Aug 2, 2018

Consolidated Communications Reports Second Quarter 2018 Results

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

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

Second quarter 2018 Consolidated Communications financial summary:

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

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

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

Pro Forma Financial Results for the Second Quarter   

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

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

Cash Available to Pay Dividends, Capex

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

Financial Guidance

The Company updated its 2018 guidance as follows:

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

Dividend Payments

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

Conference Call Information

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

About Consolidated Communications 

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

Use of Non-GAAP Financial Measures                         

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

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

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

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

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

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

Preliminary Pro Forma Results                                                                                 

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

Safe Harbor

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

Company Contact                                                                      

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

- Tables to follow -


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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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