Consolidated Communications Holdings
Aug 5, 2010

Consolidated Communications Holdings Reports Second Quarter 2010 Results

MATTOON, Ill., Aug. 5, 2010 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) reported results for the second quarter ended June 30, 2010.

Second quarter financial summary:

"I am pleased with our results for the second quarter," said Bob Currey, president and CEO. "We continued to deliver a comfortable dividend payout ratio for our shareholders while making investments to grow the business. These investments helped us generate our third consecutive quarter of growth in total customer connections and an increase of over 4,100 in the last year."

"Our broadband products grew by 2,500 during the quarter with increases of 1,300 and 1,200 for DSL and IPTV, respectively. Our subscriber retention efforts resulted in access line losses of 1.0% for the quarter and 4.8% over the last twelve months. This is the best year over year line loss rate in two and a half years and demonstrates the power of our bundled offerings," Currey concluded.

Operating Statistics at June 30, 2010, Compared to June 30, 2009.

  Period Ended June 30,  
  2010 2009 Increase/(decrease) %
     
Local access lines 242,282 254,593 (12,311) (4.8)%
DSL subscribers 103,428 95,656 7,772 8.1%
IPTV subscribers 26,074 19,731 6,343 32.1%
ILEC VOIP lines 8,605 7,883 722 9.2%
CLEC access line equivalents 73,686 72,062 1,624 2.3%
Total connections 454,075 449,925 4,150 0.9%

Cash Available to Pay Dividends

For the quarter, cash available to pay dividends, or CAPD, was $16.4 million and the dividend payout ratio was 70.6%. At June 30, 2010, cash and cash equivalents were $53.6 million, a $33.5 million increase from the second quarter of 2009. The Company made capital expenditures of $10.9 million during the quarter.  

Financial Highlights for the Second Quarter Ended June 30, 2010 

Financial Highlights for the Six Months Ended June 30, 2010 

Financial Guidance

For 2010, the Company is reaffirming its full year guidance with respect to capital expenditures and cash taxes while updating cash interest expense. Capital expenditures continue to be expected in the range of $40.0 million to $42.0 million and cash income taxes are expected to be in the range of $21.0 million to $23.0 million. Cash interest expense is now expected to be in the range of $49.5 million to $51.5 million, down from $51.0 million to $54.0 million.

Dividend Payments

On August 2, 2010, the Company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on November 1, 2010 to stockholders of record at the close of business on October 15, 2010. 

Conference Call Information 

The Company will host a conference call today at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time to discuss second quarter earnings and developments with respect to the Company. The call is being webcast and archived on the "Investor Relations" section of the Company's website at http://www.consolidated.com. If you do not have internet access, the conference call dial-in number is 1-877-374-3981 with pass code 86124583. A telephonic replay of the conference call will also be available starting two hours after completion of the call until August 12, 2010 at midnight Eastern Time. The replay can be accessed by calling 1-800-642-1687. 

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" and "adjusted diluted 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, amortization and extraordinary items on a 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, 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 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, 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 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. 

We present the non-GAAP measures adjusted net income and adjusted diluted net income per share 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.

About Consolidated

Consolidated Communications Holdings, Inc. is an established rural local exchange company providing voice, data and video services to residential and business customers in Illinois, Texas and Pennsylvania. Each of the operating companies has been operating in its local market for over 100 years.  As of June 30, 2010, the Company had 242,282 ILEC access lines, 73,686 Competitive Local Exchange Carrier (CLEC) access line equivalents, 103,428 DSL subscribers and 26,074 IPTV subscribers.  Consolidated Communications offers a wide range of telecommunications services, including local and long distance service, custom calling features, private line services, high-speed Internet access, digital TV, carrier access services and directory publishing.

Safe Harbor 

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, 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; system failures; 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; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of Consolidated's 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. These and other risks and uncertainties are discussed in more detail in Consolidated's filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond management's ability to control or predict. All forward-looking statements attributable to Consolidated or persons acting on behalf of us are expressly qualified in their entirety by the cautionary statements and risk factors contained in this press release and Consolidated's filings with the Securities and Exchange Commission. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. 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 Securities and Exchange Commission, Consolidated does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. 

 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands)
(2010 Unaudited)
   
  June 30,
2010 
 December 31,
2009 
ASSETS   
Current assets:   
Cash and cash equivalents  $ 53,574 $ 42,758
Accounts receivable, net  41,898 42,125
Prepaid expenses and other current assets  21,443 19,483
Total current assets  116,915 104,366
Property, plant and equipment, net  365,195 377,200
Intangibles, net and other assets  729,142 741,477
Total assets  $ 1,211,252 $ 1,223,043
   
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current liabilities:   
Current portion of capital lease obligation  $ --  $ 344
Accounts payable  15,265 13,482
Accrued expenses and other current liabilities  56,815 66,751
Total current liabilities  72,080 80,577
Long-term debt  880,000 880,000
Other long-term liabilities  187,279 181,749
Total liabilities  1,139,359 1,142,326
   
Stockholders' equity:   
Common stock, $0.01 par value  298 296
Paid in capital  101,733 109,746
Accumulated other comprehensive loss  (36,608) (35,540)
Total Consolidated Communications Holdings, Inc.
stockholders' equity
 65,423 74,502
Noncontrolling interest 6,470 6,215
Total equity 71,893 80,717
Total liabilities and stockholders' equity $ 1,211,252 $ 1,223,043
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
 
     
  Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  2010  2009  2010  2009 
Revenues  $ 95,737 $ 102,042 $ 194,039 $ 203,752
Operating expenses:     
Cost of services and products  35,649 36,344 71,589 72,444
Selling, general and administrative expenses  21,390 25,850 44,193 53,727
Depreciation and amortization  21,460 20,981 43,002 42,658
Income from operations  17,238 18,867 35,255 34,923
Other income (expense):     
Interest expense, net  (13,047) (14,549) (25,952) (29,019)
Other income, net  6,620 8,527 12,986 13,024
Income before income taxes  10,811 12,845 22,289 18,928
Income tax expense  3,638 5,186 8,064 7,572
Net income  7,173 7,659 14,225 11,356
Less: Net income attributable to noncontrolling interest  124 136 255 543
Net income attributable to Consolidated Communications 
Holdings, Inc. 
 $ 7,049 $ 7,523 $ 13,970 $ 10,813
     
Diluted net income attributable to Consolidated Communications
Holdings, Inc. per common share
 $ 0.24 $ 0.25 $ 0.47 $ 0.36
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
     
  Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  2010  2009  2010  2009 
OPERATING ACTIVITIES    
Net income $ 7,173 $ 7,659 $ 14,225 $ 11,356
Adjustments to reconcile net income to cash provided by operating activities:    
Depreciation and amortization 21,460 20,981 43,002 42,658
Non-cash stock compensation 616 499 1,119 932
Loss on disposal of assets 884 --  888 -- 
Other adjustments, net 331 1,518 1,440 75
Changes in operating assets and liabilities, net 818 (2,013) (5,602) (7,024)
Net cash provided by operating activities 31,283 28,644 55,072 47,998
INVESTING ACTIVITIES    
Proceeds from sale of investments 35 --  35 -- 
Proceeds from sale of assets 458 --  972 300
Capital expenditures (10,885) (10,218) (21,820) (20,375)
Net cash used in investing activities (10,392) (10,218) (20,813) (20,075)
FINANCING ACTIVITIES    
Payments made on long-term obligations (103) (229) (344) (453)
Purchase and retirement of common stock --  --  --  (9)
Dividends on common stock & participating securities (11,553) (11,519) (23,099) (22,907)
Net cash used in financing activities (11,656) (11,748) (23,443) (23,369)
Net change in cash and cash equivalents 9,235 6,678 10,816 4,554
Cash and cash equivalents at beginning of period 44,339 13,347 42,758 15,471
Cash and cash equivalents at end of period $ 53,574 $ 20,025 $ 53,574 $ 20,025
 
 
Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
   
  Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  2010  2009  2010  2009 
Telephone Operations    
Local calling services $ 23,210 $ 24,260 $ 47,020 $ 48,987
Network access services 20,883 22,143 42,085 44,123
Subsidies 11,820 13,418 24,024 27,536
Long distance services 4,730 5,402 9,363 10,890
Data and Internet services 18,681 16,704 36,682 33,105
Other services 8,389 9,217 17,322 18,197
Total Telephone Operations 87,713 91,144 176,496 182,838
Other Operations 8,024 10,898 17,543 20,914
Total operating revenues $ 95,737 $ 102,042 $ 194,039 $ 203,752
 
 
Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
     
  Three Months Ended
June 30, 
 Six Months Ended
June 30, 
  2010  2009  2010  2009 
EBITDA:    
Net cash provided by operating activities $ 31,283 $ 28,644 $ 55,072 $ 47,998
Adjustments:    
Compensation from restricted share plan (616) (499) (1,119) (932)
Other adjustments, net (1,215) (1,518) (2,328) (75)
Changes in operating assets and liabilities (818) 2,013 5,602 7,024
Interest expense, net 13,047 14,549 25,952 29,019
Income taxes 3,638 5,186 8,064 7,572
EBITDA (1) 45,319 48,375 91,243 90,606
     
Adjustments to EBITDA (2):    
Integration and restructuring (3) --  1,592 --  3,972
Other, net (4) (6,525) (6,884) (12,799) (11,788)
Investment distributions (5) 6,562 4,543 13,513 9,703
Non-cash compensation (6) 616 499 1,119 932
Adjusted EBITDA $ 45,972 $ 48,125 $ 93,077 $ 93,424
     
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, Illinois and Pennsylvania businesses. For the second quarter of 2009, this is comprised of $0.9 million of integration costs and $0.7 million of 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 Holdings, Inc.
Cash Available to Pay Dividends
(Dollars in thousands)
(Unaudited)
   
  Three Months
Ended June 30,
2010
Six Months
Ended June 30,
2010
Adjusted EBITDA $ 45,972 $ 93,077
   
 - Cash interest expense  (12,507) (24,835)
 - Capital expenditures (10,885) (21,820)
 - Cash income taxes (6,139) (11,728)
 - Principal payments on debt (103) (344)
 + Cash interest income 22 38
   
Cash available to pay dividends $ 16,360 $ 34,388
   
Dividends Paid $ 11,553 $ 23,099
Payout Ratio 70.6% 67.2%
 
 
Consolidated Communications Holdings, Inc.
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
   
   
Summary of Outstanding Debt  
Term loan  $ 880,000 
Capital leases -- 
Total debt as of June 30, 2010 $ 880,000 
Less cash on hand (53,574) 
Total net debt as of June 30, 2010 $ 826,426 
   
Adjusted EBITDA for the last twelve
months ended June 30, 2010 
 $ 188,501 
   
Total Net Debt to last twelve months
Adjusted EBITDA
 4.38 x 
 
 
Consolidated Communications Holdings, Inc.
Adjusted Net Income and Diluted Net Income Per Share
(Dollars in thousands, except per share amounts)
(Unaudited)
     
  Three Months Ended Six Months Ended 
  June 30,
2010 
 June 30,
2009 
 June 30,
2010 
 June 30,
2009 
Reported net income attributable to common stockholders  $ 7,049 $ 7,523 $ 13,970 $ 10,813
Access dispute settlement, net of tax -- (1,067) -- (1,067)
Loss on disposal of assets, net of tax 526 -- 526 --
Severance, net of tax  -- 410 -- 1,723
Integration and restructuring charges, net of tax -- 545 -- 1,021
Non-cash stock compensation 616 499 1,119 932
Adjusted net income attributable to common stockholders $ 8,191 $ 7,910 $ 15,615 $ 13,422
     
Weighted average number of shares outstanding 29,483 29,674 29,483 29,620
Adjusted diluted net income per share $ 0.28 $ 0.27 $ 0.53 $ 0.45
     
Calculations above assume a 33.3 and 40.4 percent effective tax rate for the three months ended June 30, 2010 and 2009, respectively. For the six months ended, the effective tax rate assumptions are 36.2 and 40.0 percent for 2010 and 2009, respectively.  
 
 
Consolidated Communications Holdings, Inc.
Key Operating Statistics
    
 June 30,
2010
March 31,
2010
June 30,
2009
Local access lines in service   
Residential 143,283 144,855 151,937
Business 98,999 99,841 102,656
Total local access lines  242,282 244,696 254,593
Total IPTV subscribers 26,074 24,898 19,731
ILEC DSL subscribers (1) 103,428 102,132 95,656
ILEC Broadband Connections 129,502 127,030 115,387
ILEC VOIP subscribers 8,605 8,529 7,883
CLEC Access Line Equivalents (2) 73,686 73,413 72,062
Total connections 454,075 453,668 449,925
    
Long distance lines (3) 170,374 170,765 166,006
Dial-up subscribers 1,732 2,205 3,406
    
IPTV Homes passed 197,766 193,748 152,181
    
(1) Includes only ILEC DSL. CLEC DSL is included in CLEC access line equivalents.
(2) 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.  
(3) Excludes CLEC LD subscribers.
CONTACT:  Consolidated Communications Holdings, Inc.
          Matt Smith, Treasurer & Director of Finance
          217-258-2959  
          matthew.smith@consolidated.com

(C) Copyright 2010 GlobeNewswire, Inc. All rights reserved.