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8-K - 8-K - WideOpenWest Finance, LLCa13-24317_18k.htm

EXHIBIT 99.1

 

 

Contact:

Richard Fish

Chief Financial Officer

720-479-3538

 

rfish@wideopenwest.com

 

WOW! REPORTS RESULTS FOR THE THIRD QUARTER ENDED SEPTEMBER 30, 2013

 

ENGLEWOOD, CO — (November 14, 2013) - WOW! Internet, Cable & Phone (WOW!), a leading, fully-integrated provider of residential and commercial high-speed data, video and telephony services to customers in the Midwestern and Southeastern United States, today reported financial and operating results for the third quarter ended September 30, 2013.

 

Financial & Operating Highlights

 

For the third quarter ended September 30, 2013, WOW! reported total Revenue of $297.4 million and Adjusted EBITDA(1) of $112.3 million, a sequential increase in Adjusted EBITDA of $1.2 million (or 1.1%) from the previous quarter and an increase in Adjusted EBITDA of $9.4 million (or 9.1%) from the pro forma third quarter ended September 30, 2012(2).

 

For the third quarter ended September 30, 2013, WOW! reported an increase in total customers of 16,700 and an increase in total RGUs of 21,900 over June 30, 2013 subscriber counts primarily as a result of strong customer acquisition activity during the third quarter.  Third quarter increases in total customers and RGUs referred to above include an increase of ~4,500 total customers and RGUs attributable to a change in reported subscribers in certain former Knology markets to conform to the Company’s reporting methodology related to bulk video customers in multi-dwelling units.  Excluding the total customer and RGU additions due to this change in reporting methodology, total customers increased 12,200 (or 1.5%) and total RGUs increased 17,400 (or 1.0%) during the quarter ended September 30, 2013.

 

Bluemile Asset Acquisition

 

On September 27, 2013, the Company entered into and closed an asset purchase agreement to acquire certain assets from Bluemile, Inc. (“Bluemile”), a Columbus, Ohio-based corporation, for initial cash consideration of $15.0 million, subject to closing and post-closing adjustments (the “Bluemile Assets” acquisition).  Additionally, if certain financial metrics are achieved during the twelve months ended December 31, 2014, the Company could pay additional consideration to Bluemile not to exceed $5.0 million.  The acquired Bluemile Assets include an optical and IP network, a 26,000 sq. ft. data center facility, an enterprise cloud infrastructure and customer relationships having total annualized revenue and Adjusted EBITDA of approximately $8.9 million and $2.9 million, respectively.  The Bluemile Asset acquisition will enable the Company to enhance its Business Services products and services to existing and potential customers in all of its markets.

 


(1)         Adjusted EBITDA is not a measurement of financial performance under generally accepted accounting principles.  For a definition of Adjusted EBITDA, information about management’s reasons for providing data with respect to Adjusted EBITDA, the limitations associated with its use and a quantitative reconciliation of Adjusted EBITDA to net income (loss)  see “Definitions of Non-GAAP Financial and Operating Metrics”, “Unaudited Reconciliations of Non-GAAP Measures to GAAP Measures” and the accompanying tables in this release.

 

(2)         Pro forma financial information for the three months ended September 30, 2012 has been developed by applying pro forma adjustments to the individual historical unaudited condensed consolidated financial statements of WOW! and Knology, Inc. (“Knology”) giving effect to our merger with Knology and related July 17, 2012 financing as if it had been completed at the beginning of the period presented.  See “Unaudited Pro Forma Condensed Combined Financial Information” and the accompanying tables in this release.

 



 

WideOpenWest Finance, LLC

Condensed Consolidated Statements of Operations (Unaudited)

($ in millions)

 

 

 

Three months ended
September 30,

 

 

 

2013

 

2012

 

 

 

 

 

 

 

Revenue

 

$

297.4

 

$

277.2

 

Costs and expenses:

 

 

 

 

 

Operating (excluding depreciation & amortization)

 

164.3

 

154.5

 

Selling, general and administrative

 

30.7

 

33.2

 

Depreciation and amortization

 

63.0

 

71.8

 

Management fee to related party

 

0.4

 

0.4

 

 

 

258.4

 

259.9

 

 

 

 

 

 

 

Income from operations

 

39.0

 

17.3

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(58.8

)

(75.9

)

Loss on extinguishment of debt

 

 

(8.3

)

Realized and unrealized gain (loss) on derivative instruments, net

 

0.9

 

(18.8

)

Other income (expense), net

 

0.1

 

 

 

 

 

 

 

 

Net loss

 

$

(18.8

)

$

(85.7

)

 

The unaudited condensed consolidated statements of operations above and the information in this press release should be read in conjunction with our Form 10-Q for the three months ended September 30, 2013 filed with the U.S. Securities and Exchange Commission (“SEC”) on November 14, 2013 and our Form S-4 registration statement filed with the SEC on April 10, 2013, which became effective on April 22, 2013 (the “Registration Statement”).  For ease of use, references in this press release to “WOW! Internet, Cable & Phone” or “WOW!” mean WideOpenWest Finance, LLC and its consolidated subsidiaries.

 

Conference Call

 

WOW! will host a conference call on Friday, November 15, 2013 at 1:30 pm Eastern to discuss the operating and financial results contained in this press release.  Conference call information is as follows:

 

Call Date:

Friday, November 15, 2013

Call Time:

1:30 p.m. Eastern

Dial In:

(877) 541-5069

Intn’l Dial In:

(443) 842-7607

Conf. ID:

98054173

 

 

 

A recording of the conference call will be available two hours after the completion of the call until December 15, 2013.  Dial in # for this replay is (855) 859-2056. Additionally, a copy of the transcript will be available approximately forty-eight hours after the call, at www.wowway.com.

 

About WOW!

 

WOW! has been one of the nation’s leading providers of high-speed Internet, cable TV, and phone serving communities in Illinois, Michigan, Indiana and Ohio since 1996.  In July 2012, WOW! acquired Knology, Inc. and began serving communities in the Southeast and Midwest.  Our operating philosophy is to deliver an employee and customer experience that lives up to its name.  WOW! is privately owned by Avista Capital Partners.  For more information, please visit www.wowway.com.

 


 

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Forward-Looking Statements

 

This press release may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements reflect management’s current views with respect to future events and financial performance.  The forward-looking statements included in this release are made as of the date hereof. Except as required by law, we assume no obligation to update these forward-looking statements, even if new information becomes available in the future.  Actual results may differ materially from those expected because of various risks and uncertainties.  You should review our filings with the SEC, including the section titled “Risk Factors” contained in our Registration Statement and any subsequent quarterly reports, for a discussion of such risks and uncertainties.

 

Unaudited Pro Forma Condensed Combined Financial Information

 

The following unaudited pro forma condensed combined financial information for the three months ended September 30, 2012 has been developed by applying pro forma adjustments to the individual historical unaudited condensed consolidated financial statements of WOW! and Knology, Inc. (“Knology”).  The unaudited pro forma condensed combined statement of operations for the three months ended September 30, 2012 has been prepared giving effect to our merger with Knology and related July 17, 2012 financing as if it had been completed at the beginning of the period presented. The unaudited pro forma condensed combined financial information is for informational purposes only and does not purport to represent what our results of operations or financial information would have been if the Knology merger and related financing had occurred at any date, nor does such information purport to project the results of operations for any future period.

 

The unaudited pro forma condensed combined financial information was prepared based on WOW!’s and Knology’s historical unaudited financial statements for the three months ended September 30, 2012, respectively.  The historical consolidated financial information has been adjusted to give effect to pro forma events that are (1) directly attributable to the merger, (2) factually supportable and (3) expected to have a continuing impact on the combined results.

 

The unaudited pro forma condensed combined statements of operations do not reflect non-recurring charges that have been incurred in connection with the Knology merger and related July 17, 2012 financing, including legal fees, broker fees and accounting fees.

 

The unaudited pro forma financial statements should be read in conjunction with the information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the consolidated financial statements and the accompanying notes appearing in our Registration Statement and our Form 10-Q for the three months ended September 30, 2013 as filed with the SEC.

 

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The following table provides a summary of our net loss for the three months ended September 30, 2013 and 2012, respectively:

 

WideOpenWest Finance, LLC

Condensed Consolidated Statements of Operations (Unaudited)

($ in millions)

 

 

 

 

 

Pro Forma

 

 

 

Three months
ended
September 30,
2013

 

Three months
ended
September 30,
2012

 

Revenue

 

$

297.4

 

$

299.8

 

Costs and expenses:

 

 

 

 

 

Operating (including stock-based compensation)

 

164.3

 

166.3

 

Selling, general and administrative expenses

 

30.7

 

33.7

 

Depreciation and amortization

 

63.0

 

76.1

 

Management fee to related party

 

0.4

 

0.4

 

 

 

258.4

 

276.5

 

 

 

 

 

 

 

Income from operations

 

39.0

 

23.3

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(58.8

)

(65.9

)

Unrealized gain on derivative instruments, net

 

0.9

 

(19.0

)

Other income (expense), net

 

0.1

 

 

 

 

 

 

 

 

Net loss

 

$

(18.8

)

$

(61.6

)

 

Definitions of Non-GAAP Financial Measures and Operating Metrics

 

We have included certain non-GAAP financial measures in this press release including Adjusted EBITDA and Unlevered Free Cash Flow.  We believe that these non-GAAP measures enhance an investor’s understanding of our financial performance.  We believe that these non-GAAP measures are useful financial metrics to assess our operating performance from period to period by excluding certain items that we believe are not representative of our core business.  We believe that these non-GAAP measures provide investors with useful information for assessing the comparability between periods of our ability to generate cash from operations sufficient to pay taxes, to service debt and to undertake capital expenditures.  We use these non-GAAP measures for business planning purposes and in measuring our performance relative to that of our competitors.  We believe these non-GAAP measures are measures commonly used by Investors to evaluate our performance and that of our competitors.

 

Adjusted EBITDA is defined by WOW! as net income (loss) before net interest expense, income taxes, depreciation and amortization (including impairments), gains (losses) realized and unrealized on derivative instruments, management fees to related party, the write-up or write-off of any asset, debt modification expenses, loss on extinguishment of debt, integration and restructuring expenses and all non-cash charges and expenses (including equity based compensation expense) and certain other income and expenses, as further defined in our credit facilities.  Adjusted EBITDA is not a presentation made in accordance with generally accepted accounting principles in the United States (“GAAP”) and our use of the term Adjusted EBITDA varies from others in our industry.  Adjusted EBITDA should not be considered as an alternative to net income (loss), operating income or any other performance measures derived in accordance with GAAP as measures of operating performance or operating cash flows or as measures of liquidity.  Adjusted EBITDA has important limitations as an analytical tool and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.  For example, Adjusted EBITDA:

 

·                  excludes certain tax payments that may represent a reduction in cash available to us;

 

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·                  does not reflect any cash capital expenditure requirements for the assets being depreciated and amortized that may have to be replaced in the future;

 

·                  does not reflect changes in, or cash requirements for, our working capital needs; and

 

·                  does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt.

 

Unlevered Free Cash Flow is defined by WOW! as Adjusted EBITDA less capital expenditures.  The use of Unlevered Free Cash Flow is important because it allows management, as well as investors and analysts, to assess our ability to make additional investments and meet our debt obligations.  Unlevered Free Cash Flow has important limitations as an analytical tool, such as its exclusion of mandatory debt service requirements or other non-discretionary expenditures, and should not be considered in isolation or as a substitute for analysis of our results under GAAP.

 

Furthermore, Adjusted EBITDA in this release is (i) sometimes presented on a Pro Forma basis, giving effect to our Knology merger and related July 17, 2012 financing as if they had been completed at the beginning of each period presented (see “Unaudited Pro Forma Condensed Combined Financial Information above for complete discussion), and (ii) sometimes further adjusted to include the estimated run-rate cost savings we expect to achieve in connection with our Knology merger and transitioning our billing system from one provider to another which is calculated in accordance with the definitions in our senior secured credit facilities.

 

See “Unaudited Reconciliations of Non-GAAP Measures to GAAP Measures” below and the accompanying tables for reconciliations of Adjusted EBITDA and Unlevered Free Cash Flow to our net income (loss), which is the most directly comparable GAAP financial measure.

 

In addition, we use the following operating metrics in this release:

 

·                                     Homes Passed — We report homes passed as the number of residential units, such as single residence homes, apartments and condominium units, passed by our broadband network and listed in our database excluding those we believe are covered by exclusive arrangements with other providers of competing services.

·                                     Total Customers - Because we deliver multiple services to our customers, we report the total number of customers as those who receive at least one of our video (“Video”), high-speed data (“HSD”) or telephony (“Telephony”) services, without regard to which or how many of those services they subscribe to.  We report Video subscribers as the number of basic cable subscribers and do not include customers who only subscribe to HSD or Telephony services in this total.  The combined total of Video, HSD and Telephony subscribers is referred to as Revenue Generating Units (“RGUs”).

 

Subscriber information for acquired entities is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies.

 

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As of the end of each of the following respective quarters, the Company’s operating metrics were as follows:

 

 

 

 

 

 

 

Sequential

 

 

 

Sequential

 

 

 

 

 

 

 

% Change

 

 

 

% Change

 

 

 

 

 

 

 

2Q-13

 

 

 

3Q-13

 

 

 

1Q-13

 

2Q-13

 

vs. 1Q-13

 

3Q-13

 

vs. 2Q-13

 

Homes Passed

 

2,968,000

 

2,981,000

 

0.4

%

2,987,000

 

0.2

%

Total Customers

 

817,100

 

814,500

 

-0.3

%

831,200

 

2.1

%

 

 

 

 

 

 

 

 

 

 

 

 

Video Subscribers

 

690,500

 

682,300

 

-1.2

%

690,700

 

1.2

%

HSD Subscribers

 

706,800

 

709,100

 

0.3

%

725,400

 

2.3

%

Telephony

 

432,600

 

429,500

 

-0.7

%

426,700

 

-0.7

%

Total RGUs

 

1,829,900

 

1,820,900

 

-0.5

%

1,842,800

 

1.2

%

 

Improved sequential net subscriber activity during the third quarter ended September 30, 2013 was driven primarily by increased customer acquisition activity during the third quarter of 2013.  In addition, the third quarter increases in total customers, video subscribers and total RGUs in the table above include an increase of ~4,500 total customers, video subscribers and total RGUs attributable to a change in reported subscribers in certain former Knology markets to conform to the Company’s reporting methodology related to bulk customers in multi-dwelling units.

 

Unaudited Reconciliations of Non-GAAP Measures to GAAP Measures

 

The following table provides an unaudited reconciliation of our net loss to Adjusted EBITDA and Unlevered Free Cash Flow for the three months ended September 30, 2013 and 2012, respectively:

 

WideOpenWest Finance, LLC

Reconciliation of Non-GAAP Measures to GAAP Measures (Unaudited)

($ in millions)

 

 

 

 

 

Pro Forma

 

 

 

Three months
ended
September 30,
2013

 

Three months
ended
September 30,
2012

 

Net loss

 

$

(18.8

)

$

(61.6

)

Depreciation and amortization

 

63.0

 

76.1

 

Management fee to related party

 

0.4

 

0.4

 

Interest expense

 

58.8

 

65.9

 

Unrealized (gain) loss on derivative instruments, net

 

(0.9

)

19.0

 

Non-recurring professional fees, M&A integration and restructuring expense

 

9.9

 

3.1

 

Other expense (income), net

 

(0.1

)

 

Adjusted EBITDA

 

$

112.3

 

$

102.9

 

Less:

 

 

 

 

 

Capital expenditures

 

(77.4

)

(48.2

)

Unlevered Free Cash Flow

 

$

34.9

 

$

54.7

 

 

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