Year over Year Growth in 4Q12 Revenue and Adjusted EBITDA
Strategic Data Revenue was 52% of Total 4Q12 Revenue and Grew 5% Sequentially
Adjusted EBITDA Margins Expand for Second Consecutive Quarter to 44.1%
Cash Dividend of $0.14 per Share Declared
WAYNESBORO, Va.–(BUSINESS WIRE)–
Lumos Networks Corp. (“Lumos Networks” or “the Company”) (LMOS), a fiber-based service provider of data, voice and IP-based telecommunication services in the Mid-Atlantic region, today announced financial results for its fourth quarter of 2012.
Total revenue for the fourth quarter of 2012 was $52.7 million, compared to $51.1 million for the fourth quarter of 2011 and $52.0 million in the third quarter of 2012. Total adjusted EBITDA was $23.2 million for the fourth quarter of 2012, compared to $23.0 million in the fourth quarter of 2011 and to $22.3 million in the third quarter of 2012.
“Our strong execution continued in the fourth quarter as our Strategic Data revenue grew 5% sequentially and represented 52% of total sales, up from 50% in the prior quarter,” said Tim Biltz, CEO and President of Lumos Networks. “Our Strategic Data revenue grew 17% from the same quarter in the prior year, which is the third straight quarter of accelerating revenue growth for this product segment.”
“Our adjusted EBITDA margins reached 44.1%, marking the second straight quarter of sequential margin improvements, and we are making clear progress towards our longer term margin target of 47%,” Mr. Biltz continued. “I view this quarter’s results as a true inflection point in our operating results and I am confident that our current momentum will carry through 2013.”
Highlights
- During the fourth quarter of 2012, the Company exceeded its targeted installation goals and more than doubled the number of fiber to the cell (“FTTC”) installations from 148 as of December 31, 2011 to 370 as of December 31, 2012.
- In 2012, the Company achieved its goal of ensuring that 75% of total capital expenditures were for success-based strategic data projects in its Enterprise and Carrier Data customer segments as compared to less than 50% in 2011.
- Adjusted EBITDA margins were 44.1% in the fourth quarter, up sequentially for the second consecutive quarter, from 41.5% in second quarter and 42.9% in the third quarter of 2012.
- On February 27, 2013, the Board of Directors of Lumos Networks Corporation declared a dividend on its common stock in the amount of $0.14 per share to be paid on April 11, 2013 to stockholders of record on March 13, 2013.
Business Outlook
The Company introduced financial guidance for the first quarter and full year of 2013. In the first quarter of 2013, the Company expects revenue to be approximately $52 million and adjusted EBITDA approximately $23 million. For the full year 2013, the Company expects revenue to be in the range of $208 to $212 million and adjusted EBITDA in the range of $94 to $97 million. During the first half of 2013, the Company plans to explore bank financing options to adequately fund our success-based Strategic Data growth plans over the next several years.
Please see the schedules accompanying this release for additional financial guidance, including projected 2013 cash flows and non-GAAP reconciliations.
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, Harold L. Covert, CFO, and Will Davis, Director of Investor Relations, to review these financial and operational results and financial guidance will be held at 8:30 A.M. (ET) on February 28, 2013.
The webcast may be accessed via the Internet at http://ir.lumosnetworks.com/ and the live call (“Lumos Networks Fourth Quarter 2012 Earnings Conference Call”) may be accessed with the following numbers:
Domestic: 1-888-317-6016
International: 1-412-317-6016
Canada: 1-855-669-9657
The conference call will be archived and available for replay through March 13, 2013 before 9:00 A.M. (ET) and may be accessed with the following numbers:
Domestic: 1-877-344-7529
International: 1-412-317-0088
Replay pass codes: Conference ID: 10024524
The webcast will also be archived and the replay may be accessed at http://ir.lumosnetworks.com/.
About Lumos Networks
Lumos Networks is a fiber-based service provider in the Mid-Atlantic region serving carrier, business and residential customers over a dense fiber network offering data, voice and IP services. With headquarters in Waynesboro, VA, Lumos Networks serves Virginia, West Virginia and portions of Pennsylvania, Kentucky, Ohio, and Maryland over a fiber network of 5,800 long haul miles. Detailed information about Lumos Networks is available at www.lumosnetworks.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 attributable to noncontrolling interests, other expenses/income, 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 derivatives.
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 exhibits and materials posted on the Lumos Networks website 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” 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 industry; our ability to achieve benefits from our separation from NTELOS Holdings Corp; our ability to offset expected revenue declines in our Competitive business from legacy voice products and in our RLEC business related to the recent regulatory developments and carriers grooming their networks; adverse economic conditions; operating and financial restrictions imposed by our senior credit facility; our cash and capital requirements; declining prices for our services; 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 Reports filed on Forms 10-K.
Exhibits:
- Condensed Consolidated Balance Sheets
- Condensed Consolidated Statements of Operations
- Condensed Consolidated Statements of Cash Flows
- Summary of Operating Results, Customer and Network Statistics
- Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating Income
- Reconciliation of Operating Income to Adjusted EBITDA
- Business Outlook
| Lumos Networks Corp. | ||||||
| Condensed Consolidated Balance Sheets | ||||||
| December 31, 2012 | December 31, 2011 | |||||
| (In thousands) | ||||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 2 | $ | 10,547 | ||
| Restricted cash 1 | 5,303 | 7,554 | ||||
| Accounts receivable, net | 22,676 | 23,555 | ||||
| Other receivables | 2,400 | 2,390 | ||||
| Income tax receivable | 954 | – | ||||
| Prepaid expenses and other | 5,136 | 2,278 | ||||
| Total Current Assets | 36,471 | 46,324 | ||||
| Securities and investments | 462 | 128 | ||||
| Property, plant and equipment, net | 336,589 | 299,958 | ||||
| Other Assets | ||||||
| Goodwill | 100,297 | 100,297 | ||||
| Other intangibles, net | 34,895 | 45,696 | ||||
| Deferred charges and other assets | 4,448 | 6,197 | ||||
| Total Other Assets | 139,640 | 152,190 | ||||
| Total Assets | $ | 513,162 | $ | 498,600 | ||
| LIABILITIES AND EQUITY | ||||||
| Current Liabilities | ||||||
| Current portion of long-term debt | $ | 7,900 | $ | 2,679 | ||
| Accounts payable | 17,453 | 12,432 | ||||
| Dividends payable | 3,013 | 2,980 | ||||
| Advance billings and customer deposits | 13,527 | 12,623 | ||||
| Accrued compensation | 1,742 | 2,832 | ||||
| Accrued operating taxes | 3,838 | 2,624 | ||||
| Other accrued liabilities | 6,284 | 3,262 | ||||
| Total Current Liabilities | 53,757 | 39,432 | ||||
| Long-Term Liabilities | ||||||
| Long-term debt | 304,325 | 323,897 | ||||
| Retirement benefits | 30,413 | 35,728 | ||||
| Deferred income taxes | 55,956 | 41,204 | ||||
| Other long-term liabilities | 3,500 | 5,028 | ||||
| Income tax payable | 609 | 484 | ||||
Total Long-term Liabilities | 394,803 | 406,341 | ||||
| Stockholders’ Equity | 64,050 | 52,383 | ||||
| Noncontrolling Interests | 552 | 444 | ||||
| Total Equity | 64,602 | 52,827 | ||||
| Total Liabilities and Equity | $ | 513,162 | $ | 498,600 | ||
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 Operations | Three months ended: | Year ended: | ||||||||||||||
| (In thousands, except per share amounts) | December 31, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | ||||||||||||
| Operating Revenues | $ | 52,679 | $ | 51,107 | $ | 206,871 | $ | 207,414 | ||||||||
| Operating Expenses 1 | ||||||||||||||||
| Cost of sales and services (exclusive of items shown separately below) | 20,601 | 19,584 | 80,520 | 78,484 | ||||||||||||
| Customer operations | 5,440 | 4,773 | 21,886 | 19,551 | ||||||||||||
| Corporate operations 2,3 | 5,168 | 5,341 | 23,615 | 16,251 | ||||||||||||
| Depreciation and amortization | 11,211 | 10,187 | 38,884 | 43,090 | ||||||||||||
| Asset impairment charge | – | 86,295 | – | 86,295 | ||||||||||||
| Accretion of asset retirement obligations | 31 | 31 | 124 | 116 | ||||||||||||
| Restructuring charges 4 | 2,981 | – | 2,981 | – | ||||||||||||
| Gain on settlements, net 5 | – | – | (2,335 | ) | – | |||||||||||
| Total Operating Expenses, net | 45,432 | 126,211 | 165,675 | 243,787 | ||||||||||||
| Operating Income (Loss) | 7,247 | (75,104 | ) | 41,196 | (36,373 | ) | ||||||||||
| Other Income (Expenses) | ||||||||||||||||
| Interest expense | (2,941 | ) | (3,153 | ) | (11,921 | ) | (11,993 | ) | ||||||||
| Loss on interest rate derivatives | (1,343 | ) | – | (1,898 | ) | – | ||||||||||
| Other income, net | 26 | 32 | 81 | 105 | ||||||||||||
| Income (Loss) Before Income Tax Expense | 2,989 | (78,225 | ) | 27,458 | (48,261 | ) | ||||||||||
| Income Tax Expense (Benefit) | 1,025 | (16,527 | ) | 11,010 | (4,383 | ) | ||||||||||
| Net Income (Loss) | 1,964 | (61,698 | ) | 16,448 | (43,878 | ) | ||||||||||
| Net (Income) Loss Attributable to Noncontrolling Interests | (28 | ) | 35 | (108 | ) | (52 | ) | |||||||||
| Net Income (Loss) Attributable to Lumos Networks Corp. | $ | 1,936 | $ | (61,663 | ) | $ | 16,340 | $ | (43,930 | ) | ||||||
| Basic and Diluted Earnings (Loss) per Common Share Attributable to Lumos Networks Corp. Stockholders: | ||||||||||||||||
| Earnings (loss) per share – basic 6 | $ | 0.09 | $ | (2.96 | ) | $ | 0.78 | $ | (2.11 | ) | ||||||
| Earnings (loss) per share – diluted 6 | $ | 0.09 | $ | (2.96 | ) | $ | 0.76 | $ | (2.11 | ) | ||||||
| Weighted average shares outstanding – basic | 21,047 | 20,815 | 20,958 | 20,815 | ||||||||||||
| Weighted average shares outstanding – diluted | 21,517 | 20,815 | 21,407 | 20,815 | ||||||||||||
| Cash Dividends Declared per Share – Common Stock | $ | 0.14 | $ | 0.14 | $ | 0.56 | $ | 0.14 | ||||||||
| 1 | Includes equity-based compensation charges related to all of the Company’s share-based awards and the Company’s 401(k) matching contributions of $1.0 million and $0.2 million for the three months ended December 31, 2012 and 2011, respectively, and $3.9 million and $2.4 million for the years ended December 31, 2012 and 2011, respectively. | |
| 2 | Includes amortization of actuarial losses related to certain retirement benefit plans of $0.4 million and $1.8 million for the three and twelve-month periods ended December 31, 2012, respectively. The amounts allocated to us from our former parent for amortization of actuarial losses for periods prior to the Business Separation on October 31, 2011 were not material. | |
| 3 | In 2012, the Company recorded charges of $2.3 million related to the recognition of employee separation benefits which were provided for in the employment agreements of two executive officers who left the Company in April and December 2012. | |
| 4 | In December 2012, the Company completed a cost reduction plan involving an employee reduction-in-force, consolidation of certain facilities and freezing the accumulation of benefits under certain postretirement plans. Restructuring charges of $3.0 million were recognized in the fourth quarter of 2012 in connection with this plan, $2.4 million of which related to employee severance and termination benefits and $0.6 million of which related to lease termination costs. | |
| 5 | The Company recognized a net pre-tax gain of approximately $2.3 million in the third quarter of 2012 in connection with the settlement of outstanding matters related to a prior acquisition and the settlement of an outstanding lawsuit. | |
| 6 | Basic and diluted earnings (loss) per share for the three and twelve months ended December 31, 2011 is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the two month period beginning November 1, 2011 (the date upon which we became an independent publicly traded company) and ending December 31, 2011. | |
| Lumos Networks Corp. | ||||||||
| Condensed Consolidated Statements of Cash Flows | Year ended: | |||||||
| (In thousands) | December 31, 2012 | December 31, 2011 | ||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | 16,448 | $ | (43,878 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
| Depreciation | 27,750 | 27,703 | ||||||
| Amortization | 11,134 | 15,387 | ||||||
| Accretion of asset retirement obligations | 124 | 116 | ||||||
| Asset impairment charge | – | 86,295 | ||||||
| Deferred income taxes | 10,514 | (8,110 | ) | |||||
| Loss on interest rate swap derivatives | 1,898 | – | ||||||
| Equity-based compensation expense | 3,912 | 2,383 | ||||||
| Amortization of loan origination costs | 812 | 132 | ||||||
| Gain on settlement | (3,035 | ) | – | |||||
| Retirement benefits, net of contributions and distributions | 665 | (4,059 | ) | |||||
| Excess tax benefits from share-based compensation | (428 | ) | – | |||||
| Changes in operating assets and liabilities, net | 2,421 | 6,939 | ||||||
| Net cash provided by operating activities | 72,215 | 82,908 | ||||||
| Cash flows from investing activities | ||||||||
| Purchases of property, plant and equipment | (59,881 | ) | (61,536 | ) | ||||
| Broadband network expansion funded by stimulus grant | (1,351 | ) | (2,248 | ) | ||||
| Proceeds from disposal of managed services business | 750 | – | ||||||
| Change in restricted cash | 2,251 | 508 | ||||||
| Cash reimbursement received from broadband stimulus grant | 2,251 | 508 | ||||||
| Purchase of tradename asset | (333 | ) | – | |||||
| Other | (26 | ) | – | |||||
| Net cash used in investing activities | (56,339 | ) | (62,768 | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of long-term debt | – | 310,000 | ||||||
| Proceeds from issuance of revolving credit facility | – | 30,000 | ||||||
| Payment of debt issuance costs | – | (4,854 | ) | |||||
| Cash paid to NTELOS Inc. associated with the Business Separation | – | (315,000 | ) | |||||
| Payments on senior secured term loans | (2,000 | ) | (500 | ) | ||||
| Payments on revolving credit facility, net | (11,478 | ) | (15,000 | ) | ||||
| Cash dividends paid on common stock | (11,951 | ) | – | |||||
| Payments to NTELOS Inc., net | – | (14,357 | ) | |||||
| Payments under capital lease obligations | (1,542 | ) | (317 | ) | ||||
| Proceeds from employee stock purchase plan | 122 | – | ||||||
| Excess tax benefits from share-based compensation | 428 | – | ||||||
| Other | – | (54 | ) | |||||
| Net cash used in financing activities | (26,421 | ) | (10,082 | ) | ||||
| (Decrease) increase in cash | (10,545 | ) | 10,058 | |||||
| Cash: | ||||||||
| Beginning of period | 10,547 | 489 | ||||||
| End of period | $ | 2 | $ | 10,547 | ||||
| Lumos Networks Corp. | |||||||||||||||||||||
| Operating Results, Customer and Network Statistics | |||||||||||||||||||||
| (Dollars in thousands) | Three months ended: | Year ended: | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | December 31, | December 31, | |||||||||||||||
| 2012 | 2012 | 2012 | 2012 | 2011 | 2012 | 2011 | |||||||||||||||
| Competitive Revenue and Adjusted EBITDA | |||||||||||||||||||||
| Revenue | |||||||||||||||||||||
| Enterprise Data | 9,628 | 9,448 | 9,039 | 8,667 | 8,437 | 36,782 | 33,131 | ||||||||||||||
| Carrier Data | 13,025 | 11,955 | 11,196 | 10,937 | 10,506 | 47,113 | 37,649 | ||||||||||||||
| IP Services | 4,754 | 4,718 | 4,684 | 4,587 | 4,515 | 18,743 | 17,401 | ||||||||||||||
Total Strategic Data | 27,407 | 26,121 | 24,919 | 24,191 | 23,458 | 102,638 | 88,181 | ||||||||||||||
| Legacy Voice | 10,703 | 11,244 | 11,509 | 12,010 | 12,825 | 45,466 | 54,414 | ||||||||||||||
| Access | 1,948 | 2,413 | 2,540 | 2,715 | 2,758 | 9,616 | 11,802 | ||||||||||||||
| Total Revenue | 40,058 | 39,778 | 38,969 | 38,915 | 39,042 | 157,720 | 154,397 | ||||||||||||||
| Adjusted EBITDA1 | 14,652 | 14,440 | 14,078 | 14,548 | 15,034 | 57,718 | 62,098 | ||||||||||||||
| Adjusted EBITDA % | 36.6 | % | 36.3 | % | 36.1 | % | 37.4 | % | 38.5 | % | 36.6 | % | 40.2 | % | |||||||
| RLEC Revenue and Adjusted EBITDA | |||||||||||||||||||||
| Revenue | |||||||||||||||||||||
| Legacy Voice | 4,883 | 4,874 | 4,710 | 4,756 | 4,937 | 19,223 | 20,039 | ||||||||||||||
| Access | 7,738 | 7,325 | 7,125 | 7,740 | 7,129 | 29,928 | 32,978 | ||||||||||||||
| Total Revenue | 12,621 | 12,199 | 11,835 | 12,496 | 12,066 | 49,151 | 53,017 | ||||||||||||||
| Adjusted EBITDA1 | 8,559 | 7,841 | 7,028 | 7,743 | 7,970 | 31,171 | 34,842 | ||||||||||||||
| Adjusted EBITDA % | 67.8 | % | 64.3 | % | 59.4 | % | 62.0 | % | 66.1 | % | 63.4 | % | 65.7 | % | |||||||
| Consolidated | |||||||||||||||||||||
| Revenue | |||||||||||||||||||||
| Strategic Data | 27,407 | 26,121 | 24,919 | 24,191 | 23,458 | 102,638 | 88,181 | ||||||||||||||
| Legacy Voice | 15,586 | 16,118 | 16,219 | 16,766 | 17,762 | 64,689 | 74,453 | ||||||||||||||
| Access | 9,686 | 9,738 | 9,665 | 10,455 | 9,887 | 39,544 | 44,780 | ||||||||||||||
| Total Revenue | 52,679 | 51,977 | 50,803 | 51,412 | 51,107 | 206,871 | 207,414 | ||||||||||||||
| Adjusted EBITDA1 | 23,211 | 22,281 | 21,106 | 22,291 | 23,004 | 88,889 | 96,940 | ||||||||||||||
| Adjusted EBITDA % | 44.1 | % | 42.9 | % | 41.5 | % | 43.4 | % | 45.0 | % | 43.0 | % | 46.7 | % | |||||||
| Capital Expenditures | 15,956 | 14,937 | 11,619 | 17,369 | 12,722 | 59,881 | 61,536 | ||||||||||||||
| Adjusted EBITDA less Capital Expenditures | 7,255 | 7,344 | 9,487 | 4,922 | 10,282 | 29,008 | 35,404 | ||||||||||||||
| Customer and Network Statistics | |||||||||||||||||||||
| Customer Statistics | |||||||||||||||||||||
| Competitive voice connections 2 | 110,261 | 112,709 | 114,930 | 117,965 | 122,046 | 110,261 | 122,046 | ||||||||||||||
| RLEC Broadband Customers 3 | 15,181 | 15,199 | 15,258 | 15,100 | 14,916 | 15,181 | 14,916 | ||||||||||||||
| Total Broadband Connections 3 | 39,950 | 40,401 | 37,361 | 35,974 | 35,707 | 39,950 | 35,707 | ||||||||||||||
| Video Subscribers | 4,549 | 4,390 | 4,192 | 4,019 | 3,734 | 4,549 | 3,734 | ||||||||||||||
| Network Statistics | |||||||||||||||||||||
| On-Network Buildings 4 | 1,196 | 1,150 | 1,091 | 1,066 | 1,051 | 1,196 | 1,051 | ||||||||||||||
| Fiber to the Cell Sites 4 | 370 | 261 | 178 | 155 | 148 | 370 | 148 | ||||||||||||||
| RLEC Total Access Lines | 31,203 | 31,708 | 32,272 | 32,676 | 33,193 | 31,203 | 33,193 | ||||||||||||||
| 1 | Adjusted EBITDA is a non-GAAP measure. See definition on page 2 of this earnings release. | |
| 2 | Includes customer Primary Rate Interface (PRI) line equivalents at 23 lines per PRI. Excludes intercompany PRI lines. | |
| 3 | Includes customers or customer equivalents for DSL, dedicated Internet access, wireless portable broadband, broadband over fiber and metro Ethernet. All revenues from broadband products, including RLEC broadband, are recorded in the operating revenues of the Competitive segment. | |
| 4 | Includes statistics for legacy markets only, excluding FiberNet, through December 31, 2012. | |
| Note: Certain amounts have been reclassified to agree with current year presentation. | ||
| Lumos Networks Corp. | ||||||||||||||||
| Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating Income | ||||||||||||||||
| (In thousands) | ||||||||||||||||
| Three months ended: | Year ended: | |||||||||||||||
| December 31, 2012 | December 31, 2011 | December 31, 2012 | December 31, 2011 | |||||||||||||
| Net income (loss) attributable to Lumos Networks Corp. | $ | 1,936 | $ | (61,663 | ) | $ | 16,340 | $ | (43,930 | ) | ||||||
| Net income (loss) attributable to noncontrolling interests | 28 | (35 | ) | 108 | 52 | |||||||||||
| Net income (loss) | 1,964 | (61,698 | ) | 16,448 | (43,878 | ) | ||||||||||
| Interest expense | 2,941 | 3,153 | 11,921 | 11,993 | ||||||||||||
| Loss on interest rate derivatives | 1,343 | – | 1,898 | – | ||||||||||||
| Income tax expense (benefit) | 1,025 | (16,527 | ) | 11,010 | (4,383 | ) | ||||||||||
| Other income, net | (26 | ) | (32 | ) | (81 | ) | (105 | ) | ||||||||
| Operating income (loss) | $ | 7,247 | $ | (75,104 | ) | $ | 41,196 | $ | (36,373 | ) | ||||||
| Competitive | 4,428 | 6,678 | 25,257 | 29,955 | ||||||||||||
| RLEC | 2,819 | (81,782 | ) | 15,939 | (66,328 | ) | ||||||||||
| Operating income (loss) | $ | 7,247 | $ | (75,104 | ) | $ | 41,196 | $ | (36,373 | ) | ||||||
| Lumos Networks Corp. | ||||||||||||||||||||||||
| Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||||||||||||||||
| (Dollars in thousands) | 2012 | 2011 | ||||||||||||||||||||||
| Competitive | RLEC | Total | Competitive | RLEC | Total | |||||||||||||||||||
| For The Three Months Ended December 31 | ||||||||||||||||||||||||
| Operating Income (Loss) | $ | 4,428 | $ | 2,819 | $ | 7,247 | $ | 6,678 | $ | (81,782 | ) | $ | (75,104 | ) | ||||||||||
| Depreciation and amortization and accretion of asset retirement obligations | 7,146 | 4,096 | 11,242 | 7,196 | 3,021 | 10,217 | ||||||||||||||||||
| Sub-total: | 11,574 | 6,915 | 18,489 | 13,874 | (78,761 | ) | (64,887 | ) | ||||||||||||||||
| Asset impairment charge | – | – | – | – | 86,295 | 86,295 | ||||||||||||||||||
| Amortization of actuarial losses | 334 | 111 | 445 | – | – | – | ||||||||||||||||||
| Equity based compensation | 757 | 268 | 1,025 | 140 | 97 | 237 | ||||||||||||||||||
| Acquisition related charges | – | – | – | 1 | – | 1 | ||||||||||||||||||
| Business separation charges | – | – | – | 1,019 | 339 | 1,358 | ||||||||||||||||||
| Employee separation charges 1 | 203 | 68 | 271 | – | – | – | ||||||||||||||||||
| Restructuring charges 2 | 1,784 | 1,197 | 2,981 | – | – | – | ||||||||||||||||||
Adjusted EBITDA | $ | 14,652 | $ | 8,559 | $ | 23,211 | $ | 15,034 | $ | 7,970 | $ | 23,004 | ||||||||||||
| Adjusted EBITDA Margin | 36.6 | % | 67.8 | % | 44.1 | % | 38.5 | % | 66.1 | % | 45.0 | % | ||||||||||||
| For The Year Ended December 31 | ||||||||||||||||||||||||
| Operating Income (Loss) | $ | 25,257 | $ | 15,939 | $ | 41,196 | $ | 29,955 | $ | (66,328 | ) | $ | (36,373 | ) | ||||||||||
| Depreciation and amortization and accretion of asset retirement obligations | 26,439 | 12,569 | 39,008 | 29,579 | 13,627 | 43,206 | ||||||||||||||||||
| Sub-total: | 51,696 | 28,508 | 80,204 | 59,534 | (52,701 | ) | 6,833 | |||||||||||||||||
| Asset impairment charge | – | – | – | – | 86,295 | 86,295 | ||||||||||||||||||
| Amortization of actuarial losses | 1,336 | 445 | 1,781 | – | – | – | ||||||||||||||||||
| Equity based compensation | 2,895 | 1,017 | 3,912 | 1,474 | 909 | 2,383 | ||||||||||||||||||
| Acquisition related charges | – | – | – | 71 | – | 71 | ||||||||||||||||||
| Business separation charges | – | – | – | 1,019 | 339 | 1,358 | ||||||||||||||||||
| Employee separation charges 1 | 1,759 | 587 | 2,346 | – | – | – | ||||||||||||||||||
| Restructuring charges 2 | 1,784 | 1,197 | 2,981 | – | – | – | ||||||||||||||||||
| Gain on settlements, net 3 | (1,752 | ) | (583 | ) | (2,335 | ) | – | – | – | |||||||||||||||
| Adjusted EBITDA | $ | 57,718 | $ | 31,171 | $ | 88,889 | $ | 62,098 | $ | 34,842 | $ | 96,940 | ||||||||||||
| Adjusted EBITDA Margin | 36.6 | % | 63.4 | % | 43.0 | % | 40.2 | % | 65.7 | % | 46.7 | % | ||||||||||||
| 1 | In 2012, the Company recorded charges of $2.3 million related to the recognition of employee separation benefits which were provided for in the employment agreements of two executive officers who left the Company in April and December 2012. | |
| 2 | In the fourth quarter of 2012, the Company completed a cost reduction plan involving an employee reduction-in-force, consolidation of certain facilities and freezing the accumulation of benefits under certain postretirement plans. Restructuring charges of $3.0 million were recognized in the fourth quarter in connection with this, of which $2.4 million was related to employee severance and termination benefits and $0.6 million was related to lease termination costs. | |
| 3 | The Company recognized a net pre-tax gain of approximately $2.3 million in the third quarter of 2012 in connection with the settlement of outstanding matters related to a prior acquisition and the settlement of an outstanding lawsuit. | |
| Lumos Networks Corp. | ||||||||||||
| Business Outlook 1 (as of February 28, 2013) | ||||||||||||
| (In millions) | 2013 Guidance 1 | |||||||||||
| First Quarter 2013 | 2013 Annual | |||||||||||
| Operating Revenues | approximately $52 | $ | 208 | to | $ | 212 | ||||||
| Adjusted EBITDA | approximately $23 | $ | 94 | to | $ | 97 | ||||||
| Capital Expenditures | approximately $16 | $ | 65 | to | $ | 70 | ||||||
| Reconciliation of Operating Income to Adjusted EBITDA | ||||||||||||
| Operating Income | approximately $11 | $ | 44 | to | $ | 46 | ||||||
| Depreciation and amortization | approximately $10 | 40 | to | 41 | ||||||||
| Equity based compensation charges | approximately $2 | 8 | ||||||||||
| Amortization of actuarial losses | 2 | |||||||||||
| Adjusted EBITDA | approximately $23 | $ | 94 | to | $ | 97 | ||||||
| Lumos Networks Corp. | ||||
| Projected Cash Flows for the Year 2013 1 | ||||
| (Dollars in millions) | ||||
| Adjusted EBITDA 2 | $ | 96 | ||
| Less: Capital expenditures | (65 | ) | ||
| 31 | ||||
| Less: | ||||
| Cash interest, net of interest income | (14 | ) | ||
| Cash taxes | (6 | ) | ||
| Cash flows, net, before dividends and debt payments | 11 | |||
| Less: | ||||
| Cash dividends: $0.14 per share per quarter 3 | (12 | ) | ||
| Scheduled 2013 debt payments | (3 | ) | ||
| Plus: | ||||
| Other, net | (7 | ) | ||
| Projected Cash Flows, net 4 | $ | (11 | ) | |
| 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. fourth quarter 2012 earnings release dated February 28, 2013. | |
| 2 | Based on the mid-point of the above guidance range. | |
| 3 | Represents the most recent cash dividend paid, annualized. Dividend payments are reviewed quarterly by the board of directors and are subject to change. | |
| 4 | Before discretionary payments to the credit facility Revolver loan and changes to working capital. | |
Will Davis
Director of Investor Relations
(o) 540-946-6930
(c) 917-519-6994
davisw@lumosnet.com
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