MATTOON, Ill., May 10 /PRNewswire-FirstCall/ -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) today announced results for the first quarter ended March 31, 2007. The company reported revenues of $83.0 million for the quarter. Adjusted EBITDA and net cash provided by operating activities for the quarter were $37.2 million and $18.0 million, respectively.
"Our consistent focus and execution is delivering strong results, and we are off to a great start in 2007," said Bob Currey, Consolidated's president and chief executive officer. "Increased broadband connections and improved operating efficiencies helped deliver our strong financial performance. We generated cash available to pay dividends of $14.7 million for the quarter, which resulted in a 68.5 percent payout ratio."
"DSL continues to perform very well for us and is a key component of our triple play bundle, which positively impacts customer value and retention. Continued consumer demand for DSL drove another solid quarter, with the addition of over 3,200 subscribers. We ended the quarter with nearly 56,000 DSL subscribers, and our penetration of primary residential lines now exceeds 33.6 percent."
"Our strategy of layering IPTV over our DSL product continues to gain market acceptance. We added over 1,400 IPTV subscribers during the quarter, bringing the total subscriber base to nearly 8,400. Subscribers grew by nearly 1,000 in Illinois, bringing penetration to over 20 percent of total homes passed and over 29 percent in the three original markets we launched. The rollout in Conroe, TX and Katy, TX is going well, and we expect subscriber growth to accelerate as we launch high definition and DVR service in 2007. IPTV was launched in the Lufkin, TX market in March and we are encouraged with the early results. DSL and IPTV are 'sticky' and have been drivers of the growth in connections and revenue per customer. In fact, over 90 percent of our video customers take our full triple play offering, making us the leading network based triple play provider in our markets," Currey concluded.
Operating Statistics at March 31, 2007, Compared to December 31, 2006
Steve Childers, Consolidated's chief financial officer, said, "As expected, our financial results were very strong for the quarter. Revenue, adjusted EBITDA and cash from operations grew by $3.6 million, $2.4 million and $3.6 million, respectively, compared to the first quarter of 2006. As a result of the growth in revenue and the cost reduction initiatives we put in place in 2006, we realized an approximate 100 basis point improvement in our adjusted EBITDA margin compared to the first quarter of 2006."
Cash Available to Pay Dividends
For the quarter, cash available to pay dividends, or CAPD, was $14.7 million and the dividend payout ratio was 68.5 percent. As of March 31, 2007, cumulative available cash, which is defined in the dividend restriction covenants in the company's credit facility as the difference between CAPD and dividends paid for the period since September 30, 2005, was approximately $30.0 million. At March 31, 2007, cash and cash equivalents were $26.1 million. The company made capital expenditures of $8.2 million during the first quarter.
Financial Highlights for the First Quarter Ended March 31, 2007
For 2007, the company reiterates the following guidance: Capital expenditures are expected to be in the range of $32.0 million to $34.0 million; cash interest expense is expected to be in the range of $43.5 million to $45.0 million; and cash income taxes are expected to be in the range of $12.0 million to $14.0 million.
The company paid its latest quarterly dividend of $0.38738 per common share on May 1, 2007 to stockholders of record on April 15, 2007. On May 8, 2007, the company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on August 1, 2007 to stockholders of record at the close of business on July 15, 2007.
For 2007, the company expects approximately 10 percent of its distributions to be classified as non-dividend distribution (return of capital), with the remainder being classified as ordinary dividends. This is an estimate and will be updated as appropriate.
Conference Call Information
The company will host a conference call today at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time. The call is being webcast and can be accessed from the "Investor Relations" section of the company's website at http:// http://www.consolidated.com. The webcast will also be archived on the company's website. If you do not have internet access, the conference call dial-in number is 1-800-642-1783. International parties can access the call by dialing 1-706-679-5600. A telephonic replay of the conference call will also be available starting two hours after completion of the call until May 14, 2007 at midnight Eastern Time. To hear the replay, parties in the United States and Canada should call 1-800-642-1687 and international parties should call 1-706-645-9291 and enter pass code 5511283.
Use of Non-GAAP Financial Measures
This press release, as well as the conference call, includes disclosures regarding "Adjusted EBITDA", "Adjusted EBITDA Margin", "cash available to pay dividends", "cumulative available cash", "total net debt to last twelve month Adjusted EBITDA coverage ratio", and "adjusted net income per share", all of which are non-GAAP financial measures. Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations or net income (loss) 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 these 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, which corresponds to consolidated EBITDA as used and defined in the Form 10-K dated December 31, 2006, is comprised of historical EBITDA, as adjusted for certain adjustments permitted and contemplated by our credit facility.
EBITDA is defined as net earnings (loss) before interest expenses, income taxes, depreciation and amortization on an historical basis. We believe net cash provided by operating activities is the most directly comparable financial measure to EBITDA under GAAP. EBITDA is a non-GAAP financial measure.
Cash available to pay dividends represents Adjusted EBITDA plus cash interest income less (1) cash interest expense), (2) capital expenditures, (3) cash taxes and (4) stock repurchases.
We present Adjusted EBITDA and cash available to pay dividends for several reasons. Management believes Adjusted EBITDA and cash available to pay dividends are useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt) and pay dividends. In addition, we have presented Adjusted EBITDA and cash available to pay dividends to investors in the past because they are frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting them here provides a measure of consistency in our financial reporting. Adjusted EBITDA and cash available to pay dividends, referred to as Available Cash in our credit agreement, and cumulative available cash 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, cash available to pay dividends and cumulative available cash after giving effect to specified charges. Other information related to these three non-GAAP financial measures, specifically "total net debt to last twelve month Adjusted EBITDA coverage ratio" and "Adjusted EBITDA margin", help put these three measures in context. As a result, management believes the presentation of Adjusted EBITDA and cash available to pay dividends, as supplemented by these other items, provide important additional information to investors. In addition, Adjusted EBITDA and cash available to pay dividends provide our board of directors with meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in the agreements governing our debt and to measure our ability to service and repay debt.
These non-GAAP financial measures have certain shortcomings. In particular, Adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. Similarly, while we may generate cash available to pay dividends, we are not required to use any such cash to pay dividends, and the payment of any dividends is subject to declaration by our board of directors, compliance with applicable law and the terms of our credit agreement and the indenture governing our senior notes.
Because Adjusted EBITDA is a component of the Dividend Payout Ratio and the ratio of total net debt to last twelve month Adjusted EBITDA, these measures are also subject to the material limitations discussed above. In addition, the ratio of total net debt to last twelve month Adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes these ratios are useful as a means to evaluate our ability to incur additional indebtedness in the future and, together with adjusted net income per share, assist investors, securities analysts and other interested parties in evaluating the companies in our industry.
Consolidated Communications Holdings, Inc. is an established rural local exchange company (RLEC) providing voice, data and video services to residential and business customers in Illinois and Texas. Each of the operating companies has been operating in its local market for over 100 years. With approximately 232,000 local access lines, 56,000 DSL subscribers and 8,400 IPTV subscribers, Consolidated Communications offers a wide range of telecommunications services, including local and long distance service, custom calling features, private line services, dial-up and high-speed Internet access, digital TV, carrier access services, and directory publishing. Consolidated Communications is the 15th largest local telephone company in the United States.
Any statements contained in this press release that are not statements of historical fact, including statements about management's beliefs and expectations, are forward-looking statements and should be evaluated as such. The words "anticipates", "believes", "expects", "intends", "plans", "estimates", "targets", "projects", "should", "may", "will" and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, the company's current expectations, plans, strategies and anticipated financial results and involve a number of known and unknown risks, uncertainties and factors that may cause the actual results to differ materially from those expressed or implied by these forward-looking statements. These risks include, but are not limited to the following: various risks to stockholders of not receiving dividends and risks to the company's ability to pursue growth opportunities if the company continues to pay dividends according to the current dividend policy; various risks to the price and volatility of the common stock; the substantial amount of debt and the company's ability to incur additional debt in the future; the company's need for a significant amount of cash to service and repay the debt and to pay dividends on the common stock; restrictions contained in the debt agreements that limit the discretion of management in operating the business; the ability to refinance the existing debt as necessary; regulatory changes, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with the company's possible pursuit of acquisitions; economic conditions in the company's service areas in Illinois and Texas; 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 the company's network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; liability and compliance costs regarding environmental regulations, and the risks identified or discussed in more detail in the section entitled "Risk Factors" in the company's Annual Report on Form 10-K for the year ended December 31, 2006, as well as in the other documents that we file from time to time with the Securities and Exchange Commission.
Many of these risks are beyond management's ability to control or predict. All forward-looking statements attributable to the company or persons acting on the company's behalf are expressly qualified in their entirety by the cautionary statements and risk factors contained in this press release and the company'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, the company does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
- Tables Follow - Consolidated Communications Condensed Consolidated Balance Sheets (Dollars in thousands) March 31, December 31, 2007 2006 ASSETS Current assets: Cash and cash equivalents $26,103 $26,672 Accounts receivable, net 35,788 34,396 Prepaid expenses and other current assets 14,655 13,149 Total current assets 76,546 74,217 Property, plant and equipment, net 309,187 314,381 Intangibles and other assets 495,696 500,981 Total assets $881,429 $889,579 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $7,884 $11,004 Accrued expenses and other current liabilities 55,822 54,742 Total current liabilities 63,706 65,746 Long-term debt 594,000 594,000 Other long-term liabilities 111,068 111,180 Total liabilities 768,774 770,926 Minority interests 3,867 3,695 Stockholders' equity: Common stock, $0.01 par value 261 260 Paid in capital 200,603 199,858 Accumulated deficit (92,796) (87,362) Accumulated other comprehensive income 720 2,202 Total stockholders' equity 108,788 114,958 Total liabilities and stockholders' equity $881,429 $889,579 Consolidated Communications Condensed Consolidated Statements of Operations (Dollars in thousands, except per share data) Three Months Ended March 31, 2007 2006 Revenues $82,980 $79,426 Operating expenses: Cost of services and products 25,629 24,673 Selling, general and administrative expenses 22,299 22,512 Depreciation and amortization 16,629 17,071 Income from operations 18,423 15,170 Other income (expense): Interest expense, net (11,400) (10,042) Other income, net 1,283 1,348 Income before income taxes 8,306 6,476 Income tax expense 3,687 2,928 Net income 4,619 3,548 Net income per common share $0.18 $0.12 Consolidated Communications Condensed Consolidated Statements of Cash Flows (Dollars in thousands) Three Months Ended March 31, 2007 2006 OPERATING ACTIVITIES Net Income $4,619 $3,548 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 16,629 17,071 Non-cash stock compensation 734 625 Other adjustments, net 418 5,015 Changes in operating assets and liabilities, net (4,429) (11,898) Net cash provided by operating activities 17,971 14,361 INVESTING ACTIVITIES Capital expenditures (8,187) (8,523) Net cash used in investing activities (8,187) (8,523) FINANCING ACTIVITIES Proceeds from issuance of stock 12 -- Payment of deferred financing costs (320) -- Dividends on common stock (10,045) (11,540) Net cash used in financing activities (10,353) (11,540) Net decrease in cash and cash equivalents (569) (5,702) Cash and cash equivalents at beginning of period 26,672 31,409 Cash and cash equivalents at end of period $26,103 $25,707 Consolidated Communications Consolidated Revenue by Category (Dollars in thousands) (Unaudited) Three months ended March 31, 2007 2006 Telephone Operations Local calling services $21,313 $21,364 Network access services 18,318 17,070 Subsidies 11,597 12,182 Long distance services 3,636 3,747 Data and Internet services 8,631 7,214 Other services 9,014 7,781 Total Telephone Operations 72,509 69,358 Other Operations 10,471 10,068 Total operating revenues $82,980 $79,426 Consolidated Communications Schedule of ARPU Calculations (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2007 2006 Ending Access Lines 231,818 240,959 Average Access Lines 232,582 241,130 Telephone Operations Revenue $72,509 $69,358 Prior period subsidy settlements $(235) $(197) Telephone Operations, excluding prior period subsidy settlements $72,744 $69,555 Monthly Telephone Operations ARPU $103.92 $95.88 Monthly Telephone Operations ARPU, excluding prior period subsidy settlements $104.26 $96.15 Consolidated Communications Schedule of Adjusted EBITDA Calculation (Dollars in thousands) (Unaudited) Last Three Twelve Twelve Three Months Months Months Months Ended Ended Ended Ended March 31, December 31, December 31, March 31, 2007 2006 2005 2006 2007 Historical EBITDA: Net cash provided by operating activities $17,971 $14,361 $32,229 $84,593 $88,203 Adjustments: Compensation from restricted share plan (734) (625) (1,346) (2,482) (2,591) Other adjustments, net (418) (5,015) (14,380) (8,083) (3,486) Changes in operating assets and liabilities 4,429 11,898 (2,073) 6,669 (800) Interest expense, net 11,400 10,042 10,631 42,899 44,257 Income taxes 3,687 2,928 7,234 405 1,164 Historical EBITDA (1) 36,335 33,589 32,295 124,001 126,747 Adjustments to EBITDA: Integration, restructuring and Sarbanes-Oxley (2) 172 466 1,994 3,684 3,390 Other, net (3) (1,455) (1,348) (780) (7,143) (7,250) Investment distributions (4) 1,395 1,451 771 5,516 5,460 Intangible assets impairment (5) -- -- -- 11,240 11,240 Non-cash compensation (6) 734 625 1,346 2,482 2,591 Adjusted EBITDA $37,181 $34,783 $35,626 $139,780 $142,178 Footnotes for Adjusted EBITDA: (1) Historical EBITDA is defined as net earnings (loss) before interest expense, income taxes, depreciation and amortization on a historical basis. (2) Represents certain expenses associated with integrating and restructuring the Texas and Illinois businesses and Sarbanes-Oxley start-up costs. For the first quarter of 2007, this is comprised of $0.2M in billing integration costs. For the twelve months ended March 31, 2007, this is comprised of $1.9M in severance, $0.6M in Sarbanes-Oxley start-up costs and $0.9M in billing integration costs. For YTD 2006, this is comprised of $2.0M in severance, $0.8M in Sarbanes-Oxley start-up costs and $0.9M in billing integration costs. (3) Other, net includes the equity earnings from our investments, dividend income and certain other miscellaneous non-operating items. (4) For purposes of calculating Adjusted EBITDA, we include all cash dividends and other cash distributions received from our investments. (5) Upon completion of our annual impairment review and as a result of a decline in estimated future cash flows in the telemarketing and operator services business, we determined that the value of the customer lists associated with these businesses was impaired. (6) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are being excluded from Adjusted EBITDA. Consolidated Communications Cash Available to Pay Dividends (Dollars in thousands) (Unaudited) Three Twelve Three Months Months Months October 1, Ended Ended Ended 2005 to March 31, December 31, December 31, March 31, 2007 2006 2005 2007 (4) Adjusted EBITDA $37,181 $139,780 $35,626 $212,587 - Cash interest expense (10,816) (40,613) (9,384) (60,813) - Capital Expenditures (8,187) (33,388) (9,498) (51,073) + Proceeds from asset sales(1) -- 6,594 -- 6,594 - Cash income taxes (3,748) (8,237) (172) (12,157) + Cash interest income 214 745 174 1,133 - Repurchases of stock (2) 12 (87) -- (75) Cash available to pay dividends $14,656 $64,794 $16,746 $96,196 Quarterly Dividend $10,045 $44,593 $11,537 $66,175 Payout Ratio 68.5% 68.8% 68.9% 68.8% Adjusted Payout ratio (3) 68.5% 76.6% 68.9% 73.9% (1) Represents $673 of proceeds from the sale of idle property during and $5,921 of proceeds from the redemption of class C shares of RTB stock. (2) Represents the cancellation of stock by employees to pay withholding tax on shares vesting under the Company's Long Term Incentive Plan. (3) Represents the payout ratio excluding the effect of asset sales. (4) Represents cumulative available cash for the period from October 1, 2005 to March 31, 2007. Consolidated Communications Schedule of Adjusted EBITDA Margin Calculation (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2007 2006 Revenue $82,980 $79,426 Adjusted EBITDA 37,181 34,783 Adjusted EBITDA Margin 44.8% 43.8% Consolidated Communications Total Net Debt to LTM Adjusted EBITDA Ratio (Dollars in thousands) (Unaudited) Summary of Outstanding Debt Senior Notes $130,000 Term loan D 464,000 Total debt as of March 31, 2007 $594,000 Less cash on hand (26,103) Total net debt as of March 31, 2007 $567,897 Adjusted EBITDA for the last twelve months ended March 31, 2007 142,178 Total Net Debt to last twelve months Adjusted EBITDA 4.0 x Consolidated Communications Adjusted Net Income Per Share (Dollars in thousands) (Unaudited) Three Months Ended Three Months Ended March 31, March 31, 2007 2006 Reported net income applicable to common stockholders $4,619 $3,548 Severance, net of tax 4 26 Sarbanes Oxley start-up costs, net of tax -- 109 Billing integration, net of tax 92 121 Non-cash compensation 734 625 Adjusted income applicable to common stockholders $5,449 $4,429 Weighted average number of shares outstanding 26,029,228 29,788,518 Adjusted net income per share $0.21 $0.15 Calculations above assume a 44.4 percent and 45.2 percent effective tax rate for the three months ended March 31, 2007 and 2006, respectively. Consolidated Communications Key Operating Statistics March 31, March 31, 2007 2006 Local access lines in service Residential 153,640 161,322 Business 78,178 79,637 Total local access lines 231,818 240,959 IPTV subscribers Illinois 7,288 3,514 Texas 1,078 -- Total IPTV subscribers 8,366 3,514 DSL subscribers 55,961 43,713 Broadband Connections 64,327 47,227 Total connections 296,145 288,186 Long distance lines 149,318 145,795 Dial-up subscribers 11,128 14,623 Service bundles 44,728 39,036 IPTV Homes passed Illinois 35,843 22,679 Texas 71,340 -- Total homes passed 107,183 22,679
SOURCE Consolidated Communications Holdings, Inc.
CONTACT: Stephen Jones, Vice President - Investor Relations of Consolidated Communications Holdings, Inc., +1-217-258-9522, firstname.lastname@example.org; or investors, Kirsten Chapman of Lippert - Heilshorn & Associates, +1-415-433-3777, email@example.com, for Consolidated Communications Holdings, Inc.
5063 05/10/2007 07:00 EDT http://www.prnewswire.com