FairPoint Communications, Inc (Nasdaq: FRP) has announced its financial results for the third quarter ended September 30, 2013.’ ‘
"Revenue growth, expense control and disciplined use of capital led to third quarter results that exceeded our expectations," said CEO Paul H. Sunu. "We saw solid performance in our growth products such as Ethernet and we continue to manage the decline in our legacy voice revenue.’ This is the third consecutive quarter with stable revenues, which provides further evidence we have entered a period of revenue stabilization.’ We remain focused on generating sustainable free cash flow to create long-term value for our shareholders."
Operating Highlights
FairPoint continued the positive momentum in its growth-oriented services.’ The Company expects revenue growth in business, advanced data services such as Ethernet, high-capacity data transport and other IP-based services along with broadband services to initially offset and then exceed the losses expected from the Company's legacy access products like residential voice. FairPoint has continued to invest in its broadband network to increase capacity, broaden its reach and offer more competitive services.’ In the third quarter, data and Internet services revenue grew 12.9% versus a year ago as products like FairPoint's retail’ Ethernet’ service offerings continued to attract new customers.’ Data and Internet services revenue increased 3.7% sequentially in the third quarter, which is an increase for the third consecutive quarter.’ ‘
Ethernet services contributed approximately $16.4 million of revenue in the third quarter of 2013 as compared to $11.5 million a year ago, as retail and wholesale Ethernet circuits grew 57.8% year-over-year.’ Growth in the Company's Ethernet products is expected to continue based on demand from customers like regional banks, healthcare networks and wireless carriers.
Broadband subscribers, pro forma for divestitures, grew 3.0% year-over-year. FairPoint added more than 9,000 broadband subscribers during the last 12 months, as penetration reached 36.9% of the Company's voice access lines at September 30, 2013.’ Broadband subscribers decreased quarter-over-quarter primarily due to proactive efforts to improve the credit profile of subscribers. This ongoing effort is in line with the Company's initiative to improve the quality of revenue and is expected to increase productivity and reduce collection costs.
Voice access lines, pro forma for divestitures, declined 7.3% year-over-year as compared to 7.7% a year ago.’ The improvement was driven by a slowdown in the rate of loss in business voice and wholesale access lines.
As of September 30, 2013, FairPoint had 3,182 employees, a decrease of 6.4% versus a year ago.’ Headcount declined by 73 employees, or 2.2%, in the third quarter of 2013 compared to the second quarter of 2013 due in part to the completion of a previously announced workforce reduction.
Financial Highlights
Third Quarter 2013 as compared to Second Quarter 2013
Revenue increased $1.5 million during the third quarter of 2013 to $236.0 million.’ Data and Internet services revenue increased $1.5 million as retail Ethernet circuits grew. Access revenues increased approximately $1 million as’ the Company saw continued strength in’ its’ wholesale Ethernet business as well as decreased service quality penalties, offset by decreased special access revenue driven by the exit from the National Exchange Carrier Association ("NECA") pool discussed in the second quarter.’ Selective price increases and revenue assurance activities in the quarter contributed to the smallest decline in voice services in the last four quarters.
Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $168.8 million in the third quarter of 2013 compared to $168.6 million in the second quarter of 2013.
Adjusted EBITDA was $67.5 million in the third quarter of 2013 as compared to $66.4 million in the second quarter of 2013. The increase is primarily due to increased revenue.
Capital expenditures were $33.8 million in the third quarter of 2013 as compared to $27.4 million in the second quarter of 2013.’ The increase was primarily due to work on the Maine NG 911 project.
Unlevered Free Cash Flow, which measures Adjusted EBITDA minus capital expenditures, pension contributions and cash payments for other post-employment benefits ("OPEB"), was $24.4 million in the third quarter of 2013 as compared to $34.8 million in the second quarter of 2013.’ Unlevered Free Cash Flow was lower in the third quarter of 2013 due to higher capital expenditures and pension contributions partially offset by higher Adjusted EBITDA.’ ‘
Net loss was $9.0 million in the third quarter of 2013 as compared to a net loss of $43.1 million in the second quarter of 2013.’ The change was due primarily to a $36.6 million decline in total unadjusted operating expenses, which includes a reduction of $31.6 million in depreciation and amortization expense, partially offset by a lower income tax benefit of $4.6 million.’ Lower depreciation and amortization expense reflects a benefit from an update to the estimated lives of certain asset categories made in the third quarter of 2013.
Cash was $24.7 million as of September 30, 2013, as compared to $27.0 million as of June 30, 2013.’ The decrease is primarily due to the semi-annual bond interest payment of $13.2 million made in the third quarter.’ The Company generally sees its largest cash outflow during the third quarter due to the timing of capital expenditures, operating taxes and pension contributions.’ Total gross debt outstanding was $936.8 million as of September 30, 2013, after taking into consideration the regularly scheduled principal payment of $1.6 million on the term loan made during the third quarter of 2013, as compared to $938.4 million as of June 30, 2013.’ The Company's $75.0 million revolving credit facility is undrawn, with $59.1 million available for borrowing after applying $15.9 million for outstanding letters of credit.
Third Quarter 2013 as compared to Third Quarter 2012
Revenue was $236.0 million in the third quarter of 2013 as compared to $242.1 million a year earlier.’ Adjusting for the impact of the sale of the Idaho-based operations on January 31, 2013, revenue declined $4.1 million versus a year earlier.’ The change was due primarily to a decline in voice services and access revenues, which was partially offset by growth in data and Internet services revenue.’ The loss of voice access lines versus a year ago led to a decrease in voice services revenue, while a decline in switched access minutes of use led to lower switched access revenue.’ In addition, customers continued to migrate from legacy access products such as DS1, DS3, frame relay and private line to wholesale Ethernet-based products, which tend to have lower average revenue per unit.’
Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $168.8 million in the third quarter of 2013 as compared to $173.0 million a year earlier.’ The decrease was primarily the result of lower direct cost of services and operating taxes, partially offset by increased employee costs, including lower capitalized labor. Although FairPoint has reduced its workforce, wages and benefits per employee were higher in the third quarter of 2013 compared to the third quarter of 2012.’ In addition, labor intensive capital projects were also lower in fiscal year 2013 resulting in a reduction of capitalized labor and a corresponding increase in operating expenses.
Adjusted EBITDA was $67.5 million in the third quarter of 2013 as compared to $69.2 million a year earlier.’ The slight decrease is due to lower revenue offset by operating cost savings.
Capital expenditures were $33.8 million in the third quarter of 2013 as compared to $37.7 million a year earlier.’ The decrease year-over-year was due primarily to regulatory build-out requirements in fiscal year 2012.
Unlevered Free Cash Flow of $24.4 million in the third quarter of 2013 increased slightly compared to the $23.5 million a year earlier.’ The increase was due primarily to lower capital expenditures offset by lower Adjusted EBITDA and larger pension contributions in the third quarter of 2013.
Net loss was $9.0 million in the third quarter of 2013 as compared to a net loss of $37.3 million in the third quarter of 2012.’ The change was due primarily to lower depreciation expense due to updated longer lives on certain of’ the Company's’ fixed assets offset by a combination of lower revenue and increased interest expense.
2013 Guidance
FairPoint's fiscal year 2013 Adjusted EBITDA and Unlevered Free Cash Flow guidance remains unchanged.
The Company expects to generate $100 million to $110 million of Unlevered Free Cash Flow in 2013.’ In addition, Adjusted EBITDA is expected to be $255 million to $265 million, capital expenditures are expected to be approximately $130 million, pension contributions are expected to be approximately $22 million ($13.2 million contributed through September 30, 2013) while cash OPEB payments are expected to be approximately $5 million.’ Compared to second quarter guidance, the Company's planned increase in pension contributions is forecasted to be offset by decreased capital expenditures yielding no change to Adjusted EBITDA and Unlevered Free Cash Flow expectations.’ Pension contributions are expected to be $28 million to $30 million for 2014.
Quarterly Report
The information in this press release should be read in conjunction with the financial statements and footnotes contained in the Company's quarterly report on Form 10-Q for the quarter ended September’ 30, 2013, which will be filed with the SEC no later than November 11, 2013. The Company's results for the quarter ended September’ 30, 2013 are subject to the completion of the quarterly report.
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 2013 and 2012
(Unaudited)
(in thousands, except per share data)
‘
‘
‘
‘
‘
Three Months Ended
September 30,
‘
Nine Months Ended
September 30,
‘
2013
‘
2012
‘
2013
‘
2012
Revenues
$
235,989
‘
‘
$
242,052
‘
‘
$
705,958
‘
‘
$
733,979
‘
Operating expenses:
‘
‘
‘
‘
‘
‘
‘
Cost of services and sales, excluding depreciation and amortization
107,646
‘
‘
105,502
‘
‘
332,420
‘
‘
330,937
‘
Selling, general and administrative expense, excluding depreciation and’
‘ ‘ ‘ ‘ ‘ amortization
79,520
‘
‘
80,915
‘
‘
252,489
‘
‘
257,055
‘
Depreciation and amortization
52,877
‘
‘
89,782
‘
‘
228,833
‘
‘
276,769
‘
Reorganization related expense (income)
(229)
‘
‘
172
‘
‘
(790)
‘
‘
(4,043)
‘
Total operating expenses
239,814
‘
‘
276,371
‘
‘
812,952
‘
‘
860,718
‘
Loss from operations
(3,825)
‘
‘
(34,319)
‘
‘
(106,994)
‘
‘
(126,739)
‘
Interest expense
(20,304)
‘
‘
(16,991)
‘
‘
(58,403)
‘
‘
(51,002)
‘
Loss on debt refinancing
‘
‘
‘
‘
‘
‘
(6,787)
‘
‘
‘
‘
Other income
951
‘
‘
548
‘
‘
1,386
‘
‘
725
‘
Loss from continuing operations before income taxes
(23,178)
‘
‘
(50,762)
‘
‘
(170,798)
‘
‘
(177,016)
‘
Income tax benefit
14,218
‘
‘
13,433
‘
‘
61,201
‘
‘
55,902
‘
Loss from continuing operations
(8,960)
‘
‘
(37,329)
‘
‘
(109,597)
‘
‘
(121,114)
‘
Gain on sale of discontinued operations, net of taxes
‘
‘
‘
‘
‘
‘
10,044
‘
‘
‘
‘
Net loss
$
(8,960)
‘
‘
$
(37,329)
‘
‘
$
(99,553)
‘
‘
$
(121,114)
‘
‘
‘
‘
‘
‘
‘
‘
‘
(Loss) earnings per share, basic:
‘
‘
‘
‘
‘
‘
‘
Continuing operations
$
(0.34)
‘
‘
$
(1.44)
‘
‘
$
(4.18)
‘
‘
$
(4.66)
‘
Discontinued operations
‘
‘
‘
‘
‘
‘
0.38
‘
‘
‘
‘
Loss per share, basic
$
(0.34)
‘
‘
$
(1.44)
‘
‘
$
(3.80)
‘
‘
$
(4.66)
‘
‘
‘
‘
‘
‘
‘
‘
‘
(Loss) earnings per share, diluted:
‘
‘
‘
‘
‘
‘
‘
Continuing operations
$
(0.34)
‘
‘
$
(1.44)
‘
‘
$
(4.18)
‘
‘
$
(4.66)
‘
Discontinued operations
‘
‘
‘
‘
‘
‘
0.38
‘
‘
‘
‘
Loss per share, diluted
$
(0.34)
‘
‘
$
(1.44)
‘
‘
$
(3.80)
‘
‘
$
(4.66)
‘
‘
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2013 and 2012
(Unaudited)
(in thousands)
‘
‘
‘
Nine Months Ended September
30,
‘
2013
‘
2012
Cash flows from operating activities:
‘
‘
‘
Net loss
$
(99,553)
‘
‘
$
(121,114)
‘
Adjustments to reconcile net loss to net cash provided by operating activities:
‘
‘
‘
Deferred income taxes
(55,472)
‘
‘
(56,743)
‘
Provision for uncollectible revenue
6,665
‘
‘
2,951
‘
Depreciation and amortization
228,833
‘
‘
276,769
‘
Post-retirement healthcare
39,936
‘
‘
36,919
‘
Qualified pension
7,175
‘
‘
(4,047)
‘
Gain on sale of business
(16,910)
‘
‘
‘
‘
Loss on debt refinancing
6,787
‘
‘
‘
‘
Other non-cash items
3,605
‘
‘
1,497
‘
Changes in assets and liabilities arising from operations:
‘
‘
‘
Accounts receivable
(9,002)
‘
‘
(861)
‘
Prepaid and other assets
(5,443)
‘
‘
(2,937)
‘
Restricted cash
4,554
‘
‘
(7,796)
‘
Accounts payable and accrued liabilities
(10,664)
‘
‘
732
‘
Accrued interest payable
3,241
‘
‘
162
‘
Other assets and liabilities, net
11,287
‘
‘
(2,082)
‘
Reorganization adjustments:
‘
‘
‘
Non-cash reorganization income
(980)
‘
‘
(5,119)
‘
Claims payable and estimated claims accrual
(46)
‘
‘
(8,803)
‘
Restricted cash - cash claims reserve
577
‘
‘
20,291
‘
Total adjustments
214,143
‘
‘
250,933
‘
Net cash provided by operating activities
114,590
‘
‘
129,819
‘
Cash flows from investing activities:
‘
‘
‘
Net capital additions
(91,091)
‘
‘
(95,996)
‘
Proceeds from sale of business
30,452
‘
‘
‘
‘
Distributions from investments
1,296
‘
‘
634
‘
Net cash used in investing activities
(59,343)
‘
‘
(95,362)
‘
Cash flows from financing activities:
‘
‘
‘
Refinancing costs
(13,217)
‘
‘
‘
‘
Proceeds from issuance of long-term debt
920,590
‘
‘
‘
‘
Repayments of long-term debt
(960,200)
‘
‘
(30,000)
‘
Restricted cash
‘
‘
‘
1,158
‘
Proceeds from exercise of stock options
53
‘
‘
53
‘
Repayment of capital lease obligations
(936)
‘
‘
(938)
‘
Net cash used in financing activities
(53,710)
‘
‘
(29,727)
‘
Net change
1,537
‘
‘
4,730
‘
Cash, beginning of period
23,203
‘
‘
17,350
‘
Cash, end of period
$
24,740
‘
‘
$
22,080
‘
Supplemental disclosure of cash flow information:
‘
‘
‘
Reorganization costs paid
$
324
‘
‘
$
621
‘
Non-cash settlement of claims payable
$
‘
‘
‘
$
7,668
‘
‘
FAIRPOINT COMMUNICATIONS, INC.
Supplemental Financial Information
(Unaudited)
(in thousands, except operating and financial metrics)
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
3Q13
2Q13
1Q13
4Q12
3Q12
YTD 3Q13
YTD 3Q12
Summary Income Statement:
‘
‘
‘
‘
‘
‘
‘
‘
Revenue:
‘
‘
‘
‘
‘
‘
‘
‘
Voice services
‘
$
101,272
‘
$
101,660
‘
$
103,717
‘
$
108,487
‘
$
111,337
‘
$
306,649
‘
$
337,639
‘
Access
‘
80,182
‘
79,235
‘
81,632
‘
82,476
‘
82,015
‘
241,049
‘
253,524
‘
Data and Internet services
‘
41,550
‘
40,054
‘
38,174
‘
36,668
‘
36,793
‘
119,778
‘
106,243
‘
Other services
‘
12,985
‘
13,551
‘
11,946
‘
12,039
‘
11,907
‘
38,482
‘
36,573
‘
Total revenue
‘
235,989
‘
234,500
‘
235,469
‘
239,670
‘
242,052
‘
705,958
‘
733,979
‘
Operating expenses:
‘
‘
‘
‘
‘
‘
‘
‘
Operating expenses, excluding depreciation,’
‘ ‘ ‘ ‘ amortization and reorganization
‘
187,166
‘
192,246
‘
205,497
‘
194,692
‘
186,417
‘
584,909
‘
587,992
‘
Depreciation and amortization
‘
52,877
‘
84,523
‘
91,433
‘
99,845
‘
89,782
‘
228,833
‘
276,769
‘
Reorganization (income) expense (post-
‘ ‘ ‘ ‘ emergence)
‘
(229)
‘
(398)
‘
(163)
‘
377
‘
172
‘
(790)
‘
(4,043)
‘
Total operating expenses
‘
239,814
‘
276,371
‘
296,767
‘
294,914
‘
276,371
‘
812,952
‘
860,718
‘
Loss from operations
‘
(3,825)
‘
(41,871)
‘
(61,298)
‘
(55,244)
‘
(34,319)
‘
(106,994)
‘
(126,739)
‘
Other income (expense):
‘
‘
‘
‘
‘
‘
‘
‘
Interest expense
‘
(20,304)
‘
(20,097)
‘
(18,002)
‘
(16,608)
‘
(16,991)
‘
(58,403)
‘
(51,002)
‘
Loss on debt refinancing
‘
‘
‘
‘
‘
(6,787)
‘
‘
‘
‘
‘
(6,787)
‘
‘
‘
Other income (expense), net
‘
951
‘
10
‘
425
‘
14
‘
548
‘
1,386
‘
725
‘
Total other expense
‘
(19,353)
‘
(20,087)
‘
(24,364)
‘
(16,594)
‘
(16,443)
‘
(63,804)
‘
(50,277)
‘
Loss from continuing operations before income
taxes
‘
(23,178)
‘
(61,958)
‘
(85,662)
‘
(71,838)
‘
(50,762)
‘
(170,798)
‘
(177,016)
‘
Income tax benefit
‘
14,218
‘
18,850
‘
28,133
‘
39,658
‘
13,433
‘
61,201
‘
55,902
‘
Net loss from continuing operations
‘
(8,960)
‘
(43,108)
‘
(57,529)
‘
(32,180)
‘
(37,329)
‘
(109,597)
‘
(121,114)
‘
Gain on sale of discontinued operations
‘
‘
‘
‘
‘
10,044
‘
‘
‘
‘
‘
10,044
‘
‘
‘
Net loss
‘
$
(8,960)
‘
$
(43,108)
‘
$
(47,485)
‘
$
(32,180)
‘
$
(37,329)
‘
$
(99,553)
‘
$
(121,114)
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
Reconciliation of Adjusted EBITDA and
Unlevered Free Cash Flow to Net Loss:
‘
‘
‘
‘
‘
‘
‘
‘
Net loss
‘
$
(8,960)
‘
$
(43,108)
‘
$
(47,485)
‘
$
(32,180)
‘
$
(37,329)
‘
$
(99,553)
‘
$
(121,114)
‘
Income tax benefit
‘
(14,218)
‘
(18,850)
‘
(28,133)
‘
(39,658)
‘
(13,433)
‘
(61,201)
‘
(55,902)
‘
Interest expense
‘
20,304
‘
20,097
‘
18,002
‘
16,608
‘
16,991
‘
58,403
‘
51,002
‘
Depreciation and amortization
‘
52,877
‘
84,523
‘
91,433
‘
99,845
‘
89,782
‘
228,833
‘
276,769
‘
Pension expense (1a)
‘
6,357
‘
6,980
‘
5,884
‘
4,005
‘
4,166
‘
19,221
‘
13,804
‘
OPEB expense (1a)
‘
11,973
‘
15,247
‘
15,076
‘
11,899
‘
11,729
‘
42,296
‘
38,976
‘
Compensated absences (1b)
‘
(4,367)
‘
(3,048)
‘
11,122
‘
(3,925)
‘
(4,490)
‘
3,707
‘
4,254
‘
Severance
‘
3,537
‘
3,430
‘
698
‘
938
‘
592
‘
7,665
‘
5,442
‘
Restructuring costs (1c)
‘
70
‘
101
‘
17
‘
258
‘
338
‘
188
‘
1,077
‘
Storm expenses (1d)
‘
‘
‘
‘
‘
‘
‘
3,000
‘
‘
‘
‘
‘
‘
‘
Other non-cash items, net (1e)
‘
426
‘
351
‘
826
‘
2,068
‘
1,211
‘
1,603
‘
1,450
‘
Gain on sale of assets
‘
(956)
‘
207
‘
(10,044)
‘
‘
‘
‘
‘
(10,793)
‘
‘
‘
Early debt payment expenses
‘
‘
‘
‘
‘
6,787
‘
‘
‘
‘
‘
6,787
‘
‘
‘
All other allowed adjustments, net (1f)
‘
466
‘
507
‘
(314)
‘
(288)
‘
(358)
‘
659
‘
(387)
‘
Adjusted EBITDA
‘
$
67,509
‘
$
66,437
‘
$
63,869
‘
$
62,570
‘
$
69,199
‘
$
197,815
‘
$
215,371
‘
Adjusted EBITDA margin
‘
28.6
%
28.3
%
27.1
%
26.1
%
28.6
%
28.0
%
29.3
%
Pension contributions
‘
$
(8,519)
‘
$
(3,527)
‘
$
‘
‘
$
‘
‘
$
(7,344)
‘
$
(12,046)
‘
$
(17,850)
‘
OPEB payments
‘
(786)
‘
(726)
‘
(1,020)
‘
(1,125)
‘
(656)
‘
(2,532)
‘
(2,058)
‘
Capital expenditures
‘
(33,768)
‘
(27,413)
‘
(29,910)
‘
(49,070)
‘
(37,669)
‘
(91,091)
‘
(95,996)
‘
Unlevered Free Cash Flow
‘
$
24,436
‘
$
34,771
‘
$
32,939
‘
$
12,375
‘
$
23,530
‘
$
92,146
‘
$
99,467
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
Reconciliation of Adjusted EBITDA to
Revenue:
‘
‘
‘
‘
‘
‘
‘
‘
Total revenue
‘
$
235,989
‘
$
234,500
‘
$
235,469
‘
$
239,670
‘
$
242,052
‘
$
705,958
‘
$
733,979
‘
Storm expenses (1d)
‘
‘
‘
‘
‘
‘
‘
812
‘
‘
‘
‘
‘
‘
‘
Adjusted total revenue
‘
$
235,989
‘
$
234,500
‘
$
235,469
‘
$
240,482
‘
$
242,052
‘
$
705,958
‘
$
733,979
‘
Operating expenses, excluding depreciation, amortization and reorganization
‘
$
187,166
‘
$
192,246
‘
$
205,497
‘
$
194,692
‘
$
186,417
‘
$
584,909
‘
$
587,992
‘
Pension expense (1a)
‘
(6,357)
‘
(6,980)
‘
(5,884)
‘
(4,005)
‘
(4,166)
‘
(19,221)
‘
(13,804)
‘
OPEB expense (1a)
‘
(11,973)
‘
(15,247)
‘
(15,076)
‘
(11,899)
‘
(11,729)
‘
(42,296)
‘
(38,976)
‘
Compensated Absences (1b)
‘
4,367
‘
3,048
‘
(11,122)
‘
3,925
‘
4,490
‘
(3,707)
‘
(4,254)
‘
Severance
‘
(3,537)
‘
(3,430)
‘
(698)
‘
(938)
‘
(592)
‘
(7,665)
‘
(5,442)
‘
Storm expenses (1d)
‘
‘
‘
‘
‘
‘
‘
(2,188)
‘
‘
‘
‘
‘
‘
‘
Other non-cash items, net (1e)
‘
(394)
‘
(493)
‘
(937)
‘
(1,793)
‘
(1,402)
‘
(1,824)
‘
(1,843)
‘
All other allowed adjustments, net (1f)
‘
(493)
‘
(581)
‘
‘
‘
‘
‘
‘
‘
(1,074)
‘
‘
‘
Adjusted operating expenses, excluding
depreciation, amortization and reorganization
‘
$
168,779
‘
$
168,563
‘
$
171,780
‘
$
177,794
‘
$
173,018
‘
$
509,122
‘
$
523,673
‘
Adjusted operating expenses margin
‘
71.5
%
71.9
%
73.0
%
74.2
%
71.5
%
72.1
%
71.3
%
Adjusted income from continuing operations,
excluding depreciation, amortization and
reorganization
‘
$
67,210
‘
$
65,937
‘
$
63,689
‘
$
62,688
‘
$
69,034
‘
$
196,836
‘
$
210,306
‘
Adjusted income from continuing operations margin
‘
28.5
%
28.1
%
27.0
%
26.2
%
28.5
%
27.9
%
28.7
%
Reversal of certain bankruptcy claims
‘
299
‘
500
‘
180
‘
(118)
‘
165
‘
979
‘
5,065
‘
Adjusted EBITDA
‘
$
67,509
‘
$
66,437
‘
$
63,869
‘
$
62,570
‘
$
69,199
‘
$
197,815
‘
$
215,371
‘
Adjusted EBITDA margin
‘
28.6
%
28.3
%
27.1
%
26.1
%
28.6
%
28.0
%
29.3
%
‘
‘
‘
‘
‘
‘
‘
‘
‘
Select Operating and Financial Metrics:
‘
‘
‘
‘
‘
‘
‘
‘
Residential access lines (2)
‘
542,238
‘
556,584
‘
568,594
‘
584,211
‘
599,995
‘
542,238
‘
599,995
‘
Business access lines (2)
‘
292,937
‘
294,183
‘
294,353
‘
295,134
‘
298,055
‘
292,937
‘
298,055
‘
Wholesale access lines (3)
‘
60,315
‘
61,911
‘
63,068
‘
65,641
‘
67,886
‘
60,315
‘
67,886
‘
Total switched access lines (2)
‘
895,490
‘
912,678
‘
926,015
‘
944,986
‘
965,936
‘
895,490
‘
965,936
‘
% change y-o-y
‘
(7.3)%
‘
(7.5)%
‘
(7.8)%
‘
(7.7)%
‘
(7.7)%
‘
(7.3)%
‘
(7.7)%
‘
% change q-o-q
‘
(1.9)%
‘
(1.4)%
‘
(2.0)%
‘
(2.2)%
‘
(2.1)%
‘
N/A
N/A
‘
‘
‘
‘
‘
‘
‘
‘
‘
Broadband subscribers (2) (4)
‘
330,698
‘
332,620
‘
330,082
‘
324,977
‘
321,102
‘
330,698
‘
321,102
‘
% change y-o-y
‘
3.0
%
4.2
%
4.1
%
3.9
%
3.3
%
3.0
%
3.3
%
% change q-o-q
‘
(0.6)%
‘
0.8
%
1.6
%
1.2
%
0.6
%
N/A
N/A
penetration of access lines
‘
36.9
%
36.4
%
35.6
%
34.4
%
33.2
%
36.9
%
33.2
%
‘
‘
‘
‘
‘
‘
‘
‘
‘
Access line equivalents (2)
‘
1,226,188
‘
1,245,298
‘
1,256,097
‘
1,269,963
‘
1,287,038
‘
1,226,188
‘
1,287,038
‘
% change y-o-y
‘
(4.7)%
‘
(4.6)%
‘
(4.9)%
‘
(5.0)%
‘
(5.2)%
‘
(4.7)%
‘
(5.2)%
‘
% change q-o-q
‘
(1.5)%
‘
(0.9)%
‘
(1.1)%
‘
(1.3)%
‘
(1.4)%
‘
N/A
N/A
‘
‘
‘
‘
‘
‘
‘
‘
‘
Retail Ethernet
‘
4,241
‘
3,857
‘
3,532
‘
3,192
‘
2,826
‘
4,241
‘
2,826
‘
Wholesale Ethernet
‘
4,257
‘
3,374
‘
2,933
‘
2,753
‘
2,561
‘
4,257
‘
2,561
‘
Ethernet Circuits
‘
8,498
‘
7,231
‘
6,465
‘
5,945
‘
5,387
‘
8,498
‘
5,387
‘
% change y-o-y
‘
57.8
%
49.2
%
44.9
%
N/A
N/A
57.8
%
N/A
% change q-o-q
‘
17.5
%
11.8
%
8.7
%
10.4
%
11.2
%
N/A
N/A
‘
‘
‘
‘
‘
‘
‘
‘
‘
Employee Headcount
‘
3,182
‘
3,255
‘
3,321
‘
3,369
‘
3,398
‘
3,182
‘
3,398
‘
% change y-o-y
‘
(6.4)%
‘
(4.5)%
‘
(3.9)%
‘
(4.9)%
‘
(7.9)%
‘
(6.4)%
‘
(7.9)%
‘
‘
‘
‘
‘
‘
‘
‘
‘
‘
(1) For purposes of calculating Adjusted EBITDA (in accordance with the definition of Consolidated EBITDA in the Company's credit agreement), the Company adjusts net (loss) income for interest, income taxes, depreciation and amortization, in addition to:
a) the add-back of aggregate pension and other post-employment benefits (OPEB) expense,
b) the add-back (or subtraction) of the adjustment to the compensated absences accrual to eliminate the impact of changes in the accrual,
c) the add-back of costs related to the restructuring, including professional fees for advisors and consultants,
d) the add-back of costs and expenses, including those imposed by regulatory authorities, with respect to casualty events, acts of God or force majeure to the extent they are not reimbursed’ from proceeds of insurance,
e) the add-back of other non-cash items, except to the extent they will require a cash payment in a future period, and
f) the add-back (or subtraction) of other items, including facility and office closures, labor negotiation expenses, non-cash gains/losses, non-operating dividend and interest income and other extraordinary gains/losses.
(2) Access and subscriber lines are presented pro forma for the divestiture of our Idaho-based operations and pay phone operations in our northern New England footprint.
(3) Wholesale access lines include Resale and UNE-P, but exclude UNE-L and special access circuits.
(4) Broadband subscribers include DSL, fiber-to-the-premise, cable modem and fixed wireless broadband, but exclude Ethernet and other high-capacity circuits.
About FairPoint Communications, Inc.
FairPoint Communications, Inc. (Nasdaq: FRP) is a leading communications provider of broadband Internet access, local and long-distance phone, television and other high-capacity data services to customers in communities across 17 states. Through its fast, reliable fiber network, FairPoint delivers high-quality data and voice networking communications solutions to residential, business and wholesale customers. FairPoint delivers Internet services through its resilient IP-based network in northern New England. This state-of-the-art fiber network provides carrier Ethernet connections to support the surging bandwidth and performance requirements for cloud-based applications like network storage, disaster recovery, distance learning, medical imaging, video conferencing and CAD/CAM along with traditional voice, VoIP, video and Internet access solutions. Additional information about FairPoint products and services is available at www.FairPoint.com.