Attached files
| file | filename |
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| 8-K - 8-K - FAIRPOINT COMMUNICATIONS INC | frp-q114earningsrelease.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Relations Contact:
Paul Taaffe
(704) 227-3623
ptaaffe@fairpoint.com
Media Contact:
Angelynne Amores Beaudry
(207) 535-4129
aamores@fairpoint.com
FAIRPOINT COMMUNICATIONS REPORTS
2014 FIRST QUARTER RESULTS
• | Unlevered Free Cash Flow1 of $28.1 million |
• | Adjusted EBITDA1 of $64.2 million |
• | Capital expenditures of $28.1 million |
• | Net loss of $32.2 million |
Charlotte, N.C. (May 5, 2014) - FairPoint Communications, Inc. (Nasdaq: FRP) (“FairPoint” or the “Company”), a leading communications provider, today announced its financial results for the first quarter ended March 31, 2014. As previously announced, the Company will host a conference call and simultaneous webcast to discuss its results at 8:30 a.m. (EDT) on Tuesday, May 6, 2014.
“I am pleased with the continuing trends in the business—our Adjusted EBITDA and Unlevered Free Cash Flow continue to be on track although quarterly revenue was somewhat lower than expected,” said Paul H. Sunu, Chief Executive Officer. “We saw a renewal of the trend of broadband subscriber growth and continued strength in our Ethernet products in the quarter, which provide momentum for the balance of the year.”
Operating Highlights
FairPoint's revenue transformation strategy continued with positive momentum in its growth-oriented services. The Company experienced revenue growth in business, advanced data services such as Ethernet, high-capacity data transport and other IP-based services along with broadband services.
In the first quarter of 2014, data and Internet services revenue grew 10.9% versus a year ago as products like FairPoint's retail Ethernet service offerings continued to attract new customers and broadband subscribers increased. Data and Internet services revenue increased sequentially in the first quarter, which is an increase for the fifth consecutive quarter.
Ethernet services contributed approximately $19.9 million of revenue in the first quarter of 2014 as compared to $14.9 million a year ago, as retail and wholesale Ethernet circuits grew 56.6% year-over-year. Growth in the Company's Ethernet products is expected to continue based on demand from customers like regional banks, healthcare networks and wireless carriers.
FairPoint has continued to invest in its broadband network to increase capacity, broaden its reach and offer more competitive services. Broadband subscribers grew by over 1,700 subscribers quarter-over-quarter, or 0.5% as penetration reached 38.4% of the Company's voice access lines at March 31, 2014. We continue to see strong interest in our broadband products and a lessening impact on our subscriber count from our continuing effort to improve the credit profile of customers.
_________________
1 Unlevered Free Cash Flow and Adjusted EBITDA are non-GAAP financial measures. Additional information regarding the calculation of Unlevered Free Cash Flow and Adjusted EBITDA and a reconciliation to net income (loss) are contained in the attachments to this press release.
Voice access lines declined 6.8% year-over-year as compared to 7.8% a year ago. The slower decline was driven by a reduction in the rate of loss in residential voice, business voice and wholesale access lines.
As of March 31, 2014, FairPoint had 3,166 employees, a decrease of 4.7% versus a year ago, largely due to the completion of a previously announced workforce reduction.
Two of the Company's collective bargaining agreements that cover the majority of its represented employees in Northern New England expire in August 2014. On April 25, 2014, the Company participated in the first of the scheduled bargaining sessions and began good faith negotiations for successor collective bargaining agreements.
Financial Highlights
First Quarter 2014 as compared to Fourth Quarter 2013
Revenue decreased $2.8 million during the first quarter of 2014 to $230.6 million.
• | Voice services declined $3.0 million resulting from fewer lines in service, promotional discounts on certain residential products that have now been discontinued and seasonality; |
• | Access revenue declined $3.8 million primarily due to fourth quarter 2013 revenue assurance activities that did not recur to the same extent in the first quarter of 2014 partially offset by lower service quality penalties; |
• | Data and Internet services increased $0.7 million reflecting continued strength in retail Ethernet; and |
• | Other services increased $3.3 million primarily driven by non-recurring revenue from certain special purpose construction projects. |
Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $166.4 million in the first quarter of 2014 compared to $166.2 million in the fourth quarter of 2013.
Adjusted EBITDA was $64.2 million in the first quarter of 2014 compared to $67.2 million in the fourth quarter of 2013. The decrease is primarily due to decreased revenue.
Capital expenditures were $28.1 million in the first quarter of 2014 compared to $37.2 million in the fourth quarter of 2013.
Unlevered Free Cash Flow, which measures Adjusted EBITDA minus capital expenditures, pension contributions and cash payments for other post-employment benefits (“OPEB”), was $28.1 million in the first quarter of 2014 compared to $21.1 million in the fourth quarter of 2013. Unlevered Free Cash Flow was higher in the first quarter of 2014 primarily due to lower capital expenditures.
Net loss was $32.2 million in the first quarter of 2014 compared to net income of $6.1 million in the fourth quarter of 2013. The change was due primarily to a $19.4 million decrease in income tax benefit due to a change in the valuation allowance as well as an increase in loss from operations of $15.9 million from lower revenue and higher GAAP expenses, primarily related to expense for compensated absences (paid time-off). The expense for compensated absences for certain employees is accrued in the first quarter of 2014 and released as paid time-off is incurred.
Cash was $31.7 million as of March 31, 2014 compared to $42.7 million as of December 31, 2013. The decrease is primarily due to the scheduled interest payment towards the Company's senior notes and the payment of 2013 annual performance bonuses in the first quarter. Total gross debt outstanding was $933.6 million as of March 31, 2014, after taking into consideration the regularly scheduled principal payment of $1.6 million on the term loan made during the first quarter of 2014, as compared to $935.2 million as of December 31, 2013. The Company's $75.0 million revolving credit facility is undrawn, with $59.1 million available for borrowing after applying $15.9 million of outstanding letters of credit.
First Quarter 2014 as compared to First Quarter 2013
Revenue was $230.6 million in the first quarter of 2014 compared to $235.5 million a year earlier.
• | Voice services declined $8.2 million resulting from the loss of voice access lines versus a year ago combined with lower long distance usage and promotional discounts on certain residential products that have now been discontinued; |
• | Access revenue declined $4.7 million due to decreased special access revenue driven by the continued conversion of legacy services to next generation fiber-based services and the exit from one National Exchange Carrier Association ("NECA") pool in the third quarter of 2013 partially offset by an increase in wholesale Ethernet revenue driven by legacy conversion and lower service quality penalties; |
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• | Data and Internet services increased $4.2 million reflecting strength in retail Ethernet services and broadband subscriber growth; and |
• | Other services increased $3.8 million primarily driven by non-recurring revenue from certain special purpose construction projects. |
Adjusting for the impact of the sale of the Idaho-based operations on January 31, 2013 and the exit from one NECA pool, revenue declined $2.5 million versus a year earlier.
Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $166.4 million in the first quarter of 2014 compared to $171.8 million a year earlier. The decrease was primarily the result of lower employee costs and lower bad debt expenses.
Adjusted EBITDA was $64.2 million in the first quarter of 2014 compared to $63.9 million a year earlier. The increase is due to operating cost savings offset by lower revenue.
Capital expenditures were $28.1 million in the first quarter of 2014 compared to $29.9 million a year earlier.
Unlevered Free Cash Flow of $28.1 million in the first quarter of 2014 declined compared to $32.9 million a year earlier. The decrease was due primarily to a $7.5 million pension contribution in the first quarter of 2014 compared to no contributions in the first quarter of 2013.
Net loss was $32.2 million in the first quarter of 2014 compared to a net loss of $47.5 million in the first quarter of 2013. The change was due primarily to lower operating expenses offset by lower income tax benefit, primarily due to a change in the valuation allowance, lower revenue and increased interest expense. The first quarter of 2013 included a loss on debt refinancing and a gain on the sale of the Idaho-based operations on January 31, 2013.
2014 Guidance
FairPoint's fiscal year 2014 guidance remains unchanged.
The Company expects to generate $930 million to $940 million in revenue, yielding $100 million to $110 million of Unlevered Free Cash Flow. Unlevered Free Cash Flow refers to Adjusted EBITDA minus capital expenditures, pension contributions and cash payments for OPEB. In addition, for fiscal 2014, Adjusted EBITDA is expected to be $260 million to $270 million and capital expenditures are expected to be approximately $125 million. Aggregate cash pension contributions and cash OPEB payments are expected to be approximately $35 million.
Quarterly Report
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's quarterly report on Form 10-Q for the three months ended March 31, 2014, which will be filed with the SEC no later than May 12, 2014. The Company's results for the quarter ended March 31, 2014 are subject to the completion of such quarterly report.
Conference Call Information
As previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its first quarter 2014 results at 8:30 a.m. (EDT) on Tuesday, May 6, 2014.
Participants should call (877) 415-3182 (US/Canada) or (857) 244-7325 (international) at 8:20 a.m. (EDT) and enter the passcode 71312959 when prompted. The title of the call is the First Quarter 2014 FairPoint Communications, Inc. Earnings Conference Call.
A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (888) 286-8010 (US/Canada) or (617) 801-6888 (international) and enter the passcode 48167972 when prompted. The recording will be available from Tuesday, May 6, 2014, at 12:30 p.m. (EDT) through Tuesday, May 13, 2014, at 11:59 p.m. (EDT).
A live broadcast of the earnings conference call will be available online at www.fairpoint.com/investors. An online replay will be available shortly thereafter.
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Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including but not limited to Adjusted EBITDA and Unlevered Free Cash Flow, and the adjustments to the most directly comparable GAAP measures used to determine the non-GAAP measures. Management believes that Adjusted EBITDA provides a useful measure of operational and financial performance and removes variability related to pension and OPEB expenses and that Unlevered Free Cash Flow may be useful to investors in assessing the Company's ability to generate cash and meet its debt service requirements. The Company believes that the non-GAAP measures, which also exclude the effect of special items, may be useful to investors in understanding period-to-period operating performance and in identifying historical and prospective trends that may not otherwise be apparent when relying solely on GAAP financial measures. In addition, the non-GAAP measures are useful for investors because it enables them to view performance in a manner similar to the method used by the Company’s management. The maintenance covenants contained in the Company's credit facility are based on Consolidated EBITDA, which is consistent with the calculation of Adjusted EBITDA included in the attachments to this press release.
However, the non-GAAP financial measures, as used herein, are not necessarily comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA and Unlevered Free Cash Flow have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net income or loss, operating income, cash flow or other combined income or cash flow data prepared in accordance with GAAP. Because of these limitations, Adjusted EBITDA, Unlevered Free Cash Flow and related ratios should not be considered as measures of discretionary cash available to invest in business growth or reduce indebtedness. The Company compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA and Unlevered Free Cash Flow only supplementally. A reconciliation of Adjusted EBITDA and Unlevered Free Cash Flow to net loss or income is contained in the attachments to this press release.
About FairPoint Communications, Inc.
FairPoint Communications, Inc. (Nasdaq: FRP) provides advanced data, voice and video technologies to single and multi-site businesses, public and private institutions, consumers, wireless companies and wholesale re-sellers in 17 states. Leveraging an owned, fiber-core Ethernet network - including more than 16,000 route miles of fiber in northern New England - FairPoint has the network coverage, scalable bandwidth and transport capacity to support enhanced applications, including the next generation of mobile and cloud-based communications, such as small cell wireless backhaul technology, voice over IP, data center colocation services, managed services and disaster recovery. For more information, visit www.FairPoint.com.
Cautionary Note Regarding Forward-looking Statements
Some statements herein or discussed on our earnings conference call are known as “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 forward-looking statements include, but are not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements contained herein that are not historical facts. When used herein, the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including the Company's plans, objectives, expectations and intentions and other factors. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date hereof. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in the Company's subsequent reports filed with the SEC.
Certain information contained herein or discussed on our earnings conference call may constitute guidance as to projected financial results and the Company's future performance that represent management's estimates as of the date hereof. This guidance, which consists of forward-looking statements, is prepared by the Company's management and is qualified by, and subject to, certain assumptions. Guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither the Company's independent registered public accounting firm nor any other independent expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto. Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and are based upon specific assumptions with respect to future business decisions, some of which will change. Management generally states possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent actual results, which could fall outside of the suggested ranges. The principal reason that the Company releases this data is to provide a basis for management to discuss the Company's business outlook with analysts and investors. The Company does not accept any responsibility for any projections or
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reports published by any such outside analysts or investors. Guidance is necessarily speculative in nature and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, the Company's guidance is only an estimate of what management believes is realizable as of the date hereof. Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.
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5
FAIRPOINT COMMUNICATIONS, INC.
Supplemental Financial Information
(Unaudited)
(in thousands, except operating and financial metrics)
1Q14 | 4Q13 | 3Q13 | 2Q13 | 1Q13 | |||||||||||||
Summary Income Statement: | |||||||||||||||||
Revenue: | |||||||||||||||||
Voice services | $ | 95,495 | $ | 98,510 | $ | 101,272 | $ | 101,660 | $ | 103,717 | |||||||
Access | 76,940 | 80,763 | 80,182 | 79,235 | 81,632 | ||||||||||||
Data and Internet services | 42,343 | 41,645 | 41,550 | 40,054 | 38,174 | ||||||||||||
Other services | 15,779 | 12,478 | 12,985 | 13,551 | 11,946 | ||||||||||||
Total revenue | 230,557 | 233,396 | 235,989 | 234,500 | 235,469 | ||||||||||||
Operating expenses: | |||||||||||||||||
Operating expenses, excluding depreciation, amortization and reorganization | 198,582 | 185,964 | 187,166 | 192,246 | 205,497 | ||||||||||||
Depreciation and amortization | 54,071 | 53,605 | 52,877 | 84,523 | 91,433 | ||||||||||||
Reorganization (income) expense (post-emergence) | 18 | 19 | (229 | ) | (398 | ) | (163 | ) | |||||||||
Total operating expenses | 252,671 | 239,588 | 239,814 | 276,371 | 296,767 | ||||||||||||
Loss from operations | (22,114 | ) | (6,192 | ) | (3,825 | ) | (41,871 | ) | (61,298 | ) | |||||||
Other income (expense): | |||||||||||||||||
Interest expense | (20,008 | ) | (20,272 | ) | (20,304 | ) | (20,097 | ) | (18,002 | ) | |||||||
Loss on debt refinancing | — | — | — | — | (6,787 | ) | |||||||||||
Other income (expense), net | 215 | 3,477 | 951 | 10 | 425 | ||||||||||||
Total other expense | (19,793 | ) | (16,795 | ) | (19,353 | ) | (20,087 | ) | (24,364 | ) | |||||||
Loss from continuing operations before income taxes | (41,907 | ) | (22,987 | ) | (23,178 | ) | (61,958 | ) | (85,662 | ) | |||||||
Income tax benefit | 9,670 | 29,090 | 14,218 | 18,850 | 28,133 | ||||||||||||
Net income (loss) from continuing operations | (32,237 | ) | 6,103 | (8,960 | ) | (43,108 | ) | (57,529 | ) | ||||||||
Gain on sale of discontinued operations | — | — | — | — | 10,044 | ||||||||||||
Net income (loss) | $ | (32,237 | ) | $ | 6,103 | $ | (8,960 | ) | $ | (43,108 | ) | $ | (47,485 | ) | |||
Reconciliation of Adjusted EBITDA and Unlevered Free Cash Flow to Net Income (Loss): | |||||||||||||||||
Net income (loss) | $ | (32,237 | ) | $ | 6,103 | $ | (8,960 | ) | $ | (43,108 | ) | $ | (47,485 | ) | |||
Income tax benefit | (9,670 | ) | (29,090 | ) | (14,218 | ) | (18,850 | ) | (28,133 | ) | |||||||
Interest expense | 20,008 | 20,272 | 20,304 | 20,097 | 18,002 | ||||||||||||
Depreciation and amortization | 54,071 | 53,605 | 52,877 | 84,523 | 91,433 | ||||||||||||
Pension expense (1a) | 4,799 | 7,000 | 6,357 | 6,980 | 5,884 | ||||||||||||
OPEB expense (1a) | 13,529 | 12,173 | 11,973 | 15,247 | 15,076 | ||||||||||||
Compensated absences (1b) | 11,313 | (3,276 | ) | (4,367 | ) | (3,048 | ) | 11,122 | |||||||||
Severance | 384 | 485 | 3,537 | 3,430 | 698 | ||||||||||||
Restructuring costs (1c) | 18 | 19 | 70 | 101 | 17 | ||||||||||||
Storm expenses (1d) | (410 | ) | 2,598 | — | — | — | |||||||||||
Other non-cash items, net (1e) | 1,131 | 299 | 426 | 351 | 826 | ||||||||||||
Gain on sale of assets | 10 | 36 | (956 | ) | 207 | (10,044 | ) | ||||||||||
Early debt payment expenses | — | — | — | — | 6,787 | ||||||||||||
All other allowed adjustments, net (1f) | 1,229 | (3,009 | ) | 466 | 507 | (314 | ) | ||||||||||
Adjusted EBITDA | $ | 64,175 | $ | 67,215 | $ | 67,509 | $ | 66,437 | $ | 63,869 | |||||||
Adjusted EBITDA margin | 27.8 | % | 28.8 | % | 28.6 | % | 28.3 | % | 27.1 | % | |||||||
Pension contributions | $ | (6,960 | ) | $ | (7,925 | ) | $ | (8,519 | ) | $ | (3,527 | ) | $ | — | |||
OPEB payments | (1,062 | ) | (938 | ) | (786 | ) | (726 | ) | (1,020 | ) | |||||||
Capital expenditures | (28,077 | ) | (37,207 | ) | (33,768 | ) | (27,413 | ) | (29,910 | ) | |||||||
Unlevered Free Cash Flow | $ | 28,076 | $ | 21,145 | $ | 24,436 | $ | 34,771 | $ | 32,939 | |||||||
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1Q14 | 4Q13 | 3Q13 | 2Q13 | 1Q13 | |||||||||||||
Reconciliation of Adjusted EBITDA to Revenue: | |||||||||||||||||
Total revenue | $ | 230,557 | $ | 233,396 | $ | 235,989 | $ | 234,500 | $ | 235,469 | |||||||
Operating expenses, excluding depreciation, amortization and reorganization | $ | 198,582 | $ | 185,964 | $ | 187,166 | $ | 192,246 | $ | 205,497 | |||||||
Pension expense (1a) | (4,799 | ) | (7,000 | ) | (6,357 | ) | (6,980 | ) | (5,884 | ) | |||||||
OPEB expense (1a) | (13,529 | ) | (12,173 | ) | (11,973 | ) | (15,247 | ) | (15,076 | ) | |||||||
Compensated Absences (1b) | (11,313 | ) | 3,276 | 4,367 | 3,048 | (11,122 | ) | ||||||||||
Severance | (384 | ) | (485 | ) | (3,537 | ) | (3,430 | ) | (698 | ) | |||||||
Storm expenses (1d) | 410 | (2,598 | ) | — | — | — | |||||||||||
Other non-cash items, net (1e) | (1,171 | ) | (445 | ) | (394 | ) | (493 | ) | (937 | ) | |||||||
All other allowed adjustments, net (1f) | (1,414 | ) | (358 | ) | (493 | ) | (581 | ) | — | ||||||||
Adjusted operating expenses, excluding depreciation, amortization and reorganization | $ | 166,382 | $ | 166,181 | $ | 168,779 | $ | 168,563 | $ | 171,780 | |||||||
Adjusted operating expenses margin | 72.2 | % | 71.2 | % | 71.5 | % | 71.9 | % | 73.0 | % | |||||||
Adjusted income from continuing operations, excluding depreciation, amortization and reorganization | $ | 64,175 | $ | 67,215 | $ | 67,210 | $ | 65,937 | $ | 63,689 | |||||||
Adjusted income from continuing operations margin | 27.8 | % | 28.8 | % | 28.5 | % | 28.1 | % | 27.0 | % | |||||||
Reversal of certain bankruptcy claims | — | — | 299 | 500 | 180 | ||||||||||||
Adjusted EBITDA | $ | 64,175 | $ | 67,215 | $ | 67,509 | $ | 66,437 | $ | 63,869 | |||||||
Adjusted EBITDA margin | 27.8 | % | 28.8 | % | 28.6 | % | 28.3 | % | 27.1 | % | |||||||
Select Operating and Financial Metrics: | |||||||||||||||||
Residential access lines (2) | 516,106 | 527,890 | 542,238 | 556,584 | 568,594 | ||||||||||||
Business access lines (2) | 288,699 | 290,536 | 292,937 | 294,183 | 294,353 | ||||||||||||
Wholesale access lines (3) | 58,605 | 59,859 | 60,315 | 61,911 | 63,068 | ||||||||||||
Total switched access lines (2) | 863,410 | 878,285 | 895,490 | 912,678 | 926,015 | ||||||||||||
% change y-o-y | (6.8 | )% | (7.1 | )% | (7.3 | )% | (7.5 | )% | (7.8 | )% | |||||||
% change q-o-q | (1.7 | )% | (1.9 | )% | (1.9 | )% | (1.4 | )% | (2.0 | )% | |||||||
Broadband subscribers (2) (4) | 331,538 | 329,766 | 330,698 | 332,620 | 330,082 | ||||||||||||
% change y-o-y | 0.4 | % | 1.5 | % | 3.0 | % | 4.2 | % | 4.1 | % | |||||||
% change q-o-q | 0.5 | % | (0.3 | )% | (0.6 | )% | 0.8 | % | 1.6 | % | |||||||
penetration of access lines | 38.4 | % | 37.5 | % | 36.9 | % | 36.4 | % | 35.6 | % | |||||||
Access line equivalents (2) | 1,194,948 | 1,208,051 | 1,226,188 | 1,245,298 | 1,256,097 | ||||||||||||
% change y-o-y | (4.9 | )% | (4.9 | )% | (4.7 | )% | (4.6 | )% | (4.9 | )% | |||||||
% change q-o-q | (1.1 | )% | (1.5 | )% | (1.5 | )% | (0.9 | )% | (1.1 | )% | |||||||
Retail Ethernet | 4,875 | 4,651 | 4,241 | 3,857 | 3,532 | ||||||||||||
Wholesale Ethernet | 5,248 | 4,866 | 4,257 | 3,374 | 2,933 | ||||||||||||
Ethernet Circuits | 10,123 | 9,517 | 8,498 | 7,231 | 6,465 | ||||||||||||
% change y-o-y | 56.6 | % | 60.1 | % | 57.8 | % | 49.2 | % | 44.9 | % | |||||||
% change q-o-q | 6.4 | % | 12.0 | % | 17.5 | % | 11.8 | % | 8.7 | % | |||||||
Employee Headcount | 3,166 | 3,171 | 3,182 | 3,255 | 3,321 | ||||||||||||
% change y-o-y | (4.7 | )% | (5.9 | )% | (6.4 | )% | (4.5 | )% | (3.9 | )% | |||||||
(1) For purposes of calculating Adjusted EBITDA (in accordance with the definition of Consolidated EBITDA in the Company's credit agreement), the Company adjusts net (loss) income for interest, income taxes, depreciation and amortization, in addition to: | |||||||||||||||||
a) the add-back of aggregate pension and other post-employment benefits (OPEB) expense, | |||||||||||||||||
b) the add-back (or subtraction) of the adjustment to the compensated absences accrual to eliminate the impact of changes in the accrual, | |||||||||||||||||
c) the add-back of costs related to the reorganization, including professional fees for advisors and consultants, | |||||||||||||||||
d) the add-back of costs and expenses, including those imposed by regulatory authorities, with respect to casualty events, acts of God or force majeure to the extent they are not reimbursed from proceeds of insurance, | |||||||||||||||||
e) the add-back of other non-cash items, except to the extent they will require a cash payment in a future period, and | |||||||||||||||||
f) the add-back (or subtraction) of other items, including facility and office closures, labor negotiation expenses, non-cash gains/losses, non-operating dividend and interest income and other extraordinary gains/losses. | |||||||||||||||||
(2) Access and subscriber lines are presented pro forma for the divestiture of our pay phone operations in our northern New England footprint. | |||||||||||||||||
(3) Wholesale access lines include Resale and UNE-P, but exclude UNE-L and special access circuits. | |||||||||||||||||
(4) Broadband subscribers include DSL, fiber-to-the-premise, cable modem and fixed wireless broadband, but exclude Ethernet and other high-capacity circuits. | |||||||||||||||||
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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, 2014 and December 31, 2013
(in thousands, except share data)
March 31, 2014 | December 31, 2013 | ||||||
Assets: | |||||||
Cash | $ | 31,703 | $ | 42,700 | |||
Restricted cash | 99 | 543 | |||||
Accounts receivable (net of $12.3 million and $13.1 million allowance for doubtful accounts, respectively) | 78,972 | 89,248 | |||||
Prepaid expenses | 23,421 | 26,552 | |||||
Other current assets | 3,472 | 3,876 | |||||
Deferred income tax, net | 15,833 | 18,250 | |||||
Total current assets | 153,500 | 181,169 | |||||
Property, plant and equipment (net of $938.7 million and $886.2 million accumulated depreciation, respectively) | 1,278,793 | 1,301,292 | |||||
Intangible assets (net of $35.4 million and $32.7 million accumulated amortization, respectively) | 103,131 | 105,886 | |||||
Debt issue costs, net | 6,821 | 7,101 | |||||
Restricted cash | 651 | 651 | |||||
Other assets | 3,503 | 3,799 | |||||
Total assets | $ | 1,546,399 | $ | 1,599,898 | |||
Liabilities and Stockholders’ Deficit: | |||||||
Current portion of long-term debt | $ | 6,400 | $ | 6,400 | |||
Current portion of capital lease obligations | 1,221 | 1,445 | |||||
Accounts payable | 30,647 | 37,876 | |||||
Claims payable and estimated claims accrual | 256 | 256 | |||||
Accrued interest payable | 3,414 | 9,977 | |||||
Accrued payroll and related expenses | 34,381 | 34,897 | |||||
Other accrued liabilities | 51,905 | 55,994 | |||||
Total current liabilities | 128,224 | 146,845 | |||||
Capital lease obligations | 326 | 447 | |||||
Accrued pension obligations | 150,666 | 153,534 | |||||
Accrued post-retirement healthcare obligations | 597,241 | 584,734 | |||||
Deferred income taxes | 73,889 | 85,948 | |||||
Other long-term liabilities | 24,052 | 25,864 | |||||
Long-term debt, net of current portion | 910,815 | 911,722 | |||||
Total long-term liabilities | 1,756,989 | 1,762,249 | |||||
Total liabilities | 1,885,213 | 1,909,094 | |||||
Stockholders’ deficit: | |||||||
Common stock, $0.01 par value, 37,500,000 shares authorized, 26,681,236 and 26,480,837 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively | 266 | 264 | |||||
Additional paid-in capital | 514,049 | 512,008 | |||||
Retained deficit | (693,926 | ) | (661,689 | ) | |||
Accumulated other comprehensive loss | (159,203 | ) | (159,779 | ) | |||
Total stockholders’ deficit | (338,814 | ) | (309,196 | ) | |||
Total liabilities and stockholders’ deficit | $ | 1,546,399 | $ | 1,599,898 | |||
8
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2014 and 2013
(Unaudited)
(in thousands, except per share data)
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Revenues | $ | 230,557 | $ | 235,469 | |||
Operating expenses: | |||||||
Cost of services and sales, excluding depreciation and amortization | 115,566 | 116,611 | |||||
Selling, general and administrative expense, excluding depreciation and amortization | 83,016 | 88,886 | |||||
Depreciation and amortization | 54,071 | 91,433 | |||||
Reorganization related expense (income) | 18 | (163 | ) | ||||
Total operating expenses | 252,671 | 296,767 | |||||
Loss from operations | (22,114 | ) | (61,298 | ) | |||
Interest expense | (20,008 | ) | (18,002 | ) | |||
Loss on debt refinancing | — | (6,787 | ) | ||||
Other income | 215 | 425 | |||||
Loss before income taxes | (41,907 | ) | (85,662 | ) | |||
Income tax benefit | 9,670 | 28,133 | |||||
Loss from continuing operations | (32,237 | ) | (57,529 | ) | |||
Gain on sale of discontinued operations, net of taxes | — | 10,044 | |||||
Net loss | $ | (32,237 | ) | $ | (47,485 | ) | |
(Loss) earnings per share, basic: | |||||||
Continuing operations | $ | (1.22 | ) | $ | (2.20 | ) | |
Discontinued operations | — | 0.38 | |||||
Loss per share, basic | $ | (1.22 | ) | $ | (1.82 | ) | |
(Loss) earnings per share, diluted: | |||||||
Continuing operations | $ | (1.22 | ) | $ | (2.20 | ) | |
Discontinued operations | — | 0.38 | |||||
Loss per share, diluted | $ | (1.22 | ) | $ | (1.82 | ) | |
9
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2014 and 2013
(in thousands)
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (32,237 | ) | $ | (47,485 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Deferred income taxes | (10,032 | ) | (28,158 | ) | |||
Provision for uncollectible revenue | 2,175 | 2,489 | |||||
Depreciation and amortization | 54,071 | 91,433 | |||||
Post-retirement healthcare | 12,467 | 14,135 | |||||
Qualified pension | (2,161 | ) | 5,884 | ||||
Loss on abandoned projects | 35 | — | |||||
Stock-based compensation | 2,059 | 1,845 | |||||
Gain on sale of business, net | — | (10,044 | ) | ||||
Loss on debt refinancing | — | 6,787 | |||||
Other non-cash items | (36 | ) | (907 | ) | |||
Changes in assets and liabilities arising from operations: | |||||||
Accounts receivable | 8,101 | (4,152 | ) | ||||
Prepaid and other assets | 3,536 | 3,342 | |||||
Restricted cash | 443 | 1,171 | |||||
Accounts payable and accrued liabilities | (11,857 | ) | (5,758 | ) | |||
Accrued interest payable | (6,563 | ) | 9,294 | ||||
Other assets and liabilities, net | (1,244 | ) | 3,612 | ||||
Reorganization adjustments: | |||||||
Non-cash reorganization income | — | (180 | ) | ||||
Claims payable and estimated claims accrual | — | 80 | |||||
Restricted cash - Cash Claims Reserve | — | (17 | ) | ||||
Total adjustments | 50,994 | 90,856 | |||||
Net cash provided by operating activities | 18,757 | 43,371 | |||||
Cash flows from investing activities: | |||||||
Net capital additions | (28,077 | ) | (29,910 | ) | |||
Proceeds from sale of business | — | 30,315 | |||||
Distributions from investments and proceeds from the sale of property | 265 | 421 | |||||
Net cash (used in) provided by investing activities | (27,812 | ) | 826 | ||||
Cash flows from financing activities: | |||||||
Proceeds from issuance of long-term debt | — | 920,590 | |||||
Financing costs | — | (13,217 | ) | ||||
Repayments of long-term debt | (1,600 | ) | (957,000 | ) | |||
Proceeds from exercise of stock options | 3 | 17 | |||||
Repayment of capital lease obligations | (345 | ) | (312 | ) | |||
Net cash used in financing activities | (1,942 | ) | (49,922 | ) | |||
Net change | (10,997 | ) | (5,725 | ) | |||
Cash, beginning of period | 42,700 | 23,203 | |||||
Cash, end of period | $ | 31,703 | $ | 17,478 | |||
10