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Consolidated Communications Reports Fourth Quarter 2018 Results

  • Commercial and carrier data and transport revenue grew 2.3 percent year over year

  • Ethernet revenues increased 6.8 percent year over year

  • Completed upgrades to 500,000 broadband passings across Northern New England

  • Declared 55th consecutive quarterly dividend

MATTOON, Ill., Feb. 21, 2019 (GLOBE NEWSWIRE) -- Consolidated Communications Holdings, Inc. (CNSL) (the “Company”) reported results for the fourth quarter 2018 and will hold a conference call and simultaneous webcast to discuss its results and developments today at 10 a.m. ET.

Fourth quarter 2018 Consolidated Communications financial summary:

  • Revenue totaled $344.8 million

  • Net cash from operating activities was $93.3 million

  • Adjusted EBITDA was $132.4 million

  • Dividend payout ratio was 68.3 percent

“2018 was a very productive year where we made great progress improving service levels and advancing our business and broadband strategy across our newly acquired markets,” said Bob Udell, president and chief executive officer of Consolidated Communications. “I am very pleased with our commercial growth and our progress in expanding our fiber network, including our upgrade of more than 500,000 or one-third of the broadband passings across Northern New England.”

“For 2019, we are focused on growing market share as we ramp up marketing in Northern New England and continue to make success-based, fiber investments in the business improving the customer experience,” said Udell.

Financial Results for the Fourth Quarter

  • Revenues were $344.8 million, compared to $356.4 million for the fourth quarter of 2017, a decrease of $11.6 million in the recent quarter. Commercial and carrier data and transport service revenue increased 2.3 percent or $2 million on a comparable basis, with Ethernet revenue growth of 6.8 percent being the catalyst. Business system sales and special construction projects contributed an additional $4.7 million to the fourth quarter 2018 revenues. Consumer Broadband revenue was up $500,000 from a year ago in spite of normal seasonality in the Northern New England region. Voice services revenue declined $11.8 million across all customer channels. Subsidies decreased $2.4 million during the quarter primarily due to the final CAF step down in transitional revenues, and network switched and special access revenues declined $2.9 million.

  • Income from operations was $3.6 million compared to $7.0 million in the fourth quarter of 2017. The change was primarily due to the declines in revenues described above, offset by reductions in operating expense of $8.2 million.

  • Interest expense, net was $35.5 million, compared to $29.9 million for the same period last year. The increase was due to increases in LIBOR and non-cash expense associated with interest rate hedge agreements put in place to maintain our fixed debt target of 75 percent. As of Dec. 31, 2018, our weighted average cost of debt was approximately 5.6 percent.

  • Cash distributions from the Company’s wireless partnerships were $10.3 million for the fourth quarter compared to $8.0 million for the prior year period.

  • Other income, net was $11.1 million, compared to $7.9 million in the fourth quarter of 2017, mainly due to increased income from the Company’s minority interest in wireless partnerships.

  • On a GAAP basis, net loss was $14.0 million and GAAP net loss per share was ($0.20). Adjusted diluted net loss per share excludes certain items as outlined in the table provided in this release. Adjusted diluted net loss per share was ($0.09) in the fourth quarter, compared to ($0.04) in the fourth quarter of 2017.

  • Adjusted EBITDA was $132.4 million compared to $133.2 million in the year ago quarter.

  • The total net debt to last 12-month adjusted EBITDA ratio was 4.3x.

Full-Year 2018 Results

  • For the full year 2018, operating revenue totaled $1.4 billion, down 4.2 percent from pro forma fiscal year 2017. The decline was primarily due to continued erosion of legacy voice services and access revenues as well as the step down in CAF II transitional funding support.

  • Net cash from operating activities was $357.3 million.

  • Adjusted EBITDA was $537.3 million for fiscal year 2018, up $1.1 million from pro forma fiscal year 2017.

Cash Available to Pay Dividends, Capex

For the fourth quarter, cash available to pay dividends was $40.4 million. The dividend payout ratio was 68.3 percent for the quarter and 67.4 percent for the year. At Dec. 31, 2018, cash and cash equivalents were $9.6 million. Capital expenditures were $58.1 million for the fourth quarter and $244.8 million for the year.

Financial Guidance

The Company is providing guidance for fiscal year 2019 as follows:

2018 Results

2019 Guidance

Cash interest expense

$128.1M

$135M to $140M

Cash income taxes1

$1.0M

$1M to $3M

Capital expenditures

$244.8M

$210M to $220M

(1) Cash income taxes primarily include local and state income taxes as federal income taxes will be shielded by existing net operating losses.

Dividend Payments

The Company’s board of directors declared a quarterly dividend of $0.38738 per common share, which is payable on May 1, 2019 to stockholders of record at the close of business on April 15, 2019. This will represent the 55th consecutive quarterly dividend paid by the Company.

Conference Call Information

Consolidated Communications will host a conference call and webcast today at 10 a.m. ET / 9 a.m. CT to discuss fourth quarter earnings and developments with respect to the Company. The live webcast and replay can be accessed from the Investor Relations section of the Company’s website at http://ir.consolidated.com. The live conference call dial-in number is 1-877-374-3981, conference ID 5858129. A telephonic replay of the conference call will be available through Feb. 28, 2019 and can be accessed by calling 1-855-859-2056, conference ID 5858129.

About Consolidated Communications

Consolidated Communications Holdings, Inc. (CNSL) is a leading broadband and business communications provider serving consumers, businesses, and wireless and wireline carriers across rural and metro communities and a 23-state service area. Leveraging an advanced fiber network spanning 37,000 fiber route miles, Consolidated Communications offers a wide range of communications solutions, including: high-speed Internet, data, phone, security, managed services, cloud services and wholesale, carrier solutions. From our first connection 125 years ago, Consolidated is dedicated to turning technology into solutions, connecting people and enriching how they work and live. Visit www.consolidated.com for more information.

Use of Non-GAAP Financial Measures

This press release, as well as the conference call, includes disclosures regarding “EBITDA,” “adjusted EBITDA,” “cash available to pay dividends” and the related “dividend payout ratio,” “total net debt to last twelve month adjusted EBITDA coverage ratio,” “adjusted diluted net income per share” and “adjusted net income attributable to common stockholders,” all of which are non-GAAP financial measures and described in this section as not being in compliance with Regulation S-X. Accordingly, they should not be construed as alternatives to net cash from operating or investing activities, cash and cash equivalents, cash flows from operations, net income or net income per share as defined by GAAP and are not, on their own, necessarily indicative of cash available to fund cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and the non-GAAP financial measures may not be comparable to other similarly titled measures of other companies. A reconciliation of the differences between these non-GAAP financial measures and the most directly comparable financial measures presented in accordance with GAAP is included in the tables that follow.

Adjusted EBITDA is comprised of EBITDA, adjusted for certain items as permitted or required by the lenders under our credit agreement in place at the end of each quarter in the periods presented. The tables that follow include an explanation of how adjusted EBITDA is calculated for each of the periods presented with the reconciliation to net income. EBITDA is defined as net earnings before interest expense, income taxes, depreciation and amortization on a historical basis.

Cash available to pay dividends represents adjusted EBITDA plus cash interest income less (1) cash interest expense, (2) capital expenditures and (3) cash income taxes; this calculation differs in certain respects from the similar calculation used in our credit agreement.

We present adjusted EBITDA, cash available to pay dividends and the related dividend payout ratio for several reasons. Management believes adjusted EBITDA, cash available to pay dividends and the dividend payout ratio are useful as a means to evaluate our ability to fund our estimated uses of cash (including interest on our debt) and pay dividends. In addition, we have presented adjusted EBITDA, cash available to pay dividends and the dividend payout ratio to investors in the past because they are frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and management believes presenting them here provides a measure of consistency in our financial reporting. Adjusted EBITDA and cash available to pay dividends, referred to as Available Cash in our credit agreement, are also components of the restrictive covenants and financial ratios contained in our credit agreement that requires us to maintain compliance with these covenants and limit certain activities, such as our ability to incur debt and to pay dividends. The definitions in these covenants and ratios are based on adjusted EBITDA and cash available to pay dividends after giving effect to specified charges. In addition, adjusted EBITDA, cash available to pay dividends and the dividend payout ratio provide our board of directors with meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in our credit agreement and to measure our ability to service and repay debt. We present the related “total net debt to last twelve month adjusted EBITDA coverage ratio” principally to put other non-GAAP measures in context and facilitate comparisons by investors, security analysts and others; this ratio differs in certain respects from the similar ratio used in our credit agreement. These measures differ in certain respects from the ratios used in our senior notes indenture.

These non-GAAP financial measures have certain shortcomings. In particular, adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. Similarly, while we may generate cash available to pay dividends, we are not required to use any such cash to pay dividends, and the payment of any dividends is subject to declaration by our board of directors, compliance with applicable law and the terms of our credit agreement. Because adjusted EBITDA is a component of the dividend payout ratio and the ratio of total net debt to last twelve month adjusted EBITDA, these measures are also subject to the material limitations discussed above. In addition, the ratio of total net debt to last twelve month adjusted EBITDA is subject to the risk that we may not be able to use the cash on the balance sheet to reduce our debt on a dollar-for-dollar basis. Management believes these ratios are useful as a means to evaluate our ability to incur additional indebtedness in the future.

We present the non-GAAP measures adjusted diluted net income per share and adjusted diluted net income attributable to common stockholders because our net income and net income per share are regularly affected by items that occur at irregular intervals or are non-cash items. We believe that disclosing these measures assists investors, securities analysts and other interested parties in evaluating both our company over time and the relative performance of the companies in our industry.

Preliminary Pro Forma Results

Estimated pro forma results of operations presented herein gives effect to the acquisition of FairPoint Communications, Inc. as if it had occurred on Jan. 1, 2016. The estimated pro forma results include certain accounting adjustments related to the acquisition that are expected to have a continuing impact on the combined results, including adjustments for depreciation and amortization of the acquired tangible and intangible assets, interest expense on the debt incurred to complete the acquisition and to repay certain existing indebtedness of FairPoint, the exclusion of certain acquisition related costs and the tax impact of these pro forma adjustments. These adjustments and the related results are based on a preliminary valuation of the estimated fair value of the net assets acquired, which is subject to change upon the final assessment and such changes could be material. The estimated pro forma information is not intended to represent or be indicative of the results of the combined company that would have been obtained had the acquisition been completed as of the dates presented and should not be taken as representative of the future consolidated results of the combined company.

Safe Harbor

The Securities and Exchange Commission (“SEC”) encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. Certain statements in this communication are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward-looking statements reflect, among other things, our current expectations, plans, strategies, and anticipated financial results. There are a number of risks, uncertainties, and conditions that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include our ability to successfully integrate FairPoint Communications, Inc.’s operations and realize the synergies from the integration, as well as a number of factors related to our business, including economic and financial market conditions generally and economic conditions in our service areas; various risks to stockholders of not receiving dividends and risks to our ability to pursue growth opportunities if we continue to pay dividends according to the current dividend policy; various risks to the price and volatility of our common stock; changes in the valuation of pension plan assets; the substantial amount of debt and our ability to repay or refinance it or incur additional debt in the future; our need for a significant amount of cash to service and repay the debt and to pay dividends on our common stock; restrictions contained in our debt agreements that limit the discretion of management in operating the business; regulatory changes, including changes to subsidies, rapid development and introduction of new technologies and intense competition in the telecommunications industry; risks associated with our possible pursuit of acquisitions; system failures; cyber-attacks, information or security breaches or technology failure of ours or of a third party; losses of large customers or government contracts; risks associated with the rights-of-way for the network; disruptions in the relationship with third party vendors; losses of key management personnel and the inability to attract and retain highly qualified management and personnel in the future; changes in the extensive governmental legislation and regulations governing telecommunications providers and the provision of telecommunications services; new or changing tax laws or regulations; telecommunications carriers disputing and/or avoiding their obligations to pay network access charges for use of our network; high costs of regulatory compliance; the competitive impact of legislation and regulatory changes in the telecommunications industry; and liability and compliance costs regarding environmental regulations. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements are discussed in more detail in our filings with the SEC, including our reports on Form 10-K and Form 10-Q. Many of these circumstances are beyond our ability to control or predict. Moreover, forward-looking statements necessarily involve assumptions on our part. These forward-looking statements generally are identified by the words “believe,” “expect,” “anticipate,” “estimate,” “project,” “intend,” “plan,” “should,” “may,” “will,” “would,” “will be,” “will continue” or similar expressions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Consolidated Communications Holdings, Inc. and its subsidiaries to be different from those expressed or implied in the forward-looking statements. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements that appear throughout this communication. Furthermore, forward-looking statements speak only as of the date they are made. Except as required under the federal securities laws or the rules and regulations of the SEC, we disclaim any intention or obligation to update or revise publicly any forward-looking statements. You should not place undue reliance on forward-looking statements.

Company Contact

Lisa Hood, Consolidated Communications
Phone: (844)-909-CNSL (2675)
Lisa.hood@consolidated.com

– Tables to follow –


Consolidated Communications Holdings, Inc.

Condensed Consolidated Balance Sheets

(Dollars in thousands, except share and per share amounts)

(Unaudited)

December 31,

December 31,

2018

2017

ASSETS

Current assets:

Cash and cash equivalents

$

9,599

$

15,657

Accounts receivable, net

133,136

121,528

Income tax receivable

11,072

21,846

Prepaid expenses and other current assets

44,336

33,318

Assets held for sale

-

21,310

Total current assets

198,143

213,659

Property, plant and equipment, net

1,927,126

2,037,606

Investments

110,853

108,858

Goodwill

1,035,274

1,038,032

Customer relationships, net

228,959

293,300

Other intangible assets

11,483

13,483

Other assets

23,423

14,188

Total assets

$

3,535,261

$

3,719,126

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

32,502

$

24,143

Advance billings and customer deposits

47,724

42,526

Dividends payable

27,579

27,418

Accrued compensation

64,459

49,770

Accrued interest

9,232

9,343

Accrued expense

71,650

72,041

Current portion of long-term debt and capital lease obligations

30,468

29,696

Liabilities held for sale

-

1,003

Total current liabilities

283,614

255,940

Long-term debt and capital lease obligations

2,303,585

2,311,514

Deferred income taxes

188,129

209,720

Pension and other post-retirement obligations

314,134

334,193

Other long-term liabilities

30,145

33,817

Total liabilities

3,119,607

3,145,184

Shareholders' equity:

Common stock, par value $0.01 per share; 100,000,000 shares

authorized, 71,187,301 and 70,777,354, shares outstanding

as of December 31, 2018 and December 31, 2017, respectively

712

708

Additional paid-in capital

513,070

615,662

Accumulated deficit

(50,834

)

-

Accumulated other comprehensive loss, net

(53,212

)

(48,083

)

Noncontrolling interest

5,918

5,655

Total shareholders' equity

415,654

573,942

Total liabilities and shareholders' equity

$

3,535,261

$

3,719,126

Consolidated Communications Holdings, Inc.

Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net revenues

$

344,750

$

356,360

$

1,399,074

$

1,059,574

Operating expenses:

Cost of services and products

154,656

155,453

611,872

445,998

Selling, general and administrative

expenses

82,433

86,159

333,605

249,141

Acquisition and other transaction costs

197

2,987

1,960

33,650

Depreciation and amortization

103,909

104,789

432,668

291,873

Income from operations

3,555

6,972

18,969

38,912

Other income (expense):

Interest expense, net of interest income

(35,499

)

(29,890

)

(134,578

)

(129,786

)

Other income, net

11,069

7,877

40,911

31,246

Loss before income taxes

(20,875

)

(15,041

)

(74,698

)

(59,628

)

Income tax benefit

(6,877

)

(115,065

)

(24,127

)

(124,927

)

Net income (loss)

(13,998

)

100,024

(50,571

)

65,299

Less: net income (loss) attributable to noncontrolling interest

(19

)

218

263

354

Net income (loss) attributable to common shareholders

$

(13,979

)

$

99,806

$

(50,834

)

$

64,945

Net income (loss) per basic and diluted common shares

attributable to common shareholders

$

(0.20

)

$

1.41

$

(0.73

)

$

1.07

Consolidated Communications Holdings, Inc.

Pro Forma Condensed Consolidated Statements of Operations

(Dollars in thousands, except per share amounts)

(Unaudited)

Pro Forma

Pro Forma

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net revenues

$

344,750

$

356,360

$

1,399,074

$

1,460,620

Operating expenses:

Operating expenses (exclusive of depreciation

and amortization)

237,286

241,794

947,437

981,329

Depreciation and amortization

103,909

104,789

432,668

418,365

Income from operations

3,555

9,777

18,969

60,926

Other income (expense):

Interest expense, net of interest income

(35,499

)

(29,890

)

(134,578

)

(119,510

)

Other income, net

11,069

7,877

40,911

28,875

Loss before income taxes

(20,875

)

(12,236

)

(74,698

)

(29,709

)

Income tax benefit

(6,877

)

(113,943

)

(24,127

)

(120,840

)

Net income (loss)

(13,998

)

101,707

(50,571

)

91,131

Less: net income (loss) attributable to noncontrolling interest

(19

)

218

263

354

Net income (loss) attributable to common shareholders

$

(13,979

)

$

101,489

$

(50,834

)

$

90,777

Net income (loss) per basic and diluted common share

attributable to common shareholders

$

(0.20

)

$

1.44

$

(0.73

)

$

1.29

Consolidated Communications Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

OPERATING ACTIVITIES

Net income (loss)

$

(13,998

)

$

100,024

$

(50,571

)

$

65,299

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

103,909

104,789

432,668

291,873

Deferred income taxes

(23,203

)

(130,348

)

(26,008

)

(126,127

)

Cash distributions from wireless partnerships less than earnings

(160

)

(522

)

(194

)

(1,411

)

Non-cash, stock-based compensation

1,365

447

5,119

2,766

Amortization of deferred financing

1,199

1,148

4,721

17,076

Other adjustments, net

2,251

551

6,066

3,208

Changes in operating assets and liabilities, net

21,922

8,714

(14,480

)

(42,657

)

Net cash provided by operating activities

93,285

84,803

357,321

210,027

INVESTING ACTIVITIES

Business acquisition, net of cash acquired

-

-

-

(862,385

)

Purchase of property, plant and equipment, net

(58,051

)

(61,896

)

(244,816

)

(181,185

)

Proceeds from sale of assets

485

563

2,125

859

Proceeds from business disposition

-

-

20,999

-

Proceeds from sale of investments

-

-

233

-

Net cash used in investing activities

(57,566

)

(61,333

)

(221,459

)

(1,042,711

)

FINANCING ACTIVITIES

Proceeds from issuance of long-term debt

53,001

21,000

189,588

1,052,325

Payment of capital lease obligations

(3,165

)

(2,570

)

(12,755

)

(7,933

)

Payment on long-term debt

(51,588

)

(21,587

)

(207,938

)

(111,337

)

Payment of financing costs

-

-

-

(16,732

)

Share repurchases for minimum tax withholding

(593

)

(530

)

(593

)

(571

)

Dividends on common stock

(27,601

)

(27,440

)

(110,222

)

(94,138

)

Other

-

-

-

(350

)

Net cash provided by (used in) financing activities

(29,946

)

(31,127

)

(141,920

)

821,264

Net change in cash and cash equivalents

5,773

(7,657

)

(6,058

)

(11,420

)

Cash and cash equivalents at beginning of period

3,826

23,314

15,657

27,077

Cash and cash equivalents at end of period

$

9,599

$

15,657

$

9,599

$

15,657

Consolidated Communications Holdings, Inc.

Consolidated Revenue by Category

(Dollars in thousands)

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Commercial and carrier:

Data and transport services (includes VoIP)

$

88,152

$

86,145

$

349,413

$

274,221

Voice services

49,301

54,137

202,875

152,632

Other

16,389

11,709

56,395

33,908

153,842

151,991

608,683

460,761

Consumer:

Broadband (VoIP and Data)

63,598

63,052

253,119

183,634

Video services

21,649

22,646

88,338

91,406

Voice services

47,597

54,581

202,032

137,696

132,844

140,279

543,489

412,736

Subsidies

17,948

20,375

83,371

62,272

Network access

37,382

40,243

152,582

110,196

Other products and services

2,734

3,472

10,949

13,609

Total operating revenue

344,750

356,360

1,399,074

1,059,574

Less operating revenues from divestitures

-

(1,355

)

(3,337

)

(2,784

)

$

344,750

$

355,005

$

1,395,737

$

1,056,790

Consolidated Communications Holdings, Inc.

Consolidated Revenue by Category

(Dollars in thousands)

(Unaudited)

Three Months Ended

Q4 2018

Q3 2018

Q2 2018

Q1 2018

Q4 2017

Commercial and carrier:

Data and transport services (includes VoIP)

$

88,152

$

87,633

$

87,603

$

86,025

$

86,145

Voice services

49,301

50,091

51,322

52,161

54,137

Other

16,389

13,906

14,237

11,863

11,709

153,842

151,630

153,162

150,049

151,991

Consumer:

Broadband (VoIP and Data)

63,598

63,865

62,545

63,111

63,052

Video services

21,649

21,790

22,065

22,834

22,646

Voice services

47,597

50,757

51,616

52,062

54,581

132,844

136,412

136,226

138,007

140,279

Subsidies

17,948

19,189

20,979

25,255

20,375

Network access

37,382

38,147

37,338

39,715

40,243

Other products and services

2,734

2,686

2,516

3,013

3,472

Total operating revenue

344,750

348,064

350,221

356,039

356,360

Less operating revenues from divestitures

-

(466

)

(1,417

)

(1,454

)

(1,355

)

$

344,750

$

347,598

$

348,804

$

354,585

$

355,005

Consolidated Communications Holdings, Inc.

Schedule of Adjusted EBITDA Calculation

(Dollars in thousands)

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net income (loss)

$

(13,998

)

$

100,024

$

(50,571

)

$

65,299

Add (subtract):

Income tax benefit

(6,877

)

(115,065

)

(24,127

)

(124,927

)

Interest expense, net

35,499

29,890

134,578

129,786

Depreciation and amortization

103,909

104,789

432,668

291,873

EBITDA

118,533

119,638

492,548

362,031

Adjustments to EBITDA (1):

Other, net (2)

11,552

11,854

34,599

47,536

Investment income (accrual basis)

(10,597

)

(8,681

)

(39,596

)

(31,749

)

Investment distributions (cash basis)

10,263

7,972

39,078

29,993

Pension/OPEB expense

1,249

1,925

5,546

3,527

Non-cash compensation (3)

1,365

447

5,119

2,766

Adjusted EBITDA

$

132,365

$

133,155

$

537,294

$

414,104

Notes:

(1) These adjustments reflect those required or permitted by the lenders under our credit agreement.

(2) Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.

(3) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from adjusted EBITDA.

Consolidated Communications Holdings, Inc.

Schedule of Pro Forma Adjusted EBITDA Calculation

(Dollars in thousands)

(Unaudited)

Pro Forma

Pro Forma

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net income (loss)

$

(13,998

)

$

101,707

$

(50,571

)

$

91,131

Add (subtract):

Income tax benefit

(6,877

)

(113,943

)

(24,127

)

(120,840

)

Interest expense, net

35,499

29,890

134,578

119,510

Depreciation and amortization

103,909

104,789

432,668

418,365

EBITDA

118,533

122,443

492,548

508,166

Adjustments to EBITDA (1):

Other, net (2)

11,552

9,049

34,599

14,499

Investment income (accrual basis)

(10,597

)

(8,681

)

(39,596

)

(31,749

)

Investment distributions (cash basis)

10,263

7,972

39,078

29,993

Pension/OPEB expense

1,249

1,925

5,546

9,545

Non-cash compensation (3)

1,365

447

5,119

5,752

Adjusted EBITDA

$

132,365

$

133,155

$

537,294

$

536,206

Notes:

(1) These adjustments reflect those required or permitted by the lenders under our credit agreement.

(2) Other, net includes income attributable to noncontrolling interests, acquisition and non-recurring related costs, and certain miscellaneous items.

(3) Represents compensation expenses in connection with our Restricted Share Plan, which because of the non-cash nature of the expenses are excluded from Adjusted EBITDA.

Consolidated Communications Holdings, Inc.

Cash Available to Pay Dividends

(Dollars in thousands)

(Unaudited)

Three Months Ended

Year Ended

December 31, 2018

December 31, 2018

Adjusted EBITDA

$

132,365

$

537,294

- Cash interest expense

(33,809

)

(128,081

)

- Capital expenditures

(58,051

)

(244,816

)

- Cash income taxes

(97

)

(940

)

Cash available to pay dividends

$

40,408

$

163,457

Dividends Paid

$

27,601

$

110,222

Payout Ratio

68.3

%

67.4

%

Note: The above calculation excludes the principal payments on our debt.

Consolidated Communications Holdings, Inc.

Total Net Debt to LTM Adjusted EBITDA Ratio

(Dollars in thousands)

(Unaudited)

December 31,

Summary of Outstanding Debt:

2018

Term loans, net of discount $6,994

$

1,796,068

Revolving loan

22,000

Senior unsecured notes due 2022, net of discount $2,991

497,009

Capital leases

30,362

Total debt as of December 31, 2018

$

2,345,439

Less deferred debt issuance costs

(11,386

)

Less cash on hand

(9,599

)

Total net debt as of December 31, 2018

$

2,324,454

Adjusted EBITDA for the

year ended December 31, 2018

$

537,294

Total Net Debt to last twelve months

Adjusted EBITDA

4.33x

Consolidated Communications Holdings, Inc.

Adjusted Net Income and Net Income Per Share

(Dollars in thousands, except per share amounts)

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2018

2017

2018

2017

Net income (loss)

$

(13,998

)

$

100,024

$

(50,571

)

$

65,299

Transaction and severance related costs, net of tax

7,590

4,503

23,986

25,902

Storm costs, net of tax

282

1,931

1,768

1,931

Local switching support settlement, net of tax

-

-

(2,978

)

-

Non-cash interest expense for swaps, net of tax

1,051

(440

)

3,480

666

Tax on non-deductible transaction related costs

-

1,102

-

3,443

Tax related to acquisition

-

-

1,062

5,205

Divestiture related, tax (1)

-

-

767

-

Change in deferred tax rate, tax

(2,763

)

-

(2,763

)

5,404

Change in deferred tax rate, federal tax reform

(772

)

(112,910

)

(5,169

)

(112,910

)

Other, tax

1,340

2,580

1,340

2,580

Amortization of commitment fee, net of tax

-

-

-

7,819

Ticking fees on committed financing, net of tax

-

-

-

10,966

Non-cash stock compensation, net of tax

1,020

272

3,824

1,682

Adjusted net income (loss)

$

(6,250

)

$

(2,938

)

$

(25,254

)

$

17,987

Weighted average number of shares outstanding

70,658

70,516

70,613

60,373

Adjusted diluted net income (loss) per share

$

(0.09

)

$

(0.04

)

$

(0.36

)

$

0.30

Notes:

(1) Includes sale of Virginia properties on July 31, 2018.

Calculations above assume a 25.3% effective tax rate for the three months and year ended December 31, 2018 and 39.2% effective tax rate for the three months and year ended December 31, 2017.

Net income per share has been impacted by approximately $0.22 for the year ended December 31, 2018 due to increased depreciation and amortization associated with the valuation of the FairPoint assets.

Consolidated Communications Holdings, Inc.

Key Operating Statistics

(Unaudited)

December 31,

September 30,

% Change

December 31,

% Change

2018

2018

in Qtr

2017 (2)

YOY

Voice Connections

902,414

921,896

(2.1%)

967,965

(6.8%)

Data and Internet Connections

778,970

781,912

(0.4%)

780,794

(0.2%)

Video Connections

93,065

95,889

(2.9%)

103,313

(9.9%)

Business and Broadband as % of total revenue (1)

76.2%

75.2%

1.3%

74.8%

1.8%

Fiber route network miles (long-haul and metro)

36,944

36,814

0.4%

35,962

2.7%

On-net buildings

10,424

10,041

3.8%

9,062

15.0%

Consumer Customers

628,649

641,845

(2.1%)

666,872

(5.7%)

Consumer ARPU

$70.44

$70.70

(0.4%)

$69.69

1.1%

Notes:

(1) Business and Broadband revenue % includes: commercial/carrier, equipment sales and service, directory, consumer broadband and special access.

(2) The sale of our local exchange carrier in Virginia resulted in a reduction of approximately 4,110 voice connections, 2,900 data and Internet connections and 4,340 consumer customers in the third quarter of 2018. Prior period amounts have been adjusted to reflect the sale.