Consolidated Communications Holdings
Nov 3, 2011

Consolidated Communications Reports Third Quarter 2011 Results

MATTOON, Ill., Nov. 3, 2011 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) reported results for the third quarter ended September 30, 2011.

Third quarter 2011 financial summary:

"I am pleased to report another solid quarter both operationally and financially," said Bob Currey, President and Chief Executive Officer. "We delivered significant operating cash flow and continued to build liquidity and flexibility with our balance sheet."

"Customer reception to our marketing initiatives in the quarter was very good. Our bundling efforts helped us deliver strong growth in broadband subscribers and our best access line performance in seven years. We added nearly 1,000 internet customers and 1,800 video subscribers," Currey concluded.

 

Operating Statistics at September 30, 2011, Compared to September 30, 2010
  Period Ended September 30,    
  2011 2010 Increase/(decrease) %
         
Total connections 466,426 454,664 11,762 2.60%
Local access lines 230,251 239,695 (9444) (3.9%)
DSL subscribers 109,572 104,933 4,639 4.4%
IPTV subscribers 32,981 27,953 5,028 18.0%
ILEC VOIP lines 8,916 8,770 146 1.7%
CLEC access line equivalents 84,706 73,313 11,393 15.5%

Cash Available to Pay Dividends

For the quarter, cash available to pay dividends, or CAPD, was $20.8 million, and the dividend payout ratio was 55.7%. At September 30, 2011, cash and cash equivalents were $92.0 million, representing an increase of $36.0 million over the prior year period. The Company made capital expenditures of $10.5 million and contributed $3.8 million to its pension plan in the quarter.  

Financial Highlights for the Third Quarter Ended September 30, 2011 

Financial Highlights for the Nine Months Ended September 30, 2011 

Financial Guidance

For 2011, the Company is narrowing its full year guidance for capital expenditures and cash interest expenses while lowering its guidance for cash taxes. Capital expenditures are now expected to be in the range of $40.0 million to $41.0 million versus previous guidance of $38.0 million to $41.0 million. Cash interest is now expected to be in the range of $47.0 million to $48.0 million compared to previous guidance of $45.0 million to $48.0 million. Cash taxes are now expected to be in the range of $8.0 million to $9.0 million, which is lower than previous guidance of $9.0 million to $11.0 million.     

Dividend Payments

On October 31, 2011, the Company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on February 1, 2012 to stockholders of record at the close of business on January 15, 2012. 

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 third 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 17430395. International parties can access the call by dialing 1-253-237-1158. A telephonic replay of the conference call will also be available starting three hours after completion of the call until November 10, 2011 at midnight Eastern Time. To hear the replay, parties in the United States and Canada should call 1-855-859-2056 and international parties should call 1-404-537-3406. 

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. 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 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 before interest expense, income taxes, depreciation and amortization on a historical basis. We believe net cash provided by operating activities is the GAAP financial measure most directly comparable to EBITDA.

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

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 September 30, 2011, the Company had 230,251 ILEC access lines, 84,706 Competitive Local Exchange Carrier (CLEC) access line equivalents, 109,572 DSL subscribers, 32,981 IPTV subscribers and 8,916 VOIP lines. The Company 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 repay or refinance it or 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; 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, except par value)
     
  September 30,  December 31, 
  2011  2010 
 (Unaudited)  
 ASSETS     
 Current assets:     
 Cash and cash equivalents   $ 92,005  $ 67,654
 Accounts receivable, net   35,537  42,012
 Prepaid expenses and other current assets   24,967  26,584
 Total current assets   152,509  136,250
     
 Property, plant and equipment, net   337,986  356,057
 Intangibles, net and other assets   699,878  717,239
 Total assets   $ 1,190,373  $ 1,209,546
     
 LIABILITIES AND STOCKHOLDERS' EQUITY     
 Current liabilities:     
 Current portion of long-term debt   $ 6,600  $ -- 
 Current portion of capital lease obligation   181  132
 Accounts payable   11,503  9,972
 Accrued expenses and other current liabilities   57,314  65,488
 Total current liabilities   75,598  75,592
     
 Capital lease obligation less current portion   4,571  3,993
 Long-term debt   873,400  880,000
 Other long-term liabilities   173,085  178,086
 Total liabilities   1,126,654  1,137,671
     
 Stockholders' equity:     
 Common stock, $0.01 par value   299  298
 Paid in capital   83,553  98,126
 Accumulated other comprehensive loss   (25,497)  (31,471)
Total Consolidated Communications Holdings, Inc.    
stockholders' equity  58,355  66,953
Noncontrolling interest  5,364  4,922
Total stockholders' equity  63,719  71,875
Total liabilities and stockholders' equity  $ 1,190,373  $ 1,209,546
 
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
 (Unaudited)     
     
   Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2011  2010  2011  2010
         
         
 Revenues   $ 92,548  $ 95,576  $ 280,612  $ 289,615
 Operating expenses:         
 Cost of services and products   33,913  36,371  103,864  107,960
 Selling, general and administrative         
 expenses   21,257  21,686  63,643  65,879
 Depreciation and amortization   22,161  21,918  66,306  64,920
 Income from operations   15,217  15,601  46,799  50,856
 Other income (expense):         
 Interest expense, net   (13,447)  (11,723)  (37,783)  (37,675)
 Other income, net   6,919  7,040  20,370  20,026
 Income before income taxes   8,689  10,918  29,386  33,207
 Income tax expense (benefit)   2,723  (1,049)  10,410  7,015
 Net income   5,966  11,967  18,976  26,192
 Less: Net income attributable to noncontrolling interest   148  130  442  385
 Net income attributable to Consolidated Communications         
 Holdings, Inc.   $ 5,818  $ 11,837  $ 18,534  $ 25,807
         
 Diluted net income attributable to Consolidated         
Communications Holdings, Inc. per common share  $ 0.19  $ 0.40  $ 0.61  $ 0.86
 
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
 (Unaudited) 
     
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2011  2010  2011  2010
         
OPERATING ACTIVITIES      
Net income  $ 5,966  $ 11,967  $ 18,976  $ 26,192
Adjustments to reconcile net income to cash    
provided by operating activities:    
Depreciation and amortization  22,161  21,918  66,306  64,920
Stock-based compensation expense  583  621  1,672  1,740
Non-cash change in uncertain tax positions  (302)  (5,186)  (302)  (5,186)
Loss on disposal of assets  186  14  190  902
Other adjustments, net  2,386  426  3,046  1,250
Changes in operating assets and liabilities, net  1,126  (5,086)  3,421  (10,073)
Net cash provided by operating activities  32,106  24,674  93,309  79,745
INVESTING ACTIVITIES      
Return of capital in excess of earnings  20  --   76  -- 
Proceeds from sale of investments  --   --   --   35
Cash value from termination of life insurance  83  --   83  -- 
Proceeds from sale of assets  31  25  427  997
Capital expenditures  (10,542)  (10,758)  (31,246)  (32,578)
Net cash used in investing activities  (10,408)  (10,733)  (30,660)  (31,546)
FINANCING ACTIVITIES      
Payments made on long-term obligations  (37)  --   (108)  (344)
Refinancing fees  (72)  --   (3,471)  -- 
Dividends on common stock   (11,591)  (11,553)  (34,719)  (34,652)
Net cash used in financing activities  (11,700)  (11,553)  (38,298)  (34,996)
Net change in cash and cash equivalents  9,998  2,388  24,351  13,203
Cash and cash equivalents at beginning of period  82,007  53,573  67,654  42,758
Cash and cash equivalents at end of period  $ 92,005  $ 55,961  $ 92,005  $ 55,961
 
 
 
Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
     
  Three Months Ended  Nine Months Ended 
  September 30,  September 30, 
  2011  2010  2011  2010
         
Telephone Operations        
Local calling services  $ 21,517  $ 22,631  $ 65,566  $ 69,651
Network access services  19,808  19,949  60,488  62,033
Subsidies  11,200  12,680  33,855  36,704
Long distance services  3,825  4,393  12,243  13,756
Data and Internet services  20,104  19,322  59,752  56,004
Other services  8,310  8,322  25,064  25,645
Total Telephone Operations  84,764  87,297  256,968  263,793
Other Operations  7,784  8,279  23,644  25,822
Total operating revenues  $ 92,548  $ 95,576  $ 280,612  $ 289,615
               
               
               
Consolidated Communications Holdings, Inc.       
Schedule of Adjusted EBITDA Calculation       
(Dollars in thousands)       
(Unaudited)       
            
             
  Three Months Ended  Nine Months Ended       
  September 30,  September 30,        
  2011  2010  2011  2010              
EBITDA:                      
Net cash provided by operating activities  $ 32,106  $ 24,674  $ 93,309  $ 79,745              
Adjustments:                      
Compensation from restricted share plan  (583)  (621)  (1,673)  (1,740)              
Other adjustments, net  (2,270)  (440)  (2,934)  (2,152)              
Changes in operating assets and liabilities  (1,126)  10,272  (3,420)  15,259              
Interest expense, net  13,447  11,723  37,783  37,675              
Income taxes  2,723  (1,049)  10,410  7,015              
EBITDA (1)  44,297  44,559  133,475  135,802              
                       
Adjustments to EBITDA (2):                      
Other, net (3)  (5,542)  (5,367)  (13,685)  (18,160)              
Investment distributions (4)  6,948  6,928  19,691  20,440              
Non-cash compensation (5)  583  621  1,673  1,740              
Adjusted EBITDA  $ 46,286  $ 46,741  $ 141,154  $ 139,822              
                       
Footnotes for Adjusted EBITDA:              
(1) EBITDA is defined as net earnings before interest expense, income taxes, depreciation
and amortization 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) Other, net includes the equity earnings from our investments, dividend income, income attributable 
to noncontrolling interests in subsidiaries and certain miscellaneous items.
(4) For purposes of calculating adjusted EBITDA, we include all cash dividends and other cash 
distributions received from our investments.
(5) 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
September 30,
2011
Nine Months
Ended
September 30,
2011
Adjusted EBITDA  $ 46,286  $ 141,154
     
 - Cash interest expense   (12,925)  (36,152)
 - Capital expenditures  (10,542)  (31,246)
 - Cash income taxes  (2,000)  (6,824)
     
Cash available to pay dividends  $ 20,819  $ 66,932
     
Dividends Paid  $ 11,591  $ 34,719
Payout Ratio 55.7% 51.9%
 
 
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  4,752  
Total debt as of September 30, 2011  $ 884,752  
Less cash on hand  (92,005)  
Total net debt as of September 30, 2011  $ 792,747  
     
Adjusted EBITDA for the last twelve    
months ended September 30, 2011   $ 186,950  
     
Total Net Debt to last twelve months    
Adjusted EBITDA  4.24  x 
 
 
 
Consolidated Communications Holdings, Inc.
 Adjusted Net Income and Per Share Attributable to Common Stockholders
(in thousands, except per share amounts)
 (Unaudited)
         
         
   Three Months Ended  Nine Months Ended 
  September 30, September 30,    
   2011  2010  2011  2010 
Reported net income attributable to common stockholders   $ 5,818  $ 11,837  $ 18,534  $ 25,807
Change in uncertain tax liabilities  (251)  (4,591)  (251)  (4,591)
Interest reversal on change in uncertain tax positions  (35)  (882)  (35)  (882)
Loss on disposal of assets, net of tax  --  --  --  526
Severance, net of tax   132  --  433  --
Refinancing charges, net of tax  75  --  1,711  --
Non-cash stock compensation, net of tax 401 402 1,081 1,110
Adjusted net income attributable to common stockholders  $ 6,140  $ 6,766  $ 21,473  $ 21,970
         
Weighted average number of shares outstanding  29,593  29,483  29,593  29,483
Adjusted diluted net income per share  $ 0.21  $ 0.23  $ 0.73  $ 0.75
         
Calculations above assume a 31.3 and 35.3 percent effective tax rate for the three months ended September 30, 2011 
and 2010, respectively. The assumed effective tax rates for the nine months ended September 30, 2011 and 2010 are 
35.4 and 36.2 percent, respectively.
         
               
               
               
Consolidated Communications Holdings, Inc.       
Key Operating Statistics       
 (Unaudited)       
           
 September 30,June 30,September 30,       
  2011  2011  2010              
Local access lines in service                  
Residential  138,090  138,538  141,980              
Business  92,161  93,822  97,715              
Total local access lines   230,251  232,360  239,695              
                     
Total IPTV subscribers  32,981  31,218  27,953              
                     
ILEC DSL subscribers (1)  109,572  108,581  104,933              
ILEC Broadband Connections  142,553  139,799  132,886              
                     
ILEC VOIP subscribers  8,916  8,799  8,770              
                     
CLEC Access Line Equivalents (2)  84,706  81,746  73,313              
                     
Total connections  466,426  462,704  454,664              
                     
Long distance lines (3)  176,626  175,439  172,030              
                     
IPTV Homes passed  211,495  209,609  202,948              
IPTV penetration of homes passed 16% 15% 14%              
                     
(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 and SONET-based services to the equivalent of an access line. 
 
(3) Excludes CLEC LD subscribers.
CONTACT: Matt Smith

         Treasurer & Investor Relations

         217-258-2959

         matthew.smith@consolidated.com