Consolidated Communications.jpg
Source: Consolidated Communications Holdings, Inc.

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 annouce 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 Forma4.33x  
   
(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.