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SureWest Reports Second Quarter 2010 Results
ROSEVILLE, Calif., July 29, 2010 /PRNewswire via COMTEX/ --
SureWest Communications (Nasdaq: SURW) today announced operating results for the second quarter ended June 30, 2010.
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Steve Oldham, SureWest's president and chief executive officer, said, "Our second quarter results demonstrated our ability to create growth in both business and residential markets with reduced year-to-date capital expenditures. We remain focused on growing revenues, margins and free cash flow through increases in our commercial service offerings and residential triple-play growth while continuing our cost-saving initiatives.
"Expanding our fiber-to-the-home network over the last five years has provided us a significant performance advantage over our competitors. We have a large inventory of marketable homes and therefore do not require further capital expenditures to extend the network. We built momentum in our core Broadband segment during the quarter, highlighted by Advanced Digital TV and wireless carrier backhaul. Advanced Digital TV triggered a sequential increase of 5,200 RGUs, our best results since 2008. Taking advantage of our ubiquitous fiber network, we are working with three major carriers to provide wireless backhaul service to over 200 cell sites and are in negotiations for 100 additional sites. These backhaul projects set the stage for future growth on recurring revenue streams, and can be delivered quickly and cost efficiently due to our high-capacity networks and proximity to cellular sites."
The following table highlights financial results for continuing operations on a consolidated basis (dollars are in thousands):
Y-O-Y Comparison
Q2 '10 Q2 '09 Change %
------ ------ ------ ---
Consolidated
Broadband Revenue $43,076 $40,259 $2,817 7%
Telecom Revenue 17,472 20,671 (3,199) (15%)
Total Revenue 60,548 60,930 (382) (1%)
EBITDA (adjusted) 19,928 19,859 69 0%
Income from Continuing
Operations (527) 899 (1,426) (159%)
Income from Continuing Ops
(w/o severance) 323 899 (576) (64%)
Capital Expenditure 13,878 11,170 2,708 24%
Free Cash Flow 857 3,957 (3,100) (78%)
Net Debt 212,891 226,806 (13,915) (6%)
-------- ------- ------- ------- ----
Q-O-Q Comparison
Q1 '10 Change %
------ ------ ---
Consolidated
Broadband Revenue $42,577 $499 1%
Telecom Revenue 17,611 (139) (1%)
Total Revenue 60,188 360 1%
EBITDA (adjusted) 19,468 460 2%
Income from Continuing
Operations 527 (1,054) (200%)
Income from Continuing Ops
(w/o severance) 527 (204) (39%)
Capital Expenditure 12,536 1,342 11%
Free Cash Flow 3,097 (2,240) (72%)
Net Debt 208,063 4,828 2%
-------- ------- ----- ---
See Non-GAAP measure notes near end of release, and EBITDA, Free
Cash Flow and Net Debt reconciliations for detailed adjustments.
Financial Results
Consolidated revenues decreased 1% year-over-year to $60.5 million as Broadband revenue growth of 7% was offset by Telecom revenue declines of 15%. Excluding estimated severance costs, adjusted EBITDA remained flat year-over-year at $19.9 million. On June 30, 2010, the company reduced its workforce by 60 positions as part of ongoing cost-efficiency reviews. This resulted in an estimated annual expense savings of at least $5.0 million beginning in 2011, with a savings of approximately $1.0 million over the third and fourth quarters of 2010. Additionally, the company will continue with cost-saving initiatives such as the consolidation of office space, which is expected to save $1.3 million annually beginning in 2011, and reductions in professional fees for further annual savings of approximately $1.0 million.
Operating expenses, exclusive of depreciation and amortization, increased 3% year-over-year to $43.2 million due primarily to an estimated $1.6 million in severance costs. The second quarter also saw an increase in transport charges associated with commercial services growth and an increase in video license fees due to higher programming rates and new channel additions.
Net loss for the quarter was $527 thousand compared to net income of $959 thousand in the same period last year. Earnings per share from continuing operations was negative $.04 compared to positive $.06 in the second quarter 2009 and positive $.04 in the first quarter 2010. Excluding estimated severance costs, net income for the quarter was $323 thousand and second quarter adjusted earnings per share was $.02.
Free cash flow, defined as income from continuing operations plus depreciation and amortization less capital expenditures, was positive $857 thousand for the quarter and $4 million for the six months ended June 30, 2010, compared to $500 thousand for the first six months of 2009. SureWest expects that its capital expenditures and associated free cash flow results will vary quarter-to-quarter based on developing commercial sales opportunities such as data center space and wireless carrier backhaul.
Cash and cash equivalents decreased sequentially to $6.2 million from $7.0 million. During the quarter, SureWest repurchased 358 thousand shares of outstanding stock for $2.5 million. Total debt net of cash and cash equivalents (net debt) was $212.9 million, resulting in a net debt to adjusted EBITDA ratio of 2.73.
Capital expenditures totaled $13.9 million for the second quarter and $26.4 million for the six months ended June 30, 2010, compared to $29.5 million for the first six months of 2009. The company is lowering projected 2010 capital expenditures from $55-60 million to $50-55 million due to a more selective success-based capital plan and a reduction in core maintenance expenditures. The 2010 capital plan remains aimed at increasing commercial growth and residential RGUs, with approximately two-thirds of expenditures for success-based investment.
Broadband Segment Results
Broadband revenues increased 7% year-over-year and accounted for 71% of the company's total revenues, compared to 66% in the second quarter 2009. This continues the company's long-term trend of offsetting structural declines in the traditional Telecom business with increases in the growing Broadband segment.
Broadband Residential:
Broadband Residential revenues increased 4% year-over-year to $30.9 million due to 3% growth in ARPU and a 4% increase in RGUs. To illustrate growth trends, Broadband RGUs, subscriber counts and ARPU are detailed both year-over-year and sequentially in the table and text below:
Q2 '10 vs. Q2 '09 change Q2 '10 vs. Q1 '10 change
------------------------ ------------------------
Kansas Kansas
Sacramento City Total Sacramento City Total
Market Market ----- Market Market -----
------ ------ ------ ------
Broadband
Residential
RGUs 8% 0% 4% 3% 2% 2%
Video RGUs 4% 0% 2% 5% 2% 3%
Voice RGUs 21% -2% 9% 5% 1% 3%
Data RGUs 1% 2% 2% 1% 2% 1%
Total
Residential
Subscribers 1% 2% 1% 1% 1% 1%
During the second quarter, which was the first full quarter of the Advanced Digital TV offering, 1,700 net video RGUs were added, compared to a loss of 500 video RGUs in the first quarter 2010. Through June, SureWest has added 6,905 Advanced Digital TV subscribers, representing 29% of overall video RGUs in the Sacramento market. Compared to Sacramento's other video platform, monthly recurring revenues for Advanced Digital TV were 12% higher, premium channel take rates were 34% higher and the high definition (HD) take rate was 27% higher.
ARPU for the company's fiber-to-the-home (FTTH) and hybrid fiber coaxial (HFC) networks increased 1% year-over-year to $116 from $115 as customer demand for higher data speeds, and HD and DVR services increased from the prior year. Sequentially, ARPU declined by $1 from $117 primarily due to the aggressive promotional activity related to a retention and acquisition campaign regarding the launch of Advanced Digital TV. The launch campaign was designed to drive RGU growth through a short-term discount with an expectation for ARPU increases as the promotional period phases out and customers retain the advanced triple-play bundle due to a superior experience.
Residential customer churn improved to 1.6% in the second quarter compared to 1.7% in the same period last year as the company continues to execute on churn reduction techniques such as tailored renewal offers, and network and product enhancements to increase customer retention and loyalty.
Broadband Business:
Broadband Business revenues increased by $1.6 million, or 17%, year-over-year to $11.3 million. Customer counts increased 7% year-over-year to 7,300 and ARPU grew 9% from the prior year to $518. Business service growth expectations remain high in both Sacramento and Kansas City. The Kansas City market grew ARPU 6% year-over-year while increasing customer counts by 20%. In Sacramento, sales contracts and activity increased during the first half of 2010 compared to last year. SureWest's fiber-optic network provides a superior long-term solution for customers in both regions and is driving additional revenue opportunities. For example, the company has commitments to bill over 200 wireless carrier backhaul sites, and is in negotiations for 100 additional sites.
Telecom Segment Results
Telecom revenues declined 15% year-over-year to $17.5 million due to the industry-wide trend of declines in access lines and access revenues. As the company focuses on growing its Broadband segment, the Telecom segment continues to account for a smaller percentage of total company revenues at 29%, compared to 34% in the second quarter 2009. Internal forecasts anticipate the slowing of Telecom declines over the next several years.
Telecom Residential:
Telecom Residential revenues declined 30% year-over-year to $4.5 million resulting from losses in Telecom voice RGUs of 27% year-over-year. Of the 12,300 year-over-year Telecom Residential voice RGU losses, 5,000, or 41%, migrated to the SureWest Broadband Voice over IP service.
Telecom Business:
Telecom Business revenues declined 8% year-over-year to $8.4 million due to a decline in small- and medium-sized business customers, particularly those impacted by California's depressed real estate industry, as well as a decrease in services from a few large carriers. These declines are related to the economy, not competition, and are expected to flatten out and begin growing as the Sacramento economy recovers and vacancy rates improve.
Telecom Access:
Telecom Access revenues decreased $545 thousand year-over-year to $4.4 million primarily due to the scheduled reduction in the California High Cost Fund (CHCF) subsidy and the decline in switched access revenues related to access line loss. The annual CHCF subsidies are scheduled to be $4.1 million in 2010, a decrease from $6.1 million in 2009, and will continue to decline by $2 million annually through 2011. Additionally, the transport interconnection charge will be eliminated effective January 1, 2011 resulting in an estimated reduction of $2 million in 2011 intrastate access revenues.
Non-GAAP Measures
In addition to the results presented in accordance with generally accepted accounting principles (GAAP) throughout this press release; the company has presented non-GAAP financial measures such as adjusted EBITDA, free cash flow and net debt. Adjusted EBITDA represents net income (loss) from continuing operations excluding amounts for income taxes, depreciation and amortization, non-cash pension and certain post-retirement benefits, non-cash stock compensation, severance and other related termination costs, and all other non-operating income/expenses. Free cash flow represents net income (loss) from continuing operations plus depreciation and amortization less capital expenditures. Free cash flow is a measure of operating cash flows available for corporate purposes after providing significant fixed asset additions to maintain current productive capacity. Net debt represents total long-term debt (including current maturities) less cash and cash equivalents. Net debt can be used as a component in measuring leverage. The company believes these non-GAAP measures, viewed in addition to but not in lieu of its reported GAAP results, provide useful information to investors as they are an integral part of the internal evaluation of operating performance. In addition, they are measures that the company uses to evaluate management's effectiveness. Reconciliations to the comparable GAAP measures are provided in the accompanying financial and operating summaries. SureWest's non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies.
Conference Call and Webcast
SureWest will host a conference call providing details of its results and business strategy at 11 a.m. Eastern Time on Thursday, July 29. Open to the public, a simultaneous live webcast of the call will be available from the company's investor relations website at www.surw.com. A telephone replay of the call will be available shortly after completion through Thursday, August 5, 2010 by calling 888.286.8010 and entering pass code 61012602. Visit www.surw.com for updates prior to the call.
About SureWest
SureWest Communications (www.surewest.com) is a leading integrated communications provider and the bandwidth leader in the markets it serves. Headquartered in Northern California for more than 95 years, the company expanded into the Kansas City region in February 2008 with the acquisition of Everest Broadband, Inc. and offers bundled residential and commercial services that include IP-based digital and high-definition television, high-speed Internet, Voice over IP, and local and long distance telephone. SureWest was the nation's first provider to launch residential HDTV over an IP network and offers one of the nation's fastest symmetrical Internet services with speeds of up to 50 Mbps in each direction on its fiber-to-the-home network.
Safe Harbor Statement
Statements made in this news release that are not historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements may be identified by the use of words such as "may," "will," "should," "expect," "plan," "anticipate" or "project," or the negative of those words or other comparable words. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the company's actual results to differ from those projected in such forward-looking statements.
Important factors that could cause actual results to differ from those set forth in the forward-looking statements include, but are not limited to, advances in telecommunications technology, changes in the telecommunications regulatory environment, changes in the financial stability of other telecommunications providers who are customers of the company, changes in competition in markets in which the company operates, adverse circumstances affecting the economy in California, Kansas and Missouri in general, and in the greater Sacramento, California and greater Kansas City, Kansas and Missouri areas in particular, the availability of future financing, changes in the demand for services and products, new product and service development and introductions, and pending and future litigation.
Contacts
Ron Rogers
Corporate Communications
916-746-3123
r.rogers@surewest.com
Misty Wells
Investor Relations
916-786-1799
m.wells@surewest.com
SUREWEST COMMUNICATIONS
CONDENDSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited; Amounts in thousands, except per share amounts)
Six Months Ended Six Months Ended
June 30, 2010 June 30, 2009
------------- -------------
Operating revenues:
Broadband $85,653 $79,481
Telecom 35,083 42,391
------ ------
Total operating revenues 120,736 121,872
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 51,179 50,132
Customer operations and selling 16,434 16,580
General and administrative 17,576 18,187
Depreciation and amortization 30,368 29,038
------ ------
Total operating expenses 115,557 113,937
------- -------
Income from operations 5,179 7,935
Other income (expense):
Interest income 46 71
Interest expense (3,878) (5,356)
Other, net (333) (172)
---- ----
Total other income (expense),
net (4,165) (5,457)
------ ------
Income from continuing
operations before income taxes 1,014 2,478
Income tax expense 1,014 1,500
----- -----
Income from continuing
operations - 978
Discontinued operations, net of
tax:
Loss from discontinued
operations - (69)
Gain on sale of discontinued
operations - 2,568
--- -----
Total discontinued operations - 2,499
--- -----
Net income $- $3,477
=== ======
Basic and diluted earnings per
common share:
Income from continuing
operations $- $0.07
Discontinued operations, net of
tax - 0.18
Net income per basic and diluted
common share $- $0.25
=== =====
Shares of common stock used to
calculate earnings per share:
Basic and diluted 13,958 13,992
====== ======
$ %
Change Change
------ ------
Operating revenues:
Broadband $6,172 8%
Telecom (7,308) -17%
------ ---
Total operating revenues (1,136) -1%
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 1,047 2%
Customer operations and selling (146) -1%
General and administrative (611) -3%
Depreciation and amortization 1,330 5%
----- ---
Total operating expenses 1,620 1%
----- ---
Income from operations (2,756) -35%
Other income (expense):
Interest income (25) -35%
Interest expense 1,478 28%
Other, net (161) -94%
----
Total other income (expense),
net 1,292 24%
----- ---
Income from continuing
operations before income taxes (1,464) -59%
Income tax expense (486) -32%
---- ---
Income from continuing
operations (978) -100%
Discontinued operations, net of
tax:
Loss from discontinued
operations 69 100%
Gain on sale of discontinued
operations (2,568) -100%
------ ----
Total discontinued operations (2,499) -100%
------ ----
Net income $(3,477) -100%
======= ====
Basic and diluted earnings per
common share:
Income from continuing
operations $(0.07)
Discontinued operations, net of
tax (0.18)
Net income per basic and diluted
common share $(0.25)
======
Shares of common stock used to
calculate earnings per share:
Basic and diluted (34)
===
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Amounts in thousands, except per share amounts)
Quarter Ended Quarter Ended
June 30, 2010 June 30, 2009
------------- -------------
Operating revenues:
Broadband $43,076 $40,259
Telecom 17,472 20,671
------ ------
Total operating revenues 60,548 60,930
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 26,261 25,118
Customer operations and selling 8,225 8,345
General and administrative 8,763 8,624
Depreciation and amortization 15,262 14,228
------ ------
Total operating expenses 58,511 56,315
------ ------
Income from operations 2,037 4,615
Other income (expense):
Interest income 28 34
Interest expense (2,235) (3,046)
Other, net (167) (88)
---- ---
Total other income (expense), net (2,374) (3,100)
------ ------
Income (loss) from continuing
operations before income taxes (337) 1,515
Income tax expense 190 616
--- ---
Income (loss) from continuing
operations (527) 899
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued
operations - 60
--- ---
Total discontinued operations - 60
--- ---
Net income (loss) $(527) $959
===== ====
Basic and diluted earnings per common
share:
Income (loss) from continuing
operations $(0.04) $0.06
Discontinued operations, net of tax - 0.01
--- ----
Net income (loss) per basic and
diluted common share $(0.04) $0.07
====== =====
Shares of common stock used to
calculate earnings per share:
Basic and diluted 13,913 14,020
====== ======
$ %
Change Change
------ ------
Operating revenues:
Broadband $2,817 7%
Telecom (3,199) -15%
------ ---
Total operating revenues (382) -1%
Operating expenses:
Cost of services and products (exclusive of
depreciation and amortization) 1,143 5%
Customer operations and selling (120) -1%
General and administrative 139 2%
Depreciation and amortization 1,034 7%
----- ---
Total operating expenses 2,196 4%
----- ---
Income from operations (2,578) -56%
Other income (expense):
Interest income (6) -18%
Interest expense 811 27%
Other, net (79) -90%
---
Total other income (expense), net 726 23%
--- ---
Income (loss) from continuing operations
before income taxes (1,852) -122%
Income tax expense (426) -69%
---- ---
Income (loss) from continuing operations (1,426) -159%
Discontinued operations, net of tax:
Income (loss) from discontinued operations - -
Gain on sale of discontinued operations (60) -100%
--- ----
Total discontinued operations (60) -100%
--- ----
Net income (loss) $(1,486) -155%
======= ====
Basic and diluted earnings per common
share:
Income (loss) from continuing operations $(0.10)
Discontinued operations, net of tax (0.01)
Net income (loss) per basic and diluted
common share $(0.11)
======
Shares of common stock used to calculate
earnings per share:
Basic and diluted (107)
====
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited; Amounts in thousands, except per share amounts)
Quarter Ended Quarter Ended
June 30, 2010 March 31, 2010
------------- --------------
Operating revenues:
Broadband $43,076 $42,577
Telecom 17,472 17,611
------ ------
Total operating revenues 60,548 60,188
Operating expenses:
Cost of services and products (exclusive
of depreciation and amortization) 26,261 24,918
Customer operations and selling 8,225 8,209
General and administrative 8,763 8,813
Depreciation and amortization 15,262 15,106
------ ------
Total operating expenses 58,511 57,046
------ ------
Income from operations 2,037 3,142
Other income (expense):
Interest income 28 18
Interest expense (2,235) (1,643)
Other, net (167) (166)
---- ----
Total other income (expense), net (2,374) (1,791)
------ ------
Income (loss) from continuing operations
before income taxes (337) 1,351
Income tax expense 190 824
--- ---
Income (loss) from continuing operations (527) 527
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued operations - -
--- ---
Total discontinued operations - -
--- ---
Net income (loss) $(527) $527
===== ====
Basic and diluted earnings per common
share:
Income (loss) from continuing operations $(0.04) $0.04
Discontinued operations, net of tax - -
--- ---
Net income (loss) per basic and diluted
common share $(0.04) $0.04
====== =====
Shares of common stock used to calculate
earnings per share:
Basic and diluted 13,913 14,002
====== ======
$ %
Change Change
------ ------
Operating revenues:
Broadband $499 1%
Telecom (139) -1%
---- ---
Total operating revenues 360 1%
Operating expenses:
Cost of services and products (exclusive
of depreciation and amortization) 1,343 5%
Customer operations and selling 16 0%
General and administrative (50) -1%
Depreciation and amortization 156 1%
--- ---
Total operating expenses 1,465 3%
----- ---
Income from operations (1,105) -35%
Other income (expense):
Interest income 10 56%
Interest expense (592) -36%
Other, net (1) -1%
---
Total other income (expense), net (583) -33%
---- ---
Income (loss) from continuing operations
before income taxes (1,688) -125%
Income tax expense (634) -77%
---- ---
Income (loss) from continuing operations (1,054) -200%
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued operations - -
--- ---
Total discontinued operations - -
--- ---
Net income (loss) $(1,054) -200%
======= ====
Basic and diluted earnings per common
share:
Income (loss) from continuing operations $(0.08)
Discontinued operations, net of tax -
---
Net income (loss) per basic and diluted
common share $(0.08)
======
Shares of common stock used to calculate
earnings per share:
Basic and diluted (89)
===
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - RECONCILIATION
(Unaudited; Amounts in thousands, except per share amounts)
As Reported
Quarter
Ended Severance and
June 30,
2010 Related Costs
--------- -------------
Total operating revenues $60,548 $-
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 26,261 359
Customer operations and selling 8,225 135
General and administrative 8,763 1,146
Depreciation and amortization 15,262 -
------ ---
Total operating expenses 58,511 1,640
------ -----
Income from operations 2,037 (1,640)
Total other income (expense), net (2,374) -
------ ---
Income (loss) from continuing
operations before income taxes (337) (1,640)
Income tax expense (benefit) 190 (790)
--- ----
Net income (loss) from continuing
operations (527) (850)
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued
operations - -
--- ---
Total discontinued operations - -
--- ---
Net income (loss) $(527) $(850)
===== =====
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $(0.04) $(0.06)
====== ======
Adjusted
Quarter
Ended Quarter Ended
June 30,
2010 June 30, 2009
--------- -------------
Total operating revenues $60,548 $60,930
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 25,902 25,118
Customer operations and selling 8,090 8,345
General and administrative 7,617 8,624
Depreciation and amortization 15,262 14,228
------ ------
Total operating expenses 56,871 56,315
------ ------
Income from operations 3,677 4,615
Total other income (expense), net (2,374) (3,100)
------ ------
Income (loss) from continuing
operations before income taxes 1,303 1,515
Income tax expense (benefit) 980 616
--- ---
Net income (loss) from continuing
operations 323 899
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued
operations - 60
--- ---
Total discontinued operations - 60
--- ---
Net income (loss) $323 $959
==== ====
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $0.02 $0.07
===== =====
$ %
Change Change
------ ------
Total operating revenues $(382) -1%
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 784 3%
Customer operations and selling (255) -3%
General and administrative (1,007) -12%
Depreciation and amortization 1,034 7%
----- ---
Total operating expenses 556 1%
--- ---
Income from operations (938) -20%
Total other income (expense), net 726 23%
--- ---
Income (loss) from continuing
operations before income taxes (212) -14%
Income tax expense (benefit) 364 59%
--- ---
Net income (loss) from continuing
operations (576) -64%
Discontinued operations, net of tax:
Income (loss) from discontinued
operations - -
Gain on sale of discontinued
operations (60) -100%
--- ----
Total discontinued operations (60) -100%
--- ----
Net income (loss) $(636) -66%
===== ===
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $(0.05)
======
As Reported
Quarter
Ended Severance and
June 30,
2010 Related Costs
--------- -------------
Total operating revenues $60,548 $-
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 26,261 359
Customer operations and selling 8,225 135
General and administrative 8,763 1,146
Depreciation and amortization 15,262 -
------ ---
Total operating expenses 58,511 1,640
------ -----
Income from operations 2,037 (1,640)
Total other income (expense), net (2,374) -
------ ---
Income (loss) from continuing
operations before income taxes (337) (1,640)
Income tax expense (benefit) 190 (790)
--- ----
Net income (loss) $(527) $(850)
===== =====
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $(0.04) $(0.06)
====== ======
Adjusted
Quarter
Ended Quarter Ended
June 30, March 31,
2010 2010
--------- ----------
Total operating revenues $60,548 $60,188
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 25,902 24,918
Customer operations and selling 8,090 8,209
General and administrative 7,617 8,813
Depreciation and amortization 15,262 15,106
------ ------
Total operating expenses 56,871 57,046
------ ------
Income from operations 3,677 3,142
Total other income (expense), net (2,374) (1,791)
------ ------
Income (loss) from continuing
operations before income taxes 1,303 1,351
Income tax expense (benefit) 980 824
--- ---
Net income (loss) $323 $527
==== ====
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $0.02 $0.04
===== =====
$ %
Change Change
------ ------
Total operating revenues $360 1%
Operating expenses:
Cost of services and products
(exclusive of depreciation and
amortization) 984 4%
Customer operations and selling (119) -1%
General and administrative (1,196) -14%
Depreciation and amortization 156 1%
--- ---
Total operating expenses (175) 0%
---- ---
Income from operations 535 17%
Total other income (expense), net (583) -33%
---- ---
Income (loss) from continuing
operations before income taxes (48) -4%
Income tax expense (benefit) 156 19%
--- ---
Net income (loss) $(204) -39%
===== ===
Basic and diluted earnings per common
share:
Net income (loss) per basic and
diluted common share $(0.02)
======
SureWest Communications
Quarterly Selected Financial Results & Reconciliations of Non-GAAP
Measures
(on a consolidated and a segment basis)
(Unaudited; Amounts in thousands)
Consolidated Results of Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Operating
revenues (1)
Residential $35,713 $36,180 $35,246 $35,845
Business 18,633 18,704 18,705 18,969
Access 6,031 5,351 5,031 4,942
Other 565 695 547 543
--- --- --- ---
Total operating
revenues from
external
customers 60,942 60,930 59,529 60,299
------ ------ ------ ------
Operating
expenses (1) 42,812 42,087 41,653 41,851
Depreciation and
amortization 14,810 14,228 15,260 15,426
Income from
operations $3,320 $4,615 $2,616 $3,022
====== ====== ====== ======
Twelve Months
Ended December
31, 2009
--------------
Operating revenues (1)
Residential $142,984
Business 75,011
Access 21,355
Other 2,350
-----
Total operating revenues from
external customers 241,700
-------
Operating expenses (1) 168,403
Depreciation and amortization 59,724
Income from operations $13,573
=======
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Operating revenues (1)
Residential $35,842 $35,390 $71,232
Business 18,988 19,653 38,641
Access 4,887 4,949 9,836
Other 471 556 1,027
--- --- -----
Total operating revenues
from external customers 60,188 60,548 120,736
------ ------ -------
Operating expenses (1) 41,940 43,249 85,189
Depreciation and
amortization 15,106 15,262 30,368
Income from operations $3,142 $2,037 $5,179
====== ====== ======
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Operating revenues (1)
Residential $(790) (2%) $(452) (1%)
Business 949 5% 665 4%
Access (402) (8%) 62 1%
Other (139) (20%) 85 18%
Total operating revenues from
external customers (382) (1%) 360 1%
---- ---- --- ---
Operating expenses (1) 1,162 3% 1,309 3%
Depreciation and amortization 1,034 7% 156 1%
Income from operations $(2,578) (56%) $(1,105) (35%)
======= ===== ======= =====
Consolidated Reconciliation of Adjusted EBITDA to Net Income (Loss)
from Continuing Operations
For 2009 Quarters Ended:
------------------------
Twelve Months
Ended
March June September December December
31 30 30 31 31,
2009
-------- ------- -------- ------- ---------
Net income (loss) from
continuing operations $79 $899 $(211) $(100) $667
Add: income tax expense 884 616 14 492 2,006
Less: other
(income)/expense 2,357 3,100 2,813 2,630 10,900
----- ----- ----- ----- ------
Income from operations 3,320 4,615 2,616 3,022 13,573
Add (subtract):
Depreciation and
amortization 14,810 14,228 15,260 15,426 59,724
Non-cash pension expense 755 552 642 642 2,591
Non-cash stock
compensation expense 608 464 443 495 2,010
Severance and other
related costs (3) - - - - -
Adjusted EBITDA (2) $19,493 $19,859 $18,961 $19,585 $77,898
======= ======= ======= ======= =======
Adjusted EBITDA margin 32% 33% 32% 32% 32%
For 2010 Quarters Ended:
------
March 31 June 30 Six Months
-------- ------- ----------
Ended
-----
June
----
30, 2010
--------
Net income (loss)
from continuing
operations $527 $(527) $-
Add: income tax
expense 824 190 1,014
Less: other
(income)/expense 1,791 2,374 4,165
----- ----- -----
Income from
operations 3,142 2,037 5,179
Add (subtract):
Depreciation and
amortization 15,106 15,262 30,368
Non-cash pension
expense 420 341 761
Non-cash stock
compensation expense 800 1,144 1,944
Severance and other
related costs (3) - 1,144 1,144
Adjusted EBITDA (2) $19,468 $19,928 $39,396
======= ======= =======
Adjusted EBITDA
margin 32% 33% 33%
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Net income (loss) from continuing
operations $(1,426) (159%) $(1,054) (200%)
Add: income tax expense (426) (69%) (634) (77%)
Less: other (income)/expense (726) (23%) 583 33%
---- ----- ---
Income from operations (2,578) (56%) (1,105) (35%)
Add (subtract):
Depreciation and amortization 1,034 7% 156 1%
Non-cash pension expense (211) (38%) (79) (19%)
Non-cash stock compensation
expense 680 147% 344 43%
Severance and other related costs
(3) 1,144 100% 1,144 100%
Adjusted EBITDA (2) $69 0% $460 2%
=== === ==== ===
Adjusted EBITDA margin
Consolidated Free Cash Flow from Continuing Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------ ------------ -----------
Net income (loss) from
continuing operations $79 $899 $(211) $(100)
Add: Depreciation and
amortization 14,810 14,228 15,260 15,426
Less: Capital expenditures (18,352) (11,170) (13,841) (14,967)
Free cash flow (4) $(3,463) $3,957 $1,208 $359
======= ====== ====== ====
Consolidated Net Debt Ratio
from Continuing Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net Debt:
Long-term debt,
including
current
maturities $240,187 $236,685 $226,683 $223,045
Less: Cash and
cash equivalents (1,678) (9,879) (7,138) (7,489)
Net Debt (5) $238,509 $226,806 $219,545 $215,556
======== ======== ======== ========
Ratio of Net Debt
to Adjusted
EBITDA:
Net Debt $238,509 $226,806 $219,545 $215,556
Divided by:
Adjusted EBITDA
(TTM) $74,226 $74,315 $75,328 $77,898
Ratio of net debt
to Adjusted
EBITDA (6) 3.21 3.05 2.91 2.77
Broadband Results
of Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Data $10,763 $11,184 $11,236 $11,878
Video 11,689 11,995 11,711 12,127
Voice 6,399 6,594 6,442 6,462
----- ----- ----- -----
Total residential revenues 28,851 29,773 29,389 30,467
Business 9,585 9,615 10,018 10,336
Access 384 398 427 419
Other 402 473 341 344
--- --- --- ---
Total operating revenues
from external customers 39,222 40,259 40,175 41,566
Intersegment revenues 91 94 93 160
Total operating revenues 39,313 40,353 40,268 41,726
------ ------ ------ ------
Operating expenses without
depreciation 34,695 34,294 34,615 34,247
Depreciation and
amortization 11,620 11,283 12,199 12,257
Loss from operations $(7,002) $(5,224) $(6,546) $(4,778)
======= ======= ======= =======
Twelve Months
Ended December
31, 2009
--------------
Net income (loss) from continuing
operations $667
Add: Depreciation and amortization 59,724
Less: Capital expenditures (58,330)
Free cash flow (4) $2,061
======
Consolidated Net Debt Ratio from
Continuing Operations
Net Debt:
Long-term debt, including current
maturities
Less: Cash and cash equivalents
Net Debt (5)
Ratio of Net Debt to Adjusted
EBITDA:
Net Debt
Divided by: Adjusted EBITDA (TTM)
Ratio of net debt to Adjusted
EBITDA (6)
Broadband Results of Operations
Twelve Months
Ended December
31, 2009
--------------
Data $45,061
Video 47,522
Voice 25,897
------
Total residential revenues 118,480
Business 39,554
Access 1,628
Other 1,560
-----
Total operating revenues from
external customers 161,222
Intersegment revenues 438
Total operating revenues 161,660
-------
Operating expenses without
depreciation 137,851
Depreciation and amortization 47,359
Loss from operations $(23,550)
========
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Net income (loss)
from continuing
operations $527 $(527) $-
Add: Depreciation
and amortization 15,106 15,262 30,368
Less: Capital
expenditures (12,536) (13,878) (26,414)
Free cash flow (4) $3,097 $857 $3,954
====== ==== ======
Consolidated Net
Debt Ratio from
Continuing
Operations
For 2010 Quarters Ended:
------------------------
March 31 June 30
-------- -------
Net Debt:
Long-term debt,
including current
maturities $215,045 $219,045
Less: Cash and cash
equivalents (6,982) (6,154)
Net Debt (5) $208,063 $212,891
======== ========
Ratio of Net Debt to
Adjusted EBITDA:
Net Debt $208,063 $212,891
Divided by: Adjusted
EBITDA (TTM) $77,873 $77,942
Ratio of net debt to
Adjusted EBITDA (6) 2.67 2.73
Broadband Results of
Operations
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Data $12,248 $12,145 $24,393
Video 12,219 12,166 24,385
Voice 6,507 6,600 13,107
----- ----- ------
Total residential
revenues 30,974 30,911 61,885
Business 10,570 11,253 21,823
Access 727 541 1,268
Other 306 371 677
--- --- ---
Total operating
revenues from
external customers 42,577 43,076 85,653
Intersegment
revenues 168 145 313
Total operating
revenues 42,745 43,221 85,966
------ ------ ------
Operating expenses
without
depreciation 35,137 36,003 71,140
Depreciation and
amortization 12,180 12,140 24,320
Loss from operations $(4,572) $(4,922) $(9,494)
======= ======= =======
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Net income (loss) from
continuing operations $(1,426) (159%) $(1,054) (200%)
Add: Depreciation and
amortization 1,034 7% 156 1%
Less: Capital expenditures (2,708) (24%) (1,342) (11%)
Free cash flow (4) $(3,100) (78%) $(2,240) (72%)
======= ===== ======= =====
Consolidated Net Debt
Ratio from Continuing
Operations
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Net Debt:
Long-term debt, including
current maturities $(17,640) (7%) $4,000 2%
Less: Cash and cash
equivalents 3,725 38% 828 12%
Net Debt (5) $(13,915) (6%) $4,828 2%
======== ==== ====== ===
Ratio of Net Debt to
Adjusted EBITDA:
Net Debt
Divided by: Adjusted
EBITDA (TTM)
Ratio of net debt to
Adjusted EBITDA (6)
Broadband Results of
Operations
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Data $961 9% $(103) (1%)
Video 171 1% (53) (0%)
Voice 6 0% 93 1%
--- --- --- ---
Total residential revenues 1,138 4% (63) (0%)
Business 1,638 17% 683 6%
Access 143 36% (186) (26%)
Other (102) (22%) 65 21%
---- ----- --- ---
Total operating revenues
from external customers 2,817 7% 499 1%
Intersegment revenues 51 54% (23) (14%)
Total operating revenues 2,868 7% 476 1%
----- --- --- ---
Operating expenses without
depreciation 1,709 5% 866 2%
Depreciation and
amortization 857 8% (40) (0%)
Loss from operations $302 6% $(350) (8%)
==== === ===== ====
Broadband Reconciliation of Adjusted EBITDA to Net Loss from
Continuing Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- -------- --------
Net loss from continuing
operations $(5,398) $(4,884) $(5,619) $(4,881)
Add: income tax benefits (3,656) (3,312) (3,810) (2,675)
Less: other (income)/expense 2,052 2,972 2,883 2,778
----- ----- ----- -----
Loss from operations (7,002) (5,224) (6,546) (4,778)
Add (subtract):
Depreciation and amortization 11,620 11,283 12,199 12,257
Non-cash pension expense 327 56 197 199
Non-cash stock compensation
expense 304 231 221 246
Severance and other related costs
(3) - - - -
Adjusted EBITDA (2) $5,249 $6,346 $6,071 $7,924
====== ====== ====== ======
Adjusted EBITDA margin 13% 16% 15% 19%
Twelve Months
Ended December
31, 2009
--------------
Net loss from continuing
operations $(20,782)
Add: income tax benefits (13,453)
Less: other (income)/expense 10,685
------
Loss from operations (23,550)
Add (subtract):
Depreciation and amortization 47,359
Non-cash pension expense 779
Non-cash stock compensation
expense 1,002
Severance and other related costs
(3) -
Adjusted EBITDA (2) $25,590
=======
Adjusted EBITDA margin 16%
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Net loss from
continuing
operations $(3,720) $(4,269) $(7,989)
Add: income tax
benefits (2,504) (2,867) (5,371)
Less: other
(income)/expense 1,652 2,214 3,866
----- ----- -----
Loss from
operations (4,572) (4,922) (9,494)
Add (subtract):
Depreciation and
amortization 12,180 12,140 24,320
Non-cash pension
expense 205 162 367
Non-cash stock
compensation
expense 386 560 946
Severance and
other related
costs (3) - 469 469
Adjusted EBITDA
(2) $8,199 $8,409 $16,608
====== ====== =======
Adjusted EBITDA
margin 19% 19% 19%
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Net loss from continuing
operations $615 13% $(549) (15%)
Add: income tax benefits 445 13% (363) (14%)
Less: other (income)/expense (758) (26%) 562 34%
---- ----- --- ---
Loss from operations 302 6% (350) (8%)
Add (subtract):
Depreciation and amortization 857 8% (40) (0%)
Non-cash pension expense 106 189% (43) (21%)
Non-cash stock compensation
expense 329 142% 174 45%
Severance and other related costs
(3) 469 100% 469 100%
Adjusted EBITDA (2) $2,063 33% $210 3%
====== === ==== ===
Adjusted EBITDA margin
Telecom Results of Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Residential $6,862 $6,407 $5,857 $5,378
Business 9,048 9,089 8,687 8,633
Access 5,647 4,953 4,604 4,523
Other 163 222 206 199
--- --- --- ---
Total operating
revenues from
external
customers 21,720 20,671 19,354 18,733
Intersegment
revenues 4,874 4,981 5,043 4,999
----- ----- ----- -----
Total operating
revenues 26,594 25,652 24,397 23,732
------ ------ ------ ------
Operating
expenses without
depreciation 13,082 12,868 12,174 12,763
Depreciation and
amortization 3,190 2,945 3,061 3,169
----- ----- ----- -----
Income from
operations $10,322 $9,839 $9,162 $7,800
======= ====== ====== ======
Twelve Months
Ended December
31, 2009
--------------
Residential $24,504
Business 35,457
Access 19,727
Other 790
---
Total operating revenues from
external customers 80,478
Intersegment revenues 19,897
------
Total operating revenues 100,375
-------
Operating expenses without
depreciation 50,887
Depreciation and amortization 12,365
------
Income from operations $37,123
=======
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Residential $4,868 $4,479 $9,347
Business 8,418 8,400 16,818
Access 4,160 4,408 8,568
Other 165 185 350
--- --- ---
Total operating revenues
from external customers 17,611 17,472 35,083
Intersegment revenues 4,919 5,091 10,010
----- ----- ------
Total operating revenues 22,530 22,563 45,093
------ ------ ------
Operating expenses
without depreciation 11,890 12,482 24,372
Depreciation and
amortization 2,926 3,122 6,048
----- ----- -----
Income from operations $7,714 $6,959 $14,673
====== ====== =======
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Residential $(1,928) (30%) $(389) (8%)
Business (689) (8%) (18) (0%)
Access (545) (11%) 248 6%
Other (37) (17%) 20 12%
--- ----- --- ---
Total operating revenues from
external customers (3,199) (15%) (139) (1%)
Intersegment revenues 110 2% 172 3%
--- --- --- ---
Total operating revenues (3,089) (12%) 33 0%
------ ----- --- ---
Operating expenses without
depreciation (386) (3%) 592 5%
Depreciation and amortization 177 6% 196 7%
--- ---
Income from operations $(2,880) (29%) $(755) (10%)
======= ===== ===== =====
Telecom Reconciliation of Adjusted EBITDA to Net Income from
Continuing Operations
For 2009 Quarters Ended:
------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Net income from continuing
operations $5,477 $5,783 $5,408 $4,781
Add: income tax expense 4,540 3,928 3,824 3,167
Less: other (income)/expense 305 128 (70) (148)
--- --- --- ----
Income from operations 10,322 9,839 9,162 7,800
Add (subtract):
Depreciation and amortization 3,190 2,945 3,061 3,169
Non-cash pension expense 428 496 445 443
Non-cash stock compensation
expense 304 233 222 249
Severance and other related costs
(3) - - - -
Adjusted EBITDA (2) $14,244 $13,513 $12,890 $11,661
======= ======= ======= =======
Adjusted EBITDA margin 54% 53% 53% 49%
Twelve Months
Ended December
31, 2009
--------------
Net income from continuing
operations $21,449
Add: income tax expense 15,459
Less: other (income)/expense 215
---
Income from operations 37,123
Add (subtract):
Depreciation and amortization 12,365
Non-cash pension expense 1,812
Non-cash stock compensation
expense 1,008
Severance and other related costs
(3) -
Adjusted EBITDA (2) $52,308
=======
Adjusted EBITDA margin 52%
For 2010 Quarters Ended:
------------------------
Six Months
Ended June 30,
March 31 June 30 2010
-------- ------- ---------------
Net income from
continuing
operations $4,247 $3,742 $7,989
Add: income tax
expense 3,328 3,057 6,385
Less: other
(income)/expense 139 160 299
--- --- ---
Income from
operations 7,714 6,959 14,673
Add (subtract):
Depreciation and
amortization 2,926 3,122 6,048
Non-cash pension
expense 215 179 394
Non-cash stock
compensation
expense 414 584 998
Severance and
other related
costs (3) - 675 675
Adjusted EBITDA
(2) $11,269 $11,519 $22,788
======= ======= =======
Adjusted EBITDA
margin 50% 51% 51%
Year-over-Year Qtr-over-Qtr
-------------- ------------
$chg % $chg %
---- --- ---- ---
Net income from continuing
operations $(2,041) (35%) $(505) (12%)
Add: income tax expense (871) (22%) (271) (8%)
Less: other
(income)/expense 32 25% 21 15%
--- --- --- ---
Income from operations (2,880) (29%) (755) (10%)
Add (subtract):
Depreciation and
amortization 177 6% 196 7%
Non-cash pension expense (317) (64%) (36) (17%)
Non-cash stock
compensation expense 351 151% 170 41%
Severance and other related
costs (3) 675 100% 675 100%
Adjusted EBITDA (2) $(1,994) (15%) $250 2%
======= ===== ==== ===
Adjusted EBITDA margin
(1) External customers only.
(2) Adjusted EBITDA represents net income (loss) from continuing
operations excluding amounts for income taxes; depreciation and
amortization; non-cash pension and certain post-retirement
benefits; non-cash stock compensation; severance and other related
termination costs; and all other non-operating income/expenses.
Adjusted EBITDA is a common measure of operating performance in the
telecommunications industry. Adjusted EBITDA is not a measure of
financial performance under United States generally accepted
accounting principles and should not be considered in isolation or
as a substitute for consolidated net income (loss) as a measure of
performance.
(3) Severance and other related termination costs related to the
workforce reduction initiative implemented during the quarter ended
June 30, 2010. Amounts exclude the termination costs related to
stock compensation expense, which are included in non-cash stock
compensation expense of the Adjusted EBITDA reconciliation.
(4) Free cash flow is a measure of operating cash flows available for
corporate purposes after providing sufficient fixed asset additions
to maintain current productive capacity.
(5) Net debt represents total long-term debt (including current
maturities) less cash and cash equivalents. Net debt can be a
component in measuring leverage. Net debt is not a measure
determined in accordance with United States generally accepted
accounting principles and should not be considered as a substitute
for total long-term debt.
(6) The ratio of net debt to Adjusted EBITDA is calculated as net
debt divided by Adjusted EBITDA based on a trailing twelve month
period. This measure provides useful information to our investors
about our debt level relative to our performance and about our
ability to meet our financial obligations.
SUREWEST COMMUNICATIONS
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited; Amounts in thousands)
June 30, December 31,
2010 2009
---- ----
ASSETS
Current assets:
Cash and cash equivalents $6,154 $7,489
Short-term investments 551 4,306
Accounts receivable, net 19,074 19,734
Income tax receivable 2,156 2,221
Prepaid expenses 3,938 3,704
Deferred income taxes 9,030 3,373
Other current assets - 1,760
Assets held for sale 6,009 6,009
----- -----
Total current assets 46,912 48,596
Property, plant and equipment, net
519,137 522,493
Intangible and other assets:
Customer relationships, net 3,240 3,847
Goodwill 45,814 45,814
Deferred charges and other assets 2,674 2,113
----- -----
51,728 51,774
$617,777 $622,863
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $15,636 $15,636
Accounts payable 1,785 2,547
Other accrued liabilities 15,084 18,315
Advance billings and deferred revenues 8,056 8,580
Accrued compensation 6,062 9,172
----- -----
Total current liabilities 46,623 54,250
Long-term debt 203,409 207,409
Deferred income taxes 61,532 54,856
Accrued pension and other post-
retirement benefits 33,284 32,451
Other liabilities and deferred
revenues 4,668 4,714
Commitments and contingencies - -
Shareholders' equity:
Common stock, without par value;
100,000 shares 144,427 146,844
authorized, 13,970 and 14,148 shares
issued and
outstanding at June 30, 2010 and
December 31, 2009, respectively
Accumulated other comprehensive loss (15,338) (15,280)
Retained earnings 139,172 137,619
------- -------
Total shareholders' equity 268,261 269,183
------- -------
$617,777 $622,863
======== ========
$ %
Variance Variance
-------- --------
ASSETS
Current assets:
Cash and cash equivalents $(1,335) (18%)
Short-term investments (3,755) (87%)
Accounts receivable, net (660) (3%)
Income tax receivable (65) (3%)
Prepaid expenses 234 6%
Deferred income taxes 5,657 168%
Other current assets (1,760) (100%)
Assets held for sale - 0%
--- ---
Total current assets (1,684) (3%)
Property, plant and equipment, net
(3,356) (1%)
Intangible and other assets:
Customer relationships, net (607) (16%)
Goodwill - 0%
Deferred charges and other assets 561 27%
---
(46) (0%)
----
$(5,086) (1%)
======= ====
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $- 0%
Accounts payable (762) (30%)
Other accrued liabilities (3,231) (18%)
Advance billings and deferred revenues (524) (6%)
Accrued compensation (3,110) (34%)
------ -----
Total current liabilities (7,627) (14%)
Long-term debt (4,000) (2%)
Deferred income taxes 6,676 12%
Accrued pension and other post-
retirement benefits 833 3%
Other liabilities and deferred
revenues (46) (1%)
Commitments and contingencies - -
Shareholders' equity:
Common stock, without par value;
100,000 shares (2,417) (2%)
authorized, 13,970 and 14,148 shares
issued and
outstanding at June 30, 2010 and
December 31, 2009, respectively
Accumulated other comprehensive loss (58) 0%
Retained earnings 1,553 1%
----- ---
Total shareholders' equity (922) (0%)
---- ----
$(5,086) (1%)
======= ====
SUREWEST COMMUNICATIONS - Consolidated Operations
SELECTED OPERATING METRICS
As of and for the quarter ended
6/30/2010 6/30/2009
(1) (1) Chg Chg %
--------- --------- --- -----
BROADBAND
---------
Residential
Video
Marketable Homes (2) 265,100 239,800 25,300 11%
RGUs 60,300 59,100 1,200 2%
Penetration (2) 22.7% 23.7% -1.0% -4%
ARPU $68 $67 $1 2%
Voice
Marketable Homes 310,400 309,300 1,100 0%
RGUs 74,200 68,000 6,200 9%
Penetration 23.9% 22.0% 1.9% 9%
ARPU $30 $33 ($3) -8%
Data
Marketable Homes 310,400 309,300 1,100 0%
RGUs 99,200 97,700 1,500 2%
Penetration 32.0% 31.6% 0.4% 1%
ARPU $41 $38 $3 8%
Total
RGUs 233,700 224,800 8,900 4%
Subscriber totals
Subscribers (3) 103,100 101,800 1,300 1%
Penetration 33.2% 32.9% 0.3% 1%
ARPU (4) $100 $97 $3 3%
Triple Play ARPU (5) $116 $115 $1 1%
Triple Play RGUs per
Subscriber (5) 2.57 2.58 (0.01) 0%
Churn 1.6% 1.7% -0.1% -7%
Business (6)
Customers 7,300 6,800 500 7%
ARPU $518 $475 $43 9%
6/30/2010 6/30/2009
TELECOM (1) (1) Chg Chg %
------- ---------- ---------- --- -----
Residential
Voice
Marketable Homes 91,200 90,900 300 0%
RGUs (7) 32,800 45,100 (12,300) -27%
Cumulative Migration to
Broadband Voice (8) 14,000 9,000 5,000 56%
Penetration 36.0% 49.6% -13.7% -28%
ARPU $44 $45 ($1) -3%
Churn (9) 2.1% 2.3% -0.1% -6%
Business (6)
Customers 8,200 8,900 (700) -8%
ARPU $340 $339 $1 0%
CONSOLIDATED
RESIDENTIAL VOICE RGUs
-----------------------
ILEC Voice RGUs
Broadband 19,000 12,400 6,600 53%
Telecom 32,800 45,100 (12,300) -27%
------ ------ ------- ---
Total ILEC Voice RGUs
(10) 51,800 57,500 (5,700) -10%
CLEC Residential Voice
RGUs (11) 55,200 55,600 (400) -1%
------ ------ ---- ---
TOTAL Residential Voice
RGUs (12) 107,000 113,100 (6,100) -5%
6/30/2010 6/30/2009
NETWORK METRICS (1) (1) Chg Chg %
--------------- ---------- ---------- --- -----
Marketable Homes -
Fiber 147,900 146,900 1,000 1%
Marketable Homes -HFC 93,200 92,900 300 0%
Marketable Homes -
Copper 2-Play 45,300 69,500 (24,200) -35%
Marketable Homes -
Copper 3-Play 24,000 0 24,000 n/a
------ --- ------ ---
Total 310,400 309,300 1,100 0%
3/31/2010
(1) Chg Chg %
--------- --- -----
BROADBAND
---------
Residential
Video
Marketable Homes (2) 261,900 3,200 1%
RGUs 58,600 1,700 3%
Penetration (2) 22.4% 0.4% 2%
ARPU $69 ($1) -2%
Voice
Marketable Homes 309,900 500 0%
RGUs 72,100 2,100 3%
Penetration 23.3% 0.6% 3%
ARPU $30 $0 -1%
Data
Marketable Homes 309,900 500 0%
RGUs 97,800 1,400 1%
Penetration 31.6% 0.4% 1%
ARPU $42 ($1) -1%
Total
RGUs 228,500 5,200 2%
Subscriber totals
Subscribers (3) 102,000 1,100 1%
Penetration 32.9% 0.3% 1%
ARPU (4) $101 ($1) -1%
Triple Play ARPU (5) $117 ($1) -1%
Triple Play RGUs per Subscriber (5) 2.56 0.01 0%
Churn 1.6% 0.0% 1%
Business (6)
Customers 7,200 100 1%
ARPU $494 $24 5%
3/31/2010
TELECOM (1) Chg Chg %
------- ---------- --- -----
Residential
Voice
Marketable Homes 91,100 100 0%
RGUs (7) 35,500 (2,700) -8%
Cumulative Migration to Broadband
Voice (8) 12,900 1,100 9%
Penetration 39.0% -3.0% -8%
ARPU $44 $0 0%
Churn (9) 2.3% -0.2% -9%
Business (6)
Customers 8,300 (100) -1%
ARPU $334 $6 2%
CONSOLIDATED RESIDENTIAL VOICE RGUs
-----------------------------------
ILEC Voice RGUs
Broadband 17,500 1,500 9%
Telecom 35,500 (2,700) -8%
------ ------ ---
Total ILEC Voice RGUs (10) 53,000 (1,200) -2%
CLEC Residential Voice RGUs (11) 54,600 600 1%
------ --- ---
TOTAL Residential Voice RGUs (12) 107,600 (600) -1%
3/31/2010
NETWORK METRICS (1) Chg Chg %
--------------- ---------- --- -----
Marketable Homes - Fiber 147,700 200 0%
Marketable Homes - HFC 93,000 200 0%
Marketable Homes -Copper 2-Play 47,900 (2,600) -5%
Marketable Homes -Copper 3-Play 21,300 2,700 13%
------ ----- ---
Total 309,900 500 0%
(1) The calculation of certain metrics have been revised over time to
reflect the current view of our business. Where necessary prior
period metric calculations have been revised to conform with current
practice. All amounts rounded to the nearest 100s, except percents
and dollars.
(2) Marketable Homes -Prior to Q110, video marketable homes and
penetration rate included serviceable homes in Sacramento and Kansas
City fiber and hybrid fiber coax (HFC) networks only. With launch of
ADTV in Q110, certain copper homes became video serviceable and
3-play capable and are included in marketable home counts.
Penetration rates prior to Q110 were not adjusted for small number
of video customers on copper network prior to ADTV.
(3) A residential subscriber is a customer who subscribes to one or
more residential RGUs.
(4) ARPU is the total residential revenue per average subscriber.
(5) Triple play ARPU includes the total residential revenue per
average subscriber and Triple play RGUs per Subscriber includes
ending RGUs per ending subscriber, for the triple play markets,
excluding the ILEC market.
(6) A business customer is a customer who subscribes to business
data, voice or video and represents a unique customer account. ARPU
is the total business revenue per average customer.
(7) A voice RGU is a residential customer who subscribers to one or
more voice access line.
(8) Telecom Voice RGU Migration to Broadband Voice are residential
Telecom voice RGUs in Line (7) that have ported their Telecom
primary access line service to Broadband VoIP.
(9) Telecom Churn excludes disconnects in Line (8) that have ported
their Telecom primary access line service to Broadband VoIP.
(10) ILEC Voice RGUs are the total residential voice RGUs in the ILEC
franchise market area that are either a Telecom primary access line
or Broadband VoIP subscriber.
(11) CLEC Voice RGUs are the total residential voice RGUs in the
Kansas City and Sacramento markets, excluding the ILEC market.
(12) Total Voice RGUs are the total of ILEC and CLEC residential
voice RGUs, and represent the total company residential voice RGUs
of both the Broadband and Telecom Segments.
(13) Telecom access lines include residential and business access
lines. For information purposes, access line counts were 82,600 at
6/30/09, 69,300 at 3/31/10, and 65,800 at 6/30/10.
SUREWEST COMMUNICATIONS - Consolidated Operations
SELECTED OPERATING METRICS
As of and for the quarter ended
3/31/2008 6/30/2008 9/30/2008 12/31/2008
(1) (1) (1) (1)
--------- --------- --------- ----------
BROADBAND
---------
Residential
Video
Marketable
Homes (2) 211,000 217,700 221,700 232,400
RGUs 55,200 57,100 58,500 60,100
Penetration
(2) 24.9% 25.0% 25.2% 24.7%
ARPU $64 $62 $59 $59
Voice
Marketable
Homes 286,600 292,200 296,600 304,200
RGUs 53,800 56,600 60,000 63,500
Penetration 18.8% 19.4% 20.2% 20.9%
ARPU $33 $33 $32 $32
Data
Marketable
Homes 286,600 292,200 296,600 304,200
RGUs 91,800 94,000 95,700 97,400
Penetration 32.0% 32.2% 32.3% 32.0%
ARPU $39 $37 $36 $36
Total
RGUs 200,800 207,700 214,200 221,000
Qtrly chg 2,300 6,900 6,500 6,800
Subscriber
totals
Subscribers
(3) 96,900 99,000 100,600 102,400
Penetration 33.8% 33.9% 33.9% 33.7%
ARPU (4) $85 $89 $88 $89
Triple Play
ARPU (5) $111 $109 $106 $107
Triple Play
RGUs per
Subscriber
(5) 2.59 2.60 2.60 2.59
Churn 1.4% 1.5% 1.7% 1.4%
Business (6)
Customers 6,000 6,200 6,300 6,500
ARPU $412 $458 $494 $467
3/31/2008 6/30/2008 9/30/2008 12/31/2008
TELECOM (1) (1) (1) (1)
------- ---------- ---------- ---------- -----------
Residential
Voice
Marketable
Homes 89,900 90,000 90,500 90,800
RGUs (7) 66,800 62,900 58,500 54,000
Cumulative
Migration to
Broadband
Voice (8) 0 1,400 2,900 4,700
Penetration 74.3% 69.9% 64.6% 59.5%
ARPU $44 $44 $43 $43
Churn (9) 2.3% 2.1% 2.4% 2.2%
Business (6)
Customers 9,600 9,600 9,400 9,200
ARPU $311 $341 $354 $327
CONSOLIDATED
RESIDENTIAL 3/31/2008 6/30/2008 9/30/2008 12/31/2008
VOICE RGUs (1) (1) (1) (1)
------------ ---------- ---------- ---------- -----------
ILEC Voice
RGUs
Broadband 100 2,000 4,400 7,100
Telecom 66,800 62,900 58,500 54,000
------ ------ ------ ------
Total ILEC
Voice RGUs
(10) 66,900 64,900 62,900 61,100
CLEC
Residential
Voice RGUs
(11) 53,700 54,600 55,600 56,400
------ ------ ------ ------
TOTAL
Residential
Voice RGUs
(12) 120,600 119,500 118,500 117,500
Qtrly change (2,100) (1,100) (1,000) (1,000)
NETWORK 3/31/2008 6/30/2008 9/30/2008 12/31/2008
METRICS (1) (1) (1) (1)
------- ---------- ---------- ---------- -----------
Marketable
Homes -Fiber 119,900 125,700 129,000 138,800
Marketable
Homes -HFC 91,100 92,000 92,700 93,600
Marketable
Homes -
Copper 2-Play 75,600 74,500 74,900 71,800
Marketable
Homes -
Copper 3-Play 0 0 0 0
Total 286,600 292,200 296,600 304,200
ACCESS LINES -
Telecom (13) 110,200 105,900 100,200 94,600
--------------
3/31/2009 6/30/2009 9/30/2009 12/31/2009
(1) (1) (1) (1)
--------- --------- --------- ----------
BROADBAND
---------
Residential
Video
Marketable
Homes (2) 236,500 239,800 240,000 240,500
RGUs 60,000 59,100 59,200 59,100
Penetration
(2) 24.4% 23.7% 23.8% 23.7%
ARPU $65 $67 $66 $68
Voice
Marketable
Homes 308,200 309,300 309,400 309,700
RGUs 66,300 68,000 70,300 71,600
Penetration 21.5% 22.0% 22.7% 23.1%
ARPU $33 $33 $31 $30
Data
Marketable
Homes 308,200 309,300 309,400 309,700
RGUs 98,100 97,700 97,700 98,500
Penetration 31.8% 31.6% 31.6% 31.8%
ARPU $37 $38 $38 $40
Total
RGUs 224,400 224,800 227,200 229,200
Qtrly chg 3,400 400 2,400 2,000
Subscriber
totals
Subscribers
(3) 102,800 101,800 102,500 102,600
Penetration 33.4% 32.9% 33.1% 33.1%
ARPU (4) $94 $97 $96 $99
Triple Play
ARPU (5) $112 $115 $112 $115
Triple Play
RGUs per
Subscriber
(5) 2.59 2.58 2.57 2.57
Churn 1.4% 1.7% 1.8% 1.5%
Business (6)
Customers 6,700 6,800 7,000 7,100
ARPU $484 $475 $483 $492
3/31/2009 6/30/2009 9/30/2009 12/31/2009
TELECOM (1) (1) (1) (1)
------- ---------- ---------- ---------- -----------
Residential
Voice
Marketable
Homes 90,800 90,900 90,900 91,000
RGUs (7) 49,500 45,100 41,300 38,500
Cumulative
Migration to
Broadband
Voice (8) 6,900 9,000 10,700 11,800
Penetration 54.5% 49.6% 45.4% 42.3%
ARPU $44 $45 $45 $45
Churn (9) 2.1% 2.3% 2.3% 2.0%
Business (6)
Customers 9,000 8,900 8,700 8,500
ARPU $332 $339 $329 $334
CONSOLIDATED
RESIDENTIAL 3/31/2009 6/30/2009 9/30/2009 12/31/2009
VOICE RGUs (1) (1) (1) (1)
------------ ---------- ---------- ---------- -----------
ILEC Voice
RGUs
Broadband 9,900 12,400 14,700 16,200
Telecom 49,500 45,100 41,300 38,500
------ ------ ------ ------
Total ILEC
Voice RGUs
(10) 59,400 57,500 56,000 54,700
CLEC
Residential
Voice RGUs
(11) 56,400 55,600 55,600 55,400
------ ------ ------ ------
TOTAL
Residential
Voice RGUs
(12) 115,800 113,100 111,600 110,100
Qtrly change (1,700) (2,700) (1,500) (1,500)
NETWORK 3/31/2009 6/30/2009 9/30/2009 12/31/2009
METRICS (1) (1) (1) (1)
------- ---------- ---------- ---------- -----------
Marketable
Homes -Fiber 142,900 146,900 147,100 147,600
Marketable
Homes -HFC 93,600 92,900 92,900 92,900
Marketable
Homes -
Copper 2-Play 71,700 69,500 69,400 69,200
Marketable
Homes -
Copper 3-Play 0 0 0 0
Total 308,200 309,300 309,400 309,700
ACCESS LINES -
Telecom (13) 88,400 82,600 77,600 73,200
--------------
3/31/2010 6/30/2010
(1) (1)
--------- ---------
BROADBAND
---------
Residential
Video
Marketable Homes (2) 261,900 265,100
RGUs 58,600 60,300
Penetration (2) 22.4% 22.7%
ARPU $69 $68
Voice
Marketable Homes 309,900 310,400
RGUs 72,100 74,200
Penetration 23.3% 23.9%
ARPU $30 $30
Data
Marketable Homes 309,900 310,400
RGUs 97,800 99,200
Penetration 31.6% 32.0%
ARPU $42 $41
Total
RGUs 228,500 233,700
Qtrly chg (700) 5,200
Subscriber totals
Subscribers (3) 102,000 103,100
Penetration 32.9% 33.2%
ARPU (4) $101 $100
Triple Play ARPU (5) $117 $116
Triple Play RGUs per Subscriber (5) 2.56 2.57
Churn 1.6% 1.6%
Business (6)
Customers 7,200 7,300
ARPU $494 $518
3/31/2010 6/30/2010
TELECOM (1) (1)
------- ---------- ----------
Residential
Voice
Marketable Homes 91,100 91,200
RGUs (7) 35,500 32,800
Cumulative Migration to Broadband
Voice (8) 12,900 14,000
Penetration 39.0% 36.0%
ARPU $44 $44
Churn (9) 2.3% 2.1%
Business (6)
Customers 8,400 8,200
ARPU $334 $340
3/31/2010 6/30/2010
CONSOLIDATED RESIDENTIAL VOICE RGUs (1) (1)
----------------------------------- ---------- ----------
ILEC Voice RGUs
Broadband 17,500 19,000
Telecom 35,500 32,800
------ ------
Total ILEC Voice RGUs (10) 53,000 51,800
CLEC Residential Voice RGUs (11) 54,600 55,200
------ ------
TOTAL Residential Voice RGUs (12) 107,600 107,000
Qtrly change (2,500) (600)
3/31/2010 6/30/2010
NETWORK METRICS (1) (1)
--------------- ---------- ----------
Marketable Homes - Fiber 147,700 147,900
Marketable Homes - HFC 93,000 93,200
Marketable Homes - Copper 2-Play 47,900 45,300
Marketable Homes - Copper 3-Play 21,300 24,000
------
Total 309,900 310,400
ACCESS LINES - Telecom (13) 69,300 65,800
---------------------------
(1-13) See all notes on Selected Operating Metrics Actuals Quarterly and Year-over-Year comparison
SOURCE SureWest Communications
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