Consolidated Communications Holdings
Mar 1, 2012

Consolidated Communications Reports Fourth Quarter and Full Year 2011 Results

MATTOON, Ill., March 1, 2012 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) reported results for the fourth quarter and year ended December 31, 2011.

Fourth quarter and full year 2011 financial summary:

"We delivered an exceptional quarter with sequential and year over year growth in both revenues and operating cash flows," said Bob Currey, President and Chief Executive Officer. "In addition to our continued focus on the triple play, the emphasis we placed on the wholesale and enterprise opportunities in the second half of the year are paying off."

"The Company is positioned to meet the growing demand for broadband and network services across all customer segments. The acquisition of SureWest, which we announced on February 6th, expands on these opportunities and we are excited about the prospects for the combined company," Currey concluded.

Operating Statistics at December 31, 2011, Compared to December 31, 2010.

  Period Ended December 31,    
  2011 2010 Increase/(decrease) %
         
Total connections 472,234 462,494 9,740 2.1%
ILEC access lines 227,992 237,141 (9,149) (3.9)%
DSL subscribers 110,913 106,387 4,526 4.3%
IPTV subscribers 34,356 29,236 5,120 17.5%
ILEC VOIP lines 9,199 8,640 559 6.5%
CLEC access line equivalents 89,774 81,090 8,684 10.7%

Cash Available to Pay Dividends

For the quarter, cash available to pay dividends, or CAPD, was $23.9 million, and the dividend payout ratio was 48.4%. At December 31, 2011, cash and cash equivalents were $105.7 million, representing an increase of $38.0 million over the prior year period. The Company made capital expenditures of $11.3 million and contributed $1.9 million to its pension plan in the quarter.  

Financial Highlights for the Fourth Quarter Ended December 31, 2011 

Financial Highlights for the Twelve Months Ended December 31, 2011 

Financial Guidance

For 2012, the Company is providing the following full year guidance (excluding any expenses relating to our agreement to acquire SureWest). Capital expenditures are expected to be in the range of $42.0 million to $44.0 million. Cash interest is expected to be in the range of $44.0 million to $46.0 million and cash income taxes are expected to be in the range of $15.0 million to $18.0 million.     

Dividend Payments

On February 24, 2011, the Company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on May 1, 2012 to stockholders of record at the close of business on April 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 fourth 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 52291436. 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 March 8, 2012 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 income 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 December 31, 2011, the Company had 227,992 ILEC access lines, 89,774 Competitive Local Exchange Carrier (CLEC) access line equivalents, 110,913 DSL subscribers, 34,356 IPTV subscribers and 9,199 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 our ability to complete the acquisition of SureWest and successfully integrate SureWest's operations and realize the synergies from the acquisition, as well as a number of factors related to our business and that of SureWest, including economic and financial market conditions generally and economic conditions in Consolidated's and SureWest's service areas; 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; changes in the valuation of pension plan assets; 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 and SureWest'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 and SureWest's filings with the Securities and Exchange Commission, including their respective 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. 

Prospectus/Proxy Statement

This material is not a substitute for the prospectus/proxy statement Consolidated and SureWest will file with the Securities and Exchange Commission. Investors are urged to read the prospectus/proxy statement, which will contain important information, including detailed risk factors, when it becomes available. The prospectus/proxy statement and other documents which will be filed by Consolidated and SureWest with the Securities and Exchange Commission will be available free of charge at the SEC's website, www.sec.gov, or by directing a request when such a filing is made to Consolidated Communications, 121 South 17th Street, Mattoon, IL 61938, Attention: Investor Relations; or to SureWest Communications, P.O. Box 969, Roseville, CA 95678, Attention: Investor Relations. A final proxy statement or proxy/prospectus statement will be mailed to shareholders of SureWest and Consolidated stockholders.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction.

Proxy Solicitation

Consolidated and SureWest, and certain of their respective directors, executive officers and other members of management and employees are participants in the solicitation of proxies in connection with the proposed transactions. Information about the directors and executive officers of Consolidated is set forth in the proxy statement for its 2011 annual meeting of shareholders. Information about the directors and executive officers of SureWest is set forth in its proxy statement for its 2011 annual meeting of shareholders and SureWest's Form 10-K for the year ended December 31, 2010. Investors may obtain additional information regarding the interests of such participants in the proposed transactions by reading the prospectus/proxy statement for such proposed transactions when it becomes available.

— Tables Follow —

Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)
     
   December 31,  December 31, 
  2011  2010 
 (Unaudited) 
ASSETS     
Current assets:     
Cash and cash equivalents   $ 105,704  $ 67,654
Accounts receivable, net   35,492  42,012
Prepaid expenses and other current assets   27,134  26,584
Total current assets   168,330  136,250
Property, plant and equipment, net   332,046  356,057
Intangibles, net and other assets   693,693  717,239
Total assets   $ 1,194,069  $ 1,209,546
     
LIABILITIES AND STOCKHOLDERS' EQUITY     
Current liabilities:     
Current portion of long-term debt   $ 8,800  $ -- 
Current portion of capital lease obligation   192  132
Accounts payable   13,673  9,972
Accrued expenses and other current liabilities   62,625  65,488
Total current liabilities   85,290  75,592
Capital lease obligation less current portion   4,519  3,993
Long-term debt   871,200  880,000
Other long-term liabilities   185,248  178,086
Total liabilities   1,146,257  1,137,671
     
Stockholders' equity:     
Common stock, $0.01 par value   299  298
Paid in capital   79,852  98,126
Accumulated other comprehensive loss   (37,833)  (31,471)
Total Consolidated Communications Holdings, Inc. stockholders' equity  42,318  66,953
Noncontrolling interest  5,494  4,922
Total stockholders' equity  47,812  71,875
Total liabilities and stockholders' equity  $ 1,194,069  $ 1,209,546
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited) 
         
   Three Months Ended  Twelve Months Ended 
  December 31,  December 31, 
  2011  2010  2011  2010 
         
         
Revenues   $ 93,651  $ 93,751  $ 374,263  $ 383,366
Operating expenses:         
Cost of services and products   35,400  34,342  139,264  142,302
Selling, general and administrative expenses   20,056  22,146  83,699  88,025
Depreciation and amortization   22,439  22,222  88,745  87,142
Income from operations   15,756  15,041  62,555  65,897
Other income (expense):         
Interest expense, net   (11,611)  (13,066)  (49,394)  (50,740)
Other income, net   8,296  6,961  28,666  26,986
Income before income taxes   12,441  8,936  41,827  42,143
Income tax expense (benefit)   4,435  1,975  14,845  8,991
Net income   8,006  6,961  26,982  33,152
Less: Net income attributable to noncontrolling interest   130  172  572  557
Net income attributable to Consolidated Communications Holdings, Inc.   $ 7,876  $ 6,789  $ 26,410  $ 32,595
         
Diluted net income attributable to Consolidated Communications Holdings, Inc. per common share  $ 0.26  $ 0.23  $ 0.88  $ 1.09
 
 
Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited) 
         
   Three Months Ended  Twelve Months Ended 
  December 31,  December 31, 
  2011  2010  2011  2010
         
OPERATING ACTIVITIES        
Net income  $ 8,006  $ 6,961  $ 26,982  $ 33,152
Adjustments to reconcile net income to cash provided by operating activities:        
Depreciation and amortization  22,439  22,222  88,745  87,142
Stock-based compensation expense  460  624  2,132  2,363
Non-cash change in uncertain tax positions  40  17  (262)  (5,169)
Loss on disposal of assets  180  1,155  370  2,057
Other adjustments, net  7,856  (2,333)  10,902  (1,081)
Changes in operating assets and liabilities, net  (2,106)  6,623  1,315  (3,450)
Net cash provided by operating activities  36,875  35,269  130,184  115,014
INVESTING ACTIVITIES        
Return of capital in excess of earnings  113  --   189  -- 
Proceeds from sale of investments  --   --   --   35
Cash value from termination of life insurance  --   --   83  -- 
Proceeds from sale of assets  413  68  840  1,065
Capital expenditures  (11,347)  (9,211)  (42,593)  (41,789)
Net cash used in investing activities  (10,821)  (9,143)  (41,481)  (40,689)
FINANCING ACTIVITIES        
Payments made on long-term obligations  (41)  (55)  (149)  (399)
Refinancing fees  --   --   (3,471)  -- 
Distribution to non-controlling interest  --   (1,850)  --   (1,850)
Purchase and retirement of common stock  (726)  (1,001)  (726)  (1,001)
Dividends on common stock   (11,588)  (11,527)  (46,307)  (46,179)
Net cash used in financing activities  (12,355)  (14,433)  (50,653)  (49,429)
Net change in cash and cash equivalents  13,699  11,693  38,050  24,896
Cash and cash equivalents at beginning of period  92,005  55,961  67,654  42,758
Cash and cash equivalents at end of period  $ 105,704  $ 67,654  $ 105,704  $ 67,654
 
 
Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
         
   Three Months Ended  Twelve Months Ended 
  December 31,  December 31, 
  2011  2010  2011  2010
         
Telephone Operations        
Local calling services  $ 21,335  $ 22,232  $ 86,900  $ 91,883
Network access services  20,020  19,661  80,508  81,695
Subsidies  11,519  11,957  45,374  48,661
Long distance services  3,621  4,280  15,864  18,036
Data and Internet services  20,547  19,175  80,298  75,179
Other services  8,589  8,515  33,654  34,158
Total Telephone Operations  85,631  85,820  342,598  349,612
Other Operations  8,020  7,931  31,665  33,754
Total operating revenues  $ 93,651  $ 93,751  $ 374,263  $ 383,366
 
 
Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
         
   Three Months Ended  Twelve Months Ended 
  December 31,  December 31, 
  2011  2010  2011  2010 
EBITDA:        
Net cash provided by operating activities  $ 36,875  $ 35,269  $ 130,184  $ 115,014
Adjustments:        
Compensation from restricted share plan  (460)  (624)  (2,132)  (2,363)
Other adjustments, net  (8,076)  1,161  (11,010)  4,193
Changes in operating assets and liabilities  2,106  (6,623)  (1,315)  3,450
Interest expense, net  11,611  13,066  49,394  50,740
Income taxes  4,435  1,975  14,845  8,991
EBITDA (1)  46,491  44,224  179,966  180,025
         
Adjustments to EBITDA (2):        
Other, net (3)  (7,366)  (6,089)  (21,052)  (24,247)
Investment distributions (4)  8,718  7,039  28,410  27,479
Non-cash compensation (5)  460  624  2,132  2,363
Adjusted EBITDA  $ 48,303  $ 45,798  $ 189,456  $ 185,620
         
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 December 31,
2011
Twelve Months
Ended December 31,
2011
Adjusted EBITDA  $ 48,303  $ 189,456
     
- Cash interest expense   (11,063)  (47,215)
- Capital expenditures  (11,347)  (42,585)
- Cash income taxes  (1,964)  (8,788)
     
Cash available to pay dividends  $ 23,929  $ 90,868
     
Dividends Paid  $ 11,588  $ 46,307
Payout Ratio 48.4% 51.0%
 
 
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  4,711  
Total debt as of December 31, 2011  $ 884,711  
Less cash on hand  (105,704)  
Total net debt as of December 31, 2011  $ 779,007  
     
Adjusted EBITDA for the last twelve months ended December 31, 2011   $ 189,456  
     
Total Net Debt to last twelve months    
Adjusted EBITDA  4.11x  
 
 
Consolidated Communications Holdings, Inc.
Adjusted Net Income and Per Share Attributable to Common Stockholders
(in thousands, except per share amounts)
(Unaudited)
         
   Three Months Ended  Twelve Months Ended 
  December 31,  December 31, 
  2011  2010  2011  2010 
Reported net income attributable to common stockholders   $ 7,876  $ 6,789  $ 26,410  $ 32,595
Change in uncertain tax liabilities  --  --  --  (4,591)
Interest reversal on change in uncertain tax positions  --  --  --  (1,073)
Loss on disposal of assets, net of tax  --  900  --  1,530
Severance, net of tax   43  --  475  --
Refinancing charges, net of tax  --  --  1,709  --
         
Non-cash stock compensation, net of tax 297 486 1,375 1,860
Adjusted net income attributable to common stockholders  $ 8,216  $ 8,175  $ 29,969  $ 30,321
         
Weighted average number of shares outstanding  29,620  29,514  29,600  29,490
         
Adjusted diluted net income per share  $ 0.28  $ 0.28  $ 1.01  $ 1.03
         
Calculations above assume a 35.5 percent effective tax rate for the three and twelve months ended December 31, 2011. The assumed effective tax rate for the three and twelve months ended December 31, 2010 are 22.1 and 21.3 percent, respectively. 
 
 
Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
       
 December 31,September 30,December 31,
  2011  2011  2010 
Local access lines in service      
Residential  137,179  138,090  140,660
Business  90,813  92,161  96,481
Total local access lines   227,992  230,251  237,141
Total IPTV subscribers  34,356  32,981  29,236
ILEC DSL subscribers (1)  110,913  109,572  106,387
ILEC Broadband Connections  145,269  142,553  135,623
ILEC VOIP subscribers  9,199  8,916  8,640
CLEC Access Line Equivalents (2)  89,774  84,706  81,090
       
Total connections  472,234  466,426  462,494
       
Long distance lines (3)  177,610  176,626  172,856
       
IPTV Homes passed  211,670  211,495  205,436
IPTV penetration of homes passed 16% 16% 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