News Release Article Detail

• Delivered a strong quarter of growth in data adds and fiber to the cell sites
• Increased year over year commercial and carrier revenue by 3.0%
• Grew Metro E circuits by 25% year over year
• Reached approximately 65% of the two year, $17 million synergy target for Enventis

Nov. 5, 2015  -- Consolidated Communications Holdings, Inc. (Nasdaq:CNSL) (the "Company") reported results for the third quarter 2015.  

Third quarter financial summary:

• Revenue was $194.0 million.
• Net cash from operations was $71.8 million.
• Adjusted EBITDA was $89.4 million.
• Dividend payout ratio was 54.0%.

"The third quarter was another solid quarter of results as we continued to execute on our strategy and delivered cash flows providing a comfortable dividend payout ratio," said Bob Udell, President and Chief Executive Officer. "We added over 3,300 net data subscribers and the strong growth in our data services drove commercial and carrier revenues higher by 3.0% over last year."

"It has been one year since the close of the Enventis acquisition, and I could not be more pleased with how well the integration has gone. The fiber-centric assets and the culture of the employee base have been a great fit. The acquisition strengthened our market and product diversification and positioned us well for the future," Udell concluded.

Pro Forma Financial Results for the Third Quarter 

We have presented various adjusted pro forma information below and in the tables at the end of the release. This information is presented as if the acquisition of Enventis had occurred on January 1, 2014 in order to provide a better view of the period over period performance for the combined business.

• Total revenues were $194.0 million, compared to $203.4 million for the same period last year. Excluding revenue from our equipment sales and service, revenues were $179.2 million, compared to $181.2 million for the third quarter of 2014. Solid growth in strategic sales channels were offset by declines in voice services and network access revenues. Equipment sales and service revenues, which are low margin, declined by $7.5 million.  
• Income from operations was $13.6 million, compared to $25.5 million in the third quarter of 2014. The decrease in the quarter was primarily due to $9.6 million of integration and severance charges tied to the ongoing Enventis synergy efforts and a third quarter early retirement offer that was accepted by certain employees.    
• Interest expense, net improved by $2.6 million to $19.2 million from $21.8 million for the same period last year. The improvement is primarily due to the use of proceeds from the add-on we completed in June to our 6.5% senior notes due 2022. We used certain of the proceeds to redeem the remaining portion of our outstanding 10 7/8% senior notes.    
• Other income, net was $10.5 million, compared to $8.6 million for the same period in 2014.   
• 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 for the current quarter was $0.18 compared to $0.17 for the pro forma prior year period. 
• Cash distributions from our Verizon Wireless partnerships were $20.0 million compared to $7.6 million for the third quarter of 2014. The distributions were positively impacted by the cash received for the partnership owned towers that were included as part of the larger Verizon agreement with American Tower. In addition, cash collections from device financing plans are starting to catch up to the increase in receivables over the last year.
• Adjusted EBITDA was $89.4 million compared to $79.8 million for the same period in 2014.
• The total net debt to last twelve month adjusted EBITDA coverage ratio was 4.22 times to one.

Financial Results for the Nine Months Ended September 30, 2015

• Revenues were $587.5 million and adjusted EBITDA was $249.4 million.

Cash Available to Pay Dividends

For the quarter, cash available to pay dividends, or CAPD, was $36.2 million, and the dividend payout ratio was 54.0%. At September 30, 2015, cash and cash equivalents were $23.9 million. Capital expenditures for the quarter were $34.6 million. 

Financial Guidance

The Company is reiterating its full year guidance, which was previously updated in the second quarter. The table below reflects pro forma results for the full year of 2014.

*2015 capital guidance includes $5.2 million of integration related expenses. 

Dividend Payments

On November 2, 2015, the Company's board of directors declared its next quarterly dividend of $0.38738 per common share, which is payable on February 1, 2016 to stockholders of record at the close of business on January 15, 2016. This will represent the 42^nd consecutive quarterly dividend paid by the Company. 

View Financial Tables

Conference Call Information 

The Company will host a conference call today at 11:00 a.m. Eastern Time / 10:00 a.m. Central Time to discuss second quarter earnings and developments with respect to the Company. The call is being webcast and archived on the "Investor Relations" section of the Company's website at http://www.consolidated.com. The conference call dial-in number is 1-877-374-3981 with pass code 56543992. International parties can access the call by dialing 1-253-237-1158. A telephonic replay of the conference call will also be available starting three hours after completion of the call until November 12, 2015 at midnight Eastern Time. To hear the replay, parties in the United States and Canada should call 1-855-859-2056 and international parties should call 1-404-537-3406. 

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.

About Consolidated

Consolidated Communications Holdings, Inc. is a leading communications provider within its 11-state operations. Headquartered in Mattoon, IL, the Company has been providing services in many of its markets for over a century. The Company leverages its advanced fiber optic network to offer a wide range of solutions including: high speed internet, metro Ethernet, digital TV, Voice, wireless backhaul and cloud and managed services.

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 press release 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 Enventis' operations and realize the synergies from the acquisition, 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 shareholders 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 the 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; 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 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 Securities and Exchange Commission, 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 press release.  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, 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.