Consolidated Communications Holdings
Consolidated Communications Holdings, Inc. (Form: 8-K, Received: 11/02/2017 08:02:32)
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): November 2, 2017  

Consolidated Communications Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)

Delaware 000-51446 02-0636095
(State or Other Jurisdiction of Incorporation) (Commission File Number) (I.R.S. Employer Identification Number)

 

121 South 17th Street, Mattoon, Illinois 61938-3987
(Address of Principal Executive Offices) (Zip Code)

(217) 235-3311
(Registrant's telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

  [ ]   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
  [ ]   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
  [ ]   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
  [ ]   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [    ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [    ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On November 2, 2017, Consolidated Communications Holdings, Inc. issued a press release to report its results of operations and financial condition as of and for the quarter and year-to-date period ended September 30, 2017. A copy of this press release is included as Exhibit 99.1 to this Form 8-K and incorporated into this Item 2.02 by reference.

The information in this Form 8-K, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as otherwise stated in such filing.

Item 9.01. Financial Statements and Exhibits.

(d)  Exhibits    
No.   Description
99.1   Press release dated November 2, 2017 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

  Consolidated Communications Holdings, Inc.
     
   
Date: November 2, 2017 By:  /s/ Steven L. Childers        
    Steven L. Childers
    Chief Financial Officer
   


EXHIBIT INDEX

 

No.   Description
     
99.1   Press Release dated November 2, 2017

EXHIBIT 99.1

Consolidated Communications Reports Third Quarter 2017 Results

MATTOON, Ill., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) (the “Company”) reported results for the third quarter 2017.  The Company will hold a conference call and simultaneous webcast to discuss its results today at 11 a.m. (ET).

Third quarter 2017 Consolidated Communications financial summary:

“We are focused on executing on our FairPoint integration and identifying opportunities for organic growth across all markets,” said Bob Udell, president and chief executive officer of Consolidated Communications.  “Results from these activities include growing Metro Ethernet service revenues by 10 percent on a pro forma basis, and staying focused on integration activities to enable us to achieve our two-year, $55 million synergy target. We have already recognized approximately $20.0 million in cumulative run rate synergies as of the end of the third quarter.”

“We are realizing the financial benefits of the business combination with FairPoint,” Udell added.  “In addition to synergies and improvement to our leverage ratio, we have significantly improved our dividend coverage and we are excited to have just declared our 50 th consecutive dividend to our shareholders.”

“While Hurricane Harvey and Irma impacted our Texas and Florida service areas this quarter, our customers experienced only minor service disruptions due to the resiliency of our network and employees,” said Bob Udell. “I want to take this opportunity to commend our team of skilled employees and thank them for their work in preparing for the storms and their post storm recovery execution as they quickly restored service to the impacted areas.”

Pro Forma Financial Results for the Third Quarter   

The pro forma results give effect to the FairPoint acquisition as if it had occurred as of Jan. 1, 2016.

Cash Available to Pay Dividends, Capex

For the third quarter, cash available to pay dividends was $47.8 million, and the dividend payout ratio was 57.4 percent.  At Sept. 30, 2017, cash and cash equivalents were $23.3 million.  Capital expenditures were $61.2 million for the third quarter. 

Financial Guidance

The Company affirms its 2017 financial guidance which was provided with second quarter earnings. The guidance presented in the following table, includes FairPoint as if it was part of the Company the full 2017 fiscal year.   

      2016 Results                
  ($ in millions)     CNSL   FRP Combined       2017 Pro Forma Guidance  
  Cash interest expense 1 $ 70.6 $ 77.2   $ 147.8       $111 to $116
  Cash income taxes/refund 2 $ (0.2) $ 1.3   $ 1.1       $2 to $4
  Capital expenditures $ 125.2 $ 117.1   $ 242.3       $230 to $235
                         
  (1) Pro Forma interest expense is based on the legacy CNSL debt structure plus the $935.0 million incremental term loan issued under our credit agreement for the acquisition of FairPoint at a rate of Libor, plus 3.00% coupon with a 1.00% Libor floor. 2017 cash interest guidance does not include ticking fees or commitment fees.
   
  (2) Cash income taxes primarily include local and state income taxes and federal income taxes will be shielded by net operating losses.

Dividend Payments

On Oct. 30, 2017, the Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on Feb. 1, 2018 to stockholders of record at the close of business on Dec. 15, 2017.  This will represent the 50 th consecutive quarterly dividend paid by the Company. 

Conference Call Information

The Company will host a conference call today at 11 a.m. ET / 10 a.m. CT to discuss third quarter earnings and developments with respect to the Company.  The live webcast and replay can be accessed from the Investor Relations section of the Company’s website at http://ir.consolidated.com.  The live conference call dial-in number is 1-877-374-3981 with conference ID 96573974.  A telephonic replay of the conference call will be available through Nov 9, 2017 and can be accessed by calling 1-855-859-2056, conference ID:  96573974.  
 
About Consolidated Communications 

Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) is a leading broadband and business communications provider serving consumers, businesses of all sizes, and wireless companies and carriers, across a 24-state service area.  Leveraging its advanced fiber optic network spanning more than 36,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: data, voice, video, managed services, cloud computing and wireless backhaul.  Headquartered in Mattoon, Ill., Consolidated Communications has been providing services in many of its markets for more than a century.

Use of Non-GAAP Financial Measures                                                                       

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

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

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

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

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

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

Preliminary Pro Forma Results                                                                                 

Estimated pro forma results of operations presented herein gives effect to the acquisition of FairPoint Communications, Inc. as if it had occurred on Jan. 1, 2016. The estimated pro forma results include certain accounting adjustments related to the acquisition that are expected to have a continuing impact on the combined results, including adjustments for depreciation and amortization of the acquired tangible and intangible assets acquired, interest expense on the debt incurred to complete the acquisition and to repay certain existing indebtedness of FairPoint, the exclusion of certain acquisition related costs and the tax impact of these pro forma adjustments.  These adjustments and the related results are based on a preliminary valuation of the estimated fair value of the net assets acquired, which is subject to change upon the final assessment and such changes could be material.  The estimated pro forma information is not intended to represent or be indicative of the results of the combined company that would have been obtained had the acquisition been completed as of the dates presented and should not be taken as representative of the future consolidated results of the combined company.

Safe Harbor

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

Company Contact                                                                       

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

– Tables to follow –

 

Consolidated Communications Holdings, Inc.  
Condensed Consolidated Balance Sheets  
(Dollars in thousands, except share and per share amounts)  
(Unaudited)  
    September 30,       December 31,    
  2017   2016  
         
  ASSETS          
 Current assets:         
  Cash and cash equivalents  $   23,314     $   27,077    
  Accounts receivable, net      120,844         56,216    
  Income tax receivable      23,494         21,616    
  Prepaid expenses and other current assets      33,852         28,292    
  Assets held for sale      21,406         -    
 Total current assets      222,910         133,201    
         
 Property, plant and equipment, net      2,058,418         1,055,186    
 Investments      108,268         106,221    
 Goodwill      1,042,285         756,877    
 Other intangible assets      318,487         31,612    
 Other assets      10,857         9,661    
 Total assets  $   3,761,225     $   2,092,758    
         
  LIABILITIES AND SHAREHOLDERS' EQUITY          
 Current liabilities:         
  Accounts payable  $   14,154     $   6,766    
  Advance billings and customer deposits      45,086         26,438    
  Dividends payable      27,440         19,605    
  Accrued compensation      43,477         16,971    
  Accrued interest      17,183         11,260    
  Accrued expense      75,672         54,123    
  Current portion of long-term debt and capital lease obligations      28,824         14,922    
  Liabilities held for sale      1,075         -     
 Total current liabilities      252,911         150,085    
         
 Long-term debt and capital lease obligations      2,311,247         1,376,754    
 Deferred income taxes      321,355         244,298    
 Pension and other post-retirement obligations      340,067         130,793    
 Other long-term liabilities      33,996         14,573    
 Total liabilities      3,259,576         1,916,503    
         
 Shareholders' equity:         
  Common stock, par value $0.01 per share; 100,000,000 shares         
    authorized, 70,836,042 and 50,612,362, shares outstanding         
    as of September 30, 2017 and December 31, 2016, respectively      708         506    
  Additional paid-in capital      578,218         217,725    
  Accumulated deficit      (34,861 )       -     
  Accumulated other comprehensive loss, net      (47,853 )       (47,277 )  
Noncontrolling interest     5,437         5,301    
Total shareholders' equity     501,649         176,255    
Total liabilities and shareholders' equity $   3,761,225     $   2,092,758    
         

 

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,    
  2017   2016   2017   2016  
                 
                 
 Net revenues  $   363,329     $   191,541     $   703,214     $   567,258    
 Operating expenses:                 
   Cost of services and products      145,323         85,646         287,090         246,129    
   Selling, general and administrative                 
     expenses      94,459         39,917         166,210         119,398    
  Acquisition and other transaction costs      27,139         18         30,663         266    
  Loss on impairment      -          -          -          610    
  Depreciation and amortization      104,406         43,224         187,084         130,855    
 Income (loss) from operations      (7,998 )       22,736         32,167         70,000    
 Other income (expense):                 
   Interest expense, net of interest income      (36,307 )       (19,075 )       (99,896 )       (56,827 )  
   Other income, net      9,622         8,419         23,142         24,262    
 Income (loss) before income taxes      (34,683 )       12,080         (44,587 )       37,435    
 Income tax expense (benefit)      (6,289 )       4,991         (9,862 )       22,287    
 Net income (loss)      (28,394 )       7,089         (34,725 )       15,148    
                 
 Less: net income attributable to noncontrolling interest      54         77         136         211    
                 
 Net income (loss) attributable to common shareholders  $   (28,448 )   $   7,012     $   (34,861 )   $   14,937    
                 
 Net income (loss) per basic and diluted common shares                
   attributable to common shareholders $   (0.41 )   $   0.14     $   (0.62 )   $   0.29    
                 

 

Consolidated Communications Holdings, Inc.  
Pro Forma Condensed Consolidated Statements of Operations  
(Dollars in thousands, except per share amounts)  
(Unaudited)  
                 
    Pro Forma       Pro Forma    
    Three Months Ended       Nine Months Ended    
    September 30,       September 30,    
  2017   2016   2017   2016  
                 
                 
 Net revenues  $   363,329     $   398,682     $   1,104,260     $   1,187,772    
 Operating expenses:                 
  Operating expenses (exclusive of depreciation      238,214         266,805         734,373         804,313    
  and amortization)                 
  Other post employment benefit and pension expense      1,734         (66,984 )       7,623         (172,267 )  
  Depreciation and amortization      104,406         106,915         313,576         323,028    
 Income from operations      18,975         91,946         48,688         232,698    
 Other income (expense):                 
   Interest expense, net of interest income      (30,139 )       (29,432 )       (89,622 )       (87,984 )  
   Other income, net      9,622         8,510         23,461         24,606    
 Income (loss) from before income taxes      (1,542 )       71,024         (17,473 )       169,320    
 Income tax expense (benefit)      (914 )       28,569         (6,897 )       75,041    
 Net Income (loss)      (628 )       42,455         (10,576 )       94,279    
 Less: net income attributable to noncontrolling interest      54         77         136         211    
                 
 Net income (loss) attributable to common shareholders  $   (682 )   $   42,378     $   (10,712 )   $   94,068    
                 
Net income (loss) per basic and diluted common share                
   attributable to common shareholders $   (0.01 )   $   0.60     $   (0.15 )   $   1.34    
                 

 

Consolidated Communications Holdings, Inc.  
Condensed Consolidated Statements of Cash Flows  
  (Dollars in thousands)  
(Unaudited)  
                     
        Three Months Ended       Nine Months Ended    
        September 30,       September 30,    
        2017   2016   2017   2016  
OPERATING ACTIVITIES                  
  Net income (loss)   $   (28,394 )   $   7,089     $   (34,725 )   $   15,148    
  Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
                 
  Depreciation and amortization       104,406         43,224         187,084         130,855    
  Deferred income taxes       4,199         469         4,221         7,993    
  Cash distributions from wireless partnerships in
excess of/(less than) earnings
      (953 )       (97 )       (889 )       (1,250 )  
  Non-cash, stock-based compensation       889         862         2,319         2,666    
  Amortization of deferred financing       7,119         815         15,928         2,413    
  Other adjustments, net       359         382         2,657         1,017    
  Changes in operating assets and liabilities, net       (55,934 )       5,342         (51,371 )       14,749    
     Net cash provided by operating activities       31,691         58,086         125,224         173,591    
INVESTING ACTIVITIES                  
  Business acquisition, net of cash acquired       (862,385 )       (13,422 )       (862,385 )       (13,422 )  
  Purchase of property, plant and equipment, net       (61,228 )       (31,887 )       (119,289 )       (94,158 )  
  Proceeds from sale of assets       195         20,913         296         20,963    
     Net cash used in investing activities       (923,418 )       (24,396 )       (981,378 )       (86,617 )  
FINANCING ACTIVITIES                  
  Proceeds from issuance of long-term debt       1,008,325         24,000         1,031,325         31,000    
  Payment of capital lease obligations       (2,370 )       (945 )       (5,363 )       (1,757 )  
  Payment on long-term debt       (62,250 )       (28,275 )       (89,750 )       (39,825 )  
  Payment of financing costs       (16,732 )       -          (16,732 )       -     
  Share repurchases for minimum tax withholding       -          -          (41 )       (71 )  
  Dividends on common stock        (27,441 )       (19,622 )       (66,698 )       (58,796 )  
  Other       (350 )       -          (350 )       -     
  Net cash provided by (used in) financing activities       899,182         (24,842 )       852,391         (69,449 )  
Net change in cash and cash equivalents       7,455         8,848         (3,763 )       17,525    
Cash and cash equivalents at beginning of period       15,859         24,555         27,077         15,878    
Cash and cash equivalents at end of period   $   23,314     $   33,403     $   23,314     $   33,403    
                     

 

Consolidated Communications Holdings, Inc.  
Consolidated Revenue by Category  
(Dollars in thousands)  
  (Unaudited)    
                         
        Three Months Ended           Nine Months Ended    
        September 30,           September 30,    
      2017     2016       2017     2016  
Commercial and carrier:                        
Data and transport services (includes VoIP)     $   84,226   $   49,653         $   183,741   $   147,323    
Voice services         55,688       25,098             102,830       75,446    
Other         13,366       3,481             22,199       8,808    
          153,280       78,232             308,770       231,577    
Consumer:                        
Broadband (VoIP, Data and Video)         87,587       51,363             190,127       159,025    
Voice services         56,861       13,717             82,330       42,236    
          144,448       65,080             272,457       201,261    
                         
Equipment sales and service         -       17,695             -       37,783    
Subsidies         20,933       11,681             41,897       37,737    
Network access         41,262       15,536             69,953       48,654    
  Other products and services         3,406       3,317             10,137       10,246    
Total operating revenue         363,329       191,541             703,214       567,258    
                         
Less operating revenues from divestitures      -       (18,702 )        -       (41,882 )  
Adjusted operating revenue     $   363,329   $   172,839         $   703,214   $   525,376    
                         

 

Consolidated Communications Holdings, Inc.  
Pro Forma Consolidated Revenue by Category  
(Dollars in thousands)  
  (Unaudited)    
                         
                       
      Pro Forma, Three Months Ended      
      Q3 2017       Q2 2017     Q1 2017   Q4 2016   Q3 2016    
Commercial and carrier:                        
Data and transport services (includes VoIP)   $   84,226   $   83,786   $   83,366   $   83,552     $   84,270      
Voice services       55,688       57,607       57,847       59,049         60,847      
Other       13,366       13,562       12,238       11,875         11,811      
        153,280       154,955       153,451       154,476         156,928      
Consumer:                        
Broadband (VoIP, Data and Video)       87,587       87,722       87,736       87,495         86,867      
Voice services       56,861       57,135       57,834       60,044         63,345      
        144,448       144,857       145,570       147,539         150,212      
                         
Equipment sales and service       -       -       -       5,354         17,695      
Subsidies       20,933       22,890       25,268       22,806         23,164      
Network access       41,262       42,715       43,728       45,736         46,962      
  Other products and services       3,406       3,671       3,826       3,938         3,721      
Total operating revenue       363,329       369,088       371,843       379,849         398,682      
                         
Less operating revenues from divestitures    -    -    -       (5,354 )       (18,702 )    
Adjusted operating revenue   $   363,329   $   369,088   $   371,843   $   374,495     $   379,980      
                         

 

Consolidated Communications Holdings, Inc.  
Schedule of Adjusted EBITDA Calculation  
(Dollars in thousands)  
(Unaudited)  
                 
                 
    Three Months Ended       Nine Months Ended    
    September 30,       September 30,    
  2017   2016   2017   2016  
Net income (loss) $   (28,394 )   $   7,089     $   (34,725 )   $   15,148    
Add (subtract):                
  Income tax expense (benefit)     (6,289 )       4,991         (9,862 )       22,287    
  Interest expense, net     36,307         19,075         99,896         56,827    
  Depreciation and amortization     104,406         43,224         187,084         130,855    
EBITDA     106,030         74,379         242,393         225,117    
                 
Adjustments to EBITDA (1):                
Other, net (2)     29,645         1,273         35,682         5,214    
Investment income (accrual basis)     (9,594 )       (8,735 )       (23,068 )       (24,636 )  
Investment distributions (cash basis)     8,641         8,638         22,021         23,218    
Pension/OPEB expense     1,746         720         1,602         2,159    
Non-cash compensation (3)     889         862         2,319         2,666    
                 
Adjusted EBITDA $   137,357     $   77,137     $   280,949     $   233,738    
                 
Notes:                
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.  
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.  
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.  
           

 

Consolidated Communications Holdings, Inc.  
Schedule of Pro Forma Adjusted EBITDA Calculation  
(Dollars in thousands)  
(Unaudited)  
                     
  Pro Forma   Pro Forma   Pro Forma  
  Three Months Ended   Nine Months Ended   Last Twelve  
  September 30,   September 30,   Months Ended  
  2017   2016   2017   2016   September 30, 2017  
Net income (loss) $   (628 )   $   42,455     $   (10,576 )   $   94,279     $   6,868    
Add (subtract):                    
  Income tax expense (benefit)     (914 )       28,569         (6,897 )       75,041         5,376    
  Interest expense, net     30,139         29,432         89,622         87,984         118,923    
  Depreciation and amortization     104,406         106,915         313,576         323,028         420,422    
EBITDA     133,003         207,371         385,725         580,332         551,589    
                     
Adjustments to EBITDA (1):                    
Other, net (2)     2,672         1,266         5,449         6,469         8,006    
Investment income (accrual basis)     (9,594 )       (8,735 )       (23,068 )       (24,636 )       (31,404 )  
Investment distributions (cash basis)     8,641         8,638         22,021         23,218         30,947    
Pension/OPEB expense     1,746         (66,708 )       7,621         (171,983 )       (31,280 )  
Loss on extinguishment of debt     -          -          -          -          6,559    
Non-cash compensation (3)     889         1,945         5,305         7,667         6,946    
                     
Adjusted EBITDA $   137,357     $   143,777     $   403,053     $   421,067     $   541,363    
                     
Notes:                    
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.      
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.      
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.      
               

 

Consolidated Communications Holdings, Inc.      
Cash Available to Pay Dividends        
(Dollars in thousands)        
(Unaudited)        
                 
            Pro Forma    
  Three Months Ended     Nine Months Ended   Nine Months Ended    
  September 30, 2017     September 30, 2017   September 30, 2017    
                 
Adjusted EBITDA $   137,357       $   280,949     $   403,053    (a)   
                 
 - Cash interest expense      (28,267 )         (63,420 )       (84,062 )    
 - Capital expenditures     (61,228 )         (119,289 )       (165,304 )    
 - Cash income (taxes)/refund     (60 )         (969 )       (1,314 )    
                 
Cash available to pay dividends $   47,802       $   97,271     $   152,373      
                 
Dividends Paid $   27,441       $   66,698     $   82,323      
Payout Ratio   57.4 %       68.6 %     54.0 %    
                 
Note:  The above calculation excludes the principal payments on our debt        
                 
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in Pro Forma Adjusted EBITDA.    
                 


Consolidated Communications Holdings, Inc.  
Total Net Debt to LTM Adjusted EBITDA Ratio  
(Dollars in thousands)  
(Unaudited)  
       
  September 30,    
Summary of Outstanding Debt: 2017    
Term loans, net of discount $8,676 $   1,817,324      
Revolving loan     18,000      
Senior unsecured notes due 2022, net of discount $3,831     496,169      
Capital leases     23,313      
Total debt as of September 30, 2017 $   2,354,806      
Less deferred debt issuance costs     (14,735 )    
Less cash on hand     (23,314 )    
Total net debt as of September 30, 2017 $   2,316,757      
       
Pro Forma Adjusted EBITDA for the last       
twelve months ended September 30, 2017 $   541,363   (a)
       
Total Net Debt to last twelve months      
Adjusted EBITDA - Pro Forma   4.28x      
       
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in Pro Forma Adjusted EBITDA.  
       

 

Consolidated Communications Holdings, Inc.  
Adjusted Net Income and Net Income Per Share    
Dollars in thousands, except per share amounts)  
(Unaudited)  
                 
                 
  Three Months Ended   Nine Months Ended  
  September 30,   September 30,  
  2017   2016   2017   2016    
Net income (loss) $   (28,394 )   $   7,089   $   (34,725 )   $   15,148  
Transaction and severance related costs, net of tax     17,039         606       21,320         1,985  
Amortization of commitment fee, net of tax     3,378         -       7,791         -  
Ticking fees on committed financing, net of tax     187         -       10,926         -  
Tax on non-deductible transaction related costs     2,341         -       2,341         -  
Deferred tax related to acquisition     5,205         -       5,205         -  
Impairment charge for sale of Iowa ILEC, net of tax     -         -       -         248  
Deferred tax related to asset held for sale     -         -       -         7,524  
Non-cash stock compensation, net of tax     514         506       1,405         1,082  
Adjusted net income  $   270     $   8,201   $   14,263     $   25,987  
                 
Weighted average number of shares outstanding     69,830         50,294       56,955         50,292  
Adjusted diluted net income per share $   -     $   0.16   $   0.25     $   0.52  
                 
Notes:                
Calculations above assume a 42.2% and 41.3% effective tax rate for the three months ended and 39.4% and 59.4% for the nine months ended September 30, 2017 and 2016, respectively.  
                 
Net income per share has been impacted by approximately $0.09 for the three months ended September 30, 2017 due to increased depreciation and amortization associated with the preliminary valuation of the FairPoint assets.  
   

 

Consolidated Communications Holdings, Inc.  
Key Operating Statistics  
(Unaudited)  
                         
          Pro Forma       Pro Forma      
      September 30,   June 30,   % Change   September 30,   % Change  
      2017   2017   in Qtr   2016   YOY  
                         
Voice Connections(1)      990,162       1,012,467     (2.2 %)     1,066,778     (7.2 %)  
                         
Data and Internet Connections(1)      783,945       784,619     (0.1 %)     780,021     0.5 %  
                         
Video Connections      105,480       107,279     (1.7 %)     116,365     (9.4 %)  
                         
Business and Broadband as % of total revenue(2)   74.2%       74.3%     (0.1 %)     74.6%     (0.5 %)  
                         
Fiber route network miles (long-haul and metro)   35,749       35,592     0.4 %     35,100     1.8 %  
                         
On-net buildings     8,782       8,555     2.7 %     8,000     9.8 %  
                         
Consumer Customers     683,519       696,136     (1.8 %)     723,906     (5.6 %)  
                         
Consumer ARPU     $70.44       $69.36     1.6 %     $69.17     1.8 %  
                         
                         
Notes:                      
(1) The acquisition of FairPoint Communications, Inc. resulted in an increase of 546,492 voice connections and 301,000 data connections in the third quarter 2017.  
 
(2) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.