Consolidated Communications Holdings Reports First Quarter 2007 Results
- Total Connections Up 2,800 over Prior Quarter, Driven by Broadband
Growth -
- IPTV Subscribers Grow by 1,400 in the Quarter -
- Adjusted EBITDA of $37.2 Million, Net Cash from Operating
Activities of $18.0 Million -
MATTOON, Ill., May 10 /PRNewswire-FirstCall/ -- Consolidated
Communications Holdings, Inc. (Nasdaq: CNSL) today announced results for the
first quarter ended March 31, 2007. The company reported revenues of $83.0
million for the quarter. Adjusted EBITDA and net cash provided by operating
activities for the quarter were $37.2 million and $18.0 million, respectively.
"Our consistent focus and execution is delivering strong results, and we
are off to a great start in 2007," said Bob Currey, Consolidated's president and
chief executive officer. "Increased broadband connections and improved operating
efficiencies helped deliver our strong financial performance. We generated cash
available to pay dividends of $14.7 million for the quarter, which resulted in a
68.5 percent payout ratio."
"DSL continues to perform very well for us and is a key component of our
triple play bundle, which positively impacts customer value and retention.
Continued consumer demand for DSL drove another solid quarter, with the addition
of over 3,200 subscribers. We ended the quarter with nearly 56,000 DSL
subscribers, and our penetration of primary residential lines now exceeds 33.6
percent."
"Our strategy of layering IPTV over our DSL product continues to gain
market acceptance. We added over 1,400 IPTV subscribers during the quarter,
bringing the total subscriber base to nearly 8,400. Subscribers grew by nearly
1,000 in Illinois, bringing penetration to over 20 percent of total homes passed
and over 29 percent in the three original markets we launched. The rollout in
Conroe, TX and Katy, TX is going well, and we expect subscriber growth to
accelerate as we launch high definition and DVR service in 2007. IPTV was
launched in the Lufkin, TX market in March and we are encouraged with the early
results. DSL and IPTV are 'sticky' and have been drivers of the growth in
connections and revenue per customer. In fact, over 90 percent of our video
customers take our full triple play offering, making us the leading network
based triple play provider in our markets," Currey concluded.
Operating Statistics at March 31, 2007, Compared to December 31, 2006
- -- Total connections were 296,145, an increase of 2,770, or 0.9 percent.
- -- Total local access lines were 231,818, a decrease of 1,875, or 0.8
percent.
- -- Broadband connections were 64,327, an increase of 4,641 or 7.8 percent.
-- DSL subscribers were 55,961, an increase of 3,229, or 6.1 percent.
-- IPTV subscribers were 8,366, an increase of 1,412, or 20.3 percent.
- -- Long distance lines were 149,318, an increase of 1,137, or 0.8 percent.
Steve Childers, Consolidated's chief financial officer, said, "As
expected, our financial results were very strong for the quarter. Revenue,
adjusted EBITDA and cash from operations grew by $3.6 million, $2.4 million and
$3.6 million, respectively, compared to the first quarter of 2006. As a result
of the growth in revenue and the cost reduction initiatives we put in place in
2006, we realized an approximate 100 basis point improvement in our adjusted
EBITDA margin compared to the first quarter of 2006."
Cash Available to Pay Dividends
For the quarter, cash available to pay dividends, or CAPD, was $14.7
million and the dividend payout ratio was 68.5 percent. As of March 31, 2007,
cumulative available cash, which is defined in the dividend restriction
covenants in the company's credit facility as the difference between CAPD and
dividends paid for the period since September 30, 2005, was approximately $30.0
million. At March 31, 2007, cash and cash equivalents were $26.1 million. The
company made capital expenditures of $8.2 million during the first quarter.
Financial Highlights for the First Quarter Ended March 31, 2007
- -- Revenues were $83.0 million, compared to $79.4 million in the first
quarter of 2006. The improvement was primarily due to a $1.4 million
increase in Data and Internet Services revenue and a $1.2 million increase
in Network Access Services revenue. The increase in Data and Internet
Services revenue was due to the growth in DSL and IPTV subscribers. The
increase in Network Access Services revenue was attributable to an
increase in switched access rates associated with our 2006 tariff filing
and a $0.7 million settlement of an outstanding billing claim. Also
reflected in this quarter's results were approximately $0.5 million in
other miscellaneous revenue settlements.
- -- Income from operations was $18.4 million, compared to $15.2 million in the
first quarter of 2006. The increase was driven by both the revenue items
mentioned above, as well as the impact of cost reduction initiatives
implemented in 2006.
- -- Interest expense, net was $11.4 million, compared to $10.0 million in the
same quarter last year. The increase was primarily driven by the increase
in bank debt associated with the share repurchase in the third quarter of
2006.
- -- Income tax expense was $3.7 million, compared to $2.9 million in the first
quarter of 2006. The increase was due to the increase in pre-tax income.
- -- Net income was $4.6 million, compared to $3.5 million in the first quarter
of 2006.
- -- Net income per common share was $0.18, compared to $0.12 per common share
in the first quarter of 2006. "Adjusted net income per share" excludes
certain items in the manner described in the table provided in this
release. On that basis, "adjusted net income per share" for the quarter
ended March 31, 2007 was $0.21, compared to $0.15 in the first quarter of
2006.
- -- Adjusted EBITDA was $37.2 million and net cash provided by operating
activities was $18.0 million compared to $34.8 million and $14.4 million,
respectively, for the first quarter of 2006. Total net debt to last twelve
month Adjusted EBITDA coverage ratio was 4.0 times to one, and all other
coverage ratios were also within compliance levels of our credit facility.
Financial Guidance
For 2007, the company reiterates the following guidance: Capital
expenditures are expected to be in the range of $32.0 million to $34.0 million;
cash interest expense is expected to be in the range of $43.5 million to $45.0
million; and cash income taxes are expected to be in the range of $12.0 million
to $14.0 million.
Dividend Payments
The company paid its latest quarterly dividend of $0.38738 per common
share on May 1, 2007 to stockholders of record on April 15, 2007. On May 8,
2007, the company's board of directors declared its next quarterly dividend of
$0.38738 per common share, which is payable on August 1, 2007 to stockholders of
record at the close of business on July 15, 2007.
For 2007, the company expects approximately 10 percent of its
distributions to be classified as non-dividend distribution (return of capital),
with the remainder being classified as ordinary dividends. This is an estimate
and will be updated as appropriate.
Conference Call Information
The company will host a conference call today at 11:00 a.m. Eastern Time /
10:00 a.m. Central Time. The call is being webcast and can be accessed from the
"Investor Relations" section of the company's website at http://
http://www.consolidated.com. The webcast will also be archived on the company's
website. If you do not have internet access, the conference call dial-in number
is 1-800-642-1783. International parties can access the call by dialing
1-706-679-5600. A telephonic replay of the conference call will also be
available starting two hours after completion of the call until May 14, 2007 at
midnight Eastern Time. To hear the replay, parties in the United States and
Canada should call 1-800-642-1687 and international parties should call
1-706-645-9291 and enter pass code 5511283.
Use of Non-GAAP Financial Measures
This press release, as well as the conference call, includes disclosures
regarding "Adjusted EBITDA", "Adjusted EBITDA Margin", "cash available to pay
dividends", "cumulative available cash", "total net debt to last twelve month
Adjusted EBITDA coverage ratio", and "adjusted net income per share", all of
which are non-GAAP financial measures. Accordingly, they should not be construed
as alternatives to net cash from operating or investing activities, cash and
cash equivalents, cash flows from operations or net income (loss) as defined by
GAAP and are not, on their own, necessarily indicative of cash available to fund
cash needs as determined in accordance with GAAP. In addition, not all companies
use identical calculations, and these non-GAAP financial measures may not be
comparable to other similarly titled measures of other companies. A
reconciliation of the differences between these non-GAAP financial measures and
the most directly comparable financial measures presented in accordance with
GAAP is included in the tables that follow.
Adjusted EBITDA, which corresponds to consolidated EBITDA as used and
defined in the Form 10-K dated December 31, 2006, is comprised of historical
EBITDA, as adjusted for certain adjustments permitted and contemplated by our
credit facility.
EBITDA is defined as net earnings (loss) before interest expenses, income
taxes, depreciation and amortization on an historical basis. We believe net cash
provided by operating activities is the most directly comparable financial
measure to EBITDA under GAAP. EBITDA is a non-GAAP financial measure.
Cash available to pay dividends represents Adjusted EBITDA plus cash
interest income less (1) cash interest expense), (2) capital expenditures, (3)
cash taxes and (4) stock repurchases.
We present Adjusted EBITDA and cash available to pay dividends for several
reasons. Management believes Adjusted EBITDA and cash available to pay dividends
are useful as a means to evaluate our ability to fund our estimated uses of cash
(including interest on our debt) and pay dividends. In addition, we have
presented Adjusted EBITDA and cash available to pay dividends to investors in
the past because they are frequently used by investors, securities analysts and
other interested parties in the evaluation of companies in our industry, and
management believes presenting them here provides a measure of consistency in
our financial reporting. Adjusted EBITDA and cash available to pay dividends,
referred to as Available Cash in our credit agreement, and cumulative available
cash are also components of the restrictive covenants and financial ratios
contained in the agreements governing our debt that require us to maintain
compliance with these covenants and limit certain activities, such as our
ability to incur debt and to pay dividends. The definitions in these covenants
and ratios are based on Adjusted EBITDA, cash available to pay dividends and
cumulative available cash after giving effect to specified charges. Other
information related to these three non-GAAP financial measures, specifically
"total net debt to last twelve month Adjusted EBITDA coverage ratio" and
"Adjusted EBITDA margin", help put these three measures in context. As a result,
management believes the presentation of Adjusted EBITDA and cash available to
pay dividends, as supplemented by these other items, provide important
additional information to investors. In addition, Adjusted EBITDA and cash
available to pay dividends provide our board of directors with meaningful
information to determine, with other data, assumptions and considerations, our
dividend policy and our ability to pay dividends under the restrictive covenants
in the agreements governing our debt and to measure our ability to service and
repay debt.
These non-GAAP financial measures have certain shortcomings. In
particular, Adjusted EBITDA does not represent the residual cash flows available
for discretionary expenditures, since items such as debt repayment and interest
payments are not deducted from such measure. Similarly, while we may generate
cash available to pay dividends, we are not required to use any such cash to pay
dividends, and the payment of any dividends is subject to declaration by our
board of directors, compliance with applicable law and the terms of our credit
agreement and the indenture governing our senior notes.
Because Adjusted EBITDA is a component of the Dividend Payout Ratio and
the ratio of total net debt to last twelve month Adjusted EBITDA, these measures
are also subject to the material limitations discussed above. In addition, the
ratio of total net debt to last twelve month Adjusted EBITDA is subject to the
risk that we may not be able to use the cash on the balance sheet to reduce our
debt on a dollar-for-dollar basis. Management believes these ratios are useful
as a means to evaluate our ability to incur additional indebtedness in the
future and, together with adjusted net income per share, assist investors,
securities analysts and other interested parties in evaluating the companies in
our industry.
About Consolidated
Consolidated Communications Holdings, Inc. is an established rural local
exchange company (RLEC) providing voice, data and video services to residential
and business customers in Illinois and Texas. Each of the operating companies
has been operating in its local market for over 100 years. With approximately
232,000 local access lines, 56,000 DSL subscribers and 8,400 IPTV subscribers,
Consolidated Communications offers a wide range of telecommunications services,
including local and long distance service, custom calling features, private line
services, dial-up and high-speed Internet access, digital TV, carrier access
services, and directory publishing. Consolidated Communications is the 15th
largest local telephone company in the United States.
Safe Harbor
Any statements contained in this press release that are not statements of
historical fact, including statements about management's beliefs and
expectations, are forward-looking statements and should be evaluated as such.
The words "anticipates", "believes", "expects", "intends", "plans", "estimates",
"targets", "projects", "should", "may", "will" and similar words and expressions
are intended to identify forward-looking statements. Such forward-looking
statements reflect, among other things, the company's current expectations,
plans, strategies and anticipated financial results and involve a number of
known and unknown risks, uncertainties and factors that may cause the actual
results to differ materially from those expressed or implied by these
forward-looking statements. These risks include, but are not limited to the
following: various risks to stockholders of not receiving dividends and risks to
the company's ability to pursue growth opportunities if the company continues to
pay dividends according to the current dividend policy; various risks to the
price and volatility of the common stock; the substantial amount of debt and the
company's ability to incur additional debt in the future; the company's need for
a significant amount of cash to service and repay the debt and to pay dividends
on the common stock; restrictions contained in the debt agreements that limit
the discretion of management in operating the business; the ability to refinance
the existing debt as necessary; regulatory changes, rapid development and
introduction of new technologies and intense competition in the
telecommunications industry; risks associated with the company's possible
pursuit of acquisitions; economic conditions in the company's service areas in
Illinois and Texas; system failures; losses of large customers or government
contracts; risks associated with the rights-of-way for the network; disruptions
in the relationship with third party vendors; losses of key management personnel
and the inability to attract and retain highly qualified management and
personnel in the future; changes in the extensive governmental legislation and
regulations governing telecommunications providers and the provision of
telecommunications services; telecommunications carriers disputing and/or
avoiding their obligations to pay network access charges for use of the
company's network; high costs of regulatory compliance; the competitive impact
of legislation and regulatory changes in the telecommunications industry;
liability and compliance costs regarding environmental regulations, and the
risks identified or discussed in more detail in the section entitled "Risk
Factors" in the company's Annual Report on Form 10-K for the year ended December
31, 2006, as well as in the other documents that we file from time to time with
the Securities and Exchange Commission.
Many of these risks are beyond management's ability to control or predict.
All forward-looking statements attributable to the company or persons acting on
the company's behalf are expressly qualified in their entirety by the cautionary
statements and risk factors contained in this press release and the company's
filings with the Securities and Exchange Commission. Because of these risks,
uncertainties and assumptions, you should not place undue reliance on these
forward-looking statements. Furthermore, forward-looking statements speak only
as of the date they are made. Except as required under the federal securities
laws or the rules and regulations of the Securities and Exchange Commission, the
company does not undertake any obligation to update or review any
forward-looking information, whether as a result of new information, future
events or otherwise.
- Tables Follow -
Consolidated Communications
Condensed Consolidated Balance Sheets
(Dollars in thousands)
March 31, December 31,
2007 2006
ASSETS
Current assets:
Cash and cash equivalents $26,103 $26,672
Accounts receivable, net 35,788 34,396
Prepaid expenses and other current assets 14,655 13,149
Total current assets 76,546 74,217
Property, plant and equipment, net 309,187 314,381
Intangibles and other assets 495,696 500,981
Total assets $881,429 $889,579
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,884 $11,004
Accrued expenses and other current
liabilities 55,822 54,742
Total current liabilities 63,706 65,746
Long-term debt 594,000 594,000
Other long-term liabilities 111,068 111,180
Total liabilities 768,774 770,926
Minority interests 3,867 3,695
Stockholders' equity:
Common stock, $0.01 par value 261 260
Paid in capital 200,603 199,858
Accumulated deficit (92,796) (87,362)
Accumulated other comprehensive income 720 2,202
Total stockholders' equity 108,788 114,958
Total liabilities and stockholders' equity $881,429 $889,579
Consolidated Communications
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Three Months Ended
March 31,
2007 2006
Revenues $82,980 $79,426
Operating expenses:
Cost of services and products 25,629 24,673
Selling, general and administrative
expenses 22,299 22,512
Depreciation and amortization 16,629 17,071
Income from operations 18,423 15,170
Other income (expense):
Interest expense, net (11,400) (10,042)
Other income, net 1,283 1,348
Income before income taxes 8,306 6,476
Income tax expense 3,687 2,928
Net income 4,619 3,548
Net income per common share $0.18 $0.12
Consolidated Communications
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
Three Months Ended
March 31,
2007 2006
OPERATING ACTIVITIES
Net Income $4,619 $3,548
Adjustments to reconcile net income
to cash provided by operating activities:
Depreciation and amortization 16,629 17,071
Non-cash stock compensation 734 625
Other adjustments, net 418 5,015
Changes in operating assets and liabilities, net (4,429) (11,898)
Net cash provided by operating activities 17,971 14,361
INVESTING ACTIVITIES
Capital expenditures (8,187) (8,523)
Net cash used in investing activities (8,187) (8,523)
FINANCING ACTIVITIES
Proceeds from issuance of stock 12 --
Payment of deferred financing costs (320) --
Dividends on common stock (10,045) (11,540)
Net cash used in financing activities (10,353) (11,540)
Net decrease in cash and cash equivalents (569) (5,702)
Cash and cash equivalents at beginning
of period 26,672 31,409
Cash and cash equivalents at end of period $26,103 $25,707
Consolidated Communications
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
Three months ended March 31,
2007 2006
Telephone Operations
Local calling services $21,313 $21,364
Network access services 18,318 17,070
Subsidies 11,597 12,182
Long distance services 3,636 3,747
Data and Internet services 8,631 7,214
Other services 9,014 7,781
Total Telephone Operations 72,509 69,358
Other Operations 10,471 10,068
Total operating revenues $82,980 $79,426
Consolidated Communications
Schedule of ARPU Calculations
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2007 2006
Ending Access Lines 231,818 240,959
Average Access Lines 232,582 241,130
Telephone Operations Revenue $72,509 $69,358
Prior period subsidy settlements $(235) $(197)
Telephone Operations, excluding prior
period subsidy settlements $72,744 $69,555
Monthly Telephone Operations ARPU $103.92 $95.88
Monthly Telephone Operations ARPU,
excluding prior period subsidy settlements $104.26 $96.15
Consolidated Communications
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
Last
Three Twelve Twelve
Three Months Months Months Months
Ended Ended Ended Ended
March 31, December 31, December 31, March 31,
2007 2006 2005 2006 2007
Historical EBITDA:
Net cash provided by
operating activities $17,971 $14,361 $32,229 $84,593 $88,203
Adjustments:
Compensation from
restricted share plan (734) (625) (1,346) (2,482) (2,591)
Other adjustments, net (418) (5,015) (14,380) (8,083) (3,486)
Changes in operating
assets and liabilities 4,429 11,898 (2,073) 6,669 (800)
Interest expense, net 11,400 10,042 10,631 42,899 44,257
Income taxes 3,687 2,928 7,234 405 1,164
Historical EBITDA (1) 36,335 33,589 32,295 124,001 126,747
Adjustments to EBITDA:
Integration,
restructuring and
Sarbanes-Oxley (2) 172 466 1,994 3,684 3,390
Other, net (3) (1,455) (1,348) (780) (7,143) (7,250)
Investment
distributions (4) 1,395 1,451 771 5,516 5,460
Intangible assets
impairment (5) -- -- -- 11,240 11,240
Non-cash compensation (6) 734 625 1,346 2,482 2,591
Adjusted EBITDA $37,181 $34,783 $35,626 $139,780 $142,178
Footnotes for Adjusted EBITDA:
(1) Historical EBITDA is defined as net earnings (loss) before interest
expense, income taxes, depreciation and amortization on a historical
basis.
(2) Represents certain expenses associated with integrating and restructuring
the Texas and Illinois businesses and Sarbanes-Oxley start-up costs. For
the first quarter of 2007, this is comprised of $0.2M in billing
integration costs. For the twelve months ended March 31, 2007, this is
comprised of $1.9M in severance, $0.6M in Sarbanes-Oxley start-up costs
and $0.9M in billing integration costs. For YTD 2006, this is comprised of
$2.0M in severance, $0.8M in Sarbanes-Oxley start-up costs and $0.9M in
billing integration costs.
(3) Other, net includes the equity earnings from our investments, dividend
income and certain other miscellaneous non-operating items.
(4) For purposes of calculating Adjusted EBITDA, we include all cash dividends
and other cash distributions received from our investments.
(5) Upon completion of our annual impairment review and as a result of a
decline in estimated future cash flows in the telemarketing and operator
services business, we determined that the value of the customer lists
associated with these businesses was impaired.
(6) Represents compensation expenses in connection with our Restricted Share
Plan, which because of the non-cash nature of the expenses are being
excluded from Adjusted EBITDA.
Consolidated Communications
Cash Available to Pay Dividends
(Dollars in thousands)
(Unaudited)
Three Twelve Three
Months Months Months October 1,
Ended Ended Ended 2005 to
March 31, December 31, December 31, March 31,
2007 2006 2005 2007 (4)
Adjusted EBITDA $37,181 $139,780 $35,626 $212,587
- Cash interest expense (10,816) (40,613) (9,384) (60,813)
- Capital Expenditures (8,187) (33,388) (9,498) (51,073)
+ Proceeds from asset
sales(1) -- 6,594 -- 6,594
- Cash income taxes (3,748) (8,237) (172) (12,157)
+ Cash interest income 214 745 174 1,133
- Repurchases of stock (2) 12 (87) -- (75)
Cash available to pay
dividends $14,656 $64,794 $16,746 $96,196
Quarterly Dividend $10,045 $44,593 $11,537 $66,175
Payout Ratio 68.5% 68.8% 68.9% 68.8%
Adjusted Payout ratio (3) 68.5% 76.6% 68.9% 73.9%
(1) Represents $673 of proceeds from the sale of idle property during and
$5,921 of proceeds from the redemption of class C shares of RTB stock.
(2) Represents the cancellation of stock by employees to pay withholding tax
on shares vesting under the Company's Long Term Incentive Plan.
(3) Represents the payout ratio excluding the effect of asset sales.
(4) Represents cumulative available cash for the period from October 1, 2005
to March 31, 2007.
Consolidated Communications
Schedule of Adjusted EBITDA Margin Calculation
(Dollars in thousands)
(Unaudited)
Three Months Ended
March 31,
2007 2006
Revenue $82,980 $79,426
Adjusted EBITDA 37,181 34,783
Adjusted EBITDA Margin 44.8% 43.8%
Consolidated Communications
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
Summary of Outstanding Debt Senior Notes $130,000
Term loan D 464,000
Total debt as of March 31, 2007 $594,000
Less cash on hand (26,103)
Total net debt as of March 31, 2007 $567,897
Adjusted EBITDA for the last twelve
months ended March 31, 2007 142,178
Total Net Debt to last twelve months
Adjusted EBITDA 4.0 x
Consolidated Communications
Adjusted Net Income Per Share
(Dollars in thousands)
(Unaudited)
Three Months Ended Three
Months Ended
March 31, March 31,
2007 2006
Reported net income applicable to
common stockholders $4,619 $3,548
Severance, net of tax 4 26
Sarbanes Oxley start-up costs, net of tax -- 109
Billing integration, net of tax 92 121
Non-cash compensation 734 625
Adjusted income applicable to common
stockholders $5,449 $4,429
Weighted average number of shares
outstanding 26,029,228 29,788,518
Adjusted net income per share $0.21 $0.15
Calculations above assume a 44.4 percent and 45.2 percent effective
tax
rate for the three months ended March 31, 2007 and 2006,
respectively.
Consolidated Communications
Key Operating Statistics
March 31, March 31,
2007 2006
Local access lines in service
Residential 153,640 161,322
Business 78,178 79,637
Total local access lines 231,818 240,959
IPTV subscribers
Illinois 7,288 3,514
Texas 1,078 --
Total IPTV subscribers 8,366 3,514
DSL subscribers 55,961 43,713
Broadband Connections 64,327 47,227
Total connections 296,145 288,186
Long distance lines 149,318 145,795
Dial-up subscribers 11,128 14,623
Service bundles 44,728 39,036
IPTV Homes passed
Illinois 35,843 22,679
Texas 71,340 --
Total homes passed 107,183 22,679
SOURCE Consolidated Communications Holdings, Inc.
-0- 05/10/2007
/CONTACT: Stephen Jones, Vice President - Investor Relations of
Consolidated Communications Holdings, Inc., +1-217-258-9522,
investor.relations@consolidated.com; or investors, Kirsten Chapman of
Lippert - Heilshorn & Associates, +1-415-433-3777, kchapman@lhai.com,
for
Consolidated Communications Holdings, Inc. /
/Web site: http://www.consolidated.com /