Grew broadband customer base for second
consecutive quarterContinued acceleration in
SD-WAN and Enterprise strategic salesDelivered
third consecutive quarter of Adjusted OIBDAR year-over-year
growth
Windstream Holdings, Inc. (NASDAQ: WIN), a leading provider of
advanced network communications and technology solutions, today
reported third-quarter results, highlighted by continued growth in
consumer broadband customers and enterprise strategic sales.
“Windstream added 8,400 broadband customers in the third
quarter, our strongest residential subscriber growth in years,”
said Tony Thomas, president and chief executive officer. “This
growth is clear evidence that customers are responding as we deploy
faster broadband speeds across our very rural footprint, and we
will continue to build on that success. We expect to double the
availability of 100 Mbps internet service to 30 percent of the
households in our markets by the end of March 2019.
“Our Enterprise segment saw continued acceleration of SD-WAN and
strategic sales, which represented 54 percent of total enterprise
sales during the quarter,” Thomas said. “Our intense focus on
higher-margin strategic sales enhances both our competitiveness and
contribution margins. At the end of the quarter, annualized
strategic product revenue was $165 million, representing a 71
percent year-over-year growth rate.
“These results, combined with ongoing reductions in network
interconnection expenses and optimization of other costs, helped
deliver year-over-year growth in Adjusted OIBDAR for the third
consecutive quarter, as well as improved free cash flow trends,”
Thomas said. “Windstream is on a clear path going forward to
improve revenue trends, drive Adjusted OIBDAR growth and create
value for all our stakeholders.”
Results under GAAP
Total revenues and sales were $1.42 billion, a decrease of 5
percent from the same period a year ago, and total service revenues
were $1.40 billion, a decrease of 5 percent year-over-year.
Operating income was $76 million compared to $41 million in the
same period a year ago. The company reported net income of $41
million, or 97 cents per share, compared to a net loss of $102
million, or a loss of $2.76 per share, a year ago.
ILEC consumer and small business service revenues were $459
million, a decrease of 4 percent from the same period a year ago,
and segment income was $266 million compared to $270 million
year-over-year.
Enterprise service revenues were $717 million, a 5 percent
decrease from the same period a year ago, and segment income was
$161 million compared to $147 million year-over-year.
Wholesale service revenues were $181 million, a 5 percent
decrease from the same period a year ago, and segment income was
$127 million compared to $133 million year-over-year.
CLEC consumer services revenues were $44 million, a decrease of
16 percent from the same period a year ago, and segment income was
$25 million, essentially unchanged year-over-year.
Adjusted Results of Operations
Adjusted total revenues and sales were $1.42 billion compared to
$1.50 billion in the same period a year ago. Adjusted total service
revenues were $1.40 billion compared to $1.47 billion
year-over-year.
Adjusted OIBDAR was $496 million compared to $490 million in the
same period a year ago.
Adjusted capital expenditures were $188 million compared to $205
million in the same period a year ago.
ILEC consumer and small business service revenues were $459
million, a 4 percent decrease from the same period a year ago, and
contribution margin was $266 million compared to $270 million a
year ago.
Enterprise service revenues were $717 million, a 5 percent
decrease from the same period a year ago, and contribution margin
was $161 million compared to $147 million a year ago, an increase
of 9 percent year-over-year.
Wholesale service revenues were $181 million, a decrease of 5
percent from the same period a year ago, and contribution margin
was $127 million compared to $133 million a year ago.
CLEC consumer service revenues were $44 million, a 15 percent
decrease from the same period a year ago, and contribution margin
was $25 million, essentially unchanged from a year ago.
Note: Adjusted results of operations are based on the combined
historical financial information of Windstream and EarthLink and
assume the merger was completed on Jan. 1, 2017. Operating results
for Broadview, MASS Communications and ATC are included beginning
on July 28, 2017; March 27, 2018; and Aug. 31, 2018, the dates of
the acquisitions. A reconciliation of adjusted results to the
comparable GAAP measures is included in the financial information
presented below. Additional supplemental quarterly financial
information is available on the company’s Web site at
investor.windstream.com.
About Windstream
Windstream Holdings, Inc. (NASDAQ: WIN), a FORTUNE 500 company,
is a leading provider of advanced network communications and
technology solutions. Windstream provides data networking, core
transport, security, unified communications and managed services to
mid-market, enterprise and wholesale customers across the U.S. The
company also offers broadband, entertainment and security services
for consumers and small and medium-sized businesses primarily in
rural areas in 18 states. Services are delivered over multiple
network platforms including a nationwide IP network, our
proprietary cloud core architecture and on a local and long-haul
fiber network spanning approximately 150,000 miles. Additional
information is available at windstream.com or
windstreamenterprise.com. Please visit our newsroom at
news.windstream.com or follow us on Twitter at @Windstream or
@WindstreamBiz.
Adjusted OIBDA is operating income before depreciation and
amortization, excluding pension expense, share-based compensation
expense, restructuring charges, merger, integration and certain
other costs.
Adjusted OIBDAR is Adjusted OIBDA before the annual cash rent
payment due under the master lease agreement with Uniti Group,
Inc.
Adjusted free cash flow is defined as Adjusted OIBDA, less
adjusted capital expenditures, cash taxes and cash interest on
long-term debt.
Cautionary Statement Regarding Forward Looking
Statements
Windstream Holdings, Inc. claims the protection of the
safe-harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are typically identified by words or phrases such as
“will,” “anticipate,” “estimate,” “expect,” “project,” “intend,”
“plan,” “believe,” “target,” “forecast” and other words and terms
of similar meaning. Forward-looking statements are subject to risks
and uncertainties that could cause actual future events and results
to differ materially from those expressed in the forward-looking
statements.
Forward-looking statements include, but are not limited to, 2018
guidance for service revenue, adjusted OIBDAR, adjusted capital
expenditures, and adjusted free cash flow, along with statements
regarding cash taxes, future growth of adjusted OIBDAR and free
cash flow; revenue and contribution margin trends and sales
opportunities in our business units; improvement in our ability to
compete, including opportunities associated with, and expected
sales growth, of strategic products and services; increasing
deployment and penetration levels, along with availability of
faster broadband speeds to more households within our service
areas, along with subscriber trends; the benefits of the mergers
with EarthLink Holdings Corp. and Broadview Network Holdings, Inc.
including projected synergies and the timing of the synergies; our
ability to improve our debt profile and balance sheet and overall
reduction in net leverage; expectations regarding expense
management activities, including interconnection expense, and the
timing and benefit of such activities; and opportunities regarding
sales or divestitures of certain assets; any other statements
regarding plans, objectives, expectations and intentions and other
statements that are not historical facts.
These statements, along with other forward-looking statements
regarding Windstream’s overall business outlook, are based on
estimates, projections, beliefs, and assumptions that Windstream
believes are reasonable but are not guarantees of future events,
performance or results. Actual future events and results may differ
materially from those expressed in these forward-looking statements
as a result of a number of important factors.
Factors that could cause actual results to differ materially
from those contemplated in our forward-looking statements include,
among others:
- the cost savings and expected synergies from the mergers with
EarthLink and Broadview may not be fully realized or may take
longer to realize than expected;
- the integration of Windstream and EarthLink and Broadview may
not be successful, may cause disruption in relationships with
customers, vendors and suppliers and may divert attention of
management and key personnel;
- the impact of the Federal Communications Commission’s
comprehensive business data services reforms or additional FCC
reforms or actions, including actions related to unbundled network
elements, that may result in greater capital investments and
customer and revenue churn because of possible price increases by
our ILEC suppliers for certain services we use to serve customer
locations where we do not have facilities;
- the potential for incumbent carriers to impose monetary
penalties for failure to meet specific volume and term commitments
under their special access pricing and tariff plans, which
Windstream uses to lease last-mile connections to serve its retail
business data service customers, without FCC action;
- the impact of new, emerging or competing technologies and our
ability to utilize these technologies to provide services to our
customers;
- the alleged ability of one or more purported noteholders to
establish that transactions related to the spin-off of certain
assets in 2015 into a publicly-traded real estate investment trust
allegedly violated certain covenants in existing indentures
governing certain outstanding senior notes;
- the benefits of our current capital allocation strategy, which
may be changed at any time at the discretion of our board of
directors, and certain cost reduction activities may not be fully
realized or may take longer to realize than expected, or the
implementation of these initiatives may adversely affect our sales
and operational activities or otherwise disrupt our business and
personnel;
- the availability and cost of financing in the corporate debt
markets;
- unanticipated increases or other changes in our future cash
requirements, whether caused by unanticipated increases in capital
expenditures, increases in pension funding requirements, or
otherwise;
- for certain operations where we purchase bandwidth from other
carriers, adverse effects on the availability, quality of service,
price of facilities and services provided by other carriers on
which our services depend;
- our election to accept state-wide offers under the FCC’s
Connect America Fund, Phase II, and the impact of such election on
our future receipt of federal universal service funds and capital
expenditures, and any return of support received pursuant to the
program;
- our ability to make rent payments under the master lease to
Uniti, which may be affected by results of operations, changes in
our cash requirements, cash tax payment obligations, or overall
financial position
- further adverse changes in economic conditions in the markets
served by us;
- the extent, timing and overall effects of competition in the
communications business;
- unfavorable rulings by state public service commissions in
current and further proceedings regarding universal service funds,
inter-carrier compensation or other matters that could reduce
revenues or increase expenses;
- material changes in the communications industry that could
adversely affect vendor relationships with equipment and network
suppliers and customer relationships with wholesale and enterprise
customers;
- the impact of adverse changes in the ratings given to our debt
securities by nationally accredited ratings organizations and the
potential for additional adverse changes in the future;
- earnings on pension plan investments significantly below our
expected long-term rate of return for plan assets or a significant
change in the discount rate or other actuarial assumptions;
- unfavorable results of litigation, including intellectual
property infringement claims, asserted against us;
- the risks associated with non-compliance by us with regulations
or statutes applicable to government programs under which we
receive material amounts of end-user revenue and government
subsidies, or non-compliance by us, our partners, or our
subcontractors with any terms of our government contracts;
- the effects of federal and state legislation, and rules and
regulations, and changes thereto, including changes implemented by
administrative agencies, governing the communications
industry;
- continued loss of consumer households served;
- the impact of equipment failure, natural disasters or terrorist
acts;
- the effects of work stoppages by our employees or employees of
other communications companies on whom we rely for service;
and
- those additional factors under “Risk Factors” in Item 1A of
Windstream’s Annual Report and in subsequent filings with the
Securities and Exchange Commission at www.sec.gov.
In addition to these factors, actual future performance,
outcomes and results may differ materially because of more general
factors including, among others, general industry and market
conditions and growth rates, economic conditions, and governmental
and public policy changes.
Windstream undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. The foregoing review of factors that
could cause Windstream’s actual results to differ materially from
those contemplated in the forward-looking statements should be
considered in connection with information regarding risks and
uncertainties that may affect Windstream’s future results included
in other filings with the Securities and Exchange Commission at
www.sec.gov.
Media Contact:David Avery,
501-748-5876david.avery@windstream.com
Investor Contact:Chris King,
704-319-1025christopher.c.king@windstream.com
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WINDSTREAM
HOLDINGS, INC. |
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UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions, except per share amounts) |
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
|
|
2018 |
|
|
|
2017 |
|
|
Amount |
|
% |
|
|
2018 |
|
|
|
2017 |
|
|
Amount |
|
% |
UNDER GAAP: |
|
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|
|
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|
|
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|
|
|
Revenues
and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
$ |
1,400.1 |
|
|
$ |
1,472.4 |
|
|
$ |
(72.3 |
) |
|
(5 |
) |
|
$ |
4,260.1 |
|
|
$ |
4,282.4 |
|
|
$ |
(22.3 |
) |
|
(1 |
) |
|
Product sales |
|
20.5 |
|
|
|
25.3 |
|
|
|
(4.8 |
) |
|
(19 |
) |
|
|
59.2 |
|
|
|
72.6 |
|
|
|
(13.4 |
) |
|
(18 |
) |
|
Total
revenues and sales |
|
1,420.6 |
|
|
|
1,497.7 |
|
|
|
(77.1 |
) |
|
(5 |
) |
|
|
4,319.3 |
|
|
|
4,355.0 |
|
|
|
(35.7 |
) |
|
(1 |
) |
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization included below) |
|
700.2 |
|
|
|
780.5 |
|
|
|
(80.3 |
) |
|
(10 |
) |
|
$ |
2,159.9 |
|
|
|
2,215.0 |
|
|
|
(55.1 |
) |
|
(2 |
) |
|
Cost of products
sold |
|
19.7 |
|
|
|
22.3 |
|
|
|
(2.6 |
) |
|
(12 |
) |
|
|
54.7 |
|
|
|
72.8 |
|
|
|
(18.1 |
) |
|
(25 |
) |
|
Selling, general and
administrative |
|
225.8 |
|
|
|
231.8 |
|
|
|
(6.0 |
) |
|
(3 |
) |
|
|
679.1 |
|
|
|
672.0 |
|
|
|
7.1 |
|
|
1 |
|
|
Depreciation and
amortization |
|
383.8 |
|
|
|
365.4 |
|
|
|
18.4 |
|
|
5 |
|
|
|
1,136.3 |
|
|
|
1,066.3 |
|
|
|
70.0 |
|
|
7 |
|
|
Merger, integration and
other costs |
|
9.0 |
|
|
|
33.7 |
|
|
|
(24.7 |
) |
|
(73 |
) |
|
|
30.4 |
|
|
|
107.4 |
|
|
|
(77.0 |
) |
|
(72 |
) |
|
Restructuring
charges |
|
6.5 |
|
|
|
22.8 |
|
|
|
(16.3 |
) |
|
(71 |
) |
|
|
26.0 |
|
|
|
33.7 |
|
|
|
(7.7 |
) |
|
(23 |
) |
|
Total
costs and expenses |
|
1,345.0 |
|
|
|
1,456.5 |
|
|
|
(111.5 |
) |
|
(8 |
) |
|
|
4,086.4 |
|
|
|
4,167.2 |
|
|
|
(80.8 |
) |
|
(2 |
) |
Operating
income |
|
75.6 |
|
|
|
41.2 |
|
|
|
34.4 |
|
|
83 |
|
|
|
232.9 |
|
|
|
187.8 |
|
|
|
45.1 |
|
|
24 |
|
Other
income, net |
|
3.2 |
|
|
|
1.7 |
|
|
|
1.5 |
|
|
88 |
|
|
|
12.9 |
|
|
|
8.5 |
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|
4.4 |
|
|
52 |
|
Net gain on
early extinguishment of debt |
|
190.3 |
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|
|
5.2 |
|
|
|
185.1 |
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|
* |
|
|
190.3 |
|
|
|
2.0 |
|
|
|
188.3 |
|
|
* |
Interest
expense (A) |
|
(230.0 |
) |
|
|
(216.4 |
) |
|
|
13.6 |
|
|
6 |
|
|
|
(677.5 |
) |
|
|
(642.6 |
) |
|
|
34.9 |
|
|
5 |
|
Income
(loss) before income taxes |
|
39.1 |
|
|
|
(168.3 |
) |
|
|
207.4 |
|
|
123 |
|
|
|
(241.4 |
) |
|
|
(444.3 |
) |
|
|
202.9 |
|
|
46 |
|
Income tax
benefit |
|
(2.2 |
) |
|
|
(66.8 |
) |
|
|
(64.6 |
) |
|
(97 |
) |
|
|
(67.6 |
) |
|
|
(163.4 |
) |
|
|
(95.8 |
) |
|
(59 |
) |
Net income
(loss) |
$ |
41.3 |
|
|
$ |
(101.5 |
) |
|
$ |
142.8 |
|
|
141 |
|
|
$ |
(173.8 |
) |
|
$ |
(280.9 |
) |
|
$ |
107.1 |
|
|
38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
42.5 |
|
|
|
36.8 |
|
|
|
5.7 |
|
|
15 |
|
|
|
40.2 |
|
|
|
33.2 |
|
|
|
7.0 |
|
|
21 |
|
Common
shares outstanding |
|
42.9 |
|
|
|
36.6 |
|
|
|
6.3 |
|
|
17 |
|
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Basic and
diluted income (loss) per share: |
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|
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|
|
|
|
Net income (loss) |
|
$.97 |
|
|
|
($2.76 |
) |
|
$ |
3.73 |
|
|
135 |
|
|
|
($4.32 |
) |
|
|
($8.50 |
) |
|
$ |
4.18 |
|
|
49 |
|
|
|
|
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|
ADJUSTED RESULTS OF OPERATIONS (B): |
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|
|
|
|
|
Adjusted service revenues |
$ |
1,400.1 |
|
|
$ |
1,472.4 |
|
|
$ |
(72.3 |
) |
|
(5 |
) |
|
$ |
4,260.1 |
|
|
$ |
4,431.7 |
|
|
$ |
(171.6 |
) |
|
(4 |
) |
Adjusted revenues and sales |
$ |
1,420.6 |
|
|
$ |
1,497.7 |
|
|
$ |
(77.1 |
) |
|
(5 |
) |
|
$ |
4,319.3 |
|
|
$ |
4,504.5 |
|
|
$ |
(185.2 |
) |
|
(4 |
) |
Adjusted OIBDAR (C) |
$ |
495.7 |
|
|
$ |
490.3 |
|
|
$ |
5.4 |
|
|
1 |
|
|
$ |
1,502.8 |
|
|
$ |
1,489.4 |
|
|
$ |
13.4 |
|
|
1 |
|
Adjusted OIBDA (D) |
$ |
331.5 |
|
|
$ |
327.0 |
|
|
$ |
4.5 |
|
|
1 |
|
|
$ |
1,011.3 |
|
|
$ |
999.3 |
|
|
$ |
12.0 |
|
|
1 |
|
Adjusted capital expenditures (E) |
$ |
187.6 |
|
|
$ |
205.2 |
|
|
$ |
(17.6 |
) |
|
(9 |
) |
|
$ |
575.9 |
|
|
$ |
667.4 |
|
|
$ |
(91.5 |
) |
|
(14 |
) |
|
|
|
|
|
|
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|
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|
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|
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|
* Not
meaningful |
|
|
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|
(A) |
Includes interest expense associated with the master lease
agreement with Uniti of $116.2 million and $352.1 million for the
three and nine month periods ended September 30, 2018,
respectively, as compared to $120.7 million and $365.2 million for
the three and nine month periods ended September 30, 2017. |
(B) |
Adjusted results of operations are based upon the combined
historical financial information of Windstream and EarthLink for
all periods presented. See Notes to Reconciliation of
Non-GAAP Financial Measures. |
(C) |
Adjusted OIBDAR is adjusted OIBDA before the annual cash rent
payment due under the master lease agreement with Uniti. |
(D) |
Adjusted OIBDA is operating income before depreciation and
amortization, excluding pension expense, share-based compensation
expense, restructuring charges, merger, integration and certain
other costs. |
(E) |
Adjusted capital expenditures includes applicable amounts for
EarthLink for periods prior to the merger date of February 27, 2017
and excludes post-merger integration capital expenditures for
Broadview and EarthLink and amounts related to Project Excel, a
capital program funded entirely using a portion of the proceeds
from the sale of the data center business completed in December
2015. |
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WINDSTREAM
HOLDINGS, INC. |
|
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UNAUDITED
BUSINESS SEGMENT RESULTS UNDER GAAP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions) |
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
|
|
2018 |
|
|
|
2017 |
|
|
Amount |
|
% |
|
|
2018 |
|
|
|
2017 |
|
|
Amount |
|
% |
Consumer & Small Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
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|
|
|
|
|
Service revenues |
$ |
458.9 |
|
|
$ |
479.0 |
|
|
$ |
(20.1 |
) |
|
(4 |
) |
|
$ |
1,395.8 |
|
|
$ |
1,468.9 |
|
|
$ |
(73.1 |
) |
|
(5 |
) |
|
Product
sales |
|
7.5 |
|
|
|
8.3 |
|
|
|
(0.8 |
) |
|
(10 |
) |
|
|
19.6 |
|
|
|
27.7 |
|
|
|
(8.1 |
) |
|
(29 |
) |
|
Total
revenue and sales |
|
466.4 |
|
|
|
487.3 |
|
|
|
(20.9 |
) |
|
(4 |
) |
|
|
1,415.4 |
|
|
|
1,496.6 |
|
|
|
(81.2 |
) |
|
(5 |
) |
|
Costs and expenses |
|
200.3 |
|
|
|
217.3 |
|
|
|
(17.0 |
) |
|
(8 |
) |
|
|
593.8 |
|
|
|
648.6 |
|
|
|
(54.8 |
) |
|
(8 |
) |
|
Segment income |
$ |
266.1 |
|
|
$ |
270.0 |
|
|
$ |
(3.9 |
) |
|
(1 |
) |
|
$ |
821.6 |
|
|
$ |
848.0 |
|
|
$ |
(26.4 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Windstream Enterprise & Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
$ |
716.5 |
|
|
$ |
750.3 |
|
|
$ |
(33.8 |
) |
|
(5 |
) |
|
$ |
2,179.5 |
|
|
$ |
2,122.8 |
|
|
$ |
56.7 |
|
|
3 |
|
|
Product
sales |
|
12.6 |
|
|
|
16.8 |
|
|
|
(4.2 |
) |
|
(25 |
) |
|
|
38.8 |
|
|
|
44.5 |
|
|
|
(5.7 |
) |
|
(13 |
) |
|
Total
revenue and sales |
|
729.1 |
|
|
|
767.1 |
|
|
|
(38.0 |
) |
|
(5 |
) |
|
|
2,218.3 |
|
|
|
2,167.3 |
|
|
|
51.0 |
|
|
2 |
|
|
Costs and expenses |
|
568.2 |
|
|
|
620.0 |
|
|
|
(51.8 |
) |
|
(8 |
) |
|
|
1,750.4 |
|
|
|
1,754.5 |
|
|
|
(4.1 |
) |
|
* |
|
Segment income |
$ |
160.9 |
|
|
$ |
147.1 |
|
|
$ |
13.8 |
|
|
9 |
|
|
$ |
467.9 |
|
|
$ |
412.8 |
|
|
$ |
55.1 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
$ |
180.9 |
|
|
$ |
191.2 |
|
|
$ |
(10.3 |
) |
|
(5 |
) |
|
$ |
546.9 |
|
|
$ |
566.6 |
|
|
$ |
(19.7 |
) |
|
(3 |
) |
|
Product
sales |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
100 |
|
|
|
0.4 |
|
|
|
0.1 |
|
|
|
0.3 |
|
|
* |
|
Total
revenue and sales |
|
181.1 |
|
|
|
191.3 |
|
|
|
(10.2 |
) |
|
(5 |
) |
|
|
547.3 |
|
|
|
566.7 |
|
|
|
(19.4 |
) |
|
(3 |
) |
|
Costs and expenses |
|
54.5 |
|
|
|
58.1 |
|
|
|
(3.6 |
) |
|
(6 |
) |
|
|
163.6 |
|
|
|
171.4 |
|
|
|
(7.8 |
) |
|
(5 |
) |
|
Segment income |
$ |
126.6 |
|
|
$ |
133.2 |
|
|
$ |
(6.6 |
) |
|
(5 |
) |
|
$ |
383.7 |
|
|
$ |
395.3 |
|
|
$ |
(11.6 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer CLEC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
$ |
43.8 |
|
|
$ |
51.9 |
|
|
$ |
(8.1 |
) |
|
(16 |
) |
|
$ |
137.9 |
|
|
$ |
124.1 |
|
|
$ |
13.8 |
|
|
11 |
|
|
Product
sales |
|
0.2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
100 |
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
33 |
|
|
Total
revenue and sales |
|
44.0 |
|
|
|
52.0 |
|
|
|
(8.0 |
) |
|
(15 |
) |
|
|
138.3 |
|
|
|
124.4 |
|
|
|
13.9 |
|
|
11 |
|
|
Costs and expenses |
|
19.1 |
|
|
|
27.2 |
|
|
|
(8.1 |
) |
|
(30 |
) |
|
|
59.6 |
|
|
|
62.9 |
|
|
|
(3.3 |
) |
|
(5 |
) |
|
Segment income |
$ |
24.9 |
|
|
$ |
24.8 |
|
|
$ |
0.1 |
|
|
* |
|
$ |
78.7 |
|
|
$ |
61.5 |
|
|
$ |
17.2 |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment revenues and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
$ |
1,400.1 |
|
|
$ |
1,472.4 |
|
|
$ |
(72.3 |
) |
|
(5 |
) |
|
$ |
4,260.1 |
|
|
$ |
4,282.4 |
|
|
$ |
(22.3 |
) |
|
(1 |
) |
Product sales |
|
20.5 |
|
|
|
25.3 |
|
|
|
(4.8 |
) |
|
(19 |
) |
|
|
59.2 |
|
|
|
72.6 |
|
|
|
(13.4 |
) |
|
(18 |
) |
Total
segment revenues and sales |
|
1,420.6 |
|
|
|
1,497.7 |
|
|
|
(77.1 |
) |
|
(5 |
) |
|
|
4,319.3 |
|
|
|
4,355.0 |
|
|
|
(35.7 |
) |
|
(1 |
) |
Total
segment costs and expenses |
|
842.1 |
|
|
|
922.6 |
|
|
|
(80.5 |
) |
|
(9 |
) |
|
|
2,567.4 |
|
|
|
2,637.4 |
|
|
|
(70.0 |
) |
|
(3 |
) |
Total
segment income |
|
578.5 |
|
|
|
575.1 |
|
|
|
3.4 |
|
|
1 |
|
|
|
1,751.9 |
|
|
|
1,717.6 |
|
|
|
34.3 |
|
|
2 |
|
|
Other unassigned
operating expenses (A) |
|
(103.6 |
) |
|
|
(112.0 |
) |
|
|
(8.4 |
) |
|
(8 |
) |
|
|
(326.3 |
) |
|
|
(322.4 |
) |
|
|
3.9 |
|
|
1 |
|
|
Merger, integration and
other costs |
|
(9.0 |
) |
|
|
(33.7 |
) |
|
|
(24.7 |
) |
|
(73 |
) |
|
|
(30.4 |
) |
|
|
(107.4 |
) |
|
|
(77.0 |
) |
|
(72 |
) |
|
Restructuring
charges |
|
(6.5 |
) |
|
|
(22.8 |
) |
|
|
(16.3 |
) |
|
(71 |
) |
|
|
(26.0 |
) |
|
|
(33.7 |
) |
|
|
(7.7 |
) |
|
(23 |
) |
|
Depreciation and
amortization |
|
(383.8 |
) |
|
|
(365.4 |
) |
|
|
18.4 |
|
|
5 |
|
|
|
(1,136.3 |
) |
|
|
(1,066.3 |
) |
|
|
70.0 |
|
|
7 |
|
Operating
income |
$ |
75.6 |
|
|
$ |
41.2 |
|
|
$ |
34.4 |
|
|
83 |
|
|
$ |
232.9 |
|
|
$ |
187.8 |
|
|
$ |
45.1 |
|
|
24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
These expenses are not allocated to the business segments.
Unallocated expenses include stock-based compensation, pension
expense, and shared services, such as accounting and finance,
information technology, network management, legal, human resources,
and investor relations. These expenses are centrally managed and
are not monitored by management at a segment level. |
|
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
UNAUDITED
CONSOLIDATED BALANCE SHEETS |
(In millions) |
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
2018 |
|
2017 |
Assets |
|
|
|
Current
Assets: |
|
|
|
Cash and cash
equivalents |
$ |
37.3 |
|
|
$ |
43.4 |
|
Accounts
receivable (less allowance for doubtful accounts of $24.8 and
$29.7, respectively) |
|
649.0 |
|
|
|
643.0 |
|
Inventories |
|
87.0 |
|
|
|
93.0 |
|
Prepaid
expenses and other |
|
184.3 |
|
|
|
154.3 |
|
Total
current assets |
|
957.6 |
|
|
|
933.7 |
|
|
|
|
|
Goodwill |
|
2,876.8 |
|
|
|
2,842.4 |
|
Other intangibles,
net |
|
1,300.3 |
|
|
|
1,454.4 |
|
Net property, plant and
equipment |
|
5,049.2 |
|
|
|
5,391.8 |
|
Deferred income
taxes |
|
418.0 |
|
|
|
370.8 |
|
Other assets |
|
108.2 |
|
|
|
91.2 |
|
Total
Assets |
$ |
10,710.1 |
|
|
$ |
11,084.3 |
|
|
|
|
|
Liabilities and
Shareholders’ Deficit |
|
|
|
Current
Liabilities: |
|
|
|
Current
maturities of long-term debt |
$ |
17.9 |
|
|
$ |
169.3 |
|
Current
portion of long-term lease obligations |
|
206.0 |
|
|
|
188.6 |
|
Accounts
payable |
|
483.4 |
|
|
|
494.0 |
|
Advance
payments and customer deposits |
|
195.2 |
|
|
|
207.3 |
|
Accrued
taxes |
|
93.5 |
|
|
|
89.5 |
|
Accrued
interest |
|
69.9 |
|
|
|
52.6 |
|
Other
current liabilities |
|
308.8 |
|
|
|
342.1 |
|
Total
current liabilities |
|
1,374.7 |
|
|
|
1,543.4 |
|
|
|
|
|
Long-term debt |
|
5,721.3 |
|
|
|
5,674.6 |
|
Long-term lease
obligations |
|
4,486.5 |
|
|
|
4,643.3 |
|
Other liabilities |
|
488.5 |
|
|
|
521.9 |
|
Total
liabilities |
|
12,071.0 |
|
|
|
12,383.2 |
|
|
|
|
|
Shareholders’
Deficit: |
|
|
|
Common
stock, $.0001 par value, 75.0 shares authorized, 42.9 and 36.5
shares issued and outstanding, respectively |
|
— |
|
|
|
— |
|
Additional paid-in capital |
|
1,247.1 |
|
|
|
1,191.9 |
|
Accumulated other comprehensive income |
|
44.4 |
|
|
|
21.4 |
|
Accumulated deficit |
|
(2,652.4 |
) |
|
|
(2,512.2 |
) |
Total
shareholders’ deficit |
|
(1,360.9 |
) |
|
|
(1,298.9 |
) |
Total
Liabilities and Shareholders’ Deficit |
$ |
10,710.1 |
|
|
$ |
11,084.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In millions) |
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
Net income (loss) |
$ |
41.3 |
|
|
$ |
(101.5 |
) |
|
$ |
(173.8 |
) |
|
$ |
(280.9 |
) |
Adjustments to
reconcile net income (loss) to net cash provided from
operations: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
383.8 |
|
|
|
365.4 |
|
|
|
1,136.3 |
|
|
|
1,066.3 |
|
Provision
for doubtful accounts |
|
11.1 |
|
|
|
13.8 |
|
|
|
26.3 |
|
|
|
33.5 |
|
Share-based compensation expense |
|
7.1 |
|
|
|
12.8 |
|
|
|
25.5 |
|
|
|
45.2 |
|
Deferred
income taxes |
|
(2.9 |
) |
|
|
(48.0 |
) |
|
|
(67.6 |
) |
|
|
(145.3 |
) |
Net gain
on early extinguishment of debt |
|
(190.3 |
) |
|
|
(5.2 |
) |
|
|
(190.3 |
) |
|
|
(2.0 |
) |
Other,
net |
|
5.8 |
|
|
|
7.6 |
|
|
|
10.1 |
|
|
|
15.5 |
|
Changes in operating
assets and liabilities, net: |
|
|
|
|
|
|
|
Accounts
receivable |
|
(31.7 |
) |
|
|
(24.6 |
) |
|
|
(25.9 |
) |
|
|
(8.9 |
) |
Prepaid
income taxes |
|
0.6 |
|
|
|
(0.4 |
) |
|
|
(4.1 |
) |
|
|
(5.6 |
) |
Prepaid
expenses and other |
|
(2.7 |
) |
|
|
(6.0 |
) |
|
|
4.6 |
|
|
|
(20.3 |
) |
Accounts
payable |
|
(29.9 |
) |
|
|
25.1 |
|
|
|
(12.7 |
) |
|
|
(31.2 |
) |
Accrued
interest |
|
7.7 |
|
|
|
31.8 |
|
|
|
17.6 |
|
|
|
25.0 |
|
Accrued
taxes |
|
5.9 |
|
|
|
1.6 |
|
|
|
(3.4 |
) |
|
|
3.6 |
|
Other
current liabilities |
|
16.2 |
|
|
|
6.9 |
|
|
|
(2.5 |
) |
|
|
(13.2 |
) |
Other
liabilities |
|
0.1 |
|
|
|
(0.3 |
) |
|
|
7.1 |
|
|
|
1.2 |
|
Other,
net |
|
(5.6 |
) |
|
|
(7.3 |
) |
|
|
9.0 |
|
|
|
(36.3 |
) |
Net cash
provided from operating activities |
|
216.5 |
|
|
|
271.7 |
|
|
|
756.2 |
|
|
|
646.6 |
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
Additions
to property, plant and equipment |
|
(196.9 |
) |
|
|
(216.4 |
) |
|
|
(603.2 |
) |
|
|
(724.2 |
) |
Acquisition of Broadview, net of cash acquired |
|
— |
|
|
|
(63.3 |
) |
|
|
— |
|
|
|
(63.3 |
) |
Cash
acquired from EarthLink |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5.0 |
|
Acquisitions of MASS and ATC, net of cash acquired |
|
(9.3 |
) |
|
|
— |
|
|
|
(46.9 |
) |
|
|
— |
|
Other,
net |
|
1.2 |
|
|
|
2.4 |
|
|
|
(7.6 |
) |
|
|
(9.4 |
) |
Net cash
used in investing activities |
|
(205.0 |
) |
|
|
(277.3 |
) |
|
|
(657.7 |
) |
|
|
(791.9 |
) |
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
Dividends
paid to shareholders |
|
— |
|
|
|
(28.8 |
) |
|
|
— |
|
|
|
(64.4 |
) |
Proceeds
from issuance of stock |
|
1.1 |
|
|
|
— |
|
|
|
12.2 |
|
|
|
9.6 |
|
Repayments of debt and swaps |
|
(127.3 |
) |
|
|
(428.4 |
) |
|
|
(540.4 |
) |
|
|
(1,710.6 |
) |
Proceeds
from debt issuance |
|
177.0 |
|
|
|
564.0 |
|
|
|
627.0 |
|
|
|
2,099.6 |
|
Debt
issuance costs |
|
(11.9 |
) |
|
|
— |
|
|
|
(23.5 |
) |
|
|
(7.3 |
) |
Stock
repurchases |
|
— |
|
|
|
(19.0 |
) |
|
|
— |
|
|
|
(19.0 |
) |
Payments
under long-term lease obligations |
|
(48.1 |
) |
|
|
(42.7 |
) |
|
|
(139.5 |
) |
|
|
(124.9 |
) |
Payments
under capital lease obligations |
|
(10.4 |
) |
|
|
(7.2 |
) |
|
|
(38.1 |
) |
|
|
(29.2 |
) |
Other,
net |
|
0.1 |
|
|
|
(0.5 |
) |
|
|
(2.3 |
) |
|
|
(11.1 |
) |
Net cash
(used in) provided from financing activities |
|
(19.5 |
) |
|
|
37.4 |
|
|
|
(104.6 |
) |
|
|
142.7 |
|
Decrease (increase) in
cash and cash equivalents |
|
(8.0 |
) |
|
|
31.8 |
|
|
|
(6.1 |
) |
|
|
(2.6 |
) |
Cash and Cash
Equivalents: |
|
|
|
|
|
|
|
Beginning
of period |
|
45.3 |
|
|
|
24.7 |
|
|
|
43.4 |
|
|
|
59.1 |
|
End of
period |
$ |
37.3 |
|
|
$ |
56.5 |
|
|
$ |
37.3 |
|
|
$ |
56.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
|
UNAUDITED
SUPPLEMENTAL ADJUSTED OPERATING INFORMATION |
|
|
|
|
|
|
(In
thousands) |
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
September 30, |
|
September 30, |
|
Increase (Decrease) |
|
2018 |
|
2017 |
|
Amount |
|
% |
|
2018 |
|
2017 |
|
Amount |
|
% |
Consumer - ILEC
customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Households served |
1,250.5 |
|
1,288.2 |
|
|
(37.7 |
) |
|
(3 |
) |
|
|
|
|
|
|
|
|
High-speed Internet customers |
1,015.0 |
|
1,017.4 |
|
|
(2.4 |
) |
|
* |
|
|
|
|
|
|
|
|
Digital
television customers |
247.1 |
|
289.6 |
|
|
(42.5 |
) |
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net household
losses |
0.8 |
|
19.6 |
|
|
(18.8 |
) |
|
(96 |
) |
|
18.3 |
|
66.4 |
|
|
(48.1 |
) |
|
(72 |
) |
Net
high-speed Internet customer additions (losses) |
8.3 |
|
(8.4 |
) |
|
16.7 |
|
|
199 |
|
|
8.4 |
|
(33.7 |
) |
|
42.1 |
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business
- ILEC customers |
120.5 |
|
131.2 |
|
|
(10.7 |
) |
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer CLEC
customers |
605.5 |
|
680.6 |
|
|
(75.1 |
) |
|
(11 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
NON-GAAP
FINANCIAL MEASURES - ADJUSTED CAPITAL EXPENDITURES AND ADJUSTED
FREE CASH FLOW |
|
|
|
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
|
2018 |
|
|
|
2017 |
|
|
|
2018 |
|
|
|
2017 |
|
|
Adjusted
Capital Expenditures: |
|
|
|
|
|
|
|
|
Capital expenditures
under GAAP |
$ |
196.9 |
|
|
$ |
216.4 |
|
|
$ |
603.2 |
|
|
$ |
724.2 |
|
|
EarthLink
capital expenditures pre-merger |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15.2 |
|
|
Project
Excel capital expenditures |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(49.9 |
) |
|
Integration capital expenditures |
|
(9.3 |
) |
|
|
(11.2 |
) |
|
|
(27.3 |
) |
|
|
(22.1 |
) |
|
Adjusted capital
expenditures (A) |
$ |
187.6 |
|
|
$ |
205.2 |
|
|
$ |
575.9 |
|
|
$ |
667.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
NINE MONTHS ENDED |
|
|
|
|
|
|
September 30, |
|
September 30, |
|
|
|
|
|
|
|
2018 |
|
|
|
2018 |
|
|
Adjusted Free
Cash Flow: |
|
|
|
|
|
|
|
|
Operating income under
GAAP |
|
|
|
|
$ |
75.6 |
|
|
$ |
232.9 |
|
|
Depreciation and amortization |
|
|
|
|
|
383.8 |
|
|
|
1,136.3 |
|
|
OIBDA |
|
|
|
|
|
459.4 |
|
|
|
1,369.2 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
Merger,
integration and other costs |
|
|
|
|
|
9.0 |
|
|
|
30.4 |
|
|
Restructuring charges |
|
|
|
|
|
6.5 |
|
|
|
26.0 |
|
|
Other
costs (B) |
|
|
|
|
|
12.9 |
|
|
|
49.0 |
|
|
Pension
expense |
|
|
|
|
|
0.8 |
|
|
|
2.7 |
|
|
Share-based compensation |
|
|
|
|
|
7.1 |
|
|
|
25.5 |
|
|
Master
lease rent payment |
|
|
|
|
|
(164.2 |
) |
|
|
(491.5 |
) |
|
Adjusted OIBDA |
|
|
|
|
|
331.5 |
|
|
|
1,011.3 |
|
|
Adjusted
capital expenditures (per above) |
|
|
|
|
|
(187.6 |
) |
|
|
(575.9 |
) |
|
Cash paid
for interest on long-term debt obligations |
|
|
|
|
|
(95.4 |
) |
|
|
(288.4 |
) |
|
Cash
refunded for income taxes, net |
|
|
|
|
|
— |
|
|
|
15.1 |
|
|
Adjusted free cash
flow |
|
|
|
|
$ |
48.5 |
|
|
$ |
162.1 |
|
|
|
|
|
|
|
|
|
|
(A) |
Adjusted capital expenditures includes applicable
amounts for EarthLink for periods prior to the merger date of
February 27, 2017 and excludes post-merger integration capital
expenditures for Broadview and EarthLink and amounts related to
Project Excel, a capital program funded entirely using a portion of
the proceeds from the sale of the data center business completed in
December 2015. |
(B) |
Other costs primarily include business transformation
expenses consisting of consulting fees, incremental marketing and
rebranding costs, incremental labor, travel, training and other
transition costs related to outsourcing certain support functions.
These costs also include incremental network optimization costs
incurred in migrating traffic to existing lower costs circuits and
terminating contracts prior to their expiration. For a detailed
breakdown of these amounts, see note (E) from the "Notes to
Reconciliation of Non-GAAP Financial Measures." |
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
NINE MONTHS ENDED |
|
|
September 30, |
|
September 30, |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Reconciliation
of Revenues and Sales under GAAP to Adjusted Revenues and
Sales: |
|
|
|
|
|
|
|
|
|
Service revenues under
GAAP |
|
$ |
1,400.1 |
|
|
$ |
1,472.4 |
|
|
|
$ |
4,260.1 |
|
|
$ |
4,282.4 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
EarthLink
service revenues |
(A) |
|
— |
|
|
|
— |
|
|
(A) |
|
— |
|
|
|
149.3 |
|
Adjusted service
revenues |
|
|
1,400.1 |
|
|
|
1,472.4 |
|
|
|
|
4,260.1 |
|
|
|
4,431.7 |
|
Product
sales under GAAP |
|
|
20.5 |
|
|
|
25.3 |
|
|
|
|
59.2 |
|
|
|
72.6 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
EarthLink
product sales |
(A) |
|
— |
|
|
|
— |
|
|
(A) |
|
— |
|
|
|
0.2 |
|
Adjusted product
sales |
|
|
20.5 |
|
|
|
25.3 |
|
|
|
|
59.2 |
|
|
|
72.8 |
|
Adjusted
revenues and sales |
$ |
1,420.6 |
|
|
$ |
1,497.7 |
|
|
|
$ |
4,319.3 |
|
|
$ |
4,504.5 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Income (Loss) under GAAP to Adjusted OIBDA: |
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
41.3 |
|
|
$ |
(101.5 |
) |
|
|
$ |
(173.8 |
) |
|
$ |
(280.9 |
) |
Adjustments: |
|
|
|
|
|
|
|
|
|
Other
income, net |
(B) |
|
(3.2 |
) |
|
|
(1.7 |
) |
|
(B) |
|
(12.9 |
) |
|
|
(8.5 |
) |
Net gain
on early extinguishment of debt |
(B) |
|
(190.3 |
) |
|
|
(5.2 |
) |
|
(B) |
|
(190.3 |
) |
|
|
(2.0 |
) |
Interest
expense |
(B) |
|
230.0 |
|
|
|
216.4 |
|
|
(B) |
|
677.5 |
|
|
|
642.6 |
|
Income
tax benefit |
(B) |
|
(2.2 |
) |
|
|
(66.8 |
) |
|
(B) |
|
(67.6 |
) |
|
|
(163.4 |
) |
Operating income under
GAAP |
(B) |
|
75.6 |
|
|
|
41.2 |
|
|
(B) |
|
232.9 |
|
|
|
187.8 |
|
Depreciation and amortization |
(B) |
|
383.8 |
|
|
|
365.4 |
|
|
(B) |
|
1,136.3 |
|
|
|
1,066.3 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
EarthLink
operating income |
(C) |
|
— |
|
|
|
— |
|
|
(C) |
|
— |
|
|
|
30.8 |
|
Merger,
integration and other costs |
(B) |
|
9.0 |
|
|
|
33.7 |
|
|
(B) |
|
30.4 |
|
|
|
107.4 |
|
Restructuring charges |
(B) |
|
6.5 |
|
|
|
22.8 |
|
|
(B) |
|
26.0 |
|
|
|
33.7 |
|
Other
costs |
(E) |
|
12.9 |
|
|
|
12.8 |
|
|
(E) |
|
49.0 |
|
|
|
22.3 |
|
Pension
expense |
(B) |
|
0.8 |
|
|
|
2.0 |
|
|
(B) |
|
2.7 |
|
|
|
6.1 |
|
Share-based compensation expense |
(F) |
|
7.1 |
|
|
|
12.4 |
|
|
(F) |
|
25.5 |
|
|
|
35.0 |
|
Adjusted OIBDAR |
|
|
495.7 |
|
|
|
490.3 |
|
|
|
|
1,502.8 |
|
|
|
1,489.4 |
|
Master
lease rent payment |
(D) |
|
(164.2 |
) |
|
|
(163.3 |
) |
|
(D) |
|
(491.5 |
) |
|
|
(490.1 |
) |
Adjusted OIBDA |
|
$ |
331.5 |
|
|
$ |
327.0 |
|
|
|
$ |
1,011.3 |
|
|
$ |
999.3 |
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
(In millions) |
|
THREE MONTHS ENDED |
|
|
NINE MONTHS ENDED |
|
|
September 30, |
|
September 30, |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
|
2017 |
|
|
|
2018 |
|
|
2017 |
|
Reconciliation
of Net Cash Provided from Operating Activities to Adjusted
OIBDA: |
|
|
|
|
|
|
|
|
|
Net Cash Provided From
Operating Activities |
|
$ |
216.5 |
|
|
$ |
271.7 |
|
|
|
$ |
756.2 |
|
|
$ |
646.6 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Master
lease rent payment |
(D) |
|
(164.2 |
) |
|
|
(163.3 |
) |
|
(D) |
|
(491.5 |
) |
|
|
(490.1 |
) |
EarthLink
operating income |
(C) |
|
— |
|
|
|
— |
|
|
(C) |
|
— |
|
|
|
30.8 |
|
Merger,
integration and other costs |
(B) |
|
9.0 |
|
|
|
33.7 |
|
|
(B) |
|
30.4 |
|
|
|
107.4 |
|
Restructuring charges |
(B) |
|
6.5 |
|
|
|
22.8 |
|
|
(B) |
|
26.0 |
|
|
|
33.7 |
|
Other
costs |
(E) |
|
12.9 |
|
|
|
12.8 |
|
|
(E) |
|
49.0 |
|
|
|
22.3 |
|
Other
income, net |
(B) |
|
(3.2 |
) |
|
|
(1.7 |
) |
|
(B) |
|
(12.9 |
) |
|
|
(8.5 |
) |
Interest
expense |
(B) |
|
230.0 |
|
|
|
216.4 |
|
|
(B) |
|
677.5 |
|
|
|
642.6 |
|
Income
tax benefit, net of deferred income taxes |
|
|
1.3 |
|
|
|
(18.8 |
) |
|
|
|
0.8 |
|
|
|
(18.1 |
) |
Provision
for doubtful accounts |
(G) |
|
(11.1 |
) |
|
|
(13.8 |
) |
|
(G) |
|
(26.3 |
) |
|
|
(33.5 |
) |
Other
noncash adjustments, net |
(H) |
|
(4.7 |
) |
|
|
(6.0 |
) |
|
(H) |
|
(7.3 |
) |
|
|
(19.6 |
) |
Changes
in operating assets and liabilities, net |
(G) |
|
38.5 |
|
|
|
(26.8 |
) |
|
(G) |
|
9.4 |
|
|
|
85.7 |
|
Adjusted OIBDA |
|
$ |
331.5 |
|
|
$ |
327.0 |
|
|
|
$ |
1,011.3 |
|
|
$ |
999.3 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Cash Provided from Operating Activities to Adjusted Free
Cash Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided From
Operating Activities |
|
$ |
216.5 |
|
|
|
|
|
$ |
756.2 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
Cash paid
for interest on long-term debt obligations |
|
|
(95.4 |
) |
|
|
|
|
|
(288.4 |
) |
|
|
Cash
refunded for income taxes |
|
|
— |
|
|
|
|
|
|
15.1 |
|
|
|
Capital
expenditures |
|
|
(196.9 |
) |
|
|
|
|
|
(603.2 |
) |
|
|
Integration capital expenditures |
|
|
9.3 |
|
|
|
|
|
|
27.3 |
|
|
|
Master
lease rent payment |
(D) |
|
(164.2 |
) |
|
|
|
(D) |
|
(491.5 |
) |
|
|
Merger,
integration and other costs |
(B) |
|
9.0 |
|
|
|
|
(B) |
|
30.4 |
|
|
|
Restructuring charges |
(B) |
|
6.5 |
|
|
|
|
(B) |
|
26.0 |
|
|
|
Other
costs |
(E) |
|
12.9 |
|
|
|
|
(E) |
|
49.0 |
|
|
|
Other
income, net |
(B) |
|
(3.2 |
) |
|
|
|
(B) |
|
(12.9 |
) |
|
|
Interest
expense |
(B) |
|
230.0 |
|
|
|
|
(B) |
|
677.5 |
|
|
|
Income
tax benefit, net of deferred income taxes |
|
|
1.3 |
|
|
|
|
|
|
0.8 |
|
|
|
Provision
for doubtful accounts |
(G) |
|
(11.1 |
) |
|
|
|
(G) |
|
(26.3 |
) |
|
|
Other
noncash adjustments, net |
(H) |
|
(4.7 |
) |
|
|
|
(H) |
|
(7.3 |
) |
|
|
Changes
in operating assets and liabilities, net |
(G) |
|
38.5 |
|
|
|
|
(G) |
|
9.4 |
|
|
|
Adjusted Free Cash
Flow |
|
$ |
48.5 |
|
|
|
|
|
$ |
162.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of Non-GAAP Financial
Measures |
|
WINDSTREAM HOLDINGS, INC. |
NOTES TO RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|
|
|
|
|
|
|
|
Windstream Holdings, Inc. ("Windstream", "we", "us",
"our") has presented in this package unaudited adjusted results,
which includes the results of operations of EarthLink Holdings
Corp. ("EarthLink") as if the merger with EarthLink had been
completed as of January 1, 2016. The adjusted results are based
upon the combined historical financial information of Windstream
and EarthLink for all periods presented. We have made certain
reclassifications to the historical financial information of
EarthLink to conform to our presentation. Operating results of
Broadview Networks Holdings, Inc. ("Broadview"), Mass
Communications ("MASS") and American Telephone Company ("ATC") are
included beginning on July 28, 2017, March 27, 2018, and August 31,
2018, respectively, the dates of acquisition.The adjusted results
exclude pension costs, share-based compensation expense,
restructuring charges, merger, integration and certain other costs.
We have presented certain measures of our operating performance, on
an adjusted basis, that reflects the impact of the annual cash rent
payment due under the master lease agreement with Uniti Group, Inc.
("Uniti"). |
|
|
|
|
|
|
|
|
Our purpose for these adjustments is to improve the
comparability of results of operations for all periods presented in
order to focus on the true earnings capacity of our core business
operations and our ability to generate cash flow. We use adjusted
results, including adjusted OIBDA, adjusted OIBDAR, adjusted free
cash flow and adjusted capital expenditures as key measures of the
operational performance of our business. Our management, including
the chief operating decision-maker, consistently uses these
measures for internal reporting and the evaluation of business
objectives, opportunities and performance. |
|
|
(A) |
Represents EarthLink revenues and sales prior to the
merger date of February 27, 2017. |
(B) |
Represents applicable amount as reported under GAAP -
See Unaudited Consolidated Statements of Operations. |
(C) |
Represents EarthLink operating results for periods
prior to the merger date of February 27, 2017. These amounts
exclude EarthLink's historical depreciation and amortization,
restructuring, merger and integration costs and share-based
compensation. |
(D) |
Represents the impact of the annual cash rent payment
due under the master lease agreement with Uniti. |
(E) |
Other costs for the three and nine month periods ended
September 30, 2018, primarily include business transformation
expenses of $12.9 million and $49.0 million, respectively,
consisting of consulting fees, incremental marketing and rebranding
costs, incremental labor, travel, training and other transition
costs related to outsourcing certain support functions of $6.8
million and $30.7 million, respectively. These costs also include
$6.1 million and $17.7 million, respectively, of incremental
network optimization costs incurred in migrating traffic to
existing lower costs circuits and terminating contracts prior to
their expiration. Comparatively, for the three month period ended
September 30, 2017, other costs primarily consist of incremental
expenses of $2.9 million related to Hurricanes Harvey and Irma and
$8.3 million of costs incurred with a carrier access settlement.
Other costs also include a reserve for a potential penalty
attributable to not meeting certain spend commitments under a
circuit discount plan of approximately of $7.7 million during the
nine month period ended September 30, 2017. |
(F) |
The three and nine month periods ended September 30,
2017 excludes $0.4 million and $10.2 million of share-based
compensation expense included in merger, integration and other
costs, respectively. |
(G) |
Represents applicable amount reported under GAAP - See
Unaudited Consolidated Statements of Cash Flows. |
(H) |
Consists of non-cash amortization of debt issuance
costs, debt discounts and premiums, accretion expense related to
asset retirement obligations, gains on the sale of property, and
other non-cash miscellaneous income and expenses. |
|
|
|
|
|
|
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|