Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Jul. 30, 2018 | |
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, 2018 | |
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 | 71,252,576 | |
Document Fiscal Year Focus | 2,018 | |
Document Fiscal Period Focus | Q2 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
Net revenues | $ 350,221 | $ 169,950 | $ 706,260 | $ 339,885 |
Operating expense: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 151,358 | 71,136 | 304,274 | 142,168 |
Selling, general and administrative expenses | 81,128 | 35,986 | 166,746 | 71,884 |
Acquisition and other transaction costs | 899 | 1,793 | 1,630 | 3,524 |
Depreciation and amortization | 111,741 | 40,483 | 219,640 | 82,678 |
Income from operations | 5,095 | 20,552 | 13,970 | 39,631 |
Other income (expense): | ||||
Interest expense, net of interest income | (32,839) | (33,918) | (65,555) | (63,589) |
Investment income | 12,535 | 8,196 | 20,324 | 13,474 |
Other, net | 640 | 1,145 | 1,246 | 580 |
Loss before income taxes | (14,569) | (4,025) | (30,015) | (9,904) |
Income tax benefit | (4,009) | (1,399) | (8,257) | (3,573) |
Net loss | (10,560) | (2,626) | (21,758) | (6,331) |
Less: net income attributable to noncontrolling interest | 83 | 102 | 183 | 82 |
Net loss attributable to common shareholders | $ (10,643) | $ (2,728) | $ (21,941) | $ (6,413) |
Net income (loss) per common share - basic and diluted | ||||
Net loss per basic and diluted common shares attributable to common shareholders (in dollars per share) | $ (0.15) | $ (0.06) | $ (0.32) | $ (0.13) |
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, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||
Net loss | $ (10,560) | $ (2,626) | $ (21,758) | $ (6,331) |
Pension and post-retirement obligations: | ||||
Change in net actuarial loss and prior service credit, net of tax | (814) | (814) | ||
Amortization of actuarial losses and prior service credit to earnings, net of tax | 954 | 871 | 1,876 | 1,733 |
Derivative instruments designated as cash flow hedges: | ||||
Change in fair value of derivatives, net of tax | 3,884 | (2,488) | 8,621 | (2,544) |
Reclassification of realized loss to earnings, net of tax | 1,066 | 244 | 1,331 | 449 |
Comprehensive loss | (4,656) | (4,813) | (9,930) | (7,507) |
Less: comprehensive income attributable to noncontrolling interest | 83 | 102 | 183 | 82 |
Total comprehensive loss attributable to common shareholders | $ (4,739) | $ (4,915) | $ (10,113) | $ (7,589) |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 10,642 | $ 15,657 |
Accounts receivable, net of allowance for doubtful accounts | 122,167 | 121,528 |
Income tax receivable | 12,391 | 21,846 |
Prepaid expenses and other current assets | 43,727 | 33,318 |
Assets held for sale | 20,719 | 21,310 |
Total current assets | 209,646 | 213,659 |
Property, plant and equipment, net | 1,986,318 | 2,037,606 |
Investments | 110,105 | 108,858 |
Goodwill | 1,035,274 | 1,038,032 |
Customer relationships, net | 262,853 | 293,300 |
Other intangible assets | 12,038 | 13,483 |
Other assets | 30,578 | 14,188 |
Total assets | 3,646,812 | 3,719,126 |
Current liabilities: | ||
Accounts payable | 23,057 | 24,143 |
Advance billings and customer deposits | 46,322 | 42,526 |
Dividends payable | 27,602 | 27,418 |
Accrued compensation | 55,462 | 49,770 |
Accrued interest | 9,376 | 9,343 |
Accrued expense | 74,112 | 72,041 |
Current portion of long-term debt and capital lease obligations | 32,570 | 29,696 |
Liabilities held for sale | 381 | 1,003 |
Total current liabilities | 268,882 | 255,940 |
Long-term debt and capital lease obligations | 2,308,752 | 2,311,514 |
Deferred income taxes | 211,740 | 209,720 |
Pension and other post-retirement obligations | 318,306 | 334,193 |
Other long-term liabilities | 24,816 | 33,817 |
Total liabilities | 3,132,496 | 3,145,184 |
Commitments and contingencies (Note 11) | ||
Shareholders' equity: | ||
Common stock, par value $0.01 per share; 100,000,000 shares authorized, 71,252,576 and 70,777,354 shares outstanding as of June 30, 2018 and December 31, 2017, respectively | 713 | 708 |
Additional paid-in capital | 565,961 | 615,662 |
Accumulated deficit | (21,941) | |
Accumulated other comprehensive loss, net | (36,255) | (48,083) |
Noncontrolling interest | 5,838 | 5,655 |
Total shareholders' equity | 514,316 | 573,942 |
Total liabilities and shareholders' equity | $ 3,646,812 | $ 3,719,126 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2018 | Dec. 31, 2017 |
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 | 71,252,576 | 70,777,354 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net cash provided by operating activities | $ 194,371 | $ 93,533 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment, net | (124,840) | (58,061) |
Proceeds from sale of assets | 1,443 | 101 |
Proceeds from sale of investments | 233 | |
Net cash used in investing activities | (123,164) | (57,960) |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 76,000 | 23,000 |
Payment of capital lease obligations | (6,027) | (2,993) |
Payment on long-term debt | (91,176) | (27,500) |
Share repurchases for minimum tax withholding | (41) | |
Dividends on common stock | (55,019) | (39,257) |
Net cash used in financing activities | (76,222) | (46,791) |
Change in cash and cash equivalents | (5,015) | (11,218) |
Cash and cash equivalents at beginning of period | 15,657 | 27,077 |
Cash and cash equivalents at end of period | $ 10,642 | $ 15,859 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2018 | |
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 communication solutions to consumer, commercial and carrier customers across a 24-state service area. Leveraging our advanced fiber network spanning more than 36,000 fiber route miles, we offer a wide range of communications solutions including data, voice, video, managed services, cloud computing and wireless backhaul. As of June 30, 2018, we had approximately 941,000 voice connections, 787,000 data connections and 98,000 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 2017 Annual Report on Form 10-K filed with the SEC. Recent Business Developments On July 3, 2017, we completed our acquisition of FairPoint Communications, Inc. (“FairPoint”), pursuant to the terms of a definitive agreement and plan of merger (as amended, the “Merger Agreement”) and acquired all of the issued and outstanding shares of FairPoint in exchange for shares of our common stock (the “Merger”). As a result of the Merger, FairPoint became a wholly owned subsidiary of the Company. The financial results for FairPoint have been included in our condensed consolidated financial statements as of the acquisition date. For a more complete discussion of the transaction, refer to Note 2. Revenue Recognition Effective January 1, 2018, we adopted ASU No. 2014-09 (“ASU 2014-09”, “ASC 606”, or the “new standard”), Revenue from Contracts with Customers , using the modified retrospective method for open contracts. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting practices under ASC 605 (“legacy GAAP”). The adoption of the new standard did not result in a material impact to our systems, processes or internal controls. The largest impact of the adoption of the new standard is related to the treatment of contract acquisition costs, which were previously expensed as incurred; however, under the new standard, these costs are now deferred and amortized over the expected customer life. The adoption also resulted in additional disclosures around the nature and timing of the Company’s performance obligations, deferred revenue contract liabilities and deferred contract cost assets, as well as practical expedients used by the Company in applying the new five-step revenue model. During the six months ended June 30, 2018, we recorded a pre-tax cumulative effect adjustment of $4.1 million related to the adoption, which increased retained earnings. Of this amount, $1.8 million was related to the increase in the value of our partnership interests as a result of the adoption of ASC 606 by our equity method partnerships. For a more complete discussion of our investments, refer to Note 4. Nature of Contracts with Customers Our revenue contracts with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer. The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the contract and may include promotional discounts. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified. The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable. Revenue is recognized when or as performance obligations are satisfied by transferring service to the customer as described below. Disaggregation of Revenue The following table summarizes revenue from contracts with customers for the quarters and six months ended June 30, 2018 and 2017: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Operating Revenues Commercial and carrier: Data and transport services (includes VoIP) $ 87,603 $ 51,528 $ 173,628 $ 102,432 Voice services 51,322 22,199 103,483 44,225 Other 14,237 4,931 26,100 8,833 153,162 78,658 303,211 155,490 Consumer: Broadband (VoIP and Data) 62,545 28,296 125,656 56,689 Video services 22,065 22,314 44,899 45,418 Voice services 51,616 12,860 103,678 25,902 136,226 63,470 274,233 128,009 Subsidies 20,979 10,392 46,234 20,964 Network access 37,338 14,138 77,053 28,691 Other products and services 2,516 3,292 5,529 6,731 Total operating revenues $ 350,221 $ 169,950 $ 706,260 $ 339,885 Service revenue is recognized over time, consistent with the transfer of service, as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. Contract Assets and Liabilities The following table provides information about receivables, contract assets and contract liabilities from our revenue contracts with customers: Quarter Ended At (In thousands) June 30, 2018 Adoption Accounts receivable, net $ 122,411 $ 121,745 Contract assets 7,408 1,804 Contract liabilities 49,039 46,368 Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relate to sales commissions. These costs are deferred and amortized over the expected customer life. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is not commensurate with the commission on the initial contract. During the quarter and six months ended June 30, 2018, the Company recognized expense of $0.6 million and $1.0 million, respectively, related to deferred contract acquisition costs. Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which under the new standard are generally deferred and amortized over the expected customer life as the option to renew without paying an upfront fee provides the customer with a material right. During the quarter and six months ended June 30, 2018, the Company recognized revenue of $83.8 million and $171.1 million, respectively, related to deferred revenues. A receivable is recognized in the period the Company provides goods or services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30 to 60 days. Performance Obligations ASC 606 requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of June 30, 2018. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606: 1. The performance obligation is part of a contract that has an original expected duration of one year or less. 2. Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18. Financial Statement Impact of Adopting ASC 606 As described above, the change in accounting for contract acquisition costs was the largest impact to the Company upon adoption of ASC 606. On an ongoing basis, a significant amount of commission costs, which were historically expensed as incurred, will now be deferred and amortized over the expected customer life under the new standard. The accretive benefit to operating income anticipated in 2018 is expected to moderate in future years as the basis of the amortization builds. For the quarter and six months ended June 30, 2018, we recognized commission expense of $0.6 million and $1.0 million, respectively, under the new standard as compared to $3.6 million and $6.6 million, respectively, for the same periods under legacy GAAP. Recent Accounting Pronouncements Effective January 1, 2018, we adopted ASU 2014-09 (also known as ASC 606). 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. For additional information on the new standard and the impact to our results of operations, refer to the Revenue Recognition section above. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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. We adopted ASU 2017-07 prospectively for the capitalization of the service cost component of the net periodic benefit cost. ASU 2017-07 was applied retrospectively using the practical expedient for the presentation of the other components of net periodic benefit cost in the statement of operations and as a result, we reclassified $(0.8) million and $(0.4) million of benefit from cost of services and products and $(0.2) million and $(0.1) million of benefit from selling, general and administrative expenses into other, net within non-operating income (expense) for the quarter and six months ended June 30, 2017, respectively. See Note 9 for the amount of each component of net periodic pension and post-retirement benefit costs. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures and is not expected to have a material impact on our testing of goodwill. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07 (“ASU 2018-07”), Improvements to Nonemployee Share-Based Payment Accounting . ASU 2018-07 expands the scope of Topic 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees to align the accounting guidance for both employee and nonemployee share-based transactions. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . ASU 2018-02 provides an option to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures and do not expect to make the optional election for reclassification of stranded tax effects from accumulated other comprehensive income (loss) to retained earnings. In August 2017, the FASB issued ASU Update No. 2017-12 (“ASU 2017-12”), Targeted Improvements to Accounting for Hedging Activities . ASU 2017-12 amends current guidance on accounting for hedges mainly to align more closely an entity’s risk management activities and financial reporting relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. In addition, amendments in ASU 2017-12 simplify the application of hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We plan to adopt ASU 2017-12 as of January 1, 2019 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 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 have not yet made a decision on the timing of adoption and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 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 plan to adopt this update effective January 1, 2019 and are continuing to assess the potential impact of this update on our condensed consolidated financial statements and related disclosures. Reclassifications Certain amounts in our 2017 condensed consolidated financial statements have been reclassified to conform to the current year presentation. In accordance with the adoption of ASU 2017-07, as described above, certain components of net periodic benefit cost were reclassified from operating expense to non-operating income (expense) in our condensed consolidated statement of operations. |
ACQUISITIONS AND DIVESTITURES
ACQUISITIONS AND DIVESTITURES | 6 Months Ended |
Jun. 30, 2018 | |
ACQUISITIONS AND DIVESTITURES | |
ACQUISITIONS AND DIVESTITURES | 2. ACQUISITIONS AND DIVESTITURES Acquisitions FairPoint Communications, Inc. On July 3, 2017, we completed the Merger with FairPoint and acquired all of the issued and outstanding shares of FairPoint in exchange for shares of our common stock. As a result, FairPoint became a wholly-owned subsidiary of the Company. 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 22,000 route miles of fiber, including 17,000 route miles of fiber in northern New England. 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 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 of Consolidated and cash in lieu of fractional shares, pursuant to the terms of 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 was $431.0 million, exclusive of debt of approximately $919.3 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 and we assumed approximately 2,615,153 outstanding warrants, each eligible to purchase one share of the Company’s common stock at an exercise price of $66.86 per share, subject to adjustment in accordance with the warrant agreement. On January 24, 2018, all of the warrants expired in accordance with their terms without being exercised. In connection with the Merger, we secured committed debt financing in December 2016 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 was accounted for in accordance with the acquisition method of accounting for business combinations. The tangible and intangible assets acquired and liabilities assumed were recorded at their estimated fair values as of the date of the acquisition. As of June 30, 2018, the estimated fair value of the tangible and intangible assets acquired and liabilities assumed are as follows: (In thousands) Cash and cash equivalents $ 56,980 Accounts receivable 72,206 Other current assets 22,012 Assets held for sale 20,843 Property, plant and equipment 1,047,000 Intangible assets 303,180 Other long-term assets 2,685 Total assets acquired 1,524,906 Current liabilities 123,109 Liabilities held for sale 443 Pension and other post-retirement obligations 219,298 Deferred income taxes 96,632 Other long-term liabilities 13,502 Total liabilities assumed 452,984 Net fair value of assets acquired 1,071,922 Goodwill 278,396 Total consideration transferred $ 1,350,318 We are in the process of finalizing the valuation of the net assets acquired, most notably, the valuation of deferred income taxes. Any changes within the measurement period 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. Goodwill recognized from the acquisition primarily relates to the expected contributions of the entity to the overall corporate strategy and the synergies expected to be realized from the acquisition. Amortization of goodwill is not deductible for income tax purposes. Based on the valuation analysis, the identifiable intangible assets acquired consisted of customer relationships of $300.3 million, tradenames of $1.1 million and non-compete agreements of $1.8 million. The intangible assets were valued using an income based approach (level 3 inputs) that utilized the multi-period earnings method for customer relationships, the relief from royalty method for tradenames and the with and without method for the non-compete agreements. The customer relationships are being amortized using an accelerated amortization method over their estimated useful lives of seven to eleven years depending on the nature of the customer. The tradenames and non-compete agreements are amortized using the straight-line method over their estimated useful lives of six months and one year, respectively. During the quarter ended June 30, 2018, we made certain adjustments to the fair value of the identifiable assets acquired and liabilities assumed which resulted in an increase in working capital of $0.9 million and decreases in property, plant and equipment of $6.6 million, long-term liabilities of $2.4 million and deferred income taxes of $0.9 million. The net impact of the adjustments reduced net assets acquired and increased goodwill by $2.4 million. As discussed in the “Divestures” section below, we have committed to a formal plan to sell certain assets of FairPoint and these assets have been classified as held for sale at the acquisition date. In connection with the classification as assets held for sale at the acquisition date, the carrying value of these assets was recorded at their estimated fair value of approximately $20.4 million, which was determined based on the estimated selling price less costs to sell. 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 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. Quarter Ended Six Months Ended June 30, June 30, (Unaudited; in thousands, except per share amounts) 2017 2017 Operating revenues $ $ Income from operations $ $ Net loss $ $ Less: net loss attributable to noncontrolling interest Net loss attributable to common stockholders $ $ Net loss per common share-basic and diluted $ (0.02) $ (0.14) 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 pro forma adjustments have been made to exclude these costs 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. Divestitures In August 2017, we entered into a letter of intent to sell our subsidiaries Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company, (collectively, “Peoples”), which were acquired as part of the acquisition of FairPoint. Peoples operates as a local exchange carrier in Virginia and provides telecommunications services to residential and business customers. In November 2017, the Company entered into an agreement to sell all of the issued and outstanding stock of Peoples in exchange for cash of approximately $21.0 million, subject to certain contractual adjustments. The parties received all required regulatory approvals in July 2018 and the transaction closed on July 31, 2018. As of the FairPoint acquisition date, the net assets to be sold have been classified as held for sale in the consolidated balance sheet. The expected sale of these assets has not been reported as discontinued operations in the condensed consolidated statements of operations as the annual revenues of these operations is less than 1% of the consolidated operating revenues. The estimated fair value of the net assets held for sale was determined based on the estimated selling price less costs to sell and was classified as Level 2 within the fair value hierarchy at June 30, 2018 and December 31, 2017. The classes of assets and liabilities to be sold and classified as held for sale consisted of the following: June 30, December 31, (In thousands) 2018 2017 Current assets $ 252 $ 227 Property, plant and equipment 4,369 4,254 Goodwill 16,098 16,829 Total assets $ 20,719 $ 21,310 Current liabilities $ 233 $ 701 Deferred taxes 148 302 Total liabilities $ 381 $ 1,003 |
EARNINGS (LOSS) PER SHARE
EARNINGS (LOSS) PER SHARE | 6 Months Ended |
Jun. 30, 2018 | |
EARNINGS (LOSS) PER SHARE | |
EARNINGS (LOSS) PER SHARE | 3. EARNINGS (LOSS) PER SHARE Basic and diluted earnings (loss) per common share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for each class of common stock and participating securities considering 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. The potentially dilutive impact of the Company’s restricted stock awards is determined using the treasury stock method. Under the treasury stock method, if the average market price during the period exceeds the exercise price, these instruments are treated as if they had been exercised with the proceeds of exercise used to repurchase common stock at the average market price during the period. Any incremental difference between the assumed number of shares issued and repurchased is included in the diluted share computation. 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 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) 2018 2017 2018 2017 Net loss $ (10,560) $ (2,626) $ (21,758) $ (6,331) Less: net income (loss) attributable to noncontrolling interest 83 102 183 82 Loss attributable to common shareholders before allocation of earnings to participating securities (10,643) (2,728) (21,941) (6,413) Less: earnings allocated to participating securities 221 115 442 164 Net loss attributable to common shareholders, after earnings allocated to participating securities $ (10,864) $ (2,843) $ (22,383) $ (6,577) Weighted-average number of common shares outstanding 70,598 50,412 70,598 50,411 Net loss per common share attributable to common shareholders - basic and diluted $ (0.15) $ (0.06) $ (0.32) $ (0.13) Diluted EPS attributable to common shareholders for each of the quarters ended June 30, 2018 and 2017 excludes 0.7 million and 0.3 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, 2018 and 2017, diluted earnings (loss) per common share attributable to common shareholders excludes 0.5 million and 0.3 million potential common shares, respectively. |
INVESTMENTS
INVESTMENTS | 6 Months Ended |
Jun. 30, 2018 | |
INVESTMENTS | |
INVESTMENTS | 4. INVESTMENTS Our investments are as follows: June 30, December 31, (In thousands) 2018 2017 Cash surrender value of life insurance policies $ 2,315 $ 2,272 Investments at cost: 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 9,050 9,105 Other 298 343 Equity method investments: GTE Mobilnet of Texas RSA #17 Limited Partnership (20.51% interest) 17,344 17,375 Pennsylvania RSA 6(I) Limited Partnership (16.67% interest) 7,546 7,300 Pennsylvania RSA 6(II) Limited Partnership (23.67% interest) 29,152 28,063 Totals $ 110,105 $ 108,858 Investments at Cost 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, which provides cellular service in and around the Pittsburgh metropolitan area. Because of our limited influence over these partnerships, we account for these investments at our initial cost less any impairment because fair value is not readily available for these investments. No factors of impairment existed for any of the investments during the quarters or six months ended June 30, 2018 or 2017. For these investments, we adjust the carrying value for any purchases or sales of our ownership interests. We record distributions received from these investments as investment income in non-operating income (expense). For the quarters ended June 30, 2018 and 2017, we received cash distributions from these partnerships totaling $6.1 million and $3.7 million, respectively. For the six months ended June 30, 2018 and 2017, we received cash distributions from these partnerships totaling $9.1 million and $5.3 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. In connection with the adoption of ASC 606 by our equity method partnerships, the value of our combined partnership interests increased $1.8 million, which is reflected in the cumulative effect adjustment to retained earnings during the quarter and six months ended June 30, 2018. For the quarters ended June 30, 2018 and 2017, we received cash distributions from these partnerships totaling $5.1 million and $4.1 million, respectively. For each of the six months ended June 30, 2018 and 2017, we received cash distributions from these partnerships totaling $11.6 million and $8.1 million, respectively. 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) 2018 2017 2018 2017 Total revenues $ 85,767 $ 89,811 $ 167,710 $ 169,832 Income from operations 25,149 24,518 49,647 45,806 Net income before taxes 24,837 24,145 49,041 45,042 Net income 24,837 24,145 49,041 45,042 June 30, December 31, (In thousands) 2018 2017 Current assets $ 76,641 $ 78,782 Non-current assets 97,485 95,959 Current liabilities 21,455 22,472 Non-current liabilities 51,107 51,463 Partnership equity 101,564 100,806 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2018 | |
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, 2018 and December 31, 2017 were as follows: As of June 30, 2018 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Current interest rate swap assets $ 211 $ — $ 211 $ — Long-term interest rate swap assets 10,087 — 10,087 — Total $ 10,298 $ — $ 10,298 $ — As of December 31, 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 $ 1,256 $ — $ 1,256 $ — Current interest rate swap liabilities (27) — (27) — Long-term interest rate swap liabilities (1,761) — (1,761) — Total $ (532) $ — $ (532) $ — 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, 2018 and December 31, 2017 . As of June 30, 2018 As of December 31, 2017 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Investments, equity basis $ 54,042 n/a $ 52,738 n/a Investments, at cost $ 53,748 n/a $ 53,848 n/a Long-term debt, excluding capital leases $ 2,317,227 $ 2,256,634 $ 2,331,400 $ 2,253,545 Cost & Equity Method Investments Our investments as of June 30, 2018 and December 31, 2017 accounted for at cost and under the equity method 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, 2018 | |
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) 2018 2017 Senior secured credit facility: Term loans, net of discounts of $7,674 and $8,344 at June 30, 2018 and December 31, 2017, respectively $ 1,804,563 $ 1,813,069 Revolving loan 16,000 22,000 6.50% Senior notes due 2022, net of discount of $3,336 and $3,669 at June 30, 2018 and December 31, 2017, respectively 496,664 496,331 Capital leases 36,843 23,890 2,354,070 2,355,290 Less: current portion of long-term debt and capital leases (32,570) (29,696) Less: deferred debt issuance costs (12,748) (14,080) Total long-term debt $ 2,308,752 $ 2,311,514 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 (as amended, the “Credit Agreement”). The Credit Agreement consists of a $110.0 million revolving credit facility, an initial term loan in the aggregate amount of $900.0 million (the “Initial Term Loan”) and an incremental term loan in the aggregate amount of $935.0 million (the “Incremental Term Loan”), collectively (the “Term Loans”). The Incremental Term Loan was issued on July 3, 2017 upon completion of the FairPoint Merger, as described below. 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 Credit Agreement are secured by substantially all of the assets of the Company and its subsidiaries, including certain of the FairPoint subsidiaries acquired in the Merger, with the exception of Consolidated Communications of Illinois Company and our majority-owned subsidiary, East Texas Fiber Line Incorporated. The Initial Term 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 Initial Term Loan contains an original issuance discount of 0.25% or $2.3 million, which is being amortized over the term of the loan. The Initial Term 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. 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, 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 Initial Term Loan and are being amortized over the term of the debt as interest expense. Ticking fees accrued on the incremental term loan commitments from January 15, 2017 through the July 3, 2017 Merger closing date at a rate of 3.00% plus LIBOR subject to a 1.00% LIBOR floor and became due and payable on the closing date. In connection with entering into the committed financing, commitment fees of $14.0 million were capitalized in December 2016 and were amortized to interest expense over the term of the commitment period through July 2017. 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. The Incremental Term Loan included an original issue discount of 0.50% and has the same maturity date and interest rate as the Initial Term Loan. The Incremental Term Loan requires quarterly principal payments of $2.34 million which began in December 2017. 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 be deemed to be letters of credit under the Credit Agreement. Our revolving credit facility has a maturity date of October 5, 2021 and an applicable margin (at our election) of between 2.50% and 3.25% for LIBOR-based borrowings or between 1.50% and 2.25% for alternate base rate borrowings, in each case depending on our total net leverage ratio. Based on our leverage ratio as of June 30, 2018, the borrowing margin for the three month period ending September 30, 2018 will be at a weighted-average margin of 3.00% f or a LIBOR-based loan or 2.00% 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, 2018, alternate base rate borrowings of $16.0 million were outstanding under the revolving credit facility. At December 31, 2017, t here were borrowings of $22.0 million outstanding under the revolving credit facility, which consisted of LIBOR-based borrowings of $17.0 million and alternate base rate borrowings of $5.0 million. Stand-by letters of credit of $18.2 million were outstanding under our revolving credit facility as of June 30, 2018. The stand-by letters of credit are renewable annually and reduce the borrowing availability under the revolving credit facility. As of June 30, 2018, $75.8 million was available for borrowing under the revolving credit facility. The weighted-average interest rate on outstanding borrowings under our credit facility was 5.11% and 4.58% as of June 30, 2018 and December 31, 2017, respectively . 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, 2018, 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, 2018, and including the $27.6 million dividend paid on August 1, 2018, we had $311.0 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, 2018, our total net leverage ratio under the Credit Agreement was 4.24:1.00, and our interest coverage ratio was 4.33:1.00. 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, including certain FairPoint subsidiaries, have fully and unconditionally guaranteed the Senior Notes. The Senior Notes are senior unsecured obligations of the Company. 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, 2018, this ratio was 4.30:1.00. 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 $488.5 million have been paid since May 30, 2012, including the quarterly dividend declared in May 2018 and paid on August 1, 2018, there was $1,003.5 million of the $1,492.1 million of cumulative consolidated cash flow since May 30, 2012 available to pay dividends as of June 30, 2018. As of June 30, 2018, 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 2018 and 2027. As of June 30, 2018, the present value of the minimum remaining lease commitments was approximately $36.8 million, of which $14.2 million was due and payable within the next twelve months. The leases require total remaining rental payments of $43.5 million as of June 30, 2018, of which $2.4 million will be paid to LATEL LLC, a related party entity. |
DERIVATIVE FINANCIAL INSTRUMENT
DERIVATIVE FINANCIAL INSTRUMENTS | 6 Months Ended |
Jun. 30, 2018 | |
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, 2018: Notional (In thousands) Amount 2018 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Prepaid expenses and other current assets $ Fixed to 1-month floating LIBOR (with floor) $ Other assets Series of forward starting fixed to 1-month floating LIBOR (with floor) $ Other assets Total Fair Values $ The following interest rate swaps were outstanding as of December 31, 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 Forward starting fixed to 1-month floating LIBOR (with floor) $ Other assets Series of forward starting 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 began 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. During the quarter ended March 31, 2018, we entered into an interest rate swap agreement with a notional value of $500.0 million and a term of five years. The interest rate swap agreement was designated as a cash flow hedge. On March 12, 2018, we completed a syndication of a portion of the $500.0 million interest rate swap agreement with five new counterparties. On the date of the syndication, the interest rate swap agreements were de-designated due to changes in critical terms as a result of the syndication. Prior to de-designation, the effective portion of the change in fair value of the interest rate swap was recognized in AOCI. 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 term of the interest rate swap agreements. Changes in fair value of the de-designated swaps were immediately recognized in earnings as interest expense prior to the de-designation date. During the quarter and six months ended June 30, 2018, a gain of $0.4 million and a loss of $2.5 million, respectively, was recognized in interest expense for the change in fair value of the de-designated swaps. During the quarter ended June 30, 2018, the interest rate swap agreements were re-designated as a cash flow hedge. As of June 30, 2018 and December 31, 2017, the total pre-tax unrealized gains related to our interest rate swap agreements included in AOCI was $14.1 million and $0.6 million, respectively. From the balance in AOCI as of June 30, 2018, we expect to recognize a loss of approximately $3.5 million in earnings in the next twelve months. Information regarding our cash flow hedge transactions is as follows: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Unrealized gain (loss) recognized in AOCI, pretax $ 5,256 $ (4,039) $ 11,679 $ (4,130) Deferred losses reclassified from AOCI to interest expense $ (1,446) $ (396) $ (1,802) $ (729) Gain (loss) recognized in interest expense from ineffectiveness $ 319 $ (1,535) $ 1,349 $ (1,300) |
EQUITY
EQUITY | 6 Months Ended |
Jun. 30, 2018 | |
EQUITY | |
EQUITY | 8. EQUITY Share-Based Compensation Our Board of Directors may grant share-based awards from our shareholder approved Amended and Restated Consolidated Communications Holdings, Inc. 2005 Long-Term Incentive Plan (the “Plan”). The Plan permits the issuance of awards in the form of stock options, stock appreciation rights, stock grants, stock unit grants and other equity-based awards to eligible directors and employees at the discretion of the Compensation Committee of the Board of Directors. On April 30, 2018, the shareholders approved an amendment to the Plan to increase by 2,000,000 the number of shares of our common stock authorized for issuance under the Plan and extend the term of the Plan through April 30, 2028. With the amendment, approximately 4,650,000 shares of our common stock are authorized for issuance under the Plan, provided that no more than 300,000 shares may be granted in the form of stock options or stock appreciation rights to any eligible employee or director in any calendar year. Unless terminated sooner, the Plan will continue in effect until April 30, 2028. The following table summarizes total compensation costs recognized for share-based payments during the quarters and six-month periods ended June 30, 2018 and 2017: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Restricted stock $ 979 $ $ 1,414 $ 964 Performance shares 559 802 466 Total $ 1,538 $ $ 2,216 $ 1,430 Share-based compensation expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations . As of June 30, 2018, total unrecognized compensation cost related to non-vested Restricted Stock Awards (“RSAs”) and Performance Share Awards (“PSAs”) was $12.2 million and will be recognized over a weighted-average period of approximately 2.0 years. The following table summarizes the RSA and PSA activity for the six-month period ended June 30, 2018: RSAs PSAs Weighted Weighted Average Grant Average Grant Shares Date Fair Value Shares Date Fair Value Non-vested shares outstanding - January 1, 2018 102,181 $ 23.32 77,528 $ 21.46 Shares granted 478,210 $ 12.45 — $ — Shares forfeited, cancelled or retired (1,851) $ 22.93 (1,137) $ 21.80 Non-vested shares outstanding - June 30, 2018 578,540 $ 14.34 76,391 $ 21.46 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, 2018: Pension and Post-Retirement Derivative (In thousands) Obligations Instruments Total Balance at December 31, 2017 $ (48,464) $ 381 $ (48,083) Other comprehensive income before reclassifications — 8,621 8,621 Amounts reclassified from accumulated other comprehensive loss 1,876 1,331 3,207 Net current period other comprehensive income 1,876 9,952 11,828 Balance at June 30, 2018 $ (46,588) $ 10,333 $ (36,255) The following table summarizes reclassifications from accumulated other comprehensive loss for the quarters and six-month periods ended June 30, 2018 and 2017: Quarter Ended June 30, Six Months Ended June 30, Affected Line Item in the (In thousands) 2018 2017 2018 2017 Statement of Income Amortization of pension and post-retirement items: Prior service credit $ $ $ $ (a) Actuarial loss (a) Settlement 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, 2018 | |
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 are 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. As part of our acquisition of FairPoint, we assumed sponsorship of its two non-contributory qualified defined benefit pension plans (together, the “Qualified Pension Plan”). The Qualified Pension Plan for certain non-management employees under collective bargaining agreements is closed to new participants and benefits are frozen. For existing participants, benefit accruals are capped at 30 years of total credited service. The Qualified Pension Plan for certain management employees is frozen and all future benefit accruals for existing participants have ceased. We also have two non-qualified supplemental retirement plans (the “Supplemental Plans” and, together with the Retirement Plan and the Qualified Pension 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 are 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, 2018 and 2017: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Service cost $ $ $ $ 161 Interest cost 7,180 Expected return on plan assets (9,958) Net amortization loss 3,387 Net prior service credit amortization (193) Settlement loss — — Curtailment gain — (1,337) — (1,337) Net periodic pension cost (benefit) $ $ $ $ (760) The components of net periodic pension cost other than the service cost component are included in other, net within other income (expense) in the condensed consolidated statements of operations. 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, 2018 and 2017 and $0.2 million for each of the six-month periods ended June 30, 2018 and 2017, respectively. The net present value of the remaining obligations was approximately $1.7 million and $1.9 million as of June 30, 2018 and December 31, 2017, 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 did not recognize any life insurance proceeds during the quarters and six-month periods ended June 30, 2018 or 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 as of each of June 30, 2018 and December 31, 2017. 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 are 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. In connection with the acquisition of FairPoint, we acquired its post-retirement benefit plan as of the date of acquisition. The post-retirement benefit plan provides medical, dental and life insurance benefits to certain eligible employees and in some instances, to their spouses and families. The post-retirement benefit plan is unfunded and the Company funds the benefits that are paid. 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, 2018 and 2017: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Service cost $ $ 124 $ $ 247 Interest cost 396 791 Expected return on plan assets (29) (57) Net amortization gain (21) (44) (42) (87) Net prior service credit amortization (130) (260) Net periodic post-retirement benefit cost $ $ 317 $ $ 634 The components of net periodic post-retirement benefit cost other than the service cost component are included in other, net within other income (expense) in the condensed consolidated statements of operations. Contributions We expect to contribute approximately $26.9 million to our Pension Plans and $10.0 million to our Post-retirement Plans in 2018. As of June 30, 2018, we have contributed $10.8 million and $5.1 million of the annual contribution to the Pension Plans and Post-retirement Plans, respectively. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2018 | |
INCOME TAXES | |
INCOME TAXES | 10. INCOME TAXES Our unrecognized tax benefits as of June 30, 2018 and December 31, 2017 were $4.6 million and $4.3 million, respectively. The increase of $0.3 million to unrecognized tax benefits in 2018 was primarily due to the acquisition of FairPoint and was recorded in purchase accounting. There was no material effect on the Company’s effective tax rate. The net amount of unrecognized tax benefits that, if recognized, would result in an impact to the effective tax rate is $4.4 million as of June 30, 2018 and $4.1 million as of December 31, 2017. We do not expect any material change in our unrecognized tax benefits during the remainder of 2018. 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, 2018, we did not have a material liability for interest or penalties and had no material interest or penalty expense. The periods subject to examination for our federal return are years 2014 through 2016. The periods subject to examination for our state returns are years 2013 through 2016. We are currently under audit by state taxing authorities. We do not expect any settlement or payment that may result from the examination to have a material effect on our results or cash flows. Our effective tax rate was 27.5 % and 34.8% for the quarters ended June 30, 2018 and 2017, respectively and 27.5% and 36.1% for the six-month periods ended June 30, 2018 and 2017, respectively . The primary driver of the lower rates in 2018, compared to the same periods in 2017, is the change in the corporate tax rate from 35% to 21% due to the enactment of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). For the quarter and six-month periods ended June 30, 2018 and 2017, the effective tax rate differed from the federal and state statutory rates primarily due to various permanent income tax differences and differences in allocable income for the Company’s state tax filings. Exclusive of these adjustments, our effective tax rate for the quarters and six months ended June 30, 2018 and 2017 would have been approximately 27.5% and 34.7% and approximately 27.5% and 35.6%, respectively. ASC 740 requires us to recognize the effect of the tax law changes in the period of enactment. However, on December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. SAB 118 will allow us to record provisional amounts during a measurement period which is similar to the measurement period used when accounting for business combinations. SAB 118 would allow for a measurement period of up to one year after the enactment date of the new tax legislation to finalize the recording of the related tax impacts. Any subsequent adjustment to these amounts will be recorded to tax expense in 2018 when the analysis is complete. The Company is currently evaluating the law and completing its analysis, which will be completed after the filing of the 2017 federal and state income tax returns. For the quarter and six-month period ended June 30, 2018, no adjustments were made to the provisional estimates that were recorded and disclosed as of December 31, 2017. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2018 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 11. COMMITMENTS AND CONTINGENCIES Litigation, Regulatory Proceedings and Other Contingencies Local Switching Support In 2015, FairPoint filed a Petition with the FCC requesting the FCC to direct National Exchange Carrier Association (“NECA”) to stop subtracting frozen local switching support (“LSS”) from FairPoint’s intercarrier compensation (“ICC”) Eligible Recovery for FairPoint’s rate of return Incumbent Local Exchange Carriers (“ILECs”) that participate in the NECA pooling process. This issue is unique to rate of return affiliates of price cap carriers because such companies are considered price cap carriers for the FCC’s Connect America Fund (“CAF”) funding, but remain rate of return for ICC purposes. Effective January 1, 2012, FairPoint rate of return ILECs were placed under the price cap CAF Phase I interim support mechanism, whereby the ILECs continued to receive frozen Universal Service Fund (“USF”) support for all forms of USF support received during 2011, including LSS. The rate of return rules for ICC included LSS support in that mechanism as well; therefore, NECA subtracted the frozen LSS support from the ICC Eligible Recovery amounts in accordance with FCC rules prohibiting duplicate recovery. When FairPoint accepted CAF Phase II support effective January 1, 2015, there was no longer any duplicate support and FairPoint requested NECA to stop subtracting LSS from FairPoint’s ICC Eligible Recovery. NECA declined to make that change, which led to FairPoint filing a Petition with the FCC asking the FCC to direct NECA to comply with FCC rules on ICC Eligible Recovery for rate of return ILECs. This issue also applies to Consolidated’s operations in Minnesota, which are also rate of return ILECs associated with a price cap company. The combined LSS support for the period from January 1, 2015 through December 31, 2017 is approximately $12.3 million. Our ongoing ICC Eligible Recovery support for 2018 would increase by approximately $3.6 million, and thereafter, decline by 5% per year through 2021. On March 31, 2018, we obtained the required votes necessary for an approved order and on April 19, 2018, the FCC issued its order approving our petition. As a result, during the six months ended June 30, 2018, we recognized subsidies revenue of $5.4 million and a contingent asset of $8.7 million as a pre-acquisition gain contingency for the FairPoint LSS revenue prior to the acquisition date. 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 including FairPoint, 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 $4.8 million and cover periods dating back as far as 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. Certain FairPoint entities filed counterclaims against Sprint and Verizon. Relatedly, in 2016, numerous LECs across the country, including a number of our Consolidated and FairPoint 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 that the Company’s LEC entities, including FairPoint, seek from Level 3 in this proceeding is at least $2.3 million, excluding 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. On March 12, 2018, a motion for summary judgement was filed by various LECs with counterclaims against Verizon and Sprint. On March 26, 2018, a motion for summary judgement was filed by various LECs with claims against Level 3. On May 15, 2018, the U.S. District Court granted all pending motions for summary judgment against Sprint, Verizon, and Level 3, and directed the entry of formal judgments in these cases. The formal judgments were entered in the Verizon and Sprint cases on June 7, 2018. Verizon and Sprint filed notices of appeal of these judgments to the U.S. Court of Appeals for the Fifth Circuit on June 28 and June 29, 2018, respectively. On July 17, 2018, the Court entered a judgment of $0.7 million in favor of our Consolidated LEC entities and against Level 3. Level 3 filed a notice of appeal of this judgment to the U.S. Court of Appeals for the Fifth Circuit on July 24, 2018. The U.S. District Court has not yet entered formal judgment in the case involving our FairPoint LEC entities and Level 3, however is expected to do so in the third quarter of 2018. 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 a material adverse 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 and/or Audit Assessment Notices from the Commonwealth of Pennsylvania Department of Revenue (“DOR”) increasing the amounts owed for Pennsylvania Gross Receipts Tax, and have had audits performed for the tax years of 2008 through 2016. For our CCES and CCPA subsidiaries, the total additional tax liability calculated by the DOR auditors for the tax years 2008 through 2016, including interest, is approximately $6.3 million and $7.5 million, respectively. We filed Petitions for Reassessment with the DOR’s Board of Appeals for the tax years 2008 through 2016, contesting these audit assessments. These cases remain pending and are in various stages of appeal. In May 2017, we entered into an agreement to guarantee any potential liability to the DOR up to $5.0 million. We believe that certain of the DOR’s findings regarding the Company’s additional tax liability for the tax years 2008 through 2016, for which we have filed appeals, continue to lack merit. However, in January 2018, CCES and CCPA submitted initial settlement offers to the Pennsylvania Office of Attorney General proposing to settle the intrastate and interstate cases at a reduced tax liability of the total assessed tax liability under dispute for the tax years 2008 through 2013. The settlement offers are currently under review and consideration by the Commonwealth of Pennsylvania. We expect to receive responses to our offers during the third quarter of 2018. While we continue to believe a settlement of all disputed claims is possible, we cannot anticipate at this time what the ultimate resolution of these cases will be, nor can we evaluate the likelihood of a favorable or unfavorable outcome or the potential losses (or gains) should such an outcome occur. Based on the initial settlement offers for the tax years 2008 through 2013 and the Company’s best estimate of the potential additional tax liabilities for 2014 through 2018, we have reserved $3.2 million and $1.4 million, including interest, for our CCES and CCPA subsidiaries, respectively. We do not believe that the outcome of these claims will have a material adverse impact on our financial results or cash flows. Other We have employees who are covered by collective bargaining agreements which are set to expire on August 4, 2018. These collective bargaining agreements cover approximately 31% of our employees. If we are unable to enter into new agreements before they expire, employees subject to collective bargaining agreements may engage in strikes, work stoppages or slowdowns, or other labor actions, which could disrupt our ability to provide services to our customers. Any prolonged labor dispute or labor disruption by any of our employees could have a negative effect on our financial results and operations. 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, 2018 | |
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, including our FairPoint subsidiaries, 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, 2018 and December 31, 2017, condensed consolidating statements of operations for the quarters and six-month periods ended June 30, 2018 and 2017 and condensed consolidating statements of cash flows for the six-month periods ended June 30, 2018 and 2017 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, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 10,226 $ 415 $ 1 $ — $ 10,642 Accounts receivable, net — — 111,555 10,626 (14) 122,167 Income taxes receivable 2,822 9,604 2,319 — (2,354) 12,391 Prepaid expenses and other current assets — 211 43,369 147 — 43,727 Assets held for sale — — — 20,719 — 20,719 Total current assets 2,822 20,041 157,658 31,493 (2,368) 209,646 Property, plant and equipment, net — — 1,919,360 66,958 — 1,986,318 Intangibles and other assets: Investments — 8,673 101,432 — — 110,105 Investments in subsidiaries 3,627,014 3,512,890 19,100 — (7,159,004) — Goodwill — — 985,191 50,083 — 1,035,274 Customer relationships, net — — 262,853 — — 262,853 Other intangible assets — — 2,951 9,087 — 12,038 Advances due to/from affiliates, net — 2,392,705 635,449 95,453 (3,123,607) — Deferred income taxes 26,933 — — — (26,933) — Other assets 2,938 10,137 17,468 35 — 30,578 Total assets $ 3,659,707 $ 5,944,446 $ 4,101,462 $ 253,109 $ (10,311,912) $ 3,646,812 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 23,057 $ — $ — $ 23,057 Advance billings and customer deposits — — 44,823 1,499 — 46,322 Dividends payable 27,602 — — — — 27,602 Accrued compensation — — 54,655 807 — 55,462 Accrued interest — 8,649 727 — — 9,376 Accrued expense 20 14 71,746 4,700 (2,368) 74,112 Current portion of long term debt and capital lease obligations — 18,350 14,054 166 — 32,570 Liabilities held for sale — — — 381 — 381 Total current liabilities 27,622 27,013 209,062 7,553 (2,368) 268,882 Long-term debt and capital lease obligations — 2,286,130 22,289 333 — 2,308,752 Advances due to/from affiliates, net 3,123,607 — — — (3,123,607) — Deferred income taxes — 4,288 213,165 21,220 (26,933) 211,740 Pension and postretirement benefit obligations — — 302,235 16,071 — 318,306 Other long-term liabilities — — 23,867 949 — 24,816 Total liabilities 3,151,229 2,317,431 770,618 46,126 (3,152,908) 3,132,496 Shareholders’ equity: Common Stock 713 — 17,411 30,000 (47,411) 713 Other shareholders’ equity 507,765 3,627,015 3,307,595 176,983 (7,111,593) 507,765 Total Consolidated Communications Holdings, Inc. shareholders’ equity 508,478 3,627,015 3,325,006 206,983 (7,159,004) 508,478 Noncontrolling interest — — 5,838 — — 5,838 Total shareholders’ equity 508,478 3,627,015 3,330,844 206,983 (7,159,004) 514,316 Total liabilities and shareholders’ equity $ 3,659,707 $ 5,944,446 $ 4,101,462 $ 253,109 $ (10,311,912) $ 3,646,812 Condensed Consolidating Balance Sheet (In thousands) December 31, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 8,919 $ 6,738 $ — $ — $ 15,657 Accounts receivable, net — — 114,303 7,701 (476) 121,528 Income taxes receivable 20,275 — 1,571 — — 21,846 Prepaid expenses and other current assets — — 33,188 130 — 33,318 Assets held for sale — — — 21,310 — 21,310 Total current assets 20,275 8,919 155,800 29,141 (476) 213,659 Property, plant and equipment, net — — 1,972,190 65,416 — 2,037,606 Intangibles and other assets: Investments — 8,495 100,363 — — 108,858 Investments in subsidiaries 3,643,930 2,133,049 35,374 — (5,812,353) — Goodwill — — 971,851 66,181 — 1,038,032 Customer relationships, net — — 293,300 — — 293,300 Other intangible assets — — 4,396 9,087 — 13,483 Advances due to/from affiliates, net — 2,441,690 555,332 92,615 (3,089,637) — Deferred income taxes 21,244 — — — (21,244) — Other assets — 1,307 12,844 37 — 14,188 Total assets $ 3,685,449 $ 4,593,460 $ 4,101,450 $ 262,477 $ (8,923,710) $ 3,719,126 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 24,143 $ — $ — $ 24,143 Advance billings and customer deposits — — 41,026 1,500 — 42,526 Dividends payable 27,418 — — — — 27,418 Accrued compensation — — 48,795 975 — 49,770 Accrued interest — 8,824 519 — — 9,343 Accrued expense 107 504 70,976 930 (476) 72,041 Current portion of long term debt and capital lease obligations — 18,350 11,150 196 — 29,696 Liabilities held for sale — — — 1,003 — 1,003 Total current liabilities 27,525 27,678 196,609 4,604 (476) 255,940 Long-term debt and capital lease obligations — 2,298,970 12,139 405 — 2,311,514 Advances due to/from affiliates, net 3,089,637 — — — (3,089,637) — Deferred income taxes — 750 209,116 21,098 (21,244) 209,720 Pension and postretirement benefit obligations — — 315,129 19,064 — 334,193 Other long-term liabilities — 1,761 31,030 1,026 — 33,817 Total liabilities 3,117,162 2,329,159 764,023 46,197 (3,111,357) 3,145,184 Shareholders’ equity: Common Stock 708 — 17,411 30,000 (47,411) 708 Other shareholders’ equity 567,579 2,264,301 3,314,361 186,280 (5,764,942) 567,579 Total Consolidated Communications Holdings, Inc. shareholders’ equity 568,287 2,264,301 3,331,772 216,280 (5,812,353) 568,287 Noncontrolling interest — — 5,655 — — 5,655 Total shareholders’ equity 568,287 2,264,301 3,337,427 216,280 (5,812,353) 573,942 Total liabilities and shareholders’ equity $ 3,685,449 $ 4,593,460 $ 4,101,450 $ 262,477 $ (8,923,710) $ 3,719,126 Condensed Consolidating Statements of Operations (In thousands) Quarter Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 338,867 $ 14,500 $ (3,146) $ 350,221 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 150,337 4,054 (3,033) 151,358 Selling, general and administrative expenses 657 — 77,361 3,223 (113) 81,128 Acquisition and other transaction costs 899 — — — — 899 Depreciation and amortization — — 109,333 2,408 — 111,741 Operating income (loss) (1,556) — 1,836 4,815 — 5,095 Other income (expense): Interest expense, net of interest income (27) (33,376) 521 43 — (32,839) Intercompany interest income (expense) — 14,727 (14,706) (21) — — Investment income — — 12,535 — — 12,535 Equity in earnings of subsidiaries, net (9,440) 4,348 4,347 — 745 — Other, net — — 610 30 — 640 Income (loss) before income taxes (11,023) (14,301) 5,143 4,867 745 (14,569) Income tax expense (benefit) (380) (4,861) (37) 1,269 — (4,009) Net income (loss) (10,643) (9,440) 5,180 3,598 745 (10,560) Less: net income attributable to noncontrolling interest — — 83 — — 83 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (10,643) $ (9,440) $ 5,097 $ 3,598 $ 745 $ (10,643) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ 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) — — 71,564 2,649 (3,077) 71,136 Selling, general and administrative expenses 920 — 32,112 3,065 (111) 35,986 Acquisition and other transaction costs 1,793 — — — — 1,793 Depreciation and amortization — — 38,039 2,444 — 40,483 Operating income (loss) (2,713) — 17,357 5,908 — 20,552 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 — 2 945 198 — 1,145 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 $ $ $ $ $ $ Six Months Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 683,178 $ 29,377 $ (6,295) $ 706,260 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 302,099 8,255 (6,080) 304,274 Selling, general and administrative expenses 1,238 — 159,262 6,461 (215) 166,746 Acquisition and other transaction costs 1,630 — — — — 1,630 Depreciation and amortization — — 214,621 5,019 — 219,640 Operating income (loss) (2,868) — 7,196 9,642 — 13,970 Other income (expense): Interest expense, net of interest income (53) (66,308) 713 93 — (65,555) Intercompany interest income (expense) — 29,454 (29,418) (36) — — Investment income — 178 20,146 — — 20,324 Equity in earnings of subsidiaries, net (19,751) 7,323 4,770 — 7,658 — Other, net — — 1,197 49 — 1,246 Income (loss) before income taxes (22,672) (29,353) 4,604 9,748 7,658 (30,015) Income tax expense (benefit) (731) (9,602) (477) 2,553 — (8,257) Net income (loss) (21,941) (19,751) 5,081 7,195 7,658 (21,758) Less: net income attributable to noncontrolling interest — — 183 — — 183 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (21,941) $ (19,751) $ 4,898 $ 7,195 $ 7,658 $ (21,941) 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) — — 143,179 5,145 (6,156) 142,168 Selling, general and administrative expenses 1,263 10 64,657 6,172 (218) 71,884 Acquisition and other transaction costs 3,524 — — — — 3,524 Depreciation and amortization — — 77,559 5,119 — 82,678 Operating income (loss) (4,787) (10) 32,509 11,919 — 39,631 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 — 3 460 117 — 580 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 $ $ $ $ $ $ Condensed Consolidating Statements of Cash Flows (In thousands) Six Months Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ 8,765 $ (32,503) $ 207,850 $ 10,259 $ 194,371 Cash flows from investing activities: Purchases of property, plant and equipment — — (118,623) (6,217) (124,840) Proceeds from sale of assets — — 1,439 4 1,443 Proceeds from sale of investments — — 233 — 233 Net cash used in investing activities — — (116,951) (6,213) (123,164) Cash flows from financing activities: Proceeds from issuance of long-term debt — 76,000 — — 76,000 Payment of capital lease obligation — — (5,924) (103) (6,027) Payment on long-term debt — (91,176) — — (91,176) Dividends on common stock (55,019) — — — (55,019) Transactions with affiliates, net 46,254 48,986 (91,298) (3,942) — Net cash provided by (used in) financing activities (8,765) 33,810 (97,222) (4,045) (76,222) Increase (decrease) in cash and cash equivalents — 1,307 (6,323) 1 (5,015) Cash and cash equivalents at beginning of period — 8,919 6,738 — 15,657 Cash and cash equivalents at end of period $ — $ 10,226 $ 415 $ 1 $ 10,642 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 |
SUMMARY OF SIGNIFICANT ACCOUN19
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
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 communication solutions to consumer, commercial and carrier customers across a 24-state service area. Leveraging our advanced fiber network spanning more than 36,000 fiber route miles, we offer a wide range of communications solutions including data, voice, video, managed services, cloud computing and wireless backhaul. As of June 30, 2018, we had approximately 941,000 voice connections, 787,000 data connections and 98,000 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 2017 Annual Report on Form 10-K filed with the SEC. |
Recent Business Developments | Recent Business Developments On July 3, 2017, we completed our acquisition of FairPoint Communications, Inc. (“FairPoint”), pursuant to the terms of a definitive agreement and plan of merger (as amended, the “Merger Agreement”) and acquired all of the issued and outstanding shares of FairPoint in exchange for shares of our common stock (the “Merger”). As a result of the Merger, FairPoint became a wholly owned subsidiary of the Company. The financial results for FairPoint have been included in our condensed consolidated financial statements as of the acquisition date. For a more complete discussion of the transaction, refer to Note 2. |
Revenue Recognition | Revenue Recognition Effective January 1, 2018, we adopted ASU No. 2014-09 (“ASU 2014-09”, “ASC 606”, or the “new standard”), Revenue from Contracts with Customers , using the modified retrospective method for open contracts. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting practices under ASC 605 (“legacy GAAP”). The adoption of the new standard did not result in a material impact to our systems, processes or internal controls. The largest impact of the adoption of the new standard is related to the treatment of contract acquisition costs, which were previously expensed as incurred; however, under the new standard, these costs are now deferred and amortized over the expected customer life. The adoption also resulted in additional disclosures around the nature and timing of the Company’s performance obligations, deferred revenue contract liabilities and deferred contract cost assets, as well as practical expedients used by the Company in applying the new five-step revenue model. During the six months ended June 30, 2018, we recorded a pre-tax cumulative effect adjustment of $4.1 million related to the adoption, which increased retained earnings. Of this amount, $1.8 million was related to the increase in the value of our partnership interests as a result of the adoption of ASC 606 by our equity method partnerships. For a more complete discussion of our investments, refer to Note 4. Nature of Contracts with Customers Our revenue contracts with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer. The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the contract and may include promotional discounts. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified. The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable. Revenue is recognized when or as performance obligations are satisfied by transferring service to the customer as described below. Disaggregation of Revenue The following table summarizes revenue from contracts with customers for the quarters and six months ended June 30, 2018 and 2017: Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Operating Revenues Commercial and carrier: Data and transport services (includes VoIP) $ 87,603 $ 51,528 $ 173,628 $ 102,432 Voice services 51,322 22,199 103,483 44,225 Other 14,237 4,931 26,100 8,833 153,162 78,658 303,211 155,490 Consumer: Broadband (VoIP and Data) 62,545 28,296 125,656 56,689 Video services 22,065 22,314 44,899 45,418 Voice services 51,616 12,860 103,678 25,902 136,226 63,470 274,233 128,009 Subsidies 20,979 10,392 46,234 20,964 Network access 37,338 14,138 77,053 28,691 Other products and services 2,516 3,292 5,529 6,731 Total operating revenues $ 350,221 $ 169,950 $ 706,260 $ 339,885 Service revenue is recognized over time, consistent with the transfer of service, as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the Company performs. Contract Assets and Liabilities The following table provides information about receivables, contract assets and contract liabilities from our revenue contracts with customers: Quarter Ended At (In thousands) June 30, 2018 Adoption Accounts receivable, net $ 122,411 $ 121,745 Contract assets 7,408 1,804 Contract liabilities 49,039 46,368 Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relate to sales commissions. These costs are deferred and amortized over the expected customer life. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contract is not commensurate with the commission on the initial contract. During the quarter and six months ended June 30, 2018, the Company recognized expense of $0.6 million and $1.0 million, respectively, related to deferred contract acquisition costs. Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which under the new standard are generally deferred and amortized over the expected customer life as the option to renew without paying an upfront fee provides the customer with a material right. During the quarter and six months ended June 30, 2018, the Company recognized revenue of $83.8 million and $171.1 million, respectively, related to deferred revenues. A receivable is recognized in the period the Company provides goods or services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30 to 60 days. Performance Obligations ASC 606 requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of June 30, 2018. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606: 1. The performance obligation is part of a contract that has an original expected duration of one year or less. 2. Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18. Financial Statement Impact of Adopting ASC 606 As described above, the change in accounting for contract acquisition costs was the largest impact to the Company upon adoption of ASC 606. On an ongoing basis, a significant amount of commission costs, which were historically expensed as incurred, will now be deferred and amortized over the expected customer life under the new standard. The accretive benefit to operating income anticipated in 2018 is expected to moderate in future years as the basis of the amortization builds. For the quarter and six months ended June 30, 2018, we recognized commission expense of $0.6 million and $1.0 million, respectively, under the new standard as compared to $3.6 million and $6.6 million, respectively, for the same periods under legacy GAAP. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Effective January 1, 2018, we adopted ASU 2014-09 (also known as ASC 606). 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. For additional information on the new standard and the impact to our results of operations, refer to the Revenue Recognition section above. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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. We adopted ASU 2017-07 prospectively for the capitalization of the service cost component of the net periodic benefit cost. ASU 2017-07 was applied retrospectively using the practical expedient for the presentation of the other components of net periodic benefit cost in the statement of operations and as a result, we reclassified $(0.8) million and $(0.4) million of benefit from cost of services and products and $(0.2) million and $(0.1) million of benefit from selling, general and administrative expenses into other, net within non-operating income (expense) for the quarter and six months ended June 30, 2017, respectively. See Note 9 for the amount of each component of net periodic pension and post-retirement benefit costs. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures and is not expected to have a material impact on our testing of goodwill. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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. The adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. Effective January 1, 2018, we adopted ASU 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 adoption of this guidance did not have a material impact on our condensed consolidated financial statements and related disclosures. In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07 (“ASU 2018-07”), Improvements to Nonemployee Share-Based Payment Accounting . ASU 2018-07 expands the scope of Topic 718, Compensation – Stock Compensation, to include share-based payment transactions for acquiring goods and services from nonemployees to align the accounting guidance for both employee and nonemployee share-based transactions. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU No. 2018-02 (“ASU 2018-02”), Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income . ASU 2018-02 provides an option to allow reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures and do not expect to make the optional election for reclassification of stranded tax effects from accumulated other comprehensive income (loss) to retained earnings. In August 2017, the FASB issued ASU Update No. 2017-12 (“ASU 2017-12”), Targeted Improvements to Accounting for Hedging Activities . ASU 2017-12 amends current guidance on accounting for hedges mainly to align more closely an entity’s risk management activities and financial reporting relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. In addition, amendments in ASU 2017-12 simplify the application of hedge accounting by allowing more time to prepare hedge documentation and allowing effectiveness assessments to be performed on a qualitative basis after hedge inception. The new guidance is effective for annual and interim periods beginning after December 15, 2018 with early adoption permitted. We plan to adopt ASU 2017-12 as of January 1, 2019 and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 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 have not yet made a decision on the timing of adoption and are currently evaluating the impact this update will have on our condensed consolidated financial statements and related disclosures. In February 2016, the FASB issued ASU 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 plan to adopt this update effective January 1, 2019 and are continuing to assess the potential impact of this update on our condensed consolidated financial statements and related disclosures. |
Reclassifications | Reclassifications Certain amounts in our 2017 condensed consolidated financial statements have been reclassified to conform to the current year presentation. In accordance with the adoption of ASU 2017-07, as described above, certain components of net periodic benefit cost were reclassified from operating expense to non-operating income (expense) in our condensed consolidated statement of operations. |
SUMMARY OF SIGNIFICANT ACCOUN20
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Schedule of disaggregation of revenue | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Operating Revenues Commercial and carrier: Data and transport services (includes VoIP) $ 87,603 $ 51,528 $ 173,628 $ 102,432 Voice services 51,322 22,199 103,483 44,225 Other 14,237 4,931 26,100 8,833 153,162 78,658 303,211 155,490 Consumer: Broadband (VoIP and Data) 62,545 28,296 125,656 56,689 Video services 22,065 22,314 44,899 45,418 Voice services 51,616 12,860 103,678 25,902 136,226 63,470 274,233 128,009 Subsidies 20,979 10,392 46,234 20,964 Network access 37,338 14,138 77,053 28,691 Other products and services 2,516 3,292 5,529 6,731 Total operating revenues $ 350,221 $ 169,950 $ 706,260 $ 339,885 |
Schedule of receivables, contract assets and contract liabilities | Quarter Ended At (In thousands) June 30, 2018 Adoption Accounts receivable, net $ 122,411 $ 121,745 Contract assets 7,408 1,804 Contract liabilities 49,039 46,368 |
ACQUISITIONS AND DIVESTITURES (
ACQUISITIONS AND DIVESTITURES (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
FairPoint Communications, Inc | |
Summary of purchase price allocation | (In thousands) Cash and cash equivalents $ 56,980 Accounts receivable 72,206 Other current assets 22,012 Assets held for sale 20,843 Property, plant and equipment 1,047,000 Intangible assets 303,180 Other long-term assets 2,685 Total assets acquired 1,524,906 Current liabilities 123,109 Liabilities held for sale 443 Pension and other post-retirement obligations 219,298 Deferred income taxes 96,632 Other long-term liabilities 13,502 Total liabilities assumed 452,984 Net fair value of assets acquired 1,071,922 Goodwill 278,396 Total consideration transferred $ 1,350,318 |
Schedule of unaudited pro forma results | Quarter Ended Six Months Ended June 30, June 30, (Unaudited; in thousands, except per share amounts) 2017 2017 Operating revenues $ $ Income from operations $ $ Net loss $ $ Less: net loss attributable to noncontrolling interest Net loss attributable to common stockholders $ $ Net loss per common share-basic and diluted $ (0.02) $ (0.14) |
Peoples | |
Summary of assets and liabilities sold | June 30, December 31, (In thousands) 2018 2017 Current assets $ 252 $ 227 Property, plant and equipment 4,369 4,254 Goodwill 16,098 16,829 Total assets $ 20,719 $ 21,310 Current liabilities $ 233 $ 701 Deferred taxes 148 302 Total liabilities $ 381 $ 1,003 |
EARNINGS (LOSS) PER SHARE (Tabl
EARNINGS (LOSS) PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
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) 2018 2017 2018 2017 Net loss $ (10,560) $ (2,626) $ (21,758) $ (6,331) Less: net income (loss) attributable to noncontrolling interest 83 102 183 82 Loss attributable to common shareholders before allocation of earnings to participating securities (10,643) (2,728) (21,941) (6,413) Less: earnings allocated to participating securities 221 115 442 164 Net loss attributable to common shareholders, after earnings allocated to participating securities $ (10,864) $ (2,843) $ (22,383) $ (6,577) Weighted-average number of common shares outstanding 70,598 50,412 70,598 50,411 Net loss per common share attributable to common shareholders - basic and diluted $ (0.15) $ (0.06) $ (0.32) $ (0.13) |
INVESTMENTS (Tables)
INVESTMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
INVESTMENTS | |
Schedule of investments | June 30, December 31, (In thousands) 2018 2017 Cash surrender value of life insurance policies $ 2,315 $ 2,272 Investments at cost: 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 9,050 9,105 Other 298 343 Equity method investments: GTE Mobilnet of Texas RSA #17 Limited Partnership (20.51% interest) 17,344 17,375 Pennsylvania RSA 6(I) Limited Partnership (16.67% interest) 7,546 7,300 Pennsylvania RSA 6(II) Limited Partnership (23.67% interest) 29,152 28,063 Totals $ 110,105 $ 108,858 |
Summary of combined unaudited results of operations and financial position of equity investment | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Total revenues $ 85,767 $ 89,811 $ 167,710 $ 169,832 Income from operations 25,149 24,518 49,647 45,806 Net income before taxes 24,837 24,145 49,041 45,042 Net income 24,837 24,145 49,041 45,042 June 30, December 31, (In thousands) 2018 2017 Current assets $ 76,641 $ 78,782 Non-current assets 97,485 95,959 Current liabilities 21,455 22,472 Non-current liabilities 51,107 51,463 Partnership equity 101,564 100,806 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
FAIR VALUE MEASUREMENTS | |
Schedule of interest rate swap assets and liabilities measured at fair value on a recurring basis | As of June 30, 2018 Quoted Prices Significant In Active Other Significant Markets for Observable Unobservable Identical Assets Inputs Inputs (In thousands) Total (Level 1) (Level 2) (Level 3) Current interest rate swap assets $ 211 $ — $ 211 $ — Long-term interest rate swap assets 10,087 — 10,087 — Total $ 10,298 $ — $ 10,298 $ — As of December 31, 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 $ 1,256 $ — $ 1,256 $ — Current interest rate swap liabilities (27) — (27) — Long-term interest rate swap liabilities (1,761) — (1,761) — Total $ (532) $ — $ (532) $ — |
Schedule of other financial instruments that are not carried at fair value but which require fair value disclosure | As of June 30, 2018 As of December 31, 2017 (In thousands) Carrying Value Fair Value Carrying Value Fair Value Investments, equity basis $ 54,042 n/a $ 52,738 n/a Investments, at cost $ 53,748 n/a $ 53,848 n/a Long-term debt, excluding capital leases $ 2,317,227 $ 2,256,634 $ 2,331,400 $ 2,253,545 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
LONG-TERM DEBT | |
Schedule of components of long-term debt, presented net of unamortized discounts | June 30, December 31, (In thousands) 2018 2017 Senior secured credit facility: Term loans, net of discounts of $7,674 and $8,344 at June 30, 2018 and December 31, 2017, respectively $ 1,804,563 $ 1,813,069 Revolving loan 16,000 22,000 6.50% Senior notes due 2022, net of discount of $3,336 and $3,669 at June 30, 2018 and December 31, 2017, respectively 496,664 496,331 Capital leases 36,843 23,890 2,354,070 2,355,290 Less: current portion of long-term debt and capital leases (32,570) (29,696) Less: deferred debt issuance costs (12,748) (14,080) Total long-term debt $ 2,308,752 $ 2,311,514 |
DERIVATIVE FINANCIAL INSTRUME26
DERIVATIVE FINANCIAL INSTRUMENTS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
DERIVATIVE FINANCIAL INSTRUMENTS | |
Schedule of outstanding interest rate swaps | The following interest rate swaps were outstanding as of June 30, 2018: Notional (In thousands) Amount 2018 Balance Sheet Location Fair Value Cash Flow Hedges: Fixed to 1-month floating LIBOR (with floor) $ Prepaid expenses and other current assets $ Fixed to 1-month floating LIBOR (with floor) $ Other assets Series of forward starting fixed to 1-month floating LIBOR (with floor) $ Other assets Total Fair Values $ The following interest rate swaps were outstanding as of December 31, 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 Forward starting fixed to 1-month floating LIBOR (with floor) $ Other assets Series of forward starting 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) 2018 2017 2018 2017 Unrealized gain (loss) recognized in AOCI, pretax $ 5,256 $ (4,039) $ 11,679 $ (4,130) Deferred losses reclassified from AOCI to interest expense $ (1,446) $ (396) $ (1,802) $ (729) Gain (loss) recognized in interest expense from ineffectiveness $ 319 $ (1,535) $ 1,349 $ (1,300) |
EQUITY (Tables)
EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
EQUITY | |
Summary of total compensation costs recognized for share-based payments | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Restricted stock $ 979 $ $ 1,414 $ 964 Performance shares 559 802 466 Total $ 1,538 $ $ 2,216 $ 1,430 |
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, 2018 102,181 $ 23.32 77,528 $ 21.46 Shares granted 478,210 $ 12.45 — $ — Shares forfeited, cancelled or retired (1,851) $ 22.93 (1,137) $ 21.80 Non-vested shares outstanding - June 30, 2018 578,540 $ 14.34 76,391 $ 21.46 |
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, 2017 $ (48,464) $ 381 $ (48,083) Other comprehensive income before reclassifications — 8,621 8,621 Amounts reclassified from accumulated other comprehensive loss 1,876 1,331 3,207 Net current period other comprehensive income 1,876 9,952 11,828 Balance at June 30, 2018 $ (46,588) $ 10,333 $ (36,255) |
Summary of reclassifications from accumulated other comprehensive loss | Quarter Ended June 30, Six Months Ended June 30, Affected Line Item in the (In thousands) 2018 2017 2018 2017 Statement of Income Amortization of pension and post-retirement items: Prior service credit $ $ $ $ (a) Actuarial loss (a) Settlement 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-R28
PENSION PLAN AND OTHER POST-RETIREMENT BENEFITS (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Defined Benefit Plans | |
Post-retirement benefit obligation | |
Schedule of the components of net periodic pension cost | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Service cost $ $ $ $ 161 Interest cost 7,180 Expected return on plan assets (9,958) Net amortization loss 3,387 Net prior service credit amortization (193) Settlement loss — — Curtailment gain — (1,337) — (1,337) Net periodic pension cost (benefit) $ $ $ $ (760) |
Post-retirement Benefit Obligations | |
Post-retirement benefit obligation | |
Schedule of the components of net periodic pension cost | Quarter Ended Six Months Ended June 30, June 30, (In thousands) 2018 2017 2018 2017 Service cost $ $ 124 $ $ 247 Interest cost 396 791 Expected return on plan assets (29) (57) Net amortization gain (21) (44) (42) (87) Net prior service credit amortization (130) (260) Net periodic post-retirement benefit cost $ $ 317 $ $ 634 |
CONDENSED CONSOLIDATING FINAN29
CONDENSED CONSOLIDATING FINANCIAL INFORMATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | |
Schedule of condensed consolidating balance sheets | Condensed Consolidating Balance Sheets (In thousands) June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 10,226 $ 415 $ 1 $ — $ 10,642 Accounts receivable, net — — 111,555 10,626 (14) 122,167 Income taxes receivable 2,822 9,604 2,319 — (2,354) 12,391 Prepaid expenses and other current assets — 211 43,369 147 — 43,727 Assets held for sale — — — 20,719 — 20,719 Total current assets 2,822 20,041 157,658 31,493 (2,368) 209,646 Property, plant and equipment, net — — 1,919,360 66,958 — 1,986,318 Intangibles and other assets: Investments — 8,673 101,432 — — 110,105 Investments in subsidiaries 3,627,014 3,512,890 19,100 — (7,159,004) — Goodwill — — 985,191 50,083 — 1,035,274 Customer relationships, net — — 262,853 — — 262,853 Other intangible assets — — 2,951 9,087 — 12,038 Advances due to/from affiliates, net — 2,392,705 635,449 95,453 (3,123,607) — Deferred income taxes 26,933 — — — (26,933) — Other assets 2,938 10,137 17,468 35 — 30,578 Total assets $ 3,659,707 $ 5,944,446 $ 4,101,462 $ 253,109 $ (10,311,912) $ 3,646,812 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 23,057 $ — $ — $ 23,057 Advance billings and customer deposits — — 44,823 1,499 — 46,322 Dividends payable 27,602 — — — — 27,602 Accrued compensation — — 54,655 807 — 55,462 Accrued interest — 8,649 727 — — 9,376 Accrued expense 20 14 71,746 4,700 (2,368) 74,112 Current portion of long term debt and capital lease obligations — 18,350 14,054 166 — 32,570 Liabilities held for sale — — — 381 — 381 Total current liabilities 27,622 27,013 209,062 7,553 (2,368) 268,882 Long-term debt and capital lease obligations — 2,286,130 22,289 333 — 2,308,752 Advances due to/from affiliates, net 3,123,607 — — — (3,123,607) — Deferred income taxes — 4,288 213,165 21,220 (26,933) 211,740 Pension and postretirement benefit obligations — — 302,235 16,071 — 318,306 Other long-term liabilities — — 23,867 949 — 24,816 Total liabilities 3,151,229 2,317,431 770,618 46,126 (3,152,908) 3,132,496 Shareholders’ equity: Common Stock 713 — 17,411 30,000 (47,411) 713 Other shareholders’ equity 507,765 3,627,015 3,307,595 176,983 (7,111,593) 507,765 Total Consolidated Communications Holdings, Inc. shareholders’ equity 508,478 3,627,015 3,325,006 206,983 (7,159,004) 508,478 Noncontrolling interest — — 5,838 — — 5,838 Total shareholders’ equity 508,478 3,627,015 3,330,844 206,983 (7,159,004) 514,316 Total liabilities and shareholders’ equity $ 3,659,707 $ 5,944,446 $ 4,101,462 $ 253,109 $ (10,311,912) $ 3,646,812 Condensed Consolidating Balance Sheet (In thousands) December 31, 2017 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated ASSETS Current assets: Cash and cash equivalents $ — $ 8,919 $ 6,738 $ — $ — $ 15,657 Accounts receivable, net — — 114,303 7,701 (476) 121,528 Income taxes receivable 20,275 — 1,571 — — 21,846 Prepaid expenses and other current assets — — 33,188 130 — 33,318 Assets held for sale — — — 21,310 — 21,310 Total current assets 20,275 8,919 155,800 29,141 (476) 213,659 Property, plant and equipment, net — — 1,972,190 65,416 — 2,037,606 Intangibles and other assets: Investments — 8,495 100,363 — — 108,858 Investments in subsidiaries 3,643,930 2,133,049 35,374 — (5,812,353) — Goodwill — — 971,851 66,181 — 1,038,032 Customer relationships, net — — 293,300 — — 293,300 Other intangible assets — — 4,396 9,087 — 13,483 Advances due to/from affiliates, net — 2,441,690 555,332 92,615 (3,089,637) — Deferred income taxes 21,244 — — — (21,244) — Other assets — 1,307 12,844 37 — 14,188 Total assets $ 3,685,449 $ 4,593,460 $ 4,101,450 $ 262,477 $ (8,923,710) $ 3,719,126 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ — $ — $ 24,143 $ — $ — $ 24,143 Advance billings and customer deposits — — 41,026 1,500 — 42,526 Dividends payable 27,418 — — — — 27,418 Accrued compensation — — 48,795 975 — 49,770 Accrued interest — 8,824 519 — — 9,343 Accrued expense 107 504 70,976 930 (476) 72,041 Current portion of long term debt and capital lease obligations — 18,350 11,150 196 — 29,696 Liabilities held for sale — — — 1,003 — 1,003 Total current liabilities 27,525 27,678 196,609 4,604 (476) 255,940 Long-term debt and capital lease obligations — 2,298,970 12,139 405 — 2,311,514 Advances due to/from affiliates, net 3,089,637 — — — (3,089,637) — Deferred income taxes — 750 209,116 21,098 (21,244) 209,720 Pension and postretirement benefit obligations — — 315,129 19,064 — 334,193 Other long-term liabilities — 1,761 31,030 1,026 — 33,817 Total liabilities 3,117,162 2,329,159 764,023 46,197 (3,111,357) 3,145,184 Shareholders’ equity: Common Stock 708 — 17,411 30,000 (47,411) 708 Other shareholders’ equity 567,579 2,264,301 3,314,361 186,280 (5,764,942) 567,579 Total Consolidated Communications Holdings, Inc. shareholders’ equity 568,287 2,264,301 3,331,772 216,280 (5,812,353) 568,287 Noncontrolling interest — — 5,655 — — 5,655 Total shareholders’ equity 568,287 2,264,301 3,337,427 216,280 (5,812,353) 573,942 Total liabilities and shareholders’ equity $ 3,685,449 $ 4,593,460 $ 4,101,450 $ 262,477 $ (8,923,710) $ 3,719,126 |
Schedule of condensed consolidating statements of operations | Condensed Consolidating Statements of Operations (In thousands) Quarter Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 338,867 $ 14,500 $ (3,146) $ 350,221 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 150,337 4,054 (3,033) 151,358 Selling, general and administrative expenses 657 — 77,361 3,223 (113) 81,128 Acquisition and other transaction costs 899 — — — — 899 Depreciation and amortization — — 109,333 2,408 — 111,741 Operating income (loss) (1,556) — 1,836 4,815 — 5,095 Other income (expense): Interest expense, net of interest income (27) (33,376) 521 43 — (32,839) Intercompany interest income (expense) — 14,727 (14,706) (21) — — Investment income — — 12,535 — — 12,535 Equity in earnings of subsidiaries, net (9,440) 4,348 4,347 — 745 — Other, net — — 610 30 — 640 Income (loss) before income taxes (11,023) (14,301) 5,143 4,867 745 (14,569) Income tax expense (benefit) (380) (4,861) (37) 1,269 — (4,009) Net income (loss) (10,643) (9,440) 5,180 3,598 745 (10,560) Less: net income attributable to noncontrolling interest — — 83 — — 83 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (10,643) $ (9,440) $ 5,097 $ 3,598 $ 745 $ (10,643) Total comprehensive income (loss) attributable to common shareholders $ $ $ $ $ $ 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) — — 71,564 2,649 (3,077) 71,136 Selling, general and administrative expenses 920 — 32,112 3,065 (111) 35,986 Acquisition and other transaction costs 1,793 — — — — 1,793 Depreciation and amortization — — 38,039 2,444 — 40,483 Operating income (loss) (2,713) — 17,357 5,908 — 20,552 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 — 2 945 198 — 1,145 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 $ $ $ $ $ $ Six Months Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Eliminations Consolidated Net revenues $ — $ — $ 683,178 $ 29,377 $ (6,295) $ 706,260 Operating expenses: Cost of services and products (exclusive of depreciation and amortization) — — 302,099 8,255 (6,080) 304,274 Selling, general and administrative expenses 1,238 — 159,262 6,461 (215) 166,746 Acquisition and other transaction costs 1,630 — — — — 1,630 Depreciation and amortization — — 214,621 5,019 — 219,640 Operating income (loss) (2,868) — 7,196 9,642 — 13,970 Other income (expense): Interest expense, net of interest income (53) (66,308) 713 93 — (65,555) Intercompany interest income (expense) — 29,454 (29,418) (36) — — Investment income — 178 20,146 — — 20,324 Equity in earnings of subsidiaries, net (19,751) 7,323 4,770 — 7,658 — Other, net — — 1,197 49 — 1,246 Income (loss) before income taxes (22,672) (29,353) 4,604 9,748 7,658 (30,015) Income tax expense (benefit) (731) (9,602) (477) 2,553 — (8,257) Net income (loss) (21,941) (19,751) 5,081 7,195 7,658 (21,758) Less: net income attributable to noncontrolling interest — — 183 — — 183 Net income (loss) attributable to Consolidated Communications Holdings, Inc. $ (21,941) $ (19,751) $ 4,898 $ 7,195 $ 7,658 $ (21,941) 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) — — 143,179 5,145 (6,156) 142,168 Selling, general and administrative expenses 1,263 10 64,657 6,172 (218) 71,884 Acquisition and other transaction costs 3,524 — — — — 3,524 Depreciation and amortization — — 77,559 5,119 — 82,678 Operating income (loss) (4,787) (10) 32,509 11,919 — 39,631 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 — 3 460 117 — 580 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 $ $ $ $ $ $ |
Schedule of condensed consolidating statements of cash flows | Condensed Consolidating Statements of Cash Flows (In thousands) Six Months Ended June 30, 2018 Parent Subsidiary Issuer Guarantors Non-Guarantors Consolidated Net cash (used in) provided by operating activities $ 8,765 $ (32,503) $ 207,850 $ 10,259 $ 194,371 Cash flows from investing activities: Purchases of property, plant and equipment — — (118,623) (6,217) (124,840) Proceeds from sale of assets — — 1,439 4 1,443 Proceeds from sale of investments — — 233 — 233 Net cash used in investing activities — — (116,951) (6,213) (123,164) Cash flows from financing activities: Proceeds from issuance of long-term debt — 76,000 — — 76,000 Payment of capital lease obligation — — (5,924) (103) (6,027) Payment on long-term debt — (91,176) — — (91,176) Dividends on common stock (55,019) — — — (55,019) Transactions with affiliates, net 46,254 48,986 (91,298) (3,942) — Net cash provided by (used in) financing activities (8,765) 33,810 (97,222) (4,045) (76,222) Increase (decrease) in cash and cash equivalents — 1,307 (6,323) 1 (5,015) Cash and cash equivalents at beginning of period — 8,919 6,738 — 15,657 Cash and cash equivalents at end of period $ — $ 10,226 $ 415 $ 1 $ 10,642 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 |
SUMMARY OF SIGNIFICANT ACCOUN30
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Business (Details) | Jun. 30, 2018stateitemmi |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Number of states | state | 24 |
Number of fiber route miles | mi | 36,000 |
Number of voice connections | 941,000 |
Number of data connections | 787,000 |
Number of video connections | 98,000 |
SUMMARY OF SIGNIFICANT ACCOUN31
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details) - ASC 606 Adjustments - ASU 2014-09 $ in Millions | Jun. 30, 2018USD ($) |
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |
Cumulative effect adjustment | $ 4.1 |
Adjustment of partnership interests | $ 1.8 |
SUMMARY OF SIGNIFICANT ACCOUN32
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jan. 01, 2018 | |
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | $ 350,221 | $ 706,260 | |||
Receivables, contract assets and contract liabilities | |||||
Accounts receivable, net | 122,411 | 122,411 | $ 121,745 | ||
Contract assets | 7,408 | 7,408 | 1,804 | ||
Contract liabilities | 49,039 | 49,039 | $ 46,368 | ||
Recognized expenses related to deferred contract acquisition costs. | 600 | 1,000 | |||
Recognized revenue related to deferred revenue | 83,800 | $ 171,100 | |||
Revenue, Practical Expedient, Remaining Performance Obligation | true | ||||
Minimum | |||||
Receivables, contract assets and contract liabilities | |||||
Payment term | 30 days | ||||
Maximum | |||||
Receivables, contract assets and contract liabilities | |||||
Payment term | 60 days | ||||
Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | $ 169,950 | $ 339,885 | |||
Receivables, contract assets and contract liabilities | |||||
Recognized expenses related to deferred contract acquisition costs. | 3,600 | $ 6,600 | |||
Commercial and carrier | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 153,162 | 303,211 | |||
Commercial and carrier | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 78,658 | 155,490 | |||
Commercial and carrier - Data and transport services (including VoIP) | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 87,603 | 173,628 | |||
Commercial and carrier - Data and transport services (including VoIP) | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 51,528 | 102,432 | |||
Commercial and carrier - Voice services | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 51,322 | 103,483 | |||
Commercial and carrier - Voice services | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 22,199 | 44,225 | |||
Commercial and carrier - Other | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 14,237 | 26,100 | |||
Commercial and carrier - Other | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 4,931 | 8,833 | |||
Consumer | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 136,226 | 274,233 | |||
Consumer | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 63,470 | 128,009 | |||
Consumer - Broadband (VoIP and Data) | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 62,545 | 125,656 | |||
Consumer - Broadband (VoIP and Data) | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 28,296 | 56,689 | |||
Consumer - Video services | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 22,065 | 44,899 | |||
Consumer - Video services | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 22,314 | 45,418 | |||
Consumer - Voice services | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 51,616 | 103,678 | |||
Consumer - Voice services | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 12,860 | 25,902 | |||
Subsidies | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 20,979 | 46,234 | |||
Subsidies | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 10,392 | 20,964 | |||
Network access | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 37,338 | 77,053 | |||
Network access | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | 14,138 | 28,691 | |||
Other products and services | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | $ 2,516 | $ 5,529 | |||
Other products and services | Before 606 | |||||
Disaggregation of Revenue [Line Items] | |||||
Total operating revenues | $ 3,292 | $ 6,731 |
SUMMARY OF SIGNIFICANT ACCOUN33
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cost of services and products | $ 151,358 | $ 71,136 | $ 304,274 | $ 142,168 |
Selling, general and administrative expenses | $ 81,128 | 35,986 | $ 166,746 | 71,884 |
Adjustments | ASU 2017-07 | ||||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||||
Cost of services and products | (800) | (400) | ||
Selling, general and administrative expenses | $ (200) | $ (100) |
ACQUISITIONS AND DIVESTITURES -
ACQUISITIONS AND DIVESTITURES - (Details) $ / shares in Units, $ in Thousands | Jul. 03, 2017USD ($)statemi$ / sharesshares | Jun. 30, 2018USD ($)statemi$ / shares | Jun. 30, 2017USD ($)$ / shares | Jun. 30, 2018USD ($)statemi$ / shares | Jun. 30, 2017USD ($)$ / shares | Dec. 31, 2017USD ($)$ / shares | Dec. 31, 2016USD ($) | Dec. 14, 2016USD ($) |
Unaudited Pro Forma Results | ||||||||
Number of states | state | 24 | 24 | ||||||
Number of fiber route miles | mi | 36,000 | 36,000 | ||||||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |||||
Transaction costs | $ 899 | $ 1,793 | $ 1,630 | $ 3,524 | ||||
Estimated purchase price allocation | ||||||||
Goodwill | 1,035,274 | 1,035,274 | $ 1,038,032 | |||||
Incremental Term Loan Facility | ||||||||
Unaudited Pro Forma Results | ||||||||
Aggregate principal amount | $ 935,000 | $ 935,000 | ||||||
FairPoint Communications, Inc | ||||||||
Unaudited Pro Forma Results | ||||||||
Operating revenues | 369,089 | 740,932 | ||||||
Income from operations | 20,735 | 31,867 | ||||||
Net loss | (1,400) | (9,948) | ||||||
Less: net loss attributable to noncontrolling interest | 102 | 82 | ||||||
Net loss attributable to common stockholders | $ (1,502) | $ (10,030) | ||||||
Net loss per common share-basic and diluted (in dollars per share) | $ / shares | $ (0.02) | $ (0.14) | ||||||
Number of states | state | 17 | |||||||
Number of fiber route miles | mi | 22,000 | |||||||
Number of route miles of fiber network in New England | mi | 17,000 | |||||||
Business combination exchange ratio | 0.7300 | |||||||
Purchase consideration at acquisition | $ 431,000 | |||||||
Assumption of debt at acquisition | $ 919,300 | |||||||
Number of shares issued on date of merger | shares | 20,100,000 | |||||||
Warrants outstanding | shares | 2,615,153 | |||||||
Number of shares eligible for each warrant | shares | 1 | |||||||
Exercise price of warrants | $ / shares | $ 66.86 | |||||||
Transaction costs | $ 1,700 | $ 3,200 | ||||||
Net carrying value of assets held for sale | 20,400 | 20,400 | ||||||
Estimated purchase price allocation | ||||||||
Cash and cash equivalents | $ 56,980 | |||||||
Accounts receivable | 72,206 | |||||||
Other current assets | 22,012 | |||||||
Assets held for sale | 20,843 | |||||||
Property, plant and equipment | 1,047,000 | |||||||
Intangible assets | 303,180 | |||||||
Other long-term assets | 2,685 | |||||||
Total assets acquired | 1,524,906 | |||||||
Current liabilities | 123,109 | |||||||
Liabilities held for sale | 443 | |||||||
Pension and other post-retirement obligations | 219,298 | |||||||
Deferred income taxes | 96,632 | |||||||
Other long-term liabilities | 13,502 | |||||||
Total liabilities assumed | 452,984 | |||||||
Net fair value assets acquired | 1,071,922 | |||||||
Goodwill | 278,396 | |||||||
Total consideration transferred | $ 1,350,318 | |||||||
FairPoint Communications, Inc | Customer Relationships | ||||||||
Unaudited Pro Forma Results | ||||||||
Identifiable intangible assets acquired | 300,300 | $ 300,300 | ||||||
FairPoint Communications, Inc | Customer Relationships | Minimum | ||||||||
Unaudited Pro Forma Results | ||||||||
Estimated useful life | 7 years | |||||||
FairPoint Communications, Inc | Customer Relationships | Maximum | ||||||||
Unaudited Pro Forma Results | ||||||||
Estimated useful life | 11 years | |||||||
FairPoint Communications, Inc | Tradenames | ||||||||
Unaudited Pro Forma Results | ||||||||
Identifiable intangible assets acquired | 1,100 | $ 1,100 | ||||||
Estimated useful life | 6 months | |||||||
FairPoint Communications, Inc | Non-compete agreements | ||||||||
Unaudited Pro Forma Results | ||||||||
Identifiable intangible assets acquired | 1,800 | $ 1,800 | ||||||
Estimated useful life | 1 year | |||||||
FairPoint Communications, Inc | Adjustments | ||||||||
Estimated purchase price allocation | ||||||||
Property, plant and equipment | (6,600) | $ (6,600) | ||||||
Deferred income taxes | (900) | (900) | ||||||
Other long-term liabilities | (2,400) | (2,400) | ||||||
Goodwill | 2,400 | 2,400 | ||||||
Working capital | $ 900 | $ 900 | ||||||
FairPoint Communications, Inc | Incremental Term Loan Facility | ||||||||
Unaudited Pro Forma Results | ||||||||
Aggregate principal amount | $ 935,000 |
ACQUISITIONS AND DIVESTITURES35
ACQUISITIONS AND DIVESTITURES - Divestiture (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | |||
Nov. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Divestitures | ||||||
Current assets | $ 20,719 | $ 20,719 | $ 21,310 | |||
Current liabilities | 381 | 381 | 1,003 | |||
Income tax benefit | (4,009) | $ (1,399) | (8,257) | $ (3,573) | ||
Peoples | Disposal Group, Held-for-sale, Not Discontinued Operations | ||||||
Divestitures | ||||||
Current assets | 252 | 252 | 227 | |||
Property, plant, and equipment | 4,369 | 4,369 | 4,254 | |||
Goodwill | 16,098 | 16,098 | 16,829 | |||
Total assets | 20,719 | 20,719 | 21,310 | |||
Current liabilities | 233 | 233 | 701 | |||
Deferred taxes | 148 | 148 | 302 | |||
Total liabilities | $ 381 | $ 381 | $ 1,003 | |||
Annual revenue from divestitures (as a percentage) | 1.00% | |||||
Proceeds from business dispositions | $ 21,000 |
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, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Basic and diluted earnings per share attributable to common shareholders | ||||
Net loss | $ (10,560) | $ (2,626) | $ (21,758) | $ (6,331) |
Less: net income attributable to noncontrolling interest | 83 | 102 | 183 | 82 |
Net loss attributable to common shareholders | (10,643) | (2,728) | (21,941) | (6,413) |
Less: earnings allocated to participating securities | 221 | 115 | 442 | 164 |
Net loss attributable to common shareholders, after earnings allocated to participating securities | $ (10,864) | $ (2,843) | $ (22,383) | $ (6,577) |
Weighted-average number of common shares outstanding | 70,598 | 50,412 | 70,598 | 50,411 |
Basic and diluted earnings (loss) per common share: | ||||
Net loss per common share attributable to common shareholders - basic and diluted (in dollars per share) | $ (0.15) | $ (0.06) | $ (0.32) | $ (0.13) |
Common shares excluded from computation of potentially dilutive shares because of anti-dilutive effect | 700 | 300 | 500 | 300 |
INVESTMENTS - Schedule of Inves
INVESTMENTS - Schedule of Investments (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($)item | |
Investments | |||||
Cash distributions received from partnerships treated as investments at cost | $ 6,100 | $ 3,700 | $ 9,100 | $ 5,300 | |
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 | $ 5,100 | $ 4,100 | $ 11,600 | $ 8,100 | |
Investments | |||||
Cash surrender value of life insurance policies | 2,315 | 2,315 | $ 2,272 | ||
Total | $ 110,105 | $ 110,105 | $ 108,858 | ||
GTE Mobilnet of South Texas Limited Partnership | |||||
Investments | |||||
Ownership percentage of investments at cost | 2.34% | 2.34% | 2.34% | ||
Investments | |||||
Investments at cost | $ 21,450 | $ 21,450 | $ 21,450 | ||
Pittsburgh SMSA Limited Partnership | |||||
Investments | |||||
Ownership percentage of investments at cost | 3.60% | 3.60% | 3.60% | ||
Investments | |||||
Investments at cost | $ 22,950 | $ 22,950 | $ 22,950 | ||
CoBank, ACB Stock | |||||
Investments | |||||
Investments at cost | 9,050 | 9,050 | 9,105 | ||
Other | |||||
Investments | |||||
Investments at cost | $ 298 | $ 298 | $ 343 | ||
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 | $ 17,344 | $ 17,344 | $ 17,375 | ||
Pennsylvania RSA 6(I) Limited Partnership | |||||
Investments | |||||
Ownership percentage of equity method investee | 16.67% | 16.67% | 16.67% | ||
Investments | |||||
Equity method investments | $ 7,546 | $ 7,546 | $ 7,300 | ||
Pennsylvania RSA 6(II) Limited Partnership | |||||
Investments | |||||
Ownership percentage of equity method investee | 23.67% | 23.67% | 23.67% | ||
Investments | |||||
Equity method investments | $ 29,152 | $ 29,152 | $ 28,063 | ||
ASC 606 Adjustments | ASU 2014-09 | |||||
Investments | |||||
Adjustment of partnership interests | $ 1,800 | $ 1,800 |
INVESTMENTS - Equity Method (De
INVESTMENTS - Equity Method (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Summary of unaudited summarized income statement information | |||||
Total revenues | $ 85,767 | $ 89,811 | $ 167,710 | $ 169,832 | |
Income from operations | 25,149 | 24,518 | 49,647 | 45,806 | |
Net income before taxes | 24,837 | 24,145 | 49,041 | 45,042 | |
Net income | 24,837 | $ 24,145 | 49,041 | $ 45,042 | |
Summary of unaudited summarized balance sheet information | |||||
Current assets | 76,641 | 76,641 | $ 78,782 | ||
Non-current assets | 97,485 | 97,485 | 95,959 | ||
Current liabilities | 21,455 | 21,455 | 22,472 | ||
Non-current liabilities | 51,107 | 51,107 | 51,463 | ||
Partnership equity | $ 101,564 | $ 101,564 | $ 100,806 |
FAIR VALUE MEASUREMENTS - Finan
FAIR VALUE MEASUREMENTS - Financial Instruments (Details) - Recurring - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Fair Value Measurements | ||
Current interest rate swap assets | $ 211 | |
Long-term interest rate swap assets | 10,087 | $ 1,256 |
Current interest rate swap liabilities | (27) | |
Long-term interest rate swap liabilities | (1,761) | |
Total | 10,298 | (532) |
Significant Other Observable Inputs (Level 2) | ||
Fair Value Measurements | ||
Current interest rate swap assets | 211 | |
Long-term interest rate swap assets | 10,087 | 1,256 |
Current interest rate swap liabilities | (27) | |
Long-term interest rate swap liabilities | (1,761) | |
Total | $ 10,298 | $ (532) |
FAIR VALUE MEASUREMENTS - Fin40
FAIR VALUE MEASUREMENTS - Financial Instruments Not Carried at FV (Details) - USD ($) $ in Thousands | Jun. 30, 2018 | Dec. 31, 2017 |
Carrying Value | ||
Fair Value Measurements | ||
Investments, equity basis | $ 54,042 | $ 52,738 |
Investments at cost | 53,748 | 53,848 |
Long-term debt | 2,317,227 | 2,331,400 |
Fair Value | ||
Fair Value Measurements | ||
Long-term debt | $ 2,256,634 | $ 2,253,545 |
LONG-TERM DEBT (Details)
LONG-TERM DEBT (Details) $ in Thousands | Aug. 01, 2018USD ($) | Jul. 03, 2017USD ($) | Dec. 21, 2016 | Jun. 08, 2015USD ($) | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($)item | Oct. 31, 2016USD ($) | Sep. 30, 2014USD ($) | Sep. 30, 2018 | Jun. 30, 2018USD ($) | Dec. 31, 2017USD ($) | Jul. 31, 2018USD ($) | Jul. 02, 2017USD ($) | Dec. 14, 2016USD ($) |
Debt | ||||||||||||||
Total long-term debt | $ 2,355,290 | $ 2,354,070 | $ 2,355,290 | |||||||||||
Less: current portion of long-term debt and capital leases | (29,696) | (32,570) | (29,696) | |||||||||||
Less: deferred debt issuance costs | (14,080) | (12,748) | (14,080) | |||||||||||
Total long-term debt | 2,311,514 | $ 2,308,752 | 2,311,514 | |||||||||||
Leverage ratio | 3 | 4.24 | ||||||||||||
Deferred debt issuance costs | 14,080 | $ 12,748 | 14,080 | |||||||||||
Dividend declared | $ 488,500 | |||||||||||||
Dividends available for distribution | $ 311,000 | |||||||||||||
Percentage of increase in available cash used in repayment of debt during dividend suspension period | 50.00% | |||||||||||||
Interest coverage ratio | 4.33 | |||||||||||||
Number of amendments | item | 2 | |||||||||||||
Remaining consolidated cash available for dividends and other restricted payments | $ 1,003,500 | |||||||||||||
Cumulative consolidated cash available to pay dividends and other restricted payments | $ 1,492,100 | |||||||||||||
Forecast | ||||||||||||||
Debt | ||||||||||||||
Dividend declared | $ 27,600 | |||||||||||||
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 | 496,331 | $ 496,664 | 496,331 | |||||||||||
Unamortized discount | 3,669 | $ 3,336 | $ 3,669 | |||||||||||
Aggregate principal amount | $ 300,000 | $ 200,000 | ||||||||||||
Leverage ratio | 4.30 | |||||||||||||
Interest rate (as a percent) | 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 | ||||||||||||
Number of times to be applied to fixed charges for calculating the deduction from cumulative consolidated net cash | 1.75 | |||||||||||||
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) | 5.11% | 4.58% | ||||||||||||
Senior secured credit facility - revolving loan | ||||||||||||||
Debt | ||||||||||||||
Total long-term debt | 22,000 | $ 16,000 | $ 22,000 | |||||||||||
Maximum borrowing capacity of credit facility | $ 110,000 | |||||||||||||
Amounts outstanding | 22,000 | 16,000 | 22,000 | |||||||||||
Stand-by letter of credit outstanding | $ 20,000 | 18,200 | $ 15,000 | |||||||||||
Available borrowing capacity | $ 75,800 | |||||||||||||
Senior secured credit facility - revolving loan | LIBOR | ||||||||||||||
Debt | ||||||||||||||
Amounts outstanding | 17,000 | 17,000 | ||||||||||||
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) | 3.00% | |||||||||||||
Senior secured credit facility - revolving loan | Alternate base rate | ||||||||||||||
Debt | ||||||||||||||
Amounts outstanding | 5,000 | 5,000 | ||||||||||||
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) | 2.00% | |||||||||||||
Term Loan | ||||||||||||||
Debt | ||||||||||||||
Total long-term debt | 1,813,069 | $ 1,804,563 | 1,813,069 | |||||||||||
Less: deferred debt issuance costs | $ (2,500) | |||||||||||||
Unamortized discount | 8,344 | 2,300 | 7,674 | 8,344 | ||||||||||
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 | LIBOR | ||||||||||||||
Debt | ||||||||||||||
Margin (as a percent) | 3.00% | |||||||||||||
Term Loan | LIBOR | Minimum | ||||||||||||||
Debt | ||||||||||||||
Margin (as a percent) | 1.00% | |||||||||||||
Incremental Term Loan Facility | ||||||||||||||
Debt | ||||||||||||||
Aggregate principal amount | $ 935,000 | $ 935,000 | ||||||||||||
Quarterly principal payments required | 2,340 | |||||||||||||
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 | Minimum | ||||||||||||||
Debt | ||||||||||||||
Margin (as a percent) | 1.00% | |||||||||||||
Incremental Term Loan Facility | LIBOR | Maximum | ||||||||||||||
Debt | ||||||||||||||
Margin (as a percent) | 3.00% | |||||||||||||
Capital lease agreements | ||||||||||||||
Debt | ||||||||||||||
Total long-term debt | $ 23,890 | $ 36,843 | $ 23,890 |
LONG-TERM DEBT - Capital Leases
LONG-TERM DEBT - Capital Leases (Details) $ in Millions | Jun. 30, 2018USD ($) |
Capital Leases | |
Present value of the minimum remaining lease commitments | $ 36.8 |
Capital lease commitments due and payable within the next 12 months | 14.2 |
Total remaining rental payments | 43.5 |
LATEL | |
Capital Leases | |
Total remaining rental payments | $ 2.4 |
DERIVATIVE FINANCIAL INSTRUME43
DERIVATIVE FINANCIAL INSTRUMENTS - Interest Rate Swaps (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($)item | Mar. 31, 2018USD ($)item | Jun. 30, 2017agreement | Jun. 30, 2018USD ($)item | Dec. 31, 2017USD ($) | |
Derivatives | |||||
Number of swap agreements that provide for the entity or the counterparties to post collateral | item | 0 | 0 | |||
Interest rate swaps | |||||
Derivatives | |||||
Total fair value, derivative asset (liability) | $ 10,298 | $ 10,298 | $ (532) | ||
Cash flow hedges | Interest rate swaps | |||||
Derivatives | |||||
Notional amount | $ 500,000 | ||||
Term of derivative contract | 5 years | 1 year | |||
Number of new counterparties | item | 5 | ||||
Number of new agreements | agreement | 4 | ||||
Maximum | Cash flow hedges | Interest rate swaps | |||||
Derivatives | |||||
Notional amount | 705,000 | 705,000 | |||
Minimum | Cash flow hedges | Interest rate swaps | |||||
Derivatives | |||||
Notional amount | 450,000 | 450,000 | |||
Other Assets. | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 550,000 | 550,000 | 600,000 | ||
Other assets | 1,434 | 1,434 | 873 | ||
Other Assets. | Cash flow hedges | Forward starting fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 600,000 | ||||
Other assets | 383 | ||||
Other Assets. | Cash flow hedges | Series of forward starting fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 2,010,000 | 2,010,000 | |||
Other assets | 8,653 | 8,653 | |||
Accrued Expense | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 150,000 | ||||
Accrued expense | (27) | ||||
Other long-term liabilities | Cash flow hedges | Series of forward starting fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 1,410,000 | ||||
Other long-term liabilities | $ (1,761) | ||||
Prepaid expense and other current assets | Cash flow hedges | Fixed to 1-month floating LIBOR (with floor) | |||||
Derivatives | |||||
Notional amount | 450,000 | 450,000 | |||
Prepaid expenses and other current assets | 211 | 211 | |||
De-designated Hedges | Interest rate swaps | |||||
Derivatives | |||||
Loss recognized as an increase to interest expense | $ 2,500 | ||||
Gain recognized as a reduction to interest expense | $ 400 |
DERIVATIVE FINANCIAL INSTRUME44
DERIVATIVE FINANCIAL INSTRUMENTS - Effect of Interest Rate Derivatives (Details) - Interest rate swaps - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Derivative Instruments | |||||
Derivatives | |||||
Deferred gain (losses) included in AOCI (pretax) | $ 14,100 | $ 14,100 | $ 600 | ||
Loss included in AOCI to be recognized in the next 12 months | (3,500) | ||||
Cash flow hedges | |||||
Derivatives | |||||
Unrealized gain (loss) recognized in AOCI, pretax | 5,256 | $ (4,039) | 11,679 | $ (4,130) | |
Deferred losses reclassified from AOCI to interest expense | (1,446) | (396) | (1,802) | (729) | |
Gain (loss) recognized in interest expense from ineffectiveness | $ 319 | $ (1,535) | $ 1,349 | $ (1,300) |
EQUITY (Details)
EQUITY (Details) - USD ($) $ / shares in Units, $ in Millions | Apr. 30, 2018 | Jun. 30, 2018 |
Stock-based compensation plans | ||
Additional shares of common stock authorized | 2,000,000 | |
Shares of common stock authorized for issuance | 4,650,000 | |
Unrecognized share-based compensation | ||
Unrecognized compensation cost | $ 12.2 | |
Weighted-average period of recognition | 2 years | |
Maximum | ||
Stock-based compensation plans | ||
Shares that may be granted in the form of stock options or stock appreciation rights to any eligible employee or director in any calendar year | 300,000 | |
Restricted stock | ||
Shares | ||
Non-vested shares outstanding at the beginning of the period | 102,181 | |
Shares granted | 478,210 | |
Shares forfeited, cancelled or retired | (1,851) | |
Non-vested shares outstanding at the end of the period | 578,540 | |
Weighted Average Grant Date Fair Value | ||
Non-vested shares outstanding at the beginning of the period (in dollars per share) | $ 23.32 | |
Shares granted (in dollars per share) | 12.45 | |
Shares forfeited, cancelled or retired (in dollars per share) | 22.93 | |
Non-vested shares outstanding at the end of the period (in dollars per share) | $ 14.34 | |
Performance shares | ||
Shares | ||
Non-vested shares outstanding at the beginning of the period | 77,528 | |
Shares forfeited, cancelled or retired | (1,137) | |
Non-vested shares outstanding at the end of the period | 76,391 | |
Weighted Average Grant Date Fair Value | ||
Non-vested shares outstanding at the beginning of the period (in dollars per share) | $ 21.46 | |
Shares forfeited, cancelled or retired (in dollars per share) | 21.80 | |
Non-vested shares outstanding at the end of the period (in dollars per share) | $ 21.46 |
EQUITY - Compensation costs (De
EQUITY - Compensation costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Stock-based compensation plans | ||||
Pretax stock-based compensation expense | $ 1,538 | $ 892 | $ 2,216 | $ 1,430 |
Restricted stock | ||||
Stock-based compensation plans | ||||
Pretax stock-based compensation expense | 979 | 589 | 1,414 | 964 |
Performance shares | ||||
Stock-based compensation plans | ||||
Pretax stock-based compensation expense | $ 559 | $ 303 | $ 802 | $ 466 |
EQUITY - Changes in AOCI (Detai
EQUITY - Changes in AOCI (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($) | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | $ (48,083) |
Other comprehensive income before reclassifications | 8,621 |
Amounts reclassified from accumulated other comprehensive loss | 3,207 |
Net current period other comprehensive income | 11,828 |
Balance at the end of the period | (36,255) |
Pension and Post-Retirement Obligations | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | (48,464) |
Amounts reclassified from accumulated other comprehensive loss | 1,876 |
Net current period other comprehensive income | 1,876 |
Balance at the end of the period | (46,588) |
Derivative Instruments | |
Accumulated other comprehensive loss, net of tax, by component | |
Balance at the beginning of the period | 381 |
Other comprehensive income before reclassifications | 8,621 |
Amounts reclassified from accumulated other comprehensive loss | 1,331 |
Net current period other comprehensive income | 9,952 |
Balance at the end of the period | $ 10,333 |
EQUITY - Reclassification from
EQUITY - Reclassification from AOCI (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
EQUITY | ||||
Loss before income taxes | $ (14,569) | $ (4,025) | $ (30,015) | $ (9,904) |
Interest expense | (32,839) | (33,918) | (65,555) | (63,589) |
Tax benefit | 4,009 | 1,399 | 8,257 | 3,573 |
Net loss | (10,560) | (2,626) | (21,758) | (6,331) |
Pension and Post-Retirement Obligations | ||||
EQUITY | ||||
Prior service credit | 199 | 209 | 398 | 453 |
Actuarial loss | (1,452) | (1,639) | (2,903) | (3,300) |
Settlement loss | (46) | 0 | (46) | 0 |
Loss before income taxes | (1,299) | (1,430) | (2,551) | (2,847) |
Tax benefit | 345 | 559 | 675 | 1,114 |
Net loss | (954) | (871) | (1,876) | (1,733) |
Derivative Instruments | ||||
EQUITY | ||||
Interest expense | (1,446) | (396) | (1,802) | (729) |
Tax benefit | 380 | 152 | 471 | 280 |
Net loss | $ (1,066) | $ (244) | $ (1,331) | $ (449) |
PENSION PLANS AND OTHER POST-RE
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, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Defined Benefit Plans | ||||
Components of net periodic pension costs | ||||
Service cost | $ 1,535 | $ 74 | $ 3,070 | $ 161 |
Interest cost | 7,147 | 3,567 | 14,286 | 7,180 |
Expected return on plan assets | (9,637) | (5,053) | (19,304) | (9,958) |
Net amortization loss (gain) | 1,473 | 1,683 | 2,945 | 3,387 |
Net prior service credit amortization | (61) | (79) | (122) | (193) |
Settlement loss | 46 | 46 | ||
Curtailment gain | (1,337) | (1,337) | ||
Net periodic pension cost (benefit) | 503 | (1,145) | 921 | (760) |
Post-retirement Benefit Obligations | ||||
Components of net periodic pension costs | ||||
Service cost | 127 | 124 | 254 | 247 |
Interest cost | 1,028 | 396 | 2,057 | 791 |
Expected return on plan assets | (35) | (29) | (71) | (57) |
Net amortization loss (gain) | (21) | (44) | (42) | (87) |
Net prior service credit amortization | (138) | (130) | (276) | (260) |
Net periodic pension cost (benefit) | $ 961 | $ 317 | $ 1,922 | $ 634 |
PENSION PLANS AND OTHER POST-50
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS - Other Non-qualified Deferred Comp Agreements (Details) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jun. 30, 2018USD ($)item | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
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 | 1,700,000 | $ 1,700,000 | $ 1,900,000 | ||
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 | $ 2,300,000 | ||
Proceeds from life insurance policies | 0 | $ 0 | 0 | $ 0 | |
New benefits accrued | $ 0 | $ 0 |
PENSION PLANS AND OTHER POST-51
PENSION PLANS AND OTHER POST-RETIREMENT BENEFITS - Assumptions (Details) $ in Thousands | 6 Months Ended |
Jun. 30, 2018USD ($)employeeitem | |
FairPoint Communications, Inc | |
Defined benefit plans | |
Number of non-contributory qualified defined benefit pension plans | item | 2 |
Capped number of years for benefit accruals | 30 years |
Defined Benefit Plans | |
Defined benefit plans | |
Expected contribution to pension plan | $ 26,900 |
Employer contributions | $ 10,800 |
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 | 10,000 |
Employer contributions | $ 5,100 |
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 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Unrecognized tax benefits | $ 4.6 | $ 4.6 | $ 4.3 | ||
Unrecognized tax benefits that would impact effective tax rate | $ 4.4 | $ 4.4 | $ 4.1 | ||
Effective tax rate (as a percent) | 27.50% | 34.80% | 27.50% | 36.10% | |
Corporate tax rate (as a percent) | 35.00% | 21.00% | |||
Effective tax rate exclusive of taxable adjustment | 27.50% | 34.70% | 27.50% | 35.60% | |
FairPoint Communications, Inc | |||||
Cumulative adjustment: unrecognized excess tax benefits | $ 0.3 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Litigation (Details) $ in Millions | 6 Months Ended | 12 Months Ended | 36 Months Ended | 52 Months Ended | 108 Months Ended | 150 Months Ended | |
Jun. 30, 2018USD ($)subsidiaryitem | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | May 31, 2018USD ($) | Dec. 31, 2016USD ($) | Jun. 30, 2018USD ($) | May 31, 2017USD ($) | |
Litigation and Contingencies | |||||||
Number of subsidiaries that received assessment notice | subsidiary | 2 | ||||||
Employees covered by collective bargaining (as a percent) | 31.00% | ||||||
Consolidated Communications Enterprise Services Inc. (CCES) | |||||||
Litigation and Contingencies | |||||||
Litigation amount accrued | $ 3.2 | $ 3.2 | |||||
Consolidated Communications of Pennsylvania Company LLC (CCPA) | |||||||
Litigation and Contingencies | |||||||
Litigation amount accrued | $ 1.4 | 1.4 | |||||
Sprint, MCI Communication Services, and Verizon | |||||||
Litigation and Contingencies | |||||||
Disputed amount | 4.8 | ||||||
Number of courts | item | 1 | ||||||
Level 3 Communications | |||||||
Litigation and Contingencies | |||||||
Disputed amount | $ 2.3 | ||||||
Amount awarded | $ 0.7 | ||||||
Local Switching Support | |||||||
Litigation and Contingencies | |||||||
Combined LSS support and settlement of revenues | $ 12.3 | ||||||
Subsidies revenue | $ 5.4 | ||||||
Contingent asset | $ 8.7 | $ 8.7 | |||||
Local Switching Support | Forecast | |||||||
Litigation and Contingencies | |||||||
Increase in ICC Eligible Recovery support | $ 3.6 | ||||||
Decline in ICC support (as a percent) | 5.00% | ||||||
Assessment by Commonwealth of Pennsylvania Department of Revenue | Maximum | |||||||
Litigation and Contingencies | |||||||
Potential liability amount guaranteed | $ 5 | ||||||
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 | $ 6.3 | ||||||
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 | $ 7.5 |
CONDENSED CONSOLIDATING FINAN54
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Balance Sheets (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Current assets: | ||
Cash and cash equivalents | $ 10,642 | $ 15,657 |
Accounts receivable, net | 122,167 | 121,528 |
Income taxes receivable | 12,391 | 21,846 |
Prepaid expenses and other current assets | 43,727 | 33,318 |
Assets held for sale | 20,719 | 21,310 |
Total current assets | 209,646 | 213,659 |
Property, plant and equipment, net | 1,986,318 | 2,037,606 |
Intangibles and other assets: | ||
Investments | 110,105 | 108,858 |
Goodwill | 1,035,274 | 1,038,032 |
Customer relationships, net | 262,853 | 293,300 |
Other intangible assets | 12,038 | 13,483 |
Other assets | 30,578 | 14,188 |
Total assets | 3,646,812 | 3,719,126 |
Current liabilities: | ||
Accounts payable | 23,057 | 24,143 |
Advance billings and customer deposits | 46,322 | 42,526 |
Dividends payable | 27,602 | 27,418 |
Accrued compensation | 55,462 | 49,770 |
Accrued interest | 9,376 | 9,343 |
Accrued expense | 74,112 | 72,041 |
Current portion of long term debt and capital lease obligations | 32,570 | 29,696 |
Liabilities held for sale | 381 | 1,003 |
Total current liabilities | 268,882 | 255,940 |
Long-term debt and capital lease obligations | 2,308,752 | 2,311,514 |
Deferred income taxes | 211,740 | 209,720 |
Pension and postretirement benefit obligations | 318,306 | 334,193 |
Other long-term liabilities | 24,816 | 33,817 |
Total liabilities | 3,132,496 | 3,145,184 |
Shareholders' equity: | ||
Common Stock | 713 | 708 |
Other shareholders' equity | 507,765 | 567,579 |
Total Consolidated Communications Holdings, Inc. shareholders' equity | 508,478 | 568,287 |
Noncontrolling interest | 5,838 | 5,655 |
Total shareholders' equity | 514,316 | 573,942 |
Total liabilities and shareholders' equity | 3,646,812 | 3,719,126 |
Eliminations | ||
Current assets: | ||
Accounts receivable, net | (14) | (476) |
Income taxes receivable | (2,354) | |
Total current assets | (2,368) | (476) |
Intangibles and other assets: | ||
Investments in subsidiaries | (7,159,004) | (5,812,353) |
Advances due to/from affiliates, net | (3,123,607) | (3,089,637) |
Deferred income taxes | (26,933) | (21,244) |
Total assets | (10,311,912) | (8,923,710) |
Current liabilities: | ||
Accrued expense | (2,368) | (476) |
Total current liabilities | (2,368) | (476) |
Advances due to/from affiliates, net | (3,123,607) | (3,089,637) |
Deferred income taxes | (26,933) | (21,244) |
Total liabilities | (3,152,908) | (3,111,357) |
Shareholders' equity: | ||
Common Stock | (47,411) | (47,411) |
Other shareholders' equity | (7,111,593) | (5,764,942) |
Total Consolidated Communications Holdings, Inc. shareholders' equity | (7,159,004) | (5,812,353) |
Total shareholders' equity | (7,159,004) | (5,812,353) |
Total liabilities and shareholders' equity | (10,311,912) | (8,923,710) |
Parent | Reportable legal entity | ||
Current assets: | ||
Income taxes receivable | 2,822 | 20,275 |
Total current assets | 2,822 | 20,275 |
Intangibles and other assets: | ||
Investments in subsidiaries | 3,627,014 | 3,643,930 |
Deferred income taxes | 26,933 | 21,244 |
Other assets | 2,938 | |
Total assets | 3,659,707 | 3,685,449 |
Current liabilities: | ||
Dividends payable | 27,602 | 27,418 |
Accrued expense | 20 | 107 |
Total current liabilities | 27,622 | 27,525 |
Advances due to/from affiliates, net | 3,123,607 | 3,089,637 |
Total liabilities | 3,151,229 | 3,117,162 |
Shareholders' equity: | ||
Common Stock | 713 | 708 |
Other shareholders' equity | 507,765 | 567,579 |
Total Consolidated Communications Holdings, Inc. shareholders' equity | 508,478 | 568,287 |
Total shareholders' equity | 508,478 | 568,287 |
Total liabilities and shareholders' equity | 3,659,707 | 3,685,449 |
Subsidiary Issuer | Reportable legal entity | ||
Current assets: | ||
Cash and cash equivalents | 10,226 | 8,919 |
Income taxes receivable | 9,604 | |
Prepaid expenses and other current assets | 211 | |
Total current assets | 20,041 | 8,919 |
Intangibles and other assets: | ||
Investments | 8,673 | 8,495 |
Investments in subsidiaries | 3,512,890 | 2,133,049 |
Advances due to/from affiliates, net | 2,392,705 | 2,441,690 |
Other assets | 10,137 | 1,307 |
Total assets | 5,944,446 | 4,593,460 |
Current liabilities: | ||
Accrued interest | 8,649 | 8,824 |
Accrued expense | 14 | 504 |
Current portion of long term debt and capital lease obligations | 18,350 | 18,350 |
Total current liabilities | 27,013 | 27,678 |
Long-term debt and capital lease obligations | 2,286,130 | 2,298,970 |
Deferred income taxes | 4,288 | 750 |
Other long-term liabilities | 1,761 | |
Total liabilities | 2,317,431 | 2,329,159 |
Shareholders' equity: | ||
Other shareholders' equity | 3,627,015 | 2,264,301 |
Total Consolidated Communications Holdings, Inc. shareholders' equity | 3,627,015 | 2,264,301 |
Total shareholders' equity | 3,627,015 | 2,264,301 |
Total liabilities and shareholders' equity | $ 5,944,446 | 4,593,460 |
Guarantors | ||
Condensed Consolidating Balance Sheet | ||
Ownership interest (as a percent) | 100.00% | |
Guarantors | Reportable legal entity | ||
Current assets: | ||
Cash and cash equivalents | $ 415 | 6,738 |
Accounts receivable, net | 111,555 | 114,303 |
Income taxes receivable | 2,319 | 1,571 |
Prepaid expenses and other current assets | 43,369 | 33,188 |
Total current assets | 157,658 | 155,800 |
Property, plant and equipment, net | 1,919,360 | 1,972,190 |
Intangibles and other assets: | ||
Investments | 101,432 | 100,363 |
Investments in subsidiaries | 19,100 | 35,374 |
Goodwill | 985,191 | 971,851 |
Customer relationships, net | 262,853 | 293,300 |
Other intangible assets | 2,951 | 4,396 |
Advances due to/from affiliates, net | 635,449 | 555,332 |
Other assets | 17,468 | 12,844 |
Total assets | 4,101,462 | 4,101,450 |
Current liabilities: | ||
Accounts payable | 23,057 | 24,143 |
Advance billings and customer deposits | 44,823 | 41,026 |
Accrued compensation | 54,655 | 48,795 |
Accrued interest | 727 | 519 |
Accrued expense | 71,746 | 70,976 |
Current portion of long term debt and capital lease obligations | 14,054 | 11,150 |
Total current liabilities | 209,062 | 196,609 |
Long-term debt and capital lease obligations | 22,289 | 12,139 |
Deferred income taxes | 213,165 | 209,116 |
Pension and postretirement benefit obligations | 302,235 | 315,129 |
Other long-term liabilities | 23,867 | 31,030 |
Total liabilities | 770,618 | 764,023 |
Shareholders' equity: | ||
Common Stock | 17,411 | 17,411 |
Other shareholders' equity | 3,307,595 | 3,314,361 |
Total Consolidated Communications Holdings, Inc. shareholders' equity | 3,325,006 | 3,331,772 |
Noncontrolling interest | 5,838 | 5,655 |
Total shareholders' equity | 3,330,844 | 3,337,427 |
Total liabilities and shareholders' equity | 4,101,462 | 4,101,450 |
Non-Guarantors | Reportable legal entity | ||
Current assets: | ||
Cash and cash equivalents | 1 | |
Accounts receivable, net | 10,626 | 7,701 |
Prepaid expenses and other current assets | 147 | 130 |
Assets held for sale | 20,719 | 21,310 |
Total current assets | 31,493 | 29,141 |
Property, plant and equipment, net | 66,958 | 65,416 |
Intangibles and other assets: | ||
Goodwill | 50,083 | 66,181 |
Other intangible assets | 9,087 | 9,087 |
Advances due to/from affiliates, net | 95,453 | 92,615 |
Other assets | 35 | 37 |
Total assets | 253,109 | 262,477 |
Current liabilities: | ||
Advance billings and customer deposits | 1,499 | 1,500 |
Accrued compensation | 807 | 975 |
Accrued expense | 4,700 | 930 |
Current portion of long term debt and capital lease obligations | 166 | 196 |
Liabilities held for sale | 381 | 1,003 |
Total current liabilities | 7,553 | 4,604 |
Long-term debt and capital lease obligations | 333 | 405 |
Deferred income taxes | 21,220 | 21,098 |
Pension and postretirement benefit obligations | 16,071 | 19,064 |
Other long-term liabilities | 949 | 1,026 |
Total liabilities | 46,126 | 46,197 |
Shareholders' equity: | ||
Common Stock | 30,000 | 30,000 |
Other shareholders' equity | 176,983 | 186,280 |
Total Consolidated Communications Holdings, Inc. shareholders' equity | 206,983 | 216,280 |
Total shareholders' equity | 206,983 | 216,280 |
Total liabilities and shareholders' equity | $ 253,109 | $ 262,477 |
CONDENSED CONSOLIDATING FINAN55
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Operations (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | $ 350,221 | $ 169,950 | $ 706,260 | $ 339,885 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 151,358 | 71,136 | 304,274 | 142,168 |
Selling, general and administrative expenses | 81,128 | 35,986 | 166,746 | 71,884 |
Acquisition and other transaction costs | 899 | 1,793 | 1,630 | 3,524 |
Depreciation and amortization | 111,741 | 40,483 | 219,640 | 82,678 |
Income from operations | 5,095 | 20,552 | 13,970 | 39,631 |
Other income (expense): | ||||
Interest expense, net of interest income | (32,839) | (33,918) | (65,555) | (63,589) |
Investment income | 12,535 | 8,196 | 20,324 | 13,474 |
Other, net | 640 | 1,145 | 1,246 | 580 |
Loss before income taxes | (14,569) | (4,025) | (30,015) | (9,904) |
Income tax expense (benefit) | (4,009) | (1,399) | (8,257) | (3,573) |
Net loss | (10,560) | (2,626) | (21,758) | (6,331) |
Less: net income (loss) attributable to noncontrolling interest | 83 | 102 | 183 | 82 |
Net loss attributable to common shareholders | (10,643) | (2,728) | (21,941) | (6,413) |
Total comprehensive loss attributable to common shareholders | (4,739) | (4,915) | (10,113) | (7,589) |
Eliminations | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | (3,146) | (3,188) | (6,295) | (6,374) |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | (3,033) | (3,077) | (6,080) | (6,156) |
Selling, general and administrative expenses | (113) | (111) | (215) | (218) |
Other income (expense): | ||||
Equity in earnings of subsidiaries, net | 745 | (12,705) | 7,658 | (18,083) |
Loss before income taxes | 745 | (12,705) | 7,658 | (18,083) |
Net loss | 745 | (12,705) | 7,658 | (18,083) |
Net loss attributable to common shareholders | 745 | (12,705) | 7,658 | (18,083) |
Total comprehensive loss attributable to common shareholders | (6,113) | (10,575) | (6,046) | (17,826) |
Parent | Reportable legal entity | ||||
Operating expenses: | ||||
Selling, general and administrative expenses | 657 | 920 | 1,238 | 1,263 |
Acquisition and other transaction costs | 899 | 1,793 | 1,630 | 3,524 |
Income from operations | (1,556) | (2,713) | (2,868) | (4,787) |
Other income (expense): | ||||
Interest expense, net of interest income | (27) | (53) | 6 | |
Equity in earnings of subsidiaries, net | (9,440) | (740) | (19,751) | (3,045) |
Loss before income taxes | (11,023) | (3,453) | (22,672) | (7,826) |
Income tax expense (benefit) | (380) | (725) | (731) | (1,413) |
Net loss | (10,643) | (2,728) | (21,941) | (6,413) |
Net loss attributable to common shareholders | (10,643) | (2,728) | (21,941) | (6,413) |
Total comprehensive loss attributable to common shareholders | (4,739) | (4,915) | (10,113) | (7,589) |
Subsidiary Issuer | Reportable legal entity | ||||
Operating expenses: | ||||
Selling, general and administrative expenses | 10 | |||
Income from operations | (10) | |||
Other income (expense): | ||||
Interest expense, net of interest income | (33,376) | (33,704) | (66,308) | (63,191) |
Intercompany interest income (expense) | 14,727 | 14,727 | 29,454 | 29,454 |
Investment income | 178 | 157 | ||
Equity in earnings of subsidiaries, net | 4,348 | 13,168 | 7,323 | 20,906 |
Other, net | 2 | 3 | ||
Loss before income taxes | (14,301) | (5,807) | (29,353) | (12,681) |
Income tax expense (benefit) | (4,861) | (5,067) | (9,602) | (9,636) |
Net loss | (9,440) | (740) | (19,751) | (3,045) |
Net loss attributable to common shareholders | (9,440) | (740) | (19,751) | (3,045) |
Total comprehensive loss attributable to common shareholders | (3,536) | (2,927) | (7,923) | (4,221) |
Guarantors | Reportable legal entity | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | 338,867 | 159,072 | 683,178 | 317,904 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 150,337 | 71,564 | 302,099 | 143,179 |
Selling, general and administrative expenses | 77,361 | 32,112 | 159,262 | 64,657 |
Depreciation and amortization | 109,333 | 38,039 | 214,621 | 77,559 |
Income from operations | 1,836 | 17,357 | 7,196 | 32,509 |
Other income (expense): | ||||
Interest expense, net of interest income | 521 | (244) | 713 | (450) |
Intercompany interest income (expense) | (14,706) | (14,707) | (29,418) | (29,415) |
Investment income | 12,535 | 8,196 | 20,146 | 13,317 |
Equity in earnings of subsidiaries, net | 4,347 | 277 | 4,770 | 222 |
Other, net | 610 | 945 | 1,197 | 460 |
Loss before income taxes | 5,143 | 11,824 | 4,604 | 16,643 |
Income tax expense (benefit) | (37) | 2,791 | (477) | 4,021 |
Net loss | 5,180 | 9,033 | 5,081 | 12,622 |
Less: net income (loss) attributable to noncontrolling interest | 83 | 102 | 183 | 82 |
Net loss attributable to common shareholders | 5,097 | 8,931 | 4,898 | 12,540 |
Total comprehensive loss attributable to common shareholders | 5,881 | 8,974 | 6,434 | 13,285 |
Non-Guarantors | Reportable legal entity | ||||
CONDENSED CONSOLIDATING FINANCIAL INFORMATION | ||||
Net revenues | 14,500 | 14,066 | 29,377 | 28,355 |
Operating expenses: | ||||
Cost of services and products (exclusive of depreciation and amortization) | 4,054 | 2,649 | 8,255 | 5,145 |
Selling, general and administrative expenses | 3,223 | 3,065 | 6,461 | 6,172 |
Depreciation and amortization | 2,408 | 2,444 | 5,019 | 5,119 |
Income from operations | 4,815 | 5,908 | 9,642 | 11,919 |
Other income (expense): | ||||
Interest expense, net of interest income | 43 | 30 | 93 | 46 |
Intercompany interest income (expense) | (21) | (20) | (36) | (39) |
Other, net | 30 | 198 | 49 | 117 |
Loss before income taxes | 4,867 | 6,116 | 9,748 | 12,043 |
Income tax expense (benefit) | 1,269 | 1,602 | 2,553 | 3,455 |
Net loss | 3,598 | 4,514 | 7,195 | 8,588 |
Net loss attributable to common shareholders | 3,598 | 4,514 | 7,195 | 8,588 |
Total comprehensive loss attributable to common shareholders | $ 3,768 | $ 4,528 | $ 7,535 | $ 8,762 |
CONDENSED CONSOLIDATING FINAN56
CONDENSED CONSOLIDATING FINANCIAL INFORMATION - Cash Flows (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities: | ||
Net cash (used in) provided by operating activities | $ 194,371 | $ 93,533 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (124,840) | (58,061) |
Proceeds from sale of assets | 1,443 | 101 |
Proceeds from sale of investments | 233 | |
Net cash used in investing activities | (123,164) | (57,960) |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 76,000 | 23,000 |
Payment of capital lease obligations | (6,027) | (2,993) |
Payment on long-term debt | (91,176) | (27,500) |
Share repurchases for minimum tax withholding | (41) | |
Dividends on common stock | (55,019) | (39,257) |
Net cash used in financing activities | (76,222) | (46,791) |
Change in cash and cash equivalents | (5,015) | (11,218) |
Cash and cash equivalents at beginning of period | 15,657 | 27,077 |
Cash and cash equivalents at end of period | 10,642 | 15,859 |
Parent | ||
Cash flows from operating activities: | ||
Net cash (used in) provided by operating activities | 8,765 | (4,096) |
Cash flows from financing activities: | ||
Share repurchases for minimum tax withholding | (41) | |
Dividends on common stock | (55,019) | (39,257) |
Transactions with affiliates, net | 46,254 | 43,394 |
Net cash used in financing activities | (8,765) | 4,096 |
Subsidiary Issuer | ||
Cash flows from operating activities: | ||
Net cash (used in) provided by operating activities | (32,503) | (8,211) |
Cash flows from financing activities: | ||
Proceeds from issuance of long-term debt | 76,000 | 23,000 |
Payment on long-term debt | (91,176) | (27,500) |
Transactions with affiliates, net | 48,986 | 1,493 |
Net cash used in financing activities | 33,810 | (3,007) |
Change in cash and cash equivalents | 1,307 | (11,218) |
Cash and cash equivalents at beginning of period | 8,919 | 27,064 |
Cash and cash equivalents at end of period | 10,226 | 15,846 |
Guarantors | ||
Cash flows from operating activities: | ||
Net cash (used in) provided by operating activities | 207,850 | 89,701 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (118,623) | (51,465) |
Proceeds from sale of assets | 1,439 | 74 |
Proceeds from sale of investments | 233 | |
Net cash used in investing activities | (116,951) | (51,391) |
Cash flows from financing activities: | ||
Payment of capital lease obligations | (5,924) | (2,902) |
Transactions with affiliates, net | (91,298) | (35,408) |
Net cash used in financing activities | (97,222) | (38,310) |
Change in cash and cash equivalents | (6,323) | |
Cash and cash equivalents at beginning of period | 6,738 | 13 |
Cash and cash equivalents at end of period | 415 | 13 |
Non-Guarantors | ||
Cash flows from operating activities: | ||
Net cash (used in) provided by operating activities | 10,259 | 16,139 |
Cash flows from investing activities: | ||
Purchases of property, plant and equipment | (6,217) | (6,596) |
Proceeds from sale of assets | 4 | 27 |
Net cash used in investing activities | (6,213) | (6,569) |
Cash flows from financing activities: | ||
Payment of capital lease obligations | (103) | (91) |
Transactions with affiliates, net | (3,942) | (9,479) |
Net cash used in financing activities | (4,045) | $ (9,570) |
Change in cash and cash equivalents | 1 | |
Cash and cash equivalents at end of period | $ 1 |