Windstream reports third-quarter results
Nov 07, 2013
Windstream reports third-quarter results• Business service revenues were $916 million, a 1 percent increase year-over-year
• Consumer broadband service revenues were $119 million, a 4 percent increase year-over-year
• Adjusted free cash flow was $264 million, a 54 percent increase year-over-year
• Enterprise customers grew 6 percent year-over-year
LITTLE ROCK, Ark. – Windstream (Nasdaq: WIN) grew business and consumer broadband revenues and generated strong free cash flow in the third-quarter.
3Q Investor Overview
“Growth in business and consumer broadband revenues, combined with declining capital expenditures and lower cash interest expense, produced strong free cash flow during the quarter,” said Jeff Gardner, president and CEO. “We are confident that our strategy to transform Windstream into an enterprise-focused company enhances our growth opportunities and positions us for continued success. Windstream generates substantial free cash flow which supports our dividend. As we look forward, we will remain focused on creating and returning value to our shareholders.”
Pro Forma Results
Growth in the business channel combined with steady consumer results helped to offset greater wholesale declines due to a second step-down in intercarrier compensation rates during the third quarter.
Business service revenues were $916 million in the third quarter, an increase of $10 million or 1 percent year-over-year.
Data and integrated services revenues were $407 million, an increase of 5 percent from the same period a year ago. Data and integrated services include IP-based voice and data services, dedicated Internet access and data center and managed services.
Carrier service revenues were $169 million, an increase of 4 percent year-over-year due to fiber-to-the-tower installations.
Enterprise customers, who generate $750 or more in revenue per month, grew 6 percent year-over-year. Average service revenue per business customer per month increased 5 percent from the same period a year ago.
Consumer broadband service revenues were $119 million, up 4 percent from the same period in 2012, driven by increased sales of broadband features and faster speeds. Total average revenue per customer increased 6 percent year-over-year.
Overall consumer service revenues were $324 million, a decrease of 3 percent from the same period a year ago.
Wholesale revenues in the third quarter were $148 million, a decline of 19 percent from the same period a year ago due to lower intrastate access rates as part of intercarrier compensation reform implemented in July 2012 and fewer minutes of use.
Total revenues and sales were $1.50 billion, a decline of 3 percent from the same period a year ago. On a sequential basis, total revenue declined slightly by $2 million.
Adjusted OIBDA was $575 million, a decline of 3 percent year-over-year. Sequentially, adjusted OIBDA decreased by $8 million driven by higher cash expenses primarily related to data center expansion and corresponding sales costs to support the growth.
Adjusted capital expenditures were $187 million in the third quarter. In addition, the company spent $6 million in integration capital related to PAETEC network optimization opportunities and a billing system conversion.
Adjusted free cash flow was $264 million during the third quarter, an increase of 54 percent year-over-year.
Windstream improved its balance sheet with several refinancing activities during the third quarter, which extended certain debt maturities and will result in approximately $45 million in cash interest savings in 2014. In addition, the company paid down its revolver balance by $100 million in the quarter.
In the third quarter under Generally Accepted Accounting Principles (GAAP), Windstream reported total revenues and sales of $1.50 billion, operating income of $220 million and net income of $31 million, or 5 cents per share. That compares to total revenues and sales of $1.55 billion, operating income of $237 million and net income of $47 million, or 8 cents per share, during the same period in 2012.
GAAP results include an after-tax loss on the early extinguishment of debt and merger and integration, restructuring and other expense. Excluding these non-operational charges, adjusted earnings per share would have been 8 cents for the third quarter.
Windstream will hold a conference call at 7:30 a.m. CST today to review the company's third-quarter results.
To access the call:
Interested parties can access the call by dialing 1-877-374-3977, conference ID 65100623, ten minutes prior to the start time.
To access the call replay:
A replay of the call will be available beginning at 10:30 a.m. CST today and ending at midnight on Nov. 14. The replay can be accessed by dialing 1-855-859-2056, conference ID 65100623.
The conference call also will be streamed live over the company's website at www.windstream.com/investors. Financial, statistical and other information related to the call will be posted on the site. A replay of the webcast will be available on the website beginning at 10:30 a.m. CST today.
Windstream (Nasdaq: WIN), a FORTUNE 500 and S&P 500 company, is a leading provider of advanced network communications, including cloud computing and managed services, to businesses nationwide. The company also offers broadband, phone and digital TV services to consumers primarily in rural areas. For more information, visit www.windstream.com.
Pro forma results adjust results of operations under GAAP to exclude all merger and integration costs related to strategic transactions and the results of operations of the energy business acquired as part of PAETEC. A reconciliation of pro forma results to the comparable GAAP measures is available on the company’s Web site at www.windstream.com/investors.
OIBDA is operating income before depreciation and amortization and merger and integration costs. Adjusted OIBDA adjusts OIBDA for the impact of restructuring charges, pension expense and stock-based compensation. Adjusted free cash flow is Adjusted OIBDA, excluding merger and integration expense, minus cash interest, cash taxes and adjusted capital expenditures.
Windstream claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include, but are not limited to, Windstream’s 2013 guidance ranges for revenue, adjusted OBIDA, adjusted capital expenditures, cash tax payments, amounts of adjusted free cash flow and dividend payout ratio. These statements, along with other forward-looking statements, including statements regarding Windstream’s current dividend practice and its ability to generate cash flows in future periods, are based on estimates, projections, beliefs, and assumptions that Windstream believes are reasonable but are not guarantees of future events and results. Actual future events and results of Windstream may differ materially from those expressed in these forward-looking statements as a result of a number of important factors.
Factors that could cause actual results to differ materially from those contemplated in Windstream’s forward-looking statements include, among others:
• further adverse changes in economic conditions in the markets served by Windstream;
• the extent, timing and overall effects of competition in the communications business;
• the impact of new, emerging or competing technologies;
• for certain operations where Windstream leases facilities from other carriers, adverse effects on the availability, quality of service, price of facilities and services provided by other carriers on which Windstream’s services depend;
• the uncertainty regarding the implementation of the Federal Communications Commission's ("FCC") rules on intercarrier compensation adopted in 2011, and the potential for the adoption of further rules by the FCC or Congress on intercarrier compensation and/or universal service reform proposals that result in a significant loss of revenue to Windstream;
• unfavorable rulings by state public service commissions in proceedings regarding universal service funds, inter-carrier compensation or other matters that could reduce revenues or increase expenses;
• material changes in the communications industry that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers;
• earnings on pension plan investments significantly below Windstream’s expected long term rate of return for plan assets or a significant change in the discount rate;
• the availability and cost of financing in the corporate debt markets;
• the potential for adverse changes in the ratings given to Windstream’s debt securities by nationally accredited ratings organizations;
• the risks associated with non-compliance by Windstream with regulations or statutes applicable to government programs under which Windstream receives material amounts of end user revenue and government subsidies, or non-compliance by Windstream, its partners, or its subcontractors with any terms of its government contracts;
• the risks associated with the integration of acquired businesses or the ability to realize anticipated synergies, cost savings and growth opportunities;
• unfavorable results of litigation or intellectual property infringement claims asserted against Windstream;
• the effects of federal and state legislation, and rules and regulations governing the communications industry;
• continued loss of consumer voice lines;
• the impact of equipment failure, natural disasters or terrorist acts;
• the effects of work stoppages by Windstream employees or employees of other communications companies on whom Windstream relies for service; and
• those additional factors under "Risk Factors" in Item 1A of Part I of Windstream’s Annual Report on Form 10-K for the year ended December 31, 2012, and in subsequent filings with the Securities and Exchange Commission at www.sec.gov.
In addition to these factors, actual future performance, outcomes and results may differ materially because of more general factors including, among others, general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes.
Windstream undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause Windstream’s actual results to differ materially from those contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties that may affect Windstream’s future results included in other filings by Windstream with the Securities and Exchange Commission at www.sec.gov.