Windstream today reported second-quarter results
OREANDA-NEWS. 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.
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.
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 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 | ||||||||||||||||||
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