Windstream Reports Third Quarter Earnings Results

Windstream announced it has reported third-quarter earnings results highlighted by the lowest absolute access line loss since the company's formation in 2006.

Windstream also announced the Pennsylvania Public Utilities Commission has approved the company's acquisition of D&E Communications announced on May 11. Windstream expects to close the transaction this week.

In a November 9 release, Windstream said its third-quarter results under Generally Accepted Accounting Principles (GAAP) include the following items, which lowered earnings per share by roughly 6 cents:

- $15 million in after-tax non-cash pension expense;

- $5 million in after-tax restructuring charges related to a workforce reduction announced on Sept. 30;

- $5 million in after-tax non-cash amortization of wireline franchise rights; and

- $1 million in after-tax merger and integration costs.

Third-quarter financial results:

Under GAAP:

- Revenues were $734 million, an 8 percent decrease from a year ago.

- Operating income was $225 million, a decrease of 17 percent year-over-year.

- Net income was $80 million, a 24 percent decrease from a year ago, or 18 cents of diluted earnings per share.

- Net cash provided from operations was $242 million, a 9 percent increase year-over-year.

- Average service revenue per customer per month was $79.99, essentially the same as a year ago.

- Capital expenditures were $67 million, a 22 percent decrease year-over-year.

Under pro forma results from current businesses:

- Operating income before depreciation and amortization (OIBDA) was $360 million, a 10 percent decline year-over-year. Excluding the incremental non-cash pension expense and restructuring expense, OIBDA was approximately $391 million, a 2.5 percent decline from a year ago, resulting in an OIBDA margin of approximately 54 percent.

The company generated approximately $175 million in free cash flow, which is defined as net cash from operations less capital expenditures, during the quarter and $535 million year-to-date in 2009, a 5 percent increase year-over-year. Windstream ended the third quarter with $290 million in cash and cash equivalents.

Windstream added approximately 26,000 new high-speed Internet customers during the third quarter, bringing its total broadband customer base to approximately 1,050,000 customers, an increase of 9 percent year-over-year. Overall broadband penetration is now 36 percent of total access lines and residential broadband penetration is approximately 53 percent of primary residential lines.

Windstream added more than 11,000 new digital TV customers in the quarter, bringing its total customer base to approximately 323,000, or 18 percent penetration of primary residential lines.

Total access lines declined by approximately 27,000. Total lines at the end of the quarter were 2.93 million, a decline of approximately 5.2 percent year-over-year.

Share repurchase plan:

Windstream repurchased 1.1 million shares for $11 million in the third quarter, and an additional 7.8 million shares for $78 million that settled in early October. Collectively, the company repurchased 8.9 million shares, at an average price of $9.95. The company has roughly $80 million remaining under the current $400 million share repurchase plan authorized by the board of directors in February 2008. The share repurchase authorization expires at the end of 2009. With dividends and share repurchases, Windstream has returned approximately $560 million to shareholders this year.

Windstream is a provider of phone, high-speed Internet and HD digital TV services to customers in 16 states. The company also offers a range of IP-based voice and data services and phone systems and equipment to businesses and government agencies.

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