Windstream Corporation
(
WIN
) has reported second quarter 2012 adjusted earnings per share of
12 cents, in line with the Zacks Consensus Estimate. Adjusted
earnings for the quarter were down 37% from the year-ago earnings
of 19 cents.
Adjusted earnings exclude $12 million in merger and integration
expense and $6 million related to restructuring expenses.
Including these costs, the company reported GAAP earnings per
share of 9 cents, down 53% year over year.
Pro forma revenue decreased 1.2% year over year to $1,537.8
million in the second quarter, and missed our expectation of $1,541
million. On a GAAP basis, revenue grew 49.3% year over year.
Adjusted OIBDA (excluding non-cash pension expense, non-cash
stock-based compensation and restructuring charges) dropped 2.8%
year over year to $578.2 million in the second quarter.
Subscriber Statistics
During the second quarter, total access lines, which include
voice lines, high-speed Internet and digital television customers
dropped 3.6% year over year to 3.13 million. Windstream lost 28,700
access lines. Voice lines declined 4.2% year over year to $2.9
million.
Windstream added as many as 2,200 new high-speed Internet
customers, bringing its total customer base to 1.36 million (up
1.9% year over year). Video customers increased to 441,400 from
439,300.
Liquidity
Windstream exited the second quarter with cash and cash
equivalents of $37.5 million, down from $52.1 million in the
prior-year quarter. Long-term debt and capital lease obligations
were $8,794.3 million compared to $8,936.7 million at the year-end
2011.
The company generated adjusted free cash flow of $135 million.
Capital expenditure was $276 million in the second quarter compared
to $223.9 million in the year-ago quarter.
Dividend
The company's board of directors announced a quarterly dividend
of 25 cents payable on October 15 to stockholders of record as of
September 28.
Our Analysis
We believe Windstream remains poised to gain from high-speed
Internet services that are benefiting from increased market
traction. Additionally, the company's acquisition of PAETEC will
also be aided by expanding service offerings, increasing wireless
data backhaul services and offering managed services and cloud
computing.
Further, Windstream's deleveraging initiatives and refinancing
activities are expected to generate healthy cash flows,
subsequently attracting investors through a high dividend
payout.
However, we remain on the sidelines due to competitive pressure
from peers like
Frontier Communications
(
FTR
), a highly leveraged balance sheet as well as continued
access-line erosion, which could partially be offset by
broadband opportunities.
We are currently maintaining our long-term Neutral
recommendation on Windstream supported by a Zacks #3 Rank
(Hold).
FRONTIER COMMUN (FTR): Free Stock Analysis
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WINDSTREAM CORP (WIN): Free Stock Analysis
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