2014

FairPoint Communications Reports 2013 First Quarter Results - Unlevered Free Cash Flow(1) of $33 million for the quarter

- Adjusted EBITDA(1) of $64 million for the quarter

- Capital expenditures of $30 million for the quarter

- Net loss of $47 million for the quarter

- Successful sale of Idaho operations for $30 million in gross proceeds, or 6x trailing EBITDA

- Previously announced workforce reduction expected to save $11 million annually

- Management reaffirms financial guidance for fiscal year 2013

CHARLOTTE, N.C., May 6, 2013 /PRNewswire/ -- FairPoint Communications, Inc. (NasdaqCM: FRP) ("FairPoint" or the "Company"), a leading communications provider, today announced its financial results for the first quarter ended March 31, 2013.  As previously announced, the Company will host a conference call and simultaneous webcast to discuss its results at 8:30 a.m. (ET) on Tuesday, May 7, 2013.

"We're off to a solid start in 2013," said Paul H. Sunu, Chief Executive Officer of FairPoint.  "We continue to execute on our 'four pillar' strategy, which we believe is the best way to generate sustainable free cash flow and enhance shareholder value.  We remain focused on transforming and then growing revenue and we are preparing for important labor negotiations next year."

Operating Highlights

FairPoint continues to see positive momentum in its growth-oriented business and broadband products.  Data and Internet services revenue in the first quarter grew 15% versus a year ago and products like FairPoint's Ethernet service offerings attracted new customers.  Growth in business and broadband products is a key component of FairPoint's strategy to transform its revenue composition and offset continued erosion in the Company's legacy access products like residential voice. 

Ethernet services contributed approximately $13 million of revenue in the first quarter of 2013 as compared to $9 million a year ago, as retail and wholesale Ethernet circuits grew 44.9%.  Growth in the Company's Ethernet products is expected to continue as regional banks, healthcare networks and wireless carriers transition away from legacy technologies like frame relay.

Broadband subscribers, pro forma for divestitures, grew 4.1% year-over-year and 1.6% sequentially — an acceleration of both measures versus the fourth and third quarters of 2012.  FairPoint added nearly 13,000 broadband subscribers during the last 12 months, as penetration reached 35.6% of voice access lines at March 31, 2013.

Voice access lines, pro forma for divestitures, declined 7.8% year-over-year as compared to 8.1% a year ago.  The improvement was driven largely by a slowdown in the rate of loss in business voice access lines, which declined 2.7% year-over-year as compared to 4.0% a year ago.

As of March 31, 2013, FairPoint had 3,321 employees, a decrease of 3.9% versus a year ago.  Headcount declined by 48, or 1.4% in the first quarter of 2013, due in part to a previously announced reduction in the Company's management personnel.  In that announcement, FairPoint also disclosed plans to eliminate approximately 90 bargained-for positions over the next few months.  The management and bargained-for reductions are expected to result in annualized operating expense savings of approximately $11 million, with the full benefit realized beginning in 2014.

Financial Highlights

First Quarter 2013 as compared to Fourth Quarter 2012

Revenue was $235 million in the first quarter of 2013 as compared to $240 million in the fourth quarter of 2012.  Adjusted for the impact of the sale of the Idaho operations on Jan. 31, 2013, revenue declined $3 million in the quarter.  The change was due primarily to a loss of voice access lines, which led to a decrease in voice services revenue.  Access revenue was essentially flat after adjusting for the impact of the Idaho sale.  Data and Internet services revenue increased as subscribers grew.

Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $172 million in the first quarter of 2013 as compared to $178 million in the fourth quarter of 2012.  The decrease was primarily the result of lower bad debt expense and lower employee expense.

Adjusted EBITDA, as defined in the Company's new credit facility, was $64 million in the first quarter of 2013 as compared to $63 million in the fourth quarter of 2012. The reduction in adjusted operating expenses more than offset the sequential decline in revenue as described above.

Net loss was $47 million in the first quarter of 2013 as compared to a net loss of $32 million in the fourth quarter of 2012.  The change was due primarily to lower revenue and higher GAAP expenses.  A decrease in the income tax benefit was offset by the gain recognized on the sale of the Idaho operations.

Capital expenditures were $30 million in the first quarter of 2013 as compared to $49 million in the fourth quarter of 2012.  The fourth quarter was higher due to the replacement of certain end-of-life equipment, year-end information technology purchases and certain real estate improvements.

Unlevered Free Cash Flow, which measures Adjusted EBITDA minus capital expenditures, pension contributions and cash payments for other post-employment benefits ("OPEB"), was $33 million in the first quarter of 2013 as compared to $12 million in the fourth quarter of 2012.  Unlevered Free Cash Flow was higher in the first quarter as capital expenditures were lower sequentially.  FairPoint expects capital expenditures will increase for the remainder of the year as the Company completes certain success-based projects related to announced sales, such as the New England Telehealth Consortium network project and the Maine Next Generation 911 project.  In addition, FairPoint did not make a pension contribution in the first quarter of 2013, but expects to make contributions in each of the remaining quarters of 2013.  Aggregate pension and OPEB payments are expected to be $20 million for the full year.

Cash was $17 million as of March 31, 2013, as compared to $23 million as of Dec. 31, 2012.  Total debt outstanding was $940 million as of March 31, 2013, as compared to $957 million as of Dec. 31, 2012 and $998 million as of March 31, 2012.  The Company's $75 million revolving credit facility is undrawn, with $62 million available for additional borrowing after applying $13 million for outstanding letters of credit.

First Quarter 2013 as compared to First Quarter 2012

Revenue was $235 million in the first quarter of 2013 as compared to $248 million a year earlier.  Adjusting for the impact of the sale of the Idaho operations on Jan. 31, 2013, revenue declined $12 million versus a year earlier.  The change was due primarily to a decline in voice services revenue and access revenue, 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.  Retail and wholesale service quality penalties, which normally reduce revenue, were $2 million in the first quarter of 2013 as compared to a revenue benefit of $1 million a year earlier when the Company reversed certain previously accrued penalties following the favorable outcome of various regulatory proceedings.

Adjusting for items that are added back in the computation of Adjusted EBITDA, operating expenses were $172 million in the first quarter of 2013 as compared to $177 million a year earlier.  The decrease was primarily the result of lower cost of goods sold and lower contracted services, partially offset by higher bad debt expense.  Bad debt was a source of income in the first quarter of 2012 due primarily to certain settlements with wholesale carriers.

Adjusted EBITDA was $64 million in the first quarter of 2013 as compared to $73 million a year earlier.  The first quarter of 2012 was favorably impacted by the reversal of certain bankruptcy claims, which resulted in $2 million of Adjusted EBITDA.  The remaining variance is explained by the revenue decline discussed above, partially offset by the improvement in adjusted operating expense.

Capital expenditures were $30 million in the first quarter of 2013 as compared to $26 million a year earlier.  The increase year-over-year was due primarily to higher information technology spending in the first quarter of 2013.

Unlevered Free Cash Flow was $33 million in the first quarter of 2013 as compared to $41 million a year earlier.  The decline was due primarily to lower revenue and higher capital expenditures, which were partially offset by lower adjusted operating expenses and the absence of a pension contribution in the first quarter of 2013.

Net loss was $47 million in the first quarter of 2013 as compared to a net loss of $47 million in the first quarter of 2012.  The gain on the sale of FairPoint's Idaho operations in the first quarter of 2013 offset the impact of lower operating income due to lower revenue versus a year ago.

2013 Guidance

FairPoint's fiscal year 2013 guidance remains unchanged.

The Company expects to generate $100 to 110 million of Unlevered Free Cash Flow in 2013.  In addition, Adjusted EBITDA is expected to be $255 to 265 million, capital expenditures are expected to be approximately $135 million and aggregate pension contributions and cash OPEB payments are expected to be approximately $20 million.

The financial guidance provided above gives effect to the sale of FairPoint's Idaho operations, which closed on Jan. 31, 2013.  On an annual basis, the Idaho operations contributed approximately $8 million in revenue and approximately $5 million in Adjusted EBITDA, with capital expenditures of approximately $1 million.

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 March 31, 2013, which will be filed with the SEC no later than May 10, 2013. The Company's results for the quarter ended March 31, 2013 are subject to the completion of the quarterly report.

Conference Call Information

As previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its first quarter 2013 results at 8:30 a.m. (ET) on Tuesday, May 7, 2013.

Participants should call (866) 700-0133 (US/Canada) or (617) 213-8831 (international) at 8:20 a.m. (ET) and enter the passcode 37854878 when prompted.   The title of the call is the Q1 2013 FairPoint Communications, Inc. Earnings Conference Call.

A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (888) 286-8010 (US/Canada) or (617) 801-6888 (international) and enter the passcode 20933539 when prompted.  The recording will be available from Tuesday, May 7, 2013, at 10:30 a.m. (ET) through Tuesday, May 14, 2013, at 11:59 p.m. (ET).

A live broadcast of the earnings conference call will be available online at www.fairpoint.com/investors. An online replay will be available shortly thereafter.

Use of Non-GAAP Financial Measures

This press release includes certain non-GAAP financial measures, including but not limited to Adjusted EBITDA and Unlevered Free Cash Flow, and adjustments to GAAP and non-GAAP measures to exclude the effect of special items. Management believes that Adjusted EBITDA provides a useful measure of operational and financial performance and removes variability related to pension contributions and payments for other post-employment benefits and that Unlevered Free Cash Flow may be useful to investors in assessing the Company's ability to generate cash and meet its debt service requirements.  The maintenance covenants contained in the Company's new credit facility are based on Consolidated EBITDA, which is consistent with the calculation of Adjusted EBITDA included in the attachment to this press release.  In addition, management believes that the adjustments to GAAP and non-GAAP measures to exclude the effect of special items may be useful to investors in understanding period-to-period operating performance and in identifying historical and prospective trends.

However, the non-GAAP financial measures, as used herein, are not necessarily comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA and Unlevered Free Cash Flow have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net income or loss, operating income, cash flow or other combined income or cash flow data prepared in accordance with GAAP. Because of these limitations, Adjusted EBITDA, Unlevered Free Cash Flow and related ratios should not be considered as measures of discretionary cash available to invest in business growth or reduce indebtedness. The Company compensates for these limitations by relying primarily on its GAAP results and using Adjusted EBITDA and Unlevered Free Cash Flow only supplementally.  A reconciliation of Adjusted EBITDA and Unlevered Free Cash Flow to net loss or income is contained in the attachments to this press release.

About FairPoint Communications, Inc.

FairPoint Communications, Inc. (NasdaqCM: 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 VantagePointSM 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.

Cautionary Note Regarding Forward-looking Statements

Some statements herein or discussed on our earnings conference call are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These forward-looking statements include, but are not limited to, statements about the Company's plans, objectives, expectations and intentions and other statements contained herein that are not historical facts. When used herein, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements, including the Company's plans, objectives, expectations and intentions and other factors. You should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date hereof. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  However, your attention is directed to any further disclosures made on related subjects in the Company's subsequent reports filed with the SEC.

Certain information contained herein or discussed on our earnings conference call may constitute guidance as to projected financial results and the Company's future performance that represent management's estimates as of the date hereof. This guidance, which consists of forward-looking statements, is prepared by the Company's management and is qualified by, and subject to, certain assumptions. Guidance is not prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, and neither the Company's independent registered public accounting firm nor any other independent expert or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion or any other form of assurance with respect thereto. Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company's control and are based upon specific assumptions with respect to future business decisions, some of which will change. Management generally states possible outcomes as high and low ranges which are intended to provide a sensitivity analysis as variables are changed but are not intended to represent actual results, which could fall outside of the suggested ranges. The principal reason that the Company releases this data is to provide a basis for management to discuss the Company's business outlook with analysts and investors. The Company does not accept any responsibility for any projections or reports published by any such outside analysts or investors. Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, the Company's guidance is only an estimate of what management believes is realizable as of the date hereof. Actual results will vary from the guidance and the variations may be material. Investors should also recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data is forecast. In light of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.

1 Unlevered Free Cash Flow and Adjusted EBITDA are non-GAAP financial measures. Additional information regarding the calculation of Unlevered Free Cash Flow and Adjusted EBITDA and a reconciliation to net income or loss are contained in the attachment to this press release.

 

 

 

FAIRPOINT COMMUNICATIONS, INC.

Supplemental Financial Information

(Unaudited)

(in thousands, except operating and financial metrics)



1Q13

4Q12

3Q12

2Q12

1Q12

Summary Income Statement:






Revenue:






Voice services

$

103,717


$

108,487


$

111,337


$

111,525


$

114,777


Access

81,632


82,476


82,015


84,686


86,823


Data and Internet services

38,174


36,668


36,793


36,118


33,332


Other services

11,946


12,039


11,907


11,124


13,542


Total revenue

235,469


239,670


242,052


243,453


248,474


Operating expenses:






Operating expenses, excluding depreciation, amortization and

reorganization

205,497


194,692


186,417


190,672


210,903


Depreciation and amortization

91,433


99,845


89,782


93,780


93,207


Reorganization (income) expense (post-emergence)

(163)


377


172


(2,823)


(1,392)


Total operating expenses

296,767


294,914


276,371


281,629


302,718


Loss from operations

(61,298)


(55,244)


(34,319)


(38,176)


(54,244)


Other income (expense):






Interest expense

(18,002)


(16,608)


(16,991)


(16,983)


(17,028)


Loss on debt refinancing

(6,787)






Other income (expense), net

425


14


548


(125)


302


Total other expense

(24,364)


(16,594)


(16,443)


(17,108)


(16,726)


Loss from continuing operations before income taxes

(85,662)


(71,838)


(50,762)


(55,284)


(70,970)


Income tax benefit

28,133


39,658


13,433


18,211


24,258


Net loss from continuing operations

(57,529)


(32,180)


(37,329)


(37,073)


(46,712)


Gain on sale of discontinued operations

10,044






Net loss

$

(47,485)


$

(32,180)


$

(37,329)


$

(37,073)


$

(46,712)








Reconciliation of Adjusted EBITDA and Unlevered Free Cash Flow from Net Loss:






Net loss

$

(47,485)


$

(32,180)


$

(37,329)


$

(37,073)


$

(46,712)


Income tax benefit

(28,133)


(39,658)


(13,433)


(18,211)


(24,258)


Interest expense

18,002


16,608


16,991


16,983


17,028


Depreciation and amortization

91,433


99,845


89,782


93,780


93,207


Pension expense (1a)

5,884


4,005


4,166


4,573


5,065


OPEB expense (1a)

15,076


11,899


11,729


13,373


13,874


Compensated absences (1b)

11,122


(3,925)


(4,490)


(2,864)


11,608


Severance

698


938


592


1,907


2,943


Restructuring costs (1c)

17


258


338


276


463


Storm expenses (1d)


3,000





Other non-cash items, net (1e)

826


2,068


1,211


395


(156)


Gain on sale of assets

(10,044)






Early debt payment expenses

6,787






All other allowed adjustments, net (1f)

(314)


(288)


(358)


143


(172)


Adjusted EBITDA

$

63,869


$

62,570


$

69,199


$

73,282


$

72,890


Adjusted EBITDA margin

27.1

%

26.1

%

28.6

%

30.1

%

29.3

%

Pension contributions

$


$


$

(7,344)


$

(5,156)


$

(5,350)


OPEB payments

(1,020)


(1,125)


(656)


(794)


(608)


Capital expenditures

(29,910)


(49,070)


(37,669)


(32,070)


(26,257)


Unlevered Free Cash Flow

$

32,939


$

12,375


$

23,530


$

35,262


$

40,675








Reconciliation of Adjusted EBITDA from Revenue:






Total revenue

$

235,469


$

239,670


$

242,052


$

243,453


$

248,474


Storm expenses


812





Adjusted total revenue

$

235,469


$

240,482


$

242,052


$

243,453


$

248,474








Operating expenses, excluding depreciation, amortization and reorganization

$

205,497


$

194,692


$

186,417


$

190,672


$

210,903


Pension expense

(5,884)


(4,005)


(4,166)


(4,573)


(5,065)


OPEB expense

(15,076)


(11,899)


(11,729)


(13,373)


(13,874)


Compensated Absences

(11,122)


3,925


4,490


2,864


(11,608)


Severance

(698)


(938)


(592)


(1,907)


(2,943)


Storm expenses


(2,188)





Other non-cash items, net

(937)


(1,793)


(1,402)


(412)


(29)


Adjusted operating expenses, excluding depreciation, amortization and reorganization

$

171,780


$

177,794


$

173,018


$

173,271


$

177,384


Adjusted operating expenses margin

73.0

%

74.2

%

71.5

%

71.2

%

71.4

%

Adjusted income from continuing operations, excluding depreciation, amortization and reorganization

$

63,689


$

62,688


$

69,034


$

70,182


$

71,090


Adjusted income from continuing operations margin

27.0

%

26.2

%

28.5

%

28.8

%

28.6

%

Reversal of certain bankruptcy claims

180


(118)


165


3,100


1,800


Adjusted EBITDA

$

63,869


$

62,570


$

69,199


$

73,282


$

72,890


Adjusted EBITDA margin

27.1

%

26.1

%

28.6

%

30.1

%

29.3

%


Select Operating and Financial Metrics:






Residential access lines (2)

568,594


584,211


599,995


616,564


629,329


Business access lines (2)

294,353


295,134


298,055


300,437


302,524


Wholesale access lines (3)

63,068


65,641


67,886


69,375


72,233


Total switched access lines (2)

926,015


944,986


965,936


986,376


1,004,086


% change y-o-y

(7.8)%


(7.7)%


(7.7)%


(7.8)%


(8.1)%


% change q-o-q

(2.0)%


(2.2)%


(2.1)%


(1.8)%


(1.9)%








Broadband subscribers (2) (4)

330,082


324,977


321,102


319,296


317,224


% change y-o-y

4.1

%

3.9

%

3.3

%

5.2

%

7.1

%

% change q-o-q

1.6

%

1.2

%

0.6

%

0.7

%

1.4

%

penetration of access lines

35.6

%

34.4

%

33.2

%

32.4

%

31.6

%







Access line equivalents (2)

1,256,097


1,269,963


1,287,038


1,305,672


1,321,310


% change y-o-y

(4.9)%


(5.0)%


(5.2)%


(4.9)%


(4.9)%


% change q-o-q

(1.1)%


(1.3)%


(1.4)%


(1.2)%


(1.1)%








Retail Ethernet

3,532


3,192


2,826


2,417


2,091


Wholesale Ethernet

2,933


2,753


2,561


2,429


2,370


Ethernet Circuits

6,465


5,945


5,387


4,846


4,461


% change y-o-y

44.9

%

     N/A

     N/A

     N/A

     N/A

% change q-o-q

8.7

%

10.4

%

11.2

%

8.6

%

     N/A







Employee Headcount

3,321


3,369


3,398


3,410


3,454








(1) For purposes of calculating Adjusted EBITDA (in accordance with the definition of Consolidated EBITDA in the Company's new

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 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.

 

 

 

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

March 31, 2013 and December 31, 2012

(in thousands, except share data)



March 31, 2013


December 31, 2012


(unaudited)



Assets:




Cash

$

17,478



$

23,203


Restricted cash

5,664



6,818


Accounts receivable (net of $18.8 million and $18.9 million allowance for doubtful accounts)

88,590



86,999


Prepaid expenses

16,062



20,128


Other current assets

3,981



4,219


Deferred income tax, net

16,236



16,376


Assets held for sale



12,549


Total current assets

148,011



170,292


Property, plant and equipment (net of $722.6 million and $642.1 million accumulated

depreciation, respectively)

1,381,466



1,438,309


Intangible assets (net of $24.4 million and $21.6 million accumulated amortization, respectively)

114,203



116,992


Debt issue costs, net

7,491



1,111


Restricted cash

651



651


Other assets

4,697



5,006


Total assets

$

1,656,519



$

1,732,361






Liabilities and Stockholders' Deficit:




Current portion of long-term debt

$

6,400



$

10,000


Current portion of capital lease obligations

1,235



1,220


Accounts payable

63,860



57,832


Claims payable and estimated claims accrual

1,182



1,282


Accrued interest payable

9,470



176


Other accrued liabilities

60,323



72,036


Liabilities held for sale



407


Total current liabilities

142,470



142,953


Capital lease obligations

1,143



1,470


Accrued pension obligations

208,702



203,537


Employee benefit obligations

631,426



619,108


Deferred income taxes

106,440



127,361


Other long-term liabilities

12,526



8,745


Long-term debt, net of current portion

914,501



947,000


Total long-term liabilities

1,874,738



1,907,221


Total liabilities

2,017,208



2,050,174


Commitments and contingencies




Stockholders' deficit:




Common stock, $0.01 par value, 37,500,000 shares authorized, 26,477,258 and 26,288,998 shares

issued and outstanding at March 31, 2013 and December 31, 2012, respectively

264



262


Additional paid-in capital

508,012



506,153


Retained deficit

(615,724)



(568,239)


Accumulated other comprehensive loss

(253,241)



(255,989)


Total stockholders' deficit

(360,689)



(317,813)


Total liabilities and stockholders' deficit

$

1,656,519



$

1,732,361


 

 

 

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

Three Months Ended March 31, 2013 and 2012

(Unaudited)

(in thousands, except per share data)



Three Months Ended March 31,


2013


2012

Revenues

$

235,469



$

248,474


Operating expenses:




Cost of services and sales, excluding depreciation and amortization

116,611



121,475


Selling, general and administrative expense, excluding depreciation and amortization

88,886



89,428


Depreciation and amortization

91,433



93,207


Reorganization related income

(163)



(1,392)


Total operating expenses

296,767



302,718


Loss from operations

(61,298)



(54,244)


Other income (expense):




Interest expense

(18,002)



(17,028)


Loss on debt refinancing

(6,787)




Other

425



302


Total other expense

(24,364)



(16,726)


Loss from continuing operations before income taxes

(85,662)



(70,970)


Income tax benefit

28,133



24,258


Loss from continuing operations

(57,529)



(46,712)


Gain on sale of discontinued operations, net of taxes

10,044




Net loss

$

(47,485)



$

(46,712)






Weighted average shares outstanding:




Basic

26,147



25,931


Diluted

26,147



25,931






Earnings (loss) per share, basic:




Continuing operations

$

(2.20)



$

(1.80)


Discontinued operations

0.38




Loss per share, basic

$

(1.82)



$

(1.80)






Earnings (loss) per share, diluted:




Continuing operations

$

(2.20)



$

(1.80)


Discontinued operations

0.38




Loss per share, diluted

$

(1.82)



$

(1.80)


 

 

 

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

Three Months Ended March 31, 2013 and 2012

(Unaudited)

(in thousands)



Three Months Ended March 31,


2013


2012

Cash flows from operating activities:




Net loss

$

(47,485)



$

(46,712)


Adjustments to reconcile net loss to net cash provided by (used in) operating

activities:




Deferred income taxes

(21,428)



(24,373)


Provision for uncollectible revenue

2,489



(1,857)


Depreciation and amortization

91,433



93,207


Post-retirement healthcare

14,135



13,266


Qualified pension

5,884



(285)


Gain on sale of business

(16,774)




Loss on debt refinancing

6,787




Other non-cash items

938



64


Changes in assets and liabilities arising from operations:




Accounts receivable

(4,152)



4,060


Prepaid and other assets

3,342



2,982


Restricted cash

1,171



(6,643)


Accounts payable and accrued liabilities

(5,758)



7,935


Accrued interest payable

9,294



(6)


Other assets and liabilities, net

3,612



(230)


Reorganization adjustments:




Non-cash reorganization income

(180)



(1,855)


Claims payable and estimated claims accrual

80



(5,550)


Restricted cash - cash claims reserve

(17)



13,076


Total adjustments

90,856



93,791


Net cash provided by operating activities

43,371



47,079


Cash flows from investing activities:




Net capital additions

(29,910)



(26,257)


Proceeds from sale of business

30,315




Distributions from investments

421



338


Net cash provided by (used in) investing activities

826



(25,919)


Cash flows from financing activities:




Refinancing costs

(13,217)




Proceeds from issuance of long-term debt

920,590




Repayments of long-term debt

(957,000)



(2,500)


Restricted cash



111


Proceeds from exercise of stock options

17




Repayment of capital lease obligations

(312)



(326)


Net cash used in financing activities

(49,922)



(2,715)


Net change

(5,725)



18,445


Cash, beginning of period

23,203



17,350


Cash, end of period

$

17,478



$

35,795


Supplemental disclosure of cash flow information:




Reorganization costs paid

$

228



$

270


Non-cash settlement of claims payable

$



$

5,268


 

SOURCE FairPoint Communications, Inc.



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