Knology Reports Continued Growth in First Quarter 2011
WEST POINT, Ga.--(BUSINESS WIRE)--April 26, 2011--Knology, Inc. (Nasdaq: KNOL):
First Quarter Highlights:
Knology, Inc. (Nasdaq: KNOL) today reported financial and operating results for the quarter ended March 31, 2011. Total revenue for the first quarter of 2011 was $128.0 million, compared to revenue of $110.1 million for the same period one year ago and $123.6 million for the previous quarter. Knology reported EBITDA, as adjusted, of $47.4 million for the first quarter of 2011. EBITDA, as adjusted, was $37.7 million for the first quarter of 2010 and $43.7 million for the previous quarter.
Knology reported net income for the first quarter of 2011 of $12.2 million, or $0.33 per share, compared with a net loss of $13.0 million, or $(0.35) per share, for the previous quarter and a net loss of $815,000, or $(0.02) per share, for the first quarter of 2010. During the fourth quarter of 2010, Knology recorded a one-time charge of $19.8 million for the early extinguishment of debt related to the financing of the Sunflower acquisition. Excluding the charges related to the accounting treatment of the company’s debt transactions and interest rate swaps, Knology posted net income of $11.4 million, or $0.31 per share, for the first quarter of 2011 and net income of $5.1 million, or $0.14 per share, for the fourth quarter of 2010. For the first quarter of 2010, excluding the swap related items, the company posted net income of $2.5 million, or $0.07 per share.
Total connections increased 6,729 during the first quarter of 2011 to 773,090 as of quarter end. This represents a 9.9% increase compared to one year ago. Data and voice connections increased 5,159 and 2,126, respectively, while video connections decreased 556. Average monthly revenue per connection was $55.49, which represents an increase from $52.48 for the first quarter of 2010. Average monthly connection churn was 2.3%, compared to churn of 2.2% for the same period one year ago and 2.5% in the previous quarter.
On February 18, 2011, Knology amended its existing credit facility to, among other items, reduce the pricing of the term loan A and term loan B facilities, upsize the term loan A by $20 million, and increase the capacity of the incremental facility from $200 million to $250 million. On February 21, 2011, the Company entered into a definitive agreement to acquire certain cable and broadband assets located in Fort Gordon, GA and Troy, AL. This acquisition is expected to close in late second quarter 2011 and is subject to normal and customary closing conditions.
“The business is off to a very solid start in 2011,” said Rodger L. Johnson, Chairman and Chief Executive Officer of Knology, Inc. “We achieved all-time records for Revenue, EBITDA and Net Income. We also experienced good growth in connections, including connections from our legacy footprint as well as continued growth from our high ROI edge-out network expansion. Finally, we completed the rebranding and a significant amount of the integration of the acquired Lawrence, Kansas market. Our focus continues to include taking care of our customers, growing the business with discipline and adding incremental shareholder value.”
Todd Holt, Knology’s President, added, “The first quarter of 2011 was very active. In addition to the outstanding financial performance of the business, we announced the nicely accretive, tuck-in acquisition in our southeast footprint and closed the debt repricing transaction, which lowers our debt cost of capital and reduces our annual cash interest expense by about $10 million. Our balance sheet is strong, both from a liquidity and leverage perspective, and the business is positioned for a successful 2011 and continued growth into the future.”
For full descriptions of the above metrics, please refer to Definitions of Non-GAAP Financial and Operating Measures on page 4 of this release.
Conference Call and Replay
Knology has scheduled a conference call to discuss the results of the first quarter 2011, which will be broadcast live over the Internet, on Tuesday, April 26, 2011 at 10:00 a.m. Eastern Time. Investors, analysts and the general public will have the opportunity to listen to the free conference call live over the Internet by visiting Knology’s Web site at www.knology.com or www.earnings.com. An audio archive will be available on Knology’s website at www.knology.com or www.earnings.com starting approximately two hours after the conclusion of the call. Also, a telephonic replay will be available through midnight on Tuesday, May 10, 2011, by dialing 1-800-642-1687 or local 706-645-9291. You will need to refer to Confirmation I.D. 58599667.
Knology Inc., headquartered in West Point, Georgia, is a leading provider of interactive communications and entertainment services in the Southeast, upper Midwest and Kansas regions. Knology serves both residential and business customers with one of the most technologically advanced broadband networks in the country. Innovative offerings include over 200 channels of digital cable TV, local and long distance digital telephone service with the latest enhanced voice messaging features, and high-speed Internet access, which enables consumers to quickly download video, audio and graphic files using a cable modem. Knology’s fiber-based business products include iPlex, which delivers Ethernet connections to an IP-PBX using Session Initiated Protocol (SIP) technology, Passive Optical Network (PON), which supplies IP architecture with segmented voice and data bandwidth, and Managed Integrated Network Solutions (MATRIX), an integrated IP-based technology which converges data and voice. For more information, please visit www.knology.com.
Information about Forward-Looking Statements
This press release includes "forward-looking" statements within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995, that are subject to future events, risks and uncertainties that could cause our actual results to differ materially from those expressed or implied. In addition, our revenues and earnings and our ability to achieve our planned business objectives are subject to a number of factors that make estimates of future operating results uncertain, including, without limitation, (1) that we will not retain or grow our customer base, (2) that we will fail to be competitive with existing and new competitors, (3) that we will not adequately respond to technological developments that impact our industry and markets, (4) that needed financing will not be available to us if and as needed, (5) that a significant change in the growth rate of the overall U.S. economy will occur such that there is a material impact on consumer and corporate spending, (6) that we will not be able to complete future acquisitions, including the contemplated transaction announced in this report, that we may have difficulties integrating acquired businesses, or that the cost of such integration will be greater than we expect, and (7) that some other unforeseen difficulties occur, as well as those risks set forth in our Annual Report on Form 10-K for the year ended December 31, 2010, and our other filings with the SEC. This list is intended to identify only certain of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included herein. Investors are cautioned not to place undue reliance on these forward-looking statements. Forward-looking statements relating to expectations about future results or events are based upon information available to us as of today's date, and we do not assume any obligation to update any of these statements, except as required by law.
Definitions of Non-GAAP Financial and Operating Measures
We provide financial measures generated using generally accepted accounting principles (“GAAP”) and using adjustments to GAAP (“Non-GAAP”). These financial measures reflect conventions or standard measures of liquidity, profitability or performance commonly used by the investment community in the telecommunications industry for comparability purposes.
In this release, we use the Non-GAAP financial measure EBITDA, as adjusted. EBITDA, as adjusted, is calculated as net income (loss) before interest; taxes; depreciation and amortization; non-cash stock compensation; M&A integration and restructuring expense; debt modification expense; gain on interest rate swaps; amortization of deferred loss on interest rate swaps; and other expense (income). A reconciliation of EBITDA, as adjusted, to net income (loss) for the three month periods ended March 31, 2010 and 2011 is attached to this press release. EBITDA, as adjusted, is an operational measure that is not calculated and presented in accordance with accounting principles generally accepted in the United States. EBITDA, as adjusted, eliminates the uneven effect on operating income of non-cash depreciation of tangible assets and amortization of certain intangible assets and, therefore, is useful to management in measuring the overall operational strength and performance of the Company. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used for generating our revenues. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures and investment spending. Another limitation of EBITDA, as adjusted, is that it does not reflect income net of interest expense, which is a significant expense because of the substantial debt we have incurred.
In this release, we also use the Non-GAAP financial measure Free Cash Flow. Free Cash Flow is calculated as EBITDA, as adjusted, less capitalized tangible and intangible expenditures and cash interest paid net of cash interest received. A reconciliation of Free Cash Flow to net income (loss) for the three month periods ended March 31, 2010 and 2011 is attached to this press release. The use of Free Cash Flow is important because it allows management, as well as investors and analysts, to assess our ability to make additional investments and meet our debt obligations.
The other operating metrics used in this release include the following: