Windstream Corporation
Aug 4, 2016
PDF
Add to Briefcase

Windstream reports second-quarter results

Expanded Enterprise Contribution Margin; Significantly Reduced Debt

LITTLE ROCK, Ark., Aug. 04, 2016 (GLOBE NEWSWIRE) -- Windstream (NASDAQ:WIN), a leading provider of advanced network communications and technology solutions, today reported second-quarter results.

"We are making solid progress on achieving our 2016 goals. Each business unit is executing an operational strategy to advance the goal of stabilizing and growing operating cash flow over time. We are making the right investments and optimizing the balance sheet. All of which will drive improving results and create value for investors," said Tony Thomas, president and chief executive officer at Windstream.

Results under GAAP

Total revenues and sales were $1.36 billion and total service revenues were $1.33 billion in the second quarter compared to $1.42 billion and $1.38 billion respectively year-over-year. Operating income was $155 million compared to $79 million in the period a year ago. Net income was $1.5 million or 1 cent per share compared to a loss of $111 million or a loss of $1.13 per share a year ago.

Adjusted Results of Operations

Adjusted service revenues were $1.33 billion, a decrease of 1 percent from the same period a year ago. Adjusted OIBDAR was $482 million, an increase of 1 percent year-over-year.

Consumer and small business ILEC service revenues were $395 million, a decrease of 2 percent from the same period a year ago. Consumer service revenues were $311 million, a decrease of 1 percent year-over-year. Consumer average revenue per household increased 1 percent sequentially and 5 percent year-over-year driven partly by higher consumer adoption rates of premium Internet speeds.

Carrier service revenues were $160 million, a decrease of 7 percent year-over-year. Core carrier and wholesale revenues were $149 million, a decrease of $1 million sequentially.

Enterprise service revenues were $491 million, an increase of 3 percent year-over-year. Enterprise contribution margin was $80 million, or 15.7 percent, an increase of $32 million, or 68 percent, year-over-year, and an increase of $9 million, or 13 percent, sequentially.

Small business CLEC service revenues were $125 million, a 12 percent decrease year-over-year. Small business CLEC contribution margin remained steady sequentially at $41 million, or 33 percent.

Balance Sheet

During the quarter, Windstream completed the disposition of all of its shares in Communications Sales & Leasing (CS&L) in a debt-for-equity exchange to retire approximately $672 million in debt. Through the debt-for-equity exchange and open market debt repurchases over the last 12 months to date, the company has lowered debt by $740 million.

Quarterly Dividend

On Aug. 3, 2016, the board of directors declared a quarterly dividend of 15 cents per share payable Oct. 17, 2016, to stockholders of record as of Sept. 30, 2016.

Financial Outlook for 2016

Windstream affirmed its previously provided financial guidance for the year with improved cash interest and cash tax guidance.

The company expects total service revenue of $5.275 billion to $5.425 billion and adjusted OIBDAR of $1.90 billion to $1.95 billion.

Adjusted capital expenditures are expected to be between $800 million and $850 million, which excludes approximately $200 million in expected investments to complete Project Excel, a program funded by a portion of the proceeds from the sale of the company's data center business.  Project Excel accelerates Windstream's plans to upgrade and modernize its broadband capabilities to the latest technology by year-end 2016, or two years ahead of the company's previous timeline.

The company now expects cash interest expense of approximately $365 million and cash taxes of about $10 million, resulting in adjusted free cash flow of approximately $100 million in 2016.

Conference Call

Windstream will hold a conference call at 7:30 a.m. CDT on Aug. 4 to review the company's second-quarter earnings results.

To access the call:

Interested parties can access the call by dialing 1-877-374-3977, conference ID 46000332.

To access the call replay:

A replay of the call will be available beginning at 10:30 a.m. CDT on Aug. 4 and ending at midnight on Aug. 11. The replay can be accessed by dialing 1-855-859-2056, conference ID 46000332.

Webcast information:

The conference call also will be streamed live over the company's website at www.windstream.com/investors. Financial, statistical and other information related to the call will be posted on the site. A replay of the webcast will be available on the website beginning at 10:30 a.m. CDT on Aug. 4 and ending at midnight on Aug. 11.

About Windstream

Windstream (NASDAQ: WIN), a FORTUNE 500 company, is a leading provider of advanced network communications and technology solutions for consumers, small businesses, enterprise organizations and carrier partners across the U.S. Windstream offers bundled services, including broadband, security solutions, voice and digital TV to consumers. The company also provides data, cloud solutions, unified communications and managed services to business and enterprise clients. The company supplies core transport solutions on a local and long-haul fiber-optic network spanning approximately 125,000 miles. Additional information is available at windstream.com. Please visit our newsroom at news.windstream.com or follow us on Twitter at @Windstream.

Adjusted results of operations exclude the impacts of the disposed data center and consumer CLEC businesses and directory publishing operations and all merger and integration costs related to strategic transactions. A reconciliation of adjusted results to the comparable GAAP measures is included in the financial information presented below. Additional supplemental quarterly financial information is available on the company's Web site at www.windstream.com/investors.

Adjusted OIBDA is operating income before depreciation and amortization adjusted for the impact of restructuring charges, pension costs and share-based compensation.

Adjusted OIBDAR is adjusted OIBDA before the annual cash rent payment due under the master lease agreement with CS&L assuming the lease payments began on Jan. 1, 2015.

Adjusted free cash flow is defined as operating income plus depreciation and amortization, merger and integration costs, pension costs, share-based compensation expense, restructuring charges and the annual cash rent payment due under the master lease agreement with CS&L, less adjusted capital expenditures, cash taxes, cash interest on long-term debt, plus cash dividends received from CS&L.

Windstream claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include, but are not limited to, 2016 guidance for adjusted service revenue, adjusted OIBDAR and adjusted capital expenditures, along with statements regarding free cash flow, cash interest expense and cash taxes in 2016; expectations regarding revenue trends and improving margins in the business segments; network cost optimization; stability and growth in adjusted OIBDAR; the anticipated benefits of Project Excel to improve network capabilities; the anticipated increase in availability of higher Internet speeds; the completion and benefits of network investments pursuant to the Connect America Fund; expectations regarding deployments of Windstream's IPTV service, 1 Gig service and expanding the carrier network, products and customer verticals;  and Windstream's ability to improve its debt profile and reduce interest costs. These statements, along with other forward-looking statements regarding Windstream's overall business outlook, are based on estimates, projections, beliefs, and assumptions that Windstream believes are reasonable but are not guarantees of future events and results. Actual future events and results of Windstream may differ materially from those expressed in these forward-looking statements as a result of a number of important factors. For risk factors that could cause actual results and events to differ materially from those expressed, refer to Windstream's filings with the Securities and Exchange Commission.

Factors that could cause actual results to differ materially from those contemplated in Windstream's forward looking statements include, among others:

In addition to these factors, actual future performance, outcomes and results may differ materially because of more general factors including, among others, general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes.

Windstream undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause Windstream's actual results to differ materially from those contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties that may affect Windstream's future results included in other filings by Windstream with the Securities and Exchange Commission at www.sec.gov.


 

WINDSTREAM HOLDINGS, INC.                 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS                  
(In millions, except per share amounts) THREE MONTHS ENDED SIX MONTHS ENDED 
    June 30, June 30, Increase (Decrease) June 30, June 30,  Increase (Decrease) 
     2016   2015  Amount %  2016   2015  Amount  % 
UNDER GAAP:                 
Revenues and sales:                 
  Service revenues $  1,331.3  $  1,377.2  $  (45.9)   (3) $  2,671.9  $  2,759.0  $  (87.1)   (3) 
  Product sales   28.3    43.9    (15.6)   (36)   61.1    80.7    (19.6)   (24) 
  Total revenues and sales   1,359.6    1,421.1    (61.5)   (4)   2,733.0    2,839.7    (106.7)   (4) 
Costs and expenses:                 
  Cost of services (exclusive of depreciation and amortization included below)   667.2    685.2    (18.0)   (3)   1,336.0    1,365.2    (29.2)   (2) 
  Cost of products sold   24.2    38.4    (14.2)   (37)   53.1    70.3     (17.2)   (24) 
  Selling, general and administrative   196.9    215.7    (18.8)   (9)   400.7    440.7    (40.0)   (9) 
  Depreciation and amortization   308.2    341.8    (33.6)   (10)   613.0    682.5    (69.5)   (10) 
  Merger and integration costs   2.6    57.3    (54.7)   (95)   7.6    71.4    (63.8)   (89) 
  Restructuring charges   5.9    3.4    2.5    74    10.3    10.4    (0.1)   (1) 
  Total costs and expenses   1,205.0    1,341.8    (136.8)    (10)   2,420.7     2,640.5    (219.8)   (8) 
Operating income   154.6     79.3    75.3    95    312.3    199.2    113.1    57  
Dividend income on CS&L common stock  —    13.0    (13.0) *    17.6    13.0    4.6    35  
Other (expense) income, net   (1.9)   9.3    (11.2) *    (3.1)   8.1    (11.2) *  
Net gain on disposal of investment in CS&L common stock   17.3   —    17.3  *    17.3   —    17.3  *  
Net gain (loss) on early extinguishment of debt   37.5    (43.4)   80.9  *    2.1    (43.4)   45.5  *  
Other-than-temporary impairment loss on investment in CS&L common stock  —   —   —  *    (181.9)  —    (181.9) *  
Interest expense (A)   (217.4)   (217.5)   0.1  *    (437.1)   (358.6)   (78.5)   22  
Loss before income taxes   (9.9)   (159.3)   149.4    (94)   (272.8)   (181.7)   (91.1)   50  
Income tax benefit   (11.4)   (48.1)   36.7    (76)   (42.4)   (75.8)   33.4    (44) 
Net income (loss) $  1.5  $  (111.2) $  112.7  *  $  (230.4) $  (105.9) $  (124.5) *  
                    
Weighted average common shares   92.8    100.4    (7.6)   (8)   93.2    100.2    (7.0)   (7) 
Common shares outstanding   96.4     104.1    (7.7)   (7)         
                    
Basic and diluted earnings (loss) per share:                 
Net income (loss)  $.01  ($ 1.13) $ 1.14  *  ($ 2.48) ($ 1.08) ($ 1.40) *  
                    
ADJUSTED RESULTS OF OPERATIONS (B):                 
Adjusted service revenues $  1,331.3  $  1,344.5  $  (13.2)   (1) $  2,671.9  $  2,687.6  $  (15.7)   (1) 
Adjusted revenues and sales $  1,359.6  $  1,388.4  $  (28.8)   (2) $  2,733.0  $  2,768.3  $  (35.3)   (1) 
Adjusted OIBDAR (C) $  482.2  $  479.3  $  2.9    1  $  967.5  $  960.6  $  6.9     1  
Adjusted OIBDA (D) $  318.8  $  316.8  $  2.0    1  $  640.6  $  635.6  $  5.0    1  
Adjusted capital expenditures (E) $  801.0  $  796.1  $  4.9    1  $  439.7  $  444.3  $  (4.6)   (1) 
                    
* Not meaningful                 
(A) Includes additional interest expense associated with the master lease agreement with CS&L of $125.4 million and $252.3 million for the three and six months ended June 30, 2016, respectively, as compared to $96.0 million for both the three and six months ended June 30, 2015.
(B) Adjusted results exclude the impacts of the disposed data center and consumer CLEC businesses and directory publishing operations and all merger and integration costs related to strategic transactions. See Notes to Reconciliation of Non-GAAP Financial Measures.
(C) Adjusted OIBDAR is adjusted OIBDA before the annual cash rent payment due under the master lease agreement with CS&L assuming the lease payments began on January 1, 2015.
(D) Adjusted OIBDA is operating income before depreciation and amortization adjusted for the impact of restructuring charges, pension costs, share-based compensation expense and the annual cash rent payment due under the master lease agreement with CS&L.
(E) Adjusted capital expenditures exclude the impacts of capital expenditures related to Project Excel, a $250 million capital program funded entirely using a portion of the $575 million proceeds from the sale of the data center business  completed on December 18, 2015.
    

 

WINDSTREAM HOLDINGS, INC.                 
UNAUDITED BUSINESS SEGMENT RESULTS                  
(In millions) THREE MONTHS ENDED SIX MONTHS ENDED 
    June 30, June 30, Increase (Decrease) June 30, June 30, Increase (Decrease) 
     2016   2015  Amount %  2016   2015  Amount % 
Consumer and Small Business - ILEC                 
  Revenues and sales:                 
  Service revenues $  310.8  $  313.8  $  (3.0)   (1) $  622.5  $  626.0  $  (3.5)   (1) 
  Product sales   0.2    0.6    (0.4)   (67)   0.6    1.7    (1.1)   (65) 
  Total consumer   311.0    314.4    (3.4)   (1)   623.1    627.7    (4.6)   (1) 
  Small business - ILEC   84.2    88.7    (4.5)   (5)   169.3    178.2    (8.9)   (5) 
  Total revenue and sales   395.2    403.1    (7.9)   (2)   792.4    805.9    (13.5)   (2) 
  Costs and expenses   169.8    161.8    8.0    5    338.9    325.0    13.9    4  
  Segment income   225.4    241.3    (15.9)   (7)   453.5    480.9    (27.4)   (6) 
                    
Carrier                 
  Service revenues   159.9    172.2    (12.3)   (7)   323.1    348.5    (25.4)   (7) 
  Costs and expenses   45.2    48.3    (3.1)   (6)   90.7    94.4    (3.7)   (4) 
  Segment income   114.7    123.9    (9.2)   (7)   232.4    254.1    (21.7)   (9) 
                    
Enterprise                 
  Revenues and sales:                 
  Service revenues   491.3    478.2    13.1    3    982.7    953.9    28.8    3  
  Product sales   18.0    31.7    (13.7)   (43)   39.7    59.3     (19.6)   (33) 
  Total revenue and sales   509.3    509.9    (0.6)  —    1,022.4    1,013.2    9.2    1  
  Costs and expenses   429.5    462.3    (32.8)   (7)   872.1    913.7    (41.6)   (5) 
  Segment income   79.8    47.6    32.2    68    150.3    99.5    50.8    51  
                    
Small Business - CLEC                  
  Service revenues   125.3     141.9    (16.6)   (12)   254.0    288.5    (34.5)   (12) 
  Costs and expenses   84.1    97.3    (13.2)   (14)   171.5    195.3    (23.8)   (12 ) 
  Segment income   41.2    44.6    (3.4)    (8)   82.5    93.2    (10.7)    (11) 
                     
Total segment revenues and sales:                  
Service revenues   1,171.5    1,194.8    (23.3)   (2)   2,351.6    2,395.1    (43.5)   (2) 
Product sales   18.2     32.3    (14.1)   (44)   40.3    61.0    (20.7)   (34) 
Total segment revenues and sales   1,189.7    1,227.1    (37.4)   (3)   2,391.9    2,456.1    (64.2)   (3) 
Total segment costs and expenses   728.6    769.7    (41.1)   (5)   1,473.2    1,528.4    (55.2)   (4) 
Total segment income   461.1    457.4     3.7    1    918.7     927.7    (9.0)    (1) 
  Regulatory and other operating revenues and sales (A)   169.9    161.3    8.6    5    341.1    312.2    28.9    9  
  Revenues and sales related to disposed businesses (B)  —    32.7    (32.7) *   —    71.4    (71.4) *  
  Other unassigned operating expenses (C)   (168.2)   (208.7)   40.5    (19)   (334.5)   (382.4)   47.9    (13) 
  Operating expenses related to disposed businesses (B)  —    (21.6)   21.6  *   —    (47.2)   47.2  *  
  Depreciation and amortization   (308.2)   (341.8)   33.6    (10)   (613.0)   (682.5)   69.5    (10) 
Operating income $  154.6  $  79.3  $  75.3    95  $  312.3  $  199.2  $  113.1    57  
                    
* Not meaningful                 
(A)  Other operating revenues are not allocated to the business segments. These revenues include revenue from federal and state universal service funds, CAF Phase II support, and funds received from federal access recovery mechanisms, revenues from providing switched access services, and certain surcharges assessed to our customers, including billings for our required contributions to federal and state USF programs.
(B)  Represents revenues and operating expenses associated with the disposed data center and consumer CLEC businesses and directory publishing operations that are not assigned to the business segments. 
(C)  These expenses are not allocated to the business segments. Unallocated expenses include merger and integration costs, restructuring charges, stock-based compensation, pension costs, certain regulatory fees and shared services, such as accounting and finance, information technology, engineering, network management, legal, human resources, and investor relations. These expenses are centrally managed and are not monitored by management at a segment level.
                    

 

WINDSTREAM HOLDINGS, INC.                 
UNAUDITED SUPPLEMENTAL OPERATING INFORMATION                 
(In thousands)                  
    THREE MONTHS ENDED SIX MONTHS ENDED 
    June 30, June 30,  Increase (Decrease) June 30, June 30, Increase (Decrease) 
    2016 2015 Amount % 2016 2015 Amount % 
Consumer operating metrics                 
  Households served  1,403.8  1,494.2   (90.4)   (6)         
  High-speed Internet customers  1,075.8  1,120.8   (45.0)   (4)         
  Digital television customers  342.0  372.5   (30.5)   (8)         
                    
  Net household losses  26.9  34.5   (7.6)    (22)  42.0  34.5  7.5  22 
  Net high-speed Internet customer losses  16.2  10.8   5.4    50   19.3  10.8  8.5  79 
                    
Small Business - ILEC customers (A)  141.0  151.6   (10.6)   (7)         
                    
Enterprise customers (B)  26.8  26.0   0.8    3          
                     
Small Business - CLEC customers (C)  81.2  99.3   (18.1)   (18)         
                    
(A) Small business customer relationships that generate less than $1,500 in revenue per month and are located in service areas in which we are the incumbent local exchange carrier ("ILEC") and provide services over network facilities operated by us.
(B)  Enterprise customers represent customers that generate $1,500 or more in revenue per month.
(C)
 Small business customer relationships that generate less than $1,500 in revenue per month and are located in service areas in which we are the competitive local exchange carrier ("CLEC") and provide services over network facilities primarily leased from other carriers.
                    

 

WINDSTREAM HOLDINGS, INC.      
UNAUDITED CONSOLIDATED BALANCE SHEETS      
(In millions)      
       
   June 30, December 31, 
    2016   2015  
Assets      
Current Assets:      
Cash and cash equivalents   $  41.6  $  31.3  
Accounts receivable, net    628.5    643.9  
Inventories    70.7    79.5  
Prepaid expenses and other    130.9    120.6  
Total current assets    871.7    875.3  
       
Goodwill    4,213.6    4,213.6  
Other intangibles, net    1,411.4    1,504.7  
Net property, plant and equipment    5,239.3    5,279.8  
Investment in CS&L common stock   —    549.2  
Other assets     85.6    95.5  
Total Assets  $  11,821.6  $  12,518.1  
       
Liabilities and Shareholders' Equity      
Current Liabilities:      
Current maturities of long-term debt  $  11.9  $  5.9  
Current portion of long-term lease obligations    160.4    152.7  
Accounts payable    342.2    430.1  
Advance payments and customer deposits    193.2    193.9  
Accrued taxes    76.3    84.1  
Accrued interest    66.3    78.4  
Other current liabilities    269.7    322.0  
Total current liabilities    1,120.0    1,267.1  
       
Long-term debt    4,731.6    5,164.6  
Long-term lease obligations    4,918.4    5,000.4  
Deferred income taxes    241.4    287.4  
Other liabilities    481.0    492.2  
Total liabilities    11,492.4    12,211.7  
       
Shareholders' Equity:      
Common stock   —   —  
Additional paid-in capital    578.7     602.9  
Accumulated other comprehensive loss    (7.0)   (284.4) 
Accumulated deficit    (242.5)   (12.1) 
Total shareholders' equity    329.2    306.4  
Total Liabilities and Shareholders' Equity  $  11,821.6  $  12,518.1  

 

WINDSTREAM HOLDINGS, INC.         
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS       
(In millions)        
 THREE MONTHS ENDED SIX MONTHS ENDED 
 June 30, June 30, June 30, June 30, 
  2016   2015   2016   2015  
Cash Flows from Operating Activities:        
Net income (loss)$  1.5  $  (111.2) $  (230.4) $  (105.9) 
Adjustments to reconcile net income (loss) to net cash provided from operations:        
Depreciation and amortization  308.2    341.8    613.0    682.5  
Provision for doubtful accounts  10.8    13.2    20.5    23.5  
Share-based compensation expense  8.9    13.5    22.6    28.3  
Deferred income taxes  (12.8)   (49.6)   (40.3)   (83.4) 
Net gain on disposal of investment in CS&L common stock   (17.3)  —    (17.3)  —  
Noncash portion of net gain (loss) on early extinguishment of debt  (37.7)   (2.9)   (45.1)   (2.9) 
Other-than-temporary impairment loss on investment in CS&L common stock —   —    181.9   —  
Amortization of unrealized losses on de-designated interest rate swaps  1.0    3.7    2.2    7.1  
Plan curtailment —    (13.5)   (5.5)   (13.5) 
Other, net  10.0    (14.2)   (5.3)   (7.3) 
Changes in operating assets and liabilities, net:        
Accounts receivable  (0.2)   (20.4)   (2.2)   (53.7) 
Prepaid income taxes  (0.3)   1.4    (6.1)   9.2  
Prepaid expenses and other  19.1    12.3    13.1    (12.5) 
Accounts payable  19.3    35.0    (80.9)   (29.2) 
Accrued interest  (51.8)   (87.6)   (12.0)   (20.2) 
Accrued taxes  4.7     8.8    (7.8)   (2.1) 
Other current liabilities  19.9    30.2    24.1    (13.0) 
Other liabilities  (1.7)   (4.1)   (11.7)   (6.7) 
Other, net  15.7    (20.2)   11.7    (20.2) 
Net cash provided from operating activities  297.3    136.2    424.5    380.0  
Cash Flows from Investing Activities:        
Additions to property, plant and equipment  (246.5)   (255.0)   (510.3)   (444.3) 
Proceeds from the sale of property —   —    6.2   —  
Grant funds received for broadband stimulus projects —    10.1   —    17.5  
Network expansion funded by Connect America Fund - Phase I —    (34.6)  —    (42.9) 
Change in restricted cash —    4.2   —    3.8   
Other, net  (4.3)   11.1     (4.3)   9.0  
Net cash used in investing activities  (250.8)   (264.2)   (508.4)   (456.9) 
Cash Flows from Financing Activities:        
Dividends paid to shareholders  (14.6 )   (191.1)   (29.5)   (342.6) 
Payment received from CS&L in spin-off —    1,035.0   —    1,035.0  
Repayments of debt and swaps  (646.2)    (1,316.5)   (1,631.5)   (1,641.9) 
Proceeds of debt issuance  647.0    610.0    1,925.0    1,100.0  
Debt issuance costs  (1.0)   (3.7)   (11.7 )   (3.7) 
Stock repurchases —   —    (28.9)  —  
Payments under long-term lease obligations  (37.7)   (24.5)   (74.5)   (24.5) 
Payments under capital lease obligations  (27.4)   (7.2)   (47.2)   (18.4) 
Other, net  0.4    (1.0)   (7.5)   (7.8) 
Net cash (used in) provided from financing activities  (79.5)   101.0    94.2    96.1   
(Decrease) increase in cash and cash equivalents  (33.0)   (27.0)    10.3    19.2  
Cash and Cash Equivalents:        
Beginning of period  74.6    74.0    31.3    27.8  
End of period$  41.6  $  47.0  $  41.6  $  47.0  
         

 

WINDSTREAM HOLDINGS, INC.
NON-GAAP FINANCIAL MEASURES - ADJUSTED FREE CASH FLOW AND ADJUSTED CAPITAL EXPENDITURES
(In millions)
           
    THREE MONTHS ENDED SIX MONTHS ENDED
    June 30, June 30, June 30, June 30,
     2016   2015   2016   2015 
Adjusted Free Cash Flow:        
Operating income under GAAP $154.6  $79.3  $312.3  $199.2 
  Depreciation and amortization  308.2   341.8   613.0   682.5 
OIBDA  462.8   421.1   925.3   881.7 
  Adjustments:        
  Merger and integration costs  2.6   57.3   7.6   71.4 
  Pension expense (income)  2.0   (4.7)  1.7   (6.5)
  Restructuring charges  5.9   3.4   10.3   10.4 
  Share-based compensation expense  8.9   13.5   22.6   28.3 
  Master lease rent payment  (163.4)  (121.0)  (326.9)  (121.0)
  Adjusted capital expenditures  (209.6)  (255.0)  (439.7)  (444.3)
  Cash paid for interest on long-term debt obligations  (138.8)  (206.3)  (194.3)  (281.0)
  Cash (paid) refunded for income taxes  (1.4)  0.3   (7.9)  1.5  
  Cash dividends received on CS&L common stock  17.6    35.2  
Adjusted free cash flow $(13.4) $(91.4) $33.9  $140.5 
           
Adjusted Capital Expenditures:        
Capital expenditures under GAAP$246.5  $255.0  $510.3  $444.3 
   Project Excel capital expenditures (A)  (36.9)   (70.6)  
Adjusted capital expenditures$209.6  $255.0  $439.7  $444.3 
           
           
            
(A) Represents capital expenditures related to Project Excel, a $250 million capital program funded entirely using a portion of the $575 million proceeds from the sale of the data center business completed on December 18, 2015


WINDSTREAM HOLDINGS, INC.          
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES          
(In millions)          
       
  THREE MONTHS ENDED  SIX MONTHS ENDED 
  June 30, June 30,  June 30, June 30, 
   2016    2015    2016   2015  
Reconciliation of Revenues and Sales under GAAP to Adjusted
  Revenues and Sales:
          
Service revenues under GAAP $  1,331.3  $  1,377.2   $  2,671.9  $  2,759.0  
Adjustments:          
Data center revenues(A) —    (30.4) (A) —    (59.6) 
Consumer CLEC revenues(A) —    (2.3) (A) —    (10.2) 
Directory publishing revenues(A) —   —  (A) —    (1.6) 
Adjusted service revenues   1,331.3    1,344.5     2,671.9    2,687.6  
Product sales under GAAP   28.3    43.9     61.1    80.7  
Adjusted revenues and sales$  1,359.6  $  1,388.4   $  2,733.0  $  2,768.3  
           
Reconciliation of Net Income (Loss) under GAAP to Adjusted OIBDA:          
Net income (loss) $  1.5  $  (111.2)  $  (230.4) $  (105.9) 
Adjustments:          
Dividend income on CS&L common stock(B) —    (13.0) (B)  (17.6)   (13.0) 
Other expense (income), net(B)  1.9    (9.3) (B)  3.1     (8.1) 
Net gain on disposal of investment in CS&L common stock(B)  (17.3)  —  (B)  (17.3)  —  
Net (gain) loss on early extinguishment of debt(B)  (37.5)   43.4  (B)  (2.1)   43.4  
Other-than-temporary impairment loss on investment in CS&L common stock(B) —   —  (B)  181.9   —  
Interest expense(B)  217.4    217.5  (B)  437.1    358.6  
Income tax benefit(B)  (11.4)   (48.1) (B)  (42.4)   (75.8) 
Operating income under GAAP(B)  154.6    79.3  (B)  312.3    199.2  
Depreciation and amortization(B)  308.2    341.8  (B)  613.0    682.5  
Adjustments:          
Data center business operating loss(A) —    2.1  (A) —    3.6  
Consumer CLEC business operating income(A) —    (0.8) (A) —    (3.3)  
Directory publishing operating income(A) —   —  (A) —    (0.8) 
Depreciation and amortization - disposed businesses(A) —    (12.4) (A) —    (23.7) 
Merger and integration costs(B)  2.6    57.3  (B)  7.6    71.4  
Pension expense (income)(B)  2.0    (4.7) (B)  1.7    (6.5) 
Restructuring charges(B)  5.9    3.4  (B)  10.3    10.4  
Share-based compensation expense(B)  8.9    13.3  (B)  22.6    27.8  
Adjusted OIBDAR   482.2    479.3     967.5    960.6  
Master lease rent payment(C)  (163.4)   (162.5 ) (C)  (326.9)   (325.0) 
Adjusted OIBDA $  318.8  $  316.8   $  640.6  $  635.6  
           
See Notes to Reconciliation of Non-GAAP Financial Measures 
           

 

WINDSTREAM HOLDINGS, INC.          
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES          
(In millions) THREE MONTHS ENDED  SIX MONTHS ENDED 
  June 30, June 30,  June 30, June 30, 
   2016   2015    2016   2015  
Reconciliation of Adjusted OIBDA to Net Cash Provided from Operating Activities:          
Adjusted OIBDA $  318.8  $  316.8   $  640.6  $  635.6  
Adjustments:          
Master lease rent payment(C)  163.4    162.5  (C)  326.9    325.0  
Cash dividends received on CS&L common stock   17.6   —     35.2   —  
Pretax operating results of disposed businesses(A) —    11.3  (A)  —    24.7  
Merger and integration costs(B)  (2.6)   (57.3) (B)  (7.6)   (71.4) 
Restructuring charges(B)  (5.9)   (3.4) (B)  (10.3)   (10.4) 
Other (expense) income, net(B)  (1.9)   9.3  (B)  (3.1)   8.1  
Net gain (loss) on early extinguishment of debt(B)  37.5    (43.4)  (B)  2.1    (43.4) 
Interest expense(B)  (217.4)   (217.5) (B)  (437.1)   (358.6) 
Income tax benefit, net of deferred income taxes   (1.4)   (1.5)    2.1    (7.6) 
Provision for doubtful accounts(D)  10.8    13.2  (D)  20.5    23.5  
Noncash portion of net gain (loss) on early extinguishment of debt(D)  (37.7)   (2.9) (D)  (45.1)   (2.9) 
Amortization of unrealized losses on de-designated interest rate swaps(D)  1.0    3.7  (D)  2.2    7.1   
Plan curtailment(D) —    (13.5) (D)  (5.5)   (13.5) 
Other noncash adjustments, net(F)  (9.6)   3.5  (F)  (24.6)   12.2  
Changes in operating assets and liabilities, net(D)  24.7    (44.6) (D)  (71.8)   (148.4) 
Net Cash Provided From Operating Activities $  297.3  $  136.2   $  424.5  $  380.0  
           
Reconciliation of Adjusted Free Cash Flow to Net Cash Provided from Operating Activities:          
Adjusted Free Cash Flow $  (13.4) $  (91.4)  $  33.9  $  140.5  
Adjustments:          
Cash paid (refunded) for income taxes   1.4    (0.3)     7.9    (1.5) 
Cash paid for interest on long-term debt obligations   138.8    206.3     194.3     281.0  
Capital expenditures(D)  246.5    255.0  (D)  510.3    444.3  
Project Excel capital expenditures(E)  (36.9)  —   (E)  (70.6)  —  
Master lease rent payment(A)  163.4    121.0  (A)  326.9    121.0  
Merger and integration costs(B)  (2.6)   (57.3) (B)  (7.6)   (71.4) 
Restructuring charges(B)  (5.9)   (3.4) (B)  (10.3)   (10.4) 
Other (expense) income, net(B)  (1.9)   9.3  (B)  (3.1)   8.1  
Net gain (loss) on early extinguishment of debt(B)  37.5    (43.4) (B)  2.1    (43.4) 
Interest expense(B)  (217.4)   (217.5) (B)  (437.1)   (358.6) 
Income tax benefit, net of deferred income taxes   (1.4)   (1.5)    2.1    (7.6) 
Provision for doubtful accounts(D)  10.8    13.2  (D)  20.5    23.5  
Noncash portion of net gain (loss) on early extinguishment of debt(D)  (37.7)   (2.9) (D)  (45.1)   (2.9) 
Amortization of unrealized losses on de-designated interest rate swaps(D)  1.0    3.7  (D)  2.2    7.1  
Plan curtailment(D)  —    (13.5) (D)  (5.5)   (13.5) 
Other noncash adjustments, net(F)  (9.6)   3.5  (F)  (24.6)    12.2  
Changes in operating assets and liabilities, net(D)  24.7    (44.6) (D)  (71.8)   (148.4) 
Net Cash Provided From Operating Activities $  297.3  $  136.2   $  424.5  $  380.0  
           
See Notes to Reconciliation of Non-GAAP Financial Measures 
           


WINDSTREAM HOLDINGS, INC.
NOTES TO RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
         
(A) Represents applicable amount related to the disposed data center and consumer CLEC businesses and directory publishing operations as reported under GAAP. There were no product sales attributed to the disposed businesses.
(B) Represents applicable amount as reported under GAAP - See Unaudited Consolidated Statements of Operations.
(C) Represents the impact of the annual cash rent payment due under the master lease agreement with CS&L assuming the lease payments began on January 1, 2015.
(D) Represents applicable amount reported under GAAP - See Unaudited Consolidated Statements of Cash Flows.
(E) Represents capital expenditures related to Project Excel, a $250 million capital program funded entirely using a portion of the $575 million proceeds from the sale of the data center business completed on December 18, 2015.
(F) Consists of non-cash amortization of debt issuance costs, debt discounts and premiums, accretion expense related to asset retirement obligations, ineffectiveness on interest rate swaps, gains on the sale of property, and other non-cash miscellaneous income and expenses.  
 
Windstream Holdings, Inc ("Windstream", "we", "us", "our") has disclosed in our Form 8-K furnished on May 5, 2016, that we have presented in this press release unaudited adjusted results, which exclude the impacts of the disposed data center and consumer CLEC businesses and directory publishing operations and all merger and integration costs resulting from strategic transactions.  In addition to these adjustments, we have presented certain measures of our operating performance that adjusts for the impact of the annual cash rent payment due under the master lease agreement with Communications Sales & Leasing ("CS&L"), and exclude the impacts of restructuring charges, pension costs and share-based compensation expense.
 
Our purpose for these adjustments is to improve the comparability of results of operations for all periods presented in order to focus on the true earnings capacity associated with providing telecommunication services.  Additionally, management believes that presenting adjusted measures assists investors by providing more meaningful comparisons of results from current and prior periods, and by providing information that is a better reflection of the true earnings capacity of our current operations.  We use adjusted results, including adjusted OIBDA, adjusted OIBDAR, adjusted free cash flow and adjusted capital expenditures as key measures of the operational performance of our business.  Our management, including the chief operating decision-maker, consistently uses these measures for internal reporting and the evaluation of business objectives, opportunities and performance. 

 

Media Contact:

David Avery, 501-748-5876

david.avery@windstream.com



Investor Contact:

Mary Michaels, 501-748-7578

mary.michaels@windstream.com

Primary Logo

Source: Windstream Holdings, Inc.

News Provided by Acquire Media