Windstream Posts Q3 Net Income Of $8 Million

Windstream Corp. posted third quarter net income of $8 million on declining revenue of $1.46 billion. One year ago, the Little Rock-based telecom and fiber provider reported net income of $30.6 million on revenue of $1.49 billion.

Windstream CEO Jeff Gardner said he was pleased with continued growth in enterprise and small business revenues and he called the company’s quarterly performance in the consumer channel “solid” despite earnings being pressured by higher cost of services and declines in legacy carrier revenue.

“Enterprise and small business revenues grew sequentially and year-over-year, driven by solid enterprise sales. Our consumer channel also delivered another strong quarter,” Gardner said. “Windstream’s cash flow generation remains strong, and we expect to achieve our financial targets for 2014.”

Other financial highlights and key results for the quarter included:

• Enterprise and small business service revenues were $752 million, a slight increase sequentially and year-over-year.
• Data and integrated services revenues grew 4 percent in the third quarter from the same period a year ago to $423 million due to sales of IP-based solutions and next generation data.
• Data center and managed services revenues, which total approximately $32 million, increased 21 percent from the same period a year ago.
• Carrier revenue was $151 million, down 10 percent from the same period a year ago, primarily related to wireless carrier migrations from legacy TDM circuits to newer Ethernet technology.
• Consumer broadband service revenues in the third quarter were $121 million, up 1.4 percent from the same period in 2013.
• Overall consumer service revenues in the third quarter were $321 million, an increase of 1.4 percent sequentially and a decrease of 0.3 percent from the same period a year ago.
• Wholesale revenues in the third quarter were $132 million, a decrease of 11 percent from the same period a year ago primarily due to rate reductions from intercarrier compensation reform.

REIT UPDATE
In late July, Windstream said it would spin off certain assets of the telecom and broadband company and form a new, real estate investment trust (REIT).

The independent, publicly traded REIT that will own Windstream’s existing fiber and copper network and other fixed assets. In turn, Windstream will lease the network and those assets from the new company.

Gardner said Windstream is making progress on all necessary steps to complete its spin-off. Windstream has filed its preliminary Form 10 to register the REIT’s equity securities with the Securities and Exchange Commission and continues to work with public utility commissions to obtain state approvals where necessary.

Windstream said it anticipates that the spin-off of the REIT, which has still yet to be named, would occur in the first quarter of 2015.

Shares of Windstream (NASDAQ: WIN) closed trading on Wednesday at $10.49. The company’s stock has traded between $7.18 and $13.30 per share during the last year.