Market Overview

WOW! Reports Fourth Quarter and Year End 2018 Results

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WideOpenWest, Inc. ("WOW!" or the "Company") (NYSE:WOW), a leading,
fully integrated provider of residential and commercial high-speed data,
video and telephony services to customers in the United States, today
announced financial and operating results for the fourth quarter and
year ended December 31, 2018.

Year End 2018 Highlights (1)

  • Full year Total Revenue of $1.154 billion; Net Loss of $(90.6)
    million; Net Loss Per Share of $(1.11)
  • Full year Adjusted EBITDA of $409.7 million; Adjusted Diluted Earnings
    Per Share of $1.31
  • Impact of Hurricane Michael resulted in Revenue credits of $5.4
    million, EBITDA impact of $6.1 million, Subscriber impact of 2,600,
    and RGU impact of 4,400
  • Adjusted to exclude the impact of Hurricane Michael, Transaction
    Adjusted EBITDA for the full year 2018 was $415.8 million. Transaction
    Adjusted EBITDA for the quarter ended December 31, 2018, totaled
    $110.6 million, up 5.5% compared to the quarter ended December 31,
    2017. Fourth quarter Adjusted Diluted Earnings Per Share of $0.33
  • For the first time, full year Transaction Adjusted Free Cash Flow was
    positive at $24.3 million, representing an $83.7 million increase over
    the full year 2017
  • HSD RGU net additions totaled 27,000 for 2018, excluding the impact
    from Hurricane Michael, representing a 95.7% increase in net additions
    over 2017 and 3.7% annual increase in total HSD RGUs
  • HSD RGU net additions totaled 7,100 for the quarter ended December 31,
    2018, excluding the impact from Hurricane Michael, representing the
    best HSD RGU net subscriber additions for the fourth quarter in the
    last four years; organic HSD RGU net additions, which exclude net
    additions from Edge-Outs, totaled 5,200, excluding the impact of
    Hurricane Michael
  • Business Services Subscription Revenue, Including Acquisitions and
    Dispositions, grew 12.7% over the fourth quarter of 2017, and grew
    14.0% annually over 2017
  • WOW! was recently named a national winner of the "2018 Best and
    Brightest Companies to Work For." This marks the fifth time WOW! has
    won this national award and the first time since 2014.

"This was a year of transformation, one in which we invested in our
people and customers to drive a return to Subscriber and HSD RGU
growth," said Teresa Elder, chief executive officer of WOW! "We exceeded
HSD RGU growth expectations for the full year and met Transaction
Adjusted EBITDA guidance, culminating in a return to Transaction
Adjusted EBITDA growth in the fourth quarter of 2018. We believe the
inflection back to positive growth in the fourth quarter will carry over
into 2019 where we expect to continue growing Subscribers and HSD RGUs
and grow Transaction Adjusted EBITDA to between $430 million and $440
million for the year."

"Transaction Adjusted EBITDA for the fourth quarter totaled
approximately $111 million, and we're excited that this represents the
third consecutive quarter of sequential growth and 5.5% growth over the
fourth quarter of 2017," said Rich Fish, chief financial officer of WOW!

_________________________
(1) Refer to "Non-GAAP
Financial Measures and Operating Metrics," "Unaudited Reconciliations of
GAAP Measures to Non-GAAP Measures," and "Unaudited Transaction Adjusted
Condensed Consolidated Financial and Subscriber Information" in this
Press Release for definitions and information related to Adjusted EBITDA
and Transaction Adjusted financial information, reconciliation of such
non-GAAP measures to the closest comparable GAAP measures and why our
management thinks it is beneficial to present such non-GAAP measures.



Financial Highlights

For the year ended December 31, 2018, WOW! reported Total Revenue of
$1.154 billion, down $34.3 million, or 2.9%, compared to the year ended
December 31, 2017. The Company reported a 2018 Net Loss of $(90.6)
million and Adjusted EBITDA of $409.7 million.

The following outlines the impact of Hurricane Michael on financial
results for the periods indicated:

WideOpenWest, Inc.
($ in millions)

 
        Three months ended     Year ended
December 31, December 31,
2018 2018
 
Reported Total Revenue $ 285.4 $ 1,153.8
 
Hurricane Michael Revenue Credits   5.4     5.4  
Total Revenue Including Acquisitions and Dispositions

$

290.8  

$

1,159.2  
 
 
Reported Adjusted EBITDA $ 104.5 $ 409.7
 
Hurricane Michael Impact   6.1     6.1  
Transaction Adjusted EBITDA

$

110.6  

$

415.8  
 
Reported annual change (%) -1.8 % -8.1 %
Transaction Adjusted annual change (%) 5.5 % -4.9 %
 
Reported Capital Expenditures $ 100.3 $ 314.1
 
Hurricane Michael Impact (26.4 ) (26.4 )
Reimbursement for Chicago Fiber asset build (10.0 ) (10.0 )
Capital Expenditures related to the Chicago fiber network   (7.6 )   (26.6 )
Transaction Adjusted Capital Expenditures

$

56.3  

$

251.1  
 
 

Revenue

On a reported basis, for the year ended December 31, 2018, Total Revenue
decreased 2.9% to $1.154 billion compared to the year ended December 31,
2017. Total Revenue Including Acquisitions and Dispositions decreased
1.2% to $1.159 billion compared to the year ended 2017, which was driven
primarily by Video and Telephony RGU losses, partially offset by
increases in ARPU, HSD RGU growth and Business Services Subscription
Revenue growth.

On a reported basis, Total Subscription Revenue for the year ended
December 31, 2018, was $1.063 billion. Residential Subscription Revenue,
as reported, was $933.3 million, and Business Services Subscription
Revenue, as reported, totaled $129.5 million. Adjusting for the impact
of Hurricane Michael, Residential Subscription Revenue, Including
Acquisitions and Dispositions, for the year ended December 31, 2018,
totaled $937.2 million. Business Services Subscription Revenue,
Including Acquisitions and Dispositions, increased $16.1 million, or
14.0%, compared with the year ended December 31, 2017.

Other Business Services Revenue totaled $28.1 million for the year ended
December 31, 2018, down $11.8 million compared to the year ended
December 31, 2017, primarily due to decreased Revenue generated by
network construction activities associated with the Chicago network sale
to a subsidiary of Verizon.

Other Revenue totaled $62.9 million for the year ended December 31,
2018, down $45.6 million compared to the year ended December 31, 2017,
primarily due to the reclassification of Franchise Fees to Video
Subscription Revenue.

Costs and Expenses

Operating Expenses (excluding Depreciation and Amortization) totaled
$619.0 million for the year ended December 31, 2018. Selling, General,
and Administrative expenses were $154.1 million for the year ended
December 31, 2018.

Net Income (Loss) and Earnings (Loss) Per Share

Net Loss for the year ended December 31, 2018, was $(90.6) million,
compared to Net Income of $184.2 million for the year ended December 31,
2017. Net Loss Per Share for the year ended December 31, 2018, was
$(1.11), compared to Diluted Earnings Per Share of $2.34 for the year
ended December 31, 2017. The year-over-year decline in Net Income is
attributable to an increase in the Impairment Losses on Intangibles and
Goodwill, Gain on Sale of Verizon and Lawrence in 2017, and corporate
tax reform in 2017. Adjusted Diluted Earnings Per Share for the year
ended December 31, 2018, was $1.31.

Adjusted EBITDA

Adjusted EBITDA for the year ended December 31, 2018 was $409.7 million.
Excluding the impact of Hurricane Michael, Transaction Adjusted EBITDA
totaled $415.8 million for the year ended December 31, 2018, at the
mid-point of our guidance range. Transaction Adjusted EBITDA for the
three months ended December 31, 2018, was $110.6 million, an increase of
5.5% compared to the three months ended December 31, 2017. Transaction
Adjusted EBITDA margin was 38.0% for the three months ended December 31,
2018, an increase of over 190 basis points compared to the three months
ended December 31, 2017.

The following table provides an unaudited summary of the Company's
quarterly Subscriber and RGU results, adjusting for the impact of
Hurricane Michael:

             
Net Additions/(Losses)

September 30,

2018

Excluding

Hurricane

Michael

 

Hurricane

Michael

Impact

December 31,

2018

 
Total Subscribers 805,300 5,200 (2,600 ) 807,900
 
HSD RGUs 755,100 7,100 (2,600 ) 759,600
 
Video RGUs 412,800 (5,500 ) (1,200 ) 406,100
 
Telephony RGUs 209,300 (4,300 ) (600 ) 204,400
       
Total RGUs 1,377,200 (2,700 )   (4,400 ) 1,370,100
 
 

Customers

WOW! reported Total Subscribers of 807,900 as of December 31, 2018.
Excluding the impact from Hurricane Michael, Total Subscribers increased
by 19,000, or 2.4%, compared to December 31, 2017, which was the best
yearly result in at least the last four years. HSD RGUs totaled 759,600
as of December 31, 2018, excluding the impact from Hurricane Michael,
HSD RGU's increased 27,000, or 3.7%, compared to December 31, 2017.

Edge-Outs

As of December 31, 2018, Edge-Out projects reached 138,100 homes passed
as part of the Company's Edge-Out growth efforts started in 2016.

Edge-Out projects begun in 2016 ("2016 Edge-Out nodes") include 14,000
Customers on such nodes, which represents 33.6% penetration with an
average of 873 days in active service. The Edge-Out projects begun in
2017 ("2017 Edge-Out nodes") include 18,000 Customers on such nodes,
which represents 27.1% penetration with an average of 563 days in active
service. The Edge-Out projects begun in 2018 ("2018 Edge-Out nodes") now
reach 30,100 Homes Passed. The 2018 Edge-Out projects now include 3,500
Customers on such nodes, which represents 11.6% penetration with an
average of 111 days in active service.

Capital Expenditures

Capital Expenditures, on a reported basis, totaled $314.1 million for
the year ended December 31, 2018, representing a $12.8 million, or 4.2%,
increase compared to the year ended December 31, 2017. Transaction
Adjusted Capital Expenditures totaled $251.1 million for the year ended
December 31, 2018, a decrease of $3.8 million, or 1.5%, compared to the
year ended December 31, 2017. Transaction Adjusted Strategic Capital
Expenditures, defined as Edge-Out Capital Expenditures and Business
Services Capital Expenditures dedicated to expansion of the Company's
network, were $50.7 million for the year ended December 31, 2018, which
represented a decrease of $19.5 million over the Transaction Adjusted
Strategic Capital Expenditures in the year ended December 31, 2017.
Excluding Transaction Adjusted Strategic Capital Expenditures,
Transaction Adjusted Capital Expenditures for the year ended December
31, 2018, totaled $200.4 million, which equates to 17.3% of Total
Revenue Including Acquisitions and Dispositions for the year ended
December 31, 2018.

Liquidity and Leverage

As of December 31, 2018, the total outstanding amount of long term debt
and capital lease obligations was $2.317 billion, and cash and cash
equivalents were $13.2 million. Total Net Leverage as of December 31,
2018, was 5.5x, on a LTM Transaction Adjusted EBITDA basis, and undrawn
revolver capacity totaled $234.5 million.

Guidance

For the full year 2019, WOW! expects HSD RGUs to increase by a range of
30,000 to 40,000. In addition, the Company expects Total Revenue to be
between $1.155 billion and $1.165 billion, Transaction Adjusted EBITDA
to be between $430.0 million and $440.0 million and Transaction Adjusted
Capital Expenditures to be between $245.0 million and $255.0 million.
Free Cash Flow, defined as Net Cash Provided by Operating Activities
less Transaction Adjusted Capital Expenditures (i.e. excluding Capital
Expenditures related to the completion of the Chicago fiber network), is
expected to be positive for the full year 2019. The following table
summarizes full year 2019 guidance:

           
2019 Guidance
Range
 

($ in millions)

Total Revenue $ 1,155.0 $ 1,165.0
 
Transaction Adjusted EBITDA

$

430.0

$

440.0
Transaction Adjusted Capital Expenditures ($ 245.0 ) ($ 255.0 )
 
 

Restatement of Previously Issued Consolidated
Financial Statements

As disclosed in the Current Report on Form 8-K filed on March 7, 2019,
the Company has restated its previously issued financial statements as
of and for the years ended December 31, 2017 and 2016, as well as
unaudited quarterly financial information for the fiscal year ended
December 31, 2017, and the first three quarters of 2018, in the 2018
Annual Report on Form 10-K and will be reporting a material weakness in
internal controls over financial reporting relating to complex tax
transactions involving partnership interests as of December 31, 2018, as
a result of such restatement.

Background

On May 1, 2006, an agreement and plan of merger (the "2006 Merger
Transaction") was consummated whereby proceeds from new equity and debt
financing were utilized by Racecar Acquisition, LLC to indirectly
acquire 100% of the outstanding ownership interests of WideOpenWest,
Inc. and the other existing Members at that time (collectively, the
"Members") of WOW Finance, LLC ("WOW Finance") from the Company's
previous ultimate Parent company, WideOpenWest Holdings, LLC.

As part of preparing its 2018 consolidated financial statements, the
Company identified past errors in the accounting for deferred income tax
liabilities and goodwill that resulted from the 2006 Merger Transaction.
Specifically, the Company identified a past error in that a
distribution, which occurred as part of the 2006 Merger Transaction, was
not properly reflected as a reduction to the Members' outside tax basis
in WOW Finance, which resulted in an understatement of deferred income
tax liabilities and goodwill of $97.8 million at the time of the 2006
Merger Transaction. The above resulted in an understatement of both
goodwill and stockholders' equity totaling $97.8 million in the
Company's balance sheet as of December 31, 2015.

Following the 2006 Merger Transaction, WOW Finance continued as a
partnership for tax purposes until 2016, at which point the
Restructuring occurred creating a change in tax status for WOW Finance.
Upon the change in tax status, the Members were deemed to have exchanged
the deferred tax liability associated with their investment in WOW
Finance for separate deferred tax positions in the underlying assets and
liabilities of WOW Finance. As a result of the above, the Company
determined that the deferred tax liabilities and deferred tax expense
associated with its remeasurement of its interest in WOW Finance at the
time of the 2016 Restructuring was incorrectly calculated as it was
based upon the incorrect outside tax basis calculation made at the time
of the 2006 Merger Transaction. The correction of the error resulted in
increases to non-cash deferred tax expense and deferred tax liabilities
of $59.9 million for the year ended December 31, 2016.

For 2017, the change to the deferred tax liabilities caused by the
aforementioned error required revaluation due to the effects of the 2017
Tax Act. This impact, along with further insignificant income tax errors
in the recorded tax effects related to the remeasurement of the
previously held interest in WOW Finance, resulted in a required
correction to decrease non-cash deferred tax expense and deferred tax
liabilities by $24.7 million, resulting in increases to the Company's
net income and earnings per share for the year ended December 31, 2017.

As part of its review and assessment of the deferred income tax matter
described above, the Company identified a past error in the allocation
of goodwill at the time of the 2006 Merger Transaction. Specifically,
goodwill was allocated in a manner consistent with the partnership
agreement for the allocation of profits and losses to the Members, but
not recorded and tested at the reporting unit level. Historically, the
Company has had an excess of estimated fair value over carrying value of
goodwill in the reporting units which were eventually impacted and as
such, a quantitative impairment analysis was not required. Accordingly,
the error was not discovered until further investigation of the deferred
income tax matter discussed above. In order to correct the allocation
error, the Company reallocated goodwill among reporting units in
accordance with the reporting unit methodology in place at 2006. This
correction resulted in a decrease in the impairment charge recorded
during the first quarter of 2018 by $40.1 million, which is reflected in
the consolidated financial statements for the year ended December 31,
2018. See the Company's 2018 Form 10-K filing for additional details.

Impacts

The above described historical errors from the 2006 Merger Transaction
affected reported 2016 and 2017 calculations of non-cash deferred tax
expense, first quarter of 2018 calculations of non-cash impairment
charges to goodwill, and reported balances of goodwill, deferred tax
liabilities and stockholders' equity during the fiscal years ended
December 31, 2016, 2017 and 2018. The cumulative impacts of the above
described historical errors on the Company's balance sheet as of
December 31, 2018, prior to giving effect to the restatements, are
understatements of goodwill of approximately $138.0 million, deferred
tax liabilities of approximately $41.0 million and stockholders' equity
of approximately $97.0 million. Accordingly, all financial information
referred to herein has been adjusted to reflect the effects of the
restatements.

The effects of these corrections to impacted financial statement line
items for fiscal year 2017 are as follows:

           
Three months ended Year ended
December 31, 2017 December 31, 2017
As Reported     As Restated As Reported     As Restated
(in millions)
Consolidated Statements of Operations:
Income tax benefit (expense) $ 116.1 $ 140.8   $ 132.5 $ 157.2  
Net income (loss) $ 84.2 $ 108.9   $ 159.5 $ 184.2  
 
 
Year ended
December 31, 2017
As Reported As Restated
Consolidated Balance Sheets: (in millions)
Assets
Goodwill $ 384.1   $ 481.9  
Total assets

$2,441.6

 

$2,539.4

 
Liabilities and Stockholders' Deficit
Other noncurrent liabilities $ 7.0 $ 7.4
Deferred income taxes, net 220.4 255.2
Total liabilities 2,646.0   2,681.2  
Accumulated deficit (500.4 ) (437.8 )
Total stockholders' deficit (204.4 ) (141.8 )
Total liabilities and stockholders' deficit $ 2,441.6   $ 2,539.4  
 
 
Year ended
December 31, 2017
As Reported As Restated
(in millions)
Consolidated Statements of Cash Flows:
Net income (loss) $ 159.5 $ 184.2
Deferred income taxes (149.8 ) (174.8 )
Payables and accruals (45.6 ) (45.3 )
 
 

Conference Call

WOW! will host a conference call on Thursday, March 7, 2019, at 9:00
a.m. Eastern to discuss the operating and financial results contained in
this press release. The conference call will be broadcast live on the
Company's investor relations website at ir.wowway.com.
Those parties interested in participating via telephone can use the
conference call information as follows:

          Call Date:     Thursday, March 7, 2019               Call Time:     9:00 a.m. Eastern
Dial In: (877) 541-5069 International: (443) 842-7607
Conf. ID: 8095915
 

A recording of the conference call will be available approximately two
hours after the completion of the call until April 6, 2019. The dial-in
number for this replay is (855) 859-2056.





The following unaudited condensed consolidated statements of operations
summarizes information in the Company's form 10-K for the periods
indicated, as filed on March 7, 2019, with the United States Securities
and Exchange Commission ("SEC"). For ease of use, references in this
release to "WOW!" means WideOpenWest, Inc. and its subsidiaries:

 

WideOpenWest, Inc.
Condensed Consolidated Statements of
Operations (Unaudited)
($ in millions, except for per share
data)

 
        Three months ended     Year ended
December 31, December 31,
As Restated As Restated
2017     2018 2017     2018

Revenue

       
Residential subscription $ 227.4 $ 229.7 $ 923.0 $ 933.3
Business services subscription   30.3         32.5     116.7         129.5  
Total subscription 257.7 262.2 1,039.7 1,062.8
Other business services 8.6 7.5 39.9 28.1
Other   26.5         15.7     108.5         62.9  
Total Revenue $ 292.8       $ 285.4   $ 1,188.1       $ 1,153.8  
 

Costs and expenses

Operating (excluding depreciation and amortization)

$ 156.1 $ 151.1 $ 626.5 $ 619.0
Selling, general and administrative 37.6 37.7 138.5 154.1
Depreciation and amortization 48.0 47.9 198.1 186.9
Impairment loss on intangibles and goodwill 147.4 - 147.4 216.3
Gain on sale of assets, net (94.1 ) 0.6 (94.1 ) (0.9 )
Management fee to related party   -         -     1.0         -  
$ 295.0       $ 237.3   $ 1,017.4       $ 1,175.4  
 
Income (loss) from operations $ (2.2 ) $ 48.1 $ 170.7 $ (21.6 )
Other income (expense)
Interest expense (29.6 ) (35.7 ) (151.6 ) (132.5 )
Gain on sale of system dispositions - - 38.4 -
Loss on early extinguishment of debt - - (32.1 ) -
Other income, net (0.1 ) - 1.6 1.7
Income tax benefit (expense)   140.8         3.9     157.2         61.8  
Net income (loss) $ 108.9       $ 16.3   $ 184.2       $ (90.6 )
 
Basic and diluted earnings (loss) per common shares
Basic $ 1.25       $ 0.20   $ 2.34       $ (1.11 )
Diluted $ 1.25       $ 0.20   $ 2.34       $ (1.11 )
Weighted-average common shares outstanding
Basic   86,950,430         80,298,314     78,778,640         81,808,425  
Diluted   87,252,425         81,027,130     78,915,946         81,808,425  
 
 
 

About WOW!

WOW! is one of the nation's leading providers of high-speed internet,
cable TV and phone serving communities in the U.S. Our vision is
connecting people to their world through the WOW! experience: reliable,
easy, and pleasantly surprising, every time. For more information,
please visit www.wowway.com.

Forward-Looking Statements

This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements, other than statements of historical facts, included in this
release are forward-looking statements. Forward-looking statements
discuss our current expectations and projections relating to our
financial condition, results of operations, plans, objectives, future
performance and business. Forward-looking statements are not guarantees
of future performance and we caution you not to place undue reliance on
such statements. Forward-looking statements are generally identifiable
by the use of the words "may," "will," "should," "expect," "anticipate,"
"estimate," "believe," "intend," "project," "continue," or the negative
of these words, or other similar words or terms. The forward-looking
statements included in this release are made as of the date hereof. We
assume no obligation to publicly update any forward-looking statement,
even if new information becomes available in the future or if experience
or future changes make it clear that any projected results expressed or
implied in such statements will not be realized. If we do update one or
more forward-looking statements, no inference should be made that we
will make additional updates with respect to those or other
forward-looking statements. Actual results may differ materially from
those expected because of various risks and uncertainties, many of which
are beyond our control, including the wide range of competition we face
in our business; competitors that are larger and possess more resources;
dependence upon a business services strategy; conditions in the economy,
including potentially uncertain economic conditions; our ability to
secure new businesses as customers; demand for our bundled broadband
communications services may be lower than we expect; our ability to
respond to rapid technological change; increases in programming and
retransmission costs; a decline in advertising revenues; the effects of
regulatory changes in our business; our substantial level of
indebtedness; certain covenants in our debt documents; programming
exclusivity in favor of our competitors; inability to obtain necessary
hardware, software and operational support; strain on business and
resources from future acquisitions, or the inability to identify
suitable acquisitions; the occurrence of natural disasters, including
hurricanes, in one or more of our geographic markets; potential negative
reactions to our restatement and other factors that are described from
time to time in our filings with the SEC. All forward-looking statements
are expressly qualified in their entirety by these cautionary statements.

Non-GAAP Financial Measures and Operating
Metrics

We have included certain non-GAAP financial measures in this release,
including total Revenue Including Acquisitions and Dispositions,
residential subscription Revenue Including Acquisitions and
Dispositions, Business Services Subscription Revenue Including
Acquisitions and Dispositions, Adjusted EBITDA, Transaction Adjusted
EBITDA, Transaction Adjusted Capital Expenditures, Adjusted Diluted EPS,
and Transaction Adjusted Free Cash Flow. The presentation of these
financial measures is not intended to be considered in isolation or as a
substitute for, or superior to, the financial information prepared and
presented in accordance with generally accepted accounting principles in
the United States of America ("GAAP").

We believe that these non-GAAP measures enhance an investor's
understanding of our financial performance. We believe that these
non-GAAP measures are useful financial metrics to assess our operating
performance from period to period by excluding certain items that we
believe are not representative of our core business. We believe that
these non-GAAP measures provide investors with useful information for
assessing the comparability between periods of our ability to generate
cash from operations sufficient to pay taxes, to service debt and to
undertake Capital Expenditures. We use these non-GAAP measures for
business planning purposes and in measuring our performance relative to
that of our competitors. We believe these non-GAAP measures are measures
commonly used by investors to evaluate our performance and that of our
competitors.

Total Revenue Including Acquisitions and Dispositions, Residential
Subscription Revenue Including Acquisitions and Dispositions, Business
Services Subscription Revenue Including Acquisitions and Dispositions,
and Transaction Adjusted Capital Expenditures give effect to certain
acquisitions and divestitures made by WOW!, the reimbursement of Chicago
Fiber asset build, exclude the effects associated with Hurricane Michael
and are included herein because they are key metrics used by management
and our Board of Directors to assess our financial performance. We
believe that these non-GAAP measures are appropriate measures of
operating performance because they are meaningful to investors by
showing how certain acquisitions and divestitures might have affected
our historical financial statements as well as adjustments associated
with Hurricane Michael. The presentation of these measures is not made
in accordance with GAAP and our use of these terms herein varies from
the use of similar terms by other companies in our industry due to
different methods of calculation and therefore are not necessarily
comparable. These non-GAAP measures should not be considered as an
alternative to revenue, capital expenditures or any other performance
measures derived in accordance with GAAP as measures of operating
performance.

Adjusted EBITDA is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We believe that Adjusted EBITDA is an appropriate measure
of operating performance because it eliminates the impact of expenses
that do not relate to business performance, and that the presentation of
this measure enhances an investor's understanding of our financial
performance. Transaction Adjusted EBITDA makes certain additional
adjustments to the historical financial information that WOW! believes
is meaningful to investors by showing how certain acquisitions and
divestitures might have affected WOW!'s historical financial statements
as well as adjustments associated with the Hurricane Michael.

Adjusted EBITDA is defined by WOW! as net income (loss) before net
interest expense, income taxes, depreciation and amortization (including
impairments), impairment losses on intangibles and goodwill, management
fees to related party, the write-up or write-off of any asset, loss on
early extinguishment of debt, integration and restructuring expenses and
all non-cash charges and expenses (including equity based compensation
expense) and certain other income and expenses. Transaction Adjusted
EBITDA represents Adjusted EBITDA after giving effect to the impact of
acquisitions and dispositions that were completed during the relevant
periods as if they occurred at the beginning of the period presented as
well as adjustments associated with Hurricane Michael. The presentation
of Adjusted EBITDA and Transaction Adjusted EBITDA is not made in
accordance with GAAP and our use of the terms Adjusted EBITDA and
Transaction Adjusted EBITDA may vary from others in our industry.
Adjusted EBITDA and Transaction Adjusted EBITDA should not be considered
as an alternative to net income (loss), operating income or any other
performance measures derived in accordance with GAAP as measures of
operating performance, operating cash flows or liquidity.

Adjusted EBITDA and Transaction Adjusted EBITDA have important
limitations as analytical tools. For example, adjusted EBITDA and
Transaction Adjusted EBITDA:

  • exclude certain tax payments that may represent a reduction in cash
    available to us;
  • do not reflect any cash capital expenditure requirements for the
    assets being depreciated and amortized that may have to be replaced in
    the future;
  • do not reflect changes in, or cash requirements for, our working
    capital needs; and
  • do not reflect the significant interest expense, or the cash
    requirements necessary to service interest or principal payments on
    our debt.

Adjusted Diluted Earnings Per Share (EPS) is included herein because it
is a key metric used by management and our Board of Directors to assess
our financial performance. Adjusted Diluted EPS is a non-GAAP financial
measure that eliminates the effect of management fees to related party,
loss on early extinguishment of debt, gain (loss) on sale of assets,
impairment losses on intangibles and goodwill, non-recurring
professional fees, M&A integration and restructuring expense, non-cash
stock compensation, expenses associated with Hurricane Michael and other
(income) and expenses. We then add or subtract an estimated incremental
income tax effect applicable to those items. We believe that this
measurement is useful to investors as an additional way to analyze the
underlying trends in our business consistently across the periods
presented.

The presentation of Adjusted Diluted EPS is not made in accordance with
GAAP and our use of the term Adjusted Diluted EPS herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Adjusted
Diluted EPS should not be considered as an alternative to Diluted EPS or
any other performance measures derived in accordance with GAAP as
measures of operating performance.

See "Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures"
and the accompanying tables below for a reconciliation of adjusted
EBITDA to our Net Income (Loss), which is the most directly comparable
GAAP financial measure and a reconciliation of Adjusted Earnings Per
Share to Diluted Earnings Per Share, which is the most directly
comparable GAAP financial measure.

Transaction Adjusted Free Cash Flow is included herein because it is a
key metric used by management and our Board of Directors to assess our
financial performance. We define Transaction Adjusted Free Cash Flow as
Net cash flows provided by operating activities less Transaction
Adjusted Capital Expenditures. We believe that Transaction Adjusted Free
Cash Flow is an appropriate measure of operating performance because it
is meaningful to investors because it presents the cash generated or
used by the business in a given period, and that the presentation of
this measure enhances an investor's understanding of our financial
performance.

The presentation of Transaction Adjusted Free Cash Flow is not made in
accordance with GAAP and our use of the term Transaction Adjusted Free
Cash Flow herein varies from the use of similar terms by other companies
in our industry due to different methods of calculation and is not
necessarily comparable. Transaction Adjusted Free Cash Flow should not
be considered as an alternative to net income or any other performance
measures derived in accordance with GAAP as measures of operating
performance.

In addition, we use the following subscriber information in this release:

  • Homes Passed – We report homes passed as
    the number of serviceable addresses, such as single residence homes,
    apartments and condominium units, and businesses passed by our
    broadband network and listed in our database.
  • Subscribers – Because we deliver multiple
    services to our customers, we report Total Subscribers as the number
    of Subscribers who receive at least one of our HSD, Video or Telephony
    services, without regard to which or how many services they subscribe.
    We define each of the individual HSD Subscribers, Video Subscribers
    and Telephony Subscribers as a Revenue generating unit ("RGU").

While we take appropriate steps to ensure subscriber information is
presented on a consistent and accurate basis at any given balance sheet
date, we periodically review our policies in light of the variability we
may encounter across our different markets due to the nature and pricing
of products and services and billing systems. Accordingly, we may from
time to time make appropriate adjustments to our subscriber information
based on such reviews.

Unaudited Reconciliations of GAAP Measures to
Non-GAAP Measures

The following table provides unaudited reconciliations of GAAP measures
to non-GAAP measures used herein for the periods indicated:

 

WideOpenWest, Inc.
Reconciliation of GAAP Measures to
Non-GAAP Measures (Unaudited)
($ in millions, except for per
share data)

 
      Three months ended    

Year Ended

December 31, December 31,
As Restated       As Restated      
2017     2018 2017     2018
       
Net income (loss) $ 108.9 $ 16.3 $ 184.2 $ (90.6 )
Depreciation and amortization 48.0 47.9 198.1 186.9
Impairment losses on intangibles and goodwill 147.4 - 147.4 216.3
Gain on sale of assets (94.1 ) 0.6 (94.1 ) (0.9 )
Management fee to related party - - 1.0 -
Interest expense 29.6 35.7 151.6 132.5
Loss on early extinguishment of debt - - 32.1 -
Gain on sale of system dispositions - - (38.4 ) -

Non-recurring professional fees, M&A Integration and restructuring
expense

2.2 5.9 9.2 16.0
Non-cash stock compensation 5.1 2.0 13.4 13.0
Other income, net 0.1 - (1.6 ) (1.7 )
Income tax (benefit) expense   (140.8 )       (3.9 )   (157.2 )       (61.8 )

Adjusted EBITDA (1)

$ 106.4       $ 104.5   $ 445.7       $ 409.7  
 
Net cash flows provided by operating activities $ 195.5 $ 269.3
Less: Transaction Adjusted Capital Expenditures (254.9 )

(251.1

)
Plus: Hurricane Michael Impact to Adjusted EBITDA   -         6.1  
Transaction Adjusted Free Cash Flow $ (59.4 )     $ 24.3  
 
 
 
Three months

Year

ended ended
December 31, December 31,
2018 2018
Per Share Per Share
Diluted earnings per share $ 0.20 $ (1.11 )
Impairment losses on intangibles and goodwill - 2.64
Gain on sale of assets 0.01 (0.01 )

Non-recurring professional fees, M&A integration and restructuring
expense

0.07 0.20
Non-cash stock compensation 0.02 0.16
Hurricane Michael Impact 0.08 0.07
Income tax applicable to adjustments, net(2)   (0.05 )   (0.64 )
Adjusted Diluted Earnings Per Share $ 0.33   $ 1.31  
 
(1)   See "Unaudited Transaction Adjusted Condensed Consolidated Financial
and Subscriber Information" below for a reconciliation of Adjusted
EBITDA to Transaction Adjusted EBITDA for the respective quarters
giving effect the divestiture of a portion of our Chicago Fiber
Network in December 2017, our divestiture of the Lawrence, Kansas,
system in January 2017 and the impact of Hurricane Michael in
October 2018, as if such transactions had been completed at the
beginning of the respective periods presented.
(2) The income tax impacts are determined using the applicable rates in
the taxing jurisdictions in which expense or income occurred and
includes both current and deferred income tax expense (benefit)
based on the nature of the non-GAAP performance measure.
 
 

Unaudited Transaction Adjusted Condensed
Consolidated Financial and Subscriber Information

The SEC requires that pro forma financial information be presented in a
registrant's periodic filings when events occur for which disclosure
would be material to investors, including significant business
combinations or the disposition of a significant portion of the
business. The significance of an acquired or disposed business is
determined based on the "significant subsidiary" tests specified in
Regulation S-X, Article 11, Rule 1-02(w). Although the Company has made
certain acquisitions and divestitures, such transactions do not meet the
"significant subsidiary" tests and, accordingly, the Company's
historical financial information as filed with the SEC does not contain
pro forma financial information relating to those transactions.

Nevertheless, we make certain adjustments in this release to the
historical financial and subscriber information of the Company as filed
with the SEC ("Transaction Adjusted") because we believe such
information would be meaningful to investors by showing how such
transactions might have affected the Company's historical financial
statements. The unaudited Transaction Adjusted financial and subscriber
information in this release has been prepared giving effect to the
divestiture of a portion of our Chicago Fiber Network in December 2017,
and our divestiture of the Lawrence, Kansas system in 2017 and the
impact of Hurricane Michael in October 2018, as if such transactions had
been completed at the beginning of the respective periods presented. The
unaudited Transaction Adjusted financial and subscriber information is
for informational purposes only and does not purport to represent what
our results of operations, financial or subscriber information would
have been if such transactions had occurred at any date, nor does such
information purport to project the results of operations for any future
period.

The unaudited Transaction Adjusted condensed consolidated financial and
subscriber information in this release was prepared based on our books
and records for the respective periods presented for the Lawrence,
Kansas system, the portion of the Chicago Fiber Network that was
divested, and the impact of Hurricane Michael in October 2018. Such
historical unaudited financial and subscriber information has been
adjusted to give a Transaction Adjusted effect to events that are
directly attributable to such transactions, factually supportable and
expected to have a continuing impact on the results. The unaudited
Transaction Adjusted financial information herein does not reflect
non-recurring charges that have been incurred in connection with the
transaction including legal fees, broker fees and accounting fees.

The following table provides an unaudited reconciliation of our
residential subscription revenue to residential subscription revenue
including Acquisitions and Dispositions, business services subscription
revenue to business services subscription revenue including Acquisitions
and Dispositions, Total Revenue to Total Revenue including Acquisitions
and Dispositions, Adjusted EBITDA to Transaction Adjusted EBITDA and
Capital Expenditures to Transaction Adjusted Capital Expenditures for
the periods indicated:

 

WideOpenWest, Inc.
Transaction Adjusted Condensed
Consolidated Financial Information (Unaudited)
($ in millions)

 
        Three months ended    

Year ended

December 31, December 31,
2017     2018 2017     2018
       
Residential Subscription Revenue $ 227.4 $ 229.7 $ 923.0 $ 933.3

Acquisitions and Dispositions:

Residential Subscription Revenue related to the Lawrence system - - (1.1 ) -
Hurricane Michael Revenue Credits   -         3.9     -         3.9  
Residential Subscription Revenue Including Acquisitions and
Dispositions
$ 227.4       $ 233.6   $ 921.9       $ 937.2  
 
Business Services Subscription Revenue $ 30.3 $ 32.5 $ 116.7 $ 129.5

Acquisitions and Dispositions:

Business Services Subscription Revenue related to the Lawrence system - - (0.3 ) -
Business Services Subscription Revenue related to the Chicago fiber
network
(0.4 ) - (1.8 ) -
Hurricane Michael Revenue Credits   -         1.2     -         1.2  
Business Services Subscription Including Acquisitions and
Dispositions
$ 29.9       $ 33.7   $ 114.6       $ 130.7  
 
Total Revenue $ 292.8 $ 285.4 $ 1,188.1 $ 1,153.8

Acquisitions and Dispositions:

Total Revenue related to the Lawrence system - - (1.5 ) -
Total Revenue related to the Chicago fiber network (2.5 ) - (12.9 ) -
Hurricane Michael Revenue Credits   -         5.4     -         5.4  
Total Revenue Including Acquisitions and Dispositions $ 290.3       $ 290.8   $ 1,173.7       $ 1,159.2  
 
Adjusted EBITDA $ 106.4 $ 104.5 $ 445.7 $ 409.7

Transaction Adjustments:

Adjusted EBITDA related to the Lawrence system - - (1.0 ) -
Adjusted EBITDA related to the Chicago fiber network (1.6 ) - (7.6 ) -
Hurricane Michael Impact   -         6.1     -         6.1  
Transaction Adjusted EBITDA $ 104.8       $ 110.6   $ 437.1       $ 415.8  
 
Capital Expenditures $ 77.0 $ 100.3 $ 301.3 $ 314.1

Transaction Adjustments:

Capital Expenditures related to the Lawrence system

-

- (0.1 ) -
Capital Expenditures related to the Chicago fiber network (8.1 ) (7.6 ) (46.3 ) (26.6 )

Reimbursement for Chicago Fiber asset build

-

(10.0

)

(10.0

)

Hurricane Michael Impact   -         (26.4 )   -         (26.4 )
Transaction Adjusted Capital Expenditures $ 68.9       $

56.3

  $ 254.9       $

251.1

 
 
 
 

The following table provides an unaudited summary of our subscriber
information:

        December 31,     March 31,     June 30,     September 30,     December 31,
2017(1) 2018 2018 2018 2018(2)
 
Homes Passed 3,109,200 3,129,300 3,149,200 3,160,400 3,176,500
 
Total Subscribers 777,300 798,500 800,100 805,300 807,900
 
HSD RGUs 732,700 743,900 747,800 755,100 759,600
 
Video RGUs 432,600 429,000 419,900 412,800 406,100
 
Telephony RGUs 219,900 218,300 214,000 209,300 204,400
         
Total RGUs 1,385,200 1,391,200 1,381,700 1,377,200 1,370,100
 
(1)   Statistical reporting was standardized to a single reporting
methodology beginning in the first quarter of 2018. Previously, the
data was maintained and accumulated separately through independent
processes and procedures. The standardized reporting had the
following increase/(decrease) on December 31, 2017, Homes Passed and
Subscriber numbers: Homes Passed (700); Total Subscribers 14,200;
HSD RGUs 2,500; Video RGUs 4,100; Telephony RGUs 2,700; and Total
RGUs 9,300.
(2) Includes a net reduction in Subscriber and RGU metrics of
approximately: 2,600 Total Subscribers; 2,600 HSD RGUs; 1,200 Video
RGUs; 600 Telephony RGUs; and 4,400 Total RGUs, for customers that
were located in areas most severely impacted by Hurricane Michael in
October 2018
 
 

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