Windstream Reports 3Q Profit Down 44 Percent

Windstream Corp. of Little Rock on Thursday reported third-quarter net income of $54 million, or 9 cents per share, down 44 percent from $78 million or 15 cents per share in the same quarter last year.

In a news release, the telecommunications firm (NYSE: WIN) said quarterly revenue reached $1.55 billion, up $15 million from the second quarter, which the company said was the largest sequential improvement it has recorded.

"Our business continues to perform well, and I am confident in our ability to deliver strong free cash flow long-term to support our dividend," Jeff Gardner, president and CEO, said. "The dividend is a key component of our investment thesis, and we believe it is the best way to provide returns to our shareholders."

Windstream announced a 25-cent quarterly dividend on Wednesday.

Third-quarter revenue was up 55 percent from $1 billion in the same quarter last year. Operating income was $248 million, down 11 percent from the same quarter last year.

Quarterly results included about $7.8 million in after-tax merger and integration expenses related to the company's purchase of Paetec Holding Corp. and $7.5 million in restructuring costs. Excluding those items, adjusted third-quarter earnings per share would have been 12 cents, the company said.

During the quarter, Windstream's business service revenue reached $906 million, up 3 percent from the same quarter last year. Data and integrated services revenues were $388 million, up 9 percent. Carrier service revenue reached $162 million, up 3 percent.

Consumer broadband service revenue hit $115 million, up 4 percent from the same quarter last year. Overall consumer service revenue was $335 million, down 3 percent from the same quarter last year. During the quarter, the company added about 6,000 new high-speed Internet customers, it said.

The company said business and consumer broadband revenues represented about 69 percent of Windstream's total revenues and sales in the quarter. Collectively, those sales grew 2.7 percent year-over-year, the company said.

Conference Call

In a conference call with analysts Thursday morning, CFO Tony Thomas said consumer and business voice services declined a total of $26 million. COO Brent Whittington said that represented a 4.4 percent decrease in customers year over year. But they noted that consumer broadband was up $4 million and fiber-to-the-tower projects increased by $5 million.

Whittington said that while the comany added 6,000 high-speed Internet customers in the quarter, growing that base had become more challenging. He said the company is increasing promotional activity to meet the challenge.

He also noted that Windstream installed fiber to 2,100 towers and had 1,900 more in progress, with a goal of 4,000 to 5,000. Windstream's broadband stimulus project should add 75,000 new, addressable lines, Whittington added.

He also said the company is expecting its capital expenditures to decline significantly as the fiber-to-the-tower and stimulus initiatives end.

(Luke Jones contributed to this report.)