Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the
“Company”) reported results for the third quarter 2018 and will
hold a conference call and simultaneous webcast to discuss its
results and developments today at 10 a.m. ET.
Third quarter 2018 Consolidated Communications financial
summary:
- Revenue totaled $348.1 million
- Net cash from operating activities was $69.7 million
- Adjusted EBITDA was $133.7 million
- Dividend payout ratio was 69.9 percent, impacted by increased
capital expenditures during the quarter
“We continue to make steady progress growing our commercial and
carrier revenues as we again experienced year over year growth of
data and transport revenues,” said Bob Udell, president and chief
executive officer of Consolidated Communications. “We delivered a
solid quarter with improvement in data and broadband revenues and
an increased synergy target which helps to offset declines in voice
revenues. We are proud to annouce our 54th consecutive dividend to
our shareholders.”
“We’re pleased to have secured new labor agreements with our
employees in Northern New England,” added Udell. “The new
agreements give us increased flexibility to improve the customer
experience and better manage our costs. As a result, we are
increasing our synergy target associated with the acquisition from
$55 million to $75 million.”
Financial Results for the Third Quarter
- Revenues were $348.1 million, compared to $363.3 million for
the third quarter of 2017, a decrease of $15.2 million in the
recent quarter. Commercial and carrier data and transport service
revenue increased 2.3 percent or $2 million compared to the same
period last year. Voice services revenue declined across all
customer channels, accounting for $10.6 million of the revenue
decline. Subsidies decreased $1.7 million during the quarter
primarily due to the final CAF step down in transitional revenues,
and network switched and special access revenues declined $3.1
million.
- Income from operations was $300,000, compared to a loss of $7.7
million in the third quarter of 2017. The year-over-year change is
due to reductions in operating expense of $28 million, mainly from
acquisition and transaction costs incurred during the third quarter
of 2017, offset by the revenue decline. Income from operations was
further impacted by an increase in depreciation and amortization
expense of $4.7 million associated with higher capital
expenditures.
- Interest expense, net was $33.5 million, compared to $36.3
million for the same period last year. The decrease was due to the
recognition of a $5.8 million bridge commitment fee related to the
FairPoint acquisition financing in the third quarter of 2017,
offset by increases in LIBOR and costs of additional interest rate
swaps put in place to maintain our fixed debt target of 75
percent. As of Sept. 30, 2018, our weighted average cost of
debt was approximately 5.5 percent.
- Cash distributions from the Company’s wireless partnerships
were $8.1 million for the third quarter compared to $8.6 million
for the prior year period.
- Other income, net was $9.4 million, compared to $9.3 million in
the third quarter of 2017.
- On a GAAP basis, net loss was $14.8 million and GAAP net loss
per share was ($0.21). Adjusted diluted net loss per share excludes
certain items as outlined in the table provided in this
release. Adjusted diluted net loss per share was ($0.09) in
the third quarter, compared to $0.00 for the same period last
year.
- Adjusted EBITDA was $133.7 million compared to $137.4 million a
year ago. The year over year change was primarily due to decreases
in revenue and wireless distributions, offset by declines in
operating expenses.
- The total net debt to pro forma last 12-month adjusted EBITDA
ratio was 4.3x.
Cash Available to Pay Dividends, Capex
For the third quarter, cash available to pay dividends was $39.5
million, and the dividend payout ratio was 69.9 percent for the
quarter and 67.1 percent year to date. At Sept. 30, 2018, cash and
cash equivalents were $3.8 million. Capital expenditures were
$61.9 million for the third quarter.
Financial Guidance
The Company updated its 2018 guidance as follows:
($ in millions) |
|
2018 Updated Guidance |
|
2018 Previous Guidance |
|
Cash interest expense |
|
$123 to $128 |
|
$123 to $128 |
|
Cash income taxes/refund1 |
|
$1 to $3 |
|
$1 to $3 |
|
Capital expenditures2 |
|
$240 to $245 |
|
$235 to $240 |
|
|
|
|
|
|
|
(1) Cash income taxes primarily include local
and state income taxes as federal income taxes will be shielded by
existing net operating losses. |
(2) Increasing capital expenditures in part
due to success-based, capital projects and hurricane Michael
recovery efforts. |
Dividend Payments
On Oct. 29, 2018, the Company’s board of directors declared a
quarterly dividend of $0.38738 per common share, which is payable
on Feb. 1, 2019 to stockholders of record at the close of business
on Jan. 15, 2019. This will represent the 54th 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 third 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
6283078. A telephonic replay of the conference call will be
available through Nov. 8, 2018 and can be accessed by calling
1-855-859-2056, conference ID 6283078.
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, 2016. 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 CommunicationsPhone:
(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) |
|
September
30, |
|
|
December
31, |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash
equivalents |
$ |
3,826 |
|
|
$ |
15,657 |
|
Accounts
receivable, net |
|
143,077 |
|
|
|
121,528 |
|
Income
tax receivable |
|
12,458 |
|
|
|
21,846 |
|
Prepaid
expenses and other current assets |
|
40,588 |
|
|
|
33,318 |
|
Assets
held for sale |
|
- |
|
|
|
21,310 |
|
Total current
assets |
|
199,949 |
|
|
|
213,659 |
|
|
|
|
|
Property, plant and
equipment, net |
|
1,955,753 |
|
|
|
2,037,606 |
|
Investments |
|
110,672 |
|
|
|
108,858 |
|
Goodwill |
|
1,035,274 |
|
|
|
1,038,032 |
|
Customer relationships,
net |
|
245,906 |
|
|
|
293,300 |
|
Other intangible
assets |
|
11,760 |
|
|
|
13,483 |
|
Other assets |
|
36,706 |
|
|
|
14,188 |
|
Total assets |
$ |
3,596,020 |
|
|
$ |
3,719,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
15,717 |
|
|
$ |
24,143 |
|
Advance
billings and customer deposits |
|
50,039 |
|
|
|
42,526 |
|
Dividends
payable |
|
27,602 |
|
|
|
27,418 |
|
Accrued
compensation |
|
62,641 |
|
|
|
49,770 |
|
Accrued
interest |
|
17,873 |
|
|
|
9,343 |
|
Accrued
expense |
|
72,838 |
|
|
|
72,041 |
|
Current
portion of long-term debt and capital lease obligations |
|
31,811 |
|
|
|
29,696 |
|
Liabilities held for sale |
|
- |
|
|
|
1,003 |
|
Total current
liabilities |
|
278,521 |
|
|
|
255,940 |
|
|
|
|
|
Long-term debt and
capital lease obligations |
|
2,302,795 |
|
|
|
2,311,514 |
|
Deferred income
taxes |
|
207,778 |
|
|
|
209,720 |
|
Pension and other
post-retirement obligations |
|
294,423 |
|
|
|
334,193 |
|
Other long-term
liabilities |
|
23,967 |
|
|
|
33,817 |
|
Total liabilities |
|
3,107,484 |
|
|
|
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
September 30, 2018 and December 31, 2017, respectively |
|
713 |
|
|
|
708 |
|
Additional paid-in capital |
|
539,897 |
|
|
|
615,662 |
|
Accumulated deficit |
|
(36,855 |
) |
|
|
- |
|
Accumulated other comprehensive loss, net |
|
(21,156 |
) |
|
|
(48,083 |
) |
Noncontrolling interest |
|
5,937 |
|
|
|
5,655 |
|
Total
shareholders' equity |
|
488,536 |
|
|
|
573,942 |
|
Total
liabilities and shareholders' equity |
$ |
3,596,020 |
|
|
$ |
3,719,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Condensed Consolidated Statements of
Operations |
(Dollars in thousands, except per share amounts) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
348,064 |
|
|
$ |
363,329 |
|
|
$ |
1,054,324 |
|
|
$ |
703,214 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Cost of
services and products |
|
152,942 |
|
|
|
148,377 |
|
|
|
457,216 |
|
|
|
290,545 |
|
Selling,
general and administrative |
|
|
|
|
|
|
|
expenses |
|
85,544 |
|
|
|
91,098 |
|
|
|
252,290 |
|
|
|
162,982 |
|
Acquisition and other transaction costs |
|
133 |
|
|
|
27,139 |
|
|
|
1,763 |
|
|
|
30,663 |
|
Depreciation and amortization |
|
109,119 |
|
|
|
104,406 |
|
|
|
328,759 |
|
|
|
187,084 |
|
Income (loss) from
operations |
|
326 |
|
|
|
(7,691 |
) |
|
|
14,296 |
|
|
|
31,940 |
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest
expense, net of interest income |
|
(33,524 |
) |
|
|
(36,307 |
) |
|
|
(99,079 |
) |
|
|
(99,896 |
) |
Other
income, net |
|
9,390 |
|
|
|
9,315 |
|
|
|
30,960 |
|
|
|
23,369 |
|
Loss before income
taxes |
|
(23,808 |
) |
|
|
(34,683 |
) |
|
|
(53,823 |
) |
|
|
(44,587 |
) |
Income tax benefit |
|
(8,993 |
) |
|
|
(6,289 |
) |
|
|
(17,250 |
) |
|
|
(9,862 |
) |
Net loss |
|
(14,815 |
) |
|
|
(28,394 |
) |
|
|
(36,573 |
) |
|
|
(34,725 |
) |
|
|
|
|
|
|
|
|
Less: net income
attributable to noncontrolling interest |
|
99 |
|
|
|
54 |
|
|
|
282 |
|
|
|
136 |
|
|
|
|
|
|
|
|
|
Net loss
attributable to common shareholders |
$ |
(14,914 |
) |
|
$ |
(28,448 |
) |
|
$ |
(36,855 |
) |
|
$ |
(34,861 |
) |
|
|
|
|
|
|
|
|
Net loss
per basic and diluted common shares |
|
|
|
|
|
|
|
attributable to common shareholders |
$ |
(0.21 |
) |
|
$ |
(0.41 |
) |
|
$ |
(0.53 |
) |
|
$ |
(0.62 |
) |
|
|
|
|
|
|
|
|
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 |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
$ |
348,064 |
|
|
$ |
363,329 |
|
|
$ |
1,054,324 |
|
|
$ |
1,104,261 |
|
Operating
expenses: |
|
|
|
|
|
|
|
Operating
expenses (exclusive of depreciation |
|
|
|
|
|
|
|
and
amortization) |
|
238,619 |
|
|
|
239,641 |
|
|
|
711,269 |
|
|
|
739,535 |
|
Depreciation and amortization |
|
109,119 |
|
|
|
104,406 |
|
|
|
328,759 |
|
|
|
313,576 |
|
Income from
operations |
|
326 |
|
|
|
19,282 |
|
|
|
14,296 |
|
|
|
51,150 |
|
Other income
(expense): |
|
|
|
|
|
|
|
Interest
expense, net of interest income |
|
(33,524 |
) |
|
|
(30,139 |
) |
|
|
(99,079 |
) |
|
|
(89,622 |
) |
Other
income, net |
|
9,390 |
|
|
|
9,315 |
|
|
|
30,960 |
|
|
|
20,999 |
|
Loss before income
taxes |
|
(23,808 |
) |
|
|
(1,542 |
) |
|
|
(53,823 |
) |
|
|
(17,473 |
) |
Income tax benefit |
|
(8,993 |
) |
|
|
(914 |
) |
|
|
(17,250 |
) |
|
|
(6,897 |
) |
Net loss |
|
(14,815 |
) |
|
|
(628 |
) |
|
|
(36,573 |
) |
|
|
(10,576 |
) |
Less: net income
attributable to noncontrolling interest |
|
99 |
|
|
|
54 |
|
|
|
282 |
|
|
|
136 |
|
|
|
|
|
|
|
|
|
Net loss attributable
to common shareholders |
$ |
(14,914 |
) |
|
$ |
(682 |
) |
|
$ |
(36,855 |
) |
|
$ |
(10,712 |
) |
|
|
|
|
|
|
|
|
Net loss per basic and
diluted common share |
|
|
|
|
|
|
|
attributable to common shareholders |
$ |
(0.21 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.53 |
) |
|
$ |
(0.15 |
) |
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Condensed Consolidated Statements of Cash
Flows |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
|
|
September
30, |
|
September
30, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(14,815 |
) |
|
$ |
(28,394 |
) |
|
$ |
(36,573 |
) |
|
$ |
(34,725 |
) |
|
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
|
|
|
Depreciation and
amortization |
|
|
109,119 |
|
|
|
104,406 |
|
|
|
328,759 |
|
|
|
187,084 |
|
|
Deferred income
taxes |
|
|
(2,807 |
) |
|
|
4,199 |
|
|
|
(2,805 |
) |
|
|
4,221 |
|
|
Cash distributions from
wireless partnerships in excess of/(less than) earnings |
|
|
(553 |
) |
|
|
(953 |
) |
|
|
(34 |
) |
|
|
(889 |
) |
|
Non-cash, stock-based
compensation |
|
|
1,538 |
|
|
|
889 |
|
|
|
3,754 |
|
|
|
2,319 |
|
|
Amortization of
deferred financing |
|
|
1,187 |
|
|
|
7,119 |
|
|
|
3,522 |
|
|
|
15,928 |
|
|
Other adjustments,
net |
|
|
400 |
|
|
|
359 |
|
|
|
3,815 |
|
|
|
2,657 |
|
|
Changes in operating
assets and liabilities, net |
|
|
(24,404 |
) |
|
|
(55,934 |
) |
|
|
(36,402 |
) |
|
|
(51,371 |
) |
|
Net cash
provided by operating activities |
|
|
69,665 |
|
|
|
31,691 |
|
|
|
264,036 |
|
|
|
125,224 |
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Business acquisition,
net of cash acquired |
|
|
- |
|
|
|
(862,385 |
) |
|
|
- |
|
|
|
(862,385 |
) |
|
Purchase of property,
plant and equipment, net |
|
|
(61,925 |
) |
|
|
(61,228 |
) |
|
|
(186,765 |
) |
|
|
(119,289 |
) |
|
Proceeds from sale of
assets |
|
|
197 |
|
|
|
195 |
|
|
|
1,640 |
|
|
|
296 |
|
|
Proceeds from business
disposition |
|
|
20,999 |
|
|
|
- |
|
|
|
20,999 |
|
|
|
- |
|
|
Proceeds from sale of
investments |
|
|
- |
|
|
|
- |
|
|
|
233 |
|
|
|
- |
|
|
Net cash
used in investing activities |
|
|
(40,729 |
) |
|
|
(923,418 |
) |
|
|
(163,893 |
) |
|
|
(981,378 |
) |
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Proceeds from issuance
of long-term debt |
|
|
60,587 |
|
|
|
1,008,325 |
|
|
|
136,587 |
|
|
|
1,031,325 |
|
|
Payment of capital
lease obligations |
|
|
(3,563 |
) |
|
|
(2,370 |
) |
|
|
(9,590 |
) |
|
|
(5,363 |
) |
|
Payment on long-term
debt |
|
|
(65,174 |
) |
|
|
(62,250 |
) |
|
|
(156,350 |
) |
|
|
(89,750 |
) |
|
Payment of financing
costs |
|
|
- |
|
|
|
(16,732 |
) |
|
|
- |
|
|
|
(16,732 |
) |
|
Share repurchases for
minimum tax withholding |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(41 |
) |
|
Dividends on common
stock |
|
|
(27,602 |
) |
|
|
(27,441 |
) |
|
|
(82,621 |
) |
|
|
(66,698 |
) |
|
Other |
|
|
- |
|
|
|
(350 |
) |
|
|
- |
|
|
|
(350 |
) |
|
Net cash
used in financing activities |
|
|
(35,752 |
) |
|
|
899,182 |
|
|
|
(111,974 |
) |
|
|
852,391 |
|
Net change
in cash and cash equivalents |
|
|
(6,816 |
) |
|
|
7,455 |
|
|
|
(11,831 |
) |
|
|
(3,763 |
) |
Cash and
cash equivalents at beginning of period |
|
|
10,642 |
|
|
|
15,859 |
|
|
|
15,657 |
|
|
|
27,077 |
|
Cash and
cash equivalents at end of period |
|
$ |
3,826 |
|
|
$ |
23,314 |
|
|
$ |
3,826 |
|
|
$ |
23,314 |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Consolidated Revenue by Category |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
Nine Months
Ended |
|
|
|
September
30, |
|
|
|
September
30, |
|
|
|
|
2018 |
|
|
|
2017 |
|
|
|
|
|
2018 |
|
|
|
2017 |
|
Commercial and carrier: |
|
|
|
|
|
|
|
|
|
|
|
Data and
transport services (includes VoIP) |
|
|
$ |
87,633 |
|
|
$ |
85,644 |
|
|
|
|
$ |
261,261 |
|
|
$ |
188,076 |
|
Voice
services |
|
|
|
50,091 |
|
|
|
54,270 |
|
|
|
|
|
153,574 |
|
|
|
98,495 |
|
Other |
|
|
|
13,906 |
|
|
|
13,366 |
|
|
|
|
|
40,006 |
|
|
|
22,199 |
|
|
|
|
|
151,630 |
|
|
|
153,280 |
|
|
|
|
|
454,841 |
|
|
|
308,770 |
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
Broadband
(VoIP and Data) |
|
|
|
63,865 |
|
|
|
63,893 |
|
|
|
|
|
189,521 |
|
|
|
120,582 |
|
Video
services |
|
|
|
21,790 |
|
|
|
23,342 |
|
|
|
|
|
66,689 |
|
|
|
68,760 |
|
Voice
services |
|
|
|
50,757 |
|
|
|
57,213 |
|
|
|
|
|
154,435 |
|
|
|
83,115 |
|
|
|
|
|
136,412 |
|
|
|
144,448 |
|
|
|
|
|
410,645 |
|
|
|
272,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidies |
|
|
|
19,189 |
|
|
|
20,933 |
|
|
|
|
|
65,423 |
|
|
|
41,897 |
|
Network
access |
|
|
|
38,147 |
|
|
|
41,262 |
|
|
|
|
|
115,200 |
|
|
|
69,953 |
|
Other
products and services |
|
|
|
2,686 |
|
|
|
3,406 |
|
|
|
|
|
8,215 |
|
|
|
10,137 |
|
Total operating
revenue |
|
|
|
348,064 |
|
|
|
363,329 |
|
|
|
|
|
1,054,324 |
|
|
|
703,214 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Less operating revenues
from divestitures |
|
|
|
(466 |
) |
|
|
(1,429 |
) |
|
|
|
|
(3,337 |
) |
|
|
(1,429 |
) |
|
|
|
$ |
347,598 |
|
|
$ |
361,900 |
|
|
|
|
$ |
1,050,987 |
|
|
$ |
701,785 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Consolidated Revenue by Category |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
|
Q3
2018 |
|
Q2
2018 |
|
Q1
2018 |
|
Q4
2017 |
|
Q3
2017 |
|
Commercial and carrier: |
|
|
|
|
|
|
|
|
|
|
|
Data and transport
services (includes VoIP) |
|
$ |
87,633 |
|
|
$ |
87,603 |
|
|
$ |
86,025 |
|
|
$ |
86,145 |
|
|
$ |
85,644 |
|
|
Voice
services |
|
|
50,091 |
|
|
|
51,322 |
|
|
|
52,161 |
|
|
|
54,137 |
|
|
|
54,270 |
|
|
Other |
|
|
13,906 |
|
|
|
14,237 |
|
|
|
11,863 |
|
|
|
11,709 |
|
|
|
13,366 |
|
|
|
|
|
151,630 |
|
|
|
153,162 |
|
|
|
150,049 |
|
|
|
151,991 |
|
|
|
153,280 |
|
|
Consumer: |
|
|
|
|
|
|
|
|
|
|
|
Broadband
(VoIP and Data) |
|
|
63,865 |
|
|
|
62,545 |
|
|
|
63,111 |
|
|
|
63,052 |
|
|
|
63,893 |
|
|
Video
services |
|
|
21,790 |
|
|
|
22,065 |
|
|
|
22,834 |
|
|
|
22,646 |
|
|
|
23,342 |
|
|
Voice
services |
|
|
50,757 |
|
|
|
51,616 |
|
|
|
52,062 |
|
|
|
54,581 |
|
|
|
57,213 |
|
|
|
|
|
136,412 |
|
|
|
136,226 |
|
|
|
138,007 |
|
|
|
140,279 |
|
|
|
144,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subsidies |
|
|
19,189 |
|
|
|
20,979 |
|
|
|
25,255 |
|
|
|
20,375 |
|
|
|
20,933 |
|
|
Network
access |
|
|
38,147 |
|
|
|
37,338 |
|
|
|
39,715 |
|
|
|
40,243 |
|
|
|
41,262 |
|
|
Other
products and services |
|
|
2,686 |
|
|
|
2,516 |
|
|
|
3,013 |
|
|
|
3,472 |
|
|
|
3,406 |
|
|
Total operating
revenue |
|
|
348,064 |
|
|
|
350,221 |
|
|
|
356,039 |
|
|
|
356,360 |
|
|
|
363,329 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less operating revenues
from divestitures |
|
|
(466 |
) |
|
|
(1,417 |
) |
|
|
(1,454 |
) |
|
|
(1,355 |
) |
|
|
(1,429 |
) |
|
|
|
$ |
347,598 |
|
|
$ |
348,804 |
|
|
$ |
354,585 |
|
|
$ |
355,005 |
|
|
$ |
361,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Schedule of Adjusted EBITDA
Calculation |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net loss |
$ |
(14,815 |
) |
|
$ |
(28,394 |
) |
|
$ |
(36,573 |
) |
|
$ |
(34,725 |
) |
Add (subtract): |
|
|
|
|
|
|
|
Income
tax benefit |
|
(8,993 |
) |
|
|
(6,289 |
) |
|
|
(17,250 |
) |
|
|
(9,862 |
) |
Interest
expense, net |
|
33,524 |
|
|
|
36,307 |
|
|
|
99,079 |
|
|
|
99,896 |
|
Depreciation and amortization |
|
109,119 |
|
|
|
104,406 |
|
|
|
328,759 |
|
|
|
187,084 |
|
EBITDA |
|
118,835 |
|
|
|
106,030 |
|
|
|
374,015 |
|
|
|
242,393 |
|
|
|
|
|
|
|
|
|
Adjustments to EBITDA
(1): |
|
|
|
|
|
|
|
Other,
net (2) |
|
12,413 |
|
|
|
29,645 |
|
|
|
23,047 |
|
|
|
35,682 |
|
Investment income (accrual basis) |
|
(8,675 |
) |
|
|
(9,594 |
) |
|
|
(28,999 |
) |
|
|
(23,068 |
) |
Investment distributions (cash basis) |
|
8,121 |
|
|
|
8,641 |
|
|
|
28,815 |
|
|
|
22,021 |
|
Pension/OPEB expense |
|
1,470 |
|
|
|
1,746 |
|
|
|
4,297 |
|
|
|
1,602 |
|
Non-cash
compensation (3) |
|
1,538 |
|
|
|
889 |
|
|
|
3,754 |
|
|
|
2,319 |
|
Adjusted EBITDA |
$ |
133,702 |
|
|
$ |
137,357 |
|
|
$ |
404,929 |
|
|
$ |
280,949 |
|
|
|
|
|
|
|
|
|
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. |
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Schedule of Pro Forma Adjusted EBITDA
Calculation |
(Dollars in thousands) |
(Unaudited) |
|
|
|
|
|
|
|
|
|
Pro Forma |
|
Pro Forma |
|
Three Months
Ended |
|
Nine Months
Ended |
|
September
30, |
|
September
30, |
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
Net loss |
$ |
(14,815 |
) |
|
$ |
(628 |
) |
|
$ |
(36,573 |
) |
|
$ |
(10,576 |
) |
Add (subtract): |
|
|
|
|
|
|
|
Income
tax benefit |
|
(8,993 |
) |
|
|
(914 |
) |
|
|
(17,250 |
) |
|
|
(6,897 |
) |
Interest
expense, net |
|
33,524 |
|
|
|
30,139 |
|
|
|
99,079 |
|
|
|
89,622 |
|
Depreciation and amortization |
|
109,119 |
|
|
|
104,406 |
|
|
|
328,759 |
|
|
|
313,576 |
|
EBITDA |
|
118,835 |
|
|
|
133,003 |
|
|
|
374,015 |
|
|
|
385,725 |
|
|
|
|
|
|
|
|
|
Adjustments to EBITDA
(1): |
|
|
|
|
|
|
|
Other,
net (2) |
|
12,413 |
|
|
|
2,672 |
|
|
|
23,047 |
|
|
|
5,449 |
|
Investment income (accrual basis) |
|
(8,675 |
) |
|
|
(9,594 |
) |
|
|
(28,999 |
) |
|
|
(23,068 |
) |
Investment distributions (cash basis) |
|
8,121 |
|
|
|
8,641 |
|
|
|
28,815 |
|
|
|
22,021 |
|
Pension/OPEB expense |
|
1,470 |
|
|
|
1,746 |
|
|
|
4,297 |
|
|
|
7,621 |
|
Non-cash
compensation (3) |
|
1,538 |
|
|
|
889 |
|
|
|
3,754 |
|
|
|
5,305 |
|
Adjusted EBITDA |
$ |
133,702 |
|
|
$ |
137,357 |
|
|
$ |
404,929 |
|
|
$ |
403,053 |
|
|
|
|
|
|
|
|
|
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 |
|
|
Nine Months
Ended |
|
|
September 30,
2018 |
|
|
September 30,
2018 |
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
133,702 |
|
|
|
$ |
404,929 |
|
|
|
|
|
|
|
|
- Cash interest
expense |
|
(32,239 |
) |
|
|
|
(94,272 |
) |
|
- Capital
expenditures |
|
(61,925 |
) |
|
|
|
(186,765 |
) |
|
- Cash income
taxes |
|
(58 |
) |
|
|
|
(843 |
) |
|
|
|
|
|
|
|
Cash available to pay
dividends |
$ |
39,480 |
|
|
|
$ |
123,049 |
|
|
|
|
|
|
|
|
Dividends Paid |
$ |
27,602 |
|
|
|
$ |
82,621 |
|
|
Payout Ratio |
|
69.9 |
% |
|
|
|
67.1 |
% |
|
|
|
|
|
|
|
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) |
|
|
|
|
September
30, |
|
Summary of Outstanding
Debt: |
|
2018 |
|
|
Term loans, net of
discount $7,335 |
$ |
1,800,315 |
|
|
Revolving loan |
|
16,000 |
|
|
Senior unsecured notes
due 2022, net of discount $3,165 |
|
496,835 |
|
|
Capital leases |
|
33,527 |
|
|
Total debt as of
September 30, 2018 |
$ |
2,346,677 |
|
|
Less deferred debt
issuance costs |
|
(12,071 |
) |
|
Less cash on hand |
|
(3,826 |
) |
|
Total net debt as of
September 30, 2018 |
$ |
2,330,780 |
|
|
|
|
|
Adjusted EBITDA for
the |
|
|
twelve
months ended September 30, 2018 |
$ |
538,084 |
|
(a) |
|
|
|
Total Net Debt to last
twelve months |
|
|
Adjusted
EBITDA - Pro Forma |
4.33x |
|
|
|
|
|
(a) Full benefit of targeted synergies of $55.0 million are not
yet fully reflected in 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 |
|
Nine Months
Ended |
|
|
September
30, |
|
September
30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
Net loss |
$ |
(14,815 |
) |
|
$ |
(28,394 |
) |
|
$ |
(36,573 |
) |
|
$ |
(34,725 |
) |
|
Transaction and
severance related costs, net of tax |
|
9,309 |
|
|
|
17,039 |
|
|
|
16,747 |
|
|
|
21,320 |
|
|
Storm costs, net of
tax |
|
- |
|
|
|
- |
|
|
|
1,723 |
|
|
|
- |
|
|
Local switching support
settlement, net of tax |
|
- |
|
|
|
- |
|
|
|
(2,903 |
) |
|
|
- |
|
|
Non-cash interest
expense for swaps, net of tax |
|
438 |
|
|
|
(10 |
) |
|
|
2,367 |
|
|
|
1,102 |
|
|
Tax on non-deductible
transaction related costs |
|
- |
|
|
|
2,341 |
|
|
|
- |
|
|
|
2,341 |
|
|
Tax related to
acquisition |
|
1,062 |
|
|
|
5,205 |
|
|
|
1,062 |
|
|
|
5,205 |
|
|
Amortization of
commitment fee, net of tax |
|
- |
|
|
|
3,378 |
|
|
|
- |
|
|
|
7,791 |
|
|
Divestiture related,
tax (1) |
|
767 |
|
|
|
- |
|
|
|
767 |
|
|
|
- |
|
|
Change in deferred tax
rate, federal tax reform |
|
(4,397 |
) |
|
|
- |
|
|
|
(4,397 |
) |
|
|
- |
|
|
Ticking fees on
committed financing, net of tax |
|
- |
|
|
|
187 |
|
|
|
- |
|
|
|
10,926 |
|
|
Non-cash stock
compensation, net of tax |
|
1,126 |
|
|
|
514 |
|
|
|
2,733 |
|
|
|
1,405 |
|
|
Adjusted net income
(loss) |
$ |
(6,510 |
) |
|
$ |
260 |
|
|
$ |
(18,474 |
) |
|
$ |
15,365 |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares outstanding |
|
70,598 |
|
|
|
69,830 |
|
|
|
70,598 |
|
|
|
56,955 |
|
|
Adjusted diluted net
income (loss) per share |
$ |
(0.09 |
) |
|
$ |
0.00 |
|
|
$ |
(0.26 |
) |
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
|
|
|
|
(1) Includes sale of
Virginia properties on July 31, 2018. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calculations above assume a 26.8% and 42.2% effective tax rate for
the three months ended and 27.2% and 39.4% for the nine months
ended September 30, 2018 and 2017, respectively. |
|
|
|
|
|
|
|
|
|
|
Net income
per share has been impacted by approximately $0.22 for the nine
months ended September 30, 2018 due to increased depreciation and
amortization associated with the valuation of the FairPoint
assets. |
|
|
|
|
|
|
|
|
|
|
Consolidated Communications Holdings,
Inc. |
Key Operating Statistics |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September
30, |
|
June
30, |
|
% Change |
|
September
30, |
|
% Change |
|
|
|
2018 |
|
2018 |
|
in Qtr |
|
2017 |
|
YOY |
|
|
|
|
|
|
|
|
|
|
|
|
Voice Connections |
|
|
921,896 |
|
|
|
936,576 |
|
|
(1.6%) |
|
|
|
985,814 |
|
|
(6.5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Data and
Internet Connections |
|
|
781,912 |
|
|
|
783,886 |
|
|
(0.3%) |
|
|
|
781,070 |
|
|
0.1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Video
Connections |
|
|
95,889 |
|
|
|
97,853 |
|
|
(2.0%) |
|
|
|
105,480 |
|
|
(9.1%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Business
and Broadband as % of total revenue (1) |
|
|
75.2% |
|
|
|
74.5% |
|
|
0.9% |
|
|
|
74.3% |
|
|
1.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiber route
network miles (long-haul and metro) |
|
|
36,814 |
|
|
|
36,568 |
|
|
0.7% |
|
|
|
35,749 |
|
|
3.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
On-net
buildings |
|
|
10,041 |
|
|
|
9,674 |
|
|
3.8% |
|
|
|
8,782 |
|
|
14.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
Customers |
|
|
641,845 |
|
|
|
649,561 |
|
|
(1.2%) |
|
|
|
679,165 |
|
|
(5.5%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer
ARPU |
|
|
$70.70 |
|
|
|
$69.47 |
|
|
1.8% |
|
|
|
$70.47 |
|
|
0.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes: |
|
|
|
|
|
|
|
|
|
|
(1)
Business and Broadband revenue % includes: commercial/carrier,
equipment sales and service, directory, consumer broadband and
special access. |
(2) The sale of our local exchange carrier in Virginia
resulted in a reduction of approximately 4,110 voice connections,
2,900 data and Internet connections and 4,340 consumer customers in
the third quarter of 2018. Prior period amounts have been
adjusted to reflect the sale. |
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