2 million, compared to $369.1 million for the second quarter of 2017.  While commercial and carrier data and transport service revenue increased 3 percent or $2.4 million compared to the same period last year, voice services revenues continue to decline across all customer channels, accounting for $10.6 million of the revenue decline.  Subsidies decreased $1.9 million during the quarter mostly due to the 2017 step down in CAF transitional revenues while network switched and special access continue to decline.
  • Income from operations was $5.1 million, compared to $20.7 million in the second quarter of 2017. The year-over-year decline is due to an $18.9 million decline in revenue, offset by reductions in operating expense of $11.2 million from integration and efficiency improvements.  Income from operations is being further impacted by an increase in depreciation and amortization expense of $8.0 million associated with higher capital expenditures.
  • Interest expense, net was $32.8 million, compared to $30.9 million for the same period last year. The change is due to increases in LIBOR and costs of additional interest rate swaps put in place to increase our percentage of fixed debt.
  • Cash distributions from the Company's wireless partnerships were $11.2 million for the second quarter compared to $7.7 million for the prior year period. 
  • Other income, net was $13.2 million, compared to $8.2 million in the second quarter of 2017, mainly due to increased income from the Company's minority interest in wireless partnerships.
  • On a GAAP basis, net loss was $10.6 million and GAAP net income per share was ($0.15). Adjusted diluted net income per share excludes certain items in the manner described in the table provided in this release.  Adjusted diluted net income per share was ($0.10) in the second quarter, compared to $0.18 the same period last year.  Additionally, net income per share has been impacted by approximately ($0.11) due to increased depreciation and amortization associated with the valuation of the FairPoint assets.
  • Adjusted EBITDA was $136.2 million compared to pro forma $137.2 million a year ago. The year over year decrease is primarily due to decreases in revenues, offset by declines in operating expenses and increases in wireless cash distributions, as previously discussed.
  • The total net debt to pro forma last 12-month adjusted EBITDA ratio was 4.3x, before giving effect to full targeted synergies of $55 million which are expected to be realized within the first two years from closing the FairPoint acquisition.

Cash Available to Pay Dividends, Capex

For the second quarter, cash available to pay dividends was $39.3 million, and the dividend payout ratio was 70 percent as compared to 78 percent in the second quarter a year ago. At June 30, 2018, cash and cash equivalents were $10.6 million.  Capital expenditures were $64.0 million for the second quarter. 

Financial Guidance

The Company updated its 2018 guidance as follows:

($ in millions)   2018 Updated Guidance   2018 Original Guidance  
Cash interest expense    $123 to $128    $123 to $128  
Cash income taxes/refund1    $1 to $3    $1 to $3  
Capital expenditures    $235 to $240    $235 to $245  
           
(1)  Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses and the benefit of The Tax Cuts and Jobs Act of 2017 tax reform legislation that was enacted in December 2017.

Dividend Payments

On July 30, 2018, the Company's board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on Nov. 1, 2018 to stockholders of record at the close of business on Oct. 15, 2018. This will represent the 53rd consecutive quarterly dividend paid by the Company. 

Conference Call Information

The Company will host a conference call and webcast today at 10 a.m. ET / 9 a.m. CT to discuss second quarter earnings and developments with respect to the Company. The live webcast and replay can be accessed from the Investor Relations section of the Company's website at http://ir.consolidated.com. The live conference call dial-in number is 1-877-374-3981, conference ID 2387776. A telephonic replay of the conference call will be available through Aug 9, 2018 and can be accessed by calling 1-855-859-2056, conference ID 2387776.  

About Consolidated Communications 

Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) is a leading broadband and business communications provider serving consumers, businesses of all sizes, and wireless companies and carriers, across a 23-state service area.  Leveraging its advanced fiber optic network spanning more than 36,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: data, voice, video, managed services, cloud computing and wireless backhaul. Headquartered in Mattoon, Ill., Consolidated Communications has been providing services in many of its markets for more than a century.

Use of Non-GAAP Financial Measures                         

This press release, as well as the conference call, includes disclosures regarding "EBITDA," "adjusted EBITDA," "cash available to pay dividends" and the related "dividend payout ratio," "total net debt to last twelve month adjusted EBITDA coverage ratio," "adjusted diluted net income per share" and "adjusted net income attributable to common stockholders," all of which are non-GAAP financial measures and described in this section as not being in compliance with Regulation S-X.  Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations, net income or net income per share as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and the non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.  A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.                                               

Adjusted EBITDA is comprised of EBITDA, adjusted for certain items as permitted or required by the lenders under our credit agreement in place at the end of each quarter in the periods presented.  The tables that follow include an explanation of how adjusted EBITDA is calculated for each of the periods presented with the reconciliation to net income.  EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization on a historical basis.                                 

Cash available to pay dividends represents adjusted EBITDA plus cash interest income less (1) cash interest expense, (2) capital expenditures and (3) cash income taxes; this calculation differs in certain respects from the similar calculation used in our credit agreement. 

We present adjusted EBITDA, cash available to pay dividends and the related dividend payout ratio for several reasons.  Management believes adjusted EBITDA, cash available to pay dividends and the dividend payout ratio are useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt) and pay dividends. In addition, we have presented adjusted EBITDA, cash available to pay dividends and the dividend payout ratio to investors in the past because they are frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting them here provides a measure of consistency in our financial reporting. Adjusted EBITDA and cash available to pay dividends, referred to as Available Cash in our credit agreement, are also components of the restrictive covenants and financial ratios contained in our credit agreement that requires us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt and to pay dividends.  The definitions in these covenants and ratios are based on adjusted EBITDA and cash available to pay dividends after giving effect to specified charges.  In addition, adjusted EBITDA, cash available to pay dividends and the dividend payout ratio provide our board of directors with meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in our credit agreement and to measure our ability to service and repay debt.  We present the related "total net debt to last twelve month adjusted EBITDA coverage ratio" principally to put other non-GAAP measures in context and facilitate comparisons by investors, security analysts and others; this ratio differs in certain respects from the similar ratio used in our credit agreement.  These measures differ in certain respects from the ratios used in our senior notes indenture. 

These non-GAAP financial measures have certain shortcomings.  In particular, adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure.  Similarly, while we may generate cash available to pay dividends, we are not required to use any such cash to pay dividends, and the payment of any dividends is subject to declaration by our board of directors, compliance with applicable law and the terms of our credit agreement.  Because adjusted EBITDA is a component of the dividend payout ratio and the ratio of total net debt to last twelve month adjusted EBITDA, these measures are also subject to the material limitations discussed above.  In addition, the ratio of total net debt to last twelve month adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes these ratios are useful as a means to evaluate our ability to incur additional indebtedness in the future. 

We present the non-GAAP measures adjusted diluted net income per share and adjusted diluted net income attributable to common stockholders because our net income and net income per share are regularly affected by items that occur at irregular intervals or are non-cash items.  We believe that disclosing these measures assists investors, securities analysts and other interested parties in evaluating both our company over time and the relative performance of the companies in our industry.

Preliminary Pro Forma Results                                                                                 

Estimated pro forma results of operations presented herein gives effect to the acquisition of FairPoint Communications, Inc. as if it had occurred on Jan. 1, 2017.  The estimated pro forma results include certain accounting adjustments related to the acquisition that are expected to have a continuing impact on the combined results, including adjustments for depreciation and amortization of the acquired tangible and intangible assets , interest expense on the debt incurred to complete the acquisition and to repay certain existing indebtedness of FairPoint, the exclusion of certain acquisition related costs and the tax impact of these pro forma adjustments.  These adjustments and the related results are based on a preliminary valuation of the estimated fair value of the net assets acquired, which is subject to change upon the final assessment and such changes could be material.  The estimated pro forma information is not intended to represent or be indicative of the results of the combined company that would have been obtained had the acquisition been completed as of the dates presented and should not be taken as representative of the future consolidated results of the combined company.

Safe Harbor

The Securities and Exchange Commission ("SEC") encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions.  Certain statements in this communication are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.  These forward-looking statements reflect, among other things, our current expectations, plans, strategies, and anticipated financial results.  There are a number of risks, uncertainties, and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements.  These risks and uncertainties include our ability to successfully integrate FairPoint Communications, Inc.'s operations and realize the synergies from the integration, as well as a number of factors related to our business, including economic and financial market conditions generally and economic conditions in our service areas; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; various risks to the price and volatility of our common stock; changes in the valuation of pension plan assets; the substantial amount of debt and our ability to repay or refinance it or incur additional debt in the future; our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock; restrictions contained in our debt agreements that limit the discretion of management in operating the business; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with our possible pursuit of acquisitions; system failures; cyber-attacks, information or security breaches or technology failure of ours or of a third party; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of our network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; and liability and compliance costs regarding environmental regulations. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in our filings with the SEC, including our reports on Form 10-K and Form 10-Q.  Many of these circumstances are beyond our ability to control or predict.  Moreover, forward-looking statements necessarily involve assumptions on our part.  These forward-looking statements generally are identified by the words "believe," "expect," "anticipate," "estimate," "project," "intend," "plan," "should," "may," "will," "would," "will be," "will continue" or similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subsidiaries to be different from those expressed or implied in the forward-looking statements.  All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this communication.  Furthermore, forward-looking statements speak only as of the date they are made.  Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements.  You should not place undue reliance on forward-looking statements.

Company Contact                                                                      

Lisa Hood, Consolidated Communications
Phone:  (844)-909-CNSL (2675)
Lisa.hood@consolidated.com

- Tables to follow -


Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
   June 30,     December 31, 
     2018        2017   
       
 ASSETS       
 Current assets:       
  Cash and cash equivalents  $   10,642     $   15,657  
  Accounts receivable, net      122,167         121,528  
  Income tax receivable      12,391         21,846  
  Prepaid expenses and other current assets      43,727         33,318  
  Assets held for sale      20,719         21,310  
 Total current assets      209,646         213,659  
       
 Property, plant and equipment, net      1,986,318         2,037,606  
 Investments      110,105         108,858  
 Goodwill      1,035,274         1,038,032  
 Customer relationships, net      262,853         293,300  
 Other intangible assets      12,038         13,483  
 Other assets      30,578         14,188  
 Total assets  $   3,646,812     $   3,719,126  
       
 LIABILITIES AND SHAREHOLDERS' EQUITY       
 Current liabilities:       
  Accounts payable  $   23,057     $   24,143  
  Advance billings and customer deposits      46,322         42,526  
  Dividends payable      27,602         27,418  
  Accrued compensation      55,462         49,770  
  Accrued interest      9,376         9,343  
  Accrued expense      74,112         72,041  
  Current portion of long-term debt and capital lease obligations      32,570         29,696  
  Liabilities held for sale      381         1,003  
 Total current liabilities      268,882         255,940  
       
 Long-term debt and capital lease obligations      2,308,752         2,311,514  
 Deferred income taxes      211,740         209,720  
 Pension and other post-retirement obligations      318,306         334,193  
 Other long-term liabilities      24,816         33,817  
 Total liabilities      3,132,496         3,145,184  
       
 Shareholders' equity:       
  Common stock, par value $0.01 per share; 100,000,000 shares       
  authorized, 71,252,576 and 70,777,354, shares outstanding       
  as of June 30, 2018 and December 31, 2017, respectively      713         708  
  Additional paid-in capital      565,961         615,662  
  Accumulated deficit      (21,941 )       -   
  Accumulated other comprehensive loss, net      (36,255 )       (48,083 )
Noncontrolling interest     5,838         5,655  
Total shareholders' equity     514,316         573,942  
Total liabilities and shareholders' equity $   3,646,812     $   3,719,126  
       

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
               
   Three Months Ended     Six Months Ended 
   June 30,     June 30, 
     2018         2017         2018         2017   
               
               
 Net revenues  $   350,221     $   169,950     $   706,260     $   339,885  
 Operating expenses:               
  Cost of services and products      151,358         71,136         304,274         142,168  
  Selling, general and administrative               
  expenses      81,128         35,986         166,746         71,884  
  Acquisition and other transaction costs      899         1,793         1,630         3,524  
  Depreciation and amortization      111,741         40,483         219,640         82,678  
 Income from operations      5,095         20,552         13,970         39,631  
 Other income (expense):               
  Interest expense, net of interest income      (32,839 )       (33,918 )       (65,555 )       (63,589 )
  Other income, net      13,175         9,341         21,570         14,054  
 Loss before income taxes      (14,569 )       (4,025 )       (30,015 )       (9,904 )
 Income tax benefit      (4,009 )       (1,399 )       (8,257 )       (3,573 )
 Net loss      (10,560 )       (2,626 )       (21,758 )       (6,331 )
 Less: net income attributable to noncontrolling interest      83         102         183         82  
               
 Net loss attributable to common shareholders  $   (10,643 )   $   (2,728 )   $   (21,941 )   $   (6,413 )
               
 Net loss per basic and diluted common shares              
  attributable to common shareholders $   (0.15 )   $   (0.06 )   $   (0.32 )   $   (0.13 )
               

 

Consolidated Communications Holdings, Inc.
Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
               
   Pro Forma     Pro Forma 
   Three Months Ended     Six Months Ended 
   June 30,     June 30, 
     2018         2017         2018         2017   
               
               
 Net revenues  $   350,221     $   369,089     $   706,260     $   740,932  
 Operating expenses:               
  Operating expenses (exclusive of depreciation               
  and amortization)      233,385         244,624         472,650         499,894  
  Depreciation and amortization      111,741         103,730         219,640         209,171  
 Income from operations      5,095         20,735         13,970         31,867  
 Other income (expense):               
  Interest expense, net of interest income      (32,839 )       (30,938 )       (65,555 )       (59,482 )
  Other income, net      13,175         8,222         21,570         11,684  
 Loss before income taxes      (14,569 )       (1,981 )       (30,015 )       (15,931 )
 Income tax benefit      (4,009 )       (581 )       (8,257 )       (5,983 )
 Net loss      (10,560 )       (1,400 )       (21,758 )       (9,948 )
 Less: net income attributable to noncontrolling interest      83         102         183         82  
               
 Net loss attributable to common shareholders  $   (10,643 )   $   (1,502 )   $   (21,941 )   $   (10,030 )
               
 Net loss per basic and diluted common share               
  attributable to common shareholders $   (0.15 )   $   (0.02 )   $   (0.32 )   $   (0.14 )
               
               
               
               

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
  (Dollars in thousands)
(Unaudited)
                   
       Three Months Ended     Six Months Ended 
       June 30,     June 30, 
         2018         2017         2018         2017   
OPERATING ACTIVITIES                
  Net loss   $   (10,560 )   $   (2,626 )   $   (21,758 )   $   (6,331 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
  Depreciation and amortization       111,741         40,483         219,640         82,678  
  Deferred income taxes       -          -          2         22  
  Cash distributions from wireless partnerships in excess of/(less than) earnings       (1,343 )       (459 )       519         64  
  Non-cash, stock-based compensation       1,538         892         2,216         1,430  
  Amortization of deferred financing       1,174         4,409         2,335         8,809  
  Other adjustments, net       1,075         2,302         3,415         2,298  
  Changes in operating assets and liabilities, net       (96 )       (3,186 )       (11,998 )       4,563  
  Net cash provided by operating activities       103,529         41,815         194,371         93,533  
INVESTING ACTIVITIES                
  Purchase of property, plant and equipment, net       (64,032 )       (29,036 )       (124,840 )       (58,061 )
  Proceeds from sale of assets       1,299         58         1,443         101  
  Proceeds from sale of investments       -          -          233         -   
  Net cash used in investing activities       (62,733 )       (28,978 )       (123,164 )       (57,960 )
FINANCING ACTIVITIES                
  Proceeds from issuance of long-term debt       49,000         16,000         76,000         23,000  
  Payment of capital lease obligations       (3,104 )       (1,704 )       (6,027 )       (2,993 )
  Payment on long-term debt       (59,588 )       (18,250 )       (91,176 )       (27,500 )
  Share repurchases for minimum tax withholding       -          -          -          (41 )
  Dividends on common stock        (27,602 )       (19,653 )       (55,019 )       (39,257 )
  Net cash used in financing activities       (41,294 )       (23,607 )       (76,222 )       (46,791 )
Net change in cash and cash equivalents       (498 )       (10,770 )       (5,015 )       (11,218 )
Cash and cash equivalents at beginning of period       11,140         26,629         15,657         27,077  
Cash and cash equivalents at end of period   $   10,642     $   15,859     $   10,642     $   15,859  
                   

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
                       
       Three Months Ended         Six Months Ended 
       June 30,         June 30, 
         2018       2017           2018       2017 
Commercial and carrier:                      
Data and transport services (includes VoIP)     $   87,603   $   51,528       $   173,628   $   102,432
Voice services         51,322       22,199           103,483       44,225
Other         14,237       4,931           26,100       8,833
          153,162       78,658           303,211       155,490
Consumer:                      
Broadband (VoIP and Data)         62,545       28,296           125,656       56,689
Video services         22,065       22,314           44,899       45,418
Voice services         51,616       12,860           103,678       25,902
          136,226       63,470           274,233       128,009
                       
Subsidies         20,979       10,392           46,234       20,964
Network access         37,338       14,138           77,053       28,691
  Other products and services         2,516       3,292           5,529       6,731
Total operating revenue     $   350,221   $   169,950       $   706,260   $   339,885
                       

 

Consolidated Communications Holdings, Inc.  
Pro Forma Consolidated Revenue by Category  
(Dollars in thousands)  
 (Unaudited)   
                         
                       
     Pro Forma, Three Months Ended     
     Q2 2018     Q1 2018     Q4 2017     Q3 2017     Q2 2017     
Commercial and carrier:                        
Data and transport services (includes VoIP)   $   87,603   $   86,025   $   86,145   $   85,644   $   85,213    
Voice services       51,322       52,161       54,137       54,270       56,180    
Other       14,237       11,863       11,709       13,366       13,563    
        153,162       150,049       151,991       153,280       154,956    
Consumer:                        
Broadband (VoIP and Data)       62,545       63,111       63,052       63,893       63,576    
Video services       22,065       22,834       22,646       23,342       23,900    
Voice services       51,616       52,062       54,581       57,213       57,381    
        136,226       138,007       140,279       144,448       144,857    
                         
Subsidies       20,979       25,255       20,375       20,933       22,890    
Network access       37,338       39,715       40,243       41,262       42,715    
Other products and services       2,516       3,013       3,472       3,406       3,671    
Total operating revenue   $   350,221   $   356,039   $   356,360   $   363,329   $   369,089    
                         

 

Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
               
               
   Three Months Ended     Six Months Ended 
   June 30,     June 30, 
     2018         2017         2018         2017   
Net loss $   (10,560 )   $   (2,626 )   $   (21,758 )   $   (6,331 )
Add (subtract):              
  Income tax benefit     (4,009 )       (1,399 )       (8,257 )       (3,573 )
  Interest expense, net     32,839         33,918         65,555         63,589  
  Depreciation and amortization     111,741         40,483         219,640         82,678  
EBITDA     130,011         70,376         255,180         136,363  
               
Adjustments to EBITDA (1):              
Other, net (2)     4,482         2,497         10,634         6,037  
Investment income (accrual basis)     (12,535 )       (8,196 )       (20,324 )       (13,474 )
Investment distributions (cash basis)     11,224         7,736         20,694         13,380  
Pension/OPEB expense     1,455         (837 )       2,827         (144 )
Non-cash compensation (3)     1,538         892         2,216         1,430  
Adjusted EBITDA $   136,175     $   72,468     $   271,227     $   143,592  
               
Notes:              
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.
               
               
               
         

 

Consolidated Communications Holdings, Inc.  
Schedule of Pro Forma Adjusted EBITDA Calculation  
(Dollars in thousands)  
(Unaudited)  
                 
  Pro Forma   Pro Forma  
   Three Months Ended     Six Months Ended   
   June 30,     June 30,   
     2018         2017         2018         2017     
Net loss $   (10,560 )   $   (1,400 )   $   (21,758 )   $   (9,948 )  
Add (subtract):                
  Income tax benefit     (4,009 )       (581 )       (8,257 )       (5,983 )  
  Interest expense, net     32,839         30,938         65,555         59,482    
  Depreciation and amortization     111,741         103,730         219,640         209,171    
EBITDA     130,011         132,687         255,180         252,722    
                 
Adjustments to EBITDA (1):                
Other, net (2)     4,482         658         10,634         2,777    
Investment income (accrual basis)     (12,535 )       (8,196 )       (20,324 )       (13,474 )  
Investment distributions (cash basis)     11,224         7,736         20,694         13,380    
Pension/OPEB expense     1,455         2,085         2,827         5,875    
Non-cash compensation (3)     1,538         2,244         2,216         4,416    
Adjusted EBITDA $   136,175     $   137,214     $   271,227     $   265,696    
                 
Notes:                
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.  
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.  
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from Adjusted EBITDA.  
                 
                 
                 
           

 

Consolidated Communications Holdings, Inc.
Cash Available to Pay Dividends  
(Dollars in thousands)  
(Unaudited)  
           
           
   Three Months Ended       Six Months Ended   
   June 30, 2018       June 30, 2018   
           
Adjusted EBITDA $   136,175       $   271,227    
           
 - Cash interest expense      (32,133 )         (62,033 )  
 - Capital expenditures     (64,032 )         (124,840 )  
 - Cash income taxes     (713 )         (785 )  
           
Cash available to pay dividends $   39,297       $   83,569    
           
Dividends Paid $   27,602       $   55,019    
Payout Ratio   70.2 %       65.8 %  
           
Note:  The above calculation excludes the principal payments on our debt.  
           
           

 

Consolidated Communications Holdings, Inc.  
Total Net Debt to LTM Adjusted EBITDA Ratio  
(Dollars in thousands)  
(Unaudited)  
       
   June 30,     
Summary of Outstanding Debt:    2018      
Term loans, net of discount $7,674 $   1,804,563      
Revolving loan     16,000      
Senior unsecured notes due 2022, net of discount $3,336     496,664      
Capital leases     36,843      
Total debt as of June 30, 2018 $   2,354,070      
Less deferred debt issuance costs     (12,748 )    
Less cash on hand     (10,642 )    
Total net debt as of June 30, 2018 $   2,330,680      
       
Adjusted EBITDA for the      
twelve months ended June 30, 2018 $   541,739   (a)
       
Total Net Debt to last twelve months      
Adjusted EBITDA - Pro Forma   4.30x    
       
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in Pro Forma Adjusted EBITDA.  
       

 

Consolidated Communications Holdings, Inc.  
Adjusted Net Income and Net Income Per Share   
Dollars in thousands, except per share amounts)  
(Unaudited)  
                 
                 
   Three Months Ended     Six Months Ended   
   June 30,     June 30,   
     2018        2017         2018         2017     
Net loss $   (10,560 )   $   (2,626 )   $   (21,758 )   $   (6,331 )  
Transaction and severance related costs, net of tax     2,735         1,535         7,458         3,644    
Storm costs, net of tax     (459 )       -         1,716         -    
Local switching support settlement, net of tax     -         -         (2,891 )       -    
Non-cash interest expense for swaps, net of tax     213         1,171         1,923         1,173    
Amortization of commitment fee, net of tax     -         2,286         -         4,481    
Ticking fees on committed financing, net of tax     -         6,366         -         11,314    
Non-cash stock compensation, net of tax     1,115         582         1,607         914    
Adjusted net income (loss) $   (6,955 )   $   9,314     $   (11,945 )   $   15,195    
                 
Weighted average number of shares outstanding     70,598         50,412         70,598         50,411    
Adjusted diluted net income (loss) per share $   (0.10 )   $   0.18     $   (0.17 )   $   0.30    
                 
Notes:                
Calculations above assume a 27.5% and 34.8% effective tax rate for the three months ended and 27.5% and 36.1% for the six months ended June 30, 2018 and 2017, respectively.  
                 
Net income per share has been impacted by approximately $0.11 for the three months ended June 30, 2018 and $0.22 for the six months ended June 30, 2018 due to increased depreciation and amortization associated with the preliminary valuation of the FairPoint assets.  
                 
   
                 
                 
                 

 

Consolidated Communications Holdings, Inc.  
Key Operating Statistics  
(Unaudited)  
                         
                  Pro Forma      
       June 30,     March 31,    % Change     June 30,    % Change   
         2018         2018      in Qtr      2017      YOY  
                         
Voice Connections     940,713       955,419     (1.5 %)     1,012,467     (7.1 %)  
                         
Data and Internet Connections     786,787       785,230     0.2 %     784,619     0.3 %  
                         
Video Connections      97,853       100,570     (2.7 %)     107,279     (8.8 %)  
                         
Business and Broadband as % of total revenue (1)     74.4 %     73.2 %   1.6 %     74.3 %   0.1 %  
                         
Fiber route network miles (long-haul and metro)     36,568       36,294     0.8 %     35,592     2.7 %  
                         
On-net buildings     9,674       9,356     3.4 %     8,555     13.1 %  
                         
Consumer Customers     653,910       661,758     (1.2 %)     696,136     (6.1 %)  
                         
Consumer ARPU   $ 69.44     $ 69.52     (0.1 %)   $ 69.36     0.1 %  
                         
                         
Notes:                      
(1) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.  
                         

 




 


 

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