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

Form 8-K
_____________________

CURRENT REPORT

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

Date of Report (Date of earliest event Reported): February 21, 2019  

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

Delaware000-5144602-0636095
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

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

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

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

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

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

 

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

 

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

 
 

Item 2.02. Results of Operations and Financial Condition.

On February 21, 2019, Consolidated Communications Holdings, Inc. issued a press release to report its results of operations and financial condition as of and for the quarter and full-year period ended December 31, 2018.  A copy of this press release is included as Exhibit 99.1 to this Form 8-K and incorporated into this Item 2.02 by reference.

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

Item 9.01. Financial Statements and Exhibits.

(d)  Exhibits

No.            Description
99.1 Press release dated February 21, 2019


SIGNATURE

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

 Consolidated Communications Holdings, Inc.
   
  
Date: February 21, 2019By: /s/ Steven L. Childers        
  Steven L. Childers
  Chief Financial Officer
  

EdgarFiling

EXHIBIT 99.1

Consolidated Communications Reports Fourth Quarter 2018 Results

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:

“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   

Full-Year 2018 Results

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 Connections902,414  921,896  (2.1%)  967,965  (6.8%)
          
Data and Internet Connections778,970  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 buildings10,424  10,041  3.8%  9,062  15.0%
          
Consumer Customers628,649  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.