solidated munications (CNSL) - 2019 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2019 ITEM 1. FINANCIAL STATEMENTS This section presents the unaudited condensed consolidated financial statements and related notes for the quarter ended March 31, 2019, detailing financial performance, position, and cash flows Condensed Consolidated Statements of Operations This table summarizes the company's revenues, operating income, and net loss for the first quarter of 2019 and 2018 | Metric (in thousands, except per share) | Q1 2019 | Q1 2018 | Change ($) | Change (%) | | :-------------------------------------- | :----------- | :----------- | :----------- | :----------- | | Net revenues | $338,649 | $356,039 | $(17,390) | (4.9%) | | Income from operations | $16,720 | $9,239 | $7,481 | 81.0% | | Net loss | $(7,186) | $(11,198) | $4,012 | 35.8% | | Net loss attributable to common shareholders | $(7,265) | $(11,298) | $4,033 | 35.7% | | Net loss per basic and diluted common shares | $(0.11) | $(0.16) | $0.05 | 31.3% | | Dividends declared per common share | $0.39 | $0.39 | $0.00 | 0.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) This table presents the net loss and comprehensive loss for the first quarter of 2019 and 2018, including other comprehensive income items | Metric (in thousands) | Q1 2019 | Q1 2018 | | :-------------------- | :----------- | :----------- | | Net loss | $(7,186) | $(11,198) | | Comprehensive loss | $(13,632) | $(5,274) | | Total comprehensive loss attributable to common shareholders | $(13,711) | $(5,374) | Condensed Consolidated Balance Sheets This table provides a snapshot of the company's assets, liabilities, and shareholders' equity as of March 31, 2019, and December 31, 2018 | Metric (in thousands) | March 31, 2019 | December 31, 2018 | | :-------------------- | :------------- | :---------------- | | Total current assets | $195,878 | $198,143 | | Total assets | $3,524,045 | $3,535,261 | | Total current liabilities | $285,028 | $283,614 | | Total liabilities | $3,147,881 | $3,119,607 | | Total shareholders' equity | $376,164 | $415,654 | Condensed Consolidated Statements of Changes in Shareholders' Equity This table outlines changes in the company's shareholders' equity components from December 31, 2018, to March 31, 2019 | Metric (in thousands) | Balance at Dec 31, 2018 | Balance at Mar 31, 2019 | | :-------------------- | :---------------------- | :---------------------- | | Common Stock | $712 | $721 | | Additional Paid-in Capital | $513,070 | $487,203 | | Accumulated Deficit | $(50,834) | $(58,099) | | Accumulated Other Comprehensive Loss, net | $(53,212) | $(59,658) | | Noncontrolling interest | $5,918 | $5,997 | | Total Shareholders' Equity | $415,654 | $376,164 | Condensed Consolidated Statements of Cash Flows This table details the cash flows from operating, investing, and financing activities for the first quarter of 2019 and 2018 | Cash Flow Activity (in thousands) | Q1 2019 | Q1 2018 | | :-------------------------------- | :----------- | :----------- | | Net cash provided by operating activities | $74,997 | $90,842 | | Net cash used in investing activities | $(52,200) | $(60,431) |\ | Net cash used in financing activities | $(25,672) | $(34,928) |\ | Change in cash and cash equivalents | $(2,875) | $(4,517) |\ | Cash and cash equivalents at end of period | $6,724 | $11,140 | 1. Summary of Significant Accounting Policies This section outlines the company's business operations and the adoption of new accounting standards, including ASU 2016-02 on leases - The Company provides communication solutions across a 23-state service area, utilizing an advanced fiber network of over 37,000 fiber route miles[26][27] - On July 31, 2018, the Company sold Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company for approximately $21.0 million in cash proceeds[29] - Effective January 1, 2019, the Company adopted ASU 2016-02 (Leases), recognizing approximately $30.9 million in right-of-use assets and lease liabilities for historical operating leases, with no material impact on financial statements or debt-covenant compliance[30][33] - The Company adopted ASU 2018-07, ASU 2018-02 with no material impact, and ASU 2017-12, which resulted in a cumulative adjustment of $0.6 million, net of tax, from AOCI to retained earnings[34][35][36] 2. Revenue This section details the company's operating revenues by segment and service type, along with contract balances for the periods presented Operating Revenues (in thousands) | Operating Revenues (in thousands) | Q1 2019 | Q1 2018 | Change ($) | Change (%) | | :-------------------------------- | :----------- | :----------- | :----------- | :----------- | | Commercial and carrier: | | | | | | Data and transport services | $88,126 | $86,025 | $2,101 | 2.4% | | Voice services | $48,070 | $52,161 | $(4,091) | (7.8%) | | Other | $15,176 | $11,863 | $3,313 | 27.9% | | Total Commercial and carrier | $151,372 | $150,049 | $1,323 | 0.9% | | Consumer: | | | | | | Broadband (VoIP and Data) | $63,085 | $63,111 | $(26) | (0.0%) | | Video services | $20,736 | $22,834 | $(2,098) | (9.2%) | | Voice services | $45,879 | $52,062 | $(6,183) | (11.9%) | | Total Consumer | $129,700 | $138,007 | $(8,307) | (6.0%) | | Subsidies | $18,159 | $25,255 | $(7,096) | (28.1%) | | Network access | $36,591 | $39,715 | $(3,124) | (7.9%) | | Other products and services | $2,827 | $3,013 | $(186) | (6.2%) | | Total operating revenues | $338,649 | $356,039 | $(17,390)| (4.9%) | Contract Balances (in thousands) | Contract Balances (in thousands) | March 31, 2019 | December 31, 2018 | | :------------------------------- | :------------- | :---------------- | | Accounts receivable, net | $132,326 | $134,496 | | Contract assets | $13,897 | $4,527 | | Contract liabilities | $55,212 | $47,269 | - Deferred contract acquisition costs recognized as expense were $1.2 million in Q1 2019, up from $0.4 million in Q1 2018[52] - Deferred and recognized revenues from contract liabilities were $94.0 million in Q1 2019, compared to $87.3 million in Q1 2018[53] 3. Earnings (Loss) Per Share This section presents the calculation of basic and diluted net loss per common share for the first quarter of 2019 and 2018 Earnings (Loss) Per Share (in thousands, except per share) | Metric (in thousands, except per share) | Q1 2019 | Q1 2018 | | :-------------------------------------- | :----------- | :----------- | | Net loss attributable to common shareholders, after earnings allocated to participating securities | $(7,722) | $(11,519) | | Weighted-average number of common shares outstanding | 70,813 | 70,598 | | Net loss per common share attributable to common shareholders - basic and diluted | $(0.11) | $(0.16) | - Diluted EPS for Q1 2019 and Q1 2018 excluded 0.7 million and 0.3 million potential common shares, respectively, due to their anti-dilutive effect[60] 4. Investments This section details the company's investment portfolio, including cash surrender value of life insurance policies and equity method investments Investment Type (in thousands) | Investment Type (in thousands) | March 31, 2019 | December 31, 2018 | | :----------------------------- | :------------- | :---------------- | | Cash surrender value of life insurance policies | $2,579 | $2,371 | | Investments at cost (e.g., GTE Mobilnet, Pittsburgh SMSA, CoBank) | $53,608 | $53,749 | | Equity method investments (e.g., GTE Mobilnet Texas, Pennsylvania RSA) | $55,851 | $54,733 | | Totals | $112,038 | $110,853 | - Cash distributions from cost-method partnerships totaled $3.3 million in Q1 2019, up from $3.0 million in Q1 2018[64] - Cash distributions from equity-method partnerships totaled $4.0 million in Q1 2019, down from $6.5 million in Q1 2018[66] 5. Fair Value Measurements This section provides fair value measurements for derivative instruments and other financial instruments, categorizing inputs by level Derivative Instruments (in thousands) | Derivative Instruments (in thousands) | March 31, 2019 | December 31, 2018 | | :------------------------------------ | :------------- | :---------------- | | Current interest rate swap assets | $1,352 | $2,465 | | Long-term interest rate swap assets | $4 | $1,524 | | Long-term interest rate swap liabilities | $(13,714) | $(6,647) | | Total | $(12,358) | $(2,658) | Other Financial Instruments (in thousands) | Other Financial Instruments (in thousands) | Carrying Value (Mar 31, 2019) | Fair Value (Mar 31, 2019) | Carrying Value (Dec 31, 2018) | Fair Value (Dec 31, 2018) | | :----------------------------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Investments, equity basis | $55,851 | n/a | $54,733 | n/a | | Investments, at cost | $53,608 | n/a | $53,749 | n/a | | Long-term debt, excluding finance leases | $2,321,010 | $2,182,193 | $2,315,077 | $2,155,127 | - The fair value of interest rate swaps is determined using Level 2 inputs (observable market data)[69] - It is impracticable to determine the fair value of cost and equity method investments[72] 6. Long-Term Debt This section details the company's long-term debt, including senior secured credit facilities and senior notes, and compliance with debt covenants Long-Term Debt (in thousands) | Long-Term Debt (in thousands) | March 31, 2019 | December 31, 2018 | | :---------------------------- | :------------- | :---------------- | | Senior secured credit facility: | | | | Term loans, net | $1,791,825 | $1,796,068 | | Revolving loan | $32,000 | $22,000 | | 6.50% Senior notes due 2022, net | $497,185 | $497,009 | | Total long-term debt | $2,291,966 | $2,285,341 | - The Credit Agreement includes a $110.0 million revolving credit facility, a $900.0 million Initial Term Loan, and a $935.0 million Incremental Term Loan, all secured by substantially all Company assets[76] - As of March 31, 2019, $32.0 million was outstanding under the revolving credit facility, with $61.8 million available for borrowing[79] - The weighted-average interest rate on outstanding borrowings under the credit facility was 5.53% as of March 31, 2019[81] - The Company was in compliance with all Credit Agreement covenants as of March 31, 2019, with a total net leverage ratio of 4.43:1.00 (covenant limit 5.10:1.00) and an interest coverage ratio of 3.85:1.00 (covenant limit 2.25:1.00)[82][84] - The Senior Notes mature on October 1, 2022, and the Company was in compliance with all related covenants as of March 31, 2019, with a total net leverage ratio of 4.49:1.00 (covenant limit 4.75:1.00)[86][90] 7. Derivative Financial Instruments This section describes the company's use of interest rate swap agreements to manage exposure to interest rate fluctuations on its floating-rate debt - The Company uses interest rate swap agreements to convert floating-rate debt to a fixed-rate basis, reducing exposure to interest rate fluctuations[91] Interest Rate Swaps (in thousands) | Interest Rate Swaps (in thousands) | Notional Amount | Fair Value (Mar 31, 2019) | | :--------------------------------- | :-------------- | :------------------------ | | Fixed to 1-month floating LIBOR (with floor) | $650,000 | $1,352 | | Forward starting fixed to 1-month floating LIBOR (with floor) | $705,000 | $4 | | Fixed to 1-month floating LIBOR (with floor) | $500,000 | $(10,719) | | Forward starting fixed to 1-month floating LIBOR (with floor) | $705,000 | $(2,995) | | Total Fair Values | | $(12,358) | - As of March 31, 2019, total pre-tax unrealized losses related to interest rate swap agreements included in AOCI was $(7.0) million, with an expected gain of approximately $0.1 million to be recognized in earnings over the next twelve months[97] 8. Leases This section details the company's lease accounting under the new standard, including right-of-use assets, lease liabilities, and lease expenses - Upon adoption of the new lease standard, the Company recognized operating lease right-of-use assets of $29.2 million and corresponding liabilities of $29.2 million as of March 31, 2019[104] Lease Components (in thousands) | Lease Components (in thousands) | March 31, 2019 | | :------------------------------ | :------------- | | Operating lease right-of-use assets | $29,201 | | Current lease liabilities (Operating) | $(6,236) | | Noncurrent lease liabilities (Operating) | $(23,016) | | Finance lease right-of-use assets, net | $24,751 | | Current lease liabilities (Finance) | $(10,993) | | Noncurrent lease liabilities (Finance) | $(16,133) | | Weighted-average remaining lease term (Operating) | 5.5 years | | Weighted-average remaining lease term (Finance) | 4.2 years | | Weighted-average discount rate (Operating) | 7.20% | | Weighted-average discount rate (Finance) | 7.03% | Lease Expense (in thousands) | Lease Expense (in thousands) | Q1 2019 | | :--------------------------- | :------ | | Finance lease cost: | | | Amortization of right-of-use assets | $3,533 | | Interest on lease liabilities | $528 | | Operating lease cost | $2,230 | | Variable lease cost | $781 | | Total lease cost | $7,072| Lease Liabilities Maturities (in thousands) | Lease Liabilities Maturities (in thousands) | Operating Leases | Finance Leases | | :---------------------------------------- | :--------------- | :------------- | | 2019 | $6,275 | $9,873 | | 2020 | $7,519 | $8,414 | | 2021 | $4,987 | $3,582 | | 2022 | $4,284 | $2,591 | | 2023 | $2,643 | $1,489 | | Thereafter | $6,585 | $6,405 | | Total lease payments | $32,293 | $32,354 | 9. Equity This section covers dividend declarations, the elimination of future dividends, share-based compensation, and changes in accumulated other comprehensive loss - On February 18, 2019, the Board declared a quarterly dividend of approximately $0.38738 per share, payable on May 1, 2019[110] - On April 25, 2019, the Company announced the elimination of quarterly dividend payments starting in Q2 2019 to focus on deleveraging and fiber investment[111][112] Share-Based Compensation (in thousands) | Share-Based Compensation (in thousands) | Q1 2019 | Q1 2018 | | :-------------------------------------- | :------ | :------ | | Restricted stock | $927 | $435 | | Performance shares | $571 | $243 | | Total | $1,498| $678 | - As of March 31, 2019, total unrecognized compensation cost for non-vested RSAs and PSAs was $16.9 million, to be recognized over approximately 1.8 years[115] Accumulated Other Comprehensive Loss (in thousands) | Accumulated Other Comprehensive Loss (in thousands) | December 31, 2018 | March 31, 2019 | | :-------------------------------------------------- | :---------------- | :------------- | | Pension and Post-Retirement Obligations | $(55,514) | $(54,488) | | Derivative Instruments | $2,302 | $(5,170) | | Total | $(53,212) | $(59,658) | 10. Pension Plan and Other Post-Retirement Benefits This section details the company's pension and post-retirement benefit plans, including the freezing of defined benefit plans and net periodic benefit costs - All defined benefit pension plans were frozen to current employees as of April 1, 2019, meaning no additional monthly pension benefits will accrue[118] Net Periodic Pension Cost (in thousands) | Net Periodic Pension Cost (in thousands) | Q1 2019 | Q1 2018 | | :------------------------------------- | :------ | :------ | | Service cost | $11 | $1,535 | | Interest cost | $7,661 | $7,139 | | Expected return on plan assets | $(8,671)| $(9,667)|\ | Net amortization loss | $703 | $1,472 | | Net prior service cost (credit) amortization | $30 | $(61) |\ | Net periodic pension (benefit) cost| $(266)| $418 | Net Periodic Post-retirement Benefit Cost (in thousands) | Net Periodic Post-retirement Benefit Cost (in thousands) | Q1 2019 | Q1 2018 | | :------------------------------------------------------- | :------ | :------ | | Service cost | $117 | $127 | | Interest cost | $1,144 | $1,029 | | Expected return on plan assets | $(43) | $(36) | | Net amortization gain | $(108) | $(21) | | Net prior service cost (credit) amortization | $768 | $(138) | | Net periodic post-retirement benefit cost | $1,878| $961 | - The Company expects to contribute approximately $26.3 million to Pension Plans and $9.5 million to Post-retirement Plans in 2019, having contributed $5.7 million and $1.9 million, respectively, as of March 31, 2019[128] 11. Income Taxes This section discusses unrecognized tax benefits and the effective tax rate for the first quarter of 2019 and 2018 - Unrecognized tax benefits were $4.9 million as of March 31, 2019, with a net impact of $4.7 million to the effective tax rate if recognized[129] - The effective tax rate was 30.4% for Q1 2019, compared to 27.5% for Q1 2018, primarily due to permanent income tax differences and allocable income variations for state tax filings[132] 12. Commitments and Contingencies This section outlines the company's various commitments and contingencies, including regulatory support, legal disputes, and potential tax liabilities - In Q1 2018, the Company recognized $4.9 million in subsidies revenue and an $8.4 million contingent asset related to a favorable FCC order regarding Local Switching Support (LSS) for FairPoint's rate of return ILECs[136][217] - Ongoing ICC Eligible Recovery support for 2018 increased by approximately $3.6 million and is expected to decline by 5% per year through 2021[136][217] - The Company settled a dispute with Level 3 Communications, LLC regarding access charges, resulting in a judgment of $0.7 million for legacy Consolidated LEC entities and over $1.2 million for FairPoint LEC entities, with no material impact on financial statements[142] - The Company has reserved $3.3 million for CCES and $1.5 million for CCPA, including interest, for potential additional Pennsylvania Gross Receipts Tax liabilities for tax years 2008-2018, with appeals pending[146] 13. Subsequent Events This section reports the company's announcement to eliminate quarterly dividend payments starting in the second quarter of 2019 - On April 25, 2019, the Company announced the elimination of quarterly dividend payments on its stock beginning in the second quarter of 2019[149] 14. Condensed Consolidating Financial Information This section clarifies the primary obligor and guarantors for the Senior Notes, which are jointly and severally guaranteed by the company and its subsidiaries - Consolidated Communications, Inc. is the primary obligor under the Senior Notes, which are jointly and severally guaranteed by the Company and substantially all of its 100% direct or indirect wholly-owned subsidiaries[150] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's analysis of the company's financial condition, operational results, and liquidity for the quarter ended March 31, 2019 Overview This section provides a general description of the company's business, its advanced fiber network, and strategic focus areas - Consolidated is a broadband and business communications provider operating an advanced fiber network spanning approximately 37,000 fiber route miles across 23 states[171] - Commercial and carrier services are key growth areas, with new business services like BusinessOne, SD-WAN, and MPLS launched in northern New England markets in 2018[172][174] - The Company focuses on enhancing broadband services, offering speeds up to 1 Gbps in select markets, and upgraded broadband speeds to over 500,000 homes and small businesses in northern New England in 2018[175] - Video connections decreased 9% and voice connections decreased 7% as of March 31, 2019, reflecting industry trends of declining voice services and increasing demand for streaming content[176][177] Recent Developments This section highlights significant events, including the sale of Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company - On July 31, 2018, the Company completed the sale of Peoples Mutual Telephone Company and Peoples Mutual Long Distance Company for approximately $21.0 million in cash proceeds[179] Results of Operations This section analyzes the company's operating revenues, expenses, and key operating statistics for the first quarter of 2019 compared to 2018 Metric (in millions, except for percentages) | Metric (in millions, except for percentages) | Q1 2019 | Q1 2018 | $ Change | % Change | | :------------------------------------------- | :------ | :------ | :------- | :------- | | Operating Revenues | $338.6 | $356.0 | $(17.4) | (5)% | | Cost of services and products | $148.3 | $152.9 | $(4.6) | (3)% | | Selling, general and administrative costs | $74.4 | $86.0 | $(11.6) | (13)% | | Depreciation and amortization | $99.2 | $107.9 | $(8.7) | (8)% | | Total operating expenses | $321.9 | $346.8 | $(24.9) | (7)% | | Income from operations | $16.7 | $9.2 | $7.5 | 82% | | Net loss | $(7.2) | $(11.2) | $4.0 | 36% | | Net loss attributable to common shareholders | $(7.3) | $(11.3) | $4.0 | 35% | | Adjusted EBITDA | $130.3 | $135.4 | $(5.1) | (4)% | Key Operating Statistics | Key Operating Statistics | March 31, 2019 | March 31, 2018 | Change | % Change | | :----------------------- | :------------- | :------------- | :------- | :------- | | Consumer customers | 616,091 | 661,758 | (45,667) | (7)% | | Voice connections | 887,357 | 955,419 | (68,062) | (7)% | | Data connections | 780,720 | 785,230 | (4,510) | (1)% | | Video connections | 91,269 | 100,570 | (9,301) | (9)% | | Total connections | 1,759,346 | 1,841,219 | (81,873) | (4)% | - Commercial and carrier data and transport services revenue increased by $2.1 million (2%) due to growth in Metro Ethernet and VoIP services[188] - Consumer video services revenue decreased by $2.1 million (9%) due to a 10% decrease in connections as customers shift to over-the-top streaming services[195] - Subsidies revenue decreased by $7.2 million (28%) primarily due to a $4.9 million settlement for frozen LSS recognized in Q1 2018 and scheduled reductions in CAF Phase II funding[197] - Selling, general and administrative costs decreased by $11.6 million (13%) due to headcount reduction, lower incentive compensation, operating synergies from the FairPoint integration, and property tax abatements[202] Regulatory Matters This section discusses the impact of FCC orders on support revenue, CAF Phase II funding obligations, and regulatory commitments from the FairPoint acquisition - The FCC's 2011 Order significantly impacted support revenue from USF, CAF, and intercarrier compensation (ICC), redirecting support from voice to broadband services[211] - The Company accepted CAF Phase II funding in August 2015, which replaced $36.6 million in CAF Phase I funding with $13.9 million annually through 2020 (adjusted to $48.1 million after acquisitions and divestitures)[213][214] - The Company is obligated to serve approximately 124,500 locations with 10 Mbps down/1 Mbps up broadband by December 31, 2020, and met interim milestones for 2017 and 2018[215] - The FCC approved the Company's petition regarding Local Switching Support (LSS) in April 2018, resulting in $4.9 million subsidies revenue and an $8.4 million contingent asset in Q1 2018[217] - New FCC rules for Business Data Services (BDS) went into effect August 1, 2017, allowing price flexibility for competitive services and requiring de-tariffing within three years[218][221] - As part of the FairPoint acquisition, the Company has regulatory commitments to invest in network improvements and service quality in northern New England, New York, and Illinois through 2020, all of which were met for 2017 and 2018[228] Non-Operating Items This section analyzes changes in non-operating items, including interest expense, other income, and the income tax benefit for the first quarter - Interest expense, net, increased by $1.5 million in Q1 2019 compared to Q1 2018, primarily due to higher variable interest rates, partially offset by a loss recognized on interest rate swap agreements in the prior year[230] - Other income decreased by $0.9 million, driven by a $1.8 million increase in pension and post-retirement expense, partially offset by an $0.8 million increase in investment income from wireless partnerships[231] - The income tax benefit decreased by $1.1 million, with the effective tax rate increasing to 30.4% in Q1 2019 from 27.5% in Q1 2018[232] Non-GAAP Measures This section defines and reconciles non-GAAP financial measures like EBITDA and Adjusted EBITDA, used to evaluate operating performance - The Company uses non-GAAP measures like EBITDA and Adjusted EBITDA to evaluate operating performance and trends, defining EBITDA as net earnings before interest, taxes, depreciation, and amortization[236] Non-GAAP Metric (in thousands) | Non-GAAP Metric (in thousands) | Q1 2019 | Q1 2018 | | :----------------------------- | :----------- | :----------- | | Net loss | $(7,186) | $(11,198) | | Interest expense, net | $34,283 | $32,716 | | Income tax benefit | $(3,145) | $(4,248) | | Depreciation and amortization | $99,243 | $107,899 | | EBITDA | $123,195 | $125,169 | | Other, net | $(1,672) | $99 | | Investment distributions | $7,290 | $9,470 | | Non-cash, stock-based compensation | $1,498 | $678 | | Adjusted EBITDA | $130,311 | $135,416 | Liquidity and Capital Resources This section discusses the company's funding sources, cash flow activities, capital expenditures, debt covenant compliance, and pension funding - Operating requirements are funded by cash flows from operations, existing cash, and revolving credit facilities, with future cash primarily funding capital expenditures, debt reduction, and business investments[239] Cash Flow Summary (in thousands) | Cash Flow Summary (in thousands) | Q1 2019 | Q1 2018 | | :------------------------------- | :----------- | :----------- | | Operating activities | $74,997 | $90,842 | | Investing activities | $(52,200) | $(60,431) |\ | Financing activities | $(25,672) | $(34,928) |\ | Decrease in cash and cash equivalents | $(2,875) | $(4,517) | - Capital expenditures were $53.4 million in Q1 2019, with an additional $157.0 million to $167.0 million expected for the remainder of 2019, 63% of which is for success-based projects[243] - As of March 31, 2019, the total net leverage ratio under the Credit Agreement was 4.43:1.00, and the interest coverage ratio was 3.85:1.00, both in compliance with covenants[253] - The Company paid $27.6 million in dividends in Q1 2019. On April 25, 2019, the Company announced the elimination of quarterly dividends to focus on deleveraging and fiber investment[261][262] - The Company expects to contribute approximately $26.3 million to Pension Plans and $9.5 million to Post-retirement Plans in 2019[277] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK This section discusses the Company's exposure to market risk, primarily from interest rate fluctuations on its debt obligations - The Company uses interest rate swaps to convert floating-rate debt to a fixed-rate basis, reducing the impact of interest rate changes on future cash interest payments[285] - As of March 31, 2019, a 1.00% change in market interest rates would increase or decrease annual interest expense by approximately $6.7 million, considering most variable rate debt is subject to a 1.00% LIBOR floor[286] - The fair value of interest rate swap agreements amounted to a net liability of $12.4 million as of March 31, 2019, with total pre-tax deferred losses of $7.0 million included in accumulated other comprehensive loss[287] ITEM 4. CONTROLS AND PROCEDURES This section details the Company's disclosure controls and procedures, confirming their effectiveness as of March 31, 2019, based on management's evaluation - Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2019[288] - There have been no changes in internal controls over financial reporting during Q1 2019 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[290] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, and a list of exhibits filed with the quarterly report ITEM 1. LEGAL PROCEEDINGS This section states that the Company is involved in various litigation and regulatory issues common to its industry - The Company does not believe that the outcome of any current legal matters will have a material adverse impact on its business, results of operations, financial condition, or cash flows[293] ITEM 1A. RISK FACTORS This section updates the risk factors from the Company's 2018 Annual Report on Form 10-K, specifically highlighting the potential negative effects of discontinuing dividend payments on common stock holders - The decision to eliminate quarterly dividends starting in Q2 2019 could negatively affect common stock holders, potentially leading to decreased liquidity, a decline in market price, and adverse impacts on the Company's ability to raise equity capital[295] - A significant and sustained reduction in stock price and market capitalization, along with changes in estimated future cash flows, could trigger goodwill and other intangible asset impairment tests, potentially resulting in a significant charge to earnings[295] ITEM 6. EXHIBITS This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including forms of stock grant certificates, certifications from the CEO and CFO, and XBRL formatted financial information - Exhibits include forms of Restricted Stock Grant Certificate and Performance Stock Grant Certificate, CEO and CFO certifications under Sarbanes-Oxley Act, and XBRL formatted financial statements[297] SIGNATURES This section confirms the official signing of the report by the Chief Executive Officer and Chief Financial Officer - The report was signed on April 26, 2019, by C. Robert Udell Jr., Chief Executive Officer, and Steven L. Childers, Chief Financial Officer[301]