Windstream reports second-quarter results and Implements a $75 Million Share Repurchase Program

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Aug 06, 2015

Windstream reports second-quarter results and Implements a $75 Million Share Repurchase Program

Delivers Improved Second Quarter results and Tightens full-year financial guidance

LITTLE ROCK, Ark. – Windstream (NASDAQ: WIN) today reported second-quarter results highlighted by improving financial trends and the announcement of a share repurchase program.   
 
“We are on the right track strategically and financially.  The new business unit structure has sharpened our focus and is driving operational excellence,” said Tony Thomas, president and chief executive officer. “The board and management team are confident in the future and remain focused on enhancing profitability and creating value for our shareholders.”
 
Share Repurchase Program
 
Today Windstream announced a share repurchase program of up to $75 million, which is expected to be completed by December 31, 2016.  Windstream will buy back shares opportunistically through open market purchases funded primarily by cash from operations. 

“In order to create value for our shareholders, the board of directors has authorized a share repurchase program of up to $75 million,” Thomas added.  “Windstream stock is significantly undervalued and a share buyback is an attractive investment and an efficient way to return capital to shareholders.” 

In addition, the board of directors declared the regular quarterly dividend of 15-cents per share to shareholders of record as of Sept 30, 2015.
 
Pro Forma Financial Results
 
Total revenues were $1.4 billion and grew sequentially by $10 million in the second quarter.
Consumer service revenues in the second quarter were $314 million, which grew $2 million relative to the first quarter, and were essentially unchanged from the same period a year ago.
 
“We again continue to see positive momentum in our consumer channel and we are making targeted investments to generate revenue growth in these attractive high margin businesses,” Thomas said.
 
ILEC small business revenues in the second quarter were $108 million as we continue to invest in high-speed Internet capabilities to drive additional broadband revenue growth.
 
Carrier service revenues were $156 million, excluding legacy wireless TDM, in the second quarter, which was up year over year due to growth in Ethernet sales, wholesale revenues and improving sales of our expanded long-haul express network. 
 
Enterprise service revenues were $485 million in the second quarter, up 3.5 percent from the same period a year ago, led by demand for IP-based solutions and next generation data. Data and integrated solution service revenues within Enterprise also grew approximately 7.3 percent. 
 
CLEC Small Business service revenues were $146 million in the second quarter as we continue to focus on retention, selling incremental services to existing customers and cost reductions to deliver profitable revenue opportunities.  
 
Adjusted OIBDAR was $489 million in the second quarter and was flat sequentially, with margins of 34.5 percent. 
 
Adjusted OIBDA was $327 million in the second quarter and capital expenditures were $255 million in the second quarter.
 
On a year-to-date basis, adjusted free cash flow was $141 million.

Balance Sheet
 
In connection with the REIT spinoff, Windstream paid down $3.2 billion in debt which will provide approximately $170 million in annual interest savings.   In addition, Windstream retained just under 20% of CS&L, currently valued at $624 million, and are committed to using the proceeds to reduce debt. 
 
Windstream also amended its credit facility to extend the maturity of its $1.25 billion revolver for 5 years and improved the interest rate on the company’s borrowings.
 
GAAP Financial Results
 
In the second quarter under Generally Accepted Accounting Principles (GAAP), Windstream reported total revenues and sales of $1.42 billion and a net loss of $(111) million, or $(1.13) per share including approximately $65 million in one-time after-tax transaction related expenses.  That compares to total revenues and sales of $1.47 billion and net income of $14 million, or 13 cents per share, during the same period in 2014
 
Financial Outlook for 2015
 
We are improving our 2015 service revenue guidance and affirming other guidance.
 

  Prior 2015 Guidance Revised 2015 Guidance
Service Revenue Range of (4%) to Flat
vs. 2014
Range of (3%) to Flat
vs. 2014
Adj. OIBDAR Margins 34% - 34.5% Unchanged
Capex (excluding
CAF-2)
$825M to 875M Unchanged
Cash Taxes $20M Unchanged
 
 
Conference Call:
 
Windstream will hold a conference call at 7:30 a.m. CDT today to review the company's second-quarter earnings results.
 
To access the call:
 
Interested parties can access the call by dialing 1-877-374-3977, conference ID 82120098, 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. CDT today and ending at midnight on Aug 13. The replay can be accessed by dialing 1-855-859-2056, conference ID 82120098.
 
Webcast information:
 
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. CDT today.
 
About Windstream
 
Windstream (NASDAQ: WIN), a FORTUNE 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 the company’s online newsroom at news.windstream.com or follow on Twitter at @WindstreamNews.
 
Pro forma results adjust results of operations under GAAP to exclude all merger and integration costs related to strategic transactions. 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, stock-based compensation and the CS&L lease payment. Adjusted OIBDAR is adjusted OIBDA before the CS&L lease payment. Adjusted free cash flow is adjusted OIBDA, excluding merger and integration expense, minus cash interest, cash taxes and 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 2015 guidance for service revenue and capital expenditures, statements regarding adjusted OBIDA margin ranges, cash tax payments, expectations for improved revenue trends and margins, particularly in the enterprise business, expectations regarding Kinetic, Windstream’s  IPTV video entertainment offering, and improvements in high-speed Internet capabilities, the completion and benefits of  network investments pursuant to Connect America Fund Phase 1, expectations regarding funding available under the Connect America Fund Phase 2, the expected amount, timing, and  benefits of the share repurchase program referenced herein, and the amount that Windstream may reduce its debt by selling its equity stake in CS&L. These statements, along with other forward-looking statements, including statements regarding Windstream’s overall business outlook, 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 company’s election to accept all  state-wide offers (except New Mexico) under the Federal Communications Commission’s (‘FCC’) Connect America Fund, Phase 2, and the impact of such elections on future receipt by the company of federal universal service funds and capital expenditures;
  • 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 and price of facilities and services provided by other carriers on which Windstream’s services depend;
  • unfavorable rulings by state public service commissions in proceedings regarding universal service funds, intercarrier 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;
  • changes to our current dividend practice or our share repurchase program, each of which is subject to our capital allocation policy and may be changed at any time at the discretion of our board of directors;
  • the company’s ability to make rent payments under the Master Lease to CS&L, which may be affected by results of operations, changes in our cash requirements, cash tax payment obligations, or overall financial position;
  • unanticipated increases or other changes in the company’s future cash requirements, whether caused by unanticipated increases in capital expenditures, increases in pension funding requirements, or otherwise;
  • 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;
  • 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;
  • unfavorable results of litigation or intellectual property infringement claims asserted against Windstream;
  • 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;
  • the effects of federal and state legislation, and rules and regulations governing the communications industry;
  • continued loss of consumer households served and consumer high-speed Internet customers;
  • 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, 2014, 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.
 


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