First quarter summary: -- Revenue was
$101.7 million. -- Net cash provided by operations was $19.4 million. -- Adjusted EBITDA was $45.3 million. -- Dividend payout ratio was 64.3%.
"By continuing to execute on our plan, we kicked off 2009 with a solid
quarter both operationally and financially," said
"Despite the competitive and economic headwinds, we are pleased to have access line losses moderately improving across all of our markets. It is too soon to say we have turned the corner from the cable voice launches last year, but we are encouraged by the results. As we have said before, we expect the cycle to mirror previous cable voice launches where the spike in line losses begins to decelerate in three to five quarters."
"I am also pleased to report we are in the final stages of the
Operating Statistics at
March 31, 2009, Compared to March 31, 2008. -- Total connections were 453,426, a decrease of 2,319, or 0.5%. -- Total local access lines were 259,787, a decrease of 22,854, or 8.1%. -- ILEC Broadband connections were 112,761, an increase of 15,422, or 15.8%. -- DSL subscribers were 94,554, an increase of 10,241, or 12.1%. -- IPTVsubscribers were 18,207, an increase of 5,181, or 39.8%. -- ILEC VOIP lines were 7,141, an increase of 4,203, or 143.1%. -- CLEC access line equivalents were 73,737, an increase of 910, or 1.2%.
Cash Available to Pay Dividends
For the quarter, cash available to pay dividends, or CAPD, was
Financial Highlights for the First Quarter Ended
March 31, 2009-- Revenues were $101.7 million, compared to $105.4 millionin the first quarter of 2008. Declines in Local Calling Services, Long Distance, and Network Access were partially offset by increases in Data and Internet Services and Subsidies. Local Calling Services declined $2.3 milliondue to the loss of access lines. Network Access revenues were down $2.5 milliondue to the loss of access lines, lower minutes of use and some rate reduction associated with our July 1, 2007Price Caps election for Illinoisand Texas. Data and Internet revenues were up $2 milliondue to the continued growth in DSL and IPTV. -- Depreciation and amortization was $21.7 million, compared to $22.9 millionin the same period last year. The $1.2 milliondecrease was primarily attributable to our election to discontinue FAS 71 accounting for our regulated fixed assets at year end 2008. -- Income from operations was $16.1 million, compared to $20.5 millionin the first quarter of 2008. The decrease is mainly due to the decline in revenues, $1.6 millionin incremental pension and OPEB expense, $2.2 millionin severance associated with our headcount reductions, and $0.3 millionin costs associated with the ratification of the Illinoislabor agreement, net of the $1.2 milliondecrease in depreciation and amortization. -- Interest expense, net was $14.5 million, compared to $18.1 millionin the same quarter last year. The $3.6 milliondecrease is driven by $1.0 millionin quarterly savings from the April 2008redemption of our Senior Notes as well as having an overall lower weighted average cost of debt. -- Other income, net was $4.5 million, compared to $4.4 millionfor same period in 2008. The company has five wireless partnerships with Verizon Wirelessand our pro rata share of the partnership earnings are reflected in other income. In the first quarter of 2009, we recognized $5.1 millionin income from wireless partnerships. -- Net income attributable to common stockholders was $3.3 millionversus net income of $3.7 millionin the first quarter of 2008. "Adjusted net income" excludes certain items in the manner described in the table provided in this release. On that basis, "adjusted net income" was $5.5 millionfor the first quarter of 2009, compared to $4.7 millionin the same quarter of 2008. -- Diluted net income per common share was $0.11, compared to a diluted net income per common share of $0.13in the same quarter of 2008. "Adjusted diluted net income per share" excludes certain items in the manner described in the table provided in this release. On that basis, "adjusted diluted net income per share" for the first quarter ended March 31, 2009was $0.19versus $0.16in the first quarter of 2008. -- Adjusted EBITDA was $45.3 million, compared to $49.2 millionfor the same period in 2008. The decrease was primarily driven by lower revenue, $1.6 millionin incremental pension and OPEB expense, $0.6 millionin severance that does not qualify as an add-back, and the $0.3 millionlabor agreement ratification expense. Net cash provided from operating activities was $19.4 million, compared to $25.0 millionfor the first quarter in 2008. -- The total net debt to last twelve month Adjusted EBITDA coverage ratio is 4.7 times to 1.0.
For 2009, the Company is reaffirming its full year guidance with respect
to capital expenditures, cash interest, and cash taxes. Capital expenditures
are expected to be in the range of
The Company is providing the following update to 2009 estimates for
pension expense and pension funding. Based on recent updates to our
valuations, we continue to expect to make cash contributions for 2009 in the
Conference Call Information
The Company will host a conference call today at
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", "total net debt to last twelve month Adjusted EBITDA coverage ratio", "adjusted diluted net income," and "adjusted net income per share", all of which are non-GAAP financial measures. 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 (loss) or net income (loss) 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 the credit facility 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.
EBITDA is defined as net earnings (loss) before interest expense, income taxes, depreciation and amortization on an historical basis. We believe net cash provided by operating activities is the most directly comparable financial measure to EBITDA under GAAP. EBITDA is a non-GAAP financial measure.
Cash available to pay dividends represents Adjusted EBITDA plus cash interest income less (1) cash interest expense, (2) capital expenditures, and (3) cash taxes.
We present Adjusted EBITDA and cash available to pay dividends for several reasons. Management believes Adjusted EBITDA and cash available to pay dividends 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 and cash available to pay dividends 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 the agreements governing our debt that require 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. We present other information related to the non-GAAP financial measures, specifically "total net debt to last twelve month Adjusted EBITDA coverage ratio," principally to put these other 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. As a result, management believes the presentation of Adjusted EBITDA and cash available to pay dividends, as supplemented by "total net debt to last twelve months Adjusted EBITDA coverage ratio," provides important additional information to investors. In addition, Adjusted EBITDA and cash available to pay dividends 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 the agreements governing our debt and to measure our ability to service and repay debt.
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 and, together with adjusted net income and adjusted diluted net income per share, assist investors, securities analysts and other interested parties in evaluating both our company over time and the relative performance of the companies in our industry.
Any statements contained in this press release other than statements of
historical fact, including statements about management's beliefs and
expectations, are forward-looking statements and should be evaluated as such.
These statements are made on the basis of management's views and assumptions
regarding future events and business performance. Words such as "estimate,"
"believe," "anticipate," "expect," "intend," "plan," "target," "project,"
"should," "may," "will" and similar expressions are intended to identify
forward-looking statements. Forward-looking statements (including oral
representations) involve risks and uncertainties that may cause actual results
to differ materially from any future results, performance or achievements
expressed or implied by such statements. These risks and uncertainties include
economic and financial market conditions generally and economic conditions in
Consolidated's service areas; changes in the valuation of pension plan assets;
our ability to successfully integrate North Pittsburgh's operations and
realize the synergies from the acquisition, as well as a number of other
factors related to our business, including various risks to shareholders of
not receiving dividends and risks to Consolidated's ability to pursue growth
opportunities if Consolidated continues to pay dividends according to the
current dividend policy; various risks to the price and volatility of
Consolidated's common stock; the substantial amount of debt and Consolidated's
ability to incur additional debt in the future; Consolidated's need for a
significant amount of cash to service and repay the debt and to pay dividends
on the common stock; restrictions contained in the debt agreements that limit
the discretion of management in operating the business; the ability to
refinance the existing debt as necessary; regulatory changes, including
changes to subsidies, rapid development and introduction of new technologies
and intense competition in the telecommunications industry; risks associated
with Consolidated's possible pursuit of acquisitions; economic conditions in
the Consolidated service areas in
Matt SmithDirector - Investor Relations 217-258-2959 firstname.lastname@example.org - Tables Follow - Consolidated Communications Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) March 31, December 31, 2009 2008 ---- ---- ASSETS Current assets: Cash and cash equivalents $13,347 $15,471 Accounts receivable, net 45,589 45,092 Prepaid expenses and other current assets 17,899 18,013 ------ ------ Total current assets 76,835 78,576 Property, plant and equipment, net 393,377 400,286 Intangibles, net and other assets 756,586 762,764 ------- ------- Total assets $1,226,798 $1,241,626 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of capital lease obligation $939 $922 Accounts payable 10,153 12,336 Accrued expenses and other current liabilities 62,532 58,034 ------ ------ Total current liabilities 73,624 71,292 Capital lease obligation less current portion 103 344 Long-term debt 880,000 880,000 Other long-term liabilities 203,655 214,705 ------- ------- Total liabilities 1,157,382 1,166,341 --------- --------- Stockholders' equity: Common stock, $0.01 par value 295 295 Paid in capital 121,507 129,284 Retained Earnings - - Accumulated other comprehensive loss (57,978) (59,479) -------- -------- Total Consolidated Communications Holdingsstockholders' equity: 63,824 70,100 Noncontrolling interest 5,592 5,185 ----- ----- Total stockholders' equity 69,416 75,285 ------ ------ Total liabilities and stockholder's equity $1,226,798 $1,241,626 ========== ========== Consolidated Communications Condensed Consolidated Statements of Operations (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, --------- 2009 2008 ---- ---- Revenues $101,710 $105,414 Operating expenses: Cost of services and products 36,100 33,863 Selling, general and administrative expenses 27,877 28,144 Depreciation and amortization 21,677 22,871 ------ ------ Income from operations 16,056 20,536 Other income (expense): Interest expense, net (14,470) (18,054) Other income, net 4,497 4,377 ----- ----- Income before income taxes 6,083 6,859 Income tax expense 2,386 2,878 ----- ----- Net income 3,697 3,981 Less: Net income attributable to noncontrolling interest 407 272 --- --- Net income attributable to common stockholders $3,290 $3,709 ====== ====== Diluted net income per common share $0.11 $0.13 ===== ===== Consolidated Communications Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Three Months Ended March 31, -------- 2009 2008 ---- ---- OPERATING ACTIVITIES Net income $3,697 $3,981 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 21,677 22,871 Non-cash stock compensation 433 384 Other adjustments, net (1,443) (2,092) Changes in operating assets and liabilities, net (5,010) (111) ------- ----- Net cash provided by operating activities 19,354 25,033 ------ ------ INVESTING ACTIVITIES Proceeds from sale of assets 300 - Capital expenditures (10,157) (13,285) -------- -------- Net cash used for investing activities (9,857) (13,285) ------- -------- FINANCING ACTIVITIES Payments made on long-term obligations (224) (246) Payment of deferred financing costs - (181) Purchase and retirement of common stock (9) (8) Dividends on common stock (11,388) (11,359) -------- -------- Net cash used in financing activities (11,621) (11,794) -------- -------- Net decrease in cash and cash equivalents (2,124) (46) Cash and cash equivalents at beginning of period 15,471 34,341 ------ ------ Cash and cash equivalents at end of period $13,347 $34,295 ======= ======= Consolidated Communications Consolidated Revenue by Category (Dollars in thousands) (Unaudited) Three Months Ended March 31, --------- 2009 2008 ---- ---- Telephone Operations Local calling services $24,727 $26,950 Network access services 21,981 24,631 Subsidies 14,118 13,799 Long distance services 5,488 6,299 Data and Internet services 16,401 14,401 Other services 8,980 9,190 ----- ----- Total Telephone Operations 91,695 95,270 Other Operations 10,015 10,144 ------ ------ Total operating revenues $101,710 $105,414 ======== ======== Consolidated Communications Schedule of Adjusted EBITDA Calculation (Dollars in thousands) (Unaudited) Three Months Ended March 31, --------- 2009 2008 ---- ---- EBITDA: Net cash provided by operating activities $19,354 $25,033 Adjustments: Compensation from restricted share plan (433) (384) Other adjustments, net 1,443 2,092 Changes in operating assets and liabilities 5,010 111 Interest expense, net 14,470 18,054 Income taxes 2,386 2,878 ----- ----- EBITDA (1) 42,230 47,784 Adjustments to EBITDA (2): Integration and restructuring (3) 2,380 1,082 Other, net (4) (4,904) (4,649) Investment distributions (5) 5,159 4,590 Non-cash compensation (6) 433 384 --- --- Adjusted EBITDA $45,298 $49,191 ======= ======= Footnotes for Adjusted EBITDA: (1) EBITDA is defined as net earnings before interest expense, income taxes, depreciation, amortization and extraordinary items on a historical basis. (2) These adjustments reflect those required or permitted by the lenders under the credit facility in place at the end of each of the quarters included in the periods presented. (3) Represents certain expenses associated with integrating and restructuring the Texas, Illinoisand Pennsylvaniabusinesses. For the first quarter of 2009, this is comprised of $0.8 millionof integration costs and $1.6 millionof severance costs. For the first quarter of 2008, this is comprised of $0.9 millionof integration costs and $0.2 millionof severance costs. (4) Other, net includes the equity earnings from our investments, dividend income, income attributable to noncontrolling interests in subsidiaries and certain miscellaneous non-operating items. (5) For purposes of calculating Adjusted EBITDA, we include all cash dividends and other cash distributions received from our investments. (6) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are being excluded from Adjusted EBITDA. Consolidated Communications Cash Available to Pay Dividends (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2009 Adjusted EBITDA $45,298 - Cash interest expense (14,085) - Capital Expenditures (10,157) - Cash income taxes (3,153) - Principal payments on debt (224) + Cash interest income 21 --- Cash available to pay dividends $17,700 ======= Quarterly Dividend $11,388 Payout Ratio 64.3% Consolidated Communications Total Net Debt to LTM Adjusted EBITDA Ratio (Dollars in thousands) (Unaudited) Summary of Outstanding Debt Term loan $880,000 Capital leases 1,042 ----- Total debt as of March 31, 2009 $881,042 Less cash on hand (13,347) -------- Total net debt as of March 31, 2009 $867,695 ======== Adjusted EBITDA for the last twelve months ended March 31, 2009 $185,862 Total Net Debt to last twelve months Adjusted EBITDA 4.7 x Consolidated Communications Adjusted Net Income and Diluted Net Income Per Share (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, March 31, 2009 2008 ---- ---- Reported net income attributable to common stockholders $3,290 $3,709 Deferred tax adjustment - Bond Redemption charge, net of tax - Non-cash interest on interest rate hedges, net of tax - - Severance, net of tax 1,330 130 Integration and restructuring charges, net of tax 482 479 Non-cash compensation 433 384 --- --- Adjusted income attributable to common stockholders $5,535 $4,702 ====== ====== Weighted average number of shares outstanding 29,565,311 29,449,849 ========== ========== Adjusted diluted net income per share $0.19 $0.16 ===== ===== Calculations above assume a 39.2 and 43.7 percent effective tax rate for the three months ended March 31, 2009and 2008, respectively. Consolidated Communications Key Operating Statistics March 31, December 31, March 31, 2009 2008 2008 ---- ---- ---- Local access lines in service Residential 156,935 162,067 179,864 Business (1) 102,852 102,256 102,777 ------- ------- ------- Total local access lines 259,787 264,323 282,641 Total IPTV subscribers 18,207 16,666 13,026 ILEC DSL subscribers (2) 94,554 91,817 84,313 ------ ------ ------ ILEC Broadband Connections 112,761 108,483 97,339 ILEC VOIP subscribers 7,141 6,510 2,938 CLEC Access Line Equivalents (3) 73,737 74,687 72,827 Total connections 453,426 454,003 455,745 ======= ======= ======= Long distance lines (4) 165,892 165,953 167,360 Dial-up subscribers 3,612 3,957 6,042 IPTV Homes passed 147,338 142,809 107,631 (1) We had an increase of approximately 1,000 business lines due to a one-time billing true-up of access lines installed in 2008 that were not properly reflected in our line counts until the first quarter of 2009. (2) Includes only ILEC DSL. CLEC DSL is included in CLEC access line equivalents. (3) CLEC access line equivalents represent a combination of voice services and data circuits. The calculations represent a conversion of data circuits to an access line basis. Equivalents are calculated by converting data circuits (basic rate interface (BRI), primary rate interface (PRI), DSL, DS-1, DS-3, and Ethernet) and SONET-based (optical)services (OC-3 and OC-48) to the equivalent of an access line. (4) Excludes CLEC LD subscribers.