Attached files
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| 8-K - FORM 8-K - FAIRPOINT COMMUNICATIONS INC | frp-8kq3x12.htm |
Exhibit 99.1
FOR IMMEDIATE RELEASE
Investor Relations Contact:
Lee Newitt
(704) 344-8150
lnewitt@fairpoint.com
Media Contact:
Sabina Haskell
(802) 658-7351
shaskell@fairpoint.com
FAIRPOINT COMMUNICATIONS REPORTS
2012 THIRD QUARTER RESULTS
• | Unlevered Free Cash Flow1 of $28.0 million in the quarter and $95.2 million year-to-date |
• | Adjusted EBITDA1, a newly introduced measure, of $73.7 million in the quarter |
• | Net loss of $37.3 million in the quarter |
• | Cash of $22.1 million at Sept. 30, 2012, after a $25.0 million voluntary debt prepayment |
Charlotte, N.C. (Nov. 1, 2012) - FairPoint Communications, Inc. (NasdaqCM: FRP) (“FairPoint” or the “Company”), a leading communications provider, today announced its financial results for the quarter ended Sept. 30, 2012. As previously announced, the Company will host a conference call and simultaneous webcast to discuss its results at 8:30 a.m. (ET) on Friday, Nov. 2, 2012.
“We're pleased to report another solid quarter,” said Paul H. Sunu, CEO of FairPoint. “It is clear from this quarter's results that our 'four pillar' strategy is taking hold. We expect to exceed our full year guidance and we are generating free cash flow. As a result, we were able to make a $25 million voluntary prepayment of debt in the quarter reflecting our desire to delever and increase shareholder value.”
Operating Highlights
FairPoint continues to see positive momentum in its growth-oriented business and broadband products. Data and Internet services revenue grew 12% versus a year ago and products like FairPoint's Ethernet service offerings continue to attract new customers. Growth in business and broadband products is a key element of FairPoint's strategy to transform its revenue composition and offset continued erosion in the Company's residential voice base. Ethernet services contributed approximately $10.7 million of revenue in the third quarter of 2012 as compared to $10.2 million in the second quarter of 2012 and $4.2 million in the third quarter of 2011. Growth in the Company's Ethernet products is expected to continue as regional banks, healthcare networks and wireless carriers transition away from legacy technologies like frame relay.
FairPoint continues to see a steady improvement in its ability to attract and retain business customers, which contributed to an improvement in the rate of business voice access line loss in the quarter. The rate of loss in business voice access lines, which stood at 3.3% for the twelve months ended Sept. 30, 2012, is nearly half the 6.3% loss FairPoint experienced for the twelve months ended Sept. 30, 2011. Business voice access lines declined only 0.9% sequentially versus June 30, 2012.
Broadband subscribers grew 3.2% year-over-year and 0.5% sequentially. FairPoint added more than 10,000 broadband subscribers in the last twelve months, as penetration reached 33.1% of voice access lines at Sept. 30, 2012.
Voice access line loss slowed for the tenth consecutive quarter, reaching 7.8% year-over-year and 2.1% sequentially.
As of Sept. 30, 2012, FairPoint had approximately 3,400 employees, a decrease of 4.0% and 15.7% from Dec. 31, 2011 and Dec. 31, 2010, respectively.
___________________________________
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 are contained in the attachment to this press release.
As FairPoint previously reported, the Company's retail products and services have been substantially deregulated in Maine, New Hampshire and Vermont. This deregulation went into full effect during the third quarter of 2012. The Company believes it can now compete on a more level playing field in all three northern New England states as it expands its sales efforts to transform its revenue composition. In addition, a dramatic reduction in retail service quality penalty exposure serves to de-risk the business going forward.
Financial Highlights
Third Quarter 2012 as compared to Second Quarter 2012
Revenue was $242.1 million in the third quarter of 2012 as compared to $243.5 million in the second quarter of 2012. The change was due primarily to a loss of voice access lines in the quarter, which led to decreases in voice services and access revenue. The decline in voice services revenue was partially offset by revenue assurance activities in the quarter. A decrease in switched access revenue was partially offset by growth in special access products like wholesale Ethernet. Increases in broadband subscribers and retail Ethernet product revenues led to an increase in data and Internet services revenue.
Operating expenses, excluding depreciation, amortization and reorganization, were $186.4 million in the third quarter of 2012 as compared to $190.7 million in the second quarter of 2012. The decrease was primarily the result of a decrease in employee expenses, cost of goods sold and bad debt.
Adjusted EBITDA was $73.7 million in the third quarter of 2012 as compared to $76.1 million in the second quarter of 2012. The decline was primarily the result of a decrease in revenue along with the benefit received during the second quarter of 2012 from the favorable settlement of certain bankruptcy claims.
Net loss was flat sequentially, with $37.3 million reported for the third quarter of 2012 as compared to a net loss of $37.1 million in the second quarter of 2012.
Capital expenditures were $37.7 million in the third quarter of 2012 as compared to $32.1 million in the second quarter of 2012. FairPoint continues to expand its broadband footprint in New Hampshire in accordance with a regulatory commitment to reach 95% of its customers in the state by March 31, 2013.
FairPoint's cash position was $22.1 million as of Sept. 30, 2012, as compared to $43.8 million as of June 30, 2012 and $17.4 million as of Dec. 31, 2011. The Company made a voluntary prepayment of $25.0 million on its Term Loan during the quarter. Adjusting for the voluntary debt prepayment, cash would have been flat sequentially even after a cash interest payment of approximately $16.3 million and a cash pension contribution of $8.4 million. FairPoint does not expect to make any more contributions to the pension fund in 2012. The Company's $75 million revolving credit facility is undrawn, with $62.6 million available for additional borrowing after applying $12.4 million for outstanding letters of credit.
Third Quarter 2012 as compared to Third Quarter 2011
Revenue was $242.1 million in the third quarter of 2012 as compared to $257.9 million a year earlier. The change was due primarily to a loss of voice access lines, which led to decreases in voice services and access revenue. The decrease in voice access lines led to a decline in switched access minutes of use and a corresponding decline in switched access revenue. In addition, special access revenue declined as customers migrated from legacy access products such as DS1, DS3, frame relay and private line to wholesale Ethernet-based products, which tend to have a lower average revenue per unit. Data and Internet services revenue grew as broadband subscribers and retail Ethernet product revenues increased year-over-year.
Operating expenses, excluding depreciation, amortization and reorganization, were $186.4 million in the third quarter of 2012 as compared to $213.5 million a year earlier. The decrease was primarily the result of decreases in employee expenses, bad debt, contracted services and other expenses.
Adjusted EBITDA was $73.7 million in the third quarter of 2012 as compared to $67.0 million a year earlier. FairPoint implemented a number of cost reduction initiatives in the second half of 2011 and throughout 2012. As a result, reductions in operating expenses have more than offset the decline in revenue.
Capital expenditures were $37.7 million in the third quarter of 2012 as compared to $35.2 million a year earlier. The Company continues to expand its broadband footprint in New Hampshire as discussed above. Net loss was $37.3 million in the third quarter of 2012 as compared to a net loss of $279.4 million in the third quarter of 2011, when FairPoint recognized a non-cash impairment of intangible assets and goodwill.
2012 Guidance
FairPoint generated Unlevered Free Cash Flow (after cash pension contributions and OPEB payments) of $95.2 million during the first nine months of 2012 and expects to exceed its guidance of $90 million to $100 million for the full year.
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 for the quarter ended Sept. 30, 2012, which will be filed with the SEC on or prior to Nov. 9, 2012. The Company's results for the quarter ended Sept. 30, 2012 are subject to the completion of its quarterly report for such period.
Fresh Start Accounting
On Jan. 24, 2011, the Company emerged from Chapter 11 bankruptcy protection and its Plan of Reorganization became effective. In accordance with generally accepted accounting principles, the Company adopted fresh start accounting as of Jan. 24, 2011, whereby the Company's assets and liabilities were marked to their fair value as of the date of emergence. Accordingly, the Company's consolidated statements of financial position and operations for periods after Jan. 24, 2011 are not comparable in many respects to periods prior to the adoption of fresh start accounting.
Conference Call Information
As previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its third quarter 2012 results at 8:30 a.m. (ET) on Friday, Nov. 2, 2012.
Participants should call (866) 543-6408 (US/Canada) or (617) 213-8899 (international) at 8:20 a.m. (ET) and enter the passcode 73625655 when prompted. The title of the call is the Q3 2012 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 35730646 when prompted. The recording will be available from Friday, Nov. 2, 2012, at 10:30 a.m. (ET) through Friday, Nov. 9, 2012, at 11:59 p.m. (ET).
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.
Use of Non-GAAP Financial Measures
This press release includes certain non-GAAP financial measures, including but not limited to Adjusted EBITDA, Consolidated EBITDAR (as defined in the Company's credit facility), Unlevered Free Cash Flow and adjustments to GAAP and non-GAAP measures to exclude the effect of special items. Management believes that Adjusted EBITDA provides a useful measure of operational and financial performance and removes variability related to pension contributions and payments for other post-employment benefits 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 maintenance covenants contained in the Company's credit facility are based on Consolidated EBITDAR. In addition, management believes that the adjustments to GAAP and non-GAAP measures to 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.
However, the non-GAAP financial measures, as used herein, are not necessarily comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA, Consolidated EBITDAR 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, Consolidated EBITDAR, 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, Consolidated EBITDAR and Unlevered Free Cash Flow only supplementally. A reconciliation of Adjusted EBITDA, Consolidated EBITDAR and Unlevered Free Cash Flow to net income is contained in the attachments to this press release.
About FairPoint Communications, Inc.
FairPoint Communications, Inc. (NasdaqCM: FRP) is a leading communications provider of broadband Internet access, local and long-distance phone, television and other high-capacity data services to customers in communities across 18 states. Through its fast, reliable fiber network, FairPoint delivers high-quality data and voice networking communications solutions to residential, business and wholesale customers. FairPoint delivers VantagePointSM services through its resilient IP-based network in northern New England. This state-of-the-art fiber network provides carrier Ethernet connections to support the surging bandwidth and performance requirements for cloud-based applications like network storage, disaster recovery, distance learning, medical imaging, video conferencing and CAD/CAM along with traditional voice, VoIP, video and Internet access solutions. Additional information about FairPoint products and services is available at 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 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.
###
FAIRPOINT COMMUNICATIONS, INC.
Supplemental Financial Information
(Unaudited)
(in thousands, except per unit)
3Q12 | 2Q12 | 1Q12 | 4Q11 | 3Q11 | |||||||||||||||
Summary Income Statement: | |||||||||||||||||||
Revenue: | |||||||||||||||||||
Voice services | $ | 111,337 | $ | 111,525 | $ | 114,777 | $ | 118,580 | $ | 117,583 | |||||||||
Access | 82,015 | 84,686 | 86,823 | 90,204 | 94,646 | ||||||||||||||
Data and Internet services | 36,793 | 36,118 | 33,332 | 32,418 | 32,854 | ||||||||||||||
Other services | 11,907 | 11,124 | 13,542 | 12,960 | 12,829 | ||||||||||||||
Total revenue | 242,052 | 243,453 | 248,474 | 254,162 | 257,912 | ||||||||||||||
Operating expenses: | |||||||||||||||||||
Operating expenses, excluding depreciation, amortization and reorganization | 186,417 | 190,672 | 210,903 | 203,717 | 213,483 | ||||||||||||||
Depreciation and amortization | 89,782 | 93,780 | 93,207 | 91,951 | 91,547 | ||||||||||||||
Reorganization expense (income) (post-emergence) | 172 | (2,823 | ) | (1,392 | ) | (1,743 | ) | (3,735 | ) | ||||||||||
Impairment of intangible assets and goodwill | — | — | — | — | 262,019 | ||||||||||||||
Total operating expenses | 276,371 | 281,629 | 302,718 | 293,925 | 563,314 | ||||||||||||||
Loss from operations | (34,319 | ) | (38,176 | ) | (54,244 | ) | (39,763 | ) | (305,402 | ) | |||||||||
Other income (expense): | |||||||||||||||||||
Interest expense | (16,991 | ) | (16,983 | ) | (17,028 | ) | (17,173 | ) | (17,147 | ) | |||||||||
Other income (expense), net | 548 | (125 | ) | 302 | 472 | 488 | |||||||||||||
Total other income (expense) | (16,443 | ) | (17,108 | ) | (16,726 | ) | (16,701 | ) | (16,659 | ) | |||||||||
Loss before income taxes | (50,762 | ) | (55,284 | ) | (70,970 | ) | (56,464 | ) | (322,061 | ) | |||||||||
Income tax benefit (expense) | 13,433 | 18,211 | 24,258 | (27,520 | ) | 42,620 | |||||||||||||
Net loss | $ | (37,329 | ) | $ | (37,073 | ) | $ | (46,712 | ) | $ | (83,984 | ) | $ | (279,441 | ) | ||||
Reconciliation of Adjusted EBITDA, Consolidated EBITDAR and Unlevered Free Cash Flow: | |||||||||||||||||||
Net loss | $ | (37,329 | ) | $ | (37,073 | ) | $ | (46,712 | ) | $ | (83,984 | ) | $ | (279,441 | ) | ||||
Income tax (benefit) expense | (13,433 | ) | (18,211 | ) | (24,258 | ) | 27,520 | (42,620 | ) | ||||||||||
Interest expense | 16,991 | 16,983 | 17,028 | 17,173 | 17,147 | ||||||||||||||
Depreciation and amortization | 89,782 | 93,780 | 93,207 | 91,951 | 91,547 | ||||||||||||||
Pension expense (1a) | 4,166 | 4,573 | 5,065 | 3,313 | 3,108 | ||||||||||||||
OPEB expense (1a) | 11,729 | 13,373 | 13,874 | 10,153 | 13,062 | ||||||||||||||
Other non-cash items, net (1b) | 1,211 | 395 | (156 | ) | (53 | ) | 260,518 | ||||||||||||
Restructuring costs (1c) | 338 | 276 | 463 | 275 | 844 | ||||||||||||||
All other allowed adjustments, net (1d) | 234 | 2,050 | 2,771 | 4,112 | 2,866 | ||||||||||||||
Adjusted EBITDA | $ | 73,689 | $ | 76,146 | $ | 61,282 | $ | 70,460 | $ | 67,031 | |||||||||
Adjusted EBITDA margin | 30.4 | % | 31.3 | % | 24.7 | % | 27.7 | % | 26.0 | % | |||||||||
Pension contributions (1e) | $ | (7,344 | ) | $ | (5,156 | ) | $ | (5,350 | ) | $ | — | $ | (6,178 | ) | |||||
OPEB payments (1e) | (656 | ) | (794 | ) | (608 | ) | (482 | ) | (400 | ) | |||||||||
Consolidated EBITDAR | $ | 65,689 | $ | 70,196 | $ | 55,324 | $ | 69,978 | $ | 60,453 | |||||||||
Capital expenditures | $ | 37,669 | $ | 32,070 | $ | 26,257 | $ | 35,110 | $ | 35,169 | |||||||||
Unlevered Free Cash Flow | $ | 28,020 | $ | 38,126 | $ | 29,067 | $ | 34,868 | $ | 25,284 | |||||||||
Select Operating and Financial Metrics: | |||||||||||||||||||
Residential access lines | 602,530 | 619,240 | 631,724 | 645,453 | 662,562 | ||||||||||||||
Business access lines | 303,904 | 306,682 | 309,078 | 311,241 | 314,290 | ||||||||||||||
Wholesale access lines (2) | 67,886 | 69,375 | 72,233 | 76,065 | 80,025 | ||||||||||||||
Total switched access lines | 974,320 | 995,297 | 1,013,035 | 1,032,759 | 1,056,877 | ||||||||||||||
% change y-o-y | (7.8 | )% | (7.8 | )% | (8.1 | )% | (8.4 | )% | (8.8 | )% | |||||||||
% change q-o-q | (2.1 | )% | (1.8 | )% | (1.9 | )% | (2.3 | )% | (2.1 | )% | |||||||||
Broadband subscribers (3) | 322,551 | 320,812 | 318,510 | 314,135 | 312,475 | ||||||||||||||
% change y-o-y | 3.2 | % | 5.1 | % | 7.1 | % | 8.4 | % | 8.2 | % | |||||||||
% change q-o-q | 0.5 | % | 0.7 | % | 1.4 | % | 0.5 | % | 2.4 | % | |||||||||
penetration of access lines | 33.1 | % | 32.2 | % | 31.4 | % | 30.4 | % | 29.6 | % | |||||||||
Access line equivalents | 1,296,871 | 1,316,109 | 1,331,545 | 1,346,894 | 1,369,352 | ||||||||||||||
% change y-o-y | (5.3 | )% | (5.0 | )% | (4.9 | )% | (5.0 | )% | (5.4 | )% | |||||||||
% change q-o-q | (1.5 | )% | (1.2 | )% | (1.1 | )% | (1.6 | )% | (1.1 | )% | |||||||||
(1) For purposes of calculating Consolidated EBITDAR, FairPoint's credit facility allows for: | |||||||||||||||||||
a) the add-back of aggregate pension and other post-employment benefits (OPEB) expense, | |||||||||||||||||||
b) the add-back of other non-cash items except to the extent they will require a cash payment in a future period, | |||||||||||||||||||
c) the add-back of costs related to the restructuring, including professional fees for advisors and consultants, | |||||||||||||||||||
d) the add-back (or subtraction) of other items including success bonuses, severance, non-cash gains/losses, non-operating dividend and interest income and other extraordinary gains/losses, and | |||||||||||||||||||
e) the subtraction of net pension contributions and OPEB cash benefit payments in the period. | |||||||||||||||||||
(2) Wholesale access lines include Resale and UNE-P, but exclude UNE-L and special access circuits. | |||||||||||||||||||
(3) Broadband subscribers include DSL, fiber-to-the-premise, cable modem and fixed wireless broadband, but exclude Ethernet and other high-capacity circuits. | |||||||||||||||||||
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
September 30, 2012 and December 31, 2011
(in thousands, except share data)
September 30, 2012 | December 31, 2011 | ||||||
(unaudited) | |||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 22,080 | $ | 17,350 | |||
Restricted cash | 10,792 | 24,446 | |||||
Accounts receivable, net | 102,263 | 104,298 | |||||
Prepaid expenses | 21,173 | 18,346 | |||||
Other current assets | 2,850 | 3,312 | |||||
Deferred income tax, net | 12,949 | 17,915 | |||||
Total current assets | 172,107 | 185,667 | |||||
Property, plant and equipment (net of $537.5 million and $280.5 million accumulated depreciation, respectively) | 1,493,504 | 1,663,065 | |||||
Intangible assets (net of $18.8 million and $10.4 million accumulated amortization, respectively) | 119,780 | 128,145 | |||||
Debt issue costs, net | 1,278 | 1,779 | |||||
Restricted cash | 651 | 651 | |||||
Other assets | 10,678 | 10,338 | |||||
Total assets | $ | 1,797,998 | $ | 1,989,645 | |||
Liabilities and Stockholders’ Deficit | |||||||
Current portion of long-term debt | $ | 10,000 | $ | 10,000 | |||
Current portion of capital lease obligations | 1,222 | 1,252 | |||||
Accounts payable | 52,853 | 65,184 | |||||
Claims payable and estimated claims accrual | 1,303 | 22,839 | |||||
Accrued interest payable | 670 | 508 | |||||
Other accrued liabilities | 74,987 | 54,348 | |||||
Total current liabilities | 141,035 | 154,131 | |||||
Capital lease obligations | 1,782 | 2,690 | |||||
Accrued pension obligation | 153,705 | 157,961 | |||||
Employee benefit obligations | 566,941 | 531,634 | |||||
Deferred income taxes | 183,700 | 245,369 | |||||
Other long-term liabilities | 11,526 | 14,003 | |||||
Long-term debt, net of current portion | 960,000 | 990,000 | |||||
Total long-term liabilities | 1,877,654 | 1,941,657 | |||||
Total liabilities | 2,018,689 | 2,095,788 | |||||
Commitments and contingencies | |||||||
Stockholders’ deficit: | |||||||
Common stock, $0.01 par value, 37,500,000 shares authorized, 26,240,614 and 26,197,142 shares issued and outstanding at September 30, 2012 and December 31, 2011, respectively | 262 | 262 | |||||
Additional paid-in capital | 505,209 | 502,034 | |||||
Retained deficit | (536,059 | ) | (414,945 | ) | |||
Accumulated other comprehensive loss | (190,103 | ) | (193,494 | ) | |||
Total stockholders’ deficit | (220,691 | ) | (106,143 | ) | |||
Total liabilities and stockholders’ deficit | $ | 1,797,998 | $ | 1,989,645 | |||
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three Months Ended September 30, 2012 and 2011, Nine Months Ended September 30, 2012,
Two Hundred Forty-Nine Days Ended September 30, 2011 and Twenty-Four Days Ended January 24, 2011
(Unaudited)
(in thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, 2012 | Two Hundred Forty-Nine Days Ended September 30, 2011 | Predecessor Company | |||||||||||||||||
2012 | 2011 | Twenty-Four Days Ended January 24, 2011 | ||||||||||||||||||
Revenues | $ | 242,052 | $ | 257,912 | $ | 733,979 | $ | 708,950 | $ | 66,378 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Cost of services and sales, excluding depreciation and amortization | 105,502 | 120,149 | 330,937 | 321,790 | 38,766 | |||||||||||||||
Selling, general and administrative expense, excluding depreciation and amortization | 80,915 | 93,334 | 257,055 | 245,132 | 27,161 | |||||||||||||||
Depreciation and amortization | 89,782 | 91,547 | 276,769 | 244,940 | 21,515 | |||||||||||||||
Reorganization related expense(income) | 172 | (3,735 | ) | (4,043 | ) | 1,511 | — | |||||||||||||
Impairment of intangible assets and goodwill | — | 262,019 | — | 262,019 | — | |||||||||||||||
Total operating expenses | 276,371 | 563,314 | 860,718 | 1,075,392 | 87,442 | |||||||||||||||
Loss from operations | (34,319 | ) | (305,402 | ) | (126,739 | ) | (366,442 | ) | (21,064 | ) | ||||||||||
Other income (expense): | ||||||||||||||||||||
Interest expense | (16,991 | ) | (17,147 | ) | (51,002 | ) | (46,634 | ) | (9,321 | ) | ||||||||||
Other | 548 | 488 | 725 | 1,319 | (132 | ) | ||||||||||||||
Total other expense | (16,443 | ) | (16,659 | ) | (50,277 | ) | (45,315 | ) | (9,453 | ) | ||||||||||
Loss before reorganization items and income taxes | (50,762 | ) | (322,061 | ) | (177,016 | ) | (411,757 | ) | (30,517 | ) | ||||||||||
Reorganization items | — | — | — | — | 897,313 | |||||||||||||||
(Loss) income before income taxes | (50,762 | ) | (322,061 | ) | (177,016 | ) | (411,757 | ) | 866,796 | |||||||||||
Income tax benefit (expense) | 13,433 | 42,620 | 55,902 | 80,796 | (279,889 | ) | ||||||||||||||
Net (loss) income | $ | (37,329 | ) | $ | (279,441 | ) | $ | (121,114 | ) | $ | (330,961 | ) | $ | 586,907 | ||||||
Weighted average shares outstanding: | ||||||||||||||||||||
Basic | 25,993 | 25,843 | 25,970 | 25,836 | 89,424 | |||||||||||||||
Diluted | 25,993 | 25,843 | 25,970 | 25,836 | 89,695 | |||||||||||||||
(Loss) earnings per share: | ||||||||||||||||||||
Basic | $ | (1.44 | ) | $ | (10.81 | ) | $ | (4.66 | ) | $ | (12.81 | ) | $ | 6.56 | ||||||
Diluted | $ | (1.44 | ) | $ | (10.81 | ) | $ | (4.66 | ) | $ | (12.81 | ) | $ | 6.54 | ||||||
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2012, Two Hundred Forty-Nine Days Ended September 30, 2011
and Twenty-Four Days Ended January 24, 2011
(Unaudited)
(in thousands)
Nine Months Ended September 30, 2012 | Two Hundred Forty-Nine Days Ended September 30, 2011 | Predecessor Company | ||||||||||
Twenty-Four Days Ended January 24, 2011 | ||||||||||||
Cash flows from operating activities: | ||||||||||||
Net (loss) income | $ | (121,114 | ) | $ | (330,961 | ) | $ | 586,907 | ||||
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: | ||||||||||||
Deferred income taxes | (56,743 | ) | (80,119 | ) | 279,868 | |||||||
Provision for uncollectible revenue | 2,951 | 15,713 | 3,454 | |||||||||
Depreciation and amortization | 276,769 | 244,940 | 21,515 | |||||||||
Post-retirement healthcare | 36,919 | 25,512 | 2,654 | |||||||||
Qualified pension | (4,047 | ) | 1,709 | 986 | ||||||||
Impairment of intangible assets and goodwill | — | 262,019 | — | |||||||||
Other non cash items | 1,497 | (150 | ) | 97 | ||||||||
Changes in assets and liabilities arising from operations: | ||||||||||||
Accounts receivable | (861 | ) | 1,839 | (7,752 | ) | |||||||
Prepaid and other assets | (2,937 | ) | 2,030 | (3,423 | ) | |||||||
Restricted cash | (7,796 | ) | — | — | ||||||||
Accounts payable and accrued liabilities | 732 | (2,636 | ) | 26,627 | ||||||||
Accrued interest payable | 162 | 183 | 9,017 | |||||||||
Other assets and liabilities, net | (2,082 | ) | 268 | 177 | ||||||||
Reorganization adjustments: | ||||||||||||
Non-cash reorganization income | (5,119 | ) | (5,290 | ) | (917,358 | ) | ||||||
Claims payable and estimated claims accrual | (8,803 | ) | (64,091 | ) | (1,096 | ) | ||||||
Restricted cash - cash claims reserve | 20,291 | 56,544 | (82,764 | ) | ||||||||
Total adjustments | 250,933 | 458,471 | (667,998 | ) | ||||||||
Net cash provided by (used in) operating activities | 129,819 | 127,510 | (81,091 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||
Net capital additions | (95,996 | ) | (128,538 | ) | (12,477 | ) | ||||||
Distributions from investments | 634 | 636 | — | |||||||||
Net cash used in investing activities | (95,362 | ) | (127,902 | ) | (12,477 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Loan origination costs | — | (884 | ) | (1,500 | ) | |||||||
Repayments of long-term debt | (30,000 | ) | — | — | ||||||||
Restricted cash | 1,158 | 1,675 | 34 | |||||||||
Proceeds from exercise of stock options | 53 | — | — | |||||||||
Repayment of capital lease obligations | (938 | ) | (809 | ) | (201 | ) | ||||||
Net cash used in financing activities | (29,727 | ) | (18 | ) | (1,667 | ) | ||||||
Net change | 4,730 | (410 | ) | (95,235 | ) | |||||||
Cash, beginning of period | 17,350 | 10,262 | 105,497 | |||||||||
Cash, end of period | $ | 22,080 | $ | 9,852 | $ | 10,262 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Capital additions included in accounts payable or claims payable and estimated claims accrual at period-end | $ | — | $ | 2,777 | $ | 1,818 | ||||||
Reorganization costs paid | $ | 621 | $ | 19,282 | $ | 11,110 | ||||||
Non-cash settlement of claims payable | $ | 7,668 | $ | — | $ | — | ||||||