Knology Posts Q3, Buys Small MSO

WEST POINT, Ga. -- Knology, Inc. (Nasdaq: KNOL - News):

• Revenue increased to $105.8 million for the third quarter 2009, representing a 2.5% increase compared to the same period one year ago.

• EBITDA, as adjusted, increased to $36.0 million for the third quarter 2009, representing an increase of 3.9% compared to the same period in 2008.

• GAAP operating income increased to $11.9 million for the third quarter 2009, representing an increase of 29.3% compared to the same period one year ago.

• Both business and residential connections increased during the third quarter. Total connections increased 2,575 during the period, resulting in 681,920 total connections as of quarter end.

• Free cash flow, defined as EBITDA, as adjusted, less capital expenditures and cash interest, reached $14.3 million in the third quarter, representing an 8% increase in free cash flow compared with the same period one year ago.

• During the quarter, the company successfully amended its credit facility to extend by two years the maturity of $397 million of term loans to a June 30, 2014 maturity date. The amendment includes, among other modifications, interest terms of LIBOR + 350 (with no LIBOR floor provisions) on the extended term loans, a $10 million increase in the revolving credit facility to $35 million, and an annual, cumulative restricted payment allowance of $10 million for dividends and/or share repurchases utilizing excess cash flow and subject to a maximum leverage test.

Summary of Private Cable Co., LLC Transaction

• Subsequent to quarter end, Knology executed a definitive agreement to acquire the assets of Private Cable Co., LLC (“PCL Cable”), a provider of video, voice and data services to residential and business customers in Athens and Decatur, Alabama for $7.5 million cash, to be funded from Knology’s cash on hand. The transaction is expected to close during the fourth quarter of 2009.

• PCL Cable’s operations are in Knology’s Southeast footprint and are contiguous to Knology’s existing operation in Huntsville, Alabama. PCL Cable generates approximately $5 million in annualized revenue and $1.5 million in annualized EBITDA, before synergies.

• The planned PCL Cable transaction is expected to be immediately accretive, before synergies, to Knology’s EBITDA per share, free cash flow per share and overall enterprise valuation.

Knology, Inc. (Nasdaq: KNOL - News) today reported financial and operating results for the third quarter ended September 30, 2009. Total revenue for the third quarter of 2009 was $105.8 million compared to revenue of $103.2 million for the same period one year ago. Knology reported EBITDA, as adjusted, of $36.0 million for the third quarter of 2009 compared to EBITDA, as adjusted, of $34.6 million in the third quarter of 2008.

Knology reported a net loss attributable to common stockholders for the third quarter of 2009 of $3.3 million, or $(0.09) per share. The third quarter of 2009 included a non-cash charge of $1.7 million related to the accounting treatment for the company’s interest rate swaps and a $3.4 million one-time expense related to the amendment of Knology’s credit facility. Excluding these charges, Knology posted net income of $1.8 million, or $0.05 per share for the third quarter of 2009. For the third quarter of 2008, Knology reported a net loss of $2.8 million, or $(0.08) per share.

Total connections increased 2,575 during the third quarter. Total connections as of quarter end amounted to 681,920, a 2.0% increase compared to one year ago. Video and data connections increased 136 and 2,693, respectively, while voice connections decreased 254. Business connections increased 871 during the period to 105,243 connections compared to 100,209 business connections one year ago. Average monthly revenue per connection was $51.96, which represents an increase from $51.67 for the third quarter of 2008. Average monthly connection churn was 2.8%, consistent with churn of 2.8% for the same period one year ago.

“The third quarter was a very busy period for the company,” said Rodger L. Johnson, Chairman and Chief Executive Officer of Knology, Inc. “We posted good operating results while at the same time focusing some of our attention on improving an already healthy balance sheet as well as moving forward with a small, but high quality M&A opportunity. After a slow start to the quarter, we experienced strong sales activity and lower churn near the end of the third quarter and have positive operating momentum moving into the fourth quarter.”

Knology Inc. (Nasdaq: KNOL)