SureWest Reports Fourth Quarter and Full Year 2009 Results
Broadband-focused strategy continues to drive long-term revenue, adjusted EBITDA and free cash flow growth
-- Full year revenues increased 5% and adjusted EBITDA grew 13%
-- Full year Broadband revenues grew 19% from a 20% increase in residential revenues and 20% business services growth
-- Free cash flow increased by $33 million to positive $2 million for the full year
-- Debt, net of cash and cash equivalents, reduced by $23 million from year-end 2008, resulting in a net debt to adjusted EBITDA ratio of 2.77x
-- Net income decreased to $3.2 million compared to $18.9 million in 2008 as a result of the $18.8 million gain on the sale of SureWest's wireless assets in 2008
-- Average monthly revenue per customer (ARPU) in triple-play markets increased by 8% to $115
ROSEVILLE, Calif., Feb. 25 /PRNewswire-FirstCall/ -- SureWest Communications (Nasdaq: SURW) today announced operating results for the fourth quarter and full year ended December 31, 2009.
(Logo: http://www.newscom.com/cgi-bin/prnh/20050908/SFSUREWESTLOGO)
Steve Oldham, SureWest's president and chief executive officer, said, "Our results for the year were driven by top-line revenue growth, increased adjusted EBITDA and three consecutive quarters of positive free cash flow as we continued to drive down net debt. Among our peers, we stood out with 5% revenue growth and 13% adjusted EBITDA growth. Our commercial service sales efforts are showing great results, particularly in the Kansas City market where our business customer count grew 27% from 2008 and pro forma revenues increased by 29%. We also increased residential revenues and ARPU by targeting high-value subscribers looking for the exceptional performance our superior networks deliver.
"Our ability to react quickly to market dynamics and to be flexible with our marketing strategies allowed us to grow the company during 2009's difficult economic and fiercely competitive climate. Having markets in both California and Kansas provides geographic and economic diversity in addition to cost-saving opportunities across the organization that allow for significant benefits.
"Looking ahead, we expect to continue growing our Broadband segment, focusing resources on expanding our business services customer base and increasing residential ARPU and the number of products our customers subscribe to (RGUs). Our competition is not standing still and we are seeing a significant response; however, they can only compete with us on price. We have the ability to cost effectively grow the company today largely because of investments we made over the last several years to extend our superior fiber networks, something our competitors have yet to even begin. Our new video service, Advanced Digital TV, has created an exciting buzz among both fiber and copper network customers in the Sacramento region due to its compelling features, such as Whole Home DVR, lightning-fast channel change times and an intuitive program guide. In Kansas City, improvements to the network in 2010 will allow us to add more HD channels and deliver faster Internet speeds. We are confident our superior networks will drive future growth, and we will continue to execute on the challenges and opportunities ahead in order to drive shareholder value."
The following table highlights financial results for continuing operations on a consolidated basis (dollars are in thousands):
4th Quarter Consolidated 2009 2008 Change % ---- ---- ------ --- Broadband Revenue $41,566 $36,929 $4,637 13% Telecom Revenue 18,733 22,009 (3,276) (15%) Total Revenue 60,299 58,938 1,361 2% Adjusted EBITDA 19,585 17,015 2,570 15% Income (loss) from Continuing Ops (100) (1,547) 1,447 94% Capital Expenditure 14,967 21,922 (6,955) (32%) Free Cash Flow 359 (8,803) 9,162 104% Net Debt 215,556 238,848 (23,292) (10%) Full Year Consolidated 2009 2008 Change % ---- ---- ------ --- Broadband Revenue $161,222 $135,341 25,881 19% Telecom Revenue 80,478 95,032 (14,554) (15%) Total Revenue 241,700 230,373 11,327 5% Adjusted EBITDA 77,898 69,239 8,659 13% Income (loss) from Continuing Ops 667 826 (159) (19%) Capital Expenditure 58,330 86,489 (28,159) (33%) Free Cash Flow 2,061 (30,636) 32,697 107% Net Debt 215,556 238,848 (23,292) (10%) See Non-GAAP measure notes near end of release, and EBITDA, Free Cash Flow and Net Debt reconciliations for detailed adjustments.
Fourth Quarter Financial Results
Consolidated revenues increased 2% year-over-year to $60.3 million resulting from 13% Broadband revenue growth offset by Telecom revenue declines of 15%. Adjusted EBITDA, which is adjusted for non-cash pension expense of $642 thousand and non-cash stock compensation expense of $495 thousand, increased 15% year-over-year to $19.6 million as the company continued to recognize cost savings from initiatives such as consolidation of office space and employee attrition. Employee counts decreased 3% from the prior year to 893 employees.
Operating expenses, exclusive of depreciation and amortization, remained flat year-over-year at $41.9 million due to reductions in labor expense, and sales and advertising costs offset by increases in video license fees and transport charges related to commercial business revenue growth.
Net loss was $100 thousand compared to a loss of $2.1 million in the fourth quarter of 2008 due primarily to an increase in adjusted EBITDA and a decrease in interest expense. Earnings per share from continuing operations was zero compared to negative $.15 in the fourth quarter of 2008.
Capital expenditures totaled $15 million for the fourth quarter and $58.3 million for the full year compared to $86.5 million in 2008. The company passed 8,800 additional advanced fiber homes in 2009.
As previously announced, SureWest's video service is expanding to reach over 25,000 existing voice and data marketable ILEC homes on the Sacramento copper network, creating the ability to deliver a new IP-based triple-play option to these potential customers. The first 15,000 homes receiving SureWest's extended video became available in January 2010 and the second phase of over 10,000 homes will become available throughout the second quarter of 2010. These 25,000-plus homes will be served with video for a cost of just over $3 million, which is roughly 10% of the average cost to pass a home with fiber. SureWest's projected 2010 capital expenditure remains at $55-60 million, of which approximately two-thirds is scheduled for residential and business success-based investment.
Free cash flow, defined as income from continuing operations plus depreciation and amortization less capital expenditures, increased to positive $359 thousand – a $9.2 million increase year-over-year. The increase is due to adjusted EBITDA growth and lower capital expenditures related to the third quarter 2009 completion of the fiber network expansion. The company continues to focus on increasing revenues and free cash flow by growing residential ARPU and RGUs, and increasing business services revenues.
Cash and cash equivalents increased to $7.5 million from $2.8 million at December 31, 2008. During the year, SureWest paid down $18.6 million in debt resulting in $215.6 million in remaining total debt net of cash and cash equivalents (net debt), and a net debt to adjusted EBITDA ratio of 2.77x.
Broadband Segment Results
Broadband revenues increased 13% year-over-year and accounted for 69% of the company's total revenues, compared to 63% in the fourth quarter of 2008. This growth is due to the company's successful long-term strategy of growing its Broadband operations to counteract the industry-wide trend of declining Telecom segment revenues.
Broadband Residential:
Broadband Residential revenues increased 13% year-over-year to $30.5 million due to 12% 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:
Q4 '09 vs. Q4 '08 change Q4 '09 vs. Q3 '09 change ------------------------ ------------------------ Kansas Kansas Sacramento City Sacramento City Market Market Total Market Market Total ---------- ------ ----- ---------- ------ ----- Broadband Residential RGUs 6% 1% 4% 2% 0% 1% Data RGUs 0% 3% 1% 1% 1% 1% Video RGUs - Fiber & HFC -4% 1% -1% 0% 0% 0% Voice RGUs 30% -1% 13% 4% -1% 2% Total Residential Subscribers -1% 1% 0% 0% -1% 0%
ARPU for triple-play marketable homes, consisting of the company's fiber-to-the-home (FTTH) and hybrid fiber coaxial (HFC) networks, increased 8% year-over-year to $115 from $107. This was due to a fourth quarter 2009 video and data price increase that reinforced the company's ability to maintain growth while targeting customers who value superior service offerings. Additionally, continued customer demand for higher data speeds, HDTV and DVR impacted ARPU growth.
Broadband Business:
Broadband Business revenues increased by $1.3 million, or 14%, year-over-year to $10.3 million. Customer counts increased 9% year-over-year to 7,100 and ARPU grew 5% from the prior year to $492.
Broadband Business growth expectations remain high in both Sacramento and Kansas City due to several operational and sales factors. The company has the competitive advantage of being able to add business customers at lower initial investment costs where service is provided over its extensive fiber network. Aggressive sales and renewal tactics, superior customer satisfaction levels and catered packages coupled with a host of product solutions including wireless backhaul, data center services and the upcoming launches of Hosted IP PBX and SIP Trunking will drive future growth. And as the economy begins to turn and businesses return, SureWest anticipates it will capture additional business customers.
Telecom Segment Results
The Telecom segment, which only services the Sacramento market, experienced revenue declines of 15% year-over-year to $18.7 million from the industry-wide trend of residential access line attrition and associated access revenue declines. The Telecom segment accounted for just 31% of total revenues compared to 37% in the fourth quarter of 2008 as the company continues to successfully grow its Broadband segment and perform as a Broadband-driven company. Forecasts anticipate Telecom segment declines will begin to slow over the next several years.
Telecom Residential:
Telecom Residential revenues declined 26% year-over-year to $5.4 million resulting from losses in Telecom voice RGUs of 29% year-over-year. The company continues to mitigate Telecom voice line losses as customers elect to move to its Broadband Voice over IP (VoIP) product. Though 15,500 Telecom Residential voice RGUs were lost on a year-over-year basis, 7,100, or 46%, of that number was reclaimed through new growth in SureWest's Broadband VoIP service.
Telecom Business:
Telecom Business revenues declined 5% year-over-year to $8.6 million due to a decline in small- and medium-sized business customers, particularly those impacted by California's depressed real estate industry. In addition, some carrier consolidation activity took place during the year. Growth opportunities are expected once the Sacramento office market recovers and businesses begin to return.
Telecom Access:
Telecom Access revenues decreased $950 thousand year-over-year to $4.5 million due to scheduled reductions in the California High Cost Fund (CHCF) subsidies and a decline in switched access revenues. As previously announced, CHCF subsidies are scheduled to decline by $2 million per year through 2011, in line with a negotiated transition.
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, and all other non-operating income/expenses. Free cash flow represents net income (loss) from continuing operations plus depreciation and amortization less capital expenditures. Net debt is a measure of total debt (current, plus long-term) less cash and cash equivalents. 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. Reconciliation to the comparable GAAP measures is 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 5 p.m. Eastern Time on Thursday, February 25, 2010. Open to the public, a simultaneous live webcast of the call will be available from the company's investor relations Web site at www.surw.com. A telephone replay of the call will be available shortly after completion through Thursday, March 4 by dialing 888.286.8010 and entering pass code 36995627. 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.
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Ron Rogers |
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Corporate Communications |
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916-746-3123 |
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Misty Wells |
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Investor Relations |
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916-786-1799 |
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SUREWEST COMMUNICATIONS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; Amounts in thousands, except per share amounts) Quarter Quarter Ended Ended December December $ % 31, 2009 31, 2008 Change Change --------- --------- ------ ------ Operating revenues: Broadband $41,566 $36,929 $4,637 13% Telecom 18,733 22,009 (3,276) -15% ------ ------ ------ --- Total operating revenues 60,299 58,938 1,361 2% Operating expenses: Cost of services and products (exclusive of depreciation and amortization) 24,929 23,875 1,054 4% Customer operations and selling 8,173 9,260 (1,087) -12% General and administrative 8,749 8,578 171 2% Depreciation and amortization 15,426 14,666 760 5% ------ ------ --- -- Total operating expenses 57,277 56,379 898 2% ------ ------ --- -- Income from operations 3,022 2,559 463 18% Other income (expense): Investment income 22 83 (61) -73% Interest expense (2,916) (3,281) 365 11% Other, net 264 261 3 1% --- --- -- -- Total other income (expense), net (2,630) (2,937) 307 10% ------ ------ --- -- Income (loss) from continuing operations before income taxes 392 (378) 770 204% Income tax expense 492 1,169 (677) -58% --- ----- ---- --- Loss from continuing operations (100) (1,547) 1,447 94% Discontinued operations, net of tax: Loss from discontinued operations $- (229) 229 100% Loss on sale of discontinued operations - (358) 358 100% -- ---- --- --- Total discontinued operations $- (587) 587 100% == ---- --- --- Net loss $(100) $(2,134) $2,034 95% ===== ======= ====== == Basic and diluted earnings per common share: Loss from continuing operations $- $(0.11) $0.11 Discontinued operations, net of tax - (0.04) 0.04 --- ----- ---- Net loss per basic common share $- $(0.15) $0.15 === ====== ===== Shares of common stock used to calculate earnings per share: Basic and diluted 13,956 13,976 (20) ====== ====== === SUREWEST COMMUNICATIONS CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited; Amounts in thousands, except per share amounts) Quarter Quarter Ended Ended December September $ % 31, 2009 30, 2009 Change Change --------- --------- ------ ------ Operating revenues: Broadband $41,566 $40,175 $1,391 3% Telecom 18,733 19,354 (621) -3% ------ ------ ---- -- Total operating revenues 60,299 59,529 770 1% Operating expenses: Cost of services and products (exclusive of depreciation and amortization) 24,929 24,563 366 1% Customer operations and selling 8,173 9,017 (844) -9% General and administrative 8,749 8,073 676 8% Depreciation and amortization 15,426 15,260 166 1% ------ ------ --- -- Total operating expenses 57,277 56,913 364 1% ------ ------ --- -- Income from operations 3,022 2,616 406 16% Other income (expense): Investment income 22 28 (6) -21% Interest expense (2,916) (3,046) 130 4% Other, net 264 205 59 29% --- --- -- -- Total other income (expense), net (2,630) (2,813) 183 7% ------ ------ --- -- Income (loss) from continuing operations before income taxes 392 (197) 589 299% Income tax expense 492 14 478 nm --- -- --- -- Loss from continuing operations (100) (211) 111 53% Discontinued operations, net of tax: Loss from discontinued operations - - - - Loss on sale of discontinued operations - - - - -- -- -- -- Total discontinued operations - - - - == == == == Net loss $(100) $(211) $111 53% ===== ===== ==== == Basic and diluted earnings per common share: Loss from continuing operations $- $(0.02) $0.02 Discontinued operations, net of tax - - - -- -- -- Net loss per basic common share $- $(0.02) $0.02 == ====== ===== Shares of common stock used to calculate earnings per share: Basic and diluted 13,956 13,936 20 ====== ====== == SUREWEST COMMUNICATIONS CONSOLIDATED STATEMENTS OF INCOME (Unaudited; Amounts in thousands, except per share amounts) Twelve Twelve Months Months Ended Ended December December $ % 31, 2009 31, 2008 Change Change --------- --------- ------ ------ Operating revenues: Broadband $161,222 $135,341 $25,881 19% Telecom 80,478 95,032 (14,554) -15% ------ ------ ------- --- Total operating revenues 241,700 230,373 11,327 5% Operating expenses: Cost of services and products (exclusive of depreciation and amortization) 99,624 89,684 9,940 11% Customer operations and selling 33,770 32,933 837 3% General and administrative 35,009 37,588 (2,579) -7% Depreciation and amortization 59,724 55,027 4,697 9% ------ ------ ----- -- Total operating expenses 228,127 215,232 12,895 6% ------- ------- ------ -- Income from operations 13,573 15,141 (1,568) -10% Other income (expense): Investment income 121 676 (555) -82% Interest expense (11,318) (12,126) 808 7% Other, net 297 274 23 8% --- --- -- -- Total other income (expense), net (10,900) (11,176) 276 2% ------- ------- --- -- Income from continuing operations before income taxes 2,673 3,965 (1,292) -33% Income tax expense 2,006 3,139 (1,133) -36% ----- ----- ------ --- Income from continuing operations 667 826 (159) -19% Discontinued operations, net of tax: Income (loss) from discontinued operations (69) 103 (172) -167% Gain on sale of discontinued operations 2,568 18,004 (15,436) -86% ----- ------ ------- --- Total discontinued operations 2,499 18,107 (15,608) -86% ----- ------ ------- --- Net income $3,166 $18,933 $(15,767) -83% ====== ======= ======== === Basic and diluted earnings per common share: Income from continuing operations $0.05 $0.06 $(0.01) Discontinued operations, net of tax 0.18 1.28 (1.10) ---- ---- ----- Net income per basic common share $0.23 $1.34 $(1.11) ===== ===== ====== Shares of common stock used to calculate earnings per share: Basic 13,996 14,096 (100) ====== ====== ==== Diluted 13,996 14,099 (103) ====== ====== ====
SureWest Communications Unaudited Pro Forma Selected Financial Results (3) (on a pro forma consolidated and a pro forma segment basis) (Amounts in thousands) For 2008 Twelve Quarters Ended: Months ---------------- Ended March June September December December Consolidated 31 30 30 31 31, 2008 ----- ---- --------- -------- -------- Operating revenues (1) Residential $34,647 $34,621 $33,959 $34,180 $137,407 Business 16,946 18,188 19,342 18,218 72,694 Access 6,647 6,393 6,308 5,922 25,270 Other 630 650 661 618 2,559 --- --- --- --- ----- Total operating revenues from external customers 58,870 59,852 60,270 58,938 237,930 ------ ------ ------ ------ ------- Operating expenses (1) 41,274 39,903 42,034 41,713 164,924 Depreciation and amortization 13,259 14,075 14,219 14,666 56,219 ------ ------ ------ ------ ------ Income from operations $4,337 $5,874 $4,017 $2,559 $16,787 ====== ====== ====== ====== ======= For 2009 Twelve Quarters Ended: Months ----------------- Ended March June September December December Consolidated 31 30 30 31 31, 2009 ----- ---- --------- -------- -------- Operating revenues (1) Residential $35,713 $36,180 $35,246 $35,845 $142,984 Business 18,633 18,704 18,705 18,969 75,011 Access 6,031 5,351 5,031 4,942 21,355 Other 565 695 547 543 2,350 --- --- --- --- ----- Total operating revenues from external customers 60,942 60,930 59,529 60,299 241,700 ------ ------ ------ ------ ------- Operating expenses (1) 42,812 42,087 41,653 41,851 168,403 Depreciation and amortization 14,810 14,228 15,260 15,426 59,724 ------ ------ ------ ------ ------ Income from operations $3,320 $4,615 $2,616 $3,022 $13,573 ====== ====== ====== ====== ======= Consolidated Reconciliation of Adjusted EBITDA to Net Income (Loss) from Continuing Operations For 2008 Twelve Quarters Ended: Months ---------------- Ended March June September December December 31 30 30 31 31, 2008 ----- ---- --------- -------- -------- Net income (loss) from continuing operations $376 $1,729 $622 $(1,547) $1,180 Add back: income tax expense 489 1,139 582 1,169 3,379 Less: other (income)/expense 3,472 3,006 2,813 2,937 12,228 ----- ----- ----- ----- ------ Income from operations 4,337 5,874 4,017 2,559 16,787 Add (subtract): Depreciation and amortization 13,259 14,075 14,219 14,666 56,219 Non-cash pension (income)/expense (393) (524) (458) (433) (1,808) Non-cash stock compensation expense 141 345 170 223 879 --- --- --- --- --- Adjusted EBITDA (2) $17,344 $19,770 $17,948 $17,015 $72,077 ======= ======= ======= ======= ======= Other data: Total debt $277,830 $231,828 $233,827 $241,688 n/a For 2009 Twelve Quarters Ended: 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 back: 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 (income)/expense 755 552 642 642 2,591 Non-cash stock compensation expense 608 464 443 495 2,010 --- --- --- --- ----- Adjusted EBITDA (2) $19,493 $19,859 $18,961 $19,585 $77,898 ======= ======= ======= ======= ======= Other data: Total debt $240,187 $236,685 $226,683 $223,045 n/a SureWest Communications Unaudited Pro Forma Selected Financial Results (3) (on a pro forma consolidated and a pro forma segment basis) (Amounts in thousands) For 2008 Quarters Ended: Twelve ---------------- Months Ended March June September December December 31, Broadband 31 30 30 31 2008 ----- ---- --------- -------- ------- Data $10,128 $10,338 $10,348 10,491 $41,305 Video 10,359 10,365 10,264 10,522 41,510 Voice 5,258 5,395 5,542 5,933 22,128 ----- ----- ----- ----- ------ Total residential revenues 25,745 26,098 26,154 26,946 104,943 Business 7,899 8,374 9,271 9,084 34,628 Access 305 370 414 449 1,538 Other 439 459 441 450 1,789 --- --- --- --- ----- Total operating revenues from external customers 34,388 35,301 36,280 36,929 142,898 Intersegment revenues 140 141 138 120 539 --- --- --- --- --- Total operating revenues 34,528 35,442 36,418 37,049 143,437 ------ ------ ------ ------ ------- Operating expenses without depreciation 30,742 31,085 32,844 32,698 127,369 Depreciation and amortization 9,597 10,335 10,700 11,051 41,683 ----- ------ ------ ------ ------ Loss from operations $(5,811) $(5,978) $(7,126) $(6,700) $(25,615) ======= ======= ======= ======= ======== For 2009 Quarters Ended: Twelve ----------------- Months Ended March June September December December 31, Broadband 31 30 30 31 2009 ----- ---- --------- -------- ------- Data $10,763 $11,184 $11,236 $11,878 $45,061 Video 11,689 11,995 11,711 12,127 47,522 Voice 6,399 6,594 6,442 6,462 25,897 ----- ----- ----- ----- ------ Total residential revenues 28,851 29,773 29,389 30,467 118,480 Business 9,585 9,615 10,018 10,336 39,554 Access 384 398 427 419 1,628 Other 402 473 341 344 1,560 --- --- --- --- ----- Total operating revenues from external customers 39,222 40,259 40,175 41,566 161,222 Intersegment revenues 91 94 93 160 438 -- -- -- --- --- Total operating revenues 39,313 40,353 40,268 41,726 161,660 ------ ------ ------ ------ ------- Operating expenses without depreciation 34,695 34,294 34,615 34,247 137,851 Depreciation and amortization 11,620 11,283 12,199 12,257 47,359 ------ ------ ------ ------ ------ Loss from operations $(7,002) $(5,224) $(6,546) $(4,778) $(23,550) ======= ======= ======= ======= ======== Broadband Reconciliation of Adjusted EBITDA to Net Loss from Continuing Operations For 2008 Quarters Ended: Twelve ---------------- Months Ended March June September December December 31, 31 30 30 31 2008 ----- ---- --------- -------- -------- Loss from continuing operations $(5,416) $(5,391) $(5,856) $(6,667) $(23,330) Add back: income tax benefits (4,054) (3,690) (3,994) (3,179) (14,917) Less: other (income)/expense 3,659 3,103 2,724 3,146 12,632 ----- ----- ----- ----- ------ Loss from operations (5,811) (5,978) (7,126) (6,700) (25,615) Add (subtract): Depreciation and amortization 9,597 10,335 10,700 11,051 41,683 Non-cash pension (income)/expense (162) (212) (186) (178) (738) Non-cash stock compensation expense 54 173 77 103 407 -- --- -- --- --- Adjusted EBITDA (2) $3,678 $4,318 $3,465 $4,276 $15,737 ====== ====== ====== ====== ======= For 2009 Quarters Ended: Twelve ----------------- Months Ended March June September December December 31, 31 30 30 31 2009 ----- ---- --------- -------- -------- Loss from continuing operations $(5,398) $(4,884) $(5,619) $(4,881) $(20,782) Add back: income tax benefits (3,656) (3,312) (3,810) (2,675) (13,453) Less: other (income)/expense 2,052 2,972 2,883 2,778 10,685 ----- ----- ----- ----- ------ Loss from operations (7,002) (5,224) (6,546) (4,778) (23,550) Add (subtract): Depreciation and amortization 11,620 11,283 12,199 12,257 47,359 Non-cash pension (income)/expense 327 56 197 199 779 Non-cash stock compensation expense 304 231 221 246 1,002 --- --- --- --- ----- Adjusted EBITDA (2) $5,249 $6,346 $6,071 $7,924 $25,590 ====== ====== ====== ====== ======= SureWest Communications Unaudited Pro Forma Selected Financial Results (3) (on a pro forma consolidated and a pro forma segment basis) (Amounts in thousands) For 2008 Quarters Ended: Twelve ---------------- Months Ended March June September December December 31, Telecom 31 30 30 31 2008 ----- ---- --------- -------- ------- Residential $8,902 $8,523 $7,805 $7,234 $32,464 Business 9,047 9,814 10,071 9,134 38,066 Access 6,342 6,023 5,894 5,473 23,732 Other 191 191 220 168 770 --- --- --- --- --- Total operating revenues from external customers 24,482 24,551 23,990 22,009 95,032 Intersegment revenues 4,343 4,560 4,706 4,846 18,455 ----- ----- ----- ----- ------ Total operating revenues 28,825 29,111 28,696 26,855 113,487 ------ ------ ------ ------ ------- Operating expenses without depreciation 15,015 13,519 14,034 13,981 56,549 Depreciation and amortization 3,662 3,740 3,519 3,615 14,536 ----- ----- ----- ----- ------ Income from operations $10,148 $11,852 $11,143 $9,259 $42,402 ======= ======= ======= ====== ======= For 2009 Quarters Ended: Twelve ----------------- Months Ended March June September December December 31, Telecom 31 30 30 31 2009 ----- ---- --------- -------- ------- Residential $6,862 $6,407 $5,857 $5,378 $24,504 Business 9,048 9,089 8,687 8,633 35,457 Access 5,647 4,953 4,604 4,523 19,727 Other 163 222 206 199 790 --- --- --- --- --- Total operating revenues from external customers 21,720 20,671 19,354 18,733 80,478 Intersegment revenues 4,874 4,981 5,043 4,999 19,897 ----- ----- ----- ----- ------ Total operating revenues 26,594 25,652 24,397 23,732 100,375 ------ ------ ------ ------ ------- Operating expenses without depreciation 13,082 12,868 12,174 12,763 50,887 Depreciation and amortization 3,190 2,945 3,061 3,169 12,365 ----- ----- ----- ----- ------ Income from operations $10,322 $9,839 $9,162 $7,800 $37,123 ======= ====== ====== ====== ======= Telecom Reconciliation of Adjusted EBITDA to Net Income from Continuing Operations For 2008 Quarters Ended: Twelve ---------------- Months Ended March June September December December 31, 31 30 30 31 2008 ----- ---- --------- -------- ------- Net income from continuing operations $5,792 $7,120 $6,478 $5,120 $24,510 Add back: income tax expense 4,543 4,829 4,576 4,348 18,296 Less: other (income)/expense (187) (97) 89 (209) (404) ---- --- -- ---- ---- Income from operations 10,148 11,852 11,143 9,259 42,402 Add (subtract): Depreciation and amortization 3,662 3,740 3,519 3,615 14,536 Non-cash pension (income) / expense (231) (312) (272) (255) (1,070) Non-cash stock compensation expense 87 172 93 120 472 -- --- -- --- --- Adjusted EBITDA (2) $13,666 $15,452 $14,483 $12,739 $56,340 ======= ======= ======= ======= ======= For 2009 Quarters Ended: Twelve ------------------------- Months Ended March June September December December 31, 31 30 30 31 2009 ----- ---- --------- -------- ------- Net income from continuing operations $5,477 $5,783 $5,408 $4,781 $21,449 Add back: income tax expense 4,540 3,928 3,824 3,167 15,459 Less: other (income)/expense 305 128 (70) (148) 215 --- --- --- ---- --- Income from operations 10,322 9,839 9,162 7,800 37,123 Add (subtract): Depreciation and amortization 3,190 2,945 3,061 3,169 12,365 Non-cash pension (income) / expense 428 496 445 443 1,812 Non-cash stock compensation expense 304 233 222 249 1,008 --- --- --- --- ----- Adjusted EBITDA (2) $14,244 $13,513 $12,890 $11,661 $52,308 ======= ======= ======= ======= ======= (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; 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) The pro forma selected financial results are based on the historical consolidated financial statements of SureWest Communications and Everest Broadband, Inc. ("Everest") and have been adjusted to reflect the Everest acquisition, which was consummated on February 13, 2008. The unaudited condensed combined pro forma financial statements give the effect as if the acquisition had occurred on January 1, 2008. On May 9, 2008, the sale of the Wireless assets was completed and the pro forma financial results reflect for all periods presented the classification of the sold Wireless operations as discontinued operations. Also, on February 27, 2009, SureWest Communications completed the sale of its Tower Assets and the pro forma financial results reflect the classification of the operations for the Tower Assets sold as discontinued operations for all periods presented.
SUREWEST COMMUNICATIONS CONSOLIDATED BALANCE SHEETS (Unaudited; Amounts in thousands) December 31, December 31, 2009 2008 ---- ---- ASSETS Current assets: Cash and cash equivalents $7,489 $2,840 Short-term investments 4,306 610 Accounts receivable, net 19,734 21,415 Income tax receivable 2,221 6,391 Inventories 5,263 6,527 Prepaid expenses 3,704 4,539 Deferred income taxes 3,373 2,989 Other current assets 1,760 1,752 Assets held for sale 6,009 7,388 Assets of discontinued operations - 5,002 --- ----- Total current assets 53,859 59,453 Property, plant and equipment, net 517,230 515,843 Intangible and other assets: Long-term investments - 3,508 Customer relationships, net 3,847 5,062 Goodwill 45,814 45,814 Deferred charges and other assets 2,113 4,129 ----- ----- 51,774 58,513 ------ ------ $622,863 $633,809 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $15,636 $15,643 Accounts payable 2,547 2,798 Other accrued liabilities 18,315 19,050 Advance billings and deferred revenues 8,580 8,960 Accrued compensation and pension benefits 9,172 11,292 Liabilities of discontinued operations - 453 --- --- Total current liabilities 54,250 58,196 Long-term debt 207,409 226,045 Deferred income taxes 54,856 46,358 Accrued pension and other post- retirement benefits 32,451 36,046 Other liabilities and deferred revenues 4,714 5,819 Commitments and contingencies – – Shareholders' equity: Common stock, without par value; 100,000 shares authorized, 14,148 and 14,082 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively 146,844 146,558 Accumulated other comprehensive loss (15,280) (19,248) Retained earnings 137,619 134,035 ------- ------- Total shareholders' equity 269,183 261,345 ------- ------- $622,863 $633,809 ======== ========
SUREWEST COMMUNICATIONS ADJUSTED EBITDA RECONCILIATION TO NET INCOME (LOSS) FROM CONTINUING OPERATIONS (Unaudited; Amounts in thousands) Twelve Months ended December 31, 2009 ---------------------------- Broadband Telecom Consolidated --------- ------- ------------ Income (loss) from continuing operations $(20,782) $21,449 $667 Add (subtract): Income taxes (benefit)/expense (13,453) 15,459 2,006 Other (income)/expense 10,685 215 10,900 Depreciation and amortization 47,359 12,365 59,724 Non-cash pension (income)/expense 779 1,812 2,591 Non-cash stock compensation expense 1,002 1,008 2,010 ------- ------- ------- Adjusted EBITDA (1) $25,590 $52,308 $77,898 ======= ======= ======= Twelve Months ended December 31, 2008 ---------------------------- Broadband Telecom Consolidated --------- ------- ------------ Income (loss) from continuing operations $(23,684) $24,510 $826 Add (subtract): Income taxes (benefit)/expense (15,157) 18,296 3,139 Other (income)/expense 11,580 (404) 11,176 Depreciation and amortization 40,491 14,536 55,027 Non-cash pension (income)/expense (738) (1,070) (1,808) Non-cash stock compensation expense 407 472 879 ------- ------- ------- Adjusted EBITDA (1) $12,899 $56,340 $69,239 ======= ======= ======= (1) 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; 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. SUREWEST COMMUNICATIONS CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS (Unaudited; Amounts in thousands) Twelve Months Ended December 31, --------------- 2009 2008 ---- ---- Income from continuing operations $667 $826 Add: Depreciation and amortization 59,724 55,027 Less: Capital expenditures (58,330) (86,489) ------ -------- Free cash flow (2) $2,061 $(30,636) ====== ======== SUREWEST COMMUNICATIONS CONSOLIDATED NET DEBT RATIO FROM CONTINUING OPERATIONS (Unaudited; Amounts in thousands) Twelve Months Ended December 31, ----------------- 2009 2008 ---- ---- Net Debt: Long-term debt, including current maturities $223,045 $241,681 Less: Cash and cash equivalents (7,489) (2,840) -------- -------- Net debt (3) $215,556 $238,841 ======== ======== Ratio of Net Debt to Adjusted EBITDA: Net debt $215,556 $238,841 Divided by: Adjusted EBITDA 77,898 69,239 Ratio of net debt to Adjusted EBITDA (4) 2.77 3.45 (2) 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. (3) Net debt is a measure of total long-term debt (including current maturities) less cash and cash equivalents. Net debt is 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. (4) The ratio of net debt to Adjusted EBITDA is calculated as net debt divided by Adjusted EBITDA. 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 ADJUSTED EBITDA RECONCILIATION TO NET INCOME (LOSS) FROM CONTINUING OPERATIONS (Unaudited; Amounts in thousands) Quarter Ended December 31, 2009 ------------------------------- Broadband Telecom Consolidated --------- ------- ------------ Income (loss) from continuing operations $(4,881) $4,781 $(100) Add (subtract): Income taxes (benefit)/expense (2,675) 3,167 492 Other (income)/expense 2,778 (148) 2,630 Depreciation and amortization 12,257 3,169 15,426 Non-cash pension (income)/expense 199 443 642 Non-cash stock compensation expense 246 249 495 ------ ------- ------- Adjusted EBITDA (1) $7,924 $11,661 $19,585 ====== ======= ======= Quarter Ended September 30, 2009 -------------------------------- Broadband Telecom Consolidated --------- ------- ------------ Income (loss) from continuing operations $(5,619) $5,408 $(211) Add (subtract): Income taxes (benefit)/expense (3,810) 3,824 14 Other (income)/expense 2,883 (70) 2,813 Depreciation and amortization 12,199 3,061 15,260 Non-cash pension (income)/expense 197 445 642 Non-cash stock compensation expense 221 222 443 ------ ------- ------- Adjusted EBITDA (1) $6,071 $12,890 $18,961 ====== ======= ======= Quarter Ended December 31, 2008 ------------------------------- Broadband Telecom Consolidated --------- ------- ------------ Income (loss) from continuing operations $(6,667) $5,120 $(1,547) Add (subtract): Income taxes (benefit)/expense (3,179) 4,348 1,169 Other (income)/expense 3,146 (209) 2,937 Depreciation and amortization 11,051 3,615 14,666 Non-cash pension (income)/expense (178) (255) (433) Non-cash stock compensation expense 103 120 223 ------ ------- ------- Adjusted EBITDA (1) $4,276 $12,739 $17,015 ====== ======= ======= (1) 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; 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. SUREWEST COMMUNICATIONS CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS (Unaudited; Amounts in thousands) Quarter Ended ------------- December September December 31, 2009 30, 2009 31, 2008 --------- --------- --------- Loss from continuing operations $(100) $(211) $(1,547) Add: Depreciation and amortization 15,426 15,260 14,666 Less: Capital expenditures (14,967) (13,841) (21,922) ---- ------ ------- Free cash flow (2) $359 $1,208 $(8,803) ==== ====== ======= (2) 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.
SUREWEST COMMUNICATIONS - Consolidated Operations SELECTED OPERATING METRICS (inc KC results from periods prior to acquisition) As of and for the quarter ended 3/31/ 6/30/ 9/30/ 12/31/ BROADBAND 2008 (1) 2008 (1) 2008 (1) 2008 (1) --------- -------- -------- -------- -------- Residential Video Marketable Homes - Fiber & HFC (2) 211,000 217,700 221,700 232,400 RGUs - Fiber & HFC 52,500 54,500 55,900 57,500 Qtrly change 800 2,000 1,400 1,600 YoY (% change) 6% 9% 10% 11% RGUs - Copper 2,700 2,600 2,600 2,600 Qtrly change (200) (100) 0 0 YoY (% change) -13% -10% -13% -10% Penetration - Fiber & HFC 24.9% 25.0% 25.2% 24.7% ARPU $63 $62 $59 $59 Voice Marketable Homes 286,600 292,200 296,600 304,200 RGUs 53,800 56,600 60,000 63,500 Qtrly change 300 2,800 3,400 3,500 YoY (% change) 3% 7% 13% 19% Penetration 18.8% 19.4% 20.2% 20.9% ARPU $32 $33 $32 $32 Data Marketable Homes 286,600 292,200 296,600 304,200 RGUs 91,800 94,000 95,700 97,400 Qtrly change 1,400 2,200 1,700 1,700 YoY (% change) 7% 7% 7% 8% Penetration 32.0% 32.2% 32.3% 32.0% ARPU $37 $37 $36 $36 Total Marketable Homes - Fiber, HFC, Copper 286,600 292,200 296,600 304,200 RGUs 200,800 207,700 214,200 221,000 Qtrly change 2,300 6,900 6,500 6,800 YoY (% change) 5% 7% 9% 11% Subscriber totals Subscribers (3) 96,900 99,000 100,600 102,400 Qtrly change 1,100 2,100 1,600 1,800 Penetration 33.8% 33.9% 33.9% 33.7% ARPU (4) $89 $89 $88 $89 Triple Play ARPU (5) $110 $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 $444 $458 $494 $467 3/31/ 6/30/ 9/30/ 12/31/ BROADBAND 2009 (1) 2009 (1) 2009 (1) 2009 (1) --------- -------- -------- -------- -------- Residential Video Marketable Homes - Fiber & HFC (2) 236,500 239,800 240,000 240,500 RGUs - Fiber & HFC 57,600 56,900 57,000 56,900 Qtrly change 100 (700) 100 (100) YoY (% change) 10% 4% 2% -1% RGUs - Copper 2,400 2,200 2,200 2,200 Qtrly change (200) (200) 0 0 YoY (% change) -11% -15% -15% -15% Penetration - Fiber & HFC 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 Qtrly change 2,800 1,700 2,300 1,300 YoY (% change) 23% 20% 17% 13% 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 Qtrly change 700 (400) 0 800 YoY (% change) 7% 4% 2% 1% Penetration 31.8% 31.6% 31.6% 31.8% ARPU $37 $38 $38 $40 Total Marketable Homes - Fiber, HFC, Copper 308,200 309,300 309,400 309,700 RGUs 224,400 224,800 227,200 229,200 Qtrly change 3,400 400 2,400 2,000 YoY (% change) 12% 8% 6% 4% Subscriber totals Subscribers (3) 102,800 101,800 102,500 102,600 Qtrly change 400 (1,000) 700 100 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 SUREWEST COMMUNICATIONS - Consolidated Operations SELECTED OPERATING METRICS (inc KC results from periods prior to acquisition) As of and for the quarter ended 3/31/ 6/30/ 9/30/ 12/31/ TELECOM 2008 (1) 2008 (1) 2008 (1) 2008 (1) ------- -------- -------- -------- -------- Residential Voice Marketable Homes 89,900 90,000 90,500 90,800 RGUs (7) 66,800 62,900 58,500 54,000 RGU 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 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 VOICE RGUs ------------------------------ ILEC Voice RGUs Broadband 100 2,000 4,400 7,100 Telecom 66,800 62,900 58,500 54,000 ------ ------ ------ ------ Total ILEC Voice RGUs (9) 66,900 64,900 62,900 61,100 Qtrly change (2,300) (2,000) (2,000) (1,800) YoY (% change) -13% -13% -12% -12% CLEC Residential Voice RGUs (10) 53,700 54,600 55,600 56,400 ------ ------ ------ ------ TOTAL Residential Voice RGUs (11) 118,300 119,500 118,500 117,500 Qtrly change (4,400) 1,200 (1,000) (1,000) YoY (% change) -9% -6% -5% -4% 3/31/ 6/30/ 9/30/ 12/31/ NETWORK METRICS 2008 (1) 2008 (1) 2008 (1) 2008 (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 75,600 74,500 74,900 71,800 ------ ------ ------ ------ Total 286,600 292,200 296,600 304,200 Qtrly change 2,700 5,600 4,400 7,600 3/31/ 6/30/ 9/30/ 12/31/ TELECOM 2009 (1) 2009 (1) 2009 (1) 2009 (1) ------- -------- -------- -------- -------- Residential Voice Marketable Homes 90,800 90,900 90,900 91,000 RGUs (7) 49,500 45,100 41,300 38,500 RGU 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 $44 Churn 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 VOICE RGUs ------------------------------ 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 (9) 59,400 57,500 56,000 54,700 Qtrly change (1,700) (1,900) (1,500) (1,300) YoY (% change) -11% -11% -11% -10% CLEC Residential Voice RGUs (10) 56,400 55,600 55,600 55,400 ------ ------ ------ ------ TOTAL Residential Voice RGUs (11) 115,800 113,100 111,600 110,100 Qtrly change (1,700) (2,700) (1,500) (1,500) YoY (% change) -2% -5% -6% -6% 3/31/ 6/30/ 9/30/ 12/31/ NETWORK METRICS 2009 (1) 2009 (1) 2009 (1) 2009 (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 71,700 69,500 69,400 69,200 ------ ------ ------ ------ Total 308,200 309,300 309,400 309,700 Qtrly change 4,000 1,100 100 300 (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, (2) Marketable Homes - Fiber & HFC consists of Sacramento fiber homes and Kansas City hybrid fiber coax (HFC) homes. (3) A residential subscriber is a customer who subscribers to one or more residential RGUs. (4) ARPU is the total residential revenue per average subscriber. (5) Triple play ARPU and RGU per Subscriber includes the total residential revenue per average subscriber and 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) For information purposes, sequential Telecom access line counts (residential and business) were: 110,200 105,900 100,200 94,600 88,400 82,600 77,600 73,200 SUREWEST COMMUNICATIONS - Consolidated Operations SELECTED OPERATING METRICS As of and for the quarter ended 12/31/ 12/31/ BROADBAND 2009 (1) 2008 (1) Chg Chg % --------- -------- -------- --- ----- Residential Video Marketable Homes - Fiber & HFC (2) 240,500 232,400 8,100 3% RGUs - Fiber & HFC 56,900 57,500 (600) -1% RGUs - Copper 2,200 2,600 (400) -15% Penetration - Fiber & HFC 23.7% 24.7% -1.1% -4% ARPU $68 $59 $9 15% Voice Marketable Homes 309,700 304,200 5,500 2% RGUs 71,600 63,500 8,100 13% Penetration 23.1% 20.9% 2.2% 11% ARPU $30 $32 ($2) -5% Data Marketable Homes 309,700 304,200 5,500 2% RGUs 98,500 97,400 1,100 1% Penetration 31.8% 32.0% -0.2% -1% ARPU $40 $36 $4 11% Total Marketable Homes - Fiber, HFC, Copper 309,700 304,200 5,500 2% RGUs 229,200 221,000 8,200 4% Subscriber totals Subscribers (3) 102,600 102,400 200 0% Penetration 33.1% 33.7% -0.5% -2% ARPU (4) $99 $89 $10 12% Triple Play ARPU (5) $115 $107 $8 8% Triple Play RGUs per Subscriber (5) 2.57 2.59 (0.01) -1% Churn 1.5% 1.4% 0.1% 10% Business (6) Customers 7,100 6,500 600 9% ARPU $492 $467 $25 5% 9/30/ BROADBAND 2009 (1) Chg Chg % --------- -------- --- ----- Residential Video Marketable Homes - Fiber & HFC (2) 240,000 500 0% RGUs - Fiber & HFC 57,000 (100) 0% RGUs - Copper 2,200 0 0% Penetration - Fiber & HFC 23.8% -0.1% 0% ARPU $66 $2 3% Voice Marketable Homes 309,400 300 0% RGUs 70,300 1,300 2% Penetration 22.7% 0.4% 2% ARPU $31 ($1) -2% Data Marketable Homes 309,400 300 0% RGUs 97,700 800 1% Penetration 31.6% 0.2% 1% ARPU $38 $2 5% Total Marketable Homes - Fiber, HFC, Copper 309,400 300 0% RGUs 227,200 2,000 1% Subscriber totals Subscribers (3) 102,500 100 0% Penetration 33.1% 0.0% 0% ARPU (4) $96 $3 3% Triple Play ARPU (5) $112 $3 3% Triple Play RGUs per Subscriber (5) 2.57 0.01 0% Churn 1.8% -0.3% -18% Business (6) Customers 7,000 100 1% ARPU $483 $9 2% 12/31/ 12/31/ TELECOM 2009 (1) 2008 (1) Chg Chg % ------- -------- -------- --- ----- Residential Voice Marketable Homes 91,000 90,800 200 0% RGUs (7) 38,500 54,000 (15,500) -29% Cumulative Migration to Broadband Voice (8) 11,800 4,700 7,100 151% Penetration 42.3% 59.5% -17.2% -29% ARPU $44 $43 $1 2% Churn (9) 2.0% 2.2% -0.2% -9% Business (6) Customers 8,500 9,200 (700) -8% ARPU $334 $327 $7 2% CONSOLIDATED RESIDENTIAL VOICE RGUs ------------------------ ILEC Voice RGUs Broadband 16,200 7,100 9,100 128% Telecom 38,500 54,000 (15,500) -29% ------ ------ ------- Total ILEC Voice RGUs (10) 54,700 61,100 (6,400) -10% CLEC Residential Voice RGUs (11) 55,400 56,400 (1,000) -2% ------ ------ ------ TOTAL Residential Voice RGUs (12) 110,100 117,500 (7,400) -6% 9/30/ TELECOM 2009 (1) Chg Chg % ------- -------- --- ----- Residential Voice Marketable Homes 90,900 100 0% RGUs (7) 41,300 (2,800) -7% Cumulative Migration to Broadband Voice (8) 10,700 1,100 10% Penetration 45.4% -3.1% -7% ARPU $45 ($1) -2% Churn (9) 2.3% -0.3% -14% Business (6) Customers 8,700 (200) -2% ARPU $329 $5 2% CONSOLIDATED RESIDENTIAL VOICE RGUs ------------------------ ILEC Voice RGUs Broadband 14,700 1,500 10% Telecom 41,300 (2,800) -7% ------ ------ Total ILEC Voice RGUs (10) 56,000 (1,300) -2% CLEC Residential Voice RGUs (11) 55,600 (200) 0% ------ ---- TOTAL Residential Voice RGUs (12) 111,600 (1,500) -1% 12/31/ 12/31/ NETWORK METRICS 2009 (1) 2008 (1) Chg Chg % --------------- -------- -------- --- ----- Marketable Homes - Fiber 147,600 138,800 8,800 6% Marketable Homes - HFC 92,900 93,600 (700) -1% Marketable Homes - Copper 69,200 71,800 (2,600) -4% ------ ------ ------ Total 309,700 304,200 5,500 2% NETWORK METRICS 9/30/2009 (1) Chg Chg % --------------- ------------- --- ----- Marketable Homes - Fiber 147,100 500 0% Marketable Homes - HFC 92,900 0 0% Marketable Homes - Copper 69,400 (200) 0% ------ ---- Total 309,400 300 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 - Fiber & HFC consists of Sacramento fiber homes and Kansas City hybrid fiber coax (HFC) homes. (3) A residential subscriber is a customer who subscribers 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 94,600 at 12/31/08, 77,600 at 9/30/09, and 73,200 at 12/31/09.
SOURCE SureWest Communications
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