MATTOON, Ill., May 8, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) today announced results for the first quarter ended March 31, 2008. The following reflects consolidated results from Illinois, Texas and Pennsylvania.
The company reported: -- Revenues were $105.4 million. -- Adjusted EBITDA was $49.2 million. -- Net cash provided by operations was $25.0 million. -- Dividend payout ratio was 72.2 percent.
"We are off to a great start in 2008," said Bob Currey, Consolidated's president and chief executive officer. "Our first quarter financial results are strong, we had another solid quarter of DSL growth and we have made great progress on completing our IPTV suite of products in all markets."
"With our Pennsylvania integration ahead of schedule and approximately $4.0 million in cost savings already realized, we continue to be confident that we will meet or exceed our original synergy projections of $7.0 million in 2008 for the North Pittsburgh transaction. In late April, we launched IPTV service in Pennsylvania and rolled out DVR in all our markets. The DVR offering completes our current IPTV suite and provides Consolidated with an even more competitive product. The Pennsylvania IPTV launch gives us a triple play bundle that has demonstrated strong consumer demand in other markets and we expect it to have a positive impact on access line and broadband performance," Currey concluded.
Operating Statistics at March 31, 2008, Compared to December 31, 2007 -- Total connections were 455,745, an increase of 3,453, or 0.8 percent. -- Total local access lines were 282,641, a decrease of 3,545, or 1.2 percent. o Our existing IL and TX operations had a decrease of 2,500, or 1.1 percent. o Our new Pennsylvania operations had a decrease of 1,045, or 1.7 percent. -- ILEC Broadband connections were 97,339, an increase of 3,761, or 4.0 percent. o DSL subscribers were 84,313, an increase of 2,976, or 3.7 percent. o IPTV subscribers were 13,026, an increase of 785, or 6.4 percent. -- ILEC VOIP lines were 2,938, an increase of 473, or 19.2 percent. -- CLEC access line equivalents were 72,827, an increase of 2,764, or 3.9 percent.
As of January 1, 2008 and for the quarter ended March 31, 2008, our operating statistics include metrics and results associated with our acquisition of North Pittsburgh Systems Inc. In addition, the company is now including VOIP lines and CLEC access line equivalents in its total connection count and reflecting PRI voice grade equivalents in its access line count for the Pennsylvania ILEC consistent with its methodology in Illinois and Texas and industry norms. Under the previous North Pittsburgh methodology, Pennsylvania ILEC access line loss would have been 2.3 percent for the first quarter of 2008. These adjustments have no impact on revenue and comparable historical figures are provided in the accompanying tables.
Steve Childers, Consolidated's chief financial officer, stated, "As expected, our financial results were very strong in the quarter. Quarterly revenue of $105.4 million, adjusted EBITDA of $49.2 million and a solid dividend payout ratio were all in line with our expectations for the consolidated business. Additionally, on April 1, we completed the redemption of $130.0 million of our 9.75% Senior Notes. By limiting borrowing to $120.0 million from a delayed term facility, we effectively realized a $10.0 million reduction of debt and annualized cash interest savings of $4.0 million.
Cash Available to Pay Dividends
For the first quarter 2008, cash available to pay dividends, or CAPD, was $15.7 million and the dividend payout ratio was 72.2 percent. At March 31, 2008, cash and cash equivalents were $34.3 million. The company made capital expenditures of $13.3 million during the first quarter.
Financial Highlights for the First Quarter Ended March 31, 2008 -- Revenues were $105.4 million, compared to $83.0 million in the first quarter of 2007. Revenues excluding the impact from the North Pittsburgh acquisition were $81.5 million, a decrease of $1.5 million. The decline was primarily driven by decreases in Local Calling Services and Network Access Services, partially offset by an increase in Data and Internet revenue. The reduction in Local and Network Access revenue was primarily attributable to $1.2 million in carrier billing settlements that were recognized in 2007. The increase in Data and Internet revenue was driven by continued growth in DSL and IPTV subscribers. -- Depreciation and amortization was $22.9 million, compared to $16.6 million in the first quarter of 2007. The $6.3 million increase was primarily driven by increased depreciation associated with the fixed assets acquired and the amortization of intangible assets recognized in conjunction with the acquisition of North Pittsburgh. -- Income from operations was $20.5 million, compared to $18.4 million in the first quarter of 2007. -- Interest expense, net was $18.1 million, compared to $11.4 million in the same quarter last year. The increase was primarily driven by the incremental debt and terms of the new credit facility associated with the North Pittsburgh acquisition. -- Other income, net was $4.1 million, compared to $1.3 million for same period in 2007. As part of the acquisition of North Pittsburgh, the company acquired interests in three additional cellular partnerships, which contributed approximately $3.0 million of income during the period. -- Income tax expense was $2.9 million, compared to $3.7 million in 2007. The decrease was driven by lower pre-tax income. -- Net income was $3.7 million, compared to $4.6 million in the first quarter of 2007. -- Net income per common share was $0.13, compared to $0.18 in the same quarter of 2007. "Adjusted net income per share" excludes certain items in the manner described in the table provided in this release. On that basis, "adjusted net income per share" for the first quarter ended March 31, 2008 was $0.16, compared to $0.21 in the first quarter of 2007. -- Adjusted EBITDA was $49.2 million, compared to $37.2 million for the same period in 2007. The increase was primarily driven by the impact of the North Pittsburgh acquisition. Net cash provided from operating activities was $25.0 million, compared to $18.0 million for the same period in 2007. The total net debt to last twelve month adjusted EBITDA coverage ratio was 4.6 times to one, and all coverage ratios were in compliance with our credit facility.
For 2008, the company provides the following updated full year guidance, including the Pennsylvania operations: Capital expenditures are expected to be in the range of $46.5 million to $49.5 million, including $2.0 million associated with integration related capital expenditures; cash interest expense is expected to be in the range of $64.0 million to $67.0 million; and cash income taxes are expected to be in the range of $12.0 million to $15.0 million.
On May 6, 2008, the company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on August 1, 2008 to stockholders of record at the close of business on July 15, 2008.
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 first quarter earnings and developments in the business. The call is being webcast and can be accessed from the "Investor Relations" section of the company's website at 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 12, 2008 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 42996281.
Use of Non-GAAP Financial Measures
This press release, as well as the conference call, includes disclosures regarding "adjusted EBITDA", "cash available to pay dividends", "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 is comprised of historical EBITDA, as adjusted for certain items permitted or required by the lenders under the credit facility in place at the end of each quarter in the periods presented. The tables that follow include an explanation of how adjusted EBITDA is calculated for each of the periods presented.
EBITDA is defined as net earnings (loss) before interest expense, income taxes, depreciation 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, 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. Other information related to these two non-GAAP financial measures, specifically "total net debt to last twelve month adjusted EBITDA coverage ratio", 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, provides 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.
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 both our company over time and the relative performance of the companies in our industry.
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. With approximately 282,641 ILEC access lines, 72,827 Competitive Local Exchange Carrier (CLEC) access line equivalents, 84,313 DSL subscribers, and 13,026 IPTV subscribers, Consolidated Communications offers a wide range of telecommunications services, including local and long distance service, custom calling features, private line services, high-speed Internet access, digital TV, carrier access services, and directory publishing. Consolidated Communications is the 13th largest local telephone company in the United States.
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 successfully integrate North Pittsburgh's operations and realize the synergies from the acquisition, as well as a number of other factors related to our business, including various risks to shareholders of not receiving dividends and risks to Consolidated's ability to pursue growth opportunities if Consolidated continues to pay dividends according to the current dividend policy; various risks to the price and volatility of Consolidated's common stock; the substantial amount of debt and Consolidated's ability to incur additional debt in the future; Consolidated's need for a significant amount of cash to service and repay the debt and to pay dividends on the common stock; restrictions contained in the debt agreements that limit the discretion of management in operating the business; the ability to refinance the existing debt as necessary; regulatory changes, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with Consolidated's possible pursuit of acquisitions; economic conditions in the Consolidated service areas in Illinois, Texas and Pennsylvania; system failures; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of Consolidated's network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; and liability and compliance costs regarding environmental regulations. These and other risks and uncertainties are discussed in more detail in Consolidated's filings with the Securities and Exchange Commission, including our reports on Form 10-K and Form 10-Q. Many of these risks are beyond management's ability to control or predict. All forward-looking statements attributable to Consolidated or persons acting on behalf of us are expressly qualified in their entirety by the cautionary statements and risk factors contained in this press release and Consolidated's filings with the Securities and Exchange Commission. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the Securities and Exchange Commission, Consolidated does not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.
- Tables Follow - Consolidated Communications Condensed Consolidated Balance Sheets (Dollars in thousands) (Unaudited) March 31, December 31, 2008 2007 ASSETS Current assets: Cash and cash equivalents $34,295 $34,341 Accounts receivable, net 47,250 44,001 Prepaid expenses and other current assets 19,122 21,273 Total current assets 100,667 99,615 Property, plant and equipment, net 407,732 411,647 Intangibles and other assets 787,128 793,329 Total assets $1,295,527 $1,304,591 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of capital lease obligation $1,029 $1,010 Accounts payable 16,134 17,386 Accrued expenses and other current liabilities 66,210 66,547 Total current liabilities 83,373 84,943 Capital lease obligation less current portion 1,371 1,636 Long-term debt 890,000 890,000 Other long-term liabilities 181,564 168,324 Total liabilities 1,156,308 1,144,903 Minority interests 4,594 4,322 Stockholders' equity: Common stock, $0.01 par value 295 294 Paid in capital 278,550 278,175 Accumulated deficit (125,274) (117,452) Accumulated other comprehensive income (loss) (18,946) (5,651) Total stockholders' equity 134,625 155,366 Total liabilities and stockholders' equity $1,295,527 $1,304,591 Consolidated Communications Condensed Consolidated Statements of Operations (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended March 31, 2008 2007 Revenues $105,414 $82,980 Operating expenses: Cost of services and products 33,863 25,629 Selling, general and administrative expenses 28,144 22,299 Depreciation and amortization 22,871 16,629 Income from operations 20,536 18,423 Other income (expense): Interest expense, net (18,054) (11,400) Other income, net 4,105 1,283 Income before income taxes 6,587 8,306 Income tax expense 2,878 3,687 Net income 3,709 4,619 Diluted net income per common share $0.13 $0.18 Consolidated Communications Condensed Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2008 2007 OPERATING ACTIVITIES Net income $3,709 $4,619 Adjustments to reconcile net income to cash provided by operating activities: Depreciation and amortization 22,871 16,629 Non-cash stock compensation 384 734 Other adjustments, net (2,834) 418 Changes in operating assets and liabilities, net 903 (4,429) Net cash provided by operating activities 25,033 17,971 INVESTING ACTIVITIES Capital expenditures (13,285) (8,187) Net cash used for investing activities (13,285) (8,187) FINANCING ACTIVITIES Proceeds from issuance of stock - 12 Payments made on long-term obligations (246) - Payment of deferred financing costs (181) (320) Purchase and retirement of common stock (8) - Dividends on common stock (11,359) (10,045) Net cash used in financing activities (11,794) (10,353) Net decrease in cash and cash equivalents (46) (569) Cash and cash equivalents at beginning of period 34,341 26,672 Cash and cash equivalents at end of period $34,295 $26,103 Consolidated Communications Consolidated Revenue by Category (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2008 2007 Telephone Operations Local calling services $26,950 $21,313 Network access services 24,458 18,318 Subsidies 13,799 11,597 Long distance services 6,251 3,636 Data and Internet services 14,401 8,631 Other services 9,115 9,014 Total Telephone Operations 94,974 72,509 Other Operations 10,441 10,471 Total operating revenues $105,415 $82,980 Consolidated Communications Schedule of Adjusted EBITDA Calculation (Dollars in thousands) (Unaudited) Three months ended March 31, 2008 2007 Historical EBITDA: Net cash provided by operating activities $25,033 $17,971 Adjustments: Compensation from restricted share plan (384) (734) Other adjustments, net 2,834 (418) Changes in operating assets and liabilities (903) 4,429 Interest expense, net 18,054 11,400 Income taxes 2,878 3,687 Historical EBITDA (1) 47,512 36,335 Adjustments to EBITDA (2): Integration and restructuring (3) 1,082 172 Other, net (4) (4,377) (1,455) Investment distributions (5) 4,590 1,395 Non-cash compensation (6) 384 734 Adjusted EBITDA $49,191 $37,181 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) These adjustments reflect those required or permitted by the lenders under the credit facility in place at the end of each of the quarters included in the periods presented. (3) Represents certain expenses associated with integrating and restructuring the Texas, Illinois and Pennsylvania businesses. For the first quarter of 2008, this is comprised of $0.9 million of integration costs and $0.2 million of severance costs. For the first quarter of 2007, this is comprised of $0.2 million of integration costs. (4) Other, net includes the equity earnings from our investments, dividend income and certain other miscellaneous non-operating items. (5) For purposes of calculating adjusted EBITDA, we include all cash dividends and other cash distributions received from our investments. (6) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are being excluded from adjusted EBITDA. Consolidated Communications Cash Available to Pay Dividends (Dollars in thousands) (Unaudited) Three Months Ended March 31, 2008 Adjusted EBITDA $49,191 - Cash interest expense (17,802) - Capital Expenditures (13,285) - Cash income taxes (2,585) + Cash interest income 224 Cash available to pay dividends $15,743 Quarterly Dividend $11,359 Payout Ratio 72.2% Consolidated Communications Total Net Debt to LTM Adjusted EBITDA Ratio (Dollars in thousands) (Unaudited) Summary of Outstanding Debt Senior notes $130,000 Term loan 760,000 Capital leases 2,400 Total debt as of March 31, 2008 $892,400 Less cash on hand (34,295) Total net debt as of March 31, 2008 $858,105 Adjusted EBITDA for the last twelve months ended March 31, 2008 (1) $188,091 Total Net Debt to last twelve months Adjusted EBITDA 4.6 x (1) Per the new credit facility adjusted EBITDA has been agreed upon for the second and third quarters of 2007 at $90,600 and reflects a combined pro forma number for the fourth quarter 2007. Adjusted EBITDA for the fourth quarter 2007 is the sum of $11,264 for the Pennsylvania operations and $37,036 for the Illinois and Texas operations. Adjusted EBITDA reflects actual results for the first quarter of 2008. Consolidated Communications Adjusted Diluted Net Income Per Share (Dollars in thousands) (Unaudited) Three Months Ended March 31, March 31, 2008 2007 Reported net income applicable to common stockholders $3,709 $4,619 Severance, net of tax 130 4 Billing integration, net of tax - 92 Integration and restructuring charges 479 - Non-cash compensation 384 734 Adjusted income applicable to common stockholders $4,702 $5,449 Weighted average number of shares outstanding 29,449,849 26,029,228 Adjusted diluted net income per share $0.16 $0.21 Calculations above assume a 43.7 percent and 44.4 percent effective tax rate for the three months ended March 31, 2008 and 2007, respectively. Shares outstanding in the first quarter of 2008 reflect 3.3 million shares issued pursuant to the North Pittsburgh acquisition. Consolidated Communications Key Operating Statistics March 31, December 31, March 31,(6) 2008 2007 2007 Local access lines in service Residential 179,864 183,070 192,667 Business 102,777 103,116 104,471 Total local access lines 282,641 286,186 297,138 Total IPTV subscribers 13,026 12,241 8,366 ILEC DSL subscribers(2) 84,313 81,337 69,731 ILEC Broadband Connections 97,339 93,578 78,097 ILEC VOIP subscribers(3) 2,938 2,465 1,562 CLEC Access Line Equivalents(4) 72,827 70,063 65,369 Total connections(1) 455,745 452,292 442,166 Long distance lines(5) 167,360 166,599 165,509 Dial-up subscribers 6,042 6,783 11,200 IPTV Homes passed 107,631 107,631 107,183 (1) Total connections include statistics for our Pennsylvania markets. (2) Includes only ILEC DSL. CLEC DSL is included in CLEC access line equivalents. (3) VOIP subscribers are now included in total connections for all periods presented. (4) CLEC access line equivalents represent a combination of voice services and data circuits. The calculations represent a conversion of data circuits to an access line basis. Equivalents are calculated by converting data circuits (basic rate interface (BRI), primary rate interface (PRI), DSL, DS-1, DS-3, and Ethernet) and SONET-based (optical) services (OC-3 and OC-48) to the equivalent of an access line. (5) Reflects the inclusion of long distance service provided as part of the VOIP offering while excluding CLEC long distance subscribers. North Pittsburgh included company and toll-free long distance lines in their counts. In order to be consistent with our IL and TX operations, we are excluding these from the lines and have reflected this in all above periods. (6) Presented on a pro forma basis to include the aggregate operating statistics of IL, TX and PA as of March 31, 2007, as if the acquisition of North Pittsburgh had occurred prior to that date. Consolidated Communications PA Historical Operating Statistics March 31, December 31, September 30, June 30, March 31, 2008 2007 2007 2007 2007 ILEC lines - previous method(1) 56,888 58,241 59,311 60,663 61,546 ILEC lines - revised method(2) 61,354 62,399 63,334 64,526 65,320 December 31, September 30, June 30, March 31, 2006 2006 2006 2006 ILEC lines - previous method(1) 63,317 66,347 68,143 69,187 ILEC lines - revised method(2) 66,977 69,979 71,707 72,575 (1) Reflects North Pittsburgh methodology of treating voice grade PRI equivalents as 1 access line. (2) Reflects Consolidated Communications PA voice grade PRI equivalents as 23 access lines.
Consolidated Communications Holdings, Inc.