Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Jul. 31, 2017 | |
Document and Entity Information | ||
Entity Registrant Name | Consolidated Communications Holdings, Inc. | |
Entity Central Index Key | 1,304,421 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 70,837,502 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net revenues | $ 169,950 | $ 186,871 | $ 339,885 | $ 375,717 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 70,376 | 80,763 | 141,767 | 160,483 |
Selling, general and administrative expenses | 35,720 | 38,805 | 71,751 | 79,481 |
Acquisition and other transaction costs | 1,793 | 248 | 3,524 | 248 |
Loss on impairment | 610 | 610 | ||
Depreciation and amortization | 40,483 | 43,491 | 82,678 | 87,631 |
Income from operations | 21,578 | 22,954 | 40,165 | 47,264 |
Other income (expense): | ||||
Interest expense, net of interest income | (33,918) | (19,106) | (63,589) | (37,752) |
Investment income | 8,196 | 8,704 | 13,474 | 15,901 |
Other, net | 119 | (72) | 46 | (58) |
Income (loss) before income taxes | (4,025) | 12,480 | (9,904) | 25,355 |
Income tax expense (benefit) | (1,399) | 12,323 | (3,573) | 17,296 |
Net income (loss) | (2,626) | 157 | (6,331) | 8,059 |
Less: net income attributable to noncontrolling interest | 102 | 81 | 82 | 134 |
Net income attributable to common shareholders | $ (2,728) | $ 76 | $ (6,413) | $ 7,925 |
Net income (loss) per common share - basic and diluted | ||||
Net income (loss) per basic and diluted common share attributable to common shareholders (in dollars per share) | $ (0.06) | $ (0.13) | $ 0.15 | |
Dividends declared per common share (in dollars per share) | $ 0.38 | $ 0.38 | $ 0.77 | $ 0.77 |
CONSOLIDATED STATEMENTS OF COMP
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net income (loss) | $ (2,626) | $ 157 | $ (6,331) | $ 8,059 |
Pension and post-retirement obligations: | ||||
Change in prior service credit, net of tax | (814) | (814) | ||
Amortization of actuarial losses and prior service credit to earnings, net of tax | 871 | 678 | 1,733 | 1,357 |
Derivative instruments designated as cash flow hedges: | ||||
Change in fair value of derivatives, net of tax | (2,488) | (168) | (2,544) | (598) |
Reclassification of realized loss to earnings, net of tax | 244 | 158 | 449 | 307 |
Comprehensive income (loss) | (4,813) | 825 | (7,507) | 9,125 |
Less: comprehensive income (loss) attributable to noncontrolling interest | 102 | 81 | 82 | 134 |
Total comprehensive income (loss) attributable to common shareholders | $ (4,915) | $ 744 | $ (7,589) | $ 8,991 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 15,859 | $ 27,077 |
Accounts receivable, net of allowance for doubtful accounts | 50,338 | 56,216 |
Income tax receivable | 26,056 | 21,616 |
Prepaid expenses and other current assets | 25,853 | 28,292 |
Total current assets | 118,106 | 133,201 |
Property, plant and equipment, net | 1,042,771 | 1,055,186 |
Investments | 106,504 | 106,221 |
Goodwill | 756,877 | 756,877 |
Other intangible assets | 27,211 | 31,612 |
Other assets | 9,600 | 9,661 |
Total assets | 2,061,069 | 2,092,758 |
Current liabilities: | ||
Accounts payable | 10,107 | 6,766 |
Advance billings and customer deposits | 25,040 | 26,438 |
Dividends payable | 19,653 | 19,605 |
Accrued compensation | 15,020 | 16,971 |
Accrued interest | 26,415 | 11,260 |
Accrued expense | 50,634 | 54,123 |
Current portion of long-term debt and capital lease obligations | 17,830 | 14,922 |
Total current liabilities | 164,699 | 150,085 |
Long-term debt and capital lease obligations | 1,376,248 | 1,376,754 |
Deferred income taxes | 241,363 | 244,298 |
Pension and other post-retirement obligations | 126,283 | 130,793 |
Other long-term liabilities | 19,297 | 14,573 |
Total liabilities | 1,927,890 | 1,916,503 |
Commitments and contingencies (Note 11) | ||
Shareholders' equity: | ||
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 50,733,313 and 50,612,362 shares outstanding as of June 30, 2017 and December 31, 2016, respectively | 507 | 506 |
Additional paid-in capital | 182,155 | 217,725 |
Accumulated deficit | (6,413) | |
Accumulated other comprehensive loss, net | (48,453) | (47,277) |
Noncontrolling interest | 5,383 | 5,301 |
Total shareholders' equity | 133,179 | 176,255 |
Total liabilities and shareholders' equity | $ 2,061,069 | $ 2,092,758 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2017 | Dec. 31, 2016 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares outstanding | 50,733,313 | 50,612,362 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities | ||
Net cash provided by operating activities | $ 93,533 | $ 115,505 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment, net | (58,061) | (62,271) |
Proceeds from sale of assets | 101 | 50 |
Net cash used in investing activities | (57,960) | (62,221) |
Cash flows from financing activities: | ||
Proceeds from the issuance of long-term debt | 23,000 | 7,000 |
Payment of capital lease obligations | (2,993) | (812) |
Payment on long-term debt | (27,500) | (11,550) |
Share repurchases for minimum tax withholding | (41) | (71) |
Dividends on common stock | (39,257) | (39,174) |
Net cash used in financing activities | (46,791) | (44,607) |
Increase (decrease) in cash and cash equivalents | (11,218) | 8,677 |
Cash and cash equivalents at beginning of period | 27,077 | 15,878 |
Cash and cash equivalents at end of period | $ 15,859 | $ 24,555 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Basis of Accounting Consolidated Communications Holdings, Inc. (the “Company”, “we” or “our”) is a holding company with operating subsidiaries (collectively “Consolidated”) that provide integrated communications services in consumer, commercial and carrier channels, as of June 30, 2017, in California, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, Pennsylvania, South Dakota, Texas and Wisconsin. We operate as both an Incumbent Local Exchange Carrier (“ILEC”) and a Competitive Local Exchange Carrier (“CLEC”), dependent upon the territory served. We provide a wide range of services and products that include local and long-distance service, high-speed broadband Internet access, video services, Voice over Internet Protocol (“VoIP”), private line services, carrier grade access services, network capacity services over our regional fiber optic networks, cloud data services, data center and managed services, directory publishing and equipment sales. As of June 30, 2017, we had approximately 449 thousand voice connections, 480 thousand data connections and 100 thousand video connections. In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related condensed consolidated statements of operations, comprehensive income (loss) and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States (“US GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations and accounting principles applicable for interim periods. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance. Management believes that the disclosures made are adequate to make the information presented not misleading. Interim results are not necessarily indicative of results for a full year. The information presented in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the accompanying notes to the financial statements (“Notes”) thereto included in our 2016 Annual Report on Form 10-K filed with the SEC. Recent Business Developments On December 3, 2016, we entered into a definitive agreement and plan of merger (the “Merger Agreement”) with FairPoint Communications, Inc. (“FairPoint”) to acquire all the issued and outstanding shares of FairPoint in exchange for shares of our common stock. On July 3, 2017, the merger was completed and FairPoint became a wholly owned subsidiary of the Company. For a more complete discussion of the transaction, refer to Note 2. Recent Accounting Pronouncements Effective January 1, 2017, we adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09 ”), Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 amends several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, calculation of compensation expense and classification on the statement of cash flows. ASU 2016-09 requires excess tax benefits and deficiencies resulting from stock-based compensation awards vesting to be recognized as income tax expense or benefit in the income statement on a prospective basis. Previously, these amounts were recognized in additional paid-in capital. The impact of this change was not material for the quarter and six months ended June 30, 2017. In addition, ASU 2016-09 requires excess tax benefits and deficiencies to be excluded from the assumed proceeds in the calculation of diluted shares. This requirement did not impact diluted loss per share for the quarter and six months ended June 30, 2017 as the diluted shares were excluded from the computation of loss per share. Due to our net loss for the quarter and six months ended June 30, 2017, the inclusion of these shares would have had an anti-dilutive impact. ASU 2016-09 removed the requirement to delay recognition of excess tax benefits until it reduces current income taxes payable. This update is required to be applied on a modified retrospective basis, which resulted in a cumulative effect adjustment of $2.2 million to increase opening retained earnings for the cumulative impact of excess tax benefits related to our net operating loss carryforwards. This amount was subsequently transferred into additional paid-in capital at March 31, 2017. ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. We have elected to recognize forfeitures as they occur and the cumulative impact of this change was not material to our condensed consolidated financial statements and related disclosures. In May 2017, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update No. 2017-09 (“ASU 2017-09”), Scope of Modification Accounting . ASU 2017-09 clarifies the modification accounting guidance for stock compensation included in Topic 718, Compensation – Stock Compensation . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award must be accounted for as a modification under Topic 718. The new guidance is effective prospectively for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We plan to adopt this update effective January 1, 2018 and will apply this guidance to applicable transactions after adoption date. In March 2017, the FASB issued the Accounting Standards Update No. 2017-07 (“ASU 2017-07”), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . ASU 2017-07 requires presentation of the service cost component of net periodic benefit cost within the same income statement line item as other compensation costs arising from services rendered by relevant employees during the period, and presentation of the other cost components of net periodic benefit cost separately and outside of the income from operations subtotal. In addition, only the service cost component is eligible for capitalization. The new guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of the annual period and should be applied retrospectively for the presentation of the service cost and prospectively for the capitalization of the service cost component in assets. We plan to adopt this update effective January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In February 2017, the FASB issued the Accounting Standards Update No. 2017-05 (“ASU 2017-05”), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets . ASU 2017-05 provides additional guidance to (i) clarify the scope for recognizing gains and losses from the transfer of nonfinancial assets and in substance nonfinancial assets in contracts with non-customers, and (ii) clarify the accounting for partial sales of nonfinancial assets. ASU 2017-05 is effective for annual and interim periods beginning after December 15, 2017 and can be applied using the retrospective or modified retrospective approach. We plan to adopt ASU 2017-05 as of January 1, 2018 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In January 2017, FASB issued the Accounting Standards Update No. 2017-04 (“ASU 2017-04”), Simplifying the Accounting for Goodwill Impairment . ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Under the updated guidance, the goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance is effective for annual and interim goodwill tests in fiscal years beginning after December 15, 2019 and should be applied prospectively. Early adoption is permitted for annual and interim goodwill impairment testing performed after January 1, 2017. We plan to early adopt this update in the fourth quarter of 2017. In January 2017, the FASB issued the Accounting Standards Update No. 2017-01 (“ASU 2017-01”), Clarifying the Definition of a Business . ASU 2017-01 clarifies the definition of a business and establishes a screening process to determine whether an integrated set of assets and activities acquired is deemed the acquisition of a business or the acquisition of assets. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively, with early adoption permitted. We plan to adopt this update as of January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In October 2016, the FASB issued the Accounting Standards Update No. 2016-16 (“ASU 2016-16”), Intra-Entity Transfers of Assets Other Than Inventory . ASU 2016-16 eliminates the existing exception prohibiting the recognition of the income tax consequences for intra-entity asset transfers until the asset has been sold to an outside party. Under ASU 2016-16, entities will be required to recognize the income tax consequences of intra-entity asset transfers other than inventory when the transfer occurs. ASU 2016-16 is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We currently anticipate adopting this update effective January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In August 2016, the FASB issued the Accounting Standards Update No. 2016-15 (“ASU 2016-15”), Classification of Certain Cash Receipts and Cash Payments . ASU 2016-15 provides guidance concerning the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance is effective for annual and interim periods beginning after December 15, 2017 and should be applied retrospectively, with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In June 2016, the FASB issued the Accounting Standards Update No. 2016-13 (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments . ASU 2016-13 establishes the new “current expected credit loss” model for measuring and recognizing credit losses on financial assets based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts. The new guidance is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2016, the FASB issued the Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases . ASU 2016-02 establishes a new lease accounting model for leases. Lessees will be required to recognize most leases on their balance sheets but lease expense will be recognized on the income statement in a manner similar to existing requirements. ASU 2016-02 is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the population of our leases and anticipate that most of our operating lease commitments will be recognized on our consolidated balance sheets. We have not yet made a decision on the timing and method of adoption and are continuing to assess the potential impact of this update on our condensed consolidated financial statements and related disclosures. In May 2014, the FASB issued the Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) , which will replace the current revenue recognition requirements in U.S. GAAP. The core principle of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 requires disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Two transition methods are permitted under ASU 2014-09, the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. In August 2015, the FASB issued the Accounting Standards Update No. 2015-14 (“ASU 2015-14”), Deferral of the Effective Date , which deferred the effective date of ASU 2014-09 for all entities by one year. Accordingly, ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017, at which point we plan to adopt the standard. In 2016, we established a cross-functional implementation team to assess the impact of ASU 2014-09 on our revenue contracts by reviewing our current accounting policies and practices to identify potential differences that would result from applying the requirements of this update. While we continue to assess all potential impacts of this update, we currently believe that the most significant impact relates to the deferral of contract acquisition costs, which is currently expensed as incurred, however under ASU 2014-09 will generally be capitalized and amortized over the contract performance period. Initially, we anticipated adopting this update using the full retrospective method to restate each prior reporting period presented, however, after further assessment of the impacts to our current systems, processes and internal controls as well as the transition methods allowed, we’ve determined that adopting this update using the modified retrospective method is more appropriate. |
ACQUISITION AND DISPOSITIONS
ACQUISITION AND DISPOSITIONS | 6 Months Ended |
Jun. 30, 2017 | |
ACQUISITION AND DISPOSITIONS | |
ACQUISITION AND DISPOSITIONS | 2. ACQUISITIONS AND DIVESTITURES Acquisitions FairPoint Communications, Inc. On December 3, 2016, we entered into a Merger Agreement with FairPoint to acquire all the issued and outstanding shares of FairPoint in exchange for shares of our common stock. FairPoint is an advanced communications provider to business, wholesale and residential customers within its service territory, which spans across 17 states. FairPoint owns and operates a robust fiber-based network with more than 21,000 route miles of fiber, including 17,000 route miles of fiber in northern New England. On July 3, 2017, the acquisition of FairPoint was completed, and as a result, FairPoint became a wholly-owned subsidiary of the Company. The acquisition reflects our strategy to diversify revenue and cash flows amongst multiple products and to expand our network to new markets. At the effective time of the merger, each share of common stock, par value of $0.01 per share, of FairPoint issued and outstanding immediately prior to the effective time of the merger converted into and became the right to receive 0.7300 shares of common stock, par value $0.01 per share, of Consolidated and cash in lieu of fractional shares, as set forth in the Merger Agreement. Based on the closing price of our common stock on the last complete trading day prior to the effective date of the merger, the total value of the consideration to be exchanged is approximately $431.1 million, exclusive of debt of approximately $912.8 million. On the date of the merger, we issued an approximate aggregate total of 20.1 million shares of our common stock to the former FairPoint stockholders. In connection with the merger, we secured committed debt financing through a $935.0 million incremental term loan facility, as described in Note 6, that, in addition to cash on hand and other sources of liquidity, was used to repay certain existing indebtedness of FairPoint and to pay the fees and expenses in connection with the merger. The acquisition will be accounted for in accordance with the acquisition method of accounting for business combinations. The tangible and intangible assets acquired and liabilities assumed will be recorded at their estimated fair values as of the date of the acquisition. The results of operations of FairPoint will be reported in our consolidated financial statements beginning as of the effective date of the acquisition. The preliminary estimated fair value of the tangible and intangible assets acquired and liabilities assumed are as follows: (In thousands) Working capital $ 35,213 Property, plant and equipment 948,254 Intangible assets 296,500 Other long-term assets 2,920 Total assets acquired 1,282,887 Pension and other post-retirement obligations 216,011 Deferred income taxes 109,451 Other long-term liabilities 16,407 Total liabilities assumed 341,869 Net fair value of assets acquired 941,018 Goodwill 402,836 Total consideration transferred $ 1,343,854 Due to the limited time between the acquisition date and this filing, the accounting for the business combination and the fair values of the assets acquired and liabilities assumed are based on a preliminary valuation, which is subject to change. Upon completion of the final fair value assessment, the fair values of the net assets acquired may differ from the preliminary assessment and such changes could be material. Any changes to the initial estimates of the fair value of the assets acquired and liabilities assumed will be recorded to those assets and liabilities and residual amounts will be allocated to goodwill. Upon closing of the FairPoint acquisition or shortly thereafter, various triggering events occurred which will result in the payment of various change in control payments and other contingent payments to certain FairPoint employees. The estimated cash payments under these agreements will be approximately $9.4 million of which $8.6 million is expected to be paid in 2017 with the remainder due in 2018 and 2019. Unaudited Pro Forma Results The following unaudited pro forma information presents our results of operations as if the acquisition of FairPoint occurred on January 1, 2016. The adjustments to arrive at the pro forma information below included adjustments for depreciation and amortization on the acquired tangible and intangible assets acquired, interest expense on the debt expected to be incurred to finance the acquisition and to repay certain existing indebtedness of FairPoint, and the exclusion of certain acquisition related costs. Shares used to calculate the basic and diluted earnings per share were adjusted to reflect the additional shares of common stock issued to fund the acquisition price. Quarter Ended Six Months Ended June 30, June 30, (Unaudited; in thousands, except per share amounts) 2017 2016 2017 2016 Operating revenues $ $ $ $ Income from operations $ $ $ $ Net income $ $ $ $ Less: net income attributable to noncontrolling interest Net income attributable to common stockholders $ $ $ $ Net income per common share-basic and diluted $ $ $ $ Transaction costs related to the acquisition of FairPoint were $1.7 million and $3.2 million during the quarter and six months ended June 30, 2017, respectively, which are included in acquisition and other transaction costs in the condensed consolidated statements of operations. These costs are considered to be non-recurring in nature and therefore have been excluded from the pro forma results of operations. The pro forma information does not purport to present the actual results that would have resulted if the acquisition had in fact occurred at the beginning of the fiscal periods presented, nor does the information project results for any future period. The pro forma information does not include the impact of any future cost savings or synergies that may be achieved as a result of the acquisition. Champaign Telephone Company, Inc. On July 1, 2016, we acquired substantially all of the assets of Champaign Telephone Company, Inc. and its sister company, Big Broadband Services, LLC, a private business communications provider in the Champaign-Urbana, IL area. The aggregate purchase price, including customary working capital adjustments, consisted of cash consideration of $13.4 million, which was paid from our existing cash resources. The fair value of the acquired assets and liabilities assumed consisted primarily of property, plant and equipment of $6.9 million, intangible assets of $1.0 million, working capital of $0.8 million and goodwill of $4.7 million. Goodwill and other intangible assets are expected to be amortizable and deductible for income tax purposes. Divestitures On December 6, 2016, we completed the sale of substantially all of the assets of the Company’s Enterprise Services equipment and IT Services business (“EIS”) to ePlus Technology inc. (“ePlus”) for cash proceeds of $9.2 million net of a customary working capital adjustment. As part of the transaction, we entered into a Co-Marketing Agreement with ePlus, a nationwide systems integrator of technology solutions, to cross-sell both broadband network services and IT services. The strategic partnership will provide our business customers access to a broader suite of IT solutions, and will also provide ePlus customers access to Consolidated’s business network services. On May 3, 2016, we entered into a definitive agreement to sell all of the issued and outstanding stock of our non-core, rural ILEC business located in northwest Iowa, Consolidated Communications of Iowa Company (“CCIC”), formerly Heartland Telecommunications Company of Iowa. CCIC provides telecommunications and data services to residential and business customers in 11 rural communities in northwest Iowa and surrounding areas. During the quarter and six months ended June 30, 2016, we recognized an impairment loss of $0.6 million and deferred income tax expense of $7.5 million in connection with the classification of CCIC as assets held for sale. See Note 10 for additional income tax related information regarding this transaction. The sale was completed on September 1, 2016 for total cash proceeds of approximately $21.0 million, net of certain contractual and customary working capital adjustments. |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 6 Months Ended |
Jun. 30, 2017 | |
EARNINGS (LOSS) PER SHARE | |
EARNINGS (LOSS) PER SHARE | 3. EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per share (“EPS”) are computed using the two-class method, which is an earnings allocation that determines EPS for each class of common stock and participating securities according to dividends declared and participation rights in undistributed earnings. The Company’s restricted stock awards are considered participating securities because holders are entitled to receive non-forfeitable dividends during the vesting term. Diluted EPS includes securities that could potentially dilute basic EPS during a reporting period. Dilutive securities are not included in the computation of loss per share when a company reports a net loss from continuing operations as the impact would be anti-dilutive. The potentially dilutive impact of the Company’s restricted stock awards is determined using the treasury stock method. Under the treasury stock method, awards are treated as if they had been exercised with the proceeds of exercise used to repurchase common stock at the average market price for the period. Any incremental difference between the assumed number of shares issued and repurchased is included in the diluted share computation. The computation of basic and diluted EPS attributable to common shareholders computed using the two‑class method is as follows: Quarter Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2017 2016 2017 2016 Net income (loss) $ (2,626) $ 157 $ (6,331) $ 8,059 Less: net income attributable to noncontrolling interest 102 81 82 134 Income (loss) attributable to common shareholders before allocation of earnings to participating securities (2,728) 76 (6,413) 7,925 Less: earnings allocated to participating securities 115 131 164 262 Net income (loss) attributable to common shareholders, after earnings allocated to participating securities $ (2,843) $ (55) $ (6,577) $ 7,663 Weighted-average number of common shares outstanding 50,412 50,294 50,411 50,291 Net income (loss) per common share attributable to common shareholders - basic and diluted $ (0.06) $ — $ (0.13) $ 0.15 Diluted earnings (loss) per common share attributable to common shareholders for the quarters ended June 30, 2017 and 2016 excludes 0.3 million and 0.4 million potential common shares, respectively, that could be issued under our share-based compensation plan, because the inclusion of the potential common shares would have an antidilutive effect. For each of the six months ended June 30, 2017 and 2016, diluted earnings (loss) per common share attributable to common shareholders excludes 0.3 million potential common shares. |
INVESTMENTS
INVESTMENTS | 6 Months Ended |
Jun. 30, 2017 | |
INVESTMENTS | |
INVESTMENTS | 4. INVESTMENTS Our investments are as follows: June 30, December 31, (In thousands) 2017 2016 Cash surrender value of life insurance policies $ 2,346 $ 2,156 Cost method investments: GTE Mobilnet of South Texas Limited Partnership (2.34% interest) 21,450 21,450 Pittsburgh SMSA Limited Partnership (3.60% interest) 22,950 22,950 CoBank, ACB Stock 8,295 8,138 Other 200 200 Equity method investments: GTE Mobilnet of Texas RSA #17 Limited Partnership (20.51% interest) 16,199 17,160 Pennsylvania RSA 6(I) Limited Partnership (16.67% interest) 7,035 6,540 Pennsylvania RSA 6(II) Limited Partnership (23.67% interest) 28,029 27,627 Totals $ 106,504 $ 106,221 Cost Method We own 2.34% of GTE Mobilnet of South Texas Limited Partnership (the “Mobilnet South Partnership”). The principal activity of the Mobilnet South Partnership is providing cellular service in the Houston, Galveston and Beaumont, Texas metropolitan areas. We also own 3.60% of Pittsburgh SMSA Limited Partnership (“Pittsburgh SMSA”), which provides cellular service in and around the Pittsburgh metropolitan area. Because of our limited influence over these partnerships, we use the cost method to account for both of these investments. It is not practicable to estimate the fair value of these investments. No factors of impairment existed for any of the investments during the quarters or six months ended June 30, 2017 or 2016. For the quarters ended June 30, 2017 and 2016, we received cash distributions from these partnerships totaling $3.7 million and $3.8 million, respectively. For the six months ended June 30, 2017 and 2016, we received cash distributions from these partnerships totaling $5.3 million and $6.5 million, respectively. CoBank, ACB (“CoBank”) is a cooperative bank owned by its customers. On an annual basis, CoBank distributes patronage in the form of cash and stock in the cooperative based on the Company’s outstanding loan balance with CoBank, which has traditionally been a significant lender in the Company’s credit facility. The investment in CoBank represents the accumulation of the equity patronage paid by CoBank to the Company. Equity Method We own 20.51% of GTE Mobilnet of Texas RSA #17 Limited Partnership (“RSA #17”), 16.67% of Pennsylvania RSA 6(I) Limited Partnership (“RSA 6(I)”) and 23.67% of Pennsylvania RSA 6(II) Limited Partnership (“RSA 6(II)”). RSA #17 provides cellular service to a limited rural area in Texas. RSA 6(I) and RSA 6(II) provide cellular service in and around our Pennsylvania service territory. Because we have significant influence over the operating and financial policies of these three entities, we account for the investments using the equity method. For the quarters ended June 30, 2017 and 2016, we received cash distributions from these partnerships totaling $4.1 million and $4.0 million, respectively. For each of the six months ended June 30, 2017 and 2016, we received cash distributions from these partnerships totaling $8.1 million. The combined unaudited results of operations and financial position of our three equity investments in the cellular limited partnerships are summarized below: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Total revenues $ 89,811 $ 81,885 $ 169,832 $ 164,542 Income from operations 24,518 26,797 45,806 52,393 Net income before taxes 24,145 26,396 45,042 51,585 Net income 24,145 26,396 45,042 51,585 June 30, December 31, (In thousands) 2017 2016 Current assets $ 68,446 $ 64,083 Non-current assets 95,267 89,651 Current liabilities 26,165 21,985 Non-current liabilities 51,497 51,836 Partnership equity 86,051 79,913 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2017 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 5. FAIR VALUE MEASUREMENTS Our derivative instruments related to interest rate swap agreements are required to be measured at fair value on a recurring basis. The fair values of the interest rate swaps are determined using valuation models and are categorized within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and observable market data of similar instruments. See Note 7 for further discussion regarding our interest rate swap agreements. Our interest rate swap agreements measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 were as follows: As of June 30, 2017 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Long-term interest rate swap assets $ 386 $ - $ 386 $ - Current interest rate swap liabilities (294) - (294) - Long-term interest rate swap liabilities (5,601) - (5,601) - Total $ (5,509) $ - $ (5,509) $ - As of December 31, 2016 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Long-term interest rate swap assets $ 398 $ - $ 398 $ - Current interest rate swap liabilities (453) - (453) - Long-term interest rate swap liabilities (216) - (216) - Total $ (271) $ - $ (271) $ - We have not elected the fair value option for any of our financial assets or liabilities. The carrying value of other financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. The following table presents the other financial instruments that are not carried at fair value but which require fair value disclosure as of June 30, 2017 and December 31, 2016 . As of June 30, 2017 As of December 31, 2016 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Investments, equity basis $ n/a $ n/a Investments, at cost $ n/a $ n/a Long-term debt, excluding capital leases $ $ $ $ Cost & Equity Method Investments Our investments as of June 30, 2017 and December 31, 2016 accounted for under both the equity and cost methods consisted primarily of minority positions in various cellular telephone limited partnerships and our investment in CoBank. It is impracticable to determine the fair value of these investments. Long-term Debt The fair value of our senior notes was based on quoted market prices, and the fair value of borrowings under our credit facility was determined using current market rates for similar types of borrowing arrangements. We have categorized the long-term debt as Level 2 within the fair value hierarchy. |
LONG-TERM DEBT
LONG-TERM DEBT | 6 Months Ended |
Jun. 30, 2017 | |
LONG-TERM DEBT | |
LONG-TERM DEBT | 6. LONG-TERM DEBT Long-term debt, presented net of unamortized discounts, consisted of the following: June 30, December 31, (In thousands) 2017 2016 Senior secured credit facility: Term 5 loan, net of discount of $4,346 and $4,662 at June 30, 2017 and December 31, 2016, respectively $ 888,904 $ 893,088 Revolving loan — — 6.50% Senior notes due 2022, net of discount of $3,991 and $4,302 at June 30, 2017 and December 31, 2016, respectively 496,009 495,698 Capital leases 21,962 16,857 1,406,875 1,405,643 Less: current portion of long-term debt and capital leases (17,830) (14,922) Less: deferred debt issuance costs (12,797) (13,967) Total long-term debt $ 1,376,248 $ 1,376,754 Credit Agreement In October 2016, the Company, through certain of its wholly owned subsidiaries, entered into a Third Amended and Restated Credit Agreement with various financial institutions (the “Credit Agreement”). The Credit Agreement consists of a $110.0 million revolving credit facility and initial term loans in the aggregate amount of $900.0 million (“Term 5”). The Credit Agreement also includes an incremental loan facility which provides the ability to borrow, subject to certain terms and conditions, incremental loans in an aggregate amount of up to the greater of (a) $300.0 million and (b) an amount which would cause its senior secured leverage ratio not to exceed 3.00:1.00 (the “Incremental Facility”). Borrowings under the senior secured credit facility are secured by substantially all of the assets of the Company and its subsidiaries, with the exception of Consolidated Communications of Illinois Company and our majority-owned subsidiary, East Texas Fiber Line Incorporated. The Term 5 loan was issued in an original aggregate principal amount of $900.0 million with a maturity date of October 5, 2023, but is subject to earlier maturity on March 31, 2022 if the Company’s unsecured Senior Notes due in October 2022 are not repaid in full or redeemed in full on or prior to March 31, 2022. The Term 5 loan contains an original issuance discount of 0.25% or $2.3 million, which is being amortized over the term of the loan. The Term 5 loan requires quarterly principal payments of $2.25 million and has an interest rate of 3.00% plus the London Interbank Offered Rate (“LIBOR“) subject to a 1.00% LIBOR floor. Our revolving credit facility has a maturity date of October 5, 2021 and has an interest rate, at the election of the Company, of (i) a margin between 2.50% and 3.25% plus LIBOR or (ii) a margin between 1.50% and 2.25% plus the alternate base rate, in each case depending on our total net leverage ratio. Based on our leverage ratio as of June 30, 2017, the borrowing margin for the three month period ending September 30, 2017 will be at a weighted-average margin of 3.25% f or a LIBOR-based loan or 2.25% for an alternate base rate loan. The applicable borrowing margin for the revolving credit facility is adjusted quarterly to reflect the leverage ratio from the prior quarter-end. As of June 30, 2017 and December 31, 2016, there were no outstanding borrowings under the revolving credit facility. A stand-by letter of credit of $1.6 million, issued primarily in connection with the Company’s insurance coverage, was outstanding under our revolving credit facility as of June 30, 2017. The stand-by letter of credit is renewable annually and reduces the borrowing availability under the revolving credit facility. As of June 30, 2017, $108.4 million was available for borrowing under the revolving credit facility. The weighted-average interest rate on outstanding borrowings under our credit facility was 4.05% and 4.00% as of June 30, 2017 and December 31, 2016, respective ly . Interest is payable at least quarterly . Credit Agreement Covenant Compliance The Credit Agreement contains various provisions and covenants, including, among other items, restrictions on the ability to pay dividends, incur additional indebtedness and issue certain capital stock. We have agreed to maintain certain financial ratios, including interest coverage and total net leverage ratios, all as defined in the Credit Agreement. As of June 30, 2017, we were in compliance with the Credit Agreement covenants . In general, our Credit Agreement restricts our ability to pay dividends to the amount of our available cash as defined in our Credit Agreement. As of June 30, 2017, and including the $27.4 million dividend paid on August 1, 2017, we had $262.4 million in dividend availability under the credit facility covenant. Under our Credit Agreement, if our total net leverage ratio, as defined in the Credit Agreement, as of the end of any fiscal quarter is greater than 5.10:1.00, we will be required to suspend dividends on our common stock unless otherwise permitted by an exception for dividends that may be paid from the portion of proceeds of any sale of equity not used to fund acquisitions or make other investments. During any dividend suspension period, we will be required to repay debt in an amount equal to 50.0% of any increase in available cash, among other things. In addition, we will not be permitted to pay dividends if an event of default under the Credit Agreement has occurred and is continuing. Among other things, it will be an event of default if our total net leverage ratio or interest coverage ratio as of the end of any fiscal quarter is greater than 5.25:1.00 or less than 2.25:1.00, respectively. As of June 30, 2017, our total net leverage ratio under the Credit Agreement was 4.74:1.00, and our interest coverage ratio was 3.85:1.00. Committed Financing In connection with the execution of the Merger Agreement, in December 2016, the Company entered into two amendments to its Credit Agreement to secure committed financing related to the acquisition of FairPoint. On December 14, 2016, we entered into Amendment No. 1 to the Credit Agreement and on December 21, 2016, the Company entered into Amendment No. 2 to the Credit Agreement, pursuant to which a syndicate of lenders agreed to provide an incremental term loan in an aggregate principal amount of up to $935.0 million under the Credit Agreement (the “Incremental Term Loan”), subject to the satisfaction of certain conditions. The Incremental Term Loan was made pursuant to the Incremental Facility set forth in the Credit Agreement. Fees of $2.5 million paid to the lenders in connection with Amendment No. 1 are reflected as an additional discount on the Term 5 loan and are being amortized over the term of the debt as interest expense. The Incremental Term Loan included an original issue discount of 0.50% and has an interest rate of 3.00% plus LIBOR subject to a 1.00% LIBOR floor. Ticking fees began accruing on the Incremental Term Loan commitments on January 15, 2017 at the rate equal to the interest rate of the Incremental Term Loan. In connection with entering into the committed financing, commitment fees of $14.0 million were capitalized in December 2016 and are being amortized to interest expense over the term of the commitment period of one year or fully amortized on the date of debt issuance if less than one year. On July 3, 2017, the Merger with FairPoint was completed and the net proceeds from the incurrence of the Incremental Term Loan were used, in part, to repay and redeem certain existing indebtedness of FairPoint and to pay certain fees and expenses in connection with the Merger and the related financing. In addition, effective contemporaneously with the Merger, the Company entered into Amendment No. 3 to the Credit Agreement to increase the permitted amount of outstanding letters of credit from $15.0 million to $20.0 million and to provide that certain existing letters of credit of FairPoint of $14.8 million be deemed to be letters of credit under the Credit Agreement. As a result of the Merger, certain of the FairPoint subsidiaries acquired in the Merger (the “FairPoint Guarantors”) were required to guarantee certain obligations under the Credit Agreement and to pledge as collateral all assets and property. Senior Notes 6.50% Senior Notes due 2022 In September 2014, we completed an offering of $200.0 million aggregate principal amount of 6.50% Senior Notes due in October 2022 (the “Existing Notes”). The Existing Notes were priced at par, which resulted in total gross proceeds of $200.0 million. On June 8, 2015, we completed an additional offering of $300.0 million in aggregate principal amount of 6.50% Senior Notes due 2022 (the “New Notes” and together with the Existing Notes, the “Senior Notes”). The New Notes were issued as additional notes under the same indenture pursuant to which the Existing Notes were previously issued on in September 2014. The New Notes were priced at 98.26% of par with a yield to maturity of 6.80% and resulted in total gross proceeds of approximately $294.8 million, excluding accrued interest. The discount is being amortized using the effective interest method over the term of the notes. The Senior Notes mature on October 1, 2022 and interest is payable semi-annually on April 1 and October 1 of each year. Consolidated Communications, Inc. (“CCI”) is the primary obligor under the Senior Notes, and we and certain of our wholly‑owned subsidiaries have fully and unconditionally guaranteed the Senior Notes. The Senior Notes are senior unsecured obligations of the Company. In July 2017, as a result of the FairPoint Guarantors becoming guarantors under the Credit Agreement, substantially all of the FairPoint Guarantors were also required to guarantee the Senior Notes. In October 2015, we completed an exchange offer to register all of the Senior Notes under the Securities Act of 1933 (“Securities Act”). The terms of the registered Senior Notes are substantially identical to those of the Senior Notes prior to the exchange, except that the Senior Notes are now registered under the Securities Act and the transfer restrictions and registration rights previously applicable to the Senior Notes no longer apply to the registered Senior Notes. The exchange offer did not impact the aggregate principal amount or the remaining terms of the Senior Notes outstanding. Senior Notes Covenant Compliance Subject to certain exceptions and qualifications, the indenture governing the Senior Notes contains customary covenants that, among other things, limits CCI’s and its restricted subsidiaries’ ability to: incur additional debt or issue certain preferred stock; pay dividends or make other distributions on capital stock or prepay subordinated indebtedness; purchase or redeem any equity interests; make investments; create liens; sell assets; enter into agreements that restrict dividends or other payments by restricted subsidiaries; consolidate, merge or transfer all or substantially all of its assets; engage in transactions with its affiliates; or enter into any sale and leaseback transactions. The indenture also contains customary events of default. Among other matters, the Senior Notes indenture provides that CCI may not pay dividends or make other restricted payments, as defined in the indenture, if its total net leverage ratio is 4.75:1.00 or greater. This ratio is calculated differently than the comparable ratio under the Credit Agreement; among other differences, it takes into account, on a pro forma basis, synergies expected to be achieved as a result of certain acquisitions not yet reflected in historical results. As of June 30, 2017, this ratio was 4.72:1.00. If this ratio is met, dividends and other restricted payments may be made from cumulative consolidated cash flow since April 1, 2012, less 1.75 times fixed charges, less dividends and other restricted payments made since May 30, 2012. Dividends may be paid and other restricted payments may also be made from a “basket” of $50.0 million, none of which has been used to date, and pursuant to other exceptions identified in the indenture. Since dividends of $378.6 million have been paid since May 30, 2012, including the quarterly dividend declared in May 2017 and paid on August 1, 2017, there was $482.2 million of the $860.9 million of cumulative consolidated cash flow since May 30, 2012 available to pay dividends as of June 30, 2017. As of June 30, 2017, the Company was in compliance with all terms, conditions and covenants under the indenture governing the Senior Notes. Capital Leases We lease certain facilities and equipment under various capital leases which expire between 2017 and 2021. As of June 30, 2017, the present value of the minimum remaining lease commitments was approximately $21.9 million, of which $8.8 million was due and payable within the next twelve months. The leases require total remaining rental payments of $24.1 million as of June 30, 2017, of which $3.2 million will be paid to LATEL LLC, a related party entity. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2017 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
DERIVATIVE FINANCIAL INSTRUMENTS | 7. DERIVATIVE FINANCIAL INSTRUMENTS We use derivative financial instruments to manage our exposure to the risks associated with fluctuations in interest rates. Our interest rate swap agreements effectively convert a portion of our floating-rate debt to a fixed‑rate basis, thereby reducing the impact of interest rate changes on future cash interest payments. Derivative financial instruments are recorded at fair value in our condensed consolidated balance sheets. We may designate certain of our interest rate swaps as cash flow hedges of our expected future interest payments. For derivative instruments designated as a cash flow hedge, the effective portion of the change in the fair value is recognized as a component of accumulated other comprehensive income (loss) (“AOCI”) and is recognized as an adjustment to earnings over the period in which the hedged item impacts earnings. When an interest rate swap agreement terminates, any resulting gain or loss is recognized over the shorter of the remaining original term of the hedging instrument or the remaining life of the underlying debt obligation. If a derivative instrument is de-designated, the remaining gain or loss in AOCI on the date of de-designation is amortized to earnings over the remaining term of the hedging instrument. For derivative financial instruments that are not designated as a hedge, including those that have been de-designated, changes in fair value are recognized on a current basis in earnings. The ineffective portion of the change in fair value of any hedging derivative is recognized immediately in earnings. Cash flows from hedging activities are classified under the same category as the cash flows from the hedged items in our condensed consolidated statements of cash flows. The following interest rate swaps were outstanding as of June 30, 2017: Notional (In thousands) Amount 2017 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Other assets $ Fixed to 1-month floating LIBOR (with floor) $ Accrued expense Series of forward starting fixed to 1-month floating LIBOR (with floor) $ Other long-term liabilities Total Fair Values $ The following interest rate swaps were outstanding as of December 31, 2016: Notional (In thousands) Amount 2016 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Other assets $ Fixed to 1-month floating LIBOR (with floor) $ Accrued expense Fixed to 1-month floating LIBOR (with floor) $ Other long-term liabilities Total Fair Values $ The counterparties to our various swaps are highly rated financial institutions. None of the swap agreements provide for either us or the counterparties to post collateral nor do the agreements include any covenants related to the financial condition of Consolidated or the counterparties. The swaps of any counterparty that is a lender, as defined in our credit facility, are secured along with the other creditors under the credit facility. Each of the swap agreements provides that, in the event of a bankruptcy filing by either Consolidated or the counterparty, any amounts owed between the two parties would be offset in order to determine the net amount due between parties. In connection with the acquisition of FairPoint, during the quarter ended June 30, 2017, we entered into a series of four deal contingent forward-starting interest rate swap agreements each with a term of one year which begin at various dates between July 2017 and July 2020 and mature between July 2018 and July 2021. The forward starting interest rate swap agreements have a notional value ranging from $450.0 million to $705.0 million. These interest rate swap agreements have been designated as cash flow hedges. In conjunction with the refinancing of our Credit Agreement in October 2016 as discussed in Note 6, the interest rate swaps were simultaneously de-designated and re-designated as cash flow hedges of future anticipated interest payments associated with our variable rate debt. The balance of the unrealized loss included in AOCI as of the date the swaps were de-designated is being amortized to earnings over the remaining terms of the respective interest rate swap agreements. The interest rate swap agreements mature on various dates through September 2019. As of June 30, 2017 and December 31, 2016, the total pre-tax deferred loss related to our interest rate swap agreements included in AOCI was $3.6 million and $0.2 million, respectively. The estimated amount of losses included in AOCI as of June 30, 2017 that will be recognized in earnings in the next twelve months is approximately $2.8 million. Information regarding our cash flow hedge transactions is as follows: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Unrealized loss recognized in AOCI, pretax $ (4,039) $ (273) $ (4,130) $ (973) Deferred losses reclassified from AOCI to interest expense $ (396) $ (256) $ (729) $ (499) Loss recognized in interest expense from ineffectiveness $ (1,535) $ — $ (1,300) $ — |
EQUITY
EQUITY | 6 Months Ended |
Jun. 30, 2017 | |
EQUITY | |
EQUITY | 8. EQUITY Share-Based Compensation The following table summarizes total compensation costs recognized for share-based payments during the quarters and six-month periods ended June 30, 2017 and 2016: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Restricted stock $ $ $ 964 $ 1,072 Performance shares 466 732 Total $ $ $ 1,430 $ 1,804 Share-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations . As of June 30, 2017, total unrecognized compensation cost related to non-vested Restricted Stock Awards (“RSAs”) and Performance Share Awards (“PSAs”) was $6.0 million and will be recognized over a weighted-average period of approximately 2.2 years. The following table summarizes the RSA and PSA activity for the six-month period ended June 30, 2017: RSAs PSAs Weighted Weighted Average Grant Average Grant Shares Date Fair Value Shares Date Fair Value Non-vested shares outstanding - January 1, 2017 93,662 $ 22.34 109,160 $ 20.12 Shares granted 124,100 $ 23.12 5,204 $ 24.00 Shares vested (4,708) $ 22.30 — $ — Shares forfeited, cancelled or retired (3,011) $ 22.48 (3,507) $ 20.68 Non-vested shares outstanding - June 30, 2017 210,043 $ 22.80 110,857 $ 20.28 Accumulated Other Comprehensive Loss The following table summarizes the changes in accumulated other comprehensive loss, net of tax, by component for the six-month period ended June 30, 2017: Pension and Post-Retirement Derivative (In thousands) Obligations Instruments Total Balance at December 31, 2016 $ (47,150) $ (127) $ (47,277) Other comprehensive income before reclassifications (814) (2,544) (3,358) Amounts reclassified from accumulated other comprehensive loss 1,733 449 2,182 Net current period other comprehensive income 919 (2,095) (1,176) Balance at June 30, 2017 $ (46,231) $ (2,222) $ (48,453) The following table summarizes reclassifications from accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2017 and 2016: Quarter Ended June 30, Six Months Ended June 30, Affected Line Item in the (In thousands) 2017 2016 2017 2016 Statement of Income Amortization of pension and post-retirement items: Prior service credit $ $ $ $ (a) Actuarial loss (a) Total before tax Tax benefit $ $ $ $ Net of tax Loss on cash flow hedges: Interest rate derivatives $ $ $ $ Interest expense Tax benefit $ $ $ $ Net of tax (a) These items are included in the components of net periodic benefit cost for our pension and other post-retirement benefit plans. See Note 9 for further discussion regarding our pension and other post-retirement benefit plans. |
PENSION PLAN AND OTHER POST-RET
PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS | 6 Months Ended |
Jun. 30, 2017 | |
PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS | |
PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS | 9. PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS Defined Benefit Plans We sponsor a qualified defined benefit pension plan (“Retirement Plan”) that is non-contributory covering certain of our hourly employees under collective bargaining agreements who fulfill minimum age and service requirements. Certain salaried employees are also covered by the Retirement Plan, although these benefits have previously been frozen. The Retirement Plan is closed to all new entrants. Benefits for eligible participants under collective bargaining agreements are accrued based on a cash balance benefit plan. We also have two non-qualified supplemental retirement plans (the “Supplemental Plans” and, together with the Retirement Plan, the “Pension Plans”). The Supplemental Plans provide supplemental retirement benefits to certain former employees by providing for incremental pension payments to partially offset the reduction of the amount that would have been payable under the qualified defined benefit pension plans if it were not for limitations imposed by federal income tax regulations. The Supplemental Plans have previously been frozen so that no person is eligible to become a new participant. These plans are unfunded and have no assets. The benefits paid under the Supplemental Plans are paid from the general operating funds of the Company. The following table summarizes the components of net periodic pension cost for our Pension Plans for the quarters and six-month periods ended June 30, 2017 and 2016: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Service cost $ $ 86 $ $ 172 Interest cost 4,073 8,146 Expected return on plan assets (5,159) (10,318) Net amortization loss 1,356 2,711 Net prior service credit amortization (115) (229) Curtailment gain — — Net periodic pension cost $ $ 241 $ $ 482 In May 2017, the Retirement Plan was amended to freeze benefit accruals under the cash balance benefit plan for certain participants under collective bargaining agreements effective as of June 30, 2017. As a result of this amendment, we recognized a pre-tax curtailment gain of $1.3 million as a component of net periodic pension cost during the quarter and six-month period ended June 30, 2017. Other Non-qualified Deferred Compensation Agreements We are also liable for deferred compensation agreements with former members of the board of directors and certain other former employees of acquired companies. Depending on the plan, benefits are payable in monthly or annual installments for a period of time based on the terms of the agreement, which range from five years up to the life of the participant or to the beneficiary upon the death of the participant, and may begin as early as age 55. Participants accrue no new benefits as these plans had previously been frozen. Payments related to the deferred compensation agreements totaled approximately $0.1 million for each of the quarters ended June 30, 2017 and 2016 and $0.2 million for each of the six-month periods ended June 30, 2017 and 2016, respectively. The net present value of the remaining obligations was approximately $1.9 million and $2.0 million as of June 30, 2017 and December 31, 2016, respectively, and is included in pension and other post-retirement benefit obligations in the accompanying condensed consolidated balance sheets . We also maintain 25 life insurance policies on certain of the participating former directors and employees. We recognized $0.2 million in life insurance proceeds as other non-operating income in the six-month period ended June 30, 2016. We did not recognize any life insurance proceeds during the quarter and six-month period ended June 30, 2017. The excess of the cash surrender value of the remaining life insurance policies over the notes payable balances related to these policies totaled $2.3 million and $2.2 million as of June 30, 2017 and December 31, 2016. These amounts are included in investments in the accompanying condensed consolidated balance sheets. Cash principal payments for the policies and any proceeds from the policies are classified as operating activities in the condensed consolidated statements of cash flows. Post-retirement Benefit Obligations We sponsor various healthcare and life insurance plans (“Post-retirement Plans”) that provide post-retirement medical and life insurance benefits to certain groups of retired employees. Certain plans have previously been frozen so that no person is eligible to become a new participant. Retirees share in the cost of healthcare benefits, making contributions that are adjusted periodically—either based upon collective bargaining agreements or because total costs of the program have changed. Covered expenses for retiree health benefits are paid as they are incurred. Post-retirement life insurance benefits are fully insured. A majority of the healthcare plans are unfunded and have no assets, and benefits are paid from the general operating funds of the Company. However, a plan acquired in the purchase of another company is funded by assets that are separately designated within the Retirement Plan for the sole purpose of providing payments of retiree medical benefits for this specific plan. The following table summarizes the components of the net periodic cost for our Post-retirement Plans for the quarters and six-month periods ended June 30, 2017 and 2016: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Service cost $ $ 150 $ $ 300 Interest cost 505 1,010 Expected return on plan assets (37) (74) Net amortization gain (44) — (87) — Net prior service credit amortization (130) (260) Net periodic post-retirement benefit cost $ $ 488 $ $ 976 Contributions We expect to contribute approximately $6.4 million to our Pension Plans and $3.9 million to our Post-retirement Plans in 2017. As of June 30, 2017, we have contributed $1.0 million and $1.8 million of the annual contribution to the Pension Plans and Post-retirement Plans, respectively. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2017 | |
INCOME TAXES | |
INCOME TAXES | 10. INCOME TAXES There have been no material changes to our unrecognized tax benefits as reported at December 31, 2016. As of June 30, 2017, we did not have any unrecognized tax benefits. As of December 31, 2016, the amount of unrecognized tax benefits was $0.1 million. During the six months ended June 30, 2017, we recorded a decrease of $0.1 million to our unrecognized tax benefits, which reduced our tax expense by less than $0.1 million due to reductions for tax positions in prior years. We do not expect any material changes in our unrecognized tax benefits during the remainder of 2017. Our practice is to recognize interest and penalties related to income tax matters in interest expense and selling, general and administrative expenses, respectively. As of June 30, 2017, we did not have a liability for interest or penalties and had no material interest or penalty expense. The periods subject to examination for our federal return are years 2013 through 2015. The periods subject to examination for our state returns are years 2012 through 2015. We are not currently under examination by federal or state taxing authorities. Our effective tax rate was 34.8 % and 98.7% for the quarters ended June 30, 2017 and 2016, respectively and 36.1% and 68.2% for the six-month periods ended June 30, 2017 and 2016, respectively . For the quarter and six-month periods ended June 30, 2017 and 2016, the effective tax rate differed from the federal and state statutory rates due to various permanent income tax differences and differences in allocable income for the Company’s state tax filings. For the quarter and six-month period ended June 30, 2016, we recognized approximately $7.5 million of deferred taxes related to the assets held for sale of CCIC, which was the primary driver of the effective tax rate differing from the federal and statutory rates. Exclusive of these adjustments, our effective tax rate for the quarters ended June 30, 2017 and 2016 would have been approximately 34.7% and 38.5%, respectively and for the six-month periods ended June 30, 2017 and 2016 would have been approximately 35.6% and 38.6%, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 11. COMMITMENTS AND CONTINGENCIES Litigation, Regulatory Proceedings and Other Contingencies FairPoint On February 7, 2017, an alleged class action complaint was filed by a purported stockholder of FairPoint in the United States District Court for the Western District of North Carolina (Case No. 3:17-cv-51) against us, FairPoint and its directors. Among other things, the complaint alleges that the disclosures in our Form S-4 Registration Statement filed with the SEC on January 26, 2017, in connection with the Merger Agreement, are materially incomplete and misleading in violation of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934, as amended. The plaintiff sought to enjoin us from consummating the merger with FairPoint on the agreed-upon terms or, alternatively, to rescind the merger in the event that we consummate the merger, in addition to damages and attorney fees and costs. On March 7, 2017, the plaintiff filed a motion for preliminary injunction to enjoin FairPoint’s special meeting of stockholders to approve the proposed Merger. On March 17, 2017, the plaintiff voluntarily dismissed the action with prejudice as to his individual claims and without prejudice as to the claims of the putative class. No payment, promise of payment, or other consideration has been offered or made to the plaintiff or his attorneys. On March 3, 2017, an alleged class action complaint was filed by a purported stockholder of the Company in the Court of Chancery of the State of Delaware ( the “Court”) captioned Vento v. Currey, et al. (Case No. 2017-0157) against the members of the Company’s board of directors ( the “Delaware Action”). The lawsuit is related to our Merger Agreement with FairPoint. Among other things, the lawsuit alleged that the members of the Company’s board of directors breached their fiduciary duties in connection with soliciting approval of the Company’s stockholders of the issuance of the Company’s common stock to stockholders of FairPoint in the merger (the “Merger”) contemplated by the Merger Agreement (the “Stockholder Vote”) because Amendment No. 1 to the Registration Statement on Form S-4 filed by the Company on February 24, 2017 failed to disclose allegedly material information relating to the retention, compensation and financial incentives of a financial advisor to the Company in connection with the proposed Merger. The plaintiff sought, among other relief, to enjoin the Stockholder Vote. On March 14, 2017, the plaintiff filed a motion for preliminary injunction to enjoin the Stockholder Vote until such time as certain information concerning the financial interests of the Company’s financial advisor in the proposed Merger were fully disclosed. On March 22, 2017, the Court issued a letter decision stating that it would preliminarily enjoin the Stockholder Vote (the “Injunction”) until five days after such time as the Company had supplemented its disclosures to include a clear and direct explanation of the amount of financing-related fees that the Company’s financial advisor, Morgan Stanley & Co. LLC, or any of its affiliates stands to receive in connection with the Merger if the Merger is consummated. In response to the Injunction, in order to provide a clear and direct explanation of the amount of financing-related fees that Morgan Stanley & Co. LLC or any of its affiliates stands to receive in connection with the Merger, and to provide additional information to its stockholders, the Company supplemented the Joint Proxy Statement/Prospectus filed in connection with the Merger Agreement as described in the Company’s Current Report on Form 8-K filed on March 22, 2017 at a time and in a manner that would not cause any delay of the special meeting of the Company’s stockholders, which was scheduled to be held on March 28, 2017, or the Merger. Subsequently on March 22, 2017, the Court entered an order that, among other things, vacated the Injunction, dismissed the Delaware Action as moot, and allowed the special meeting of the Company’s stockholders, which was held on March 28, 2017, to proceed as scheduled. The Court retained jurisdiction solely for the purpose of determining the plaintiff’s counsel’s application for an award of attorneys’ fees and reimbursement of expenses. At a special meeting of the Company’s stockholders, the issuance of the Company’s common stock to stockholders of FairPoint in the Merger received the affirmative vote of approximately 98% of the shares voted. The Merger closed on July 3, 2017. Following the Stockholder Vote and through the closing of the Merger, the parties, through their respective counsel, engaged in arm’s length negotiations to resolve plaintiff’s counsel’s claim for an award of attorneys’ fees and expenses for a payment of $0.345 million to plaintiff’s counsel by the Company, which payment has not been approved or ruled upon by the Court. Access Charges In 2014, Sprint Communications Company L.P. (“Sprint”) along with MCI Communications Services, Inc. and Verizon Select Services Inc. (collectively, “Verizon”) filed lawsuits against certain entities of the Company and many other Local Exchange Carriers (collectively, “LECs”) throughout the country challenging the switched access charges LECs assessed Sprint and Verizon, as interexchange carriers (“IXCs”), for certain calls originating from or terminating to mobile devices that are routed to or from these LECs through these IXCs. The plaintiffs’ position is based on their interpretation of federal law, among other things, and they are seeking refunds of past access charges paid for such calls. The disputed amounts total $2.4 million and cover periods dating back to 2006. CenturyLink, Inc. and its LEC subsidiaries (collectively “CenturyLink”), requested that the U.S. Judicial Panel on Multidistrict Litigation (the “Panel”), which has the authority to transfer the pretrial proceedings to a single court for multiple civil cases involving common questions of fact, transfer and consolidate these cases in one court. The Panel granted CenturyLink’s request and ordered that these cases be transferred to and centralized in the U.S. District Court for the Northern District of Texas (the “U.S. District Court”). On November 17, 2015, the U.S. District Court dismissed these complaints based on its interpretation of federal law and held that LECs could assess switched access charges for the calls at issue (the “November 2015 Order”). The November 2015 Order also allowed the plaintiffs to amend their complaints to assert claims that arise under state laws independent of the dismissed claims asserted under federal law. While Verizon did not make such a filing, on May 16, 2016, Sprint filed amended complaints and on June 30, 2016, the LEC defendants named in such complaints filed, among other things, a Joint Motion to Dismiss them, which the U.S. District Court granted on May 3, 2017. Relatedly, in 2016, numerous LECs across the country, including a number of our LEC entities, filed complaints in various U.S. district courts against Level 3 Communications, LLC and certain of its affiliates (collectively, “Level 3”) for its failure to pay access charges for certain calls that the November 2015 Order held could be assessed by LECs. The total amount our LEC entities seek from Level 3 in this proceeding is at least approximately $0.3 million, excluding late payment charges/penalties and attorneys’ fees. These complaint cases were transferred to and included in the above-referenced consolidated proceeding before the U.S. District Court. Level 3 filed a Motion to Dismiss these complaints that, in part, repeated arguments the November 2015 Order rejected. On March 22, 2017, the U.S. District Court denied Level 3’s Motion to Dismiss (“March 2017 Order”). On June 1, 2017, the U.S. District Court adopted a scheduling order in the consolidated cases that established deadlines on how the claims at issue (“intraMTA claims”) would be addressed in upcoming aspects of the proceeding. Once the proceeding before the U.S. District Court on the intraMTA claims becomes final, including resolution of any related counterclaims, Sprint, Verizon, and Level 3 are expected to appeal the U.S. District Court’s November 2015 and March 2017 Orders. Absent a decision by an appellate court that overturns these Orders, it could be difficult for Sprint or Verizon to succeed on its claims against us or for Level 3 to avoid paying the access charges it disputes in this litigation. Therefore, we do not expect any potential settlement or judgment to have an adverse material impact on our financial results or cash flows. Gross Receipts Tax Two of our subsidiaries, Consolidated Communications of Pennsylvania Company LLC (“CCPA”) and Consolidated Communications Enterprise Services Inc. (“CCES”), have, at various times, received assessment notices from the Commonwealth of Pennsylvania Department of Revenue (“DOR”) increasing the amounts owed for Pennsylvania Gross Receipts Tax, and/or have had audits performed for the tax years of 2008 through 2015. In addition, a re-audit was performed on CCPA for the 2010 calendar year. Pennsylvania generally imposes tax on the gross receipts received from telephone messages transmitted wholly within the state and telephone messages transmitted in interstate commerce where such messages originate or terminate in Pennsylvania, and the charges for such messages are billed to a service address in the state. In a 2013 decision involving Verizon Pennsylvania, Inc. (“Verizon Pennsylvania”), the Commonwealth Court of Pennsylvania held that the gross receipts tax applies to Verizon Pennsylvania’s installation of private phone lines because the sole purpose of private lines is to transmit messages. Similarly, the court held that directory assistance is subject to the gross receipts tax because it makes the transmission of messages more effective and satisfactory. However, the court did not find Verizon Pennsylvania’s nonrecurring charges for the installation of telephone lines, moves of and changes to telephone lines and services and repairs of telephone lines to be subject to the gross receipts tax as no telephone messages are transmitted when Verizon Pennsylvania performs these nonrecurring services. In November 2015, on appeal, the Supreme Court of Pennsylvania held in Verizon Pennsylvania, Inc. v. Commonwealth of Pennsylvania , 127 A.3d 745 (Pa. 2015), that charges for the installation of private phone lines, charges for directory assistance and certain nonrecurring charges were all subject to the state’s gross receipt tax. The Supreme Court of Pennsylvania found that all of the services, including those related to nonrecurring charges, in some way made transmission more effective or communication more satisfactory even though such services did not involve actual transmission. This is a partial reversal of the 2013 Commonwealth Court of Pennsylvania decision described above, which had ruled that while the charges for the installation of private phone lines and directory assistance were subject to the state’s gross receipts tax, the nonrecurring charges in question were not. As neither reargument nor reconsideration was sought, the Verizon Pennsylvania case is now final. For our CCES and CCPA subsidiaries, the total additional tax liability calculated by the DOR auditors for the calendar years 2008 through 2013 is approximately $4.2 million and $5.0 million, respectively. In May 2016, the Commonwealth of Pennsylvania Board of Finance and Revenue reviewed our appeals of the cases for the audits in calendar years 2008 through 2013 and held that the charges in question were subject to the state’s gross receipts tax. In June 2016, we filed appeals with the Pennsylvania Commonwealth Court for the audits in calendar years 2008 through 2013, captioned as Consolidated Communications Enterprise Services, Inc. v. Commonwealth of Pennsylvania , Nos. 400 through 411 FR 2016 and Consolidated Communications of Pennsylvania Company, LLC v. Commonwealth of Pennsylvania , Nos. 422 through 432 FR 2016. These appeals are presently in the fact development stage, with a consolidated joint status report to be filed with the Commonwealth Court in September 2017. In October and December 2016, CCPA and CCES received Audit Assessment Notices from the DOR increasing the amounts owed for Pennsylvania Gross Receipts Tax for the 2014 tax year. The total additional tax liability calculated by the DOR auditors for CCPA and CCES for 2014 is approximately $0.7 million and $0.9 million, respectively. We filed Petitions for Reassessment with the DOR’s Board of Appeals in January 2017 for CCPA and in March 2017 for CCES, contesting these audit assessments. By Interlocutory Orders issued in April 2017, the DOR’s Board of Appeals stayed the matters pending final action of the Commonwealth Court in litigation involving the same issues related to CCPA’s and CCES’s 2008 through 2013 tax periods. In May 2017, CCES received Audit Assessment Notices from the DOR increasing the amounts owed for Pennsylvania Gross Receipts Tax for the 2015 tax year. The total additional tax liability calculated by the DOR auditors for CCES for 2015 is approximately $0.7 million. We filed Petitions for Reassessment with the DOR’s Board of Appeals in May 2017 contesting these audit assessments. We expect the Board to stay these matters pending final action of the Commonwealth Court in litigation involving the same issues related to CCES’s 2008 through 2013 tax periods. Additionally, in July 2017, CCPA received audit schedules from the DOR increasing the amounts owed for Pennsylvania Gross Receipts Tax for the 2015 tax year. The total additional tax liability calculated by the DOR auditors for CCPA for 2015 is approximately $0.7 million. We expect to appeal the audit findings when the Audit Assessment Notices are issued. In May 2017, we entered into an agreement to guarantee any potential liability to the DOR up to $5.0 million. However, we believe that certain of the DOR’s findings regarding the Company’s additional tax liability for the calendar years 2008 through 2015, for which we have filed appeals, continue to lack merit. In light of the Supreme Court of Pennsylvania’s Verizon Pennsylvania decision, we have accrued $1.4 million and $1.2 million for our CCES and CCPA subsidiaries, respectively. These accruals also include the Company’s best estimate of the potential 2016 and 2017 additional tax liabilities. We do not believe that the outcome of these claims will have a material adverse impact on our financial results or cash flows. From time to time we may be involved in litigation that we believe is of the type common to companies in our industry, including regulatory issues. While the outcome of these claims cannot be predicted with certainty, we do not believe that the outcome of any of these legal matters will have a material adverse impact on our business, results of operations, financial condition or cash flows. |
CONDENSED CONSOLIDATING FINANCI
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 6 Months Ended |
Jun. 30, 2017 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | 12. CONDENSED CONSOLIDATING FINANCIAL INFORMATION Consolidated Communications, Inc. is the primary obligor under the unsecured Senior Notes. We and substantially all of our subsidiaries, excluding Consolidated Communications of Illinois Company, have jointly and severally guaranteed the Senior Notes. All of the subsidiary guarantors are 100% direct or indirect wholly owned subsidiaries of the parent, and all guarantees are full, unconditional and joint and several with respect to principal, interest and liquidated damages, if any. As such, we present condensed consolidating balance sheets as of June 30, 2017 and December 31, 2016, condensed consolidating statements of operations for the quarters and six-month periods ended June 30, 2017 and 2016 and condensed consolidating statements of cash flows for the six-month periods ended June 30, 2017 and 2016 for each of the Company (Parent), Consolidated Communications, Inc. (Subsidiary Issuer), guarantor subsidiaries and other non-guarantor subsidiaries with any consolidating adjustments. See Note 6 for more information regarding our Senior Notes. Condensed Consolidating Balance Sheets (In thousands) June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 15,846 $ 13 $ — $ — $ 15,859 Accounts receivable, net — — 43,490 7,145 (297) 50,338 Income taxes receivable 22,724 9,636 — — (6,304) 26,056 Prepaid expenses and other current assets — 5,844 19,881 128 — 25,853 Total current assets 22,724 31,326 63,384 7,273 (6,601) 118,106 Property, plant and equipment, net — — 985,206 57,565 — 1,042,771 Intangibles and other assets: Investments — 8,495 98,009 — — 106,504 Investments in subsidiaries 2,188,334 2,041,549 14,501 — (4,244,384) — Goodwill — — 690,696 66,181 — 756,877 Other intangible assets — — 18,124 9,087 — 27,211 Advances due to/from affiliates, net — 1,523,418 463,016 96,651 (2,083,085) — Deferred income taxes 19,175 322 — — (19,497) — Other assets 319 1,537 7,706 38 — 9,600 Total assets $ 2,230,552 $ 3,606,647 $ 2,340,642 $ 236,795 $ (6,353,567) $ 2,061,069 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 10,107 $ — $ — $ 10,107 Advance billings and customer deposits — — 22,878 2,162 — 25,040 Dividends payable 19,653 — — — — 19,653 Accrued compensation — — 14,050 970 — 15,020 Accrued interest — 25,936 479 — — 26,415 Accrued expense 18 14,660 35,389 864 (297) 50,634 Income tax payable — — 3,124 3,180 (6,304) — Current portion of long term debt and capital lease obligations — 9,000 8,631 199 — 17,830 Total current liabilities 19,671 49,596 94,658 7,375 (6,601) 164,699 Long-term debt and capital lease obligations — 1,363,116 12,633 499 — 1,376,248 Advances due to/from affiliates, net 2,083,085 — — — (2,083,085) — Deferred income taxes — — 232,957 27,903 (19,497) 241,363 Pension and postretirement benefit obligations — — 106,206 20,077 — 126,283 Other long-term liabilities — 5,601 13,236 460 — 19,297 Total liabilities 2,102,756 1,418,313 459,690 56,314 (2,109,183) 1,927,890 Shareholders’ equity: Common Stock 507 — 17,411 30,000 (47,411) 507 Other shareholders’ equity 127,289 2,188,334 1,858,158 150,481 (4,196,973) 127,289 Total Consolidated Communications Holdings, Inc. shareholders’ equity 127,796 2,188,334 1,875,569 180,481 (4,244,384) 127,796 Noncontrolling interest — — 5,383 — — 5,383 Total shareholders’ equity 127,796 2,188,334 1,880,952 180,481 (4,244,384) 133,179 Total liabilities and shareholders’ equity $ 2,230,552 $ 3,606,647 $ 2,340,642 $ 236,795 $ (6,353,567) $ 2,061,069 Condensed Consolidating Balance Sheet (In thousands) December 31, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 27,064 $ 13 $ — $ — $ 27,077 Accounts receivable, net — — 48,911 7,347 (42) 56,216 Income taxes receivable 20,756 — 885 (25) — 21,616 Prepaid expenses and other current assets — 12,856 15,310 126 — 28,292 Total current assets 20,756 39,920 65,119 7,448 (42) 133,201 Property, plant and equipment, net — — 999,416 55,770 — 1,055,186 Intangibles and other assets: Investments — 8,338 97,883 — — 106,221 Investments in subsidiaries 2,192,556 2,019,692 14,279 — (4,226,527) — Goodwill — — 690,696 66,181 — 756,877 Other intangible assets — — 22,525 9,087 — 31,612 Advances due to/from affiliates, net — 1,524,906 427,720 87,171 (2,039,797) — Deferred income taxes 17,150 — — — (17,150) — Other assets — 1,562 8,058 41 — 9,661 Total assets $ 2,230,462 $ 3,594,418 $ 2,325,696 $ 225,698 $ (6,283,516) $ 2,092,758 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 6,766 $ — $ — $ 6,766 Advance billings and customer deposits — — 24,981 1,457 — 26,438 Dividends payable 19,605 — — — — 19,605 Accrued compensation — — 16,002 969 — 16,971 Accrued interest — 10,824 436 — — 11,260 Accrued expense 36 15,057 38,192 880 (42) 54,123 Current portion of long term debt and capital lease obligations — 9,000 5,735 187 — 14,922 Total current liabilities 19,641 34,881 92,112 3,493 (42) 150,085 Long-term debt and capital lease obligations — 1,365,820 10,332 602 — 1,376,754 Advances due to/from affiliates, net 2,039,797 — — — (2,039,797) — Deferred income taxes — 984 232,668 27,796 (17,150) 244,298 Pension and postretirement benefit obligations — — 109,185 21,608 — 130,793 Other long-term liabilities 70 216 13,807 480 — 14,573 Total liabilities 2,059,508 1,401,901 458,104 53,979 (2,056,989) 1,916,503 Shareholders’ equity: Common Stock 506 — 17,411 30,000 (47,411) 506 Other shareholders’ equity 170,448 2,192,517 1,844,880 141,719 (4,179,116) 170,448 Total Consolidated Communications Holdings, Inc. shareholders’ equity 170,954 2,192,517 1,862,291 171,719 (4,226,527) 170,954 Noncontrolling interest — — 5,301 — — 5,301 Total shareholders’ equity 170,954 2,192,517 1,867,592 171,719 (4,226,527) 176,255 Total liabilities and shareholders’ equity $ 2,230,462 $ 3,594,418 $ 2,325,696 $ 225,698 $ (6,283,516) $ 2,092,758 Condensed Consolidating Statements of Operations (In thousands) Quarter Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 159,072 $ 14,066 $ (3,188) $ 169,950 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 70,952 2,501 (3,077) 70,376 Selling, general and administrative expenses 920 — 31,899 3,012 (111) 35,720 Acquisition and other transaction costs 1,793 — — — — 1,793 Depreciation and amortization — — 38,039 2,444 — 40,483 Operating income (loss) (2,713) — 18,182 6,109 — 21,578 Other income (expense): Interest expense, net of interest income — (33,704) (244) 30 — (33,918) Intercompany interest income (expense) — 14,727 (14,707) (20) — — Investment income — — 8,196 — — 8,196 Equity in earnings of subsidiaries, net (740) 13,168 277 — (12,705) — Other, net — 2 120 (3) — 119 Income (loss) before income taxes (3,453) (5,807) 11,824 6,116 (12,705) (4,025) Income tax expense (benefit) (725) (5,067) 2,791 1,602 — (1,399) Net income (loss) (2,728) (740) 9,033 4,514 (12,705) (2,626) Less: net income attributable to noncontrolling interest — — 102 — — 102 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (2,728) $ (740) $ 8,931 $ 4,514 $ (12,705) $ (2,728) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Quarter Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ 18 $ 175,245 $ 14,897 $ (3,289) $ 186,871 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 80,739 3,204 (3,180) 80,763 Selling, general and administrative expenses 1,076 7 35,622 2,209 (109) 38,805 Acquisition and other transaction costs 248 — — — — 248 Loss on impairment — — 610 — — 610 Depreciation and amortization — — 41,216 2,275 — 43,491 Operating income (loss) (1,324) 11 17,058 7,209 — 22,954 Other income (expense): Interest expense, net of interest income 7 (18,963) (160) 10 — (19,106) Intercompany interest income (expense) (31,886) 33,824 (2,706) 768 — — Investment income — — 8,704 — — 8,704 Equity in earnings of subsidiaries, net 21,443 19,393 219 — (41,055) — Other, net — — (66) (6) — (72) Income (loss) before income taxes (11,760) 34,265 23,049 7,981 (41,055) 12,480 Income tax expense (benefit) (11,836) 12,821 8,490 2,848 — 12,323 Net income (loss) 76 21,444 14,559 5,133 (41,055) 157 Less: net income attributable to noncontrolling interest — — 81 — — 81 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ 76 $ 21,444 $ 14,478 $ 5,133 $ (41,055) $ 76 Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Six Months Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 317,904 $ 28,355 $ (6,374) $ 339,885 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 142,873 5,050 (6,156) 141,767 Selling, general and administrative expenses 1,263 10 64,557 6,139 (218) 71,751 Acquisition and other transaction costs 3,524 — — — — 3,524 Depreciation and amortization — — 77,559 5,119 — 82,678 Operating income (loss) (4,787) (10) 32,915 12,047 — 40,165 Other income (expense): Interest expense, net of interest income 6 (63,191) (450) 46 — (63,589) Intercompany interest income (expense) — 29,454 (29,415) (39) — — Investment income — 157 13,317 — — 13,474 Equity in earnings of subsidiaries, net (3,045) 20,906 222 — (18,083) — Other, net — 3 54 (11) — 46 Income (loss) before income taxes (7,826) (12,681) 16,643 12,043 (18,083) (9,904) Income tax expense (benefit) (1,413) (9,636) 4,021 3,455 — (3,573) Net income (loss) (6,413) (3,045) 12,622 8,588 (18,083) (6,331) Less: net income attributable to noncontrolling interest — — 82 — — 82 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (6,413) $ (3,045) $ 12,540 $ 8,588 $ (18,083) $ (6,413) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Six Months Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ (5) $ 352,500 $ 29,784 $ (6,562) $ 375,717 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 160,453 6,377 (6,347) 160,483 Selling, general and administrative expenses 1,972 7 72,222 5,495 (215) 79,481 Acquisition and other transaction costs 248 — — — — 248 Loss on impairment — — 610 — — 610 Depreciation and amortization — — 83,077 4,554 — 87,631 Operating income (loss) (2,220) (12) 36,138 13,358 — 47,264 Other income (expense): Interest expense, net of interest income 46 (37,398) (408) 8 — (37,752) Intercompany interest income (expense) (63,773) 67,648 (5,405) 1,530 — — Investment income — 166 15,735 — — 15,901 Equity in earnings of subsidiaries, net 50,162 38,215 361 — (88,738) — Other, net — — (40) (18) — (58) Income (loss) before income taxes (15,785) 68,619 46,381 14,878 (88,738) 25,355 Income tax expense (benefit) (23,710) 18,456 17,201 5,349 — 17,296 Net income (loss) 7,925 50,163 29,180 9,529 (88,738) 8,059 Less: net income attributable to noncontrolling interest — — 134 — — 134 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ 7,925 $ 50,163 $ 29,046 $ 9,529 $ (88,738) $ 7,925 Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Condensed Consolidating Statements of Cash Flows (In thousands) Six Months Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ (4,096) $ (8,211) $ 89,701 $ 16,139 $ 93,533 Cash flows from investing activities: Purchases of property, plant and equipment — — (51,465) (6,596) (58,061) Proceeds from sale of assets — — 74 27 101 Net cash provided by (used in) investing activities — — (51,391) (6,569) (57,960) Cash flows from financing activities: Proceeds from issuance of long-term debt — 23,000 — — 23,000 Payment of capital lease obligation — — (2,902) (91) (2,993) Payment on long-term debt — (27,500) — — (27,500) Share repurchases for minimum tax withholding (41) — — — (41) Dividends on common stock (39,257) — — — (39,257) Transactions with affiliates, net 43,394 1,493 (35,408) (9,479) — Net cash provided by (used in) financing activities 4,096 (3,007) (38,310) (9,570) (46,791) Increase (decrease) in cash and cash equivalents — (11,218) — — (11,218) Cash and cash equivalents at beginning of period — 27,064 13 — 27,077 Cash and cash equivalents at end of period $ — $ 15,846 $ 13 $ — $ 15,859 Six Months Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ (63,494) $ 31,781 $ 129,467 $ 17,751 $ 115,505 Cash flows from investing activities: Purchases of property, plant and equipment — — (55,172) (7,099) (62,271) Proceeds from sale of assets — — 40 10 50 Net cash used in investing activities — — (55,132) (7,089) (62,221) Cash flows from financing activities: Proceeds from issuance of long-term debt — 7,000 — — 7,000 Payment of capital lease obligation — — (756) (56) (812) Payment on long-term debt — (11,550) — — (11,550) Share repurchases for minimum tax withholding (71) — — — (71) Dividends on common stock (39,174) — — — (39,174) Transactions with affiliates, net 102,739 (8,615) (81,147) (12,977) — Net cash provided by (used in) financing activities 63,494 (13,165) (81,903) (13,033) (44,607) Increase (decrease) in cash and cash equivalents — 18,616 (7,568) (2,371) 8,677 Cash and cash equivalents at beginning of period — 5,877 7,629 2,372 15,878 Cash and cash equivalents at end of period $ — $ 24,493 $ 61 $ 1 $ 24,555 |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Business and Basis of Accounting | Business and Basis of Accounting Consolidated Communications Holdings, Inc. (the “Company”, “we” or “our”) is a holding company with operating subsidiaries (collectively “Consolidated”) that provide integrated communications services in consumer, commercial and carrier channels, as of June 30, 2017, in California, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota, Pennsylvania, South Dakota, Texas and Wisconsin. We operate as both an Incumbent Local Exchange Carrier (“ILEC”) and a Competitive Local Exchange Carrier (“CLEC”), dependent upon the territory served. We provide a wide range of services and products that include local and long-distance service, high-speed broadband Internet access, video services, Voice over Internet Protocol (“VoIP”), private line services, carrier grade access services, network capacity services over our regional fiber optic networks, cloud data services, data center and managed services, directory publishing and equipment sales. As of June 30, 2017, we had approximately 449 thousand voice connections, 480 thousand data connections and 100 thousand video connections. In the opinion of management, the accompanying unaudited condensed consolidated balance sheets and related condensed consolidated statements of operations, comprehensive income (loss) and cash flows include all adjustments, consisting only of normal recurring items, necessary for their fair presentation in conformity with accounting principles generally accepted in the United States (“US GAAP” or “GAAP”) for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations and accounting principles applicable for interim periods. Events subsequent to the balance sheet date have been evaluated for inclusion in the accompanying condensed consolidated financial statements through the date of issuance. Management believes that the disclosures made are adequate to make the information presented not misleading. Interim results are not necessarily indicative of results for a full year. The information presented in this Form 10-Q should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and the accompanying notes to the financial statements (“Notes”) thereto included in our 2016 Annual Report on Form 10-K filed with the SEC. |
Recent Business Developments | Recent Business Developments On December 3, 2016, we entered into a definitive agreement and plan of merger (the “Merger Agreement”) with FairPoint Communications, Inc. (“FairPoint”) to acquire all the issued and outstanding shares of FairPoint in exchange for shares of our common stock. On July 3, 2017, the merger was completed and FairPoint became a wholly owned subsidiary of the Company. For a more complete discussion of the transaction, refer to Note 2. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Effective January 1, 2017, we adopted the Accounting Standards Update No. 2016-09 (“ASU 2016-09 ”), Improvements to Employee Share-Based Payment Accounting . ASU 2016-09 amends several aspects of the accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities, calculation of compensation expense and classification on the statement of cash flows. ASU 2016-09 requires excess tax benefits and deficiencies resulting from stock-based compensation awards vesting to be recognized as income tax expense or benefit in the income statement on a prospective basis. Previously, these amounts were recognized in additional paid-in capital. The impact of this change was not material for the quarter and six months ended June 30, 2017. In addition, ASU 2016-09 requires excess tax benefits and deficiencies to be excluded from the assumed proceeds in the calculation of diluted shares. This requirement did not impact diluted loss per share for the quarter and six months ended June 30, 2017 as the diluted shares were excluded from the computation of loss per share. Due to our net loss for the quarter and six months ended June 30, 2017, the inclusion of these shares would have had an anti-dilutive impact. ASU 2016-09 removed the requirement to delay recognition of excess tax benefits until it reduces current income taxes payable. This update is required to be applied on a modified retrospective basis, which resulted in a cumulative effect adjustment of $2.2 million to increase opening retained earnings for the cumulative impact of excess tax benefits related to our net operating loss carryforwards. This amount was subsequently transferred into additional paid-in capital at March 31, 2017. ASU 2016-09 permits the election of an accounting policy for forfeitures of share-based payment awards, either to recognize forfeitures as they occur or estimate forfeitures over the vesting period of the award. We have elected to recognize forfeitures as they occur and the cumulative impact of this change was not material to our condensed consolidated financial statements and related disclosures. In May 2017, the Financial Accounting Standards Board (“FASB”) issued the Accounting Standards Update No. 2017-09 (“ASU 2017-09”), Scope of Modification Accounting . ASU 2017-09 clarifies the modification accounting guidance for stock compensation included in Topic 718, Compensation – Stock Compensation . ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award must be accounted for as a modification under Topic 718. The new guidance is effective prospectively for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We plan to adopt this update effective January 1, 2018 and will apply this guidance to applicable transactions after adoption date. In March 2017, the FASB issued the Accounting Standards Update No. 2017-07 (“ASU 2017-07”), Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost . ASU 2017-07 requires presentation of the service cost component of net periodic benefit cost within the same income statement line item as other compensation costs arising from services rendered by relevant employees during the period, and presentation of the other cost components of net periodic benefit cost separately and outside of the income from operations subtotal. In addition, only the service cost component is eligible for capitalization. The new guidance is effective for annual and interim periods beginning after December 15, 2017. Early adoption is permitted as of the beginning of the annual period and should be applied retrospectively for the presentation of the service cost and prospectively for the capitalization of the service cost component in assets. We plan to adopt this update effective January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In February 2017, the FASB issued the Accounting Standards Update No. 2017-05 (“ASU 2017-05”), Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets . ASU 2017-05 provides additional guidance to (i) clarify the scope for recognizing gains and losses from the transfer of nonfinancial assets and in substance nonfinancial assets in contracts with non-customers, and (ii) clarify the accounting for partial sales of nonfinancial assets. ASU 2017-05 is effective for annual and interim periods beginning after December 15, 2017 and can be applied using the retrospective or modified retrospective approach. We plan to adopt ASU 2017-05 as of January 1, 2018 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In January 2017, FASB issued the Accounting Standards Update No. 2017-04 (“ASU 2017-04”), Simplifying the Accounting for Goodwill Impairment . ASU 2017-04 eliminates Step 2 from the goodwill impairment test. Under the updated guidance, the goodwill impairment test will be performed by comparing the fair value of a reporting unit with its carrying amount and an impairment charge will be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. The new guidance is effective for annual and interim goodwill tests in fiscal years beginning after December 15, 2019 and should be applied prospectively. Early adoption is permitted for annual and interim goodwill impairment testing performed after January 1, 2017. We plan to early adopt this update in the fourth quarter of 2017. In January 2017, the FASB issued the Accounting Standards Update No. 2017-01 (“ASU 2017-01”), Clarifying the Definition of a Business . ASU 2017-01 clarifies the definition of a business and establishes a screening process to determine whether an integrated set of assets and activities acquired is deemed the acquisition of a business or the acquisition of assets. ASU 2017-01 is effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively, with early adoption permitted. We plan to adopt this update as of January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In October 2016, the FASB issued the Accounting Standards Update No. 2016-16 (“ASU 2016-16”), Intra-Entity Transfers of Assets Other Than Inventory . ASU 2016-16 eliminates the existing exception prohibiting the recognition of the income tax consequences for intra-entity asset transfers until the asset has been sold to an outside party. Under ASU 2016-16, entities will be required to recognize the income tax consequences of intra-entity asset transfers other than inventory when the transfer occurs. ASU 2016-16 is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2017, with early adoption permitted. We currently anticipate adopting this update effective January 1, 2018 and do not expect a material impact on our condensed consolidated financial statements and related disclosures. In August 2016, the FASB issued the Accounting Standards Update No. 2016-15 (“ASU 2016-15”), Classification of Certain Cash Receipts and Cash Payments . ASU 2016-15 provides guidance concerning the classification of certain cash receipts and cash payments in the statement of cash flows. The new guidance is effective for annual and interim periods beginning after December 15, 2017 and should be applied retrospectively, with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In June 2016, the FASB issued the Accounting Standards Update No. 2016-13 (“ASU 2016-13”), Measurement of Credit Losses on Financial Instruments . ASU 2016-13 establishes the new “current expected credit loss” model for measuring and recognizing credit losses on financial assets based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts. The new guidance is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2019, with early adoption permitted for annual and interim periods beginning after December 15, 2018. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2016, the FASB issued the Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases . ASU 2016-02 establishes a new lease accounting model for leases. Lessees will be required to recognize most leases on their balance sheets but lease expense will be recognized on the income statement in a manner similar to existing requirements. ASU 2016-02 is effective on a modified retrospective basis for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the population of our leases and anticipate that most of our operating lease commitments will be recognized on our consolidated balance sheets. We have not yet made a decision on the timing and method of adoption and are continuing to assess the potential impact of this update on our condensed consolidated financial statements and related disclosures. In May 2014, the FASB issued the Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers (Topic 606) , which will replace the current revenue recognition requirements in U.S. GAAP. The core principle of ASU 2014-09 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In addition, ASU 2014-09 requires disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. Two transition methods are permitted under ASU 2014-09, the full retrospective method, in which case the standard would be applied to each prior reporting period presented and the cumulative effect of applying the standard would be recognized at the earliest period shown, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. In August 2015, the FASB issued the Accounting Standards Update No. 2015-14 (“ASU 2015-14”), Deferral of the Effective Date , which deferred the effective date of ASU 2014-09 for all entities by one year. Accordingly, ASU 2014-09 is effective for annual and interim periods beginning after December 15, 2017, at which point we plan to adopt the standard. In 2016, we established a cross-functional implementation team to assess the impact of ASU 2014-09 on our revenue contracts by reviewing our current accounting policies and practices to identify potential differences that would result from applying the requirements of this update. While we continue to assess all potential impacts of this update, we currently believe that the most significant impact relates to the deferral of contract acquisition costs, which is currently expensed as incurred, however under ASU 2014-09 will generally be capitalized and amortized over the contract performance period. Initially, we anticipated adopting this update using the full retrospective method to restate each prior reporting period presented, however, after further assessment of the impacts to our current systems, processes and internal controls as well as the transition methods allowed, we’ve determined that adopting this update using the modified retrospective method is more appropriate. |
ACQUISITION AND DISPOSITIONS (T
ACQUISITION AND DISPOSITIONS (Tables) - FairPoint Communications, Inc | 6 Months Ended |
Jun. 30, 2017 | |
Summary of purchase price allocation | (In thousands) Working capital $ 35,213 Property, plant and equipment 948,254 Intangible assets 296,500 Other long-term assets 2,920 Total assets acquired 1,282,887 Pension and other post-retirement obligations 216,011 Deferred income taxes 109,451 Other long-term liabilities 16,407 Total liabilities assumed 341,869 Net fair value of assets acquired 941,018 Goodwill 402,836 Total consideration transferred $ 1,343,854 |
Schedule of unaudited pro forma results | Quarter Ended Six Months Ended June 30, June 30, (Unaudited; in thousands, except per share amounts) 2017 2016 2017 2016 Operating revenues $ $ $ $ Income from operations $ $ $ $ Net income $ $ $ $ Less: net income attributable to noncontrolling interest Net income attributable to common stockholders $ $ $ $ Net income per common share-basic and diluted $ $ $ $ |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
EARNINGS (LOSS) PER SHARE | |
Schedule of basic and diluted EPS | Quarter Ended Six Months Ended June 30, June 30, (In thousands, except per share amounts) 2017 2016 2017 2016 Net income (loss) $ (2,626) $ 157 $ (6,331) $ 8,059 Less: net income attributable to noncontrolling interest 102 81 82 134 Income (loss) attributable to common shareholders before allocation of earnings to participating securities (2,728) 76 (6,413) 7,925 Less: earnings allocated to participating securities 115 131 164 262 Net income (loss) attributable to common shareholders, after earnings allocated to participating securities $ (2,843) $ (55) $ (6,577) $ 7,663 Weighted-average number of common shares outstanding 50,412 50,294 50,411 50,291 Net income (loss) per common share attributable to common shareholders - basic and diluted $ (0.06) $ — $ (0.13) $ 0.15 |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
INVESTMENTS | |
Schedule of investments | June 30, December 31, (In thousands) 2017 2016 Cash surrender value of life insurance policies $ 2,346 $ 2,156 Cost method investments: GTE Mobilnet of South Texas Limited Partnership (2.34% interest) 21,450 21,450 Pittsburgh SMSA Limited Partnership (3.60% interest) 22,950 22,950 CoBank, ACB Stock 8,295 8,138 Other 200 200 Equity method investments: GTE Mobilnet of Texas RSA #17 Limited Partnership (20.51% interest) 16,199 17,160 Pennsylvania RSA 6(I) Limited Partnership (16.67% interest) 7,035 6,540 Pennsylvania RSA 6(II) Limited Partnership (23.67% interest) 28,029 27,627 Totals $ 106,504 $ 106,221 |
Summary of combined unaudited results of operations and financial position of our three equity investments in the cellular limited partnerships | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Total revenues $ 89,811 $ 81,885 $ 169,832 $ 164,542 Income from operations 24,518 26,797 45,806 52,393 Net income before taxes 24,145 26,396 45,042 51,585 Net income 24,145 26,396 45,042 51,585 June 30, December 31, (In thousands) 2017 2016 Current assets $ 68,446 $ 64,083 Non-current assets 95,267 89,651 Current liabilities 26,165 21,985 Non-current liabilities 51,497 51,836 Partnership equity 86,051 79,913 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
FAIR VALUE MEASUREMENTS | |
Schedule of interest rate swap assets and liabilities measured at fair value on a recurring basis | As of June 30, 2017 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Long-term interest rate swap assets $ 386 $ - $ 386 $ - Current interest rate swap liabilities (294) - (294) - Long-term interest rate swap liabilities (5,601) - (5,601) - Total $ (5,509) $ - $ (5,509) $ - As of December 31, 2016 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Long-term interest rate swap assets $ 398 $ - $ 398 $ - Current interest rate swap liabilities (453) - (453) - Long-term interest rate swap liabilities (216) - (216) - Total $ (271) $ - $ (271) $ - |
Schedule of other financial instruments that are not carried at fair value but which require fair value disclosure | As of June 30, 2017 As of December 31, 2016 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Investments, equity basis $ n/a $ n/a Investments, at cost $ n/a $ n/a Long-term debt, excluding capital leases $ $ $ $ |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
LONG-TERM DEBT | |
Schedule of components of long-term debt, presented net of unamortized discounts | June 30, December 31, (In thousands) 2017 2016 Senior secured credit facility: Term 5 loan, net of discount of $4,346 and $4,662 at June 30, 2017 and December 31, 2016, respectively $ 888,904 $ 893,088 Revolving loan — — 6.50% Senior notes due 2022, net of discount of $3,991 and $4,302 at June 30, 2017 and December 31, 2016, respectively 496,009 495,698 Capital leases 21,962 16,857 1,406,875 1,405,643 Less: current portion of long-term debt and capital leases (17,830) (14,922) Less: deferred debt issuance costs (12,797) (13,967) Total long-term debt $ 1,376,248 $ 1,376,754 |
DERIVATIVE FINANCIAL INSTRUME25
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of outstanding interest rate swaps | The following interest rate swaps were outstanding as of June 30, 2017: Notional (In thousands) Amount 2017 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Other assets $ Fixed to 1-month floating LIBOR (with floor) $ Accrued expense Series of forward starting fixed to 1-month floating LIBOR (with floor) $ Other long-term liabilities Total Fair Values $ The following interest rate swaps were outstanding as of December 31, 2016: Notional (In thousands) Amount 2016 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Other assets $ Fixed to 1-month floating LIBOR (with floor) $ Accrued expense Fixed to 1-month floating LIBOR (with floor) $ Other long-term liabilities Total Fair Values $ |
Schedule of gains and losses on cash flow hedge transactions | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Unrealized loss recognized in AOCI, pretax $ (4,039) $ (273) $ (4,130) $ (973) Deferred losses reclassified from AOCI to interest expense $ (396) $ (256) $ (729) $ (499) Loss recognized in interest expense from ineffectiveness $ (1,535) $ — $ (1,300) $ — |
EQUITY (Tables)
EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
EQUITY | |
Summary of RSA and PSA activity | RSAs PSAs Weighted Weighted Average Grant Average Grant Shares Date Fair Value Shares Date Fair Value Non-vested shares outstanding - January 1, 2017 93,662 $ 22.34 109,160 $ 20.12 Shares granted 124,100 $ 23.12 5,204 $ 24.00 Shares vested (4,708) $ 22.30 — $ — Shares forfeited, cancelled or retired (3,011) $ 22.48 (3,507) $ 20.68 Non-vested shares outstanding - June 30, 2017 210,043 $ 22.80 110,857 $ 20.28 |
Summary of total compensation costs recognized for share-based payments | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Restricted stock $ $ $ 964 $ 1,072 Performance shares 466 732 Total $ $ $ 1,430 $ 1,804 |
Schedule of changes in accumulated other comprehensive loss, net of tax, by component | Pension and Post-Retirement Derivative (In thousands) Obligations Instruments Total Balance at December 31, 2016 $ (47,150) $ (127) $ (47,277) Other comprehensive income before reclassifications (814) (2,544) (3,358) Amounts reclassified from accumulated other comprehensive loss 1,733 449 2,182 Net current period other comprehensive income 919 (2,095) (1,176) Balance at June 30, 2017 $ (46,231) $ (2,222) $ (48,453) |
Summary of reclassifications from accumulated other comprehensive loss | Quarter Ended June 30, Six Months Ended June 30, Affected Line Item in the (In thousands) 2017 2016 2017 2016 Statement of Income Amortization of pension and post-retirement items: Prior service credit $ $ $ $ (a) Actuarial loss (a) Total before tax Tax benefit $ $ $ $ Net of tax Loss on cash flow hedges: Interest rate derivatives $ $ $ $ Interest expense Tax benefit $ $ $ $ Net of tax |
PENSION PLAN AND OTHER POST-R27
PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Defined Benefit Plans | |
Post-retirement benefit obligation | |
Schedule of the components of net periodic pension cost recognized in the consolidated statements of income | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Service cost $ $ 86 $ $ 172 Interest cost 4,073 8,146 Expected return on plan assets (5,159) (10,318) Net amortization loss 1,356 2,711 Net prior service credit amortization (115) (229) Curtailment gain — — Net periodic pension cost $ $ 241 $ $ 482 |
Post-retirement Benefit Obligations | |
Post-retirement benefit obligation | |
Schedule of the components of net periodic pension cost recognized in the consolidated statements of income | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2017 2016 2017 2016 Service cost $ $ 150 $ $ 300 Interest cost 505 1,010 Expected return on plan assets (37) (74) Net amortization gain (44) — (87) — Net prior service credit amortization (130) (260) Net periodic post-retirement benefit cost $ $ 488 $ $ 976 |
CONDENSED CONSOLIDATING FINAN28
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | |
Schedule of condensed consolidating balance sheets | Condensed Consolidating Balance Sheets (In thousands) June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 15,846 $ 13 $ — $ — $ 15,859 Accounts receivable, net — — 43,490 7,145 (297) 50,338 Income taxes receivable 22,724 9,636 — — (6,304) 26,056 Prepaid expenses and other current assets — 5,844 19,881 128 — 25,853 Total current assets 22,724 31,326 63,384 7,273 (6,601) 118,106 Property, plant and equipment, net — — 985,206 57,565 — 1,042,771 Intangibles and other assets: Investments — 8,495 98,009 — — 106,504 Investments in subsidiaries 2,188,334 2,041,549 14,501 — (4,244,384) — Goodwill — — 690,696 66,181 — 756,877 Other intangible assets — — 18,124 9,087 — 27,211 Advances due to/from affiliates, net — 1,523,418 463,016 96,651 (2,083,085) — Deferred income taxes 19,175 322 — — (19,497) — Other assets 319 1,537 7,706 38 — 9,600 Total assets $ 2,230,552 $ 3,606,647 $ 2,340,642 $ 236,795 $ (6,353,567) $ 2,061,069 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 10,107 $ — $ — $ 10,107 Advance billings and customer deposits — — 22,878 2,162 — 25,040 Dividends payable 19,653 — — — — 19,653 Accrued compensation — — 14,050 970 — 15,020 Accrued interest — 25,936 479 — — 26,415 Accrued expense 18 14,660 35,389 864 (297) 50,634 Income tax payable — — 3,124 3,180 (6,304) — Current portion of long term debt and capital lease obligations — 9,000 8,631 199 — 17,830 Total current liabilities 19,671 49,596 94,658 7,375 (6,601) 164,699 Long-term debt and capital lease obligations — 1,363,116 12,633 499 — 1,376,248 Advances due to/from affiliates, net 2,083,085 — — — (2,083,085) — Deferred income taxes — — 232,957 27,903 (19,497) 241,363 Pension and postretirement benefit obligations — — 106,206 20,077 — 126,283 Other long-term liabilities — 5,601 13,236 460 — 19,297 Total liabilities 2,102,756 1,418,313 459,690 56,314 (2,109,183) 1,927,890 Shareholders’ equity: Common Stock 507 — 17,411 30,000 (47,411) 507 Other shareholders’ equity 127,289 2,188,334 1,858,158 150,481 (4,196,973) 127,289 Total Consolidated Communications Holdings, Inc. shareholders’ equity 127,796 2,188,334 1,875,569 180,481 (4,244,384) 127,796 Noncontrolling interest — — 5,383 — — 5,383 Total shareholders’ equity 127,796 2,188,334 1,880,952 180,481 (4,244,384) 133,179 Total liabilities and shareholders’ equity $ 2,230,552 $ 3,606,647 $ 2,340,642 $ 236,795 $ (6,353,567) $ 2,061,069 Condensed Consolidating Balance Sheet (In thousands) December 31, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 27,064 $ 13 $ — $ — $ 27,077 Accounts receivable, net — — 48,911 7,347 (42) 56,216 Income taxes receivable 20,756 — 885 (25) — 21,616 Prepaid expenses and other current assets — 12,856 15,310 126 — 28,292 Total current assets 20,756 39,920 65,119 7,448 (42) 133,201 Property, plant and equipment, net — — 999,416 55,770 — 1,055,186 Intangibles and other assets: Investments — 8,338 97,883 — — 106,221 Investments in subsidiaries 2,192,556 2,019,692 14,279 — (4,226,527) — Goodwill — — 690,696 66,181 — 756,877 Other intangible assets — — 22,525 9,087 — 31,612 Advances due to/from affiliates, net — 1,524,906 427,720 87,171 (2,039,797) — Deferred income taxes 17,150 — — — (17,150) — Other assets — 1,562 8,058 41 — 9,661 Total assets $ 2,230,462 $ 3,594,418 $ 2,325,696 $ 225,698 $ (6,283,516) $ 2,092,758 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 6,766 $ — $ — $ 6,766 Advance billings and customer deposits — — 24,981 1,457 — 26,438 Dividends payable 19,605 — — — — 19,605 Accrued compensation — — 16,002 969 — 16,971 Accrued interest — 10,824 436 — — 11,260 Accrued expense 36 15,057 38,192 880 (42) 54,123 Current portion of long term debt and capital lease obligations — 9,000 5,735 187 — 14,922 Total current liabilities 19,641 34,881 92,112 3,493 (42) 150,085 Long-term debt and capital lease obligations — 1,365,820 10,332 602 — 1,376,754 Advances due to/from affiliates, net 2,039,797 — — — (2,039,797) — Deferred income taxes — 984 232,668 27,796 (17,150) 244,298 Pension and postretirement benefit obligations — — 109,185 21,608 — 130,793 Other long-term liabilities 70 216 13,807 480 — 14,573 Total liabilities 2,059,508 1,401,901 458,104 53,979 (2,056,989) 1,916,503 Shareholders’ equity: Common Stock 506 — 17,411 30,000 (47,411) 506 Other shareholders’ equity 170,448 2,192,517 1,844,880 141,719 (4,179,116) 170,448 Total Consolidated Communications Holdings, Inc. shareholders’ equity 170,954 2,192,517 1,862,291 171,719 (4,226,527) 170,954 Noncontrolling interest — — 5,301 — — 5,301 Total shareholders’ equity 170,954 2,192,517 1,867,592 171,719 (4,226,527) 176,255 Total liabilities and shareholders’ equity $ 2,230,462 $ 3,594,418 $ 2,325,696 $ 225,698 $ (6,283,516) $ 2,092,758 |
Schedule of condensed consolidating statements of operations | Condensed Consolidating Statements of Operations (In thousands) Quarter Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 159,072 $ 14,066 $ (3,188) $ 169,950 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 70,952 2,501 (3,077) 70,376 Selling, general and administrative expenses 920 — 31,899 3,012 (111) 35,720 Acquisition and other transaction costs 1,793 — — — — 1,793 Depreciation and amortization — — 38,039 2,444 — 40,483 Operating income (loss) (2,713) — 18,182 6,109 — 21,578 Other income (expense): Interest expense, net of interest income — (33,704) (244) 30 — (33,918) Intercompany interest income (expense) — 14,727 (14,707) (20) — — Investment income — — 8,196 — — 8,196 Equity in earnings of subsidiaries, net (740) 13,168 277 — (12,705) — Other, net — 2 120 (3) — 119 Income (loss) before income taxes (3,453) (5,807) 11,824 6,116 (12,705) (4,025) Income tax expense (benefit) (725) (5,067) 2,791 1,602 — (1,399) Net income (loss) (2,728) (740) 9,033 4,514 (12,705) (2,626) Less: net income attributable to noncontrolling interest — — 102 — — 102 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (2,728) $ (740) $ 8,931 $ 4,514 $ (12,705) $ (2,728) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Quarter Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ 18 $ 175,245 $ 14,897 $ (3,289) $ 186,871 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 80,739 3,204 (3,180) 80,763 Selling, general and administrative expenses 1,076 7 35,622 2,209 (109) 38,805 Acquisition and other transaction costs 248 — — — — 248 Loss on impairment — — 610 — — 610 Depreciation and amortization — — 41,216 2,275 — 43,491 Operating income (loss) (1,324) 11 17,058 7,209 — 22,954 Other income (expense): Interest expense, net of interest income 7 (18,963) (160) 10 — (19,106) Intercompany interest income (expense) (31,886) 33,824 (2,706) 768 — — Investment income — — 8,704 — — 8,704 Equity in earnings of subsidiaries, net 21,443 19,393 219 — (41,055) — Other, net — — (66) (6) — (72) Income (loss) before income taxes (11,760) 34,265 23,049 7,981 (41,055) 12,480 Income tax expense (benefit) (11,836) 12,821 8,490 2,848 — 12,323 Net income (loss) 76 21,444 14,559 5,133 (41,055) 157 Less: net income attributable to noncontrolling interest — — 81 — — 81 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ 76 $ 21,444 $ 14,478 $ 5,133 $ (41,055) $ 76 Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Six Months Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 317,904 $ 28,355 $ (6,374) $ 339,885 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 142,873 5,050 (6,156) 141,767 Selling, general and administrative expenses 1,263 10 64,557 6,139 (218) 71,751 Acquisition and other transaction costs 3,524 — — — — 3,524 Depreciation and amortization — — 77,559 5,119 — 82,678 Operating income (loss) (4,787) (10) 32,915 12,047 — 40,165 Other income (expense): Interest expense, net of interest income 6 (63,191) (450) 46 — (63,589) Intercompany interest income (expense) — 29,454 (29,415) (39) — — Investment income — 157 13,317 — — 13,474 Equity in earnings of subsidiaries, net (3,045) 20,906 222 — (18,083) — Other, net — 3 54 (11) — 46 Income (loss) before income taxes (7,826) (12,681) 16,643 12,043 (18,083) (9,904) Income tax expense (benefit) (1,413) (9,636) 4,021 3,455 — (3,573) Net income (loss) (6,413) (3,045) 12,622 8,588 (18,083) (6,331) Less: net income attributable to noncontrolling interest — — 82 — — 82 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (6,413) $ (3,045) $ 12,540 $ 8,588 $ (18,083) $ (6,413) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ Six Months Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ (5) $ 352,500 $ 29,784 $ (6,562) $ 375,717 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 160,453 6,377 (6,347) 160,483 Selling, general and administrative expenses 1,972 7 72,222 5,495 (215) 79,481 Acquisition and other transaction costs 248 — — — — 248 Loss on impairment — — 610 — — 610 Depreciation and amortization — — 83,077 4,554 — 87,631 Operating income (loss) (2,220) (12) 36,138 13,358 — 47,264 Other income (expense): Interest expense, net of interest income 46 (37,398) (408) 8 — (37,752) Intercompany interest income (expense) (63,773) 67,648 (5,405) 1,530 — — Investment income — 166 15,735 — — 15,901 Equity in earnings of subsidiaries, net 50,162 38,215 361 — (88,738) — Other, net — — (40) (18) — (58) Income (loss) before income taxes (15,785) 68,619 46,381 14,878 (88,738) 25,355 Income tax expense (benefit) (23,710) 18,456 17,201 5,349 — 17,296 Net income (loss) 7,925 50,163 29,180 9,529 (88,738) 8,059 Less: net income attributable to noncontrolling interest — — 134 — — 134 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ 7,925 $ 50,163 $ 29,046 $ 9,529 $ (88,738) $ 7,925 Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ |
Schedule of condensed consolidating statements of cash flows | Condensed Consolidating Statements of Cash Flows (In thousands) Six Months Ended June 30, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ (4,096) $ (8,211) $ 89,701 $ 16,139 $ 93,533 Cash flows from investing activities: Purchases of property, plant and equipment — — (51,465) (6,596) (58,061) Proceeds from sale of assets — — 74 27 101 Net cash provided by (used in) investing activities — — (51,391) (6,569) (57,960) Cash flows from financing activities: Proceeds from issuance of long-term debt — 23,000 — — 23,000 Payment of capital lease obligation — — (2,902) (91) (2,993) Payment on long-term debt — (27,500) — — (27,500) Share repurchases for minimum tax withholding (41) — — — (41) Dividends on common stock (39,257) — — — (39,257) Transactions with affiliates, net 43,394 1,493 (35,408) (9,479) — Net cash provided by (used in) financing activities 4,096 (3,007) (38,310) (9,570) (46,791) Increase (decrease) in cash and cash equivalents — (11,218) — — (11,218) Cash and cash equivalents at beginning of period — 27,064 13 — 27,077 Cash and cash equivalents at end of period $ — $ 15,846 $ 13 $ — $ 15,859 Six Months Ended June 30, 2016 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ (63,494) $ 31,781 $ 129,467 $ 17,751 $ 115,505 Cash flows from investing activities: Purchases of property, plant and equipment — — (55,172) (7,099) (62,271) Proceeds from sale of assets — — 40 10 50 Net cash used in investing activities — — (55,132) (7,089) (62,221) Cash flows from financing activities: Proceeds from issuance of long-term debt — 7,000 — — 7,000 Payment of capital lease obligation — — (756) (56) (812) Payment on long-term debt — (11,550) — — (11,550) Share repurchases for minimum tax withholding (71) — — — (71) Dividends on common stock (39,174) — — — (39,174) Transactions with affiliates, net 102,739 (8,615) (81,147) (12,977) — Net cash provided by (used in) financing activities 63,494 (13,165) (81,903) (13,033) (44,607) Increase (decrease) in cash and cash equivalents — 18,616 (7,568) (2,371) 8,677 Cash and cash equivalents at beginning of period — 5,877 7,629 2,372 15,878 Cash and cash equivalents at end of period $ — $ 24,493 $ 61 $ 1 $ 24,555 |
SUMMARY OF SIGNIFICANT ACCOUN29
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business (Details) item in Thousands, $ in Millions | Jun. 30, 2017item | Jan. 01, 2017USD ($) |
Number of voice connections | 449 | |
Number of data connections | 480 | |
Number of video connections | 100 | |
Accounting Standards Update 2016-09 | ||
Cumulative effect adjustment increasing opening retained earnings | $ | $ 2.2 |
ACQUISITION AND DIPOSITIONS - (
ACQUISITION AND DIPOSITIONS - (Details) $ / shares in Units, $ in Thousands, shares in Millions | Jul. 03, 2017USD ($)shares | Dec. 03, 2016USD ($)statemi$ / shares | Jul. 01, 2016USD ($) | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2016USD ($)$ / shares | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2016USD ($)$ / shares | Dec. 31, 2019USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)$ / shares |
Unaudited Pro Forma Results | ||||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||||
Transaction costs | $ 1,793 | $ 248 | $ 3,524 | $ 248 | ||||||
Estimated purchase price allocation | ||||||||||
Goodwill | 756,877 | 756,877 | $ 756,877 | |||||||
FairPoint Communications, Inc | ||||||||||
Unaudited Pro Forma Results | ||||||||||
Operating revenues | 369,089 | 393,428 | 740,931 | 789,090 | ||||||
Income from operations | 37,163 | 93,685 | 63,065 | 176,094 | ||||||
Net income | 8,770 | 40,692 | 10,376 | 79,908 | ||||||
Less: income attributable to noncontrolling interest | 102 | 81 | 82 | 134 | ||||||
Net income attributable to common shareholders | $ 8,668 | $ 40,611 | $ 10,294 | $ 79,774 | ||||||
Net income per basic and diluted common share attributable to common shareholders (in dollars per share) | $ / shares | $ 0.12 | $ 0.58 | $ 0.15 | $ 1.13 | ||||||
Number of route miles of fiber network | mi | 21,000 | |||||||||
Number of route miles of fiber network in New England | mi | 17,000 | |||||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | |||||||||
Business combination exchange ratio | 0.7300 | |||||||||
Number of states | state | 17 | |||||||||
Purchase consideration at acquisition | $ 431,100 | |||||||||
Assumption of debt at acquisition | 912,800 | |||||||||
Aggregate price of acquisition | $ 431,100 | |||||||||
Transaction costs | $ 1,700 | $ 3,200 | ||||||||
FairPoint Communications, Inc | Forecast | ||||||||||
Unaudited Pro Forma Results | ||||||||||
Number of shares issued on date of merger | shares | 20.1 | |||||||||
Estimated cash payable to employees | $ 9,400 | $ 8,600 | ||||||||
Estimated purchase price allocation | ||||||||||
Working capital | $ 35,213 | |||||||||
Property, plant and equipment | 948,254 | |||||||||
Intangible assets | 296,500 | |||||||||
Other long-term assets | 2,920 | |||||||||
Total assets acquired | 1,282,887 | |||||||||
Pension and other post-retirement obligations | 216,011 | |||||||||
Deferred income taxes | 109,451 | |||||||||
Other long-term liabilities | 16,407 | |||||||||
Total liabilities assumed | 341,869 | |||||||||
Net fair value assets acquired | 941,018 | |||||||||
Goodwill | 402,836 | |||||||||
Total consideration transferred | $ 1,343,854 | |||||||||
Champaign Telephone Company And Big Broadband Services | ||||||||||
Unaudited Pro Forma Results | ||||||||||
Cash paid on acquisition | $ 13,400 | |||||||||
Estimated purchase price allocation | ||||||||||
Working capital | 800 | |||||||||
Property, plant and equipment | 6,900 | |||||||||
Intangible assets | 1,000 | |||||||||
Goodwill | $ 4,700 |
ACQUISITION AND DISPOSITIONS -
ACQUISITION AND DISPOSITIONS - Divestiture (Details) $ in Thousands | Dec. 06, 2016USD ($) | Dec. 05, 2016item | Sep. 01, 2016USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2016USD ($) |
Divestitures | |||||
Loss on impairment | $ 610 | $ 610 | |||
CCIC | Disposal Group, Disposed of by Sale, Not Discontinued Operations | |||||
Divestitures | |||||
Proceeds from business dispositions | $ 21,000 | ||||
Rural communities | item | 11 | ||||
Loss on impairment | 600 | 600 | |||
Deferred income taxes | $ 7,500 | $ 7,500 | |||
ePlus Technology inc. | Disposal Group, Disposed of by Sale, Not Discontinued Operations | |||||
Divestitures | |||||
Proceeds from business dispositions | $ 9,200 |
EARNINGS (LOSS) PER SHARE (Deta
EARNINGS (LOSS) PER SHARE (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Basic and diluted earnings per share attributable to common shareholders | ||||
Net income (loss) | $ (2,626) | $ 157 | $ (6,331) | $ 8,059 |
Less: net income attributable to noncontrolling interest | 102 | 81 | 82 | 134 |
Income (loss) attributable to common shareholders before allocation of earnings to participating securities | (2,728) | 76 | (6,413) | 7,925 |
Less: earnings allocated to participating securities | 115 | 131 | 164 | 262 |
Net income (loss) attributable to common shareholders, after earnings allocated to participating securities | $ (2,843) | $ (55) | $ (6,577) | $ 7,663 |
Weighted-average number of common shares outstanding | 50,412 | 50,294 | 50,411 | 50,291 |
Basic and diluted earnings (loss) per common share: | ||||
Net income (loss) per basic and diluted common share attributable to common shareholders (in dollars per share) | $ (0.06) | $ (0.13) | $ 0.15 | |
Common shares excluded from computation of potentially dilutive shares because of anti-dilutive effect | 300 | 400 | 300 | 300 |
INVESTMENTS - Schedule of Inves
INVESTMENTS - Schedule of Investments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($)item | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)item | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($)item | |
Investments | |||||
Cash distributions received from partnerships treated as cost method investees | $ 3,700 | $ 3,800 | $ 5,300 | $ 6,500 | |
Number of entity's investments which is accounted for using equity method | item | 3 | 3 | 3 | ||
Cash distributions received from partnerships treated as equity method investees | $ 4,100 | $ 4,000 | $ 8,100 | $ 8,100 | |
Investments | |||||
Cash surrender value of life insurance policies | 2,346 | 2,346 | $ 2,156 | ||
Total | $ 106,504 | $ 106,504 | $ 106,221 | ||
GTE Mobilnet of South Texas Limited Partnership | |||||
Investments | |||||
Ownership percentage of cost method investee | 2.34% | 2.34% | 2.34% | ||
Investments | |||||
Cost method investments: | $ 21,450 | $ 21,450 | $ 21,450 | ||
Pittsburgh SMSA Limited Partnership | |||||
Investments | |||||
Ownership percentage of cost method investee | 3.60% | 3.60% | 3.60% | ||
Investments | |||||
Cost method investments: | $ 22,950 | $ 22,950 | $ 22,950 | ||
CoBank, ACB Stock | |||||
Investments | |||||
Cost method investments: | 8,295 | 8,295 | 8,138 | ||
Other | |||||
Investments | |||||
Cost method investments: | $ 200 | $ 200 | $ 200 | ||
GTE Mobilnet of Texas RSA #17 Limited Partnership | |||||
Investments | |||||
Ownership percentage of equity method investee | 20.51% | 20.51% | 20.51% | ||
Investments | |||||
Equity method investments: | $ 16,199 | $ 16,199 | $ 17,160 | ||
Pennsylvania RSA 6(I) Limited Partnership | |||||
Investments | |||||
Ownership percentage of equity method investee | 16.67% | 16.67% | 16.67% | ||
Investments | |||||
Equity method investments: | $ 7,035 | $ 7,035 | $ 6,540 | ||
Pennsylvania RSA 6(II) Limited Partnership | |||||
Investments | |||||
Ownership percentage of equity method investee | 23.67% | 23.67% | 23.67% | ||
Investments | |||||
Equity method investments: | $ 28,029 | $ 28,029 | $ 27,627 |
INVESTMENTS - Equity Method (De
INVESTMENTS - Equity Method (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Summary of unaudited summarized income statement information | |||||
Total revenues | $ 89,811 | $ 81,885 | $ 169,832 | $ 164,542 | |
Income from operations | 24,518 | 26,797 | 45,806 | 52,393 | |
Net income before taxes | 24,145 | 26,396 | 45,042 | 51,585 | |
Net income | 24,145 | $ 26,396 | 45,042 | $ 51,585 | |
Summary of unaudited summarized balance sheet information | |||||
Current assets | 68,446 | 68,446 | $ 64,083 | ||
Non-current assets | 95,267 | 95,267 | 89,651 | ||
Current liabilities | 26,165 | 26,165 | 21,985 | ||
Non-current liabilities | 51,497 | 51,497 | 51,836 | ||
Partnership equity | $ 86,051 | $ 86,051 | $ 79,913 |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - Financial Instruments (Details) - Recurring - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Fair Value Measurements | ||
Long-term interest rate swap assets | $ 386 | $ 398 |
Current interest rate swap liabilities | (294) | (453) |
Long-term interest rate swap liabilities | (5,601) | (216) |
Total Fair Value | (5,509) | (271) |
Significant Other Observable Inputs (Level 2) | ||
Fair Value Measurements | ||
Long-term interest rate swap assets | 386 | 398 |
Current interest rate swap liabilities | (294) | (453) |
Long-term interest rate swap liabilities | (5,601) | (216) |
Total Fair Value | $ (5,509) | $ (271) |
FAIR VALUE MEASUREMENTS - Fin36
FAIR VALUE MEASUREMENTS - Financial Instuments Not Carried at FV (Details) - USD ($) $ in Thousands | Jun. 30, 2017 | Dec. 31, 2016 |
Carrying Value | ||
Fair Value Measurements | ||
Investments, equity basis | $ 51,263 | $ 51,327 |
Investments, at cost | 52,895 | 52,738 |
Long-term debt | 1,384,913 | 1,388,786 |
Fair Value | ||
Fair Value Measurements | ||
Long-term debt | $ 1,387,136 | $ 1,390,773 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) $ in Thousands | Aug. 01, 2017USD ($) | Dec. 21, 2016 | Jun. 08, 2015USD ($) | May 31, 2017USD ($) | Dec. 31, 2016USD ($)item | Oct. 31, 2016USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2017 | Jun. 30, 2017USD ($) | Dec. 31, 2016USD ($) | Aug. 01, 2017USD ($) | Jul. 03, 2017USD ($) | Jul. 02, 2017USD ($) | Dec. 14, 2016USD ($) | Dec. 03, 2016USD ($) |
Debt | |||||||||||||||
Total long-term debt | $ 1,405,643 | $ 1,406,875 | $ 1,405,643 | ||||||||||||
Less: current portion of long-term debt and capital leases | (14,922) | (17,830) | (14,922) | ||||||||||||
Less: deferred debt issuance costs | (13,967) | (12,797) | (13,967) | ||||||||||||
Total long-term debt | 1,376,754 | $ 1,376,248 | 1,376,754 | ||||||||||||
Leverage ratio | 3 | 4.74 | |||||||||||||
Deferred debt issuance costs | $ 13,967 | $ 12,797 | 13,967 | ||||||||||||
Dividend declared | $ 27,400 | ||||||||||||||
Dividends available for distribution | $ 262,400 | ||||||||||||||
Percentage of increase in available cash used in repayment of debt during dividend suspension period | 50.00% | ||||||||||||||
Interest coverage ratio | 3.85 | ||||||||||||||
Number of amendments | item | 2 | ||||||||||||||
Forecast | |||||||||||||||
Debt | |||||||||||||||
Dividend paid | $ 27,400 | ||||||||||||||
Minimum | |||||||||||||||
Debt | |||||||||||||||
Interest coverage ratio | 2.25 | ||||||||||||||
Maximum | |||||||||||||||
Debt | |||||||||||||||
Leverage ratio | 5.10 | ||||||||||||||
Leverage ratio for an event of default | 5.25 | ||||||||||||||
Senior Notes 6.50 Percent Due 2022 | |||||||||||||||
Debt | |||||||||||||||
Total long-term debt | $ 495,698 | $ 496,009 | 495,698 | ||||||||||||
Unamortized discount | $ 4,302 | $ 3,991 | $ 4,302 | ||||||||||||
Aggregate principal amount | $ 300,000 | $ 200,000 | |||||||||||||
Leverage ratio | 4.72 | ||||||||||||||
Interest rate (as a percent) | 6.50% | 6.50% | 6.50% | 6.50% | 6.50% | ||||||||||
Dividends available for distribution | $ 50,000 | ||||||||||||||
Issue price as a percentage of par | 98.26% | ||||||||||||||
Yield to maturity (as a percent) | 6.80% | ||||||||||||||
Gross proceeds | $ 294,800 | $ 200,000 | |||||||||||||
Remaining consolidated cash available for dividends and other restricted payments | $ 482,200 | ||||||||||||||
Number of times to be applied to fixed charges for calculating the deduction from cumulative consolidated net cash | 1.75 | ||||||||||||||
Cumulative consolidated cash available to pay dividends and other restricted payments | $ 860,900 | ||||||||||||||
Senior Notes 6.50 Percent Due 2022 | Forecast | |||||||||||||||
Debt | |||||||||||||||
Dividend declared | $ 378,600 | ||||||||||||||
Senior Notes 6.50 Percent Due 2022 | Maximum | |||||||||||||||
Debt | |||||||||||||||
Leverage ratio | 4.75 | ||||||||||||||
Senior Secured Credit Facility | Weighted average | |||||||||||||||
Debt | |||||||||||||||
Weighted average interest rate (as a percent) | 4.05% | 4.00% | |||||||||||||
Senior secured credit facility - revolving loan | |||||||||||||||
Debt | |||||||||||||||
Maximum borrowing capacity of credit facility | $ 110,000 | ||||||||||||||
Amounts outstanding | $ 0 | $ 0 | $ 0 | ||||||||||||
Stand-by letter of credit outstanding | 1,600 | $ 20,000 | $ 15,000 | ||||||||||||
Available borrowing capacity | $ 108,400 | ||||||||||||||
Senior secured credit facility - revolving loan | FairPoint Communications, Inc | |||||||||||||||
Debt | |||||||||||||||
Stand-by letter of credit outstanding | $ 14,800 | ||||||||||||||
Senior secured credit facility - revolving loan | LIBOR | Minimum | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 2.50% | ||||||||||||||
Senior secured credit facility - revolving loan | LIBOR | Maximum | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 3.25% | ||||||||||||||
Senior secured credit facility - revolving loan | LIBOR | Weighted average | Forecast | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 3.25% | ||||||||||||||
Senior secured credit facility - revolving loan | Alternate base rate | Minimum | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 1.50% | ||||||||||||||
Senior secured credit facility - revolving loan | Alternate base rate | Maximum | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 2.25% | ||||||||||||||
Senior secured credit facility - revolving loan | Alternate base rate | Weighted average | Forecast | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 2.25% | ||||||||||||||
Term loan 5 | |||||||||||||||
Debt | |||||||||||||||
Total long-term debt | 893,088 | $ 888,904 | 893,088 | ||||||||||||
Less: deferred debt issuance costs | $ (2,500) | ||||||||||||||
Unamortized discount | 4,662 | 2,300 | 4,346 | 4,662 | |||||||||||
Aggregate principal amount | $ 900,000 | ||||||||||||||
Quarterly principal payments required | $ 2,250 | ||||||||||||||
Deferred debt issuance costs | 2,500 | ||||||||||||||
Issue discount (as a percentage) | 0.25% | ||||||||||||||
Term loan 5 | LIBOR | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 3.00% | ||||||||||||||
Term loan 5 | LIBOR | Minimum | |||||||||||||||
Debt | |||||||||||||||
Margin (as a percent) | 1.00% | ||||||||||||||
Incremental Term Loan Facility | |||||||||||||||
Debt | |||||||||||||||
Aggregate principal amount | $ 935,000 | ||||||||||||||
Margin (as a percent) | 3.00% | ||||||||||||||
Issue discount (as a percentage) | 0.50% | ||||||||||||||
Commitment fees amortized over commitment period | 14,000 | ||||||||||||||
Incremental Term Loan Facility | Maximum | |||||||||||||||
Debt | |||||||||||||||
Additional borrowing capacity | $ 300,000 | ||||||||||||||
Incremental Term Loan Facility | FairPoint Communications, Inc | |||||||||||||||
Debt | |||||||||||||||
Aggregate principal amount | $ 935,000 | ||||||||||||||
Incremental Term Loan Facility | LIBOR | |||||||||||||||
Debt | |||||||||||||||
Variable rate basis, floor (as a percent) | 1.00% | ||||||||||||||
Capital lease agreements | |||||||||||||||
Debt | |||||||||||||||
Total long-term debt | $ 16,857 | $ 21,962 | $ 16,857 |
LONG-TERM DEBT - Capital Leases
LONG-TERM DEBT - Capital Leases (Details) $ in Millions | Jun. 30, 2017USD ($) |
Capital Leases | |
Present value of the minimum remaining lease commitments | $ 21.9 |
Capital lease commitments due and payable within the next 12 months | 8.8 |
Total remaining rental payments | 24.1 |
LATEL | |
Capital Leases | |
Total remaining rental payments | $ 3.2 |
DERIVATIVE FINANCIAL INSTRUME39
DERIVATIVE FINANCIAL INSTRUMENTS - Interest Rate Swaps (Details) $ in Thousands | 3 Months Ended | |
Jun. 30, 2017USD ($)agreementitem | Dec. 31, 2016USD ($) | |
Derivatives | ||
Number of swap agreements that provide for the entity or the counterparties to post collateral | item | 0 | |
Interest rate swaps | ||
Derivatives | ||
Other long-term liabilities | $ (5,509) | $ (271) |
Cash flow hedges | Interest rate swaps | ||
Derivatives | ||
Duration of hedge | 1 year | |
Number of new agreements | agreement | 4 | |
Maximum | Cash flow hedges | Interest rate swaps | ||
Derivatives | ||
Notional amount | $ 705,000 | |
Minimum | Cash flow hedges | Interest rate swaps | ||
Derivatives | ||
Notional amount | 450,000 | |
Other Assets. | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | ||
Derivatives | ||
Notional amount | 150,000 | 100,000 |
Other assets | 386 | 398 |
Accrued Expense | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | ||
Derivatives | ||
Notional amount | 100,000 | 100,000 |
Accrued expense | (294) | (453) |
Other long-term liabilities | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | ||
Derivatives | ||
Notional amount | 50,000 | |
Other long-term liabilities | $ (216) | |
Other long-term liabilities | Cash flow hedges | Series of forward starting fixed to 1-month floating LIBOR (with floor) | ||
Derivatives | ||
Notional amount | 2,460,000 | |
Other long-term liabilities | $ (5,601) |
DERIVATIVE FINANCIAL INSTRUME40
DERIVATIVE FINANCIAL INSTRUMENTS - Effect of Interest Rate Derivatives (Details) - Interest rate swaps - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Derivative Instruments | |||||
Derivatives | |||||
Deferred gain (losses) included in AOCI (pretax) | $ (3,600) | $ (3,600) | $ (200) | ||
Losses included in AOCI to be recognized in the next 12 months | (2,800) | ||||
Cash flow hedges | |||||
Derivatives | |||||
Unrealized loss recognized in AOCI, pretax | (4,039) | $ (273) | (4,130) | $ (973) | |
Deferred losses reclassified from AOCI to interest expense | (396) | $ (256) | (729) | $ (499) | |
Loss recognized in interest expense from ineffectiveness | $ (1,535) | $ (1,300) |
EQUITY - Share-based Compensati
EQUITY - Share-based Compensation (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Weighted Average Grant Date Fair Value | ||||
Pretax stock-based compensation expense | $ 892 | $ 912 | $ 1,430 | $ 1,804 |
Unrecognized share-based compensation | ||||
Unrecognized compensation costs | $ 6,000 | $ 6,000 | ||
Weighted-average period of recognition | 2 years 2 months 12 days | |||
Restricted stock | ||||
Shares | ||||
Non-vested shares outstanding at the beginning of the period | 93,662 | |||
Shares granted | 124,100 | |||
Shares vested | (4,708) | |||
Shares forfeited, cancelled or retired | (3,011) | |||
Non-vested shares outstanding at the end of the period | 210,043 | 210,043 | ||
Weighted Average Grant Date Fair Value | ||||
Non-vested shares outstanding at the beginning of the period (in dollars per share) | $ 22.34 | |||
Shares granted (in dollars per share) | 23.12 | |||
Shares vested (in dollars per share) | 22.30 | |||
Shares forfeited, cancelled or retired (in dollars per share) | 22.48 | |||
Non-vested shares outstanding at the end of the period (in dollars per share) | $ 22.80 | $ 22.80 | ||
Pretax stock-based compensation expense | $ 589 | 511 | $ 964 | 1,072 |
Performance shares | ||||
Shares | ||||
Non-vested shares outstanding at the beginning of the period | 109,160 | |||
Shares granted | 5,204 | |||
Shares forfeited, cancelled or retired | (3,507) | |||
Non-vested shares outstanding at the end of the period | 110,857 | 110,857 | ||
Weighted Average Grant Date Fair Value | ||||
Non-vested shares outstanding at the beginning of the period (in dollars per share) | $ 20.12 | |||
Shares granted (in dollars per share) | 24 | |||
Shares forfeited, cancelled or retired (in dollars per share) | 20.68 | |||
Non-vested shares outstanding at the end of the period (in dollars per share) | $ 20.28 | $ 20.28 | ||
Pretax stock-based compensation expense | $ 303 | $ 401 | $ 466 | $ 732 |
EQUITY - Changes in AOCI (Detai
EQUITY - Changes in AOCI (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | $ (47,277) |
Other comprehensive income before reclassifications | (3,358) |
Amounts reclassified from accumulated other comprehensive loss | 2,182 |
Net current period other comprehensive income | (1,176) |
Balance at the end of the period | (48,453) |
Pension and Post-Retirement Obligations | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | (47,150) |
Other comprehensive income before reclassifications | (814) |
Amounts reclassified from accumulated other comprehensive loss | 1,733 |
Net current period other comprehensive income | 919 |
Balance at the end of the period | (46,231) |
Derivative Instruments | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | (127) |
Other comprehensive income before reclassifications | (2,544) |
Amounts reclassified from accumulated other comprehensive loss | 449 |
Net current period other comprehensive income | (2,095) |
Balance at the end of the period | $ (2,222) |
EQUITY - Reclassification from
EQUITY - Reclassification from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
EQUITY | ||||
Income (loss) before income taxes | $ (4,025) | $ 12,480 | $ (9,904) | $ 25,355 |
Interest expense | (33,918) | (19,106) | (63,589) | (37,752) |
Tax benefit (expense) | 1,399 | (12,323) | 3,573 | (17,296) |
Net income (loss) | (2,626) | 157 | (6,331) | 8,059 |
Pension and Post-Retirement Obligations | ||||
EQUITY | ||||
Prior service credit | 209 | 245 | 453 | 489 |
Actuarial loss | (1,639) | (1,356) | (3,300) | (2,711) |
Income (loss) before income taxes | (1,430) | (1,111) | (2,847) | (2,222) |
Tax benefit (expense) | 559 | 433 | 1,114 | 865 |
Net income (loss) | (871) | (678) | (1,733) | (1,357) |
Derivative Instruments | ||||
EQUITY | ||||
Interest expense | (396) | (256) | (729) | (499) |
Tax benefit (expense) | 152 | 98 | 280 | 192 |
Net income (loss) | $ (244) | $ (158) | $ (449) | $ (307) |
PENSION PLANS AND OTHER POST-RE
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2017USD ($)employeeitem | |
Defined Benefit Plans | |
Defined benefit plans | |
Expected contribution to pension plan | $ 6,400 |
Employer contributions | $ 1,000 |
Post-retirement Benefit Obligations | |
Defined benefit plans | |
Number of persons eligible to become a new participant | employee | 0 |
Plan unfunded status | $ 0 |
Expected contribution to pension plan | 3,900 |
Employer contributions | $ 1,800 |
Supplemental Plans | |
Defined benefit plans | |
Number of non-qualified plans | item | 2 |
Number of persons eligible to become a new participant | item | 0 |
Plan unfunded status | $ 0 |
PENSION PLANS AND OTHER POST-45
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS - Other Non-qualified Deferred Comp Agreements (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017USD ($) | Jun. 30, 2016USD ($) | Jun. 30, 2017USD ($)item | Jun. 30, 2016USD ($) | Dec. 31, 2016USD ($) | |
Other Non-qualified Deferred Compensation Agreements | |||||
Minimum number of years benefits are payable | 5 years | ||||
Minimum age at which payments under deferred compensation agreements may begin | 55 years | ||||
Payment related to deferred compensation agreements | $ 100,000 | $ 100,000 | $ 200,000 | $ 200,000 | |
Net present value of the remaining obligations | 1,900,000 | $ 1,900,000 | $ 2,000,000 | ||
Number of life insurance policies | item | 25 | ||||
Excess of cash surrender value of remaining life insurance policies over notes payable | 2,300,000 | $ 2,300,000 | $ 2,200,000 | ||
Proceeds from life insurance policies | 0 | 0 | $ 200,000 | ||
New benefits accrued | $ 0 | $ 0 |
PENSION PLANS AND OTHER POST-46
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS - Components of net periodic pension cost (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Defined Benefit Plans | ||||
Components of net periodic pension costs | ||||
Service cost | $ 74 | $ 86 | $ 161 | $ 172 |
Interest cost | 3,567 | 4,073 | 7,180 | 8,146 |
Expected return on plan assets | (5,053) | (5,159) | (9,958) | (10,318) |
Net amortization loss (gain) | 1,683 | 1,356 | 3,387 | 2,711 |
Net prior service credit amortization | (79) | (115) | (193) | (229) |
Curtailment gain | (1,337) | (1,337) | ||
Net periodic pension cost | (1,145) | 241 | (760) | 482 |
Post-retirement Benefit Obligations | ||||
Components of net periodic pension costs | ||||
Service cost | 124 | 150 | 247 | 300 |
Interest cost | 396 | 505 | 791 | 1,010 |
Expected return on plan assets | (29) | (37) | (57) | (74) |
Net amortization loss (gain) | (44) | (87) | ||
Net prior service credit amortization | (130) | (130) | (260) | (260) |
Net periodic pension cost | $ 317 | $ 488 | $ 634 | $ 976 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | |
Unrecognized tax benefits | $ 0 | $ 0 | $ 100,000 | ||
Decrease in liability for unrecognized tax benefits | $ 100,000 | ||||
Effective tax rate (as a percent) | 34.80% | 98.70% | 36.10% | 68.20% | |
Effective tax rate exclusive of taxable adjustment | 34.70% | 38.50% | 35.60% | 38.60% | |
Changes in unrecognized tax benefits | $ (100,000) | ||||
CCIC | Disposal Group, Disposed of by Sale, Not Discontinued Operations | |||||
Deferred tax expense | $ 7,500,000 | $ 7,500,000 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Litigation (Details) | Jul. 03, 2017USD ($) | Mar. 22, 2017 | Jun. 30, 2017USD ($)subsidiaryitem | Dec. 31, 2015USD ($) | Dec. 31, 2014USD ($) | Jun. 30, 2017USD ($) | Dec. 31, 2013USD ($) | Jun. 30, 2017USD ($) | May 31, 2017USD ($) | Mar. 28, 2017 |
Litigation and Contingencies | ||||||||||
Number of subsidiaries that received assessment notice | subsidiary | 2 | |||||||||
Consolidated Communications Enterprise Services Inc. (CCES) | ||||||||||
Litigation and Contingencies | ||||||||||
Litigation amount accrued | $ 1,400,000 | $ 1,400,000 | $ 1,400,000 | |||||||
Consolidated Communications of Pennsylvania Company LLC (CCPA) | ||||||||||
Litigation and Contingencies | ||||||||||
Litigation amount accrued | $ 1,200,000 | 1,200,000 | 1,200,000 | |||||||
Sprint, MCI Communication Services, and Verizon | ||||||||||
Litigation and Contingencies | ||||||||||
Disputed amount | $ 2,400,000 | |||||||||
Number of courts | item | 1 | |||||||||
FairPoint Communications, Inc | ||||||||||
Litigation and Contingencies | ||||||||||
Number of days to supplement disclosures and provide explanation | 5 days | |||||||||
Payment amount | $ 0 | |||||||||
Percentage of shareholders voted for issue of common stock upon merger | 98.00% | |||||||||
Attorney's fees and expenses | $ 345,000 | |||||||||
Level 3 Communications | ||||||||||
Litigation and Contingencies | ||||||||||
Disputed amount | $ 300,000 | |||||||||
Assessment by Commonwealth of Pennsylvania Department of Revenue | Maximum | ||||||||||
Litigation and Contingencies | ||||||||||
Potential liability amount guaranteed | $ 5,000,000 | |||||||||
Assessment by Commonwealth of Pennsylvania Department of Revenue | Consolidated Communications Enterprise Services Inc. (CCES) | ||||||||||
Litigation and Contingencies | ||||||||||
Total additional tax liability calculated by the auditors | $ 700,000 | $ 900,000 | $ 4,200,000 | |||||||
Assessment by Commonwealth of Pennsylvania Department of Revenue | Consolidated Communications of Pennsylvania Company LLC (CCPA) | ||||||||||
Litigation and Contingencies | ||||||||||
Total additional tax liability calculated by the auditors | $ 700,000 | $ 700,000 | $ 5,000,000 |
CONDENSED CONSOLIDATING FINAN49
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Balance Sheets (Details) - USD ($) $ in Thousands | 6 Months Ended | |||
Jun. 30, 2017 | Dec. 31, 2016 | Jun. 30, 2016 | Dec. 31, 2015 | |
Current assets: | ||||
Cash and cash equivalents | $ 15,859 | $ 27,077 | $ 24,555 | $ 15,878 |
Accounts receivable, net | 50,338 | 56,216 | ||
Income taxes receivable | 26,056 | 21,616 | ||
Prepaid expenses and other current assets | 25,853 | 28,292 | ||
Total current assets | 118,106 | 133,201 | ||
Property, plant and equipment, net | 1,042,771 | 1,055,186 | ||
Intangibles and other assets: | ||||
Investments | 106,504 | 106,221 | ||
Goodwill | 756,877 | 756,877 | ||
Other intangible assets | 27,211 | 31,612 | ||
Other assets | 9,600 | 9,661 | ||
Total assets | 2,061,069 | 2,092,758 | ||
Current liabilities: | ||||
Accounts payable | 10,107 | 6,766 | ||
Advance billings and customer deposits | 25,040 | 26,438 | ||
Dividends payable | 19,653 | 19,605 | ||
Accrued compensation | 15,020 | 16,971 | ||
Accrued interest | 26,415 | 11,260 | ||
Accrued expense | 50,634 | 54,123 | ||
Current portion of long term debt and capital lease obligations | 17,830 | 14,922 | ||
Total current liabilities | 164,699 | 150,085 | ||
Long-term debt and capital lease obligations | 1,376,248 | 1,376,754 | ||
Deferred income taxes | 241,363 | 244,298 | ||
Pension and postretirement benefit obligations | 126,283 | 130,793 | ||
Other long-term liabilities | 19,297 | 14,573 | ||
Total liabilities | 1,927,890 | 1,916,503 | ||
Shareholders' equity: | ||||
Common Stock | 507 | 506 | ||
Other shareholders' equity | 127,289 | 170,448 | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | 127,796 | 170,954 | ||
Noncontrolling interest | 5,383 | 5,301 | ||
Total shareholders' equity | 133,179 | 176,255 | ||
Total liabilities and shareholders' equity | 2,061,069 | 2,092,758 | ||
Eliminations | ||||
Current assets: | ||||
Accounts receivable, net | (297) | (42) | ||
Income taxes receivable | (6,304) | |||
Total current assets | (6,601) | (42) | ||
Intangibles and other assets: | ||||
Investments in subsidiaries | (4,244,384) | (4,226,527) | ||
Advances due to/from affiliates, net | (2,083,085) | (2,039,797) | ||
Deferred income taxes | (19,497) | (17,150) | ||
Total assets | (6,353,567) | (6,283,516) | ||
Current liabilities: | ||||
Accrued expense | (297) | (42) | ||
Income tax payable | (6,304) | |||
Total current liabilities | (6,601) | (42) | ||
Advances due to/from affiliates, net | (2,083,085) | (2,039,797) | ||
Deferred income taxes | (19,497) | (17,150) | ||
Total liabilities | (2,109,183) | (2,056,989) | ||
Shareholders' equity: | ||||
Common Stock | (47,411) | (47,411) | ||
Other shareholders' equity | (4,196,973) | (4,179,116) | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | (4,244,384) | (4,226,527) | ||
Total shareholders' equity | (4,244,384) | (4,226,527) | ||
Total liabilities and shareholders' equity | (6,353,567) | (6,283,516) | ||
Parent | Reportable legal entity | ||||
Current assets: | ||||
Income taxes receivable | 22,724 | 20,756 | ||
Total current assets | 22,724 | 20,756 | ||
Intangibles and other assets: | ||||
Investments in subsidiaries | 2,188,334 | 2,192,556 | ||
Deferred income taxes | 19,175 | 17,150 | ||
Other assets | 319 | |||
Total assets | 2,230,552 | 2,230,462 | ||
Current liabilities: | ||||
Dividends payable | 19,653 | 19,605 | ||
Accrued expense | 18 | 36 | ||
Total current liabilities | 19,671 | 19,641 | ||
Advances due to/from affiliates, net | 2,083,085 | 2,039,797 | ||
Other long-term liabilities | 70 | |||
Total liabilities | 2,102,756 | 2,059,508 | ||
Shareholders' equity: | ||||
Common Stock | 507 | 506 | ||
Other shareholders' equity | 127,289 | 170,448 | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | 127,796 | 170,954 | ||
Total shareholders' equity | 127,796 | 170,954 | ||
Total liabilities and shareholders' equity | 2,230,552 | 2,230,462 | ||
Subsidiary Issuer | ||||
Current assets: | ||||
Cash and cash equivalents | 15,846 | 27,064 | 24,493 | 5,877 |
Subsidiary Issuer | Reportable legal entity | ||||
Current assets: | ||||
Cash and cash equivalents | 15,846 | 27,064 | ||
Income taxes receivable | 9,636 | |||
Prepaid expenses and other current assets | 5,844 | 12,856 | ||
Total current assets | 31,326 | 39,920 | ||
Intangibles and other assets: | ||||
Investments | 8,495 | 8,338 | ||
Investments in subsidiaries | 2,041,549 | 2,019,692 | ||
Advances due to/from affiliates, net | 1,523,418 | 1,524,906 | ||
Deferred income taxes | 322 | |||
Other assets | 1,537 | 1,562 | ||
Total assets | 3,606,647 | 3,594,418 | ||
Current liabilities: | ||||
Accrued interest | 25,936 | 10,824 | ||
Accrued expense | 14,660 | 15,057 | ||
Current portion of long term debt and capital lease obligations | 9,000 | 9,000 | ||
Total current liabilities | 49,596 | 34,881 | ||
Long-term debt and capital lease obligations | 1,363,116 | 1,365,820 | ||
Deferred income taxes | 984 | |||
Other long-term liabilities | 5,601 | 216 | ||
Total liabilities | 1,418,313 | 1,401,901 | ||
Shareholders' equity: | ||||
Other shareholders' equity | 2,188,334 | 2,192,517 | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | 2,188,334 | 2,192,517 | ||
Total shareholders' equity | 2,188,334 | 2,192,517 | ||
Total liabilities and shareholders' equity | $ 3,606,647 | 3,594,418 | ||
Guarantors | ||||
Condensed Consolidating Balance Sheet | ||||
Ownership interest (as a percent) | 100.00% | |||
Current assets: | ||||
Cash and cash equivalents | $ 13 | 13 | 61 | 7,629 |
Guarantors | Reportable legal entity | ||||
Current assets: | ||||
Cash and cash equivalents | 13 | 13 | ||
Accounts receivable, net | 43,490 | 48,911 | ||
Income taxes receivable | 885 | |||
Prepaid expenses and other current assets | 19,881 | 15,310 | ||
Total current assets | 63,384 | 65,119 | ||
Property, plant and equipment, net | 985,206 | 999,416 | ||
Intangibles and other assets: | ||||
Investments | 98,009 | 97,883 | ||
Investments in subsidiaries | 14,501 | 14,279 | ||
Goodwill | 690,696 | 690,696 | ||
Other intangible assets | 18,124 | 22,525 | ||
Advances due to/from affiliates, net | 463,016 | 427,720 | ||
Other assets | 7,706 | 8,058 | ||
Total assets | 2,340,642 | 2,325,696 | ||
Current liabilities: | ||||
Accounts payable | 10,107 | 6,766 | ||
Advance billings and customer deposits | 22,878 | 24,981 | ||
Accrued compensation | 14,050 | 16,002 | ||
Accrued interest | 479 | 436 | ||
Accrued expense | 35,389 | 38,192 | ||
Income tax payable | 3,124 | |||
Current portion of long term debt and capital lease obligations | 8,631 | 5,735 | ||
Total current liabilities | 94,658 | 92,112 | ||
Long-term debt and capital lease obligations | 12,633 | 10,332 | ||
Deferred income taxes | 232,957 | 232,668 | ||
Pension and postretirement benefit obligations | 106,206 | 109,185 | ||
Other long-term liabilities | 13,236 | 13,807 | ||
Total liabilities | 459,690 | 458,104 | ||
Shareholders' equity: | ||||
Common Stock | 17,411 | 17,411 | ||
Other shareholders' equity | 1,858,158 | 1,844,880 | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | 1,875,569 | 1,862,291 | ||
Noncontrolling interest | 5,383 | 5,301 | ||
Total shareholders' equity | 1,880,952 | 1,867,592 | ||
Total liabilities and shareholders' equity | 2,340,642 | 2,325,696 | ||
Non-Guarantors | ||||
Current assets: | ||||
Cash and cash equivalents | $ 1 | $ 2,372 | ||
Non-Guarantors | Reportable legal entity | ||||
Current assets: | ||||
Accounts receivable, net | 7,145 | 7,347 | ||
Income taxes receivable | (25) | |||
Prepaid expenses and other current assets | 128 | 126 | ||
Total current assets | 7,273 | 7,448 | ||
Property, plant and equipment, net | 57,565 | 55,770 | ||
Intangibles and other assets: | ||||
Goodwill | 66,181 | 66,181 | ||
Other intangible assets | 9,087 | 9,087 | ||
Advances due to/from affiliates, net | 96,651 | 87,171 | ||
Other assets | 38 | 41 | ||
Total assets | 236,795 | 225,698 | ||
Current liabilities: | ||||
Advance billings and customer deposits | 2,162 | 1,457 | ||
Accrued compensation | 970 | 969 | ||
Accrued expense | 864 | 880 | ||
Income tax payable | 3,180 | |||
Current portion of long term debt and capital lease obligations | 199 | 187 | ||
Total current liabilities | 7,375 | 3,493 | ||
Long-term debt and capital lease obligations | 499 | 602 | ||
Deferred income taxes | 27,903 | 27,796 | ||
Pension and postretirement benefit obligations | 20,077 | 21,608 | ||
Other long-term liabilities | 460 | 480 | ||
Total liabilities | 56,314 | 53,979 | ||
Shareholders' equity: | ||||
Common Stock | 30,000 | 30,000 | ||
Other shareholders' equity | 150,481 | 141,719 | ||
Total Consolidated Communications Holdings, Inc. shareholders' equity | 180,481 | 171,719 | ||
Total shareholders' equity | 180,481 | 171,719 | ||
Total liabilities and shareholders' equity | $ 236,795 | $ 225,698 |
CONDENSED CONSOLIDATING FINAN50
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | $ 169,950 | $ 186,871 | $ 339,885 | $ 375,717 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 70,376 | 80,763 | 141,767 | 160,483 |
Selling, general and administrative expenses | 35,720 | 38,805 | 71,751 | 79,481 |
Acquisition and other transaction costs | 1,793 | 248 | 3,524 | 248 |
Loss on impairment | 610 | 610 | ||
Depreciation and amortization | 40,483 | 43,491 | 82,678 | 87,631 |
Income from operations | 21,578 | 22,954 | 40,165 | 47,264 |
Other income (expense): | ||||
Interest expense, net of interest income | (33,918) | (19,106) | (63,589) | (37,752) |
Investment income | 8,196 | 8,704 | 13,474 | 15,901 |
Other, net | 119 | (72) | 46 | (58) |
Income (loss) before income taxes | (4,025) | 12,480 | (9,904) | 25,355 |
Income tax expense (benefit) | (1,399) | 12,323 | (3,573) | 17,296 |
Net income (loss) | (2,626) | 157 | (6,331) | 8,059 |
Less: net income (loss) attributable to noncontrolling interest | 102 | 81 | 82 | 134 |
Net income attributable to common shareholders | (2,728) | 76 | (6,413) | 7,925 |
Total comprehensive income (loss) attributable to common shareholders | (4,915) | 744 | (7,589) | 8,991 |
Eliminations | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | (3,188) | (3,289) | (6,374) | (6,562) |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | (3,077) | (3,180) | (6,156) | (6,347) |
Selling, general and administrative expenses | (111) | (109) | (218) | (215) |
Other income (expense): | ||||
Equity in earnings of subsidiaries, net | (12,705) | (41,055) | (18,083) | (88,738) |
Income (loss) before income taxes | (12,705) | (41,055) | (18,083) | (88,738) |
Net income (loss) | (12,705) | (41,055) | (18,083) | (88,738) |
Net income attributable to common shareholders | (12,705) | (41,055) | (18,083) | (88,738) |
Total comprehensive income (loss) attributable to common shareholders | (10,575) | (42,401) | (17,826) | (91,161) |
Parent | Reportable legal entity | ||||
Operating expenses: | ||||
Selling, general and administrative expenses | 920 | 1,076 | 1,263 | 1,972 |
Acquisition and other transaction costs | 1,793 | 248 | 3,524 | 248 |
Income from operations | (2,713) | (1,324) | (4,787) | (2,220) |
Other income (expense): | ||||
Interest expense, net of interest income | 7 | 6 | 46 | |
Intercompany interest income (expense) | (31,886) | (63,773) | ||
Equity in earnings of subsidiaries, net | (740) | 21,443 | (3,045) | 50,162 |
Income (loss) before income taxes | (3,453) | (11,760) | (7,826) | (15,785) |
Income tax expense (benefit) | (725) | (11,836) | (1,413) | (23,710) |
Net income (loss) | (2,728) | 76 | (6,413) | 7,925 |
Net income attributable to common shareholders | (2,728) | 76 | (6,413) | 7,925 |
Total comprehensive income (loss) attributable to common shareholders | (4,915) | 744 | (7,589) | 8,991 |
Subsidiary Issuer | Reportable legal entity | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | 18 | (5) | ||
Operating expenses: | ||||
Selling, general and administrative expenses | 7 | 10 | 7 | |
Income from operations | 11 | (10) | (12) | |
Other income (expense): | ||||
Interest expense, net of interest income | (33,704) | (18,963) | (63,191) | (37,398) |
Intercompany interest income (expense) | 14,727 | 33,824 | 29,454 | 67,648 |
Investment income | 157 | 166 | ||
Equity in earnings of subsidiaries, net | 13,168 | 19,393 | 20,906 | 38,215 |
Other, net | 2 | 3 | ||
Income (loss) before income taxes | (5,807) | 34,265 | (12,681) | 68,619 |
Income tax expense (benefit) | (5,067) | 12,821 | (9,636) | 18,456 |
Net income (loss) | (740) | 21,444 | (3,045) | 50,163 |
Net income attributable to common shareholders | (740) | 21,444 | (3,045) | 50,163 |
Total comprehensive income (loss) attributable to common shareholders | (2,927) | 22,112 | (4,221) | 51,229 |
Guarantors | Reportable legal entity | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | 159,072 | 175,245 | 317,904 | 352,500 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 70,952 | 80,739 | 142,873 | 160,453 |
Selling, general and administrative expenses | 31,899 | 35,622 | 64,557 | 72,222 |
Loss on impairment | 610 | 610 | ||
Depreciation and amortization | 38,039 | 41,216 | 77,559 | 83,077 |
Income from operations | 18,182 | 17,058 | 32,915 | 36,138 |
Other income (expense): | ||||
Interest expense, net of interest income | (244) | (160) | (450) | (408) |
Intercompany interest income (expense) | (14,707) | (2,706) | (29,415) | (5,405) |
Investment income | 8,196 | 8,704 | 13,317 | 15,735 |
Equity in earnings of subsidiaries, net | 277 | 219 | 222 | 361 |
Other, net | 120 | (66) | 54 | (40) |
Income (loss) before income taxes | 11,824 | 23,049 | 16,643 | 46,381 |
Income tax expense (benefit) | 2,791 | 8,490 | 4,021 | 17,201 |
Net income (loss) | 9,033 | 14,559 | 12,622 | 29,180 |
Less: net income (loss) attributable to noncontrolling interest | 102 | 81 | 82 | 134 |
Net income attributable to common shareholders | 8,931 | 14,478 | 12,540 | 29,046 |
Total comprehensive income (loss) attributable to common shareholders | 8,974 | 15,023 | 13,285 | 30,137 |
Non-Guarantors | Reportable legal entity | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | 14,066 | 14,897 | 28,355 | 29,784 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 2,501 | 3,204 | 5,050 | 6,377 |
Selling, general and administrative expenses | 3,012 | 2,209 | 6,139 | 5,495 |
Depreciation and amortization | 2,444 | 2,275 | 5,119 | 4,554 |
Income from operations | 6,109 | 7,209 | 12,047 | 13,358 |
Other income (expense): | ||||
Interest expense, net of interest income | 30 | 10 | 46 | 8 |
Intercompany interest income (expense) | (20) | 768 | (39) | 1,530 |
Other, net | (3) | (6) | (11) | (18) |
Income (loss) before income taxes | 6,116 | 7,981 | 12,043 | 14,878 |
Income tax expense (benefit) | 1,602 | 2,848 | 3,455 | 5,349 |
Net income (loss) | 4,514 | 5,133 | 8,588 | 9,529 |
Net income attributable to common shareholders | 4,514 | 5,133 | 8,588 | 9,529 |
Total comprehensive income (loss) attributable to common shareholders | $ 4,528 | $ 5,266 | $ 8,762 | $ 9,795 |
CONDENSED CONSOLIDATING FINAN51
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Cash Flows (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities | ||
Net cash (used in) provided by operating activities | $ 93,533 | $ 115,505 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (58,061) | (62,271) |
Proceeds from sale of assets | 101 | 50 |
Net cash used in investing activities | (57,960) | (62,221) |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 23,000 | 7,000 |
Payment of capital lease obligations | (2,993) | (812) |
Payment on long-term debt | (27,500) | (11,550) |
Share repurchases for minimum tax withholding | (41) | (71) |
Dividends on common stock | (39,257) | (39,174) |
Net cash used in financing activities | (46,791) | (44,607) |
Increase (decrease) in cash and cash equivalents | (11,218) | 8,677 |
Cash and cash equivalents at beginning of period | 27,077 | 15,878 |
Cash and cash equivalents at end of period | 15,859 | 24,555 |
Parent | ||
Cash flows from operating activities | ||
Net cash (used in) provided by operating activities | (4,096) | (63,494) |
Cash flows from financing activities: | ||
Share repurchases for minimum tax withholding | (41) | (71) |
Dividends on common stock | (39,257) | (39,174) |
Transactions with affiliates, net | 43,394 | 102,739 |
Net cash used in financing activities | 4,096 | 63,494 |
Subsidiary Issuer | ||
Cash flows from operating activities | ||
Net cash (used in) provided by operating activities | (8,211) | 31,781 |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 23,000 | 7,000 |
Payment on long-term debt | (27,500) | (11,550) |
Transactions with affiliates, net | 1,493 | (8,615) |
Net cash used in financing activities | (3,007) | (13,165) |
Increase (decrease) in cash and cash equivalents | (11,218) | 18,616 |
Cash and cash equivalents at beginning of period | 27,064 | 5,877 |
Cash and cash equivalents at end of period | 15,846 | 24,493 |
Subsidiary Issuer | Reportable legal entity | ||
Cash flows from financing activities: | ||
Cash and cash equivalents at beginning of period | 27,064 | |
Cash and cash equivalents at end of period | 15,846 | |
Guarantors | ||
Cash flows from operating activities | ||
Net cash (used in) provided by operating activities | 89,701 | 129,467 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (51,465) | (55,172) |
Proceeds from sale of assets | 74 | 40 |
Net cash used in investing activities | (51,391) | (55,132) |
Cash flows from financing activities: | ||
Payment of capital lease obligations | (2,902) | (756) |
Transactions with affiliates, net | (35,408) | (81,147) |
Net cash used in financing activities | (38,310) | (81,903) |
Increase (decrease) in cash and cash equivalents | (7,568) | |
Cash and cash equivalents at beginning of period | 13 | 7,629 |
Cash and cash equivalents at end of period | 13 | 61 |
Guarantors | Reportable legal entity | ||
Cash flows from financing activities: | ||
Cash and cash equivalents at beginning of period | 13 | |
Cash and cash equivalents at end of period | 13 | |
Non-Guarantors | ||
Cash flows from operating activities | ||
Net cash (used in) provided by operating activities | 16,139 | 17,751 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (6,596) | (7,099) |
Proceeds from sale of assets | 27 | 10 |
Net cash used in investing activities | (6,569) | (7,089) |
Cash flows from financing activities: | ||
Payment of capital lease obligations | (91) | (56) |
Transactions with affiliates, net | (9,479) | (12,977) |
Net cash used in financing activities | $ (9,570) | (13,033) |
Increase (decrease) in cash and cash equivalents | (2,371) | |
Cash and cash equivalents at beginning of period | 2,372 | |
Cash and cash equivalents at end of period | $ 1 |