Nov 1, 2018

Consolidated Communications Reports Third Quarter 2018 Results

  • Grew commercial and carrier data and transport revenue 2.3 percent year over year
  • Successfully ratified contract with union employees in Northern New England
  • Increased synergy target from $55 million to $75 million
  • Declared 54th consecutive quarterly dividend

MATTOON, Ill., Nov. 01, 2018 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq: CNSL) (the “Company”) reported results for the third quarter 2018 and will hold a conference call and simultaneous webcast to discuss its results and developments today at 10 a.m. ET.

Third quarter 2018 Consolidated Communications financial summary:

  • Revenue totaled $348.1 million
  • Net cash from operating activities was $69.7 million
  • Adjusted EBITDA was $133.7 million
  • Dividend payout ratio was 69.9 percent, impacted by increased capital expenditures during the quarter

“We continue to make steady progress growing our commercial and carrier revenues as we again experienced year over year growth of data and transport revenues,” said Bob Udell, president and chief executive officer of Consolidated Communications. “We delivered a solid quarter with improvement in data and broadband revenues and an increased synergy target which helps to offset declines in voice revenues. We are proud to announce our 54th consecutive dividend to our shareholders.”

“We’re pleased to have secured new labor agreements with our employees in Northern New England,” added Udell. “The new agreements give us increased flexibility to improve the customer experience and better manage our costs.  As a result, we are increasing our synergy target associated with the acquisition from $55 million to $75 million.”

Financial Results for the Third Quarter   

  • Revenues were $348.1 million, compared to $363.3 million for the third quarter of 2017, a decrease of $15.2 million in the recent quarter. Commercial and carrier data and transport service revenue increased 2.3 percent or $2 million compared to the same period last year. Voice services revenue declined across all customer channels, accounting for $10.6 million of the revenue decline. Subsidies decreased $1.7 million during the quarter primarily due to the final CAF step down in transitional revenues, and network switched and special access revenues declined $3.1 million.
  • Income from operations was $300,000, compared to a loss of $7.7 million in the third quarter of 2017. The year-over-year change is due to reductions in operating expense of $28 million, mainly from acquisition and transaction costs incurred during the third quarter of 2017, offset by the revenue decline. Income from operations was further impacted by an increase in depreciation and amortization expense of $4.7 million associated with higher capital expenditures.
  • Interest expense, net was $33.5 million, compared to $36.3 million for the same period last year. The decrease was due to the recognition of a $5.8 million bridge commitment fee related to the FairPoint acquisition financing in the third quarter of 2017, offset by increases in LIBOR and costs of additional interest rate swaps put in place to maintain our fixed debt target of 75 percent.  As of Sept. 30, 2018, our weighted average cost of debt was approximately 5.5 percent.
  • Cash distributions from the Company’s wireless partnerships were $8.1 million for the third quarter compared to $8.6 million for the prior year period. 
  • Other income, net was $9.4 million, compared to $9.3 million in the third quarter of 2017.
  • On a GAAP basis, net loss was $14.8 million and GAAP net loss per share was ($0.21). 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 third quarter, compared to $0.00 for the same period last year. 
  • Adjusted EBITDA was $133.7 million compared to $137.4 million a year ago. The year over year change was primarily due to decreases in revenue and wireless distributions, offset by declines in operating expenses.
  • The total net debt to pro forma last 12-month adjusted EBITDA ratio was 4.3x.

Cash Available to Pay Dividends, Capex

For the third quarter, cash available to pay dividends was $39.5 million, and the dividend payout ratio was 69.9 percent for the quarter and 67.1 percent year to date. At Sept. 30, 2018, cash and cash equivalents were $3.8 million.  Capital expenditures were $61.9 million for the third quarter. 

Financial Guidance

The Company updated its 2018 guidance as follows:

($ in millions)   2018 Updated Guidance   2018 Previous Guidance  
Cash interest expense   $123 to $128   $123 to $128  
Cash income taxes/refund1   $1 to $3   $1 to $3  
Capital expenditures2   $240 to $245   $235 to $240  
           
(1)  Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses.
(2)  Increasing capital expenditures in part due to success-based, capital projects and hurricane Michael recovery efforts.

Dividend Payments

On Oct. 29, 2018, the Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on Feb. 1, 2019 to stockholders of record at the close of business on Jan. 15, 2019. This will represent the 54th consecutive quarterly dividend paid by the Company. 

Conference Call Information

The Company will host a conference call and webcast today at 10 a.m. ET / 9 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, conference ID 6283078. A telephonic replay of the conference call will be available through Nov. 8, 2018 and can be accessed by calling 1-855-859-2056, conference ID 6283078.  
 
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 23-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 , 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,   
   2018       2017   
           
       
 ASSETS       
Current assets:      
Cash and cash equivalents $ 3,826     $ 15,657  
Accounts receivable, net   143,077       121,528  
Income tax receivable   12,458       21,846  
Prepaid expenses and other current assets   40,588       33,318  
Assets held for sale     -         21,310  
Total current assets   199,949       213,659  
       
Property, plant and equipment, net   1,955,753       2,037,606  
Investments   110,672       108,858  
Goodwill   1,035,274       1,038,032  
Customer relationships, net   245,906       293,300  
Other intangible assets   11,760       13,483  
Other assets     36,706         14,188  
Total assets $   3,596,020     $   3,719,126  
               
       
       
 LIABILITIES AND SHAREHOLDERS' EQUITY       
Current liabilities:      
Accounts payable $ 15,717     $ 24,143  
Advance billings and customer deposits   50,039       42,526  
Dividends payable   27,602       27,418  
Accrued compensation   62,641       49,770  
Accrued interest   17,873       9,343  
Accrued expense   72,838       72,041  
Current portion of long-term debt and capital lease obligations   31,811       29,696  
Liabilities held for sale     -          1,003  
Total current liabilities   278,521       255,940  
       
Long-term debt and capital lease obligations   2,302,795       2,311,514  
Deferred income taxes   207,778       209,720  
Pension and other post-retirement obligations   294,423       334,193  
Other long-term liabilities     23,967         33,817  
Total liabilities     3,107,484         3,145,184  
               
       
Shareholders' equity:      
Common stock, par value $0.01 per share; 100,000,000 shares      
authorized, 71,252,576 and 70,777,354, shares outstanding      
as of September 30, 2018 and December 31, 2017, respectively   713       708  
Additional paid-in capital   539,897       615,662  
Accumulated deficit   (36,855 )     -  
Accumulated other comprehensive loss, net   (21,156 )     (48,083 )
Noncontrolling interest     5,937         5,655  
Total shareholders' equity     488,536         573,942  
Total liabilities and shareholders' equity $   3,596,020     $   3,719,126  
               
       

 

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, 
     2018         2017         2018         2017   
               
               
Net revenues $ 348,064     $ 363,329     $ 1,054,324     $ 703,214  
Operating expenses:              
Cost of services and products   152,942       148,377       457,216       290,545  
Selling, general and administrative              
expenses   85,544       91,098       252,290       162,982  
Acquisition and other transaction costs   133       27,139       1,763       30,663  
Depreciation and amortization   109,119       104,406       328,759       187,084  
Income (loss) from operations   326       (7,691 )     14,296       31,940  
Other income (expense):              
Interest expense, net of interest income   (33,524 )     (36,307 )     (99,079 )     (99,896 )
Other income, net   9,390       9,315       30,960       23,369  
Loss before income taxes   (23,808 )     (34,683 )     (53,823 )     (44,587 )
Income tax benefit   (8,993 )     (6,289 )     (17,250 )     (9,862 )
Net loss   (14,815 )     (28,394 )     (36,573 )     (34,725 )
               
Less: net income attributable to noncontrolling interest   99       54       282       136  
               
Net loss attributable to common shareholders $ (14,914 )   $ (28,448 )   $ (36,855 )   $ (34,861 )
               
Net loss per basic and diluted common shares              
attributable to common shareholders $ (0.21 )   $ (0.41 )   $ (0.53 )   $ (0.62 )
               

 

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, 
     2018         2017         2018         2017   
               
               
Net revenues $ 348,064     $ 363,329     $ 1,054,324     $ 1,104,261  
Operating expenses:              
Operating expenses (exclusive of depreciation              
and amortization)   238,619       239,641       711,269       739,535  
Depreciation and amortization   109,119       104,406       328,759       313,576  
Income from operations   326       19,282       14,296       51,150  
Other income (expense):              
Interest expense, net of interest income   (33,524 )     (30,139 )     (99,079 )     (89,622 )
Other income, net   9,390       9,315       30,960       20,999  
Loss before income taxes   (23,808 )     (1,542 )     (53,823 )     (17,473 )
Income tax benefit   (8,993 )     (914 )     (17,250 )     (6,897 )
Net loss   (14,815 )     (628 )     (36,573 )     (10,576 )
Less: net income attributable to noncontrolling interest   99       54       282       136  
               
Net loss attributable to common shareholders $ (14,914 )   $ (682 )   $ (36,855 )   $ (10,712 )
               
Net loss per basic and diluted common share              
attributable to common shareholders $ (0.21 )   $ (0.01 )   $ (0.53 )   $ (0.15 )
               

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
  (Dollars in thousands)
(Unaudited)
                   
       Three Months Ended     Nine Months Ended 
       September 30,     September 30, 
         2018         2017         2018         2017   
OPERATING ACTIVITIES                
  Net loss   $ (14,815 )   $ (28,394 )   $ (36,573 )   $ (34,725 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
  Depreciation and amortization     109,119       104,406       328,759       187,084  
  Deferred income taxes     (2,807 )     4,199       (2,805 )     4,221  
  Cash distributions from wireless partnerships in excess of/(less than) earnings     (553 )     (953 )     (34 )     (889 )
  Non-cash, stock-based compensation     1,538       889       3,754       2,319  
  Amortization of deferred financing     1,187       7,119       3,522       15,928  
  Other adjustments, net     400       359       3,815       2,657  
  Changes in operating assets and liabilities, net     (24,404 )     (55,934 )     (36,402 )     (51,371 )
  Net cash provided by operating activities     69,665       31,691       264,036       125,224  
INVESTING ACTIVITIES                
  Business acquisition, net of cash acquired     -       (862,385 )     -       (862,385 )
  Purchase of property, plant and equipment, net     (61,925 )     (61,228 )     (186,765 )     (119,289 )
  Proceeds from sale of assets     197       195       1,640       296  
  Proceeds from business disposition     20,999       -       20,999       -  
  Proceeds from sale of investments     -       -       233       -  
  Net cash used in investing activities     (40,729 )     (923,418 )     (163,893 )     (981,378 )
FINANCING ACTIVITIES                
  Proceeds from issuance of long-term debt     60,587       1,008,325       136,587       1,031,325  
  Payment of capital lease obligations     (3,563 )     (2,370 )     (9,590 )     (5,363 )
  Payment on long-term debt     (65,174 )     (62,250 )     (156,350 )     (89,750 )
  Payment of financing costs     -       (16,732 )     -       (16,732 )
  Share repurchases for minimum tax withholding     -       -       -       (41 )
  Dividends on common stock     (27,602 )     (27,441 )     (82,621 )     (66,698 )
  Other     -       (350 )     -       (350 )
  Net cash used in financing activities     (35,752 )     899,182       (111,974 )     852,391  
Net change in cash and cash equivalents     (6,816 )     7,455       (11,831 )     (3,763 )
Cash and cash equivalents at beginning of period     10,642       15,859       15,657       27,077  
Cash and cash equivalents at end of period   $ 3,826     $ 23,314     $ 3,826     $ 23,314  
                   

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
                       
       Three Months Ended         Nine Months Ended 
       September 30,         September 30, 
         2018         2017             2018         2017   
Commercial and carrier:                      
Data and transport services (includes VoIP)     $ 87,633     $ 85,644         $ 261,261     $ 188,076  
Voice services       50,091       54,270           153,574       98,495  
Other       13,906       13,366           40,006       22,199  
        151,630       153,280           454,841       308,770  
Consumer:                      
Broadband (VoIP and Data)       63,865       63,893           189,521       120,582  
Video services       21,790       23,342           66,689       68,760  
Voice services       50,757       57,213           154,435       83,115  
        136,412       144,448           410,645       272,457  
                       
Subsidies       19,189       20,933           65,423       41,897  
Network access       38,147       41,262           115,200       69,953  
Other products and services       2,686       3,406           8,215       10,137  
Total operating revenue       348,064       363,329           1,054,324       703,214  
                       
Less operating revenues from divestitures       (466 )     (1,429 )         (3,337 )     (1,429 )
      $ 347,598     $ 361,900         $ 1,050,987     $ 701,785  
                       

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
 (Unaudited) 
                       
                     
     Three Months Ended   
     Q3 2018     Q2 2018     Q1 2018     Q4 2017     Q3 2017   
Commercial and carrier:                      
Data and transport services (includes VoIP)   $ 87,633     $ 87,603     $ 86,025     $ 86,145     $ 85,644    
Voice services     50,091       51,322       52,161       54,137       54,270    
Other     13,906       14,237       11,863       11,709       13,366    
      151,630       153,162       150,049       151,991       153,280    
Consumer:                      
Broadband (VoIP and Data)     63,865       62,545       63,111       63,052       63,893    
Video services     21,790       22,065       22,834       22,646       23,342    
Voice services     50,757       51,616       52,062       54,581       57,213    
      136,412       136,226       138,007       140,279       144,448    
                       
Subsidies     19,189       20,979       25,255       20,375       20,933    
Network access     38,147       37,338       39,715       40,243       41,262    
Other products and services     2,686       2,516       3,013       3,472       3,406    
Total operating revenue     348,064       350,221       356,039       356,360       363,329    
                       
Less operating revenues from divestitures     (466 )     (1,417 )     (1,454 )     (1,355 )     (1,429 )  
    $ 347,598     $ 348,804     $ 354,585     $ 355,005     $ 361,900    
                       

 

Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
               
               
   Three Months Ended     Nine Months Ended 
   September 30,     September 30, 
     2018         2017         2018         2017   
Net loss $ (14,815 )   $ (28,394 )   $ (36,573 )   $ (34,725 )
Add (subtract):              
Income tax benefit   (8,993 )     (6,289 )     (17,250 )     (9,862 )
Interest expense, net   33,524       36,307       99,079       99,896  
Depreciation and amortization   109,119       104,406       328,759       187,084  
EBITDA   118,835       106,030       374,015       242,393  
               
Adjustments to EBITDA (1):              
Other, net (2)   12,413       29,645       23,047       35,682  
Investment income (accrual basis)   (8,675 )     (9,594 )     (28,999 )     (23,068 )
Investment distributions (cash basis)   8,121       8,641       28,815       22,021  
Pension/OPEB expense   1,470       1,746       4,297       1,602  
Non-cash compensation (3)   1,538       889       3,754       2,319  
Adjusted EBITDA $ 133,702     $ 137,357     $ 404,929     $ 280,949  
               
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.
         

 

Consolidated Communications Holdings, Inc.
Schedule of Pro Forma Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
               
  Pro Forma   Pro Forma
   Three Months Ended     Nine Months Ended 
   September 30,     September 30, 
     2018         2017         2018         2017   
Net loss $ (14,815 )   $ (628 )   $ (36,573 )   $ (10,576 )
Add (subtract):              
Income tax benefit   (8,993 )     (914 )     (17,250 )     (6,897 )
Interest expense, net   33,524       30,139       99,079       89,622  
Depreciation and amortization   109,119       104,406       328,759       313,576  
EBITDA   118,835       133,003       374,015       385,725  
               
Adjustments to EBITDA (1):              
Other, net (2)   12,413       2,672       23,047       5,449  
Investment income (accrual basis)   (8,675 )     (9,594 )     (28,999 )     (23,068 )
Investment distributions (cash basis)   8,121       8,641       28,815       22,021  
Pension/OPEB expense   1,470       1,746       4,297       7,621  
Non-cash compensation (3)   1,538       889       3,754       5,305  
Adjusted EBITDA $ 133,702     $ 137,357     $ 404,929     $ 403,053  
               
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       Nine Months Ended   
   September 30, 2018       September 30, 2018   
           
Adjusted EBITDA $ 133,702       $ 404,929    
           
- Cash interest expense   (32,239 )       (94,272 )  
- Capital expenditures   (61,925 )       (186,765 )  
- Cash income taxes   (58 )       (843 )  
           
Cash available to pay dividends $ 39,480       $ 123,049    
           
Dividends Paid $ 27,602       $ 82,621    
Payout Ratio   69.9 %       67.1 %  
           
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)
     
   September 30,   
Summary of Outstanding Debt:    2018     
Term loans, net of discount $7,335 $ 1,800,315    
Revolving loan   16,000    
Senior unsecured notes due 2022, net of discount $3,165   496,835    
Capital leases   33,527    
Total debt as of September 30, 2018 $ 2,346,677    
Less deferred debt issuance costs   (12,071 )  
Less cash on hand   (3,826 )  
Total net debt as of September 30, 2018 $ 2,330,780    
     
Adjusted EBITDA for the    
twelve months ended September 30, 2018 $ 538,084   (a)
     
Total Net Debt to last twelve months    
Adjusted EBITDA - Pro Forma 4.33x    
     
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in 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,   
     2018         2017         2018         2017     
Net loss $ (14,815 )   $ (28,394 )   $ (36,573 )   $ (34,725 )  
Transaction and severance related costs, net of tax   9,309       17,039       16,747       21,320    
Storm costs, net of tax   -       -       1,723       -    
Local switching support settlement, net of tax   -       -       (2,903 )     -    
Non-cash interest expense for swaps, net of tax   438       (10 )     2,367       1,102    
Tax on non-deductible transaction related costs   -       2,341       -       2,341    
Tax related to acquisition   1,062       5,205       1,062       5,205    
Amortization of commitment fee, net of tax   -       3,378       -       7,791    
Divestiture related, tax (1)   767       -       767       -    
Change in deferred tax rate, federal tax reform   (4,397 )     -       (4,397 )     -    
Ticking fees on committed financing, net of tax   -       187       -       10,926    
Non-cash stock compensation, net of tax   1,126       514       2,733       1,405    
Adjusted net income (loss) $ (6,510 )   $ 260     $ (18,474 )   $ 15,365    
                 
Weighted average number of shares outstanding   70,598       69,830       70,598       56,955    
Adjusted diluted net income (loss) per share $ (0.09 )   $ 0.00     $ (0.26 )   $ 0.27    
                 
Notes:                
(1) Includes sale of Virginia properties on July 31, 2018.                
                 
Calculations above assume a 26.8% and 42.2% effective tax rate for the three months ended and 27.2% and 39.4% for the nine months ended September 30, 2018 and 2017, respectively.  
                 
Net income per share has been impacted by approximately $0.22 for the nine months ended September 30, 2018 due to increased depreciation and amortization associated with the valuation of the FairPoint assets.  
                 

 

Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
                       
       September 30,     June 30,    % Change     September 30,    % Change 
       2018     2018    in Qtr    2017    YOY
                       
Voice Connections     921,896       936,576     (1.6%)       985,814     (6.5%)  
                       
Data and Internet Connections     781,912       783,886     (0.3%)       781,070     0.1%  
                       
Video Connections     95,889       97,853     (2.0%)       105,480     (9.1%)  
                       
Business and Broadband as % of total revenue (1)     75.2%       74.5%     0.9%       74.3%     1.2%  
                       
Fiber route network miles (long-haul and metro)     36,814       36,568     0.7%       35,749     3.0%  
                       
On-net buildings     10,041       9,674     3.8%       8,782     14.3%  
                       
Consumer Customers     641,845       649,561     (1.2%)       679,165     (5.5%)  
                       
Consumer ARPU     $70.70       $69.47     1.8%       $70.47     0.3%  
                       
                       
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.