) has reported first quarter 2012 adjusted earnings per share of 13
cents, missing the Zacks Consensus Estimate of 16 cents. Adjusted
earnings for the quarter shot up 116.7% from the year-ago earnings
of 6 cents.
Adjusted earnings exclude $14 million in merger and integration
expenses and a gain of approximately $1 million related to the
early debt retirement.
Including these costs, the company reported earnings per share
of 11 cents, up 83% year-over-year.
Pro forma revenue decreased 0.5% year-over-year to $1,545.2
million in the first quarter, and missed our expectation of $1,558
million. On a GAAP basis, revenue grew 51% year-over-year.
Adjusted OIBDA (excluding non-cash pension expense, non-cash
stock-based compensation and restructuring charges) dropped 1.6%
year-over-year to stand at $594.3 million in the first quarter.
During the first quarter, total access lines, which include
voice lines, high-speed Internet and digital television customers,
dropped 3.5% year-over-year to 3.16 million. Windstream lost 28,600
access lines. Voice lines declined 4.3% year-over-year to $2.9
Windstream added as many as 8,500 new high-speed Internet
customers, bringing its total customer base to approximately 1.4
million (up 4% year over year). Video customers decreased to
445,100 from 445,800
Windstream exited the first quarter with cash and cash
equivalents of $64.2 million, up from $35.8 million in the
prior-year quarter. Long-term debt reduced to $8.8 billion from
$8.9 billion at the end of 2011.
The company generated adjusted free cash flow of $352 million.
Adjusted capital expenditure grew 8.1% year-over-year to $223
million in the first quarter. The company completed spectrum sale
and received $57 million in the first quarter.
The company Board of directors announced a quarterly dividend of
25 cents payable on July 16 to stockholders of record as of June
We believe Windstream remains poised to gain from high-speed
Internet services that benefit from increased market traction.
Additionally, the company's latest acquisition, PAETEC, a leading
broadband service provider, will also be aided by expanding service
offerings, increasing wireless data backhaul services and offer of
managed services and cloud computing.
Further, Windstream's deleveraging initiatives and refinancing
activities are expected to generate healthy cash flows,
subsequently attracting investors through high dividend
However, we remain on the sidelines due to competitive pressures
from peers such as
), a highly leveraged balance sheet and continued access-line
erosion. These would partially be offset by a high dividend yield
and broadband opportunities.
We are currently maintaining our long-term Neutral
recommendation on Windstream, supported by a Zacks #3 (Hold)
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