Lumos Networks Corp. Reports First Quarter 2013 Financial Results

  Lumos Networks Corp. Reports First Quarter 2013 Financial Results

                     In-Line Quarterly Operating Results

              Confirms 2013 Revenue and Adjusted EBITDA Guidance

                   Completes $425 Million Debt Refinancing

                  Cash Dividend of $0.14 per Share Declared

Business Wire

WAYNESBORO, Va. -- May 03, 2013

Lumos Networks Corp. (“Lumos Networks” or “the Company”) (Nasdaq: LMOS), a
fiber-based service provider of data, voice and IP-based telecommunication
services in the Mid-Atlantic region, today announced financial results for its
first quarter of 2013.

Total revenue for the first quarter of 2013 was $52.5 million, compared to
$51.4 million for the first quarter of 2012 and $52.7 million in the fourth
quarter of 2012. Total Adjusted EBITDA was $24.7 million for the first quarter
of 2013, compared to $22.3 million in the first quarter of 2012 and to $23.2
million in the fourth quarter of 2012.

“Our operational momentum and execution continued in the first quarter as our
Strategic Data revenue grew approximately 15% year over year and represented
nearly 57% of total revenues, up from 50% in the year ago period,” said Tim
Biltz, CEO and President of Lumos Networks. “Additionally, I am pleased to
announce that on April 30, 2013, we completed our $425 million debt
re-financing. I am confident that we will now have the capital ‘runway’ needed
to finance continued expansion of our dense fiber network to meet our
customer’s demands for fiber-based bandwidth for our key target customers in
our Enterprise and Carrier data segments.”

“In the first quarter, our Adjusted EBITDA margin reached 47%, which is nearly
3 percentage points higher than the prior quarter and clearly demonstrates the
impact of increased focus on Strategic Data and expense control,” Mr. Biltz
continued. “Our adjusted EBITDA grew 11% from the prior year period which is a
significant milestone for Lumos Networks.”

Highlights

  *During the quarter, the Company completed 35 fiber to the cell (“FTTC”)
    installations, reaching a total of 405 as of March 31^st. Lumos Networks
    anticipates that the number of new FTTC installations will grow
    sequentially in the second quarter and maintains its target of 550-600
    total FTTC installations by the end of 2013. The mid-point of this
    guidance implies approximately 55% year over year growth in total FTTC
    installations in 2013.
  *On April 30^th, Lumos Networks completed its $425 million debt
    refinancing, which bolstered our balance sheet with approximately $52
    million in cash, lowered our blended interest rate and increased our
    leverage ratio. We believe this new credit facility significantly
    increases our financial flexibility to handle our capital needs over the
    next few years. Please see our SEC filing and corresponding press release
    from April 30^th for further details.
  *In the first quarter of 2013, the Company allocated 75% of its total
    capital expenditures for success-based strategic data revenue projects and
    maintains its target of 75% for 2013.
  *As a part of our “edge-out” fiber network expansion strategy, Lumos
    Networks recently signed contracts with two core Enterprise customers and
    three carrier customers in the Richmond market. We expect the Richmond
    market to “go live” in the third quarter of 2013.
  *On May 1, 2013, the Board of Directors of Lumos Networks declared a
    dividend on its common stock in the amount of $0.14 per share to be paid
    on July 11, 2013 to stockholders of record on June 13, 2013.

Business Outlook

In the second quarter of 2013, the Company expects revenue to be approximately
$52 million and adjusted EBITDA approximately $24 million. For the full year
2013, the Company re-iterates its prior guidance for revenue to be in the
range of $208 to $212 million and adjusted EBITDA in the range of $94 to $97
million.

Please see the schedules accompanying this release for additional financial
guidance, including projected 2013 cash flows and reconciliations of non-GAAP
measures to GAAP results.

Statements made are based on management’s current expectations. These
statements are forward-looking and actual results may differ materially.
Please see “Special Note from the Company Regarding Forward-Looking
Statements.”

Conference Call

A conference call and simultaneous webcast, hosted by Timothy G. Biltz, CEO,
Harold L. Covert, CFO, and Will Davis, Director of Investor Relations, to
review these financial and operational results and financial guidance will be
held at 8:30 A.M. (ET) on May 3, 2013.

The webcast may be accessed via the Internet at http://ir.lumosnetworks.com/
and the live call (“Lumos Networks First Quarter 2013 Earnings Conference
Call”) may be accessed with the following numbers:

Domestic: 1-888-317-6016
International: 1-412-317-6016
Canada: 1-855-669-9657

The conference call will be archived and available for replay through May 13,
2013 before 9:00 A.M. (ET) and may be accessed with the following numbers:

Domestic: 1-877-344-7529
International: 1-412-317-0088
Replay pass codes: Conference ID: 10027848

The webcast will also be archived and the replay may be accessed at
http://ir.lumosnetworks.com/.

About Lumos Networks

Lumos Networks is a fiber-based service provider in the Mid-Atlantic region
serving carrier, business and residential customers over a dense fiber network
offering data, voice and IP services. With headquarters in Waynesboro, VA,
Lumos Networks serves Virginia, West Virginia and portions of Pennsylvania,
Kentucky, Ohio, and Maryland over a fiber network of approximately 5,800 long
haul miles. Detailed information about Lumos Networks is available at
www.lumosnetworks.com.

Non-GAAP Measures

Adjusted EBITDA is defined as net income attributable to Lumos Networks before
interest, income taxes, depreciation and amortization, accretion of asset
retirement obligations, net income attributable to noncontrolling interests,
other expenses/income, equity based compensation charges, acquisition related
charges, amortization of actuarial losses on retirement plans, employee
separation charges, restructuring related charges, gain or loss on settlements
and gain or loss on interest rate derivatives. Adjusted EBITDA margin is
calculated as the ratio of Adjusted EBITDA, as defined, to operating revenues.

Adjusted EBITDA is a non-GAAP financial performance measure. It should not be
considered in isolation or as an alternative to measures determined in
accordance with GAAP. Please refer to the schedules herein and our SEC filings
for a reconciliation of these non-GAAP financial performance measures to the
most comparable measures reported in accordance with GAAP and for a discussion
of the presentation, comparability and use of such financial performance
measures.

SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS

Any statements contained in this presentation that are not statements of
historical fact, including statements about our beliefs and expectations, are
forward-looking statements and should be evaluated as such. The words
“anticipates,” “believes,” “expects,” “intends,” “plans,” “estimates,”
“targets,” “projects,” “should,” “may,” “will” and similar words and
expressions are intended to identify forward-looking statements. Such
forward-looking statements reflect, among other things, our current
expectations, plans and strategies, and anticipated financial results, all of
which are subject to known and unknown risks, uncertainties and factors that
may cause our actual results to differ materially from those expressed or
implied by these forward-looking statements. Many of these risks are beyond
our ability to control or predict. Because of these risks, uncertainties and
assumptions, you should not place undue reliance on these forward-looking
statements. Furthermore, forward-looking statements speak only as of the date
they are made. We do not undertake any obligation to update or review any
forward-looking information, whether as a result of new information, future
events or otherwise. Important factors with respect to any such
forward-looking statements, including certain risks and uncertainties that
could cause actual results to differ from those contained in the
forward-looking statements, include, but are not limited to: rapid development
and intense competition in the telecommunications industry; our ability to
achieve benefits from our separation from NTELOS Holdings Corp in 2011; our
ability to offset expected revenue declines in legacy voice and access
products related to the recent regulatory developments and carriers grooming
their networks; adverse economic conditions; operating and financial
restrictions imposed by our senior credit facility; our cash and capital
requirements; declining prices for our services; the potential to experience a
high rate of customer turnover; federal and state regulatory fees,
requirements and developments; our reliance on certain suppliers and vendors;
and other unforeseen difficulties that may occur. These risks and
uncertainties are not intended to represent a complete list of all risks and
uncertainties inherent in our business, and should be read in conjunction with
the more detailed cautionary statements and risk factors included in our SEC
filings, including our Annual Reports filed on Forms 10-K.

Exhibits:

  *Condensed Consolidated Balance Sheets
  *Condensed Consolidated Statements of Income
  *Condensed Consolidated Statements of Cash Flows
  *Summary of Operating Results, Customer and Network Statistics
  *Reconciliation of Net Income Attributable to Lumos Networks Corp. to
    Operating Income
  *Reconciliation of Operating Income to Adjusted EBITDA
  *Business Outlook

                                                       
Lumos Networks Corp.
Condensed Consolidated Balance Sheets
                                       March 31, 2013  December 31, 2012
(In thousands)
                                                          
ASSETS
Current Assets
Cash                                     $    2           $     2
Restricted cash ^1                            5,303             5,303
Accounts receivable, net                      23,499            22,676
Other receivables                             1,992             2,400
Income tax receivable                         463               954
Prepaid expenses and other                    4,652             5,136
Deferred income taxes                       4,752           3,357
Total Current Assets                        40,663          39,828
                                                          
Securities and investments                    425               462
                                                          
Property, plant and equipment, net            340,506           336,589
                                                          
Other Assets
Goodwill                                      100,297           100,297
Other intangibles, net                        32,439            34,895
Deferred charges and other assets           4,263           4,448
Total Other Assets                          136,999         139,640
                                                          
Total Assets                            $    518,593    $     516,519
                                                          
                                                          
LIABILITIES AND EQUITY
Current Liabilities
Current portion of long-term debt        $    2,630       $     7,900
Accounts payable                              10,496            17,453
Dividends payable                             3,058             3,013
Advance billings and customer deposits        13,471            13,527
Accrued compensation                          1,754             1,742
Accrued operating taxes                       4,381             3,838
Other accrued liabilities                   5,495           6,284
Total Current Liabilities                   41,285          53,757
                                                          
Long-Term Liabilities
Long-term debt                                309,568           304,325
Retirement benefits                           30,024            30,413
Deferred income taxes                         64,518            59,313
Other long-term liabilities                   3,330             3,500
Income tax payable                          665             609
Total Long-term Liabilities                 408,105         398,160
                                                          
Stockholders' Equity                        68,582          64,050
Noncontrolling Interests                    621             552
Total Equity                                69,203          64,602
                                                          
Total Liabilities and Equity            $    518,593    $     516,519
                                                          

     During 2010, the Company received a Federal stimulus award providing 50%
     funding to bring broadband services and infrastructure to Alleghany
^1  County, Virginia. The Company was required to deposit 100% of its grant
     ($8.1 million) into pledged accounts in advance of any reimbursements, to
     be drawn down ratably following reimbursement approvals.
     

                                                             
Lumos Networks Corp.                                          
Condensed Consolidated Statements of          Three months ended March 31,
Income
                                                                 
(In thousands, except per share amounts)      2013             2012
                                                                 
Operating Revenues                             $   52,534        $  51,412
                                                                 
Operating Expenses
Network access costs                               11,154           11,764
Selling, general and administrative ^1             18,020           18,813
Depreciation and amortization                      9,563            9,220
Accretion of asset retirement obligations          31               30
Restructuring charges                            40            -       
Total Operating Expenses                         38,808        39,827  
Operating Income                                   13,726           11,585
                                                                 
Other Income (Expenses)
Interest expense                                   (3,128  )        (2,987  )
Gain on interest rate derivatives                  187              146
Other income, net                                25            8       
                                                                 
Income Before Income Tax Expense                   10,810           8,752
                                                                 
Income Tax Expense                               4,332         3,443   
Net Income                                         6,478            5,309
                                                                 
Net Income Attributable to Noncontrolling          (69     )        (22     )
Interests
                                                             
Net Income Attributable to Lumos Networks     $   6,409       $  5,287   
Corp.
                                                                 
                                                                 
Basic and Diluted Earnings per Common Share Attributable to Lumos Networks
Corp. Stockholders:
                                                                 
Earnings per share - basic                     $   0.30          $  0.25
Earnings per share - diluted                   $   0.30          $  0.25
                                                                 
Weighted average shares outstanding -              21,186           20,850
basic
Weighted average shares outstanding -              21,693           21,237
diluted
                                                                 
Cash Dividends Declared per Share - Common     $   0.14          $  0.14
Stock
                                                                 

     Includes equity-based compensation charges related to all of the
^1  Company’s share-based awards and the Company’s 401(k) matching
     contributions of $1.0 million for each of the three months ended March
     31, 2013 and 2012.
     

                                                                
Lumos Networks Corp.                                            
Condensed Consolidated Statements of Cash Flows  Three Months Ended March 31,
                                                                   
(In thousands)                                   2013            2012
                                                                   
Cash flows from operating activities
Net income                                        $  6,478         $ 5,309
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation                                         7,107           6,439
Amortization                                         2,456           2,781
Accretion of asset retirement obligations            31              30
Deferred income taxes                                3,768           3,267
Gain on interest rate derivatives                    (187     )      (146    )
Equity-based compensation expense                    1,025           1,011
Amortization of loan origination costs               208             199
Retirement benefits, net of contributions and        (80      )      (1,382  )
distributions
Excess tax benefits from share-based                 (78      )      -
compensation
Other                                                (20      )      (90     )
Changes in operating assets and liabilities,       (2,131   )    1,809   
net
Net cash provided by operating activities          18,577       19,227  
                                                                   
Cash flows from investing activities
Purchases of property, plant and equipment           (15,032  )      (17,369 )
Broadband network expansion funded by stimulus       (31      )      (511    )
grant
Change in restricted cash                            -               332
Cash reimbursement received from broadband           -               332
stimulus grant
Other                                              -            (27     )
Net cash used in investing activities              (15,063  )    (17,243 )
                                                                   
Cash flows from financing activities
Principal payments on senior secured term loans      (1,875   )      (500    )
Borrowings from revolving credit facility            3,000           2,066
Principal payments on revolving credit facility      (1,523   )      (11,000 )
Cash dividends paid on common stock                  (3,013   )      (2,965  )
Principal payments under capital lease               (113     )      (172    )
obligations
Proceeds from stock option exercises and             20              36
employee stock purchase plan
Excess tax benefits from share-based                 78              -
compensation
Other                                              (88      )    6       
Net cash used in financing activities              (3,514   )    (12,529 )
Decrease in cash                                     -               (10,545 )
Cash:
Beginning of period                                2            10,547  
                                                                   
End of period                                    $  2           $ 2       
                                                                   

                                                                
Lumos Networks Corp.
Operating Results, Customer and Network Statistics
(Dollars in             Three months ended:
thousands)
                      March 31,  December  September  June 30,  March
                        2013        31, 2012   30, 2012    2012       31, 2012
Revenue and Adjusted
EBITDA
Revenue
Enterprise Data         9,935       9,906      9,662       9,214      8,848
Carrier Data            14,945      14,363     13,001      12,669     12,474
IP Services             4,781       4,730      4,689       4,648      4,549
Total Strategic Data    29,661      28,999     27,352      26,531     25,871
Legacy Voice            14,884      15,399     16,074      16,186     16,744
Access                  7,989       8,281      8,551       8,086      8,797
Total Revenue           52,534      52,679     51,977      50,803     51,412
Adjusted EBITDA^1
Strategic Data          13,723      13,629     12,581      12,330     12,097
Legacy Voice            4,988       3,835      3,808       3,401      4,063
Access                  5,984       5,747      5,892       5,375      6,131
Total Adjusted EBITDA   24,695      23,211     22,281      21,106     22,291
Adjusted EBITDA         47.0%       44.1%      42.9%       41.5%      43.4%
Margin^1
Capital Expenditures    15,032      15,956     14,937      11,619     17,369
Adjusted EBITDA less    9,663       7,255      7,344       9,487      4,922
Capital Expenditures

Customer and Network
Statistics
Customer Statistics
Competitive voice       105,695     110,261    112,709     114,930    117,965
connections ^2
RLEC Broadband          15,232      15,181     15,199      15,258     15,100
Customers ^3
Total Broadband         42,110      39,950     40,401      37,361     35,974
Connections ^3
Video Subscribers       4,666       4,549      4,390       4,192      4,019
                                                                      
Network Statistics
On-Network Buildings    1,235       1,196      1,150       1,091      1,066
^4
Fiber to the Cell       405         370        261         178        155
Sites ^4
                                                                      
RLEC Total Access       30,643      31,203     31,708      32,272     32,676
Lines
                                                                      

   
     Adjusted EBITDA is a non-GAAP measure. See definition on page 2 of this
^1   earnings release. Adjusted EBITDA margin is calculated as the ratio of
     Adjusted EBITDA, as defined, to Total Revenue.
     
^2   Includes customer Primary Rate Interface (PRI) line equivalents at 23
     lines per PRI. Excludes intercompany PRI lines.
     
     Includes customers or customer equivalents for DSL, dedicated Internet
^3   access, wireless portable broadband, broadband over fiber and metro
     Ethernet. All revenues from broadband products are recorded in the
     operating revenues of our strategic data segment.
     
^4   Includes statistics for legacy markets only, excluding FiberNet, through
     March 31, 2013.
     
Note: Certain prior period revenue amounts have been reclassified to conform
with the current year presentation.



Lumos Networks Corp.
Reconciliation of Net Income Attributable to Lumos Networks Corp. to Operating
Income
(In thousands)                                                  
                                               Three months ended March 31,
                                              2013              2012
Net income attributable to Lumos Networks       $    6,409        $  5,287
Corp.
Net income attributable to noncontrolling          69            22     
interests
Net income                                           6,478            5,309
                                                                   
Interest expense                                     3,128            2,987
Gain on interest rate derivatives                    (187    )        (146   )
Income tax expense                                   4,332            3,443
Other income, net                                  (25     )      (8     )
Operating income                               $    13,726      $  11,585 
                                                                             

                                                                 
Lumos Networks Corp.
Reconciliation of Operating Income to Adjusted EBITDA
(Dollars in thousands)
For The Three Months Ended March 31
Operating Income                                       $ 13,726     $ 11,585
Depreciation and amortization and accretion of asset   9,594     9,250  
retirement obligations
Sub-total:                                             23,320    20,835 
Amortization of actuarial losses                         310          445
Equity based compensation                                1,025        1,011
Restructuring charges                                  40        -      
Adjusted EBITDA                                       $ 24,695   $ 22,291 
Adjusted EBITDA Margin                                   47.0   %     43.4   %
                                                                    

                                                                    
Lumos Networks Corp.
Business Outlook ^1  (as of May 3, 2013)
(In millions)                        2013 Guidance ^1
                                     Second Quarter 2013   2013 Annual
Operating Revenues                   approximately $52     $ 208   to    $ 212
                                                                         
Adjusted EBITDA                      approximately $24     $ 94    to    $ 97
                                                                         
Capital Expenditures                 approximately $16     $ 65    to    $ 70
                                                                         
                                                                         
Reconciliation of Operating Income
to Adjusted EBITDA
Operating Income                     approximately $12     $ 44    to    $ 46
Depreciation and amortization        approximately $10     $ 40    to    $ 41
Equity based compensation charges    approximately $2              $ 8
Amortization of actuarial losses                                $ 2  
Adjusted EBITDA                      approximately $24     $ 94   to   $ 97
                                                                         

   
     These estimates are based on management’s current expectations. These
     estimates are forward-looking and actual results may differ materially.
^1   Please see “Special Note from the Company Regarding Forward-Looking
     Statements" in the Lumos Networks Corp. first quarter 2013 earnings
     release dated May 3, 2013.
     

Contact:

Lumos Networks Corp.
Will Davis
Director of Investor Relations
(o) 540-946-6930
(c) 917-519-6994
davisw@lumosnet.com
 
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