FairPoint Q1 revenues down, broadband subscribers increase

first_imgQuarter ended Other assets and liabilities, net Deferred income taxes (Unaudited) 1,948 897,313(15,552)(10,352)1,375(16,591) 1Q11  Reported4Q10  Reported3Q10  Restated2Q10  Restated1Q10  Restated Proceeds from issuance of long-term debt Revenue: (41,245) ‘ 3493772,20710526 (12,477) (7,752) –1,3978,30710,436 (264,534)(6,413)7,33010,245(3,501) 34 $ 562,484$ (74,987)$ (66,084)$ (54,178)$ (86,330) 84,29474,60672,36471,47271,382 Post-retirement accruals All other allowed adjustments, net (2e) Non-cash reorganization costs (income) (1,141) Days Ended (5,901) Net change Supplemental Financial Information (201) (722) Claims payable and estimated claims accrual Depreciation and amortization ($ in thousands, except units) $ 562,484$ (74,987)$ (66,084)$ (54,178)$ (86,330) Months Ended (3,423) 109,355 (21,463)(34,810)(33,151)(35,616)(34,604) 5,103 (1,100) (48,832)(18,212)(29,911)(30,182)(31,634) 3 2,182 827,018(68,574)(73,414)(64,423)(82,829) Net cash provided by (used in) operating activities 1,236 Total adjustments Condensed Consolidated Statements of Cash Flows ‘ payable, estimated claims accrual or liabilities subject Income tax benefit (expense) Interest expense 986 91,35892,12895,92396,18296,856 105,497 (95,235) 30,258 33,583 Reorganization items (1) Other non-cash items, net (2b) Voice services 5,513 Prepaid and other assets (Restated) 28,49527,50426,69128,96127,067 Other income (expense): 219732(999)959859 Consolidated EBITDAR (1,667) Consolidated EBITDAR margin (82,764) 2,068 Reorganization adjustments: 276,204 (40,407) $586,907$(86,330) 2,418 Successor Company Predecessor Company Sixty-Six Twenty-Four 17,32614,94811,39518,78814,739 Days Ended (866) 177 (912,270)16,0961,066(8,509)1,327 (298) $   49,085$   83,987$   59,203$   72,294$   60,784 (26,485) Operating expenses, excluding depreciation, amortization and reorganization 21,515 2,736—- Capital additions included in accounts payable, claims ‘ 779 (11,996) Accrued interest payable Other non cash items Consolidated Communications,FairPoint Communications, Inc. (Nasdaq: FRP) (FairPoint or the Company), a leading provider of communications services, today announced its financial results for the first quarter ended March 31, 2011. Revenue was $254.8 million in the first quarter of 2011 as compared to $270.8 million a year earlier. Revenue was $254.8 million in the first quarter of 2011 as compared to $268.0 million in the fourth quarter of 2010. Consolidated EBITDAR was $49.1 million in the first quarter of 2011 as compared to $60.8 million a year earlier.  First quarter 2010 Consolidated EBITDAR was favorably impacted by the add-back of $10.4 million related to the net effect of a financial restatement. (see table below)As previously announced, the Company will host a conference call and simultaneous webcast to discuss its results at 2:00 p.m. (EDT) on Tuesday, May 17, 2011.High-speed Internet subscribers increased over 13,600, or 4.8% year-over-year, with over 56% of the increase coming during the first quarterVoice access line loss continued to improve to 9.6% annually from 10.3% reported in the prior quarterNet Income, including Cancellation of Debt Income of $1,351.1 million, increased to $562.5 millionversus a Net Loss of $86.3 million a year earlierRevenue was flat sequentially from fourth quarter 2010, after adjusting for one-time items”We are encouraged by the operational improvements taking hold,” said Paul H. Sunu, CEO of FairPoint.  “We believe the recently announced fiber-to-the-tower project, along with the increase in high-speed Internet subscribers and the reduction in the rate of voice access line loss are all leading indicators of expected future revenue growth.  As we’ve said before, this is a transition year for FairPoint and we’re excited about the organic revenue growth opportunities in our markets.”High-speed Internet penetration increased to 27% of voice access lines at March 31, 2011, which represents the highest level since FairPoint acquired the northern New England assets on March 31, 2008.  The addition of over 7,700 high-speed Internet subscribers was also the largest quarterly increase since FairPoint took over the northern New England properties.  Company-wide, year-over-year voice access line loss slowed for the fourth consecutive quarter to 9.6%.  In addition, continued service quality improvements led to a decline in penalties of $5.1 million versus a year earlier.  FairPoint ended the quarter with revenue of $254.8 million and Consolidated EBITDAR(1) of $49.1 million.  Included in the first quarter Consolidated EBITDAR was the impact of a $13.5 million expense related to the annual vacation award for northern New England employees.  This annual vacation expense is recorded by the Company in the first quarter of each year.  Adjusting for this item, Consolidated EBITDAR would have been approximately $62.6 million in the first quarter of 2011.Operating and Regulatory HighlightsOperating metrics continue to improve.  For example, sustained improvements in retail service quality indicators such as faster call center answer times and shorter installation and repair intervals resulted in lower retail penalties of $0.4 million in the quarter versus $4.3 million a year earlier, an improvement of$3.9 million.  In addition, continued improvements in wholesale service quality metrics resulted in lower wholesale penalties of $1.4 million in the quarter versus $2.6 million a year earlier, an improvement of $1.2 million.High-speed Internet subscribers increased 4.8% year-over-year, compared to a 0.4% increase in the fourth quarter of 2010 and a 5.5% decline in the first quarter of 2010.  The rate of voice access line loss slowed to 9.6% annually versus 10.3% in the fourth quarter of 2010 and 12.4% a year earlier.FairPoint continued its northern New England broadband expansion efforts by announcing it has brought high-speed Internet access to hundreds more communities and neighborhoods in Maine, New Hampshireand Vermont.  As of March 31, 2011, FairPoint offers broadband service to more than 83% of customers in Maine, more than 85% of customers in New Hampshire and more than 80% of customers in Vermont.  The Company is on track to meet its 2011 regulatory broadband commitments.On April 14, 2011 the Company announced an initial network build which will bring fiber to more than half of the approximately 1,600 wireless communications towers it serves in its northern New England service footprint.  With this strategic investment, FairPoint will further enhance its next-generation IP/MPLS network, branded as VantagePoint(sm), and will be uniquely positioned to capture the growth in mobile data usage by providing Ethernet backhaul to wireless carriers.Financial HighlightsFirst Quarter 2011 as compared to First Quarter 2010Revenue was $254.8 million in the first quarter of 2011 as compared to $270.8 million a year earlier.  The$16.0 million decrease was primarily the result of the 9.6% decline in voice access lines year-over-year, which led to decreases in voice services and access revenue. Partially offsetting the decline was the improvement in service quality penalties discussed above and a 5.3% increase in data and Internet services revenue.Operating expenses, excluding depreciation, amortization and reorganization, were $216.6 million in the first quarter of 2011 as compared to $231.1 million a year earlier.  The favorable variance of $14.5 million, or 6.3%, was primarily the result of reductions in contracted services, data and voice transport and bad debt expense.Consolidated EBITDAR was $49.1 million in the first quarter of 2011 as compared to $60.8 million a year earlier.  First quarter 2010 Consolidated EBITDAR was favorably impacted by the add-back of $10.4 million related to the net effect of a financial restatement. Excluding the benefit from this financial restatement add-back, Consolidated EBITDAR for the first quarter of 2010 would have been $50.4 million.  The $1.3 million decrease year-over-year is primarily explained by the decrease in revenue mostly offset by operating expense reductions as discussed above.Net income was $562.5 million in the first quarter of 2011 as compared to a net loss of $86.3 million a year earlier, First quarter 2011 net income benefited from a one-time pre-tax gain of $911.3 million related to the reorganization, which included $1,351.1 million of Cancellation of Debt Income.Capital expenditures were $53.7 million in the first quarter of 2011 as compared to $40.4 million a year earlier.  Major capital initiatives in 2011 include the continued expansion of the VantagePoint(sm) network, the fiber-to-the-tower build, regulatory broadband commitments in northern New England, information technology improvements and enhancements, success-based capital projects for targeted revenue opportunities and network and facilities maintenance.First Quarter 2011 as compared to Fourth Quarter 2010Revenue was $254.8 million in the first quarter of 2011 as compared to $268.0 million in the fourth quarter of 2010.  Revenue was essentially flat quarter-over-quarter after adjusting fourth quarter 2010 revenue for the one-time benefit of a $12.7 million service quality penalty reversal.Operating expenses, excluding depreciation, amortization and reorganization, increased $5.0 million to $216.6 million as compared to $211.6 million in the fourth quarter of 2010.  As previously reported, the majority of the Company’s employees are entitled to their annual vacation allowance on January 1st of each year.  Accordingly, the Company recognized $13.5 million of vacation expense on January 1, 2011, which will be amortized over the balance of the year as vacation is used.  In addition, fourth quarter 2010 operating expenses included certain one-time non-cash charges related to project abandonment, inventory obsolescence and other non-recurring items which totaled approximately $14.8 million.  Adjusting for these items, first quarter 2011 expenses would have been $203.1 million compared to $196.8 million for the fourth quarter of 2010.  The increase of $6.3 million was primarily driven by a $12.5 million change in bad debt expense, which was partially offset by expense reductions in other areas such as contracted services.  First quarter 2011 bad debt expense was approximately 2.2% of revenue, while in the fourth quarter of 2010 the Company benefited from a reduction in the bad debt allowance as a result of improved collections activity.Consolidated EBITDAR declined $34.9 million to $49.1 million as compared to $84.0 million in the fourth quarter of 2010.  The first quarter of 2011 was unfavorably impacted by the $13.5 million annual vacation expense.  In addition, the fourth quarter of 2010 was favorably impacted by the one-time revenue benefit of the $12.7 million service quality penalty reversal.  Adjusting for these items, Consolidated EBITDAR would have been approximately $62.6 million in the first quarter of 2011 compared to $71.3 million in the fourth quarter of 2010.  The $8.7 million unfavorable variance quarter-over-quarter is primarily the result of the$12.5 million change in bad debt expense discussed above, partially offset by operating expense reductions in other areas such as contracted services.Capital expenditures were $53.7 million in the first quarter of 2011 as compared to $40.9 million in the fourth quarter of 2010.2011 GuidanceWhile the Company is encouraged by the fact that revenue in the first quarter of 2011 was essentially flat versus the fourth quarter of 2010 on an adjusted basis, the full year 2011 revenue guidance of $1,060 to $1,090 million is unlikely to be achieved. The Company does not intend to provide new revenue guidance.  However, the Company continues to believe that it can achieve the low end of its Consolidated EBITDAR guidance of $260 to $280 million through cost reduction initiatives, many of which are already underway, and revenue growth.Fresh Start AccountingOn January 24, 2011, the Company emerged from Chapter 11 bankruptcy protection and its Plan of Reorganization became effective. For purposes of generally accepted accounting principles, the Company adopted fresh start accounting as of January 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 condensed consolidated statements of financial position and operations for periods after January 24, 2011, will not be comparable in many respects to periods prior to the adoption of fresh start accounting.Conference Call InformationAs previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its first quarter 2011 results at 2:00 p.m. (EDT) on Tuesday, May 17, 2011.Participants should call (800) 706-7741 (US/Canada) or (617) 614-3471 (international) at 1:50 p.m. (EDT)and enter the passcode 31415391 when prompted.  The title of the call is the Q1 2011 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 61310099 when prompted.  The recording will be available from Tuesday, May 17, 2011, at 5:00 p.m. (EDT) throughTuesday, May 31, 2011, at 11:59 p.m. (EDT).A live broadcast of the earnings conference call will be available via the Internet atwww.fairpoint.com/investors(link is external). An online replay will be available shortly thereafter.Use of Non-GAAP Financial MeasuresThis press release includes certain non-GAAP financial measures, including but not limited to Consolidated EBITDAR and adjustments to GAAP measures to exclude the effect of special items. Management believes that Consolidated EBITDAR may be useful to investors in assessing the Company’s operating performance and its ability to meet its debt service requirements, and the maintenance covenants contained in the Company’s credit facility are based on Consolidated EBITDAR. In addition, management believes that the adjustments to 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, Consolidated EBITDAR has limitations as an analytical tool 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, Consolidated EBITDAR 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 Consolidated EBITDAR only supplementally. A reconciliation of Consolidated EBITDAR to Net Income is contained in the attachments to this press release.About FairPointFairPoint Communications, Inc. (Nasdaq: FRP) (www.FairPoint.com(link is external)) is a leading communications provider of high-speed Internet access, local and long-distance phone, television and other broadband services to customers in communities across 18 states. Through its fast, reliable data network, FairPoint delivers data and voice networking communications solutions to residential, business and wholesale customers. VantagePoint(sm), FairPoint’s resilient IP-based network in northern New England, provides business customers a fast, flexible, affordable Ethernet connection.  VantagePoint(sm) supports applications like video conferencing and e-learning. Additional information about FairPoint products and services is available at www.FairPoint.com(link is external).Cautionary Note Regarding Forward-looking StatementsSome statements herein 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 may constitute guidance as to projected financial results and the Company’s future performance that represents 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.(1)  Consolidated EBITDAR means earnings before interest, taxes, depreciation, amortization and restructuring items as defined in the Company’s new credit facility.  Consolidated EBITDAR is a non-GAAP financial measure.  A reconciliation of Consolidated EBITDAR to Net Income is contained in the attachments to this press release.  Cash flows from investing activities: 3,454 458 Reorganization costs paid 10,68610,99212,0369,97910,240 Changes in assets and liabilities arising from operations: 71,382 19.3%31.3%22.7%26.6%22.4% Loss before reorganization items and income taxes 10,70211,69612,41811,47712,460 Provision for uncollectible revenue Reorganization expense (post-emergence) (1) Cash, beginning of period Net income (loss) 2,654 Income (loss) before income taxes (48) 130 3,170 (709) Net capital additions (667,998) Data and Internet services (in thousands) (1,096) 1,818 Access Non-cash pension and OPEB expense (2a) Net cash (used in) provided by financing activities March 31, 2011 Total revenue FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES 8,058 FAIRPOINT COMMUNICATIONS, INC. 9,017 (8,517) 180 Loss from operations Other services 84,29474,60672,36471,47271,382 Repayment of capital lease obligations Three (41,248) (917,358) 977 (211) Distributions from investments 303,612286,204290,541301,745302,435 10,262 (1,500) 23,888 Accounts payable and accrued liabilities 160,184 Three months ended March 31, 2010 71,120 Pension accruals 264,5346,413(7,330)(10,245)3,501 Adjustments to reconcile net income to net cash provided by 216,582211,598218,177230,273231,053 Total other income (expense) (81,091) Restructuring costs (2c) Accounts receivable $ 124,225$ 136,664$ 125,598$ 134,943$ 134,418 13,918 Depreciation and amortization (70,295)(53,022)(63,062)(65,798)(66,238) (Unaudited) operating activities: Loan origination costs Net cash used in investing activities 254,780267,992260,630271,563270,801 Operating expenses: $10,262$145,980 Cash flows from financing activities: 8,133 Restricted cash Supplemental disclosure of cash flow information: 46,697 Summary Income Statement: Cash flows from operating activities: Restricted cash – cash claims reserve (12,477) March 31, 2010 Other income (expense), net Cash, end of period$15,416 3,207 62,779 32,687 subject to compromise at period-end (521) 73,854 33,810 (40,399) 36,625 12,812 5,154 ‘ Depreciation and amortization Net income (loss) Sixty-Six Days ended March 31, 2011, Twenty-Four Days ended January 24, 2011 and Interest expense Total operating expenses Consolidated EBITDAR Reconciliation: Income tax (benefit) expense 8 14,381 (21,812)(35,187)(35,358)(35,721)(34,630) CHARLOTTE, N.C., May 16, 2011 /PRNewswire/ — January 24, 2011 379 Restatement impact, net (2d) 8,064 ‘ 11,110 21,81235,18735,35835,72134,630 Net (loss) income$(24,423)last_img

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