Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Lumos Networks Corp. | d57224d8k.htm |
| EX-99.2 - EX-99.2 - Lumos Networks Corp. | d57224dex992.htm |
Exhibit 99.1
| Contact: | Will Davis Vice President of Investor Relations and Chief of Staff Phone: 917-519-6994 Email: davisw@lumosnet.com |
Lumos Networks Corp. Reports Second Quarter 2015 Results
Announces $150 million Investment from Pamplona Capital Management
Creates Strategic Partnership to Accelerate the Transformation of Lumos Networks to a Pure-Play Fiber Bandwidth Infrastructure Company
Delivers 2Q15 Revenue of $51 million and Adjusted EBITDA of $22.7 Million
Reiterates 2015 Revenue and Adjusted EBITDA Guidance of Approximately $202 Million and Approximately $92 Million, respectively
2Q15 Fiber to the Cell (“FTTC”) Revenue Reaches $6.8 million, up 34% Year-over-Year
Raises 2015 Enterprise Growth Target to 8-9% from 6% after posting 8.2% 2Q15 Enterprise growth
WAYNESBORO, VA – August 5, 2015 – Lumos Networks Corp. (“Lumos Networks”, “Lumos” or the “Company”) (Nasdaq: LMOS), a leading fiber-based service provider of data, voice and IP-based telecommunication services in the Mid-Atlantic region, today announced entry into definitive agreements providing for an investment by affiliates of Pamplona Capital Management (“Pamplona”) in the Company, forming a strategic financial partnership between the parties. Pamplona is a leading global private equity firm with offices in New York and London. Since its inception in 2005, Pamplona has raised private equity funds with over $8 billion of capital commitments and invests across a wide range of industry sectors and geographies.
The closing of the investment is scheduled to occur before the market opens on August 6, 2015, upon which affiliates of Pamplona will invest $150 million in debt securities of the Company and warrants to acquire up to 5.5 million shares of the Company’s common stock. The Company intends to allocate up to $50 million of the investment proceeds to pay down its existing senior bank debt and costs related to the transaction with the remainder of approximately $100 million expected to be allocated towards pursuing potential growth opportunities, both organic and inorganic, in order to accelerate the Company’s strategic transformation to a pure-play fiber bandwidth infrastructure company. At the closing, the Company will appoint William Pruellage, a Partner of Pamplona based in New York, and Peter Aquino, former Executive Chairman of Primus Telecommunications Group and former President and CEO of RCN Corporation, as members of the Lumos Board of Directors in accordance with the terms of Pamplona’s investment which entitle Pamplona to nominate two Board designees. No other changes to the Lumos Board of Directors are contemplated at this time.
Interest payable on the notes to be issued to Pamplona will accrue at an annual rate of 8%, paid quarterly either in cash or in kind. The warrants to be issued will entitle Pamplona to purchase up to 5.5 million shares of the Company’s common stock by net share settlement at an exercise price equal to $13.99, the closing bid price per share of the Company’s common stock prior to the announcement of the transaction on August 5, 2015. Further detail regarding the terms of the strategic investment will be disclosed in a Current Report on Form 8-K to be filed by the Company with the SEC.
“We are excited to announce our strategic financial relationship with Pamplona as it serves as validation of our operating strategy and provides significant capital runway needed to accelerate our transformation into a pure-play fiber bandwidth infrastructure provider,” said Timothy G. Biltz, President and CEO of Lumos Networks. “We are in the midst of a generational demand curve for bandwidth and our industry is aggressively consolidating. This partnership provides the capital required to capitalize on these significant opportunities. Additionally, the investment will result in adding two strong members to our Board who we believe will significantly add to our already robust Board dynamic, including by the addition of Peter Aquino who brings relevant operational and capital markets industry expertise to our Board that we believe will be invaluable in helping to accelerate our transformation and the enhancement of value for our shareholders.”
“Pamplona is thrilled to announce this strategic investment in Lumos Networks,” said William Pruellage. “We see a great opportunity for Lumos to become a significant platform company within the fiber and co-location sectors and have strong confidence that the current management team will successfully execute this transformation. We believe that our interests are very clearly aligned with those of the current shareholder base and the Lumos leadership team.”
Wells Fargo Securities, LLC acted as exclusive financial advisor to Lumos Networks and Troutman Sanders LLP provided legal representation on the transaction. RBC Capital Markets has also provided investment banking services to Lumos Networks. Jefferies LLC acted as the exclusive financial advisor to Pamplona and Skadden, Arps, Slate Meagher & Flom LLP provided legal representation.
Second Quarter 2015 Results
Total revenue in the second quarter of 2015 grew nearly 1% on a sequential basis and 1.6% from the prior year period. Total Adjusted EBITDA reached nearly $22.7 million, up nearly 1% from the first quarter of 2015 and essentially flat from the prior year period. Total Data segment revenue grew over 5% year-over-year and constituted 55% of total revenue, up from 53% in the prior year period. In aggregate, FTTC and Enterprise revenue grew nearly 17% year-over-year and constituted 64% of total data revenue, up from 58% in the prior year period.
The Company generated operating income of $9.3 million and $17.7 million for the three and six months ended June 30, 2015, respectively. Net income attributable to Lumos Networks Corp. was $3.3 million, or 14 cents per diluted share, for the second quarter of 2015 and $6.1 million, or 26 cents per diluted share, for the six months ended June 20, 2015.
“Our results in the second quarter validate that our transformation into a fiber bandwidth infrastructure provider is progressing well,” said Timothy G. Biltz, President and CEO of Lumos Networks. “We are investing in valuable fiber infrastructure, supported by long-term contracts from large Enterprise and carrier customers. FTTC revenue is on pace to achieve our target of $29 million in 2015, up 45% year-over-year. We now expect 2015 Enterprise revenue of $46 million, up 8-9% from 2014 and ahead of our prior guidance of 6% growth. Due to higher than expected TDM churn from carrier grooming, we reduce our 2015 target for total data revenue slightly from $116 million to $115 million. This implies 2015 overall data growth of 8%, which is among the industry’s fastest organic data growth rates.”
“We remain focused on completing the vast majority of our transformational network expansion project of approximately 665 miles into the Richmond and Norfolk markets by the end of 2015. This network, underpinned by a 257 FTTC site build with a major US wireless carrier, increases our Enterprise addressable market by approximately 60%, or $135 million, and significantly de-risks our business model in 2016.”
Second Quarter 2015 Highlights
| • | The Company ended 2Q15 with 976 unique FTTC sites, up 69 sequentially and an increase of 45% from the prior year. Additionally, Lumos ended the second quarter with 1,307 total FTTC connections, which is in-line with our target, up 49% from the prior year. In the last year, Lumos installed 431 FTTC connections. |
| • | In the second quarter of 2015, the Company renewed Enterprise accounts totaling $255,000 in monthly recurring charges (“MRC”), up 60% from the prior year period. In the last six quarters, Lumos has renewed approximately 27% of the total Enterprise monthly revenue stream on long-term contracts of 3-4 years. In the first half of 2015, the Company renewed Enterprise accounts totaling nearly $18.5 million in total contract value, up 60% from the first half of 2014. |
| • | Lumos Networks added 145 route miles of fiber in the quarter, all of which are Company-owned, ending the quarter with 8,100 total route miles. Lumos added 44 Enterprise lit buildings in the quarter and 97 in the first half of 2015, up over 70% from the second half of 2014. |
Business Outlook
For the full year 2015, the Company reiterates its financial guidance for revenue of approximately $202 million, Adjusted EBITDA of approximately $92 million and capital expenditures of approximately $112 million.
Please see the schedules accompanying this release for additional financial guidance, including reconciliations of non-GAAP measures to GAAP results.
Statements made are based on management’s current expectations. These statements are forward-looking and actual results may differ materially. Please see “Special Note from the Company Regarding Forward-Looking Statements.”
Conference Call
A conference call and simultaneous webcast, hosted by Timothy G. Biltz, CEO, Johan Broekhuysen, CFO, and Will Davis, Vice President of Investor Relations and Chief of Staff, to discuss today’s announcement and to review these financial and operational results and financial guidance will be held at 8:30 A.M. (ET) on August 6, 2015.
The webcast may be accessed via the Internet at http://ir.lumosnetworks.com/ and the live call (“Lumos Networks First Quarter Earnings Conference Call”) may be accessed with the following numbers:
Domestic: 1-877-510-3772
International: 1-412-902-4135
Canada: 1-855-669-9657
The conference call will be archived and available for replay through August 21, 2015 and may be accessed with the following numbers:
Domestic: 1-877-344-7529
International: 1-412-317-0088
Canada: 1-855-669-9658
Replay pass codes: Conference ID: 10069524
The webcast will also be archived and the replay may be accessed at http://ir.lumosnetworks.com/.
About Lumos Networks
Lumos Networks is a leading fiber-based service provider in the Mid-Atlantic region serving Carrier, Enterprise and Data Center customers, offering end-to-end connectivity in 24 markets in Virginia, Pennsylvania, West Virginia, Maryland, Ohio and Kentucky. With a fiber network of 8,100 fiber route miles and over 369,000 total fiber strand miles, Lumos Networks connects 976 unique Fiber to the Cell sites, 1,307 total FTTC connections, 32 data centers, including 7 company owned co-location facilities, 1,574 on-net buildings and approximately 2,560 total on-net locations. In 2014, Lumos Networks generated over $106 million in data revenue and nearly $52 million in Adjusted EBITDA over our fiber network. Detailed information about Lumos Networks is available at www.lumosnetworks.com.
About Pamplona Capital Management
Pamplona Capital Management is a New York and London based specialist investment manager established in 2005 that provides an alternative investment platform across private equity, fund of hedge funds and single manager hedge fund investments. Pamplona Capital Management manages over USD 8 billion in assets across a number of funds for a variety of clients including public pension funds, international wealth managers, multinational corporations, family offices and funds of hedge funds. Pamplona is currently managing its fourth private equity fund, Pamplona Capital Partners IV, L.P., which was raised in 2014. Pamplona invests long-term capital across the capital structure of its portfolio companies in both public and private market situations. Please see http://pamplonafunds.com for further information.
Pamplona Media Enquiries:
Temple Bar Advisory
Ed Orlebar
Phone: +44 20 7002 1510 / +44 773 872 4630
E-Mail: edo@templebaradvisory.com
Non-GAAP Measures
Adjusted EBITDA is defined as net income attributable to Lumos Networks before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, net income or loss attributable to non-controlling interests, other income or expenses, equity-based compensation charges, acquisition-related charges, amortization of actuarial losses on retirement plans, employee separation charges, restructuring-related charges, gain or loss on settlements and gain or loss on interest rate swap derivatives. Adjusted EBITDA margin is calculated as the ratio of Adjusted EBITDA, as defined, to operating revenues.
Adjusted EBITDA is a non-GAAP financial performance measure. It should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the schedules herein and our SEC filings for a reconciliation of these non-GAAP financial performance measures to the most comparable measures reported in accordance with GAAP and for a discussion of the presentation, comparability and use of such financial performance measures.
SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS
Any statements contained in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words “anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,” “targets,” “projects,” “should,” “may,” “will,” “scheduled” and similar words and expressions are intended to identify forward-looking statements. Such forward-looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include, but are not limited to: rapid development and intense competition in the telecommunications and high speed data transport industry; our ability to offset expected revenue declines in legacy voice and access products related to the recent regulatory actions, wireless substitution, technology changes and other factors; our ability to effectively allocate capital and implement our “edge-out” expansion plans in a timely manner; our ability to complete customer installations in a timely manner; adverse economic conditions; operating and financial restrictions imposed by our senior credit facility; our cash and capital requirements; declining prices for our services; our ability to maintain and enhance our network; the potential to experience a high rate of customer turnover; federal and state regulatory fees, requirements and developments; our reliance on certain suppliers and vendors; and other unforeseen difficulties that may occur. These risks and uncertainties are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our SEC filings, including our Annual Report filed on Form 10-K.
Exhibits:
| • | Condensed Consolidated Balance Sheets |
| • | Condensed Consolidated Statements of Income |
| • | Condensed Consolidated Statements of Cash Flows |
| • | Summary of Operating Results, Customer and Network Statistics |
| • | Reconciliation of Net Income Attributable to Lumos Networks Corp. to Adjusted EBITDA |
| • | Business Outlook |
Lumos Networks Corp.
Condensed Consolidated Balance Sheets
| June 30, 2015 | December 31, 2014 | |||||||
| (In thousands) |
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| ASSETS |
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| Current Assets |
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| Cash and cash equivalents |
$ | 7,200 | $ | 14,140 | ||||
| Marketable securities |
22,046 | 16,870 | ||||||
| Restricted cash 1 |
2,634 | 4,208 | ||||||
| Accounts receivable, net |
21,442 | 22,925 | ||||||
| Other receivables |
2,409 | 2,113 | ||||||
| Income tax receivable |
175 | 172 | ||||||
| Prepaid expenses and other |
5,487 | 4,321 | ||||||
| Deferred income taxes |
5,418 | 5,601 | ||||||
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| Total Current Assets |
66,811 | 70,350 | ||||||
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| Securities and investments |
1,092 | 914 | ||||||
| Property, plant and equipment, net |
462,198 | 429,451 | ||||||
| Other Assets |
||||||||
| Goodwill |
100,297 | 100,297 | ||||||
| Other intangibles, net |
12,536 | 15,884 | ||||||
| Deferred charges and other assets |
7,059 | 5,718 | ||||||
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| Total Other Assets |
119,892 | 121,899 | ||||||
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| Total Assets |
$ | 649,993 | $ | 622,614 | ||||
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| LIABILITIES AND EQUITY |
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| Current Liabilities |
||||||||
| Current portion of long-term debt |
$ | 10,462 | $ | 10,227 | ||||
| Accounts payable |
16,020 | 20,257 | ||||||
| Dividends payable |
— | 3,152 | ||||||
| Advance billings and customer deposits |
13,772 | 14,029 | ||||||
| Accrued compensation |
1,409 | 1,516 | ||||||
| Accrued operating taxes |
4,734 | 4,618 | ||||||
| Other accrued liabilities |
4,630 | 4,223 | ||||||
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| Total Current Liabilities |
51,027 | 58,022 | ||||||
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| Long-Term Liabilities |
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| Long-term debt, excluding current portion |
384,732 | 363,156 | ||||||
| Retirement benefits |
17,441 | 18,257 | ||||||
| Deferred income taxes |
92,117 | 87,864 | ||||||
| Other long-term liabilities |
1,865 | 1,746 | ||||||
| Income tax payable |
89 | 110 | ||||||
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| Total Long-term Liabilities |
496,244 | 471,133 | ||||||
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| Stockholders’ Equity |
101,862 | 92,677 | ||||||
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| Noncontrolling Interests |
860 | 782 | ||||||
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| Total Equity |
102,722 | 93,459 | ||||||
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| Total Liabilities and Equity |
$ | 649,993 | $ | 622,614 | ||||
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| 1 | During 2010, the Company received a Federal stimulus award providing 50% funding to bring broadband services and infrastructure to Alleghany County, Virginia. The Company was required to deposit 100% of its grant ($8.1 million) into pledged accounts in advance of any reimbursements, to be drawn down ratably following reimbursement approvals. |
Lumos Networks Corp.
Condensed Consolidated Statements of Income
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| (In thousands, except per share amounts) |
2015 | 2014 | 2015 | 2014 | ||||||||||||
| Operating Revenues |
$ | 50,953 | $ | 50,165 | $ | 101,448 | $ | 100,255 | ||||||||
| Operating Expenses |
||||||||||||||||
| Network access costs |
9,912 | 10,190 | 19,624 | 20,904 | ||||||||||||
| Selling, general and administrative 1 |
20,269 | 18,487 | 40,103 | 36,419 | ||||||||||||
| Depreciation and amortization |
11,441 | 11,210 | 23,309 | 21,869 | ||||||||||||
| Accretion of asset retirement obligations |
38 | 30 | 72 | 57 | ||||||||||||
| Restructuring charges |
4 | — | 637 | — | ||||||||||||
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| Total Operating Expenses |
41,664 | 39,917 | 83,745 | 79,249 | ||||||||||||
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| Operating Income |
9,289 | 10,248 | 17,703 | 21,006 | ||||||||||||
| Other Income (Expenses) |
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| Interest expense |
(3,719 | ) | (3,812 | ) | (7,205 | ) | (7,786 | ) | ||||||||
| Gain (loss) on interest rate swap derivatives |
165 | (16 | ) | 247 | 93 | |||||||||||
| Other income (expenses), net |
96 | 170 | (147 | ) | 350 | |||||||||||
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| Income Before Income Tax Expense |
5,831 | 6,590 | 10,598 | 13,663 | ||||||||||||
| Income Tax Expense |
2,438 | 2,711 | 4,447 | 5,689 | ||||||||||||
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| Net Income |
3,393 | 3,879 | 6,151 | 7,974 | ||||||||||||
| Net Income Attributable to Noncontrolling Interests |
(44 | ) | (33 | ) | (78 | ) | (66 | ) | ||||||||
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| Net Income Attributable to Lumos Networks Corp. |
$ | 3,349 | $ | 3,846 | $ | 6,073 | $ | 7,908 | ||||||||
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| Basic and Diluted Earnings per Common Share Attributable to Lumos Networks Corp. Stockholders: |
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| Earnings per share—basic |
$ | 0.15 | $ | 0.17 | $ | 0.27 | $ | 0.36 | ||||||||
| Earnings per share—diluted |
$ | 0.14 | $ | 0.17 | $ | 0.26 | $ | 0.35 | ||||||||
| Cash Dividends Declared per Share—Common Stock |
$ | — | $ | 0.14 | $ | — | $ | 0.28 | ||||||||
| 1 | Includes equity-based compensation expense related to all of the Company’s share-based awards and the Company’s 401(k) matching contributions of $1.6 million and $1.2 million for the three months ended June 30, 2015 and 2014, respectively, and $2.8 million and $2.0 million for the six months ended June 30, 2015 and 2014, respectively. |
Lumos Networks Corp.
Condensed Consolidated Statements of Cash Flows
| Six Months Ended June 30, | ||||||||
| (In thousands) |
2015 | 2014 | ||||||
| Cash Flows from Operating Activities: |
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| Net income |
$ | 6,151 | $ | 7,974 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation |
19,961 | 17,275 | ||||||
| Amortization |
3,348 | 4,594 | ||||||
| Accretion of asset retirement obligations |
72 | 57 | ||||||
| Deferred income taxes |
4,166 | 5,383 | ||||||
| Gain on interest rate swap derivatives |
(247 | ) | (93 | ) | ||||
| Equity-based compensation expense |
2,782 | 1,986 | ||||||
| Amortization of debt issuance costs |
822 | 738 | ||||||
| Retirement benefits, net of cash contributions and distributions |
(142 | ) | (813 | ) | ||||
| Excess tax benefits from share-based compensation |
— | (149 | ) | |||||
| Other |
332 | 128 | ||||||
| Changes in operating assets and liabilities, net |
(2,251 | ) | 938 | |||||
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| Net Cash Provided by Operating Activities |
34,994 | 38,018 | ||||||
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| Cash Flows from Investing Activities: |
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| Purchases of property, plant and equipment |
(55,349 | ) | (37,288 | ) | ||||
| Broadband network expansion funded by stimulus grant |
(2,082 | ) | 196 | |||||
| Purchases of available-for-sale marketable securities |
(23,356 | ) | (12,461 | ) | ||||
| Proceeds from sale or maturity of available-for-sale marketable securities |
18,045 | 14,174 | ||||||
| Change in restricted cash |
1,574 | — | ||||||
| Cash reimbursement received from broadband stimulus grant |
1,574 | — | ||||||
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| Net Cash Used in Investing Activities |
(59,594 | ) | (35,379 | ) | ||||
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| Cash Flows from Financing Activities: |
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| Proceeds from issuance of long-term debt |
28,000 | — | ||||||
| Payment of debt issuance costs |
(861 | ) | — | |||||
| Principal payments on senior secured term loans |
(3,945 | ) | (1,375 | ) | ||||
| Cash dividends paid on common stock |
(3,152 | ) | (6,195 | ) | ||||
| Principal payments under capital lease obligations |
(2,317 | ) | (1,145 | ) | ||||
| Proceeds from stock option exercises and employee stock purchase plan |
182 | 1,630 | ||||||
| Excess tax benefits from share-based compensation |
— | 149 | ||||||
| Other |
(247 | ) | (13 | ) | ||||
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| Net Cash Provided by (Used in) Financing Activities |
17,660 | (6,949 | ) | |||||
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| Decrease in cash and cash equivalents |
(6,940 | ) | (4,310 | ) | ||||
| Cash and cash equivalents: |
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| Beginning of Period |
14,140 | 14,114 | ||||||
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| End of Period |
$ | 7,200 | $ | 9,804 | ||||
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Lumos Networks Corp.
Operating Results, Customer and Network Statistics
| Three months ended: | Six months ended: | |||||||||||||||||||||||||||
| (Dollars in thousands) |
June 30, 2015 | March 31, 2015 | December 31, 2014 | September 30, 2014 | June 30, 2014 | June 30, 2015 | June 30, 2014 | |||||||||||||||||||||
| Revenue, Gross Margin and Adjusted EBITDA |
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| Revenue |
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| Enterprise Data |
11,298 | 11,027 | 10,833 | 10,470 | 10,445 | 22,325 | 21,031 | |||||||||||||||||||||
| Transport |
10,036 | 10,473 | 10,962 | 11,279 | 11,225 | 20,509 | 22,132 | |||||||||||||||||||||
| FTTC |
6,755 | 6,267 | 5,515 | 4,739 | 5,037 | 13,022 | 9,681 | |||||||||||||||||||||
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| Total Data |
28,089 | 27,767 | 27,310 | 26,488 | 26,707 | 55,856 | 52,844 | |||||||||||||||||||||
| Residential and Small Business |
17,010 | 17,265 | 17,423 | 17,668 | 18,290 | 34,275 | 36,937 | |||||||||||||||||||||
| RLEC Access |
5,854 | 5,463 | 5,952 | 6,360 | 5,168 | 11,317 | 10,474 | |||||||||||||||||||||
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| Total Revenue |
50,953 | 50,495 | 50,685 | 50,516 | 50,165 | 101,448 | 100,255 | |||||||||||||||||||||
| Gross Margin |
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| Data |
85.5 | % | 86.9 | % | 85.5 | % | 85.1 | % | 85.3 | % | 86.2 | % | 84.7 | % | ||||||||||||||
| Residential and Small Business |
65.6 | % | 64.9 | % | 67.0 | % | 64.3 | % | 65.7 | % | 65.2 | % | 65.3 | % | ||||||||||||||
| Adjusted EBITDA1 |
||||||||||||||||||||||||||||
| Data |
12,492 | 12,367 | 12,629 | 12,984 | 13,395 | 24,859 | 26,112 | |||||||||||||||||||||
| Residential and Small Business |
5,327 | 5,627 | 4,623 | 4,503 | 5,230 | 10,954 | 10,774 | |||||||||||||||||||||
| RLEC Access |
4,848 | 4,517 | 4,621 | 5,214 | 4,098 | 9,365 | 8,404 | |||||||||||||||||||||
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| Adjusted EBITDA before Curtailment Gain |
22,667 | 22,511 | 21,873 | 22,701 | 22,723 | 45,178 | 45,290 | |||||||||||||||||||||
| Curtailment Gain2 |
— | — | 567 | 10,207 | — | — | — | |||||||||||||||||||||
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| Total Adjusted EBITDA |
22,667 | 22,511 | 22,440 | 32,908 | 22,723 | 45,178 | 45,290 | |||||||||||||||||||||
| Adjusted EBITDA Margin1 |
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| Data |
44.5 | % | 44.5 | % | 46.2 | % | 49.0 | % | 50.2 | % | 44.5 | % | 49.4 | % | ||||||||||||||
| Residential and Small Business |
31.3 | % | 32.6 | % | 26.5 | % | 25.5 | % | 28.6 | % | 32.0 | % | 29.2 | % | ||||||||||||||
| RLEC Access |
82.8 | % | 82.7 | % | 77.6 | % | 82.0 | % | 79.3 | % | 82.8 | % | 80.2 | % | ||||||||||||||
| Total Adjusted EBITDA Margin |
44.5 | % | 44.6 | % | 44.3 | % | 65.1 | % | 45.3 | % | 44.5 | % | 45.2 | % | ||||||||||||||
| Capital Expenditures |
26,125 | 29,224 | 19,949 | 26,863 | 19,171 | 55,349 | 37,288 | |||||||||||||||||||||
| Adjusted EBITDA less Capital Expenditures |
(3,458 | ) | (6,713 | ) | 2,491 | 6,045 | 3,552 | (10,171 | ) | 8,002 | ||||||||||||||||||
| Fiber Network Statistics |
||||||||||||||||||||||||||||
| Fiber Route-Miles |
8,100 | 7,955 | 7,822 | 7,645 | 7,548 | 8,100 | 7,548 | |||||||||||||||||||||
| Fiber Miles3 |
369,238 | 363,189 | 354,118 | 352,347 | — | 369,238 | — | |||||||||||||||||||||
| Fiber Markets |
24 | 23 | 23 | 23 | 23 | 24 | 23 | |||||||||||||||||||||
| FTTC Unique Towers |
976 | 907 | 858 | 708 | 673 | 976 | 673 | |||||||||||||||||||||
| FTTC Total Connections |
1,307 | 1,236 | 1,153 | 961 | 876 | 1,307 | 876 | |||||||||||||||||||||
| On-Network Buildings |
1,574 | 1,530 | 1,477 | 1,456 | 1,420 | 1,574 | 1,420 | |||||||||||||||||||||
| Data Centers4 |
32 | 31 | 31 | 28 | 26 | 32 | 26 | |||||||||||||||||||||
| R&SB Statistics |
||||||||||||||||||||||||||||
| Competitive Voice Connections |
79,022 | 81,456 | 83,406 | 85,683 | 88,941 | 79,022 | 88,941 | |||||||||||||||||||||
| Video Subscribers |
5,516 | 5,472 | 5,352 | 5,309 | 5,155 | 5,516 | 5,155 | |||||||||||||||||||||
| Fiber-to-the-Premise Broadband Connections |
6,807 | 6,602 | 6,358 | 6,119 | 5,906 | 6,807 | 5,906 | |||||||||||||||||||||
| Premises Passed by Fiber5 |
18,983 | 18,142 | 17,461 | 17,102 | 16,631 | 18,983 | 16,631 | |||||||||||||||||||||
| RLEC Access Lines |
26,276 | 26,746 | 27,257 | 27,716 | 28,081 | 26,276 | 28,081 | |||||||||||||||||||||
| 1 | Adjusted EBITDA is a non-GAAP measure. See definition on page 2 of this earnings release. Adjusted EBITDA margin is calculated as the ratio of Adjusted EBITDA, as defined, to Total Revenue. |
| 2 | The Company recorded a gain totaling $10.8 million in the second half of 2014 related to the curtailment of medical benefits under the Company’s postretirement plan, which was not allocated to the operating segments. |
| 3 | Fiber miles are calculated as the fiber route miles multiplied by the number of fiber strands within each cable (represents an average of 46 fibers per route as of June 30, 2015) and are based on the results of the Company’s conversion of its fiber records to a centralized fiber management system in the third quarter of 2014. |
| 4 | Data centers reported include both commercial and private data centers and Company-owned facilities offering commercial data center services. |
| 5 | Includes residential and small business locations passed by fiber and available for service. Approximately 93% of the premises passed by fiber and available for service as of June 30, 2015 were residential. |
Lumos Networks Corp.
Reconciliation of Net Income Attributable to Lumos Networks Corp. to Adjusted EBITDA
| (Dollars in thousands) |
2015 | 2014 | ||||||
| For The Three Months Ended June 30, |
||||||||
| Net Income Attributable to Lumos Networks Corp. |
$ | 3,349 | $ | 3,846 | ||||
| Net Income Attributable to Noncontrolling Interests |
44 | 33 | ||||||
|
|
|
|
|
|||||
| Net Income |
3,393 | 3,879 | ||||||
| Income tax expense |
2,438 | 2,711 | ||||||
| Interest expense |
3,719 | 3,812 | ||||||
| (Gain) loss on interest rate swap derivatives |
(165 | ) | 16 | |||||
| Other income, net |
(96 | ) | (170 | ) | ||||
|
|
|
|
|
|||||
| Operating Income |
9,289 | 10,248 | ||||||
| Depreciation and amortization and accretion of asset retirement obligations |
11,479 | 11,240 | ||||||
| Amortization of actuarial losses |
338 | 64 | ||||||
| Equity-based compensation |
1,557 | 1,152 | ||||||
| Restructuring charges |
4 | — | ||||||
| Employee separation charges |
— | 19 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 22,667 | $ | 22,723 | ||||
|
|
|
|
|
|||||
| Adjusted EBITDA Margin |
44.5 | % | 45.3 | % | ||||
| For The Six Months Ended June 30, |
||||||||
| Net Income Attributable to Lumos Networks Corp. |
$ | 6,073 | $ | 7,908 | ||||
| Net Income Attributable to Noncontrolling Interests |
78 | 66 | ||||||
|
|
|
|
|
|||||
| Net Income |
6,151 | 7,974 | ||||||
| Income tax expense |
4,447 | 5,689 | ||||||
| Interest expense |
7,205 | 7,786 | ||||||
| Gain on interest rate swap derivatives |
(247 | ) | (93 | ) | ||||
| Other expense (income), net |
147 | (350 | ) | |||||
|
|
|
|
|
|||||
| Operating Income |
17,703 | 21,006 | ||||||
| Depreciation and amortization and accretion of asset retirement obligations |
23,381 | 21,926 | ||||||
| Amortization of actuarial losses |
675 | 128 | ||||||
| Equity-based compensation |
2,782 | 1,986 | ||||||
| Restructuring charges |
637 | — | ||||||
| Employee separation charges |
— | 244 | ||||||
|
|
|
|
|
|||||
| Adjusted EBITDA |
$ | 45,178 | $ | 45,290 | ||||
|
|
|
|
|
|||||
| Adjusted EBITDA Margin |
44.5 | % | 45.2 | % | ||||
Lumos Networks Corp.
Business Outlook 1 (as of August 5, 2015)
| (In millions) | 2015 Annual Guidance 1 | |
| Operating Revenues |
approximately $202 | |
| Adjusted EBITDA |
approximately $92 | |
| Capital Expenditures |
approximately $112 | |
| Cash, Cash Equivalents and Marketable Securities (at end of period)2 |
approximately $5 | |
| Reconciliation of Net Income to Adjusted EBITDA: |
||
| Net Income |
approximately $12 | |
| Income tax expense |
approximately $8 | |
| Interest expense |
approximately $15 | |
|
| ||
| Operating Income |
approximately $35 | |
| Depreciation and amortization |
approximately $50 | |
| Equity-based compensation charges |
approximately$6 | |
| Amortization of actuarial losses |
approximately $1 | |
|
| ||
| Adjusted EBITDA |
approximately $92 | |
|
|
| 1 | These estimates are based on management’s current expectations. These estimates are forward-looking and actual results may differ materially. Please see “Special Note from the Company Regarding Forward-Looking Statements” in the Lumos Networks Corp. second quarter 2015 earnings release dated August 5, 2015. |
| 2 | Exclusive of proceeds from Pamplona investment transaction described on Page 1 of this release. |