ENGLEWOOD, Colo.--(BUSINESS WIRE)--
WideOpenWest, Inc. (“WOW!” or the “Company”) (NYSE: WOW), a leading,
fully integrated provider of residential and commercial high-speed data,
video and telephony services to customers in the United States, today
announced financial and operating results for the fourth quarter and
year ended December 31, 2017.
Year End 2017 Highlights (1)
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Teresa Elder joins WOW! as Chief Executive Officer
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Total Revenue of $1.188 billion; Net Income of $159.5 million; Diluted
Earnings Per Share of $2.02
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Adjusted EBITDA of $445.7 million; Transaction Adjusted EBITDA of
$437.1 million; Adjusted Diluted Earnings Per Share of $1.06
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Added 2,700 high-speed data (HSD) RGUs in the fourth quarter of 2017
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Total Edge-Out projects have extended the network to 104,800 homes
passed; 2017 Edge-Out Nodes now extend to 63,700 new homes passed and
2016 Edge-Out Nodes total 41,100 homes passed and have achieved over
31% penetration
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Business Services Subscription Revenue Including Acquisitions and
Dispositions grew 11.8% over 2016
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Launched 1 Gig service throughout 95% of homes passed
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Successfully closed the Chicago Fiber Network transaction for $225.0
million
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Retired over $620.0 million of outstanding indebtedness, substantially
improving WOW!’s leverage ratio to 5.1x at year-end 2017 from 6.1x at
year-end 2016, and reduced the cost of debt to 4.82% from 6.18%
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Announced a $50.0 million common stock buyback; purchased more than
461,000 shares as of December 31, 2017, and 4.0 million shares as of
March 9, 2018
Financial Highlights
For the
year ended December 31, 2017, WOW! reported Total Revenue of $1.188
billion, down $48.9 million, or 4.0%, compared to the year ended
December 31, 2016. Total Revenue Including Acquisitions and Dispositions
declined 1.4% from year end 2016. The Company reported 2017 Net Income
of $159.5 million and Transaction Adjusted EBITDA of $437.1
million, a decrease of $5.0 million, or 1.1%, compared to the year ended
December 31, 2016.
“WOW! went into 2017 with very aggressive goals,” said Teresa Elder,
chief executive officer of WOW!. “While we met many of our objectives,
we are disappointed to report that we fell short in some key customer
and financial metrics, which is unacceptable. We ended the year,
however, with good momentum and have a strong plan in place to build on
our rich heritage of putting the customer first and to drive growth in
2018. We will rededicate ourselves to delivering an exceptional customer
experience that is more reliable, easy and pleasantly surprising by
investing in sales and marketing, our customer care organization, the
online experience and expansion of our product portfolio.”
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____________________
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(1)
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Refer to “Non-GAAP Financial Measures and Operating Metrics,”
“Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures,”
and “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” in this Press Release for
definitions and information related to Adjusted EBITDA and
Transaction Adjusted financial and subscriber information,
reconciliation of such non-GAAP measures to GAAP measures and why
our management thinks it is beneficial to present such non-GAAP
measures.
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Revenue
On a reported basis,
for the year ended December 31, 2017, Total Revenue decreased 4.0%
compared to the year ended December 31, 2016. Total Revenue Including
Acquisitions and Dispositions decreased 1.4% to $1.174 billion compared
to the year ended 2016, which was driven primarily by video and
telephony RGU losses, partially offset by increases in ARPU and Business
Services Subscription Revenue growth.
On a reported basis, Residential Subscription Revenue for the year ended
December 31, 2017, was down 4.5% compared to the year ended December 31,
2016. Residential Subscription Revenue Including Acquisitions and
Dispositions decreased 2.6% to $921.9 million compared to the year ended
December 31, 2016. The largest contributor to the decline in Residential
Subscription Revenue and Residential Subscription Revenue Including
Acquisitions and Dispositions was video and telephony RGU losses,
partially offset by increases in ARPU and HSD subscriber net gain.
On a reported basis, Business Services Subscription Revenue for the year
ended December 31, 2017, was up 7.0% compared to the year ended December
31, 2016. Business Services Subscription Revenue Including Acquisitions
and Dispositions increased 11.8% to $114.6 million compared to the year
ended December 31, 2016. The largest contributor to the increase in
Business Services Subscription Revenue and Business Services
Subscription Revenue Including Acquisitions and Dispositions was an
increase in commercial customers.
Other Business Services Revenue totaled $39.9 million for the year ended
December 31, 2017, a decrease of 12.5% compared to year ended December
31, 2016. The decline was driven by lower pass-through revenue related
to the construction of the Company’s wireless backhaul project, which is
non-recurring in nature.
Other revenue totaled $108.5 million for the year ended December 31,
2017, a decrease of 6.5% compared to the year ended December 31, 2016,
primarily driven by decreases in advertising revenues associated with a
non-political year and franchise fees, both of which are affected by the
reduction in subscribers compared to the year ended December 31, 2016.
Costs and Expenses
Operating
Expenses, Excluding Depreciation and Amortization, totaled $626.5
million for 2017, a decrease of $41.8 million, or 6.3%, compared to
2016. The decrease is primarily due to reductions in video programming
costs, decreased costs related to the Company’s fiber network
construction activities and overall reductions in costs as a result of
the net effect of acquisitions and dispositions.
Selling, General, and Administrative expenses were $138.5 million for
2017, an increase of $22.1 million, or 19.0%, compared to 2016. The
increase is mainly due to a $12.3 million increase in non-cash stock
compensation as a result of being a public company, an increase in
telecom taxes, and third party professional fees. Partially offsetting
these increases was an overall reduction in expenses related to the net
effect of acquisitions and dispositions.
Net Income and Earnings per Share
Net
Income for the year ended December 31, 2017, was $159.5 million,
compared to Net Income of $26.3 million for the year ended December 31,
2016. Diluted Earnings Per Share for the year ended December 31, 2017,
was $2.02, compared to $0.40 for the year ended December 31, 2016. The
year-over-year improvement in Net Income is attributable to gains on the
sale of a portion of the Company’s Chicago fiber network and on the sale
of the Company’s Lawrence, Kansas, system, a reduction in interest
expense, and the favorable impact associated with corporate tax reform
relating to the passage of the Tax Cut and Jobs Act on December 22,
2017, offset by the impairment loss on intangibles and goodwill.
Adjusted Diluted Earnings Per Share for 2017 was $1.06.
Adjusted EBITDA
Transaction
Adjusted EBITDA for 2017 was $437.1 million, down 1.1% from 2016.
Transaction Adjusted EBITDA margin was 37.2% in 2017, representing a
slight increase compared to the year ended December 31, 2016,
Transaction Adjusted EBITDA margin of 37.1%.
Customers
WOW! reported Total
Subscribers of 777,300 as of December 31, 2017, compared to 772,300 as
of December 31, 2016, on a Transaction Adjusted basis, a 0.6% increase.
Total Subscribers were up sequentially from 776,400 as of September 30,
2017.
HSD RGUs totaled 732,700 as of December 31, 2017, representing a 13,800
increase over December 31, 2016, on a Transaction Adjusted basis, or
1.9%, and a sequential increase of 2,700 from 730,000 or 0.4%, as of
September 30, 2017.
Edge-Outs
As of December 31,
2017, Edge-Out projects now reach 104,800 homes passed as part of the
Company’s Edge-Out growth efforts started in 2016. Edge-Out projects
begun in 2016 (“2016 Edge-Out Nodes”) passed approximately 41,100 homes
at December 31, 2017. The Company has 12,800 customers on such nodes,
which represents over 31% penetration with an average of 497 days in
active service.
The Edge-Out projects begun in 2017 (“2017 Edge-Out Nodes”) passed
approximately 63,700 homes as of December 31, 2017. WOW! had 13,600
customers on such nodes, which represents over 21% penetration with an
average of 230 days in active service.
Sale of Chicago Fiber Network
On
December 14, 2017, the Company completed the sale of a portion of its
fiber network in the Company’s Chicago market to a subsidiary of Verizon
for $225.0 million in cash. In addition, the Company and subsidiary of
Verizon entered into a new construction agreement pursuant to which the
Company will complete the build-out of the Chicago fiber network in
exchange for approximately $50.0 million (which approximates the
Company’s remaining estimate to complete the network build-out), payable
as the remaining network elements are completed. The final build-out of
the network is expected to be completed during the second half of 2018.
Capital Expenditures
Capital
Expenditures totaled $301.3 million for the year ended December 31,
2017, representing a $13.8 million increase compared to the year ended
December 31, 2016, on a reported basis. Transaction Adjusted Capital
Expenditures increased $22.2 million to $254.9 million for the year
ended December 31, 2017. On a Transaction Adjusted Basis, Strategic
Capital Expenditures, defined as Edge-Out Capital Expenditures and
Business Services Capital Expenditures dedicated to expansion of the
Company’s network, were $70.2 million for the year ended December 31,
2017, which represented an increase of $15.6 million over the year ended
December 31, 2016, as a result of an increase in Edge-Out Capital
Expenditures. Excluding Strategic Capital Expenditures, Transaction
Adjusted Capital Expenditures for the full year of 2017 totaled $184.7
million, which equates to 15.7% of Total Revenue Including Acquisitions
and Dispositions for the full year of 2017.
Liquidity and Leverage
As of
December 31, 2017, the total outstanding amount of long term debt and
capital lease obligations was $2.277 billion. Cash and cash equivalents
as of December 31, 2017, was $69.4 million. Total Net Leverage as of
December 31, 2017, was 5.1x on a LTM Transaction Adjusted EBITDA basis.
Undrawn revolver capacity totaled $292.1 million.
Stock Repurchase
On December
14, 2017, WOW! announced a $50.0 million common stock repurchase
program. As of December 31, 2017, WOW! had repurchased over 461,000
shares of the Company’s common stock in the open market. Through March
9, 2018, WOW! had repurchased in excess of 4.0 million shares.
Impairment
As a result of the
annual impairment test for indefinite-lived intangible assets and
goodwill, the Company recorded a non-cash impairment charge of $147.4
million related to franchise operating rights and goodwill in certain
markets. The primary driver of the impairment charge was a decline in
the price of WOW!’s common stock, which reduced market multiples
utilized to determine estimated fair market values of indefinite-lived
intangible assets and goodwill in certain reporting units.
Guidance
For the full year
2018, WOW! expects HSD RGUs to increase by a range of 5,000 to 15,000.
In addition, the Company expects Total Revenue to be between $1.15
billion and $1.17 billion, Adjusted EBITDA to be between $410.0 million
and $420.0 million and Capital Expenditures to be between $235.0 million
and $225.0 million. The Company’s expectations regarding 2018 operating
and selling, general, and administrative expenses and resulting Adjusted
EBITDA is affected by the previously described investments in the
Company’s business, which are expected to total between $20.0 million
and $25.0 million and are being incurred to position WOW! to return to a
growth profile in 2019 and beyond. Free Cash Flow, defined as Net Cash
Provided by Operating Activities less Transaction Adjusted Capital
Expenditures (i.e. excluding capital expenditures related to the
completion of the Chicago Fiber Network), is expected to be between
$45.0 million and $55.0 million. The following table summarizes full
year 2018 guidance:
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2018 Guidance
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Range
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($ in millions)
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Total Revenue
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$ 1,150.0
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$ 1,170.0
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Adjusted EBITDA
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410.0
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420.0
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Transaction Adjusted Capital Expenditures
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(235.0)
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(225.0)
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Interest Expense & Other
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(130.0)
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(140.0)
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Free Cash Flow
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$ 45.0
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$ 55.0
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The Company’s full year 2018 guidance includes non-GAAP financial
measures. The Company believes that it is impracticable to provide a
reconciliation to the most comparable GAAP measures due to the
forward-looking nature of these forecasted adjusted metrics and the
degree of uncertainty associated with forecasting the reconciling items
and amounts. The Company further believes that providing estimates of
the amounts that would be required to reconcile the forecasted adjusted
measures to forecasted GAAP measures would imply a degree of precision
that would be confusing or misleading. The adjustments that cannot be
predicted with reasonable certainty include, but are not limited to,
Depreciation and Amortization, Interest Expense, Non-recurring
professional fees, Integration and restructuring, Non-cash stock
compensation, Other expense, and Income tax expense.
Conference Call
WOW! will host
a conference call on Wednesday, March 14, 2018, at 5:00 p.m. Eastern to
discuss the operating and financial results contained in this press
release. The conference call will be broadcast live on the Company’s
investor relations website at ir.wowway.com.
Those parties interested in participating via telephone can use the
conference call information as follows:
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Call Date:
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Wednesday, March 14, 2018
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Call Time:
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5:00 p.m. Eastern
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Dial In:
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(877) 541-5069
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Intn’l Dial In:
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(443) 842-7607
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Conf. ID:
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7888257
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A recording of the conference call will be available approximately two
hours after the completion of the call until April 14, 2018. The dial-in
number for this replay is (855) 859-2056.
The following unaudited condensed consolidated statements of operations
summarizes information in the Company’s Form 10-K for the three months
and twelve months ended December 31, 2017, as filed on March 14, 2018,
with the United States Securities and Exchange Commission (“SEC”). For
ease of use, references in this release to “WOW!” means WideOpenWest,
Inc. and its subsidiaries.
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WideOpenWest Inc.
Condensed Consolidated Statements of Operations (Unaudited)
($ in millions, except for per share data)
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Three months ended
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Twelve months ended
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December 31,
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December 31,
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2017
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2016
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2017
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2016
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Revenue
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Residential subscription
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$
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227.4
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$
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243.4
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$
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923.0
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$
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966.3
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Business services subscription
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30.3
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28.9
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116.7
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109.1
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Total subscription
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257.7
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272.3
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1,039.7
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1,075.4
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Other business services
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8.6
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13.8
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39.9
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45.6
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Other
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26.5
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29.9
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108.5
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116.0
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Total Revenue
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$
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292.8
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$
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316.0
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$
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1,188.1
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$
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1,237.0
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Costs and expenses
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Operating (excluding depreciation and amortization)
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$
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156.1
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$
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169.2
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$
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626.5
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$
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668.3
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Selling, general and administrative
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37.6
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30.2
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138.5
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116.4
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Depreciation and amortization
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48.0
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52.0
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198.1
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207.0
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Impairment loss on intangibles and goodwill
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147.4
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-
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147.4
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-
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Gain on sale of assets
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(94.1
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-
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(94.1
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-
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Management fee to related party
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-
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0.4
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1.0
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1.7
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$
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295.0
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$
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251.8
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$
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1,017.4
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$
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993.4
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Income (loss) from operations
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$
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(2.2
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$
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64.2
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$
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170.7
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$
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243.6
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Other income (expense)
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Interest expense
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(29.6
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(48.8
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(151.6
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(211.1
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Realized and unrealized gain on derivative instruments
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-
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-
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-
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2.3
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Gain on sale of system dispositions
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-
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-
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38.4
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-
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Loss on early extinguishment of debt
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-
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(7.4
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(32.1
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(38.0
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Other income (expense), net
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(0.1
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0.2
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1.6
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2.2
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Income tax benefit
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116.1
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19.9
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132.5
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27.3
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Net Income
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$
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84.2
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$
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28.1
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$
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159.5
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$
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26.3
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Basic and diluted earnings per common shares
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Basic
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$
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0.97
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$
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0.42
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$
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2.03
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$
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0.40
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Diluted
|
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$
|
0.97
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$
|
0.42
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$
|
2.02
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$
|
0.40
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Weighted-average common shares outstanding
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Basic
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86,950,430
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66,525,044
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78,778,640
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65,837,555
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Diluted
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87,252,425
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66,584,905
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78,915,946
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65,864,203
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About WOW!
WOW! is one of the
nation’s leading providers of high-speed internet, cable TV and phone
serving communities in the U.S. Our operating philosophy is to deliver
an employee and customer experience that lives up to its name. For more
information, please visit www.wowway.com.
Forward-Looking Statements
This
press release may contain 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. All statements,
other than statements of historical facts, included in this release are
forward-looking statements. Forward-looking statements discuss our
current expectations and projections relating to our financial
condition, results of operations, plans, objectives, future performance
and business. Forward-looking statements are not guarantees of future
performance and we caution you not to place undue reliance on such
statements. Forward-looking statements are generally identifiable by the
use of the words “may,” “will,” “should,” “expect,” “anticipate,”
“estimate,” “believe,” “intend,” “project,” “continue,” or the negative
of these words, or other similar words or terms. The forward-looking
statements included in this release are made as of the date hereof.
Except as required by law, we assume no obligation to publicly update
any forward-looking statement, even if new information becomes available
in the future or if experience or future changes make it clear that any
projected results expressed or implied in such statements will not be
realized. If we do update one or more forward-looking statements, no
inference should be made that we will make additional updates with
respect to those or other forward-looking statements. Actual results may
differ materially from those expected because of various risks and
uncertainties, many of which are beyond our control, including the wide
range of competition we face in our business; competitors that are
larger and possess more resources; dependence upon a business services
strategy; conditions in the economy, including potentially uncertain
economic conditions; our ability to secure new businesses as customers;
demand for our bundled broadband communications services may be lower
than we expect; our ability to respond to rapid technological change;
increases in programming and retransmission costs; a decline in
advertising revenues; the effects of regulatory changes in our business;
our substantial level of indebtedness; certain covenants in our debt
documents; programming exclusivity in favor of our competitors;
inability to obtain necessary hardware, software and operational
support; strain on business and resources from future acquisitions, or
the inability to identify suitable acquisitions; and other factors that
may be described from time to time in our filings with the SEC. All
forward-looking statements are expressly qualified in their entirety by
these cautionary statements.
Non-GAAP Financial Measures and Operating
Metrics
We have included certain non-GAAP financial
measures in this release, including Revenue Including Acquisitions and
Dispositions, Residential Subscription Revenue Including Acquisitions
and Dispositions, Business Services Subscription Revenue Including
Acquisitions and Dispositions, Adjusted EBITDA, Transaction Adjusted
EBITDA, Transaction Adjusted Capital Expenditures, Adjusted EPS and Free
Cash Flow. The presentation of these financial measures is not intended
to be considered in isolation or as a substitute for, or superior to,
the financial information prepared and presented in accordance with
generally accepted accounting principles in the United States of America
(“GAAP”).
We believe that these non-GAAP measures enhance an investor’s
understanding of our financial performance. We believe that these
non-GAAP measures are useful financial metrics to assess our operating
performance from period to period by excluding certain items that we
believe are not representative of our core business. We believe that
these non-GAAP measures provide investors with useful information for
assessing the comparability between periods of our ability to generate
cash from operations sufficient to pay taxes, to service debt and to
undertake capital expenditures. We use these non-GAAP measures for
business planning purposes and in measuring our performance relative to
that of our competitors. We believe these non-GAAP measures are measures
commonly used by investors to evaluate our performance and that of our
competitors.
Revenue Including Acquisitions and Dispositions, Residential
Subscription Revenue Including Acquisitions and Dispositions, Business
Services Subscription Revenue Including Acquisitions and Dispositions,
and Transaction Adjusted Capital Expenditures give effect to certain
acquisitions and divestitures made by WOW! and are included herein
because they are key metrics used by management and our Board of
Directors to assess our financial performance. We believe that these
non-GAAP measures are appropriate measures of operating performance
because they are meaningful to investors by showing how certain
acquisitions and divestitures might have affected our historical
financial statements. The presentation of these measures is not made in
accordance with GAAP and our use of these terms herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and therefore are not necessarily comparable.
These non-GAAP measures should not be considered as an alternative to
revenue, capital expenditures or any other performance measures derived
in accordance with GAAP as measures of operating performance.
Adjusted EBITDA is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We believe that Adjusted EBITDA is an appropriate measure
of operating performance because it eliminates the impact of expenses
that do not relate to business performance, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance. Transaction Adjusted EBITDA makes certain additional
adjustments to the historical financial information that WOW! believes
is meaningful to investors by showing how certain acquisitions and
divestitures might have affected WOW!’s historical financial statements.
Adjusted EBITDA is defined by WOW! as net income (loss) before net
interest expense, income taxes, depreciation and amortization (including
impairments), impairment losses on intangibles and goodwill, gains
(losses) realized and unrealized on derivative instruments, management
fees to related party, the write-up or write-off of any asset, loss on
early extinguishment of debt, integration and restructuring expenses and
all non-cash charges and expenses (including equity based compensation
expense) and certain other income and expenses. Transaction Adjusted
EBITDA represents Adjusted EBITDA after giving effect to the impact of
acquisitions and dispositions that were completed during the relevant
periods as if they occurred at the beginning of the period presented.
The presentation of Adjusted EBITDA and Transaction Adjusted EBITDA is
not made in accordance with GAAP and our use of the terms Adjusted
EBITDA and Transaction Adjusted EBITDA may vary from others in our
industry. Adjusted EBITDA and Transaction Adjusted EBITDA should not be
considered as an alternative to net income (loss), operating income or
any other performance measures derived in accordance with GAAP as
measures of operating performance, operating cash flows or liquidity.
Adjusted EBITDA and Transaction Adjusted EBITDA have important
limitations as an analytical tool. For example, Adjusted EBITDA and
Transaction Adjusted EBITDA:
-
exclude certain tax payments that may represent a reduction in cash
available to us;
-
do not reflect any cash capital expenditure requirements for the
assets being depreciated and amortized that may have to be replaced in
the future;
-
do not reflect changes in, or cash requirements for, our working
capital needs; and
-
do not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments on
our debt.
Adjusted Diluted Earnings per Share (EPS) is included herein because it
is a key metric used by management and our Board of Directors to assess
our financial performance. Adjusted Diluted EPS is a non-GAAP financial
measure that eliminates the effect of management fees to related party,
loss on early extinguishment of debt, gain (loss) on sale of assets,
impairment losses on intangibles and goodwill, non-recurring
professional fees, M&A integration and restructuring expense, non-cash
stock compensation, and other (income) and expenses. We then add or
subtract an estimated incremental income tax effect applicable to those
items. We believe that this measurement is useful to investors as an
additional way to analyze the underlying trends in our business
consistently across the periods presented.
The presentation of Adjusted Diluted EPS is not made in accordance with
GAAP and our use of the term Adjusted Diluted EPS herein varies from the
use of similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Adjusted
Diluted EPS should not be considered as an alternative to Diluted EPS or
any other performance measures derived in accordance with GAAP as
measures of operating performance.
See “Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures”
and the accompanying tables below for a reconciliation of Adjusted
EBITDA to our net income (loss), which is the most directly comparable
GAAP financial measure and a reconciliation of Adjusted EPS to Diluted
Earnings Per Share, which is the most directly comparable GAAP financial
measure.
Free Cash Flow is included herein because it is a key metric used by
management and our Board of Directors to assess our financial
performance. We define Free Cash Flow as Net cash flows provided by
operating activities less Capital Expenditures. We believe that Free
Cash Flow is an appropriate measure of operating performance because it
is meaningful to investors because it presents the cash generated or
used by the business in a given period, and that the presentation of
this measure enhances an investor’s understanding of our financial
performance.
The presentation of Free Cash Flow is not made in accordance with GAAP
and our use of the term Free Cash Flow herein varies from the use of
similar terms by other companies in our industry due to different
methods of calculation and is not necessarily comparable. Free Cash Flow
should not be considered as an alternative to net income or any other
performance measures derived in accordance with GAAP as measures of
operating performance.
In addition, we use the following subscriber information in this release:
-
Homes Passed – We report homes passed as
the number of serviceable addresses, such as single residence homes,
apartments condominium units and businesses passed by our broadband
network and listed in our database.
-
Subscribers – Because we deliver multiple
services to our customers, we report the total number of customers
(“Total Customers”) as those who subscribe to at least one of our
high-speed data (“HSD”), video (“Video”) or telephony (“Telephony”)
services without regard to which or how many of those services they
subscribe. We report Video subscribers as the number of basic cable
subscribers, excluding customers who only subscribe to HSD or
Telephony services in this total. We define total Revenue Generating
Units (“RGUs”) as the sum of HSD subscribers, Video subscribers and
Telephony subscribers.
Subscriber information for acquired entities is preliminary and subject
to adjustment until we have completed our review of such information and
determined that it is presented in accordance with our policies. While
we take appropriate steps to ensure subscriber information is presented
on a consistent and accurate basis at any given balance sheet date, we
periodically review our policies in light of the variability we may
encounter across our different markets due to the nature and pricing of
products and services and billing systems. Accordingly, we may from time
to time make appropriate adjustments to our subscriber information based
on such reviews.
Unaudited Reconciliations of GAAP Measures to
Non-GAAP Measures
The following table provides unaudited reconciliations of GAAP measures
to non-GAAP measures used herein for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WideOpenWest, Inc.
Reconciliation of GAAP Measures to Non-GAAP Measures (Unaudited)
($ in millions, except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
Twelve months ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
84.2
|
|
|
|
$
|
28.1
|
|
|
|
$
|
159.5
|
|
|
|
$
|
26.3
|
|
|
Depreciation and amortization
|
|
|
|
48.0
|
|
|
|
|
52.0
|
|
|
|
|
198.1
|
|
|
|
|
207.0
|
|
|
Impairment loss on intangibles and goodwill
|
|
|
|
147.4
|
|
|
|
|
-
|
|
|
|
|
147.4
|
|
|
|
|
-
|
|
|
Gain on sale of assets
|
|
|
|
(94.1
|
)
|
|
|
|
-
|
|
|
|
|
(94.1
|
)
|
|
|
|
-
|
|
|
Management fee to related party
|
|
|
|
-
|
|
|
|
|
0.4
|
|
|
|
|
1.0
|
|
|
|
|
1.7
|
|
|
Interest expense
|
|
|
|
29.6
|
|
|
|
|
48.8
|
|
|
|
|
151.6
|
|
|
|
|
211.1
|
|
|
Loss on early extinguishment of debt
|
|
|
|
-
|
|
|
|
|
7.4
|
|
|
|
|
32.1
|
|
|
|
|
38.0
|
|
|
Realized and unrealized gain on derivative instruments
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(2.3
|
)
|
|
Gain on sale of system dispositions
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
(38.4
|
)
|
|
|
|
-
|
|
|
Non-recurring professional fees, M&A Integration and restructuring
expense
|
|
|
|
2.2
|
|
|
|
|
2.9
|
|
|
|
|
9.2
|
|
|
|
|
10.2
|
|
|
Non-cash stock compensation
|
|
|
|
5.1
|
|
|
|
|
0.6
|
|
|
|
|
13.4
|
|
|
|
|
1.1
|
|
|
Other expense (income), net
|
|
|
|
0.1
|
|
|
|
|
(0.2
|
)
|
|
|
|
(1.6
|
)
|
|
|
|
(2.2
|
)
|
|
Income tax (benefit) expense
|
|
|
|
(116.1
|
)
|
|
|
|
(19.9
|
)
|
|
|
|
(132.5
|
)
|
|
|
|
(27.3
|
)
|
|
Adjusted EBITDA (1)
|
|
|
$
|
106.4
|
|
|
|
$
|
120.1
|
|
|
|
$
|
445.7
|
|
|
|
$
|
463.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months
|
|
|
|
|
|
Twelve months
|
|
|
|
|
|
|
|
ended
|
|
|
|
|
|
ended
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
Per Share
|
|
|
|
|
|
Per Share
|
|
|
|
|
Diluted earnings per share
|
|
|
$
|
0.97
|
|
|
|
|
|
|
$
|
2.02
|
|
|
|
|
|
Impairment loss on intangibles and goodwill
|
|
|
|
1.69
|
|
|
|
|
|
|
|
1.87
|
|
|
|
|
|
Gain on Sale of Assets
|
|
|
|
(1.08
|
)
|
|
|
|
|
|
|
(1.19
|
)
|
|
|
|
|
Management fee to related party
|
|
|
|
-
|
|
|
|
|
|
|
|
0.01
|
|
|
|
|
|
Loss on early extinguishment of debt
|
|
|
|
-
|
|
|
|
|
|
|
|
0.41
|
|
|
|
|
|
Gain on sale of system dispositions
|
|
|
|
-
|
|
|
|
|
|
|
|
(0.49
|
)
|
|
|
|
|
Non-recurring professional fees, M&A integration and restructuring
expense
|
|
|
|
0.03
|
|
|
|
|
|
|
|
0.12
|
|
|
|
|
|
Non-cash stock compensation
|
|
|
|
0.06
|
|
|
|
|
|
|
|
0.17
|
|
|
|
|
|
Corporate tax reform
|
|
|
|
(1.20
|
)
|
|
|
|
|
|
|
(1.33
|
)
|
|
|
|
|
Income tax applicable to adjustments, net(2)
|
|
|
|
(0.15
|
)
|
|
|
|
|
|
|
(0.53
|
)
|
|
|
|
|
Adjusted Diluted Earnings Per Share
|
|
|
$
|
0.32
|
|
|
|
|
|
|
$
|
1.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
See “Unaudited Transaction Adjusted Condensed Consolidated
Financial and Subscriber Information” below for a reconciliation
of Adjusted EBITDA to Transaction Adjusted EBITDA for the
respective quarters ended giving effect the acquisition of NuLink
on September 9, 2016, the divestiture of a portion of our Chicago
Fiber Network on December 14, 2017 and our divestiture of the
Lawrence, Kansas, system on January 12, 2017, as if such
transactions had been completed at the beginning of the respective
periods presented herein
|
|
|
|
|
(2)
|
|
|
The income tax impacts are determined using the applicable
rates in the taxing jurisdictions in which expense or income
occurred and includes both current and deferred income tax expense
(benefit) based on the nature of the non-GAAP performance measure.
|
|
|
|
|
|
|
|
|
Unaudited Transaction Adjusted Condensed
Consolidated Financial and Subscriber Information
The SEC requires that pro forma financial information be presented in a
registrant’s periodic filings when events occur for which disclosure
would be material to investors, including significant business
combinations or the disposition of a significant portion of the
business. The significance of an acquired or disposed business is
determined based on the “significant subsidiary” tests specified in
Regulation S-X, Article 11, Rule 1-02(w). Although the Company has made
certain acquisitions and divestitures, such transactions do not meet the
“significant subsidiary” tests and, accordingly, the Company’s
historical financial information as filed with the SEC does not contain
pro forma financial information relating to those transactions.
Nevertheless, we make certain adjustments in this release to the
historical financial and subscriber information of the Company as filed
with the SEC (“Transaction Adjusted”) because we believe such
information would be meaningful to investors by showing how such
transactions might have affected the Company’s historical financial
statements. The unaudited Transaction Adjusted financial and subscriber
information in this release has been prepared giving effect to our
acquisition of the operating assets of NuLink on September 9, 2016, the
divestiture of a portion of our Chicago Fiber Network on December 14,
2017, and our divestiture of the Lawrence, Kansas, system on January 12,
2017, as if such transactions had been completed at the beginning of the
respective periods presented herein. The unaudited Transaction Adjusted
financial and subscriber information is for informational purposes only
and does not purport to represent what our results of operations,
financial or subscriber information would have been if such transactions
had occurred at any date, nor does such information purport to project
the results of operations for any future period.
The unaudited Transaction Adjusted condensed consolidated financial and
subscriber information in this release was prepared based on NuLink’s
unaudited financial and subscriber information for the respective
periods presented. The historical unaudited financial and subscriber
information for the Lawrence, KS system and the portion of the Chicago
Fiber Network that was divested was prepared based on our books and
records for the Lawrence, KS system and the portion of the Chicago Fiber
Network for the perspective periods presented. Such historical unaudited
financial and subscriber information has been adjusted to give a
Transaction Adjusted effect to events that are directly attributable to
such transactions, factually supportable and expected to have a
continuing impact on the results. The unaudited Transaction Adjusted
financial information herein does not reflect non-recurring charges that
have been incurred in connection with the transaction including legal
fees, broker fees and accounting fees.
The following table provides an unaudited reconciliation of our
residential subscription revenue to residential subscription revenue
including Acquisitions and Dispositions, business services subscription
revenue to business services subscription revenue including Acquisitions
and Dispositions, Total Revenue to Total Revenue including Acquisitions
and Dispositions, Adjusted EBITDA to Transaction Adjusted EBITDA and
Capital Expenditures to Transaction Adjusted Capital Expenditures for
the periods indicated:
|
|
|
WideOpenWest, Inc.
Transaction Adjusted Condensed Consolidated Financial Information
(Unaudited)
($ in millions)
|
|
|
|
|
|
|
Three months ended
|
|
|
Twelve months ended
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Subscription Revenue
|
|
|
$
|
227.4
|
|
|
|
$
|
243.4
|
|
|
|
$
|
923.0
|
|
|
|
$
|
966.3
|
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential Subscription Revenue related to NuLink
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
13.5
|
|
|
Residential Subscription Revenue related to the Lawrence system
|
|
|
|
-
|
|
|
|
|
(8.4
|
)
|
|
|
|
(1.1
|
)
|
|
|
|
(33.6
|
)
|
|
Residential Subscription Revenue Including Acquisitions and
Dispositions
|
|
|
$
|
227.4
|
|
|
|
$
|
235.0
|
|
|
|
$
|
921.9
|
|
|
|
$
|
946.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Services Subscription Revenue
|
|
|
$
|
30.3
|
|
|
|
$
|
28.9
|
|
|
|
$
|
116.7
|
|
|
|
$
|
109.1
|
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Business Services Subscription Revenue related to NuLink
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1.3
|
|
|
Business Services Subscription Revenue related to the Lawrence system
|
|
|
|
-
|
|
|
|
|
(1.6
|
)
|
|
|
|
(0.3
|
)
|
|
|
|
(6.8
|
)
|
|
Business Services Subscription Revenue related to the Chicago fiber
network
|
|
|
|
(0.4
|
)
|
|
|
|
(0.4
|
)
|
|
|
|
(1.8
|
)
|
|
|
|
(1.1
|
)
|
|
Business Services Subscription Including Acquisitions and
Dispositions
|
|
|
$
|
29.9
|
|
|
|
$
|
26.9
|
|
|
|
$
|
114.6
|
|
|
|
$
|
102.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
|
$
|
292.8
|
|
|
|
$
|
316.0
|
|
|
|
$
|
1,188.1
|
|
|
|
$
|
1,237.0
|
|
|
Acquisitions and Dispositions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue related to NuLink
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
17.1
|
|
|
Total Revenue related to the Lawrence system
|
|
|
|
-
|
|
|
|
|
(11.4
|
)
|
|
|
|
(1.5
|
)
|
|
|
|
(45.7
|
)
|
|
Total Revenue related to the Chicago fiber network
|
|
|
|
(2.5
|
)
|
|
|
|
(5.2
|
)
|
|
|
|
(12.9
|
)
|
|
|
|
(17.8
|
)
|
|
Total Revenue Including Acquisitions and Dispositions
|
|
|
$
|
290.3
|
|
|
|
$
|
299.4
|
|
|
|
$
|
1,173.7
|
|
|
|
$
|
1,190.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
106.4
|
|
|
|
$
|
120.1
|
|
|
|
$
|
445.7
|
|
|
|
$
|
463.6
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA related to NuLink
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
5.8
|
|
|
Adjusted EBITDA related to the Lawrence system
|
|
|
|
-
|
|
|
|
|
(6.0
|
)
|
|
|
|
(1.0
|
)
|
|
|
|
(23.7
|
)
|
|
Adjusted EBITDA related to the Chicago fiber network
|
|
|
|
(1.6
|
)
|
|
|
|
(1.3
|
)
|
|
|
|
(7.6
|
)
|
|
|
|
(3.6
|
)
|
|
Transaction Adjusted EBITDA
|
|
|
$
|
104.8
|
|
|
|
$
|
112.8
|
|
|
|
$
|
437.1
|
|
|
|
$
|
442.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
$
|
77.0
|
|
|
|
$
|
80.3
|
|
|
|
$
|
301.3
|
|
|
|
$
|
287.5
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures related to NuLink
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
3.8
|
|
|
Capital Expenditures related to the Lawrence system
|
|
|
|
-
|
|
|
|
|
(1.3
|
)
|
|
|
|
(0.1
|
)
|
|
|
|
(5.7
|
)
|
|
Capital Expenditures related to the Chicago fiber network
|
|
|
|
(8.1
|
)
|
|
|
|
(8.4
|
)
|
|
|
|
(46.3
|
)
|
|
|
|
(52.9
|
)
|
|
Transaction Adjusted Capital Expenditures
|
|
|
$
|
68.9
|
|
|
|
$
|
70.6
|
|
|
|
$
|
254.9
|
|
|
|
$
|
232.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides an unaudited reconciliation of our reported
subscriber information to Transaction Adjusted subscriber information as
of the end of each of the respective quarterly periods:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Homes Passed
|
|
|
3,109,200
|
|
|
3,097,500
|
|
|
3,094,300
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(68,000
|
)
|
|
Transaction Adjusted Homes Passed
|
|
|
3,109,200
|
|
|
3,097,500
|
|
|
3,026,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Total Customers
|
|
|
777,300
|
|
|
776,400
|
|
|
803,400
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(31,100
|
)
|
|
Transaction Adjusted Total Customers
|
|
|
777,300
|
|
|
776,400
|
|
|
772,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported HSD Subscribers
|
|
|
732,700
|
|
|
730,000
|
|
|
747,400
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(28,500
|
)
|
|
Transaction Adjusted HSD Subscribers
|
|
|
732,700
|
|
|
730,000
|
|
|
718,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Video Subscribers
|
|
|
432,600
|
|
|
442,500
|
|
|
501,400
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(15,000
|
)
|
|
Transaction Adjusted Video Subscribers
|
|
|
432,600
|
|
|
442,500
|
|
|
486,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Telephony Subscribers
|
|
|
219,900
|
|
|
226,200
|
|
|
258,100
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(7,000
|
)
|
|
Transaction Adjusted Telephony Subscribers
|
|
|
219,900
|
|
|
226,200
|
|
|
251,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported Total RGUs
|
|
|
1,385,200
|
|
|
1,398,700
|
|
|
1,506,900
|
|
|
Transaction Adjustments:
|
|
|
|
|
|
|
|
|
|
|
Lawrence
|
|
|
-
|
|
|
-
|
|
|
(50,500
|
)
|
|
Transaction Adjusted Total RGUs
|
|
|
1,385,200
|
|
|
1,398,700
|
|
|
1,456,400
|
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20180314005858/en/
Source: WideOpenWest, Inc.