Feb 21, 2019

Consolidated Communications Reports Fourth Quarter 2018 Results

  • Commercial and carrier data and transport revenue grew 2.3 percent year over year
  • Ethernet revenues increased 6.8 percent year over year
  • Completed upgrades to 500,000 broadband passings across Northern New England
  • Declared 55th consecutive quarterly dividend

MATTOON, Ill., Feb. 21, 2019 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company”) reported results for the fourth quarter 2018 and will hold a conference call and simultaneous webcast to discuss its results and developments today at 10 a.m. ET.

Fourth quarter 2018 Consolidated Communications financial summary:

  • Revenue totaled $344.8 million
  • Net cash from operating activities was $93.3 million
  • Adjusted EBITDA was $132.4 million
  • Dividend payout ratio was 68.3 percent

“2018 was a very productive year where we made great progress improving service levels and advancing our business and broadband strategy across our newly acquired markets,” said Bob Udell, president and chief executive officer of Consolidated Communications. “I am very pleased with our commercial growth and our progress in expanding our fiber network, including our upgrade of more than 500,000 or one-third of the broadband passings across Northern New England.”

“For 2019, we are focused on growing market share as we ramp up marketing in Northern New England and continue to make success-based, fiber investments in the business improving the customer experience,” said Udell.

Financial Results for the Fourth Quarter   

  • Revenues were $344.8 million, compared to $356.4 million for the fourth quarter of 2017, a decrease of $11.6 million in the recent quarter. Commercial and carrier data and transport service revenue increased 2.3 percent or $2 million on a comparable basis, with Ethernet revenue growth of 6.8 percent being the catalyst. Business system sales and special construction projects contributed an additional $4.7 million to the fourth quarter 2018 revenues. Consumer Broadband revenue was up $500,000 from a year ago in spite of normal seasonality in the Northern New England region. Voice services revenue declined $11.8 million across all customer channels. Subsidies decreased $2.4 million during the quarter primarily due to the final CAF step down in transitional revenues, and network switched and special access revenues declined $2.9 million.
  • Income from operations was $3.6 million compared to $7.0 million in the fourth quarter of 2017. The change was primarily due to the declines in revenues described above, offset by reductions in operating expense of $8.2 million.
  • Interest expense, net was $35.5 million, compared to $29.9 million for the same period last year. The increase was due to increases in LIBOR and non-cash expense associated with interest rate hedge agreements put in place to maintain our fixed debt target of 75 percent. As of Dec. 31, 2018, our weighted average cost of debt was approximately 5.6 percent.
  • Cash distributions from the Company’s wireless partnerships were $10.3 million for the fourth quarter compared to $8.0 million for the prior year period. 
  • Other income, net was $11.1 million, compared to $7.9 million in the fourth quarter of 2017, mainly due to increased income from the Company’s minority interest in wireless partnerships.
  • On a GAAP basis, net loss was $14.0 million and GAAP net loss per share was ($0.20). Adjusted diluted net loss per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net loss per share was ($0.09) in the fourth quarter, compared to ($0.04) in the fourth quarter of 2017. 
  • Adjusted EBITDA was $132.4 million compared to $133.2 million in the year ago quarter.
  • The total net debt to last 12-month adjusted EBITDA ratio was 4.3x.

Full-Year 2018 Results

  • For the full year 2018, operating revenue totaled $1.4 billion, down 4.2 percent from pro forma fiscal year 2017. The decline was primarily due to continued erosion of legacy voice services and access revenues as well as the step down in CAF II transitional funding support.
  • Net cash from operating activities was $357.3 million.
  • Adjusted EBITDA was $537.3 million for fiscal year 2018, up $1.1 million from pro forma fiscal year 2017.

Cash Available to Pay Dividends, Capex

For the fourth quarter, cash available to pay dividends was $40.4 million. The dividend payout ratio was 68.3 percent for the quarter and 67.4 percent for the year. At Dec. 31, 2018, cash and cash equivalents were $9.6 million. Capital expenditures were $58.1 million for the fourth quarter and $244.8 million for the year. 

Financial Guidance

The Company is providing guidance for fiscal year 2019 as follows:

 
    2018 Results   2019 Guidance
Cash interest expense   $128.1M   $135M to $140M
Cash income taxes1   $1.0M   $1M to $3M
Capital expenditures   $244.8M   $210M to $220M
 
(1)  Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses.

Dividend Payments

The Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on May 1, 2019 to stockholders of record at the close of business on April 15, 2019. This will represent the 55th consecutive quarterly dividend paid by the Company. 

Conference Call Information

Consolidated Communications will host a conference call and webcast today at 10 a.m. ET / 9 a.m. CT to discuss fourth 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, conference ID 5858129. A telephonic replay of the conference call will be available through Feb. 28, 2019 and can be accessed by calling 1-855-859-2056, conference ID 5858129.  
 
About Consolidated Communications 

Consolidated Communications Holdings, Inc. (NASDAQ: CNSL) is a leading broadband and business communications provider serving consumers, businesses, and wireless and wireline carriers across rural and metro communities and a 23-state service area. Leveraging an advanced fiber network spanning 37,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: high-speed Internet, data, phone, security, managed services, cloud services and wholesale, carrier solutions. From our first connection 125 years ago, Consolidated is dedicated to turning technology into solutions, connecting people and enriching how they work and live. Visit www.consolidated.com for more information.

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, 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)
   December 31,     December 31, 
    2018       2017  
       
ASSETS       
Current assets:      
Cash and cash equivalents $   9,599     $   15,657  
Accounts receivable, net     133,136         121,528  
Income tax receivable     11,072         21,846  
Prepaid expenses and other current assets     44,336         33,318  
Assets held for sale     -         21,310  
Total current assets     198,143         213,659  
       
Property, plant and equipment, net     1,927,126         2,037,606  
Investments     110,853         108,858  
Goodwill     1,035,274         1,038,032  
Customer relationships, net     228,959         293,300  
Other intangible assets     11,483         13,483  
Other assets     23,423         14,188  
Total assets $   3,535,261     $   3,719,126  
       
LIABILITIES AND SHAREHOLDERS' EQUITY       
Current liabilities:      
Accounts payable $   32,502     $   24,143  
Advance billings and customer deposits     47,724         42,526  
Dividends payable     27,579         27,418  
Accrued compensation     64,459         49,770  
Accrued interest     9,232         9,343  
Accrued expense     71,650         72,041  
Current portion of long-term debt and capital lease obligations     30,468         29,696  
Liabilities held for sale     -          1,003  
Total current liabilities     283,614         255,940  
       
Long-term debt and capital lease obligations     2,303,585         2,311,514  
Deferred income taxes     188,129         209,720  
Pension and other post-retirement obligations     314,134         334,193  
Other long-term liabilities     30,145         33,817  
Total liabilities     3,119,607         3,145,184  
       
Shareholders' equity:      
Common stock, par value $0.01 per share; 100,000,000 shares      
authorized, 71,187,301 and 70,777,354, shares outstanding      
as of December 31, 2018 and December 31, 2017, respectively     712         708  
Additional paid-in capital     513,070         615,662  
Accumulated deficit     (50,834 )       -   
Accumulated other comprehensive loss, net     (53,212 )       (48,083 )
Noncontrolling interest     5,918         5,655  
Total shareholders' equity     415,654         573,942  
Total liabilities and shareholders' equity $   3,535,261     $   3,719,126  
       

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
               
   Three Months Ended     Year Ended 
   December 31,     December 31, 
    2018       2017       2018       2017  
               
               
Net revenues $   344,750     $   356,360     $   1,399,074     $   1,059,574  
Operating expenses:              
Cost of services and products     154,656         155,453         611,872         445,998  
Selling, general and administrative              
expenses     82,433         86,159         333,605         249,141  
Acquisition and other transaction costs     197         2,987         1,960         33,650  
Depreciation and amortization     103,909         104,789         432,668         291,873  
Income from operations     3,555         6,972         18,969         38,912  
Other income (expense):              
Interest expense, net of interest income     (35,499 )       (29,890 )       (134,578 )       (129,786 )
Other income, net     11,069         7,877         40,911         31,246  
Loss before income taxes     (20,875 )       (15,041 )       (74,698 )       (59,628 )
Income tax benefit     (6,877 )       (115,065 )       (24,127 )       (124,927 )
Net income (loss)     (13,998 )       100,024         (50,571 )       65,299  
               
Less: net income (loss) attributable to noncontrolling interest     (19 )       218         263         354  
               
Net income (loss) attributable to common shareholders $   (13,979 )   $   99,806     $   (50,834 )   $   64,945  
               
Net income (loss) per basic and diluted common shares              
attributable to common shareholders $   (0.20 )   $   1.41     $   (0.73 )   $   1.07  
               

 

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     Year Ended 
   December 31,     December 31, 
    2018       2017       2018       2017  
               
               
Net revenues $   344,750     $   356,360     $   1,399,074     $   1,460,620  
Operating expenses:              
Operating expenses (exclusive of depreciation              
and amortization)     237,286         241,794         947,437         981,329  
Depreciation and amortization     103,909         104,789         432,668         418,365  
Income from operations     3,555         9,777         18,969         60,926  
Other income (expense):              
Interest expense, net of interest income     (35,499 )       (29,890 )       (134,578 )       (119,510 )
Other income, net     11,069         7,877         40,911         28,875  
Loss before income taxes     (20,875 )       (12,236 )       (74,698 )       (29,709 )
Income tax benefit     (6,877 )       (113,943 )       (24,127 )       (120,840 )
Net income (loss)     (13,998 )       101,707         (50,571 )       91,131  
Less: net income (loss) attributable to noncontrolling interest     (19 )       218         263         354  
               
Net income (loss) attributable to common shareholders $   (13,979 )   $   101,489     $   (50,834 )   $   90,777  
               
Net income (loss) per basic and diluted common share              
attributable to common shareholders $   (0.20 )   $   1.44     $   (0.73 )   $   1.29  
               

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
  (Dollars in thousands)
(Unaudited)
                 
     Three Months Ended     Year Ended 
     December 31,     December 31, 
      2018       2017       2018       2017  
OPERATING ACTIVITIES              
  Net income (loss) $   (13,998 )   $   100,024     $   (50,571 )   $   65,299  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:              
  Depreciation and amortization     103,909         104,789         432,668         291,873  
  Deferred income taxes     (23,203 )       (130,348 )       (26,008 )       (126,127 )
  Cash distributions from wireless partnerships less than earnings     (160 )       (522 )       (194 )       (1,411 )
  Non-cash, stock-based compensation   1,365       447       5,119       2,766  
  Amortization of deferred financing   1,199       1,148       4,721       17,076  
  Other adjustments, net   2,251       551       6,066       3,208  
  Changes in operating assets and liabilities, net   21,922       8,714       (14,480 )     (42,657 )
  Net cash provided by operating activities   93,285       84,803       357,321       210,027  
INVESTING ACTIVITIES              
  Business acquisition, net of cash acquired   -       -       -       (862,385 )
  Purchase of property, plant and equipment, net   (58,051 )     (61,896 )     (244,816 )     (181,185 )
  Proceeds from sale of assets   485       563       2,125       859  
  Proceeds from business disposition   -       -       20,999       -  
  Proceeds from sale of investments   -       -       233       -  
  Net cash used in investing activities   (57,566 )     (61,333 )     (221,459 )     (1,042,711 )
FINANCING ACTIVITIES              
  Proceeds from issuance of long-term debt   53,001       21,000       189,588       1,052,325  
  Payment of capital lease obligations   (3,165 )     (2,570 )     (12,755 )     (7,933 )
  Payment on long-term debt   (51,588 )     (21,587 )     (207,938 )     (111,337 )
  Payment of financing costs   -       -       -       (16,732 )
  Share repurchases for minimum tax withholding   (593 )     (530 )     (593 )     (571 )
  Dividends on common stock   (27,601 )     (27,440 )     (110,222 )     (94,138 )
  Other   -       -       -       (350 )
  Net cash provided by (used in) financing activities   (29,946 )     (31,127 )     (141,920 )     821,264  
Net change in cash and cash equivalents   5,773       (7,657 )     (6,058 )     (11,420 )
Cash and cash equivalents at beginning of period   3,826       23,314       15,657       27,077  
Cash and cash equivalents at end of period $ 9,599     $ 15,657     $ 9,599     $ 15,657  
                 

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
               
   Three Months Ended     Year Ended 
   December 31,     December 31, 
   2018     2017     2018     2017 
Commercial and carrier:              
Data and transport services (includes VoIP) $ 88,152   $ 86,145     $ 349,413     $ 274,221  
Voice services   49,301     54,137       202,875       152,632  
Other   16,389     11,709       56,395       33,908  
    153,842     151,991       608,683       460,761  
Consumer:              
Broadband (VoIP and Data)   63,598     63,052       253,119       183,634  
Video services   21,649     22,646       88,338       91,406  
Voice services   47,597     54,581       202,032       137,696  
    132,844     140,279       543,489       412,736  
               
Subsidies   17,948     20,375       83,371       62,272  
Network access   37,382     40,243       152,582       110,196  
Other products and services   2,734     3,472       10,949       13,609  
Total operating revenue   344,750     356,360       1,399,074       1,059,574  
               
Less operating revenues from divestitures   -     (1,355 )     (3,337 )     (2,784 )
  $   344,750   $   355,005     $   1,395,737     $   1,056,790  
               

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
                   
                   
   Three Months Ended 
   Q4 2018     Q3 2018     Q2 2018     Q1 2018     Q4 2017 
Commercial and carrier:                  
Data and transport services (includes VoIP) $   88,152   $   87,633     $   87,603     $   86,025     $   86,145  
Voice services     49,301       50,091         51,322         52,161         54,137  
Other     16,389       13,906         14,237         11,863         11,709  
      153,842       151,630         153,162         150,049         151,991  
Consumer:                  
Broadband (VoIP and Data)     63,598       63,865         62,545         63,111         63,052  
Video services     21,649       21,790         22,065         22,834         22,646  
Voice services     47,597       50,757         51,616         52,062         54,581  
      132,844       136,412         136,226         138,007         140,279  
                   
Subsidies     17,948       19,189         20,979         25,255         20,375  
Network access     37,382       38,147         37,338         39,715         40,243  
Other products and services     2,734       2,686         2,516         3,013         3,472  
Total operating revenue     344,750       348,064         350,221         356,039         356,360  
                   
Less operating revenues from divestitures     -       (466 )       (1,417 )       (1,454 )       (1,355 )
  $   344,750   $   347,598     $   348,804     $   354,585     $   355,005  
                   

 

Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
               
               
   Three Months Ended     Year Ended 
   December 31,     December 31, 
    2018       2017       2018       2017  
Net income (loss) $   (13,998 )   $   100,024     $   (50,571 )   $   65,299  
Add (subtract):              
Income tax benefit     (6,877 )       (115,065 )       (24,127 )       (124,927 )
Interest expense, net     35,499         29,890         134,578         129,786  
Depreciation and amortization     103,909         104,789         432,668         291,873  
EBITDA     118,533         119,638         492,548         362,031  
               
Adjustments to EBITDA (1):              
Other, net (2)     11,552         11,854         34,599         47,536  
Investment income (accrual basis)     (10,597 )       (8,681 )       (39,596 )       (31,749 )
Investment distributions (cash basis)     10,263         7,972         39,078         29,993  
Pension/OPEB expense     1,249         1,925         5,546         3,527  
Non-cash compensation (3)     1,365         447         5,119         2,766  
Adjusted EBITDA $   132,365     $   133,155     $   537,294     $   414,104  
               
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
   Three Months Ended     Year Ended 
   December 31,     December 31, 
    2018       2017       2018       2017  
Net income (loss) $   (13,998 )   $   101,707     $   (50,571 )   $   91,131  
Add (subtract):              
  Income tax benefit     (6,877 )       (113,943 )       (24,127 )       (120,840 )
  Interest expense, net     35,499         29,890         134,578         119,510  
  Depreciation and amortization     103,909         104,789         432,668         418,365  
EBITDA     118,533         122,443         492,548         508,166  
               
Adjustments to EBITDA (1):              
Other, net (2)     11,552         9,049         34,599         14,499  
Investment income (accrual basis)     (10,597 )       (8,681 )       (39,596 )       (31,749 )
Investment distributions (cash basis)     10,263         7,972         39,078         29,993  
Pension/OPEB expense     1,249         1,925         5,546         9,545  
Non-cash compensation (3)     1,365         447         5,119         5,752  
Adjusted EBITDA $   132,365     $   133,155     $   537,294     $   536,206  
               
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)
       
       
   Three Months Ended     Year Ended 
   December 31, 2018     December 31, 2018 
       
Adjusted EBITDA $   132,365     $   537,294  
       
 - Cash interest expense      (33,809 )       (128,081 )
 - Capital expenditures     (58,051 )       (244,816 )
 - Cash income taxes     (97 )       (940 )
       
Cash available to pay dividends $   40,408     $   163,457  
       
Dividends Paid $   27,601     $   110,222  
Payout Ratio   68.3 %     67.4 %
       
Note:  The above calculation excludes the principal payments on our debt.
       

 

Consolidated Communications Holdings, Inc.
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
   
   December 31, 
Summary of Outstanding Debt:   2018  
Term loans, net of discount $6,994 $   1,796,068  
Revolving loan     22,000  
Senior unsecured notes due 2022, net of discount $2,991     497,009  
Capital leases     30,362  
Total debt as of December 31, 2018 $   2,345,439  
Less deferred debt issuance costs     (11,386 )
Less cash on hand     (9,599 )
Total net debt as of December 31, 2018 $   2,324,454  
   
Adjusted EBITDA for the  
year ended December 31, 2018 $   537,294  
   
Total Net Debt to last twelve months  
Adjusted EBITDA   4.33x  
   

 

Consolidated Communications Holdings, Inc.
Adjusted Net Income and Net Income Per Share 
(Dollars in thousands, except per share amounts)
(Unaudited)
               
               
   Three Months Ended     Year Ended 
   December 31,     December 31, 
    2018       2017       2018       2017  
Net income (loss) $   (13,998 )   $   100,024     $   (50,571 )   $   65,299  
Transaction and severance related costs, net of tax     7,590         4,503         23,986         25,902  
Storm costs, net of tax     282         1,931         1,768         1,931  
Local switching support settlement, net of tax     -         -         (2,978 )       -  
Non-cash interest expense for swaps, net of tax     1,051         (440 )       3,480         666  
Tax on non-deductible transaction related costs     -         1,102         -         3,443  
Tax related to acquisition     -         -         1,062         5,205  
Divestiture related, tax (1)     -         -         767         -  
Change in deferred tax rate, tax     (2,763 )       -         (2,763 )       5,404  
Change in deferred tax rate, federal tax reform     (772 )       (112,910 )       (5,169 )       (112,910 )
Other, tax     1,340         2,580         1,340         2,580  
Amortization of commitment fee, net of tax     -         -         -         7,819  
Ticking fees on committed financing, net of tax     -         -         -         10,966  
Non-cash stock compensation, net of tax     1,020         272         3,824         1,682  
Adjusted net income (loss) $   (6,250 )   $   (2,938 )   $   (25,254 )   $   17,987  
               
Weighted average number of shares outstanding     70,658         70,516         70,613         60,373  
Adjusted diluted net income (loss) per share $   (0.09 )   $   (0.04 )   $   (0.36 )   $   0.30  
               
Notes:              
(1) Includes sale of Virginia properties on July 31, 2018.              
               
Calculations above assume a 25.3% effective tax rate for the three months and year ended December 31, 2018 and 39.2% effective tax rate for the three months and year ended December 31, 2017.
               
Net income per share has been impacted by approximately $0.22 for the year ended December 31, 2018 due to increased depreciation and amortization associated with the valuation of the FairPoint assets.
               

 

Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
                   
   December 31,     September 30,    % Change     December 31,    % Change 
    2018       2018     in Qtr     2017 (2)   YOY
                   
Voice Connections 902,414    921,896    (2.1%)    967,965    (6.8%)
                   
Data and Internet Connections 778,970    781,912    (0.4%)    780,794    (0.2%)
                   
Video Connections  93,065    95,889    (2.9%)    103,313    (9.9%)
                   
Business and Broadband as % of total revenue (1) 76.2%    75.2%   1.3%    74.8%   1.8%
                   
Fiber route network miles (long-haul and metro) 36,944    36,814    0.4%    35,962    2.7%
                   
On-net buildings 10,424    10,041    3.8%    9,062    15.0%
                   
Consumer Customers 628,649    641,845    (2.1%)    666,872    (5.7%)
                   
Consumer ARPU $70.44   $70.70    (0.4%)   $69.69    1.1%
                   
                   
Notes:                  
(1) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.
(2) The sale of our local exchange carrier in Virginia resulted in a reduction of approximately 4,110 voice connections, 2,900 data and Internet connections and 4,340 consumer customers in the third quarter of 2018.  Prior period amounts have been adjusted to reflect the sale.