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Windstream Sees Cash Flow Progress; Cogent Results Disappoint; Lumos Gains

Windstream is making good progress toward stabilizing and increasing operational cash flow over time, CEO Tony Thomas said in a Q2 earnings release Thursday. Sales fell to $1.36 billion from $1.42 billion in Q2 2015; operating income was $155 million…

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compared with $79 million, and net income was $1.5 million compared with a loss of $111 million. A Windstream presentation said the company is focused on "mid-market" business customers and driving enterprise margins to 20 percent. On a conference call, Thomas said Windstream can lower the $1 billion a year it spends leasing wholesale access on other networks by building its own facilities and through other steps. He said the FCC could help by reining in "excessive" Bell/ILEC rates for business data services, particularly for lower-capacity circuits that competitors cannot replicate economically, but he said "it's too early to speculate" on the outcome. Windstream is on both sides as a CLEC and ILEC, but "on balance, we think reforming the system to address this market power will be positive for our customers." Wells Fargo analysts called Windstream's Q2 results "mixed" as revenue was "light of our estimates" but adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) excluding sale-related changes were "a nice beat." Cogent Communications said Q2 gross service revenue increased 11 percent to $110 million, and adjusted EBITDA increased 26 percent to $39.4 million from a year ago, said a company release Thursday. Lumos Networks reported Q2 total revenue grew 3 percent to $52.4 million, operating income grew 5 percent to $9.7 million, adjusted EBITDA grew almost 5 percent to $23.8 million, though net income was down to $1.2 million, said a company release Wednesday. Wells Fargo analysts said the Cogent revenue was "a touch light of expectations" but adjusted EBITDA margins "were quite strong." They hailed the "strong" Lumos results and said the company was "over the hump" as its "hard work pays off." At market close Thursday, Cogent stock was down 13 percent to $37.30 a share and Lumos' was up 10 percent to $12.94.