Windstream Holdings, Inc. (Nasdaq:WIN), a leading provider of
advanced network communications and technology solutions, today
reported fourth-quarter and full-year 2017 results.
2017 Achievements:
- Completed EarthLink and Broadview acquisitions;
- Launched SD-WAN Concierge and OfficeSuite across entire company
footprint;
- Expanded Enterprise contribution margin percentage – up 200 bps
sequentially and 160 bps year-over year;
- Exited 2017 at highest adjusted OIBDAR margin level since
pre-EarthLink acquisition;
- Achieved 12th consecutive quarter of Consumer ARPU growth;
- Significantly improved maturity profile of balance sheet;
and
- Ended year with synergy plans on schedule and ramping into
2018.
“2017 was a very productive year for Windstream. We delivered
improved financial and operating results for almost all metrics
across the business and positioned the company for growth,” said
Tony Thomas, president and chief executive officer. “We continued
to see growing demand for our SD-WAN service and strategic
enterprise products, as well as increased customer adoption of
faster broadband speeds as a result of our significant network
investments."
“For 2018 we are focused on advancing our industry-leading
Enterprise and Wholesale service capabilities and launching faster,
more cost-effective broadband deployment techniques. We will
further simplify our business and transform customer-facing and
internal tools and drive revenue improvements through enhanced
sales and improved customer retention. We also will continue our
work to optimize our balance sheet,” Thomas said.
Results under GAAP
For the fourth quarter, total revenues and sales were $1.50
billion and total service revenues were $1.48 billion compared to
$1.31 billion and $1.29 billion respectively year-over-year. During
the quarter, the company recorded a $1.8 billion non-cash goodwill
impairment charge related to its ILEC Consumer & Small Business
and Wholesale segments, resulting in an operating loss of $1.8
billion compared to operating income of $74 million in the same
period a year ago. The company reported a net loss of $1.84 billion
or a loss of $10.26 per share compared to a net loss of $87 million
or a loss of 94-cents per share a year ago.
For 2017, total revenues and sales were $5.85 billion and total
service revenues were $5.76 billion compared to $5.39 billion and
$5.28 billion respectively year-over-year. The company reported an
operating loss of $1.6 billion compared to operating income of $515
million in the same period a year ago. The company reported a net
loss of $2.1 billion or a loss of $12.52 per share compared to a
net loss of $384 million or a loss of $4.11 per share a year
ago.
Adjusted Results of Operations
Adjusted revenues and sales were $1.50 billion in the fourth
quarter, a decline of 3 percent from the same period a year ago,
and $6.0 billion for the year, a decline of 6 percent
year-over-year.
Adjusted service revenues were $1.48 billion in the fourth
quarter, a decrease of 3 percent year-over-year, and $5.91 billion
for the year, a decline of 6 percent year-over-year.
Adjusted OIBDAR was $521 million in the fourth quarter, a
decrease of 1 percent year-over-year, and $2.01 billion for the
year, a decline of 6 percent from the same period a year ago.
ILEC Consumer and Small Business service revenues were $476
million in the fourth quarter, a 4 percent decline year-over-year,
and $1.94 billion, a decline of 4 percent from 2016. Contribution
margin was $282 million or 59 percent in the fourth quarter and
$1.13 billion or 57 percent for the year.
Enterprise service revenues were $760 million in the fourth
quarter, a decrease of less than 1 percent year-over-year, and
$2.98 billion for the year, a decrease of 5 percent from 2016.
Contribution margin was $164 million or 21 percent in the fourth
quarter and $593 million or 20 percent for the year.
Wholesale service revenues were $190 million in the fourth
quarter, a decrease of 8 percent year-over-year, and $778 million
for the year, a decline of 10 percent from 2016. Contribution
margin was $135 million or 71 percent in the fourth quarter and
$540 million or 69 percent for the year.
CLEC Consumer service revenues, which primarily consists of
EarthLink’s consumer Internet business, were $51 million in the
fourth quarter, a decline of 5 percent year-over-year, and $206
million for the year, a decrease of 8 percent from 2016.
Contribution margin was $27.5 million or 54 percent in the fourth
quarter and $107 million or 52 percent for the year.
Adjusted capital expenditures were $172 million in the fourth
quarter compared to $212 million in the same period a year ago and
$839 million for all of 2017 compared to $900 million for 2016.
The company generated $143 million in adjusted free cash flow
for 2017.
Note: Adjusted results of operations are based on the combined
historical financial information of Windstream and EarthLink and
assume the merger was completed on Jan. 1, 2016. Operating results
for Broadview are included beginning on July 28, 2017, the date of
acquisition. A reconciliation of adjusted results to the comparable
GAAP measures is included in the financial information presented
below. Additional supplemental quarterly financial information is
available on the company’s Web site at
www.windstream.com/investors.
Balance Sheet
Windstream significantly improved the maturity profile of its
balance sheet in 2017 by pushing almost $2 billion in maturities
out an average of more than two years. The company has no
meaningful maturities prior to 2020.
Financial Outlook for 2018
The company expects service revenue trends to be slightly
improved versus 2017 trends. The company expects adjusted OIBDAR to
be in the range of $1.95 billion to $2.01 billion. Adjusted capital
expenditures are expected to be between $750 million and $800
million.
The company expects to generate adjusted free cash flow of
approximately $165 million. The outlook assumes cash interest on
long-term debt of approximately $385 million.
About Windstream
Windstream Holdings, Inc. (Nasdaq:WIN), a FORTUNE 500 company,
is a leading provider of advanced network communications and
technology solutions for consumers, businesses, enterprise
organizations and wholesale customers across the U.S. Windstream
offers broadband, entertainment and security services for consumers
and small and medium-sized businesses. Windstream also provides
data networking, core transport, security, unified communications
and managed services to mid-market, enterprise and wholesale
customers. Services are delivered over multiple network platforms
including a nationwide IP network, our proprietary cloud core
architecture and on a local and long-haul fiber network spanning
approximately 150,000 miles. Additional information is available at
windstream.com or windstreamenterprise.com. Please visit our
newsroom at news.windstream.com or follow us on Twitter at
@Windstream or @WindstreamBiz.
Adjusted OIBDA is operating income before depreciation and
amortization, excluding goodwill impairment, merger, integration
and certain other costs, 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 Uniti Group,
Inc., formerly Communications Sales & Leasing (CS&L).
Adjusted free cash flow is defined as Adjusted OIBDA, less
adjusted capital expenditures, cash taxes and cash interest on
long-term debt.
Cautionary Statement Regarding Forward Looking
Statements
Windstream Holdings, Inc. 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 typically identified by words or phrases such as
“will,” “anticipate,” “estimate,” “expect,” “project,” “intend,”
“plan,” “believe,” “target,” “forecast” and other words and terms
of similar meaning. Forward-looking statements are subject to risks
and 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, 2018
guidance for service revenue, adjusted OIBDAR, adjusted capital
expenditures, and adjusted free cash flow, along with statements
regarding future growth of adjusted OBIDAR and free cash flow; 2018
directional outlook for business units and overall business trends,
including revenue and contribution margin trends and sales
opportunities; improvement in our ability to compete, including
expanding utilization of next generation technology in our products
and services, increasing availability of faster broadband speeds
and Kinetic to more households within our service areas, and
expected continued sales growth of strategic products for business
customers; statements regarding our 2018 priorities; the benefits
of the mergers with EarthLink Holdings Corp. and Broadview Network
Holdings, Inc. including projected synergies in operating and
capital expenditures and the timing of the synergies; our ability
to improve of our debt profile and balance sheet and overall
reduction in net leverage; expectations regarding our updated
business unit structure and expense management activities and the
timing and benefit of such activities; benefits of the new federal
tax laws and our ability to utilize certain net operating loss
carryforwards, and any other statements regarding plans,
objectives, expectations and intentions and other statements that
are not historical facts.
These statements, along with other forward-looking 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,
performance or results. Actual future events and results 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 our forward-looking statements include,
among others:
- the cost savings and expected synergies from the mergers with
EarthLink and Broadview may not be fully realized or may take
longer to realize than expected;
- the integration of Windstream and EarthLink and Broadview may
not be successful, may cause disruption in relationships with
customers, vendors and suppliers and may divert attention of
management and key personnel;
- the impact of the Federal Communications Commission’s
comprehensive business data services reforms that may result in
greater capital investments and customer and revenue churn because
of possible price increases by our ILEC suppliers for certain
services we use to serve customer locations where we do not have
facilities;
- the potential for incumbent carriers to impose monetary
penalties for failure to meet specific volume and term commitments
under their special access pricing and tariff plans, which
Windstream uses to lease last-mile connections to serve its retail
business data service customers, without FCC action;
- the impact of new, emerging or competing technologies and our
ability to utilize these technologies to provide services to our
customers;
- the alleged ability of one or more purported noteholders to
establish that transactions related to the spin-off of certain
assets in 2015 into a publicly-traded real estate investment trust
allegedly violated certain covenants in existing indentures
governing certain outstanding senior notes;
- the benefits of our current capital allocation strategy, which
may be changed at anytime at the discretion of our board of
directors, and certain cost reduction activities may not be fully
realized or may take longer to realize than expected, or the
implementation of these initiatives may adversely affect our sales
and operational activities or otherwise disrupt our business and
personnel;
- the availability and cost of financing in the corporate debt
markets;
- unanticipated increases or other changes in our future cash
requirements, whether caused by unanticipated increases in capital
expenditures, increases in pension funding requirements, or
otherwise;
- for certain operations where we lease facilities from other
carriers, adverse effects on the availability, quality of service,
price of facilities and services provided by other carriers on
which our services depend;
- our election to accept state-wide offers under the FCC’s
Connect America Fund, Phase II, and the impact of such election on
our future receipt of federal universal service funds and capital
expenditures, and any return of support received pursuant to the
program;
- our ability to make rent payments under the master lease to
Uniti, which may be affected by results of operations, changes in
our cash requirements, cash tax payment obligations, or overall
financial position;
- further adverse changes in economic conditions in the markets
served by us;
- the extent, timing and overall effects of competition in the
communications business;
- unfavorable rulings by state public service commissions in
current and further 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;
- the impact of recent adverse changes in the ratings given to
our debt securities by nationally accredited ratings organizations
and the potential for additional adverse changes in the
future;
- earnings on pension plan investments significantly below our
expected long-term rate of return for plan assets or a significant
change in the discount rate or other actuarial
assumptions;
- unfavorable results of litigation or intellectual property
infringement claims asserted against us;
- the risks associated with non-compliance by us with regulations
or statutes applicable to government programs under which we
receive material amounts of end-user revenue and government
subsidies, or non-compliance by us, our partners, or our
subcontractors with any terms of our government
contracts;
- the effects of federal and state legislation, and rules and
regulations, and changes thereto, 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 our employees or employees of
other communications companies on whom we rely for service;
and
- those additional factors under “Risk Factors” in Item 1A of
Windstream’s Annual Report 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 with the Securities and Exchange Commission at
www.sec.gov.
-end-
Media Contact: |
|
|
|
Investor Contact: |
David Avery,
501-748-5876 |
|
|
|
Chris King,
704-319-1025 |
david.avery@windstream.com |
|
|
|
christopher.c.king@windstream.com |
|
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF OPERATIONS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In
millions, except per share amounts) |
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
|
|
|
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
% |
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
% |
|
UNDER GAAP: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
|
$ |
1,477.3 |
|
|
$ |
1,289.1 |
|
|
$ |
188.2 |
|
|
15 |
|
|
$ |
5,759.7 |
|
|
$ |
5,279.9 |
|
|
$ |
479.8 |
|
|
9 |
|
|
|
Product sales |
|
|
20.6 |
|
|
|
20.0 |
|
|
|
0.6 |
|
|
3 |
|
|
|
93.2 |
|
|
|
107.1 |
|
|
|
(13.9 |
) |
|
(13 |
) |
|
|
Total
revenues and sales |
|
|
1,497.9 |
|
|
|
1,309.1 |
|
|
|
188.8 |
|
|
14 |
|
|
|
5,852.9 |
|
|
|
5,387.0 |
|
|
|
465.9 |
|
|
9 |
|
|
Costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services
(exclusive of depreciation and amortization included below) |
|
|
756.0 |
|
|
|
664.3 |
|
|
|
91.7 |
|
|
14 |
|
|
|
2,964.9 |
|
|
|
2,677.8 |
|
|
|
287.1 |
|
|
11 |
|
|
|
Cost of products
sold |
|
|
20.7 |
|
|
|
23.9 |
|
|
|
(3.2 |
) |
|
(13 |
) |
|
|
93.5 |
|
|
|
98.5 |
|
|
|
(5.0 |
) |
|
(5 |
) |
|
|
Selling, general and
administrative |
|
|
226.7 |
|
|
|
206.9 |
|
|
|
19.8 |
|
|
10 |
|
|
|
896.8 |
|
|
|
797.7 |
|
|
|
99.1 |
|
|
12 |
|
|
|
Depreciation and
amortization |
|
|
403.7 |
|
|
|
329.5 |
|
|
|
74.2 |
|
|
23 |
|
|
|
1,470.0 |
|
|
|
1,263.5 |
|
|
|
206.5 |
|
|
16 |
|
|
|
Goodwill
impairment |
|
|
1,840.8 |
|
|
|
— |
|
|
|
1,840.8 |
|
|
* |
|
|
1,840.8 |
|
|
|
— |
|
|
|
1,840.8 |
|
|
* |
|
|
Merger, integration and
other costs |
|
|
30.0 |
|
|
|
3.3 |
|
|
|
26.7 |
|
|
* |
|
|
137.4 |
|
|
|
13.8 |
|
|
|
123.6 |
|
|
* |
|
|
Restructuring
charges |
|
|
9.3 |
|
|
|
7.5 |
|
|
|
1.8 |
|
|
* |
|
|
43.0 |
|
|
|
20.3 |
|
|
|
22.7 |
|
|
112 |
|
|
|
Total
costs and expenses |
|
|
3,287.2 |
|
|
|
1,235.4 |
|
|
|
2,051.8 |
|
|
166 |
|
|
|
7,446.4 |
|
|
|
4,871.6 |
|
|
|
2,574.8 |
|
|
53 |
|
|
Operating
(loss) income |
|
|
(1,789.3 |
) |
|
|
73.7 |
|
|
|
(1,863.0 |
) |
|
* |
|
|
(1,593.5 |
) |
|
|
515.4 |
|
|
|
(2,108.9 |
) |
|
* |
|
Dividend
income on Uniti common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
* |
|
|
— |
|
|
|
17.6 |
|
|
|
(17.6 |
) |
|
(100 |
) |
|
Other
income (expense), net |
|
|
0.1 |
|
|
|
1.3 |
|
|
|
(1.2 |
) |
|
(92 |
) |
|
|
— |
|
|
|
(1.2 |
) |
|
|
1.2 |
|
|
100 |
|
|
Net gain on
disposal of investment in Uniti common stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
* |
|
|
— |
|
|
|
15.2 |
|
|
|
(15.2 |
) |
|
(100 |
) |
|
(Loss) gain
on sale of data center business |
|
|
— |
|
|
|
(10.0 |
) |
|
|
10.0 |
|
|
100 |
|
|
|
0.6 |
|
|
|
(10.0 |
) |
|
|
10.6 |
|
|
(106 |
) |
|
Net loss on
early extinguishment of debt |
|
|
(58.4 |
) |
|
|
— |
|
|
|
(58.4 |
) |
|
* |
|
|
(56.4 |
) |
|
|
(18.0 |
) |
|
|
(38.4 |
) |
|
* |
|
Other-than-temporary impairment loss on investment in Uniti common
stock |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
* |
|
|
— |
|
|
|
(181.9 |
) |
|
|
181.9 |
|
|
100 |
|
|
Interest
expense (A) |
|
|
(232.8 |
) |
|
|
(207.1 |
) |
|
|
25.7 |
|
|
(12 |
) |
|
|
(875.4 |
) |
|
|
(860.6 |
) |
|
|
14.8 |
|
|
2 |
|
|
Loss before
income taxes |
|
|
(2,080.4 |
) |
|
|
(142.1 |
) |
|
|
1,938.3 |
|
|
* |
|
|
(2,524.7 |
) |
|
|
(523.5 |
) |
|
|
2,001.2 |
|
|
* |
|
Income tax
benefit |
|
|
(244.7 |
) |
|
|
(55.2 |
) |
|
|
189.5 |
|
|
* |
|
|
(408.1 |
) |
|
|
(140.0 |
) |
|
|
268.1 |
|
|
192 |
|
|
Net
loss |
|
$ |
(1,835.7 |
) |
|
$ |
(86.9 |
) |
|
$ |
1,748.8 |
|
|
* |
|
$ |
(2,116.6 |
) |
|
$ |
(383.5 |
) |
|
$ |
1,733.1 |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares |
|
|
178.9 |
|
|
|
92.9 |
|
|
|
86.0 |
|
|
93 |
|
|
|
169.1 |
|
|
|
93.9 |
|
|
|
75.2 |
|
|
80 |
|
|
Common
shares outstanding |
|
|
182.7 |
|
|
|
96.3 |
|
|
|
86.4 |
|
|
90 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
($ 10.26 |
) |
|
($ .94 |
) |
|
($ 9.32 |
) |
|
* |
|
($ 12.52 |
) |
|
($ 4.11 |
) |
|
$ 8.41 |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED RESULTS OF OPERATIONS (B): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted service revenues |
|
$ |
1,477.3 |
|
|
$ |
1,524.7 |
|
|
$ |
(47.4 |
) |
|
(3 |
) |
|
$ |
5,909.0 |
|
|
$ |
6,261.6 |
|
|
$ |
(352.6 |
) |
|
(6 |
) |
|
Adjusted revenues and sales |
|
$ |
1,497.9 |
|
|
$ |
1,544.9 |
|
|
$ |
(47.0 |
) |
|
(3 |
) |
|
$ |
6,002.4 |
|
|
$ |
6,369.3 |
|
|
$ |
(366.9 |
) |
|
(6 |
) |
|
Adjusted OIBDAR (C) |
|
$ |
520.8 |
|
|
$ |
527.0 |
|
|
$ |
(6.2 |
) |
|
(1 |
) |
|
$ |
2,009.6 |
|
|
$ |
2,126.7 |
|
|
$ |
(117.1 |
) |
|
(6 |
) |
|
Adjusted OIBDA (D) |
|
$ |
357.4 |
|
|
$ |
363.6 |
|
|
$ |
(6.2 |
) |
|
(2 |
) |
|
$ |
1,356.1 |
|
|
$ |
1,473.1 |
|
|
$ |
(117.0 |
) |
|
(8 |
) |
|
Adjusted capital expenditures (E) |
|
$ |
172.0 |
|
|
$ |
211.6 |
|
|
$ |
(39.6 |
) |
|
(19 |
) |
|
$ |
839.4 |
|
|
$ |
900.1 |
|
|
$ |
(60.7 |
) |
|
(7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Not
meaningful |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
Includes interest expense associated with the master
lease agreement with Uniti of $119.7 million and $484.9 million for
the three and twelve month periods ended December 31, 2017,
respectively, as compared to $123.7 and $500.8 million for the
three and twelve month periods ended December 31, 2016. |
|
(B) |
Adjusted results of operations are based upon the
combined historical financial information of Windstream and
EarthLink for all periods presented. 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
Uniti. |
|
(D) |
Adjusted OIBDA is operating income before depreciation
and amortization, excluding goodwill impairment, merger,
integration and certain other costs, restructuring charges, pension
costs and share-based compensation expense. |
|
(E) |
Adjusted capital expenditures includes applicable
amounts for EarthLink for periods prior to the merger date of
February 27, 2017 and excludes post-merger integration capital
expenditures and amounts related to Project Excel, a capital
program funded entirely using a portion of the proceeds from the
sale of the data center business completed in December 2015. |
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
UNAUDITED
BUSINESS SEGMENT RESULTS UNDER GAAP |
|
|
|
|
|
|
|
|
|
|
|
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
|
|
|
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
% |
|
|
2017 |
|
|
|
2016 |
|
|
Amount |
|
% |
|
Consumer & Small Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
|
$ |
475.9 |
|
|
$ |
498.3 |
|
|
$ |
(22.4 |
) |
|
(4 |
) |
|
$ |
1,944.5 |
|
|
$ |
2,023.4 |
|
|
$ |
(78.9 |
) |
|
(4 |
) |
|
|
Product
sales |
|
|
5.9 |
|
|
|
8.7 |
|
|
|
(2.8 |
) |
|
(32 |
) |
|
|
33.8 |
|
|
|
39.9 |
|
|
|
(6.1 |
) |
|
(15 |
) |
|
|
Total
revenue and sales |
|
|
481.8 |
|
|
|
507.0 |
|
|
|
(25.2 |
) |
|
(5 |
) |
|
|
1,978.3 |
|
|
|
2,063.3 |
|
|
|
(85.0 |
) |
|
(4 |
) |
|
|
Costs and expenses |
|
|
199.8 |
|
|
|
205.1 |
|
|
|
(5.3 |
) |
|
(3 |
) |
|
|
848.5 |
|
|
|
870.7 |
|
|
|
(22.2 |
) |
|
(3 |
) |
|
|
Segment income |
|
|
282.0 |
|
|
|
301.9 |
|
|
|
(19.9 |
) |
|
(7 |
) |
|
|
1,129.8 |
|
|
|
1,192.6 |
|
|
|
(62.8 |
) |
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
|
|
760.3 |
|
|
|
615.3 |
|
|
|
145.0 |
|
|
24 |
|
|
|
2,883.5 |
|
|
|
2,520.7 |
|
|
|
362.8 |
|
|
14 |
|
|
|
Product
sales |
|
|
14.4 |
|
|
|
11.3 |
|
|
|
3.1 |
|
|
27 |
|
|
|
58.6 |
|
|
|
67.2 |
|
|
|
(8.6 |
) |
|
(13 |
) |
|
|
Total
revenue and sales |
|
|
774.7 |
|
|
|
626.6 |
|
|
|
148.1 |
|
|
24 |
|
|
|
2,942.1 |
|
|
|
2,587.9 |
|
|
|
354.2 |
|
|
14 |
|
|
|
Costs and expenses |
|
|
610.6 |
|
|
|
497.0 |
|
|
|
113.6 |
|
|
23 |
|
|
|
2,364.9 |
|
|
|
2,075.7 |
|
|
|
289.2 |
|
|
14 |
|
|
|
Segment income |
|
|
164.1 |
|
|
|
129.6 |
|
|
|
34.5 |
|
|
27 |
|
|
|
577.2 |
|
|
|
512.2 |
|
|
|
65.0 |
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
|
|
189.8 |
|
|
|
172.0 |
|
|
|
17.8 |
|
|
10 |
|
|
|
756.3 |
|
|
|
720.8 |
|
|
|
35.5 |
|
|
5 |
|
|
|
Product
sales |
|
|
0.2 |
|
|
|
— |
|
|
|
0.2 |
|
|
* |
|
|
0.3 |
|
|
|
— |
|
|
|
0.3 |
|
|
* |
|
|
Total
revenue and sales |
|
|
190.0 |
|
|
|
172.0 |
|
|
|
18.0 |
|
|
10 |
|
|
|
756.6 |
|
|
|
720.8 |
|
|
|
35.8 |
|
|
5 |
|
|
|
Costs and expenses |
|
|
55.5 |
|
|
|
47.5 |
|
|
|
8.0 |
|
|
17 |
|
|
|
226.8 |
|
|
|
194.5 |
|
|
|
32.3 |
|
|
17 |
|
|
|
Segment income |
|
|
134.5 |
|
|
|
124.5 |
|
|
|
10.0 |
|
|
8 |
|
|
|
529.8 |
|
|
|
526.3 |
|
|
|
3.5 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and
sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
|
|
51.3 |
|
|
|
3.5 |
|
|
|
47.8 |
|
|
* |
|
|
175.4 |
|
|
|
15.0 |
|
|
|
160.4 |
|
|
* |
|
|
Product
sales |
|
|
0.1 |
|
|
|
— |
|
|
|
0.1 |
|
|
* |
|
|
0.5 |
|
|
|
— |
|
|
|
0.5 |
|
|
* |
|
|
Total
revenue and sales |
|
|
51.4 |
|
|
|
3.5 |
|
|
|
47.9 |
|
|
* |
|
|
175.9 |
|
|
|
15.0 |
|
|
|
160.9 |
|
|
* |
|
|
Costs and expenses |
|
|
23.9 |
|
|
|
3.0 |
|
|
|
20.9 |
|
|
* |
|
|
86.9 |
|
|
|
13.1 |
|
|
|
73.8 |
|
|
* |
|
|
Segment income |
|
|
27.5 |
|
|
|
0.5 |
|
|
|
27.0 |
|
|
* |
|
|
89.0 |
|
|
|
1.9 |
|
|
|
87.1 |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
segment revenues and sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
|
|
1,477.3 |
|
|
|
1,289.1 |
|
|
|
188.2 |
|
|
15 |
|
|
|
5,759.7 |
|
|
|
5,279.9 |
|
|
|
479.8 |
|
|
9 |
|
|
Product sales |
|
|
20.6 |
|
|
|
20.0 |
|
|
|
0.6 |
|
|
3 |
|
|
|
93.2 |
|
|
|
107.1 |
|
|
|
(13.9 |
) |
|
(13 |
) |
|
Total
segment revenues and sales |
|
|
1,497.9 |
|
|
|
1,309.1 |
|
|
|
188.8 |
|
|
14 |
|
|
|
5,852.9 |
|
|
|
5,387.0 |
|
|
|
465.9 |
|
|
9 |
|
|
Total
segment costs and expenses |
|
|
889.8 |
|
|
|
752.6 |
|
|
|
137.2 |
|
|
18 |
|
|
|
3,527.1 |
|
|
|
3,154.0 |
|
|
|
373.1 |
|
|
12 |
|
|
Total
segment income |
|
|
608.1 |
|
|
|
556.5 |
|
|
|
51.6 |
|
|
9 |
|
|
|
2,325.8 |
|
|
|
2,233.0 |
|
|
|
92.8 |
|
|
4 |
|
|
|
Other unassigned
operating expenses (A) |
|
|
(113.6 |
) |
|
|
(142.5 |
) |
|
|
28.9 |
|
|
(20 |
) |
|
|
(428.1 |
) |
|
|
(420.0 |
) |
|
|
(8.1 |
) |
|
2 |
|
|
|
Merger, integration and
other costs |
|
|
(30.0 |
) |
|
|
(3.3 |
) |
|
|
(26.7 |
) |
|
* |
|
|
(137.4 |
) |
|
|
(13.8 |
) |
|
|
(123.6 |
) |
|
* |
|
|
Restructuring
charges |
|
|
(9.3 |
) |
|
|
(7.5 |
) |
|
|
(1.8 |
) |
|
24 |
|
|
|
(43.0 |
) |
|
|
(20.3 |
) |
|
|
(22.7 |
) |
|
112 |
|
|
|
Goodwill
impairment |
|
|
(1,840.8 |
) |
|
|
— |
|
|
|
(1,840.8 |
) |
|
* |
|
|
(1,840.8 |
) |
|
|
— |
|
|
|
(1,840.8 |
) |
|
* |
|
|
Depreciation and
amortization |
|
|
(403.7 |
) |
|
|
(329.5 |
) |
|
|
(74.2 |
) |
|
23 |
|
|
|
(1,470.0 |
) |
|
|
(1,263.5 |
) |
|
|
(206.5 |
) |
|
16 |
|
|
Operating
(loss) income |
|
$ |
(1,789.3 |
) |
|
$ |
73.7 |
|
|
$ |
(1,863.0 |
) |
|
* |
|
$ |
(1,593.5 |
) |
|
$ |
515.4 |
|
|
$ |
(2,108.9 |
) |
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Results for 2016 exclude the acquired EarthLink
operations. |
|
|
|
|
(A) |
These expenses are not allocated to the business
segments. Unallocated expenses include stock-based compensation,
pension costs, and shared services, such as accounting and finance,
information technology, 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 CONSOLIDATED BALANCE SHEETS |
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Assets |
|
|
|
|
|
|
Current
Assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
|
$ |
43.4 |
|
|
$ |
59.1 |
|
|
Accounts
receivable, net |
|
|
|
643.0 |
|
|
|
618.6 |
|
|
Inventories |
|
|
|
93.0 |
|
|
|
77.5 |
|
|
Prepaid
expenses and other |
|
|
|
153.1 |
|
|
|
111.7 |
|
|
Total
current assets |
|
|
|
932.5 |
|
|
|
866.9 |
|
|
|
|
|
|
|
|
|
Goodwill |
|
|
|
2,842.4 |
|
|
|
4,213.6 |
|
|
Other intangibles,
net |
|
|
|
1,454.4 |
|
|
|
1,320.5 |
|
|
Net property, plant and
equipment |
|
|
|
5,391.8 |
|
|
|
5,283.5 |
|
|
Deferred income
taxes |
|
|
|
370.8 |
|
|
|
— |
|
|
Other assets |
|
|
|
92.4 |
|
|
|
85.5 |
|
|
Total
Assets |
|
|
$ |
11,084.3 |
|
|
$ |
11,770.0 |
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders' Equity (Deficit) |
|
|
|
|
|
|
Current
Liabilities: |
|
|
|
|
|
|
Current
maturities of long-term debt |
|
|
$ |
169.3 |
|
|
$ |
14.9 |
|
|
Current
portion of long-term lease obligations |
|
|
|
188.6 |
|
|
|
168.7 |
|
|
Accounts
payable |
|
|
|
494.0 |
|
|
|
390.2 |
|
|
Advance
payments and customer deposits |
|
|
|
207.3 |
|
|
|
178.1 |
|
|
Accrued
taxes |
|
|
|
89.5 |
|
|
|
78.0 |
|
|
Accrued
interest |
|
|
|
52.6 |
|
|
|
58.1 |
|
|
Other
current liabilities |
|
|
|
342.1 |
|
|
|
366.6 |
|
|
Total
current liabilities |
|
|
|
1,543.4 |
|
|
|
1,254.6 |
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
|
5,674.6 |
|
|
|
4,848.7 |
|
|
Long-term lease
obligations |
|
|
|
4,643.3 |
|
|
|
4,831.9 |
|
|
Deferred income
taxes |
|
|
|
— |
|
|
|
151.5 |
|
|
Other liabilities |
|
|
|
521.9 |
|
|
|
513.3 |
|
|
Total
liabilities |
|
|
|
12,383.2 |
|
|
|
11,600.0 |
|
|
|
|
|
|
|
|
|
Shareholders'
Equity (Deficit): |
|
|
|
|
|
|
Common
stock |
|
|
|
— |
|
|
|
— |
|
|
Additional paid-in capital |
|
|
|
1,191.9 |
|
|
|
559.7 |
|
|
Accumulated other comprehensive income |
|
|
|
21.4 |
|
|
|
5.9 |
|
|
Accumulated deficit |
|
|
|
(2,512.2 |
) |
|
|
(395.6 |
) |
|
Total
shareholders' equity (deficit) |
|
|
|
(1,298.9 |
) |
|
|
170.0 |
|
|
Total
Liabilities and Shareholders' Equity (Deficit) |
|
|
$ |
11,084.3 |
|
|
$ |
11,770.0 |
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
|
UNAUDITED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
|
(In millions) |
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Cash Flows from
Operating Activities: |
|
|
|
|
|
|
|
|
Net loss |
$ |
(1,835.7 |
) |
|
$ |
(86.9 |
) |
|
$ |
(2,116.6 |
) |
|
$ |
(383.5 |
) |
|
Adjustments to
reconcile net loss to net cash provided from operations: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
403.7 |
|
|
|
329.5 |
|
|
|
1,470.0 |
|
|
|
1,263.5 |
|
|
Goodwill
impairment |
|
1,840.8 |
|
|
|
— |
|
|
|
1,840.8 |
|
|
|
— |
|
|
Provision
for doubtful accounts |
|
12.3 |
|
|
|
10.7 |
|
|
|
45.8 |
|
|
|
43.8 |
|
|
Share-based compensation expense |
|
10.2 |
|
|
|
9.8 |
|
|
|
55.4 |
|
|
|
41.6 |
|
|
Pension
expense |
|
12.7 |
|
|
|
57.7 |
|
|
|
10.1 |
|
|
|
59.1 |
|
|
Deferred
income taxes |
|
(267.4 |
) |
|
|
(58.3 |
) |
|
|
(412.7 |
) |
|
|
(138.3 |
) |
|
Net gain
on disposal of investment in Uniti common stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(15.2 |
) |
|
Noncash
portion of net loss on early extinguishment of debt |
|
56.2 |
|
|
|
— |
|
|
|
36.0 |
|
|
|
(51.9 |
) |
|
Other-than-temporary impairment loss on investment in Uniti common
stock |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
181.9 |
|
|
Amortization of unrealized losses on de-designated interest rate
swaps |
|
1.1 |
|
|
|
1.8 |
|
|
|
5.3 |
|
|
|
4.8 |
|
|
Loss
(gain) from sale of data center |
|
— |
|
|
|
10.0 |
|
|
|
(0.6 |
) |
|
|
10.0 |
|
|
Plan
curtailment |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5.5 |
) |
|
Other,
net |
|
9.5 |
|
|
|
1.4 |
|
|
|
24.0 |
|
|
|
1.2 |
|
|
Changes in operating
assets and liabilities, net: |
|
|
|
|
|
|
|
|
Accounts
receivable |
|
26.6 |
|
|
|
20.8 |
|
|
|
17.7 |
|
|
|
(15.1 |
) |
|
Prepaid
income taxes |
|
6.4 |
|
|
|
5.3 |
|
|
|
0.8 |
|
|
|
(4.4 |
) |
|
Prepaid
expenses and other |
|
21.6 |
|
|
|
12.5 |
|
|
|
1.3 |
|
|
|
30.4 |
|
|
Accounts
payable |
|
74.5 |
|
|
|
44.1 |
|
|
|
43.3 |
|
|
|
(47.2 |
) |
|
Accrued
interest |
|
(41.3 |
) |
|
|
(34.9 |
) |
|
|
(16.3 |
) |
|
|
(20.1 |
) |
|
Accrued
taxes |
|
(3.8 |
) |
|
|
0.3 |
|
|
|
(0.2 |
) |
|
|
(6.1 |
) |
|
Other
current liabilities |
|
18.0 |
|
|
|
2.9 |
|
|
|
4.8 |
|
|
|
21.2 |
|
|
Other
liabilities |
|
(26.9 |
) |
|
|
(31.5 |
) |
|
|
(25.7 |
) |
|
|
(42.4 |
) |
|
Other,
net |
|
6.8 |
|
|
|
7.1 |
|
|
|
(32.5 |
) |
|
|
(3.4 |
) |
|
Net cash
provided from operating activities |
|
325.3 |
|
|
|
302.3 |
|
|
|
950.7 |
|
|
|
924.4 |
|
|
Cash Flows from
Investing Activities: |
|
|
|
|
|
|
|
|
Additions
to property, plant and equipment |
|
(184.4 |
) |
|
|
(236.4 |
) |
|
|
(908.6 |
) |
|
|
(989.8 |
) |
|
Proceeds
from the sale of property |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6.3 |
|
|
Acquisition of Broadview, net of cash acquired |
|
— |
|
|
|
— |
|
|
|
(63.3 |
) |
|
|
— |
|
|
Cash
acquired from EarthLink |
|
— |
|
|
|
— |
|
|
|
5.0 |
|
|
|
— |
|
|
Other,
net |
|
(6.9 |
) |
|
|
— |
|
|
|
(16.3 |
) |
|
|
(6.5 |
) |
|
Net cash
used in investing activities |
|
(191.3 |
) |
|
|
(236.4 |
) |
|
|
(983.2 |
) |
|
|
(990.0 |
) |
|
Cash Flows from
Financing Activities: |
|
|
|
|
|
|
|
|
Dividends
paid to shareholders |
|
— |
|
|
|
(14.5 |
) |
|
|
(64.4 |
) |
|
|
(58.6 |
) |
|
Proceeds
from issuance of stock |
|
— |
|
|
|
— |
|
|
|
9.6 |
|
|
|
— |
|
|
Repayments of debt and swaps |
|
(588.5 |
) |
|
|
(344.1 |
) |
|
|
(2,277.9 |
) |
|
|
(3,263.7 |
) |
|
Proceeds
from debt issuance |
|
515.0 |
|
|
|
334.5 |
|
|
|
2,614.6 |
|
|
|
3,674.5 |
|
|
Debt
issuance costs |
|
(19.8 |
) |
|
|
(0.1 |
) |
|
|
(27.1 |
) |
|
|
(12.4 |
) |
|
Stock
repurchases |
|
— |
|
|
|
— |
|
|
|
(19.0 |
) |
|
|
(28.9 |
) |
|
Payments
under long-term lease obligations |
|
(43.8 |
) |
|
|
(39.6 |
) |
|
|
(168.7 |
) |
|
|
(152.8 |
) |
|
Payments
under capital lease obligations |
|
(9.8 |
) |
|
|
(4.6 |
) |
|
|
(39.0 |
) |
|
|
(57.7 |
) |
|
Other,
net |
|
(0.2 |
) |
|
|
0.2 |
|
|
|
(11.3 |
) |
|
|
(7.0 |
) |
|
Net cash
(used in) provided from financing activities |
|
(147.1 |
) |
|
|
(68.2 |
) |
|
|
16.8 |
|
|
|
93.4 |
|
|
(Decrease) increase in
cash and cash equivalents |
|
(13.1 |
) |
|
|
(2.3 |
) |
|
|
(15.7 |
) |
|
|
27.8 |
|
|
Cash and Cash
Equivalents: |
|
|
|
|
|
|
|
|
Beginning
of period |
|
56.5 |
|
|
|
61.4 |
|
|
|
59.1 |
|
|
|
31.3 |
|
|
End of
period |
$ |
43.4 |
|
|
$ |
59.1 |
|
|
$ |
43.4 |
|
|
$ |
59.1 |
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
|
UNAUDITED
SUPPLEMENTAL ADJUSTED OPERATING INFORMATION |
|
|
|
|
|
|
(In
thousands) |
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
|
|
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
December 31, |
|
December 31, |
|
Increase (Decrease) |
|
|
|
2017 |
|
2016 |
|
Amount |
|
% |
|
2017 |
|
2016 |
|
Amount |
|
% |
Consumer - ILEC customers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Households served |
|
1,268.8 |
|
1,354.6 |
|
(85.8 |
) |
|
(6 |
) |
|
|
|
|
|
|
|
|
|
High-speed Internet
customers |
|
1,006.6 |
|
1,051.1 |
|
(44.5 |
) |
|
(4 |
) |
|
|
|
|
|
|
|
|
|
Digital television
customers |
|
277.9 |
|
321.0 |
|
(43.1 |
) |
|
(13 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net household
losses |
|
19.4 |
|
23.9 |
|
(4.5 |
) |
|
(19 |
) |
|
85.8 |
|
91.2 |
|
(5.4 |
) |
|
(6 |
) |
|
Net high-speed Internet
customer losses |
|
10.8 |
|
11.9 |
|
(1.1 |
) |
|
(9 |
) |
|
44.5 |
|
44.0 |
|
0.5 |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Small Business - ILEC customers |
|
128.1 |
|
139.7 |
|
(11.6 |
) |
|
(8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Enterprise customers |
|
133.5 |
|
135.0 |
|
(1.5 |
) |
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CLEC Consumer customers |
|
662.1 |
|
0.7 |
|
661.4 |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
Customer
metrics include acquired EarthLink customers for all periods
presented. Broadview customers are included as of the acquisition
date of July 28, 2017. |
|
|
WINDSTREAM
HOLDINGS, INC. |
|
|
|
|
|
|
|
NON-GAAP
FINANCIAL MEASURES - ADJUSTED CAPITAL EXPENDITURES AND ADJUSTED
FREE CASH FLOW |
|
|
|
(In
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
TWELVE MONTHS ENDED |
|
|
|
December 31, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
|
2016 |
|
|
Adjusted Capital Expenditures: |
|
|
|
|
|
|
|
|
Capital
expenditures under GAAP |
$ |
184.4 |
|
|
$ |
236.4 |
|
|
$ |
908.6 |
|
|
$ |
989.8 |
|
|
EarthLink capital expenditures pre-merger |
|
— |
|
|
|
28.5 |
|
|
|
15.2 |
|
|
|
84.1 |
|
|
Project Excel capital expenditures |
|
— |
|
|
|
(53.3 |
) |
|
|
(49.9 |
) |
|
|
(173.8 |
) |
|
Integration capital expenditures |
|
(12.4 |
) |
|
|
— |
|
|
|
(34.5 |
) |
|
|
— |
|
|
Adjusted
capital expenditures (A) |
$ |
172.0 |
|
|
$ |
211.6 |
|
|
$ |
839.4 |
|
|
$ |
900.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREEMONTHSENDED |
|
TWELVEMONTHSENDED |
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
|
|
|
2017 |
|
|
|
2017 |
|
|
Adjusted Free Cash Flow: |
|
|
|
|
|
|
|
|
Operating
(loss) income under GAAP |
|
|
|
|
$ |
(1,789.3 |
) |
|
$ |
(1,593.5 |
) |
|
Depreciation and amortization |
|
|
|
|
|
403.7 |
|
|
|
1,470.0 |
|
|
Goodwill impairment |
|
|
|
|
|
1,840.8 |
|
|
|
1,840.8 |
|
|
OIBDA |
|
|
|
|
|
455.2 |
|
|
|
1,717.3 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
EarthLink operating income (B) |
|
|
|
|
|
— |
|
|
|
30.8 |
|
|
Merger, integration and other costs (C) |
|
|
|
|
|
33.5 |
|
|
|
163.2 |
|
|
Restructuring charges |
|
|
|
|
|
9.3 |
|
|
|
43.0 |
|
|
Pension expense |
|
|
|
|
|
12.6 |
|
|
|
10.1 |
|
|
Share-based compensation expense (D) |
|
|
|
|
|
10.2 |
|
|
|
45.2 |
|
|
Master lease rent payment |
|
|
|
|
|
(163.4 |
) |
|
|
(653.5 |
) |
|
Adjusted
OIBDA |
|
|
|
|
|
357.4 |
|
|
|
1,356.1 |
|
|
Adjusted capital expenditures (per above) |
|
|
|
|
|
(172.0 |
) |
|
|
(839.4 |
) |
|
Cash paid for interest on long-term debt obligations |
|
|
|
|
|
(138.2 |
) |
|
|
(371.9 |
) |
|
Cash paid for income taxes |
|
|
|
|
|
(0.2 |
) |
|
|
(2.0 |
) |
|
Adjusted
free cash flow |
|
|
|
|
$ |
47.0 |
|
|
$ |
142.8 |
|
|
(A) |
|
|
Adjusted capital
expenditures includes applicable amounts for EarthLink for periods
prior to the merger date of February 27, 2017 and excludes
post-merger integration capital expenditures and amounts related to
Project Excel, a capital program funded entirely using a portion of
the proceeds from the sale of the data center business completed in
December 2015. |
(B) |
|
|
Represents EarthLink
operating results for the pre-merger period January 1, 2017 to
February 26, 2017. This amount excludes EarthLink's historical
depreciation and amortization, restructuring, merger and
integration costs and share-based compensation. |
(C) |
|
|
Included in other costs
for 2017 are incremental expenses of $4.7 million related to
Hurricanes Harvey and Irma and $8.3 million of costs incurred in
connection with a carrier access settlement. Other costs also
include a reserve for a penalty attributable to not meeting certain
spend commitments under a circuit discount plan of approximately
$7.7 million. |
(D) |
|
|
Excludes share-based
compensation expense included in merger, integration and other
costs of $10.1 million. |
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF
NON-GAAP FINANCIAL MEASURES |
|
|
|
|
|
|
|
|
|
|
(In millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS ENDED |
|
|
TWELVE MONTHS ENDED |
|
|
|
December 31, |
|
December 31, |
|
|
December 31, |
|
December 31, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Reconciliation
of Revenues and Sales under GAAP to Adjusted
Revenues and Sales: |
|
|
|
|
|
|
|
|
|
|
Service revenues under
GAAP |
|
$ |
1,477.3 |
|
|
$ |
1,289.1 |
|
|
|
$ |
5,759.7 |
|
|
$ |
5,279.9 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
EarthLink
service revenues |
(A) |
|
— |
|
|
|
235.6 |
|
|
(A) |
|
149.3 |
|
|
|
981.7 |
|
|
Adjusted service
revenues |
|
|
1,477.3 |
|
|
|
1,524.7 |
|
|
|
|
5,909.0 |
|
|
|
6,261.6 |
|
|
Product
sales under GAAP |
|
|
20.6 |
|
|
|
20.0 |
|
|
|
|
93.2 |
|
|
|
107.1 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
EarthLink
product sales |
(A) |
|
— |
|
|
|
0.2 |
|
|
(A) |
|
0.2 |
|
|
|
0.6 |
|
|
Adjusted product
sales |
|
|
20.6 |
|
|
|
20.2 |
|
|
|
|
93.4 |
|
|
|
107.7 |
|
|
Adjusted
revenues and sales |
$ |
1,497.9 |
|
|
$ |
1,544.9 |
|
|
|
$ |
6,002.4 |
|
|
$ |
6,369.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Loss under GAAP to Adjusted OIBDA: |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,835.7 |
) |
|
$ |
(86.9 |
) |
|
|
$ |
(2,116.6 |
) |
|
$ |
(383.5 |
) |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Dividend
income on Uniti common stock |
(B) |
|
— |
|
|
|
— |
|
|
(B) |
|
— |
|
|
|
(17.6 |
) |
|
Other
expense (income), net |
(B) |
|
(0.1 |
) |
|
|
(1.3 |
) |
|
(B) |
|
— |
|
|
|
1.2 |
|
|
(Gain)
loss on sale of data center business |
|
|
— |
|
|
|
10.0 |
|
|
|
|
(0.6 |
) |
|
|
10.0 |
|
|
Net gain
on disposal of investment in Uniti common stock |
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(15.2 |
) |
|
Net loss
on early extinguishment of debt |
(B) |
|
58.4 |
|
|
|
— |
|
|
(B) |
|
56.4 |
|
|
|
18.0 |
|
|
Other-than-temporary impairment loss on investment in Uniti common
stock |
(B) |
|
— |
|
|
|
— |
|
|
(B) |
|
— |
|
|
|
181.9 |
|
|
Interest
expense |
(B) |
|
232.8 |
|
|
|
207.1 |
|
|
(B) |
|
875.4 |
|
|
|
860.6 |
|
|
Income
tax benefit |
(B) |
|
(244.7 |
) |
|
|
(55.2 |
) |
|
(B) |
|
(408.1 |
) |
|
|
(140.0 |
) |
|
Operating (loss) income
under GAAP |
(B) |
|
(1,789.3 |
) |
|
|
73.7 |
|
|
(B) |
|
(1,593.5 |
) |
|
|
515.4 |
|
|
Depreciation and amortization |
(B) |
|
403.7 |
|
|
|
329.5 |
|
|
(B) |
|
1,470.0 |
|
|
|
1,263.5 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
EarthLink
operating income |
(C) |
|
— |
|
|
|
45.5 |
|
|
(C) |
|
30.8 |
|
|
|
213.0 |
|
|
Goodwill
impairment |
(B) |
|
1,840.8 |
|
|
|
— |
|
|
(B) |
|
1,840.8 |
|
|
|
— |
|
|
Merger,
integration and other costs |
(E) |
|
33.5 |
|
|
|
3.3 |
|
|
(E) |
|
163.2 |
|
|
|
13.8 |
|
|
Restructuring charges |
(B) |
|
9.3 |
|
|
|
7.5 |
|
|
(B) |
|
43.0 |
|
|
|
20.3 |
|
|
Pension
(income) expense |
(B) |
|
12.6 |
|
|
|
57.7 |
|
|
(B) |
|
10.1 |
|
|
|
59.1 |
|
|
Share-based compensation expense |
(F) |
|
10.2 |
|
|
|
9.8 |
|
|
(F) |
|
45.2 |
|
|
|
41.6 |
|
|
Adjusted OIBDAR |
|
|
520.8 |
|
|
|
527.0 |
|
|
|
|
2,009.6 |
|
|
|
2,126.7 |
|
|
Master
lease rent payment |
(D) |
|
(163.4 |
) |
|
|
(163.4 |
) |
|
(D) |
|
(653.5 |
) |
|
|
(653.6 |
) |
|
Adjusted OIBDA |
|
$ |
357.4 |
|
|
$ |
363.6 |
|
|
|
$ |
1,356.1 |
|
|
$ |
1,473.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM HOLDINGS,
INC. |
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|
(In millions) |
|
THREE MONTHS ENDED |
|
|
TWELVE MONTHS ENDED |
|
|
|
December 31, |
|
December 31, |
|
|
December 31, |
|
December 31, |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
|
|
2017 |
|
|
|
2016 |
|
|
Reconciliation
of Net Cash Provided from Operating Activities to Adjusted
OIBDA: |
|
|
|
|
|
|
|
|
|
|
Net Cash Provided From
Operating Activities |
|
$ |
325.3 |
|
|
$ |
302.3 |
|
|
|
$ |
950.7 |
|
|
$ |
924.4 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Master
lease rent payment |
(D) |
|
(163.4 |
) |
|
|
(163.4 |
) |
|
(D) |
|
(653.5 |
) |
|
|
(653.6 |
) |
|
Cash
dividends received on Uniti common stock |
(B) |
|
— |
|
|
|
— |
|
|
(B) |
|
— |
|
|
|
(35.2 |
) |
|
EarthLink
operating income |
(C) |
|
— |
|
|
|
45.5 |
|
|
(C) |
|
30.8 |
|
|
|
213.0 |
|
|
Merger,
integration and other costs |
(E) |
|
33.5 |
|
|
|
3.3 |
|
|
(E) |
|
163.2 |
|
|
|
13.8 |
|
|
Restructuring charges |
(B) |
|
9.3 |
|
|
|
7.5 |
|
|
(B) |
|
43.0 |
|
|
|
20.3 |
|
|
Other
expense (income), net |
(B) |
|
— |
|
|
|
(1.3 |
) |
|
(B) |
|
(0.5 |
) |
|
|
1.2 |
|
|
Net loss
on early extinguishment of debt |
(B) |
|
58.4 |
|
|
|
— |
|
|
(B) |
|
56.4 |
|
|
|
18.0 |
|
|
Interest
expense |
(B) |
|
232.7 |
|
|
|
207.1 |
|
|
(B) |
|
875.3 |
|
|
|
860.6 |
|
|
Income
tax benefit, net of deferred income taxes |
|
|
5.3 |
|
|
|
3.1 |
|
|
|
|
(12.8 |
) |
|
|
(1.7 |
) |
|
Provision
for doubtful accounts |
(G) |
|
(12.2 |
) |
|
|
(10.7 |
) |
|
(G) |
|
(45.7 |
) |
|
|
(43.8 |
) |
|
Noncash
portion of net loss on early extinguishment of debt |
(G) |
|
(56.2 |
) |
|
|
— |
|
|
(G) |
|
(36.0 |
) |
|
|
51.9 |
|
|
Amortization of unrealized losses on de-designated interest rate
swaps |
(G) |
|
(1.0 |
) |
|
|
(1.7 |
) |
|
(G) |
|
(5.2 |
) |
|
|
(4.8 |
) |
|
Plan
curtailment |
(G) |
|
— |
|
|
|
— |
|
|
(G) |
|
— |
|
|
|
5.5 |
|
|
Other
noncash adjustments, net |
(I) |
|
(9.3 |
) |
|
|
(1.5 |
) |
|
(I) |
|
(33.2 |
) |
|
|
16.4 |
|
|
Changes
in operating assets and liabilities, net |
(G) |
|
(65.0 |
) |
|
|
(26.6 |
) |
|
(G) |
|
23.6 |
|
|
|
87.1 |
|
|
Adjusted OIBDA |
|
$ |
357.4 |
|
|
$ |
363.6 |
|
|
|
$ |
1,356.1 |
|
|
$ |
1,473.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of Net Cash Provided from Operating Activities to Adjusted Free
Cash Flow: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided From
Operating Activities |
|
$ |
325.3 |
|
|
|
|
|
$ |
950.7 |
|
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Cash paid
for interest on long-term debt obligations |
|
|
(138.2 |
) |
|
|
|
|
|
(371.9 |
) |
|
|
|
Cash paid
for income taxes |
|
|
(0.2 |
) |
|
|
|
|
|
(2.0 |
) |
|
|
|
Capital
expenditures |
|
|
(184.4 |
) |
|
|
|
|
|
(908.6 |
) |
|
|
|
Project
Excel capital expenditures |
(H) |
|
— |
|
|
|
|
(H) |
|
49.9 |
|
|
|
|
Post-merger integration capital expenditures |
|
|
12.4 |
|
|
|
|
|
|
34.5 |
|
|
|
|
EarthLink
capital expenditures pre-merger |
|
|
— |
|
|
|
|
|
|
(15.2 |
) |
|
|
|
EarthLink
operating income |
(C) |
|
— |
|
|
|
|
(C) |
|
30.8 |
|
|
|
|
Master
lease rent payment |
(D) |
|
(163.4 |
) |
|
|
|
(D) |
|
(653.5 |
) |
|
|
|
Merger,
integration and other costs |
(E) |
|
33.5 |
|
|
|
|
(E) |
|
163.2 |
|
|
|
|
Restructuring charges |
(B) |
|
9.3 |
|
|
|
|
(B) |
|
43.0 |
|
|
|
|
Other
expense (income), net |
(B) |
|
— |
|
|
|
|
(B) |
|
(0.5 |
) |
|
|
|
Net loss
on early extinguishment of debt |
(B) |
|
58.4 |
|
|
|
|
(B) |
|
56.4 |
|
|
|
|
Interest
expense |
(B) |
|
232.7 |
|
|
|
|
(B) |
|
875.3 |
|
|
|
|
Income
tax benefit, net of deferred income taxes |
|
|
5.3 |
|
|
|
|
|
|
(12.8 |
) |
|
|
|
Provision
for doubtful accounts |
(G) |
|
(12.2 |
) |
|
|
|
(G) |
|
(45.7 |
) |
|
|
|
Noncash
portion of net (gain) loss on early extinguishment of debt |
(G) |
|
(56.2 |
) |
|
|
|
(G) |
|
(36.0 |
) |
|
|
|
Amortization of unrealized losses on de-designated interest rate
swaps |
(G) |
|
(1.0 |
) |
|
|
|
(G) |
|
(5.2 |
) |
|
|
|
Other
noncash adjustments, net |
(I) |
|
(9.3 |
) |
|
|
|
(I) |
|
(33.2 |
) |
|
|
|
Changes
in operating assets and liabilities, net |
(G) |
|
(65.0 |
) |
|
|
|
(G) |
|
23.6 |
|
|
|
|
Adjusted Free Cash
Flow |
|
$ |
47.0 |
|
|
|
|
|
$ |
142.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See Notes to Reconciliation of Non-GAAP Financial
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
WINDSTREAM
HOLDINGS, INC. |
|
NOTES TO
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES |
|
|
|
|
|
|
|
|
|
Windstream Holdings, Inc. ("Windstream", "we", "us",
"our") has presented in this package unaudited adjusted results,
which includes the results of operations of EarthLink Holdings
Corp. ("EarthLink") as if the merger with EarthLink had been
completed as of January 1, 2016. The adjusted results are based
upon the combined historical financial information of Windstream
and EarthLink for all periods presented. Operating results of
Broadview Networks Holdings, Inc. ("Broadview") are included
beginning on July 28, 2017, the date of acquisition.The adjusted
results exclude pension costs, share-based compensation expense,
goodwill impairment, restructuring charges, and merger, integration
and certain other costs. We have made certain reclassifications to
the historical financial information of EarthLink to conform to our
presentation. We have presented certain measures of our operating
performance, on an adjusted basis, that reflects the impact of the
annual cash rent payment due under the master lease agreement with
Uniti Group, Inc. ("Uniti"), formerly Communications Sales &
Leasing, Inc. |
|
|
|
|
|
|
|
|
|
|
Our purpose for these adjustments is to improve the
comparability of results of operations for all periods presented in
order to focus on the true earnings capacity of our core business
operations and our ability to generate cash flow. We use adjusted
results, including adjusted OIBDA, adjusted OIBDAR, adjusted free
cash flow and adjusted capital expenditures as key measures of the
operational performance of our business. Our management, including
the chief operating decision-maker, consistently uses these
measures for internal reporting and the evaluation of business
objectives, opportunities and performance. |
|
|
|
|
(A) |
Represents EarthLink revenues and sales prior to the merger
date of February 27, 2017. |
|
(B) |
Represents applicable amount as reported under GAAP - See
Unaudited Consolidated Statements of Operations. |
|
(C) |
Represents EarthLink operating results for periods prior to the
merger date of February 27, 2017. These amounts exclude
EarthLink's historical depreciation and amortization,
restructuring, merger and integration costs and share-based
compensation. |
|
(D) |
Represents the impact of the annual cash rent payment due under
the master lease agreement with Uniti. |
|
(E) |
In addition to amounts reported in the Unaudited Consolidated
Statement of Operations, other costs for the year ended December
31, 2017, primarily include incremental expenses of $4.7 million
related to Hurricanes Harvey and Irma, $8.3 million of costs
incurred in connection with a carrier access settlement, a reserve
for a penalty attributable to not meeting certain spend commitments
under a circuit discount plan of approximately $7.7 million. |
|
(F) |
Excludes share-based compensation expense included in merger,
integration and other costs of $10.1 million during the year ended
December 31, 2017. |
|
(G) |
Represents applicable amount reported under GAAP - See
Unaudited Consolidated Statements of Cash Flows. |
|
(H) |
Represents capital expenditures related to Project Excel, a
capital program funded entirely using a portion of the proceeds
from the sale of the data center business completed in December
2015. |
|
(I) |
Consists of non-cash amortization of debt issuance costs, debt
discounts and premiums, accretion expense related to asset
retirement obligations, ineffectiveness on interest rate swaps,
gains on the sale of property, and other non-cash miscellaneous
income and expenses. |
|
|
|
|
|
|
|
|
|
|