• Declared 51^st consecutive quarterly dividend
  
• Grew commercial and carrier data and transport revenue 1.4 percent
• FairPoint integration on target to achieve $55 million in synergies
• Announced plans to expand fiber network resulting in significant broadband speed upgrades available to 500,000 residents and small businesses in 2018
• Rebranded FairPoint markets to Consolidated Communications

MATTOON, Ill., March 01, 2018 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) (the “Company”) reported results for the fourth quarter 2017 and will hold a conference call and simultaneous webcast to discuss its results today at 11 a.m. ET.

Fourth quarter 2017 Consolidated Communications financial summary:

• Revenue totaled $356.4 million
• Net cash from operating activities was $84.8 million
• Adjusted EBITDA was $133.2 million
• Dividend payout ratio was 64.6 percent
• Recognized $115.1 million net tax benefit, largely associated with recent tax reform legislation

“2017 was a transformational year, one which has positioned the Company for future growth and opportunities,” said Bob Udell, president and chief executive officer of Consolidated Communications. “In the first half of the year, we executed on our organic growth strategy and closed the FairPoint acquisition. In the second half, we completed our organizational alignment, while we launched integration projects and fast-start initiatives to leverage our expanded fiber network and minimize customer pain points. We are recognizing the immediate financial and capital structure benefits of the merger and are excited about 2018 as we invest and expand our fiber network to position ourselves for future broadband and business growth.”

“Last week we announced plans to increase broadband speeds to more than 500,000 residents and small businesses across our Northern New England service area by the end of 2018,” Udell added. “We have aggressive projects underway to expand our fiber network which will result in increased broadband speeds and improve network reliability.”

“We are making great progress on our FairPoint integration and I am pleased to report we have completed the conversion of our ERP system and are now operating on a single, fully integrated platform for finance, supply chain and human resource functions,” said Bob Udell.

Pro Forma Financial Results for the Fourth Quarter   

The pro forma results give effect to the FairPoint acquisition as if it had occurred as of Jan. 1, 2016.

• Revenues were $356.4 million, compared to adjusted revenue of $374.5 million for the fourth quarter of 2016, after excluding $5.4 million attributed to the equipment sales and service business, which the Company divested in 2016.  Results continue to reflect expected declines in voice, subsidies and network access revenues, while commercial and carrier data and transport service revenue increased 1.4 percent or $1.2 million.  Consumer broadband increased $200,000, while video, a low margin product, declined $1.6 million.
• Income from operations was $9.3 million, compared to $55.8 million in the fourth quarter of 2016. The year over year decline is primarily due to a $39.6 million non-cash pension benefit recognized by FairPoint in the fourth quarter of 2016. The one-time benefit resulted from the reduction in a post-retirement benefit obligation as a result of the elimination of certain post-employment healthcare benefits. The remaining decline was due to a decrease in operating revenue, which was partially offset by a reduction in operating expenses from synergy realization and efficiency improvements.
• Interest expense, net was $29.9 million, compared to $29.3 million for the same period last year. 
• Cash distributions from the Company’s wireless partnerships were $8.0 million for the quarter ended Dec. 31, 2017, as compared to $8.9 million the prior year. 
• Other income, net was $8.4 million, compared to $9.8 million in the fourth quarter of 2016.  
• On a GAAP basis, net income was $101.7 million and GAAP income per share was $1.44.  Net income was impacted by $112.9 million net tax benefit recorded as a result of the recent tax legislation. Adjusted diluted net income per share excludes certain items in the manner described in the table provided in this release.  Adjusted diluted net income per share was ($0.04) in the fourth quarter, compared to $0.11 the same period last year.  Additionally, net income per share has been impacted by approximately $0.11 due to increased depreciation and amortization associated with the preliminary valuation of the FairPoint assets.
• Adjusted EBITDA was $133.2 million compared to pro forma $138.3 million a year ago. The year over year decline is primarily due to lower revenues as well as the decline in wireless cash distributions, offset by declining expenses and synergies realized as a result of the FairPoint acquisition.
• The total net debt to pro forma last 12-month adjusted EBITDA ratio was 4.34x, before giving effect to full targeted synergies of $55 million which are expected to be realized within the first two years from closing the FairPoint acquisition.

Full-Year Pro Forma 2017 Results

• For the full year 2017, pro forma operating revenue totaled $1,460.6 million, down 6.8 percent from fiscal 2016. Approximately 44 percent of the revenue decline is attributed to the divestiture of the equipment services business and the Iowa ILEC in 2016. The balance of the year over year decline is primarily due to continued erosion of legacy voice services and access revenues as well as the step down in transition funding in CAF II support.
• Pro Forma Adjusted EBITDA was $536.2 million for fiscal 2017.
• The pro forma dividend payout ratio was 56.3 percent.

Cash Available to Pay Dividends, Capex

For the fourth quarter, cash available to pay dividends was $42.5 million, and the dividend payout ratio was 64.6 percent as compared to 78.2 percent in the fourth quarter a year ago.  At Dec. 31, 2017, cash and cash equivalents were $15.7 million.  Capital expenditures were $61.9 million for the fourth quarter. 

Financial Guidance

The Company is providing guidance for fiscal 2018 as follows:

($ in millions)		2017 Pro Forma Results			2018 Guidance
Cash interest expense1		$  112.9			$123 to $128
Cash income taxes/refund2		$  1.3			$1 to $3
Capital expenditures		$  227.2			$235 to $245
(1) 2017 Pro Forma cash interest expense is based on actual interest expense incurred since the July 3rd closing of the Fairpoint acquisition and pro forma for January 1, 2017 through July 3rd, 2017 calculated as if the merger was in effect at January 1. 2017.
(2) Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses and the benefit of The Tax Cuts and Jobs Act of 2017 tax reform legislation that was enacted in December, 2017.

Dividend Payments

On Feb. 23, 2018, the Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on May 1, 2018 to stockholders of record at the close of business on April 15, 2018.  This will represent the 51^st consecutive quarterly dividend paid by the Company. 

Conference Call Information

The Company will host a conference call and webcast today at 11 a.m. ET / 10 a.m. CT to discuss fourth quarter earnings and developments with respect to the Company.  The live webcast and replay can be accessed from the Investor Relations section of the Company’s website at http://ir.consolidated.com.  The live conference call dial-in number is 1-877-374-3981, conference ID 6091509.  A telephonic replay of the conference call will be available through March 9, 2018 and can be accessed by calling 1-855-859-2056, conference ID 6091509.  
 
About Consolidated Communications 

Consolidated Communications Holdings, Inc. (NASDAQ:CNSL) is a leading broadband and business communications provider serving consumers, businesses of all sizes, and wireless companies and carriers, across a 24-state service area.  Leveraging its advanced fiber optic network spanning more than 36,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: data, voice, video, managed services, cloud computing and wireless backhaul.  Headquartered in Mattoon, Ill., Consolidated Communications has been providing services in many of its markets for more than a century.

Use of Non-GAAP Financial Measures                                                                       

This press release, as well as the conference call, includes disclosures regarding “EBITDA,” “adjusted EBITDA,” “cash available to pay dividends” and the related “dividend payout ratio,” “total net debt to last twelve month adjusted EBITDA coverage ratio,” “adjusted diluted net income per share” and “adjusted net income attributable to common stockholders,” all of which are non-GAAP financial measures and described in this section as not being in compliance with Regulation S-X.  Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations, net income or net income per share as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and the non-GAAP financial measures may not be comparable to other similarly titled measures of other companies.  A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.

Adjusted EBITDA is comprised of EBITDA, adjusted for certain items as permitted or required by the lenders under our credit agreement in place at the end of each quarter in the periods presented.  The tables that follow include an explanation of how adjusted EBITDA is calculated for each of the periods presented with the reconciliation to net income.  EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization on a historical basis.  

Cash available to pay dividends represents adjusted EBITDA plus cash interest income less (1) cash interest expense, (2) capital expenditures and (3) cash income taxes; this calculation differs in certain respects from the similar calculation used in our credit agreement. 

We present adjusted EBITDA, cash available to pay dividends and the related dividend payout ratio for several reasons.  Management believes adjusted EBITDA, cash available to pay dividends and the dividend payout ratio are useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt) and pay dividends. In addition, we have presented adjusted EBITDA, cash available to pay dividends and the dividend payout ratio to investors in the past because they are frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting them here provides a measure of consistency in our financial reporting. Adjusted EBITDA and cash available to pay dividends, referred to as Available Cash in our credit agreement, are also components of the restrictive covenants and financial ratios contained in our credit agreement that requires us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt and to pay dividends.  The definitions in these covenants and ratios are based on adjusted EBITDA and cash available to pay dividends after giving effect to specified charges.  In addition, adjusted EBITDA, cash available to pay dividends and the dividend payout ratio provide our board of directors with meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in our credit agreement and to measure our ability to service and repay debt.  We present the related “total net debt to last twelve month adjusted EBITDA coverage ratio” principally to put other non-GAAP measures in context and facilitate comparisons by investors, security analysts and others; this ratio differs in certain respects from the similar ratio used in our credit agreement.  These measures differ in certain respects from the ratios used in our senior notes indenture. 

These non-GAAP financial measures have certain shortcomings.  In particular, adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure.  Similarly, while we may generate cash available to pay dividends, we are not required to use any such cash to pay dividends, and the payment of any dividends is subject to declaration by our board of directors, compliance with applicable law and the terms of our credit agreement.  Because adjusted EBITDA is a component of the dividend payout ratio and the ratio of total net debt to last twelve month adjusted EBITDA, these measures are also subject to the material limitations discussed above.  In addition, the ratio of total net debt to last twelve month adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes these ratios are useful as a means to evaluate our ability to incur additional indebtedness in the future. 

We present the non-GAAP measures adjusted diluted net income per share and adjusted diluted net income attributable to common stockholders because our net income and net income per share are regularly affected by items that occur at irregular intervals or are non-cash items.  We believe that disclosing these measures assists investors, securities analysts and other interested parties in evaluating both our company over time and the relative performance of the companies in our industry.

Preliminary Pro Forma Results                                                                                 

Estimated pro forma results of operations presented herein gives effect to the acquisition of FairPoint Communications, Inc. as if it had occurred on Jan. 1, 2016.  The estimated pro forma results include certain accounting adjustments related to the acquisition that are expected to have a continuing impact on the combined results, including adjustments for depreciation and amortization of the acquired tangible and intangible assets acquired, interest expense on the debt incurred to complete the acquisition and to repay certain existing indebtedness of FairPoint, the exclusion of certain acquisition related costs and the tax impact of these pro forma adjustments.  These adjustments and the related results are based on a preliminary valuation of the estimated fair value of the net assets acquired, which is subject to change upon the final assessment and such changes could be material.  The estimated pro forma information is not intended to represent or be indicative of the results of the combined company that would have been obtained had the acquisition been completed as of the dates presented and should not be taken as representative of the future consolidated results of the combined company.

Safe Harbor

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions.  Certain statements in this communication are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995.  These forward-looking statements reflect, among other things, our current expectations, plans, strategies, and anticipated financial results.  There are a number of risks, uncertainties, and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements.  These risks and uncertainties include our ability to successfully integrate FairPoint Communications, Inc.’s operations and realize the synergies from the integration, as well as a number of factors related to our business, including economic and financial market conditions generally and economic conditions in our service areas; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; various risks to the price and volatility of our common stock; changes in the valuation of pension plan assets; the substantial amount of debt and our ability to repay or refinance it or incur additional debt in the future; our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock; restrictions contained in our debt agreements that limit the discretion of management in operating the business; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with our possible pursuit of acquisitions; system failures; cyber-attacks, information or security breaches or technology failure of ours or of a third party; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of our network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; and liability and compliance costs regarding environmental regulations. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in our filings with the SEC, including our reports on Form 10-K and Form 10-Q.  Many of these circumstances are beyond our ability to control or predict.  Moreover, forward-looking statements necessarily involve assumptions on our part.  These forward-looking statements generally are identified by the words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,” “would,” “will be,” “will continue” or similar expressions.  Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subsidiaries to be different from those expressed or implied in the forward-looking statements.  All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this communication.  Furthermore, forward-looking statements speak only as of the date they are made.  Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements.  You should not place undue reliance on forward-looking statements.

Company Contact                                                                      

Lisa Hood, Consolidated Communications
Phone:  (844)-909-CNSL (2675)
Lisa.hood@consolidated.com

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Balance Sheets
(Dollars in thousands, except share and per share amounts)
(Unaudited)
	December 31,				December 31,
		2017				2016
ASSETS
Current assets:
Cash and cash equivalents	$	15,657			$	27,077
Accounts receivable, net		121,528				56,216
Income tax receivable		21,846				21,616
Prepaid expenses and other current assets		33,318				28,292
Assets held for sale		21,310				-
Total current assets		213,659				133,201
Property, plant and equipment, net		2,037,606				1,055,186
Investments		108,858				106,221
Goodwill		1,038,032				756,877
Other intangible assets		306,783				31,612
Other assets		14,188				9,661
Total assets	$	3,719,126			$	2,092,758
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	24,143			$	6,766
Advance billings and customer deposits		42,526				26,438
Dividends payable		27,418				19,605
Accrued compensation		49,770				16,971
Accrued interest		9,343				11,260
Accrued expense		72,041				54,123
Current portion of long-term debt and capital lease obligations		29,696				14,922
Liabilities held for sale		1,003				-
Total current liabilities		255,940				150,085
Long-term debt and capital lease obligations		2,311,514				1,376,754
Deferred income taxes		209,720				244,298
Pension and other post-retirement obligations		334,193				130,793
Other long-term liabilities		33,817				14,573
Total liabilities		3,145,184				1,916,503
Shareholders' equity:
Common stock, par value $0.01 per share; 100,000,000 shares
authorized, 70,777,354 and 50,612,362, shares outstanding
as of December 31, 2017 and December 31, 2016, respectively		708				506
Additional paid-in capital		615,662				217,725
Accumulated other comprehensive loss, net		(48,083	)			(47,277	)
Noncontrolling interest		5,655				5,301
Total shareholders' equity		573,942				176,255
Total liabilities and shareholders' equity	$	3,719,126			$	2,092,758

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
	Three Months Ended								Year Ended
	December 31,								December 31,
		2017				2016				2017				2016
Net revenues	$	356,360			$	175,919			$	1,059,574			$	743,177
Operating expenses:
Cost of services and products		155,752				76,663				446,065				322,792
Selling, general and administrative
expenses		86,345				37,714				249,332				157,111
Acquisition and other transaction costs		2,987				947				33,650				1,214
Loss on impairment		-				-				-				610
Depreciation and amortization		104,789				43,155				291,873				174,010
Income from operations		6,487				17,440				38,654				87,440
Other income (expense):
Interest expense, net of interest income		(29,890	)			(19,999	)			(129,786	)			(76,826	)
Loss on extinguishment of debt		-				(6,559	)			-				(6,559	)
Other income, net		8,362				9,841				31,504				34,103
Income (loss) before income taxes		(15,041	)			723				(59,628	)			38,158
Income tax expense (benefit)		(115,065	)			675				(124,927	)			22,962
Net income		100,024				48				65,299				15,196
Less: net income attributable to noncontrolling interest		218				54				354				265
Net income (loss) attributable to common shareholders	$	99,806			$	(6	)		$	64,945			$	14,931
Net income (loss) per basic and diluted common shares
attributable to common shareholders	$	1.41			$	-			$	1.07			$	0.29

 

Consolidated Communications Holdings, Inc.
Pro Forma Condensed Consolidated Statements of Operations
(Dollars in thousands, except per share amounts)
(Unaudited)
	Pro Forma								Pro Forma
	Three Months Ended								Year Ended
	December 31,								December 31,
		2017				2016				2017				2016
Net revenues	$	356,360			$	379,848			$	1,460,620			$	1,567,620
Operating expenses:
Operating expenses (exclusive of depreciation
and amortization)		240,354				256,119				974,730				1,060,148
Other post employment benefit and pension expense		1,925				(38,901	)			9,545				(210,884	)
Depreciation and amortization		104,789				106,846				418,365				429,874
Income from operations		9,292				55,784				57,980				288,482
Other income (expense):
Interest expense, net of interest income		(29,890	)			(29,301	)			(119,512	)			(117,285	)
Loss on extinguishment of debt		-				(6,559	)			-				(6,559	)
Other income, net		8,362				9,793				31,823				34,399
Income (loss) from before income taxes		(12,236	)			29,717				(29,709	)			199,037
Income tax expense (benefit)		(113,943	)			12,273				(120,840	)			87,314
Net Income		101,707				17,444				91,131				111,723
Less: net income attributable to noncontrolling interest		218				54				354				265
Net income attributable to common shareholders	$	101,489			$	17,390			$	90,777			$	111,458
Net income per basic and diluted common share
attributable to common shareholders	$	1.44			$	0.25			$	1.29			$	1.58

 

Consolidated Communications Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
			Three Months Ended								Year Ended
			December 31,								December 31,
				2017				2016				2017				2016
OPERATING ACTIVITIES
	Net income		$	100,024			$	48			$	65,299			$	15,196
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization			104,789				43,155				291,873				174,010
	Deferred income taxes			(130,348	)			12,870				(126,127	)			20,863
	Cash distributions from wireless partnerships in excess of/(less than) earnings			(522	)			746				(1,411	)			(504	)
	Non-cash, stock-based compensation			447				351				2,766				3,017
	Amortization of deferred financing			1,148				810				17,076				3,223
	Loss on extinguishment of debt			-				6,559				-				6,559
	Other adjustments, net			551				(1,937	)			3,208				(920	)
	Changes in operating assets and liabilities, net			8,714				(17,960	)			(42,657	)			(3,211	)
	Net cash provided by operating activities			84,803				44,642				210,027				218,233
INVESTING ACTIVITIES
	Business acquisition, net of cash acquired			-				-				(862,385	)			(13,422	)
	Purchase of property, plant and equipment, net			(61,896	)			(31,034	)			(181,185	)			(125,192	)
	Proceeds from sale of assets			563				137				859				208
	Proceeds from business dispositions			-				9,227				-				30,119
	Net cash used in investing activities			(61,333	)			(21,670	)			(1,042,711	)			(108,287	)
FINANCING ACTIVITIES
	Proceeds from issuance of long-term debt			21,000				905,750				1,052,325				936,750
	Payment of capital lease obligations			(2,570	)			(1,128	)			(7,933	)			(2,885	)
	Payment on long-term debt			(21,587	)			(903,225	)			(111,337	)			(943,050	)
	Payment of financing costs			-				(9,912	)			(16,732	)			(9,912	)
	Share repurchases for minimum tax withholding			(530	)			(1,160	)			(571	)			(1,231	)
	Dividends on common stock			(27,440	)			(19,623	)			(94,138	)			(78,419	)
	Other			-				-				(350	)			-
	Net cash provided by (used in) financing activities			(31,127	)			(29,298	)			821,264				(98,747	)
Net change in cash and cash equivalents				(7,657	)			(6,326	)			(11,420	)			11,199
Cash and cash equivalents at beginning of period				23,314				33,403				27,077				15,878
Cash and cash equivalents at end of period			$	15,657			$	27,077			$	15,657			$	27,077

 

Consolidated Communications Holdings, Inc.
Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
			Three Months Ended									Year Ended
			December 31,									December 31,
				2017			2016						2017			2016
Commercial and carrier:
Data and transport services (includes VoIP)				84,712			49,331						268,453			196,654
Voice services				55,570			24,352						158,400			99,798
Other				11,709			3,710						33,908			12,518
				151,991			77,393						460,761			308,970
Consumer:
Broadband (VoIP and Data)				63,494			28,257						184,887			115,787
Video services				22,637			22,622						91,371			94,117
Voice services				54,148			13,039						136,478			55,275
				140,279			63,918						412,736			265,179
Equipment sales and service				-			5,354						-			43,137
Subsidies				20,375			10,626						62,272			48,363
Network access				40,243			15,097						110,196			63,751
Other products and services				3,472			3,531						13,609			13,777
Total operating revenue				356,360			175,919						1,059,574			743,177
Less operating revenues from divestitures				-			(5,354	)					-			(47,236	)
Adjusted operating revenue			$	356,360		$	170,565					$	1,059,574		$	695,941

 

Consolidated Communications Holdings, Inc.
Pro Forma Consolidated Revenue by Category
(Dollars in thousands)
(Unaudited)
		Pro Forma, Three Months Ended
		Q4 2017			Q3 2017			Q2 2017			Q1 2017			Q4 2016
Commercial and carrier:
Data and transport services (includes VoIP)		$	84,712		$	84,226		$	83,786		$	83,366		$	83,552
Voice services			55,570			55,688			57,607			57,847			59,049
Other			11,709			13,366			13,562			12,238			11,875
			151,991			153,280			154,955			153,451			154,476
Consumer:
Broadband (VoIP and Data)			63,494			64,254			63,831			63,025			63,298
Video services			22,637			23,333			23,891			24,711			24,197
Voice services			54,148			56,861			57,135			57,834			60,044
			140,279			144,448			144,857			145,570			147,539
Equipment sales and service			-			-			-			-			5,354
Subsidies			20,375			20,933			22,890			25,268			22,806
Network access			40,243			41,262			42,715			43,728			45,736
Other products and services			3,472			3,406			3,671			3,826			3,938
Total operating revenue			356,360			363,329			369,088			371,843			379,849
Less operating revenues from divestitures			-			-			-			-			(5,354	)
Adjusted operating revenue		$	356,360		$	363,329		$	369,088		$	371,843		$	374,495

 

Consolidated Communications Holdings, Inc.
Schedule of Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
	Three Months Ended								Year Ended
	December 31,								December 31,
		2017				2016				2017				2016
Net income	$	100,024			$	48			$	65,299			$	15,196
Add (subtract):
Income tax expense (benefit)		(115,065	)			675				(124,927	)			22,962
Interest expense, net		29,890				19,999				129,786				76,826
Depreciation and amortization		104,789				43,155				291,873				174,010
EBITDA		119,638				63,877				362,031				288,994
Adjustments to EBITDA (1):
Other, net (2)		11,854				(73	)			47,536				5,141
Investment income (accrual basis)		(8,681	)			(8,336	)			(31,749	)			(32,972	)
Investment distributions (cash basis)		7,972				8,926				29,993				32,144
Pension/OPEB expense		1,925				717				3,527				2,876
Loss on extinguishment of debt		-				6,559				-				6,559
Non-cash compensation (3)		447				351				2,766				3,017
Adjusted EBITDA	$	133,155			$	72,021			$	414,104			$	305,759
Notes:
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.

 

Consolidated Communications Holdings, Inc.
Schedule of Pro Forma Adjusted EBITDA Calculation
(Dollars in thousands)
(Unaudited)
	Pro Forma								Pro Forma
	Three Months Ended								Year Ended
	December 31,								December 31,
		2017				2016				2017				2016
Net income	$	101,707			$	17,444			$	91,131			$	111,723
Add (subtract):
Income tax expense (benefit)		(113,943	)			12,273				(120,840	)			87,314
Interest expense, net		29,890				29,301				119,512				117,285
Depreciation and amortization		104,789				106,846				418,365				429,874
EBITDA		122,443				165,864				508,168				746,196
Adjustments to EBITDA (1):
Other, net (2)		9,049				2,557				14,499				9,026
Investment income (accrual basis)		(8,681	)			(8,336	)			(31,749	)			(32,972	)
Investment distributions (cash basis)		7,972				8,926				29,993				32,144
Pension/OPEB expense		1,925				(38,901	)			9,545				(210,884	)
Loss on extinguishment of debt		-				6,559				-				6,559
Non-cash compensation (3)		447				1,641				5,752				9,308
Adjusted EBITDA	$	133,155			$	138,310			$	536,208			$	559,377
Notes:
(1)  These adjustments reflect those required or permitted by the lenders under our credit agreement.
(2)  Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.
(3)  Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.

 

Consolidated Communications Holdings, Inc.
Cash Available to Pay Dividends
(Dollars in thousands)
(Unaudited)
										Pro Forma
	Three Months Ended					Year Ended				Year Ended
	December 31, 2017					December 31, 2017				December 31, 2017
Adjusted EBITDA	$	133,155				$	414,104			$	536,208		(a)
- Cash interest expense		(28,812	)				(94,932	)			(112,874	)
- Capital expenditures		(61,896	)				(181,185	)			(227,200	)
- Cash income (taxes)/refund		16					(953	)			(1,298	)
Cash available to pay dividends	$	42,463				$	137,034			$	194,836
Dividends Paid	$	27,440				$	94,138			$	109,763
Payout Ratio		64.6	%				68.7	%			56.3	%
Note:  The above calculation excludes the principal payments on our debt.
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in Pro Forma Adjusted EBITDA.

 

Consolidated Communications Holdings, Inc.
Total Net Debt to LTM Adjusted EBITDA Ratio
(Dollars in thousands)
(Unaudited)
	December 31,
Summary of Outstanding Debt:		2017
Term loans, net of discount $8,344	$	1,813,069
Revolving loan		22,000
Senior unsecured notes due 2022, net of discount $3,669		496,331
Capital leases		23,890
Total debt as of December 31, 2017	$	2,355,290
Less deferred debt issuance costs		(14,080	)
Less cash on hand		(15,657	)
Total net debt as of December 31, 2017	$	2,325,553
Pro Forma Adjusted EBITDA for the
twelve months ended December 31, 2017	$	536,208		(a)
Total Net Debt to last twelve months
Adjusted EBITDA - Pro Forma		4.34x
(a) Full benefit of targeted synergies of $55.0 million are not yet fully reflected in Pro Forma Adjusted EBITDA.

 

Consolidated Communications Holdings, Inc.
Adjusted Net Income and Net Income Per Share
Dollars in thousands, except per share amounts)
(Unaudited)
	Three Months Ended								Year Ended
	December 31,								December 31,
		2017				2016				2017				2016
Net income	$	100,024			$	48			$	65,299			$	15,196
Transaction and severance related costs, net of tax		4,503				909				25,902				3,902
Storm costs, net of tax		1,931				-				1,931				-
Amortization of commitment fee, net of tax		-				715				7,819				715
Ticking fees on committed financing, net of tax		-				-				10,966				-
Tax on non-deductible transaction related costs		1,102				-				3,443				-
Deferred tax related to acquisition		-				-				5,205				-
Loss on extinguishment of debt, net of tax		-				4,014				-				4,014
Reversal of legal settlement, net of tax		-				(750	)			-				(750	)
Impairment charge for sale of Iowa ILEC, net of tax		-				-				-				373
Non-cash stock compensation, net of tax		272				215				1,682				1,846
Divestiture related, tax (1)		-				1,455				-				8,770
Change in deferred tax rate, tax		-				(1,533	)			5,404				(1,533	)
Change in deferred tax rate, federal tax reform		(112,910	)			-				(112,910	)			-
Other, tax		2,580				472				2,580				817
Adjusted net income (loss)	$	(2,498	)		$	5,545			$	17,321			$	33,350
Weighted average number of shares outstanding		70,516				50,326				60,373				50,301
Adjusted diluted net income per share	$	(0.04	)		$	0.11			$	0.29			$	0.66
Notes:
Calculations above assume a 39.2% effective tax rate for the three months and year ended December 31, 2017 and a 38.8% effective tax rate for the three months and year ended December 31, 2016.
Net income per share has been impacted by approximately $0.11 for the three months ended December 31, 2017 and $0.23 for the year ended December 31, 2017 due to increased depreciation and amortization associated with the preliminary valuation of the FairPoint assets.
(1) Includes sale of stock in Iowa ILEC and non deductible goodwill for equipment business.

 

Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
														Pro Forma
			December 31,				September 30,				% Change			December 31,				% Change
				2017				2017			in Qtr				2016			YOY
Voice Connections(1)				972,178				990,162			(1.8	%)			1,047,028			(7.1	%)
Data and Internet Connections(1)				783,682				783,945			(0.0	%)			780,027			0.5	%
Video Connections				103,313				105,480			(2.1	%)			113,665			(9.1	%)
Business and Broadband as % of total revenue(2)				74.7	%			74.2	%		0.7	%			71.2	%		4.9	%
Fiber route network miles (long-haul and metro)				35,984				35,749			0.7	%			35,282			2.0	%
On-net buildings				9,062				8,782			3.2	%			8,121			11.6	%
Consumer Customers				671,300				683,519			(1.8	%)			711,880			(5.7	%)
Consumer ARPU			$	69.66			$	70.44			(1.1	%)		$	69.08			0.8	%
Notes:
(1) The acquisition of FairPoint Communications, Inc. resulted in an increase of 546,492 voice connections and 301,000 data connections in the third quarter 2017.
(2) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.

 

Consolidated Communications Holdings, Inc.
Key Operating Statistics
(Unaudited)
											Pro Forma
			Q4 2017				Q3 2017				Q2 2017				Q1 2017				Q4 2016				Q3 2016				Q2 2016			Q1 2016
Voice Connections				972,178				990,162				1,012,467				1,028,231				1,047,028				1,066,778			1,091,537			1,109,972
Data and Internet Connections				783,682				783,945				784,619				782,533				780,027				780,021			773,999			770,920
Video Connections				103,313				105,480				107,279				109,981				113,665				116,365			119,362			122,511
Business and Broadband as % of total revenue(1)				74.7	%			74.2	%			74.3	%			73.7	%			71.2	%			74.6	%		73.3	%		72.9	%
Fiber route network miles (long-haul and metro)				35,984				35,749				35,592				35,550				35,282				35,100			(2	)		(2	)
On-net buildings				9,062				8,782				8,555				8,215				8,121				8,000			(2	)		(2	)
Consumer Customers				671,300				683,519				696,136				700,154				711,880				723,906			(2	)		(2	)
Consumer ARPU			$	69.66			$	70.44			$	69.36			$	69.30			$	69.08			$	69.17
Notes:
(1) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.
(2) Metric for FairPoint isn't available for Q1 or Q2 2016, therefore, we are unable to provide a pro forma metric for these reporting periods.

 

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