Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-34686

Hawaiian Telcom Holdco, Inc.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

16-1710376
(I.R.S. Employer Identification No.)

1177 Bishop Street

Honolulu, Hawaii 96813

(Address of principal executive offices)

808-546-4511

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o		Accelerated Filer x

Non-Accelerated Filer o		Smaller reporting company o
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x No o

As of August 4, 2015, 11,007,318 shares of the registrant’s common stock were outstanding.

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Table of Contents

		Page
Part I	Financial Information
Item 1	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	32

Part II	Other Information
Item 1	Legal Proceedings	33
Item 1A	Risk Factors	33
Item 5	Other Information	34
Item 6	Exhibits	35

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PART I — FINANCIAL STATEMENTS

Item 1. Condensed Consolidated Financial Statements (Unaudited)

Hawaiian Telcom Holdco, Inc.

Condensed Consolidated Statements of Income

(Unaudited, dollars in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Operating revenues	$	96,187		$	96,784		$	193,303		$	193,856

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	39,219			41,288			79,402			82,236
Selling, general and administrative	29,767			28,720			59,499			57,986
Depreciation and amortization	21,941			18,884			43,221			37,604

Total operating expenses	90,927			88,892			182,122			177,826

Operating income	5,260			7,892			11,181			16,030

Other income (expense):
Interest expense	(4,166		)	(4,109		)	(8,503		)	(8,298		)
Interest income and other	4			5			11			13

Total other expense	(4,162		)	(4,104		)	(8,492		)	(8,285		)

Income before income tax provision	1,098			3,788			2,689			7,745

Income tax provision	643			1,549			1,257			3,141

Net income	$	455		$	2,239		$	1,432		$	4,604

Net income per common share -
Basic	$	0.04		$	0.21		$	0.13		$	0.44
Diluted	$	0.04		$	0.20		$	0.13		$	0.41

Weighted average shares used to compute net income per common share -
Basic	10,797,111			10,585,736			10,744,944			10,557,047
Diluted	11,258,178			11,263,618			11,261,535			11,300,608

See accompanying notes to condensed consolidated financial statements.

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Hawaiian Telcom Holdco, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited, dollars in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Net income	$	455		$	2,239		$	1,432		$	4,604

Other comprehensive income (loss) -
Unrealized holding gains (losses) arising during period	(2		)	2			—			(1		)
Retirement plan gain (loss)	4,093			44			2,075			(245		)
Income tax credit (charge) on comprehensive income	(1,571		)	(17		)	(792		)	100
Other comprehensive income (loss), net of tax	2,520			29			1,283			(146		)

Comprehensive income	$	2,975		$	2,268		$	2,715		$	4,458

See accompanying notes to condensed consolidated financial statements.

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Hawaiian Telcom Holdco, Inc.

Condensed Consolidated Balance Sheets

(Unaudited, dollars in thousands, except per share amounts)

	June 30,			December 31,
	2015			2014

Assets

Current assets
Cash and cash equivalents	$	28,228		$	39,885
Receivables, net	34,053			32,662
Material and supplies	9,792			9,337
Prepaid expenses	5,334			3,598
Deferred income taxes	6,840			6,840
Other current assets	3,289			3,481
Total current assets	87,536			95,803
Property, plant and equipment, net	570,667			565,956
Intangible assets, net	36,079			37,328
Goodwill	12,104			12,104
Deferred income taxes	79,213			81,626
Other assets	10,513			9,151

Total assets	$	796,112		$	801,968

Liabilities and Stockholders’ Equity

Current liabilities
Current portion of long-term debt	$	3,000		$	3,000
Accounts payable	45,797			50,499
Accrued expenses	16,102			19,399
Advance billings and customer deposits	15,354			14,686
Other current liabilities	7,488			6,790
Total current liabilities	87,741			94,374
Long-term debt	288,307			289,423
Employee benefit obligations	93,728			99,366
Other liabilities	15,774			14,271
Total liabilities	485,550			497,434

Commitments and contingencies (Note 11)

Stockholders’ equity
Common stock, par value of $0.01 per share, 245,000,000 shares authorized and 11,005,434 and 10,673,292 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	110			107
Additional paid-in capital	173,831			170,521
Accumulated other comprehensive loss	(22,664		)	(23,947		)
Retained earnings	159,285			157,853
Total stockholders’ equity	310,562			304,534

Total liabilities and stockholders’ equity	$	796,112		$	801,968

See accompanying notes to condensed consolidated financial statements.

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Hawaiian Telcom Holdco, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)

	Six Months Ended
	June 30,
	2015			2014

Cash flows from operating activities:
Net income	$	1,432		$	4,604
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	43,221			37,604
Employee retirement benefits	(3,565		)	(6,494		)
Provision for uncollectibles	1,634			1,478
Stock based compensation	900			2,099
Deferred income taxes	1,621			3,544
Changes in operating assets and liabilities:
Receivables	(3,025		)	979
Material and supplies	(92		)	121
Prepaid expenses and other current assets	(1,944		)	(2,090		)
Accounts payable and accrued expenses	(2,037		)	(3,896		)
Advance billings and customer deposits	668			(181		)
Other current liabilities	(465		)	113
Other	1,445			758
Net cash provided by operating activities	39,793			38,639

Cash flows from investing activities:
Capital expenditures	(52,916		)	(51,315		)
Funds released from restricted cash account	400			—
Net cash used in investing activities	(52,516		)	(51,315		)

Cash flows from financing activities:
Proceeds from stock issuance	3,341			—
Proceeds from installment financing	2,279			2,085
Repayment of capital lease and installment financing	(1,976		)	(856		)
Repayment of debt	(1,500		)	(1,500		)
Refinancing costs	(150		)	—
Taxes paid related to net share settlement of equity awards	(928		)	(1,005		)
Net cash provided by (used in) financing activities	1,066			(1,276		)

Net change in cash and cash equivalents	(11,657		)	(13,952		)
Cash and cash equivalents, beginning of period	39,885			49,551

Cash and cash equivalents, end of period	$	28,228		$	35,599

Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	7,604		$	7,433

See accompanying notes to condensed consolidated financial statements.

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Hawaiian Telcom Holdco, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

(Unaudited, dollars in thousands)

							Accumulated
				Additional			Other					Total
	Common Stock			Paid-In			Comprehensive			Retained		Stockholders’
	Shares	Amount		Capital			Income (Loss)			Earnings		Equity

Balance, January 1, 2015	10,673,292	$	107	$	170,521		$	(23,947	)	$	157,853	$	304,534

Stock based compensation	—	—		900			—			—		900

Exercise of warrant agreement	260,068	2		3,339			—			—		3,341

Common stock issued for stock compensation plans, net of shares withheld and withholding paid for employee taxes	72,074	1		(929		)	—			—		(928		)

Net income	—	—		—			—			1,432		1,432

Other comprehensive income, net of tax	—	—		—			1,283			—		1,283

Balance, June 30, 2015	11,005,434	$	110	$	173,831		$	(22,664	)	$	159,285	$	310,562

Balance, January 1, 2014	10,495,856	$	105	$	167,869		$	(4,716	)	$	149,754	$	313,012

Stock based compensation	—	—		2,099			—			—		2,099

Exercise of warrant agreement	15,361	—		—			—			—		—

Common stock issued for stock compensation plans, net of shares withheld and withholding paid for employee taxes	74,824	1		(1,006		)	—			—		(1,005		)

Net income	—	—		—			—			4,604		4,604

Other comprehensive loss, net of tax	—	—		—			(146		)	—		(146		)

Balance, June 30, 2014	10,586,041	$	106	$	168,962		$	(4,862	)	$	154,358	$	318,564

See accompanying notes to condensed consolidated financial statements.

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Hawaiian Telcom Holdco, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business

Business Description

Hawaiian Telcom Holdco, Inc. and subsidiaries (the “Company”) is the incumbent local exchange carrier for the State of Hawaii with an integrated telecommunications network. The Company offers a variety of telecommunication services to residential and business customers in Hawaii including local telephone, network access and data transport, television, Internet, long distance and wireless phone service. The Company also provides communications equipment sales and maintenance, data center colocation and network managed services.

Organization

The Company has one direct wholly-owned subsidiary, Hawaiian Telcom Communications, Inc. which has two direct wholly-owned subsidiaries — Hawaiian Telcom, Inc. and Hawaiian Telcom Services Company, Inc. Hawaiian Telcom, Inc. operates the regulated local exchange carrier and Hawaiian Telcom Services Company, Inc. operates all other businesses.

2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America and pursuant to rules and regulations of the U.S. Securities and Exchange Commission. Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted and condensed. In the opinion of the Company’s management, all adjustments (consisting of only normal and recurring accruals) have been made to present fairly the results of operations, comprehensive income, financial position and cash flows for the periods presented. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. Although the Company believes that the disclosures are adequate to make the information presented not misleading, these financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2014.

Cash and Cash Equivalents

Cash and cash equivalents include cash and money market accounts with maturities at acquisition of three months or less. The majority of cash balances at June 30, 2015 are held in one bank in demand deposit accounts. During the six months ended June 30, 2015, funds amounting to $0.4 million in a restricted cash account held in conjunction with a lease agreement provision were released and deposited into unrestricted cash.

Supplemental Non-Cash Investing and Financing Activities

Accounts payable included $15.2 million and $13.6 million at June 30, 2015 and 2014, respectively, for additions to property, plant and equipment.

Taxes Collected from Customers

The Company presents taxes collected from customers and remitted to governmental authorities on a gross basis, including such amounts in the Company’s reported operating revenues. Such amounts represent primarily Hawaii state general excise taxes and Hawaii Public Utility Commission fees. Such taxes and fees amounted to $2.0 million and $4.0 million for the three and six months ended June 30, 2015, and $1.8 million and $3.6 million for the three and six months ended June 30, 2014, respectively.

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Earnings per Share

Basic earnings per share is based on the weighted effect of all common shares issued and outstanding, and is calculated by dividing earnings by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing earnings, adjusted for the effect, if any, from assumed conversion of all potentially dilutive common shares outstanding, by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares that would be issued assuming conversion of all potentially dilutive common shares outstanding. The denominator used to compute basic and diluted earnings per share was as follows:

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2015	2014	2015	2014

Basic earnings per share - weighted average shares	10,797,111	10,585,736	10,744,944	10,557,047
Effect of dilutive securities:
Employee and director restricted stock units	25,878	87,655	72,367	135,777
Warrants	435,189	590,227	444,224	607,784

Diluted earnings per share - weighted average shares	11,258,178	11,263,618	11,261,535	11,300,608

The computation of weighted average dilutive shares outstanding excluded grants of restricted stock units convertible into 22,825 shares of common stock for the three months ended June 30, 2015, and 85,074 shares and 34,721 shares of common stock for the three and six month periods ended June 30, 2014, respectively. The unrecognized compensation on a per unit basis for these restricted stock units was greater than the average market price of the Company’s common stock for the periods presented. Therefore, the effect would be anti-dilutive. For the six months ended June 30, 2015, there were no restricted stock units that were anti-dilutive to earnings per share.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which provides guidance for revenue recognition which was amended in July 2015. The new accounting standard will supersede the current revenue recognition requirements and most industry-specific guidance. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The standard will be effective for the Company in the first quarter of 2018 and either full retrospective or modified retrospective adoption is permitted. Early adoption is permitted from the first quarter of 2017. The Company is currently evaluating the impact of the adoption of this accounting standard on the Company’s financial position, results of operations and cash flows.

In August 2014, the FASB issued an accounting standard with new guidance on management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. Management must evaluate whether it is probable that known conditions or events, considered in the aggregate, would raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. If such conditions or events are identified, the standard requires management’s mitigation plans to alleviate the doubt or a statement of the substantial doubt about the entity’s ability to continue as a going concern to be disclosed in the financial statements. The standard is effective for fiscal years and interim periods beginning after December 15, 2016 with early adoption permitted. The Company is currently evaluating the impact of adoption of this accounting standard.

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In April 2015, the FASB issued an accounting standard simplifying the presentation of debt issuance costs. The new standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability which is consistent with debt discounts. The standard requires retrospective adoption and will be effective beginning in the first quarter of 2016 for the Company. Early adoption is permitted. The Company is currently evaluating the impact and timing of adopting this new accounting standard and the impact it will have on the Company’s financial position, results of operations and cash flows.

3. Receivables

Receivables consisted of the following (dollars in thousands):

	June 30,			December 31,
	2015			2014

Customers and other	$	37,873		$	36,4177
Allowance for doubtful accounts	(3,820		)	(3,755		)

	$	34,053		$	32,662

4. Long-Lived Assets

Property, plant and equipment consisted of the following (dollars in thousands):

	June 30,			December 31,
	2015			2014

Property, plant and equipment	$	887,861		$	843,589
Less accumulated depreciation	(317,194		)	(277,633		)

	$	570,667		$	565,956

Depreciation expense amounted to $21.3 million and $42.0 million for the three and six months ended June 30, 2015, respectively. Depreciation expense amounted to $18.2 million and $36.2 million for the three and six months ended June 30, 2014, respectively.

The gross carrying amount and accumulated amortization of identifiable intangible assets are as follows (dollars in thousands):

	June 30, 2015						December 31, 2014
	Gross						Gross
	Carrying		Accumulated		Net Carrying		Carrying		Accumulated		Net Carrying
	Value		Amortization		Value		Value		Amortization		Value

Subject to amortization —
Customer relationships	$	21,709	$	13,018	$	8,691	$	21,709	$	11,799	$	9,910
Trade name and other	320		232		88		320		202		118
	22,029		13,250		8,779		22,029		12,001		10,028
Not subject to amortization —
Brand name	27,300		—		27,300		27,300		—		27,300
	27,300		—		27,300		27,300		—		27,300

	$	49,329	$	13,250	$	36,079	$	49,329	$	12,001	$	37,328

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Amortization expense amounted to $0.6 million and $1.2 million for the three and six months ended June 30, 2015, respectively. Amortization expense amounted to $0.7 million and $1.4 million for the three and six months ended June 30, 2014, respectively. Estimated amortization expense for the next five years and thereafter is as follows (dollars in thousands):

2015 (remaining months)	$	1,249
2016	2,101
2017	1,703
2018	1,308
2019	1,188
Thereafter	1,230

	$	8,779

5. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following (dollars in thousands):

	June 30,		December 31,
	2015		2014

Salaries and benefits	$	12,604	$	15,910
Interest	2,496		2,550
Other taxes	1,002		939

	$	16,102	$	19,399

Other current liabilities consisted of the following (dollars in thousands):

	June 30,		December 31,
	2015		2014

Other postretirement benefits, current	$	2,660	$	2,660
Installment financing contracts, current	3,524		2,787
Other	1,304		1,343

	$	7,488	$	6,790

6. Long-Term Debt

Long-term debt consisted of the following (dollars in thousands):

	Interest Rate
	at June 30,		Final	June 30,			December 31,
	2015		Maturity	2015			2014

Term loan	5.00	%	June 6, 2019	$	294,638		$	296,138
Original issue discount				(3,331		)	(3,715		)
				291,307			292,423
Current				3,000			3,000

Noncurrent				$	288,307		$	289,423

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The term loan outstanding at June 30, 2015 provides for interest at the Alternate Base Rate, a rate which is indexed to the prime rate with certain adjustments as defined, plus a margin of 3.00% or a Eurocurrency rate on deposits of one, two, three or six months but no less than 1.00% per annum plus a margin of 4.00%. The Company has selected the Eurocurrency rate as of June 30, 2015 resulting in an interest rate currently at 5.00%.

The term loan provides for interest payments no less than quarterly. In addition, quarterly principal payments of $0.8 million are required. The balance of the loan is due at maturity on June 6, 2019. The Company must prepay, generally within three months after year end, 50% or 25% of excess cash flow, as defined. The percent of excess cash flow required is dependent on the Company’s leverage ratio. The excess cash flow payment due for the year ended December 31, 2014 was not significant. The Company must also make prepayments on loans in the case of certain events such as large asset sales.

The Company also has a revolving credit facility which was extended on April 9, 2015 to mature on December 6, 2018. The facility has an available balance of $30.0 million with no amounts drawn as of or for the periods ended June 30, 2015 and 2014. A commitment fee is payable quarterly to the lender under the facility. Interest on amounts outstanding is based on, at the Company’s option, the bank prime rate plus a margin of 3.0% to 6.0% or the Eurocurrency rate for one, two, three or six month periods plus a margin of 4.0% to 5.5%. The margin is dependent on the Company’s leverage, as defined in the agreement, at the time of the borrowing.

Maturities

The annual requirements for principal payments on long-term debt as of June 30, 2015 are as follows (dollars in thousands):

Years ended December 31,
2015 (remainder of year)	$	1,500
2016	3,000
2017	3,000
2018	3,000
2019	284,138

	$	294,638

Capitalized Interest

Interest capitalized by the Company amounted to $0.3 million and $0.5 million for the three and six months ended June 30, 2015, respectively. Interest capitalized by the Company amounted to $0.3 million and $0.5 million for the three and six months ended June 30, 2014, respectively.

7. Employee Benefit Plans

The Company sponsors a defined benefit pension plan, with benefits frozen as of March 1, 2012, and postretirement health and life insurance benefits for union employees. The Company also sponsors a cash balance pension plan for nonunion employees, with benefits frozen as of April 1, 2007, and certain management employees receive postretirement health and life insurance under grandfathered provisions of a terminated plan.

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The following provides the components of benefit costs (income) for the three and six months ended June 30, 2015 and 2014 (dollars in thousands):

Pension

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Interest cost	$	1,984		$	2,208		$	4,057		$	4,416
Expected asset return	(3,366		)	(3,178		)	(6,760		)	(6,356		)
Amortization of loss	39			29			(18		)	58
Net periodic benefit income	(1,343		)	(941		)	(2,721		)	(1,882		)
Settlement loss	1,397			—			2,248			—

Net benefit expense (income)	$	54		$	(941	)	$	(473	)	$	(1,882	)

Other Postretirement Benefits

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014

Service cost	$	259	$	230	$	518	$	460
Interest cost	589		602		1,178		1,204
Amortization of loss	149		15		299		30

Net periodic benefit cost	$	997	$	847	$	1,995	$	1,694

During the three and six months ended June 30, 2015, the Company’s pension plan for union employees paid lump-sum benefits to plan participants in full settlement of obligations due amounting to $13.7 million and $19.7 million, respectively. During the six months ended June 30, 2015, the Company’s pension plan for management employees paid lump sum benefits in full settlement amounting to $0.6 million. The Company’s pension plan for management employees paid such benefits for the first quarter of 2015 only. This resulted in the recognition of a loss on settlement for both pension plans amounting to $1.4 and $2.2 million for the three and six months ended June 30, 2015, respectively. Because of the settlements, the Company remeasured its union pension plan obligations and plan assets as of June 30, 2015. The Company had previously measured both its union and management pension plan obligations and plan assets as of March 31, 2015 in determining its employee benefit obligations as of that date. The Company used a discount rate of 4.09% as of June 30, 2015 to measure the union pension plan obligation. The Company used discount rates of 3.54% to 3.57% to measure the plan obligations as of March 31, 2015. The new measurements resulted in other comprehensive income of $3.9 million and $1.7 million for the three and six months ended June 30, 2015, respectively.

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2014 that it expected to contribute $10.0 million to its pension plan in 2015. As of June 30, 2015, the Company has contributed $4.2 million. The Company presently anticipates contributing the full amount during the remainder of 2015.

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8. Income Taxes

Income tax expense differs from the amounts determined by applying the statutory federal income tax rate of 34% to the income before income tax provision for the following reasons (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Income tax at federal rate	$	373		$	1,288		$	914		$	2,633
Increase (decrease) resulting from:
State income taxes, net of federal income tax	46			143			113			310
Compensation deduction limitations	104			236			228			354
Expense reflected in tax basis	211			—			211			—
Other permanent differences	49			185			154			248
Capital goods excise tax credit	(140		)	(303		)	(363		)	(404		)

Total income tax expense	$	643		$	1,549		$	1,257		$	3,141

The Company evaluates its tax positions for liability recognition. As of June 30, 2015, the Company had no unrecognized tax benefits. No interest or penalties related to tax assessments were recognized in the Company’s condensed consolidated statements of operations for the three and six months ended June 30, 2015 or 2014. All tax years from 2011 remain open for both federal and Hawaii state purposes.

9. Stock Compensation

The Company has an equity incentive plan. The Compensation Committee of the Company’s Board of Directors may grant awards under the plan in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards. The maximum number of shares issuable under the equity incentive plan is 1,400,000 shares. All grants under the equity incentive plan will be issued to acquire shares at the fair value on date of grant.

As of June 30, 2015, all awards were restricted stock units. Activity with respect to outstanding restricted stock units for the six months ended June 30, 2015 and 2014 was as follows:

			Weighted-
			Average
			Grant-Date
	Shares		Fair Value
2015
Nonvested at January 1, 2015	245,752		$	27
Granted	140,909		26
Vested	(107,788	)	28
Forfeited	(100,053	)	25
Nonvested at June 30, 2015	178,820		$	26

2014
Nonvested at January 1, 2014	260,734		$	18
Granted	157,481		31
Vested	(109,399	)	25
Forfeited	(1,534	)	29
Nonvested at June 30, 2014	307,282		$	24

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The Company recognized compensation expense of $0.5 million and $0.9 million for the three and six months ended June 30, 2015, respectively. The Company recognized compensation expense of $1.0 million and $2.1 million for the three and six months ended June 30, 2014, respectively. The fair value as of the vesting date for the restricted stock units that vested during the six months ended June 30, 2015 and 2014 was $2.5 million and $2.7 million, respectively. Upon vesting, unit holders have the option to net share-settle to cover the required withholding tax and the remaining amount is converted into an equivalent number of shares of common stock. The total shares withheld were 35,714 and 34,573 for the six months ended June 30, 2015 and 2014, respectively, and were based on the value of the restricted stock units as determined by the Company’s closing stock price on the date of vesting. Total payments for the employees’ tax obligations to the tax authorities amounted to $0.9 million and $1.0 million for the six months ended June 30, 2015 and 2014, respectively. Other than reimbursements for tax withholdings, there was no cash received under all share-based arrangements. In March 2014, the terms of certain restricted stock units were modified which resulted in the restricted stock units vesting as of the date of the modification. The Company recognized the incremental value of $0.6 million as additional expense in the first quarter of 2014.

10. Stockholders’ Equity

Warrants

In 2010, the Company issued warrants to purchase 1,481,055 shares of common stock for $14.00 per share. The warrants to purchase shares may be exercised anytime from January 26, 2011 to the maturity on October 28, 2015. The warrants may be exercised on a cashless basis whereby a portion of the exercised warrants are tendered in lieu of payment for the exercise price. During the six months ended June 30, 2015 and 2014, warrants were exercised on a cashless basis resulting in the issuance of 21,371 shares and 15,361 shares of common stock, respectively. In addition, another 238,697 warrants were exercised for cash consideration of $3.3 million during the six months ended June 30, 2015.

Accumulated Other Comprehensive Income (Loss)

The changes in components of accumulated other comprehensive income (loss) are as follows (dollars in thousands):

	Unrealized
	Gain (Loss) on			Retirement
	Investments			Plans			Total

Three months ended June 30, 2015
April 1, 2015	$	(62	)	$	(25,122	)	$	(25,184	)
Other comprehensive income (loss) for 2015	(2		)	2,522			2,520

June 30, 2015	$	(64	)	$	(22,600	)	$	(22,664	)

Six months ended June 30, 2015
January 1, 2015	$	(64	)	$	(23,883	)	$	(23,947	)
Other comprehensive income for 2015	—			1,283			1,283

June 30, 2015	$	(64	)	$	(22,600	)	$	(22,664	)

	Unrealized
	Gain (Loss) on			Retirement
	Investments			Plans			Total

Three months ended June 30, 2014
April 1, 2014	$	(63	)	$	(4,828	)	$	(4,891	)
Other comprehensive income for 2014	2			27			29

June 30, 2014	$	(61	)	$	(4,801	)	$	(4,862	)

Six months ended June 30, 2014
January 1, 2014	$	(60	)	$	(4,656	)	$	(4,716	)
Other comprehensive loss for 2014	(1		)	(145		)	(146		)

June 30, 2014	$	(61	)	$	(4,801	)	$	(4,862	)

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Reclassifications out of accumulated other comprehensive income (loss) for the three and six months ended June 30, 2015 and 2014 were as follows (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Retirement plans
Amortization of (gain) loss and settlement loss	1,585			44			2,529			(245		)
Income tax credit (charge) on comprehensive income	(602		)	(17		)	(961		)	100

Net of tax	$	983		$	27		$	1,568		$	(145	)

The amortization of (gain) loss and settlement loss was recognized primarily in selling, general and administrative expense for the periods ended June 30, 2015 and 2014.

11. Commitments and Contingencies

Trans-Pacific Submarine Cable

In August 2014, the Company entered into an agreement with several other telecommunication companies to build and operate a trans-Pacific submarine cable system. The total system cost is expected to be $245 million and is primarily composed of a supply contract with the lead contractor. The Company will contribute $25 million over the multi-year construction period for a fractional ownership in the system. In addition, the Company will construct a cable landing station in Hawaii and provide cable landing services. The system is expected to be completed in December 2016. As of June 30, 2015, the Company had paid $2.3 million to the cable contractor for the cable build.

The Company will have excess capacity on its share of the trans-Pacific cable that it will make available to other carriers for a fee. The Company is in the process of contracting with other carriers for long-term indefeasible right of use, or IRU, agreements for fiber circuit capacity. The Company may receive up-front payments for services to be delivered over a period of up to 25 years. The Company has entered into agreements for the sale of capacity for $27.0 million plus fees to activate assigned capacity, and for operations and maintenance. This includes a sale of $22.0 million in July 2015. As of June 30, 2015, the Company had received up-front payments, as provided for in one of the agreements, which are held in escrow amounting to $2.0 million. The funds in escrow will be released to the Company when the trans-Pacific cable is ready for service. The restricted cash is reflected in other assets in the condensed consolidated balance sheet. A liability to provide services in the future for the same amount is included in other liabilities.

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Collective Bargaining Agreement

The Company has a collective bargaining agreement with the International Brotherhood of Electrical Workers Local 1357 (“IBEW”) that expires on December 31, 2017. The agreement covers approximately half of the Company’s work force.

Third Party Claims

In the normal course of conducting its business, the Company is involved in various disputes with third parties, including vendors and customers. The outcome of such disputes is generally uncertain and subject to commercial negotiations. The Company periodically assesses its liabilities in connection with these matters and records reserves for those matters where it is probable that a loss has been incurred and the loss can be reasonably estimated. Based on management’s most recent assessment, the Company believes that the risk of loss in excess of liabilities recorded is not material for all outstanding claims and disputes and the ultimate outcome of such matters will not have a material adverse effect on the Company’s results of operations, cash flows or financial position.

Litigation

The Company is involved in litigation arising in the normal course of business. The outcome of litigation is not expected to have a material adverse impact on the Company’s condensed consolidated financial statements.

12. Fair Value of Financial Instruments

The following method and assumptions were used to estimate the fair value of each class of financial instruments for which it is practical to estimate the fair value.

Cash and cash equivalents, accounts receivable and accounts payable — The carrying amount approximates fair value. The valuation is based on settlements of similar financial instruments all of which are short-term in nature and generally settled at or near cost. Cash is measured at Level 1.

Investment securities — The fair value of investment securities is based on quoted market prices. Investment securities are included in other assets on the condensed consolidated balance sheets.

Debt — The fair value of debt is based on the value at which the debt is trading among holders.

The estimated fair value of financial instruments is as follows (dollars in thousands):

	Carrying		Fair
	Value		Value

June 30, 2015
Assets - investment in U.S. Treasury obligations	$	810	$	810
Liabilities - long-term debt (carried at cost)	291,307		296,111

December 31, 2014
Assets - investment in U.S. Treasury obligations	$	808	$	808
Liabilities - long-term debt (carried at cost)	292,423		296,908

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Fair Value Measurements

Fair value for accounting purposes is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price).

Accounting standards establish a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Assets measured at fair value on a recurring basis represent investment securities included in other assets. Liabilities carried at amortized cost with fair value disclosure on a recurring basis represent long-term debt. A summary is as follows (dollars in thousands):

	June 30,		December 31,
	2015		2014

Asset value measurements using:
Quoted prices in active markets for identical assets (Level 1)	$	810	$	808
Signficant other observable inputs (Level 2)	—		—
Significant unobservable inputs (Level 3)	—		—

	$	810	$	808

Liability value measurements using:
Quoted prices in active markets for identical liabilities (Level 1)	$	—	$	—
Signficant other observable inputs (Level 2)	296,111		296,908
Significant unobservable inputs (Level 3)	—		—

	$	296,111	$	296,908

13. Segment Information

The Company operates in two reportable segments of telecommunications and data center colocation. This conclusion is based on how resources are allocated and performance is assessed by the Chief Executive Officer, the Company’s chief operating decision maker. The telecommunications segment provides local voice services, video, high-speed internet and long distance voice services. In addition, the segment provides network access which includes data transport. Various related telephony services are provided including equipment and managed services. The data center colocation segment provides physical colocation, virtual colocation and various related telephony services.

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The following table provides operating financial information for the Company’s reportable segments for the three and six months ended June 30, 2015 and 2014 (dollars in thousands):

	Tele-		Data Center			Intersegment
	communications		Colocation			Elimination			Total

Three months ended June 30, 2015
Operating revenues	$	93,812	$	2,784		$	(409	)	$	96,187
Depreciation and amortization	21,374		567			—			21,941
Operating income (loss)	5,570		(310		)	—			5,260

Three months ended June 30, 2014
Operating revenues	$	94,700	$	2,323		$	(239	)	$	96,784
Depreciation and amortization	18,467		417			—			18,884
Operating income (loss)	8,126		(234		)	—			7,892

Six months ended June 30, 2015
Operating revenues	$	188,649	$	5,381		$	(727	)	$	193,303
Depreciation and amortization	42,102		1,119			—			43,221
Operating income (loss)	11,818		(637		)	—			11,181
Capital expeditures	46,377		578			—			46,955

Six months ended June 30, 2014
Operating revenues	$	189,576	$	4,728		$	(448	)	$	193,856
Depreciation and amortization	36,781		823			—			37,604
Operating income (loss)	16,166		(136		)	—			16,030
Capital expeditures	50,716		345			—			51,061

Intersegment revenue represents primarily network access services provided by the telecommunications segment for data center colocation. For the three and six months ended June 30, 2015 and 2014, total operating income above reconciles to the condensed consolidated statement of income as follows (dollars in thousands):

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Operating income	$	5,260		$	7,892		$	11,181		$	16,030
Corporate other expense	(4,162		)	(4,104		)	(8,492		)	(8,285		)

Income before income tax provision	$	1,098		$	3,788		$	2,689		$	7,745

The following table provides information on the Company’s revenue, net of intersegment eliminations, by product group (dollars in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2015		2014		2015		2014

Local voice and other retail services	$	63,142	$	62,951	$	126,354	$	125,887
Network access services	30,261		31,510		61,568		63,241
Data center colocation	2,784		2,323		5,381		4,728

	$	96,187	$	96,784	$	193,303	$	193,856

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Item 2. Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance (including our anticipated cost structure) and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continues,” “assumption” or the negative of these terms or other comparable terminology. These statements (including statements related to our anticipated cost structure) are only predictions. Actual events or results may differ materially from those anticipated or projected due to a number of factors. These factors include, but are not limited to:

· failures in critical back-office systems and IT infrastructure or a breach of our data security systems;

· our ability to provide customers with reliable and uninterrupted service;

· our ability to fund capital expenditures for network enhancements;

· our ability to maintain arrangements with third-party service providers;

· changes in regulations and legislation applicable to providers of telecommunications services;

· a reduction in rates we are allowed to charge our customers as dictated by regulatory authorities;

· changes in demand for our products and services;

· technological changes affecting the telecommunications industry;

· economic conditions in Hawaii;

· our ability to retain experienced personnel;

· our ability to utilize net operating loss carryforwards or fund tax payments;

· our indebtedness could adversely affect our financial condition;

· risks of severe weather and natural disasters;

· the ability of shareholders to influence corporate decisions; and

· future sales of a substantial amount of common stock may depress our stock price.

These and other factors may cause our actual results to differ materially from any forward-looking statement. Refer to our Annual Report on Form 10-K for a detailed discussion of risks that could materially adversely affect our business, financial condition and results of operations. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business operations.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements are made as of the date of issuance of these quarterly condensed consolidated financial statements, we assume no obligation to update or revise them or to provide reasons why actual results may differ.

We do not undertake any responsibility to release any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of issuance of these quarterly condensed consolidated financial statements. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this quarterly report.

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Background

In the following discussion and analysis of financial condition and results of operations, unless the context otherwise requires, “we,” “us” or the “Company” refers, collectively, to Hawaiian Telcom Holdco, Inc. and its subsidiaries.

Recent Developments

Effective June 20, 2015, Scott K. Barber, the Company’s former Chief Operating Officer, became the Company’s President and Chief Executive Officer and was also appointed to the Company’s Board of Directors. Mr. Barber, had served as the Company’s Chief Operating Officer since January 2013, and has been responsible for overseeing day-to-day operations of the Company’s technology, sales, marketing, customer service, customer care, business operations, and business development teams. Prior to joining the Company, Mr. Barber was Vice President of Operations of Consolidated Communications, an Illinois based telecommunications company, since July 2012, during which time he led field and network operations teams across six states. Prior to its acquisition by Consolidated Communications, Mr. Barber held various executive positions at SureWest Communications beginning in 1994, most recently as Chief Operating Officer from 2011 to 2012.

Effective May 11, 2015, Dan T. Bessey was appointed the Company’s Chief Financial Officer. Mr. Bessey previously served as the Chief Financial Officer of Cesca Therapeutics Inc., a biotechnology company, from March 2013. From 2008 to 2012, Mr. Bessey served as Vice President and Chief Financial Officer of SureWest Communications. Before becoming Chief Financial Officer of SureWest Communications, Mr. Bessey served in a number of key financial leadership roles within the company, including but not limited to Vice President of Finance, Controller and Director of Corporate Finance beginning in 1995. Prior to joining SureWest Communications, Mr. Bessey was with Ernst & Young LLP. Mr. Bessey is a Certified Public Accountant.

Segments and Sources of Revenue

We operate in two reportable segments (telecommunication and data center colocation) based on how resources are allocated and performance is assessed by our chief operating decision maker. Our chief operating decision maker is our Chief Executive Officer.

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Telecommunications

The telecommunications segment derives revenue from the following sources:

Local Telephone Services — We receive revenue from providing local exchange telephone services. These revenues include monthly charges for basic service, local private line services and enhanced calling features such as voice mail, caller ID and 3-way calling.

Network Access Services — We receive revenue for access to our network for wholesale carrier data, business customer data including Dedicated Internet Access, switched carrier access and subscriber line charges imposed on end users. Switched carrier access revenue compensates us for origination, transport and termination of calls for long distance and other interexchange carriers.

High-Speed Internet (“HSI”) Services — We provide HSI to our residential and business customers.

Video Services — Our video services marketed as Hawaiian Telcom TV is an advanced entertainment service.

Long Distance Services — We receive revenue from providing long distance services to our customers.

Equipment and managed services — We provide installation and maintenance of customer premise equipment as well as managed service for customer telephone and IT networks.

Wireless — We receive revenue from wireless services, including the sale of wireless handsets and other wireless accessories.

Data Center Colocation

The data center colocation segment provides physical colocation, virtual colocation and various related telephony services.

Results of Operations for the Three and Six Months Ended June 30, 2015 and 2014

Operating Revenues

The following tables summarize our volume information (lines or subscribers) as of June 30, 2015 and 2014, and our operating revenues for the three and six months ended June 30, 2015 and 2014. For comparability, we also present volume information as of June 30, 2015 compared to March 31, 2015.

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Volume Information

As of June 30, 2015 compared to June 30, 2014

	June 30,	June 30,	Change
	2015	2014	Number		Percentage

Voice access lines
Residential	160,819	177,953	(17,134	)	-9.6	%
Business	185,975	190,754	(4,779	)	-2.5	%
Public	3,638	4,028	(390	)	-9.7	%
	350,432	372,735	(22,303	)	-6.0	%

High-Speed Internet lines
Residential	93,338	91,405	1,933		2.1	%
Business	19,759	19,465	294		1.5	%
Wholesale	749	866	(117	)	-13.5	%
	113,846	111,736	2,110		1.9	%

Long distance lines
Residential	101,648	112,231	(10,583	)	-9.4	%
Business	75,719	78,522	(2,803	)	-3.6	%
	177,367	190,753	(13,386	)	-7.0	%

Video services
Subscribers	31,921	23,101	8,820		38.2	%
Homes Enabled	175,000	142,000	33,000		23.2	%

As of June 30, 2015 compared to March 31, 2015

	June 30,	March 31,	Change
	2015	2015	Number		Percentage

Voice access lines
Residential	160,819	165,074	(4,255	)	-2.6	%
Business	185,975	187,300	(1,325	)	-0.7	%
Public	3,638	3,733	(95	)	-2.5	%
	350,432	356,107	(5,675	)	-1.6	%

High-Speed Internet lines
Residential	93,338	93,090	248		0.3	%
Business	19,759	19,624	135		0.7	%
Wholesale	749	796	(47	)	-5.9	%
	113,846	113,510	336		0.3	%

Long distance lines
Residential	101,648	104,527	(2,879	)	-2.8	%
Business	75,719	76,916	(1,197	)	-1.6	%
	177,367	181,443	(4,076	)	-2.2	%

Video services
Subscribers	31,921	29,721	2,200		7.4	%
Homes Enabled	175,000	166,000	9,000		5.4	%

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Operating Revenues (dollars in thousands)

For Three Months

	Three Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Wireline Services
Local voice services	$	30,864	$	33,077	$	(2,213	)	-6.7	%
Network access services
Business data	6,704		6,712		(8		)	-0.1	%
Wholesale carrier data	13,789		14,280		(491		)	-3.4	%
Subscriber line access charge	8,562		9,030		(468		)	-5.2	%
Switched carrier access	1,206		1,488		(282		)	-19.0	%
	30,261		31,510		(1,249		)	-4.0	%
High-Speed Internet	11,342		10,753		589			5.5	%
Video	8,280		5,474		2,806			51.3	%
Long distance services	5,104		5,716		(612		)	-10.7	%
Equipment and managed services	4,779		4,723		56			1.2	%
Wireless	427		539		(112		)	-20.8	%
Other	2,346		2,669		(323		)	-12.1	%
	93,403		94,461		(1,058		)	-1.1	%
Data center colocation	2,784		2,323		461			19.8	%
	$	96,187	$	96,784	$	(597	)	-0.6	%

Channel
Business	$	41,181	$	42,068	$	(887	)	-2.1	%
Consumer	37,881		36,349		1,532			4.2	%
Wholesale	14,995		15,768		(773		)	-4.9	%
Other	2,130		2,599		(469		)	-18.0	%
	$	96,187	$	96,784	$	(597	)	-0.6	%

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For Six Months

	Six Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Wireline Services
Local voice services	$	62,633	$	66,852	$	(4,219	)	-6.3	%
Network access services
Business data	13,710		13,336		374			2.8	%
Wholesale carrier data	28,122		28,666		(544		)	-1.9	%
Subscriber line access charge	17,218		18,199		(981		)	-5.4	%
Switched carrier access	2,518		3,040		(522		)	-17.2	%
	61,568		63,241		(1,673		)	-2.6	%
High-Speed Internet	22,670		21,297		1,373			6.4	%
Video	15,802		10,228		5,574			54.5	%
Long distance services	10,412		11,622		(1,210		)	-10.4	%
Equipment and managed services	9,043		9,212		(169		)	-1.8	%
Wireless	877		1,132		(255		)	-22.5	%
Other	4,917		5,544		(627		)	-11.3	%
	187,922		189,128		(1,206		)	-0.6	%
Data center colocation	5,381		4,728		653			13.8	%
	$	193,303	$	193,856	$	(553	)	-0.3	%

Channel
Business	$	82,757	$	84,579	$	(1,822	)	-2.2	%
Consumer	75,414		72,171		3,243			4.5	%
Wholesale	30,640		31,706		(1,066		)	-3.4	%
Other	4,492		5,400		(908		)	-16.8	%
	$	193,303	$	193,856	$	(553	)	-0.3	%

A decrease in local voice services revenues for both the three and six month periods was caused primarily by the decline of voice access lines. Continued competition in the telecommunications industry has increasingly resulted in customers using technologies other than traditional phone lines for voice and data. Residential customers are increasingly using wireless services in place of traditional wireline phone services as well as moving local voice service to VoIP technology offered by competitors. Generally, VoIP technology offered by cable providers is less expensive than traditional wireline phone service, requiring us to respond with more competitive pricing. Additionally, Competitive Local Exchange Carriers (CLECs) and our cable competitor continue to focus on business customers and selling services to our customer base.

In an effort to slow the rate of line loss, we are continuing retention and acquisition programs, and are increasingly focusing efforts on bundling of services. We have instituted various “saves” tactics designed to focus on specific circumstances where we believe customer churn is controllable. These tactics include targeted offers to “at risk” customers as well as other promotional tools designed to enhance customer retention. We also emphasize win-back and employee referral programs. Additionally, we are intensifying our efforts relative to developing tools and training to enhance our customer service capability to improve customer retention and growth.

Business data revenues for the three and six months ended June 30, 2015 was comparable to the same periods in the prior year. Wholesale carrier data revenue for the three and six months ended June 30, 2015 decreased when compared to the three and six months ended June 30, 2014. This was primarily because of various customer special service charges in the second quarter of 2014. The impact of the decline in voice access lines is reflected in subscriber line access charges and switched carrier access charges. Switched carrier access revenue is also adversely impacted by reduced switched access rates in conjunction with the revised regulatory regime for intercarrier compensation.

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HSI revenues increased when compared to the prior year as a result of year-over-year increases in total HSI subscribers as well as premium pricing on higher bandwidth offerings.

We are continuing the roll out of Hawaiian Telcom TV to selected areas as we expand the number of homes enabled. Our volume is increasing as more homes become enabled for video service. We expect to expand both the availability and the capabilities of our Hawaiian Telcom TV service over the next several years through additional capital investment and innovation.

The decrease in long distance revenue was primarily because of the decline in long distance lines and customers moving to wireless and VoIP based technologies for long distance calling.

Equipment and managed services revenues was comparable to prior year periods. Revenue from equipment sales varies from period to period based on the volume of large installation projects. The outlook for future periods is uncertain.

Wireless revenues and other service revenues decreased as we attempt to focus our marketing efforts on other services.

Data center colocation revenues increased when compared to the prior year periods as a result of year-over-year increased colocation services and data security related sales.

Operating Costs and Expenses

The following tables summarize our costs and expenses for all segments and by segments for the three and six months ended June 30, 2015 compared to the costs and expenses for the three and six months ended June 30, 2014 (dollars in thousands):

For Three Months

	Three Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Cost of revenues (exclusive of depreciation and amortization)	$	39,219	$	41,288	$	(2,069	)	-5.0	%
Selling, general and administrative expenses	29,767		28,720		1,047			3.6	%
Depreciation and amortization	21,941		18,884		3,057			16.2	%

	$	90,927	$	88,892	$	2,035		2.3	%

By segment —
Data center colocation	$	3,094	$	2,557	$	537		21.0	%
Telecommunications	87,833		86,335		1,498			1.7	%

	$	90,927	$	88,892	$	2,035		2.3	%

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For Six Months

	Six Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Cost of revenues (exclusive of depreciation and amortization)	$	79,402	$	82,236	$	(2,834	)	-3.4	%
Selling, general and administrative expenses	59,499		57,986		1,513			2.6	%
Depreciation and amortization	43,221		37,604		5,617			14.9	%

	$	182,122	$	177,826	$	4,296		2.4	%

By segment —
Data center colocation	$	6,018	$	4,864	$	1,154		23.7	%
Telecommunications	176,104		172,962		3,142			1.8	%

	$	182,122	$	177,826	$	4,296		2.4	%

The increase in operating costs and expenses for the data center colocation segment for the three and six months ended June 30, 2015 compared to the same periods in the prior year is because of greater costs for leased circuits of $0.2 million and $0.4 million, respectively, with increased service volumes. In addition, for the three and six month periods, depreciation increased $0.2 million and $0.3 million, respectively, on asset additions made to support expected business growth.

The change in operating costs and expenses for the telecommunications segment for the three and six months ended June 30, 2015 compared to the same periods in 2014 are the same as those below explaining changes in costs and expenses for all segments.

The Company’s total number of employees on a Company-wide basis as of June 30, 2015 was 1,305 compared to 1,384 as of June 30, 2014. Employee related costs are included in both cost of revenues and selling, general and administrative expenses.

Cost of revenues consists of costs we incur to provide our products and services including those for operating and maintaining our networks, installing and maintaining customer premise equipment, and cost of services sold directly associated with various products. Cost of revenues for the three and six month periods ended June 30, 2015 decreased when compared to the prior year periods because of lower electricity costs of $1.5 million and $2.8 million, respectively, on lower rates and reduced usage from various power saving initiatives.

Selling, general and administrative expenses include costs related to sales and marketing, information systems and other administrative functions. For the three and six months ended June 30, 2015, the increase is because of the pension settlement loss of $1.4 million and $2.2 million, respectively. The settlement loss occurred because of a large number of retirements in the first and second quarters of 2015. It is anticipated that such retirements will slow by the fourth quarter of 2015.

Depreciation and amortization for the three month and six month periods ended June 30, 2015 was higher than the same periods in the prior year because of asset additions to support growth in the business for next-generation services such as video, and higher speed internet and data.

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Other Income and (Expense)

The following tables summarize other income (expense) for the three and six months ended June 30, 2015 and 2014 (dollars in thousands).

For Three Months

	Three Months Ended
	June 30,						Change
	2015			2014			Amount			Percentage

Interest expense	$	(4,166	)	$	(4,109	)	$	(57	)	1.4	%
Interest income and other	4			5			(1		)	-20.0	%

	$	(4,162	)	$	(4,104	)	$	(58	)	1.4	%

For Six Months

	Six Months Ended
	June 30,						Change
	2015			2014			Amount			Percentage

Interest expense	$	(8,503	)	$	(8,298	)	$	(205	)	2.5	%
Interest income and other	11			13			(2		)	-15.4	%

	$	(8,492	)	$	(8,285	)	$	(207	)	2.5	%

Interest expense increased for the three and six month periods because of interest on new installment financing incurred at the end of 2014. Interest capitalized amounted to $0.3 million and $0.5 million for the three and six months ended June 30, 2015, respectively. Interest capitalized amounted to $0.3 million and $0.5 million for the three and six months ended June 30, 2014, respectively.

Income Tax Provision

We had effective tax rates of 58.6% and 46.7% for the three and six months ended June 30, 2015, respectively. We had effective tax rates of 40.6% and 40.9% for the three and six months ended June 30, 2014, respectively. The effective tax rates increased from the prior year periods as permanent differences between financial reporting and income tax income, primarily related to non-deductible compensation, increased relative to pretax income. We consider a variety of factors in determining the effective tax rate, including our forecasted full-year pretax results, the U.S. federal statutory rate, expected nondeductible expenses and estimated state taxes.

As of December 31, 2014, net operating losses available for carry forward through 2034 amounted to $105.9 million for federal purposes and $113.1 million for state purposes. Availability of net operating losses in future periods may be subject to additional limitations if there is a deemed change in control for income tax reporting purposes. Such change in control will be determined for income tax reporting purposes based on cumulative changes in stock ownership over a defined period.

Liquidity and Capital Resources

As of June 30, 2015, we had cash of $28.2 million. From an ongoing operating perspective, our cash requirements in 2015 consist of supporting the development and introduction of new products, capital expenditure projects, pension funding obligations and other changes in working capital. A combination of cash-on-hand and cash generated from operating activities will be used to fund our cash requirements.

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We have continued to take actions to conserve cash and improve liquidity. Efforts have also been taken to generate further operating efficiencies and focus on expense management. We have focused on improving operating results, including efforts to simplify product offerings, improve our customer service experience and increase our revenue enhancement activities. There can be no assurance that these additional actions will result in improved overall cash flow. We continue to have sizable retirement obligations for our existing employee base. Any sustained declines in the value of pension trust assets or higher levels of pension lump sum benefit payments will increase the magnitude of future plan contributions.

Agreements with the Hawaii Public Utilities Commission and the debt agreements of Hawaiian Telcom Communications, Inc. limit the ability of our subsidiaries to pay dividends to the parent company and restrict the net assets of all of our subsidiaries. This can limit our ability to pay dividends to our shareholders. As the parent company has no operations, debt or other obligations, this restriction has no other immediate impact on our operations.

Cash Flows for Six Months Ended June 30, 2015 and 2014

Our primary source of funds continues to be cash generated from operations. We use the net cash generated from operations to fund network expansion and modernization. We expect that our capital spending requirements will continue to be financed through internally generated funds. We also expect to use cash generated in future periods for debt service. Additional debt or equity financing may be needed to fund additional development activities or to maintain our capital structure to ensure financial flexibility.

Net cash provided by operations amounted to $39.8 million for the six months ended June 30, 2015. Our cash flows from operations are impacted by our results of operations, changes in working capital and payments on certain long-term pension liabilities. Net cash provided by operations amounted to $38.6 million for the six months ended June 30, 2014. The increase in cash provided by operations was because of a decline in contributions to our pension plans of $0.9 million from the six months ended June 30, 2014 to the six months ended June 30, 2015.

Cash used in investing activities for the six months ended June 30, 2015 was primarily comprised of capital expenditures of $52.9 million. Cash used in investing activities included capital expenditures of $51.3 million for the six months ended June 30, 2014. The level of capital expenditures for 2015 is expected to be in the high-$90 million range as we invest in systems to support new product introductions and transform our network to enable next-generation technologies.

Cash used in financing activities for the six months ended June 30, 2015 and 2014 was related primarily to the repayment of our debt and satisfaction of other obligations. In addition, we received $3.3 million upon the exercise of warrants for cash.

Outstanding Debt and Financing Arrangements

As of June 30, 2015, we had outstanding $294.6 million in aggregate long-term debt with a maturity date of June 2019. We do not expect to generate the necessary cash flow from operations to repay the facility in its entirety by the maturity date and repayment is dependent on our ability to refinance the credit facility at reasonable terms. The ability to refinance the indebtedness at reasonable terms before maturity cannot be assured.

Contractual Obligations

During the six months ended June 30, 2015, the Company’s future contractual obligations have not changed materially from the amounts disclosed as of December 31, 2014 in our Form 10-K.

We do not maintain any off balance sheet financing or other arrangements.

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Critical Accounting Policies and Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect amounts reported in the consolidated financial statements. Changes in these estimates and assumptions are considered reasonably possible and may have a material effect on the condensed consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein. The Company’s critical accounting policies that require the use of estimates and assumptions were discussed in detail in our Annual Report on Form 10-K for the year ended December 31, 2014, and have not changed materially from that discussion.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

As of June 30, 2015, our floating rate obligations consisted of $294.6 million of debt outstanding under our term loan facility. Accordingly, our earnings and cash flow are affected by changes in interest rates. Based on our borrowings at June 30, 2015 and assuming a 1.0 percentage point increase or decrease in the average interest rate under these borrowings, we estimate that our annual interest expense would increase or decrease by approximately $2.9 million.

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Item 4. Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

Scott K. Barber, Chief Executive Officer, and Dan T. Bessey, Chief Financial Officer, have evaluated the disclosure controls and procedures of Hawaiian Telcom Holdco, Inc. (the “Company”) as of June 30, 2015. Based on their evaluation, as of June 30, 2015, they have concluded that the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were effective in ensuring that information required to be disclosed by the Company in reports the Company files or submits under the Securities Exchange Act of 1934:

(1) is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and

(2) is accumulated and communicated to the Company’s management, including the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Certifications

The certifications attached hereto as Exhibits 31.1, 31.2, 32.1 and 32.2 should be read in conjunction with the disclosures set forth herein.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Other than ordinary routine litigation incidental to the business, we are not involved in any material pending legal proceedings that are likely to have a material adverse effect on us.

Item 1A. Risk Factors

See Part I, Item 1a, “Risk Factors,” of our 2014 Annual Report for a detailed discussion of risk factors related to our business, results of operations and financial condition.

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Item 5. Other Information.

Earnings Release

Hawaiian Telcom Holdco, Inc. issued a press release on August 4, 2015 announcing its 2015 second quarter earnings. This information, attached as Exhibit 99.1, is being furnished to the SEC pursuant to Item 2.02 of Form 8-K.

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Item 6. Exhibits

See Exhibit Index following the signature page of this Report.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HAWAIIAN TELCOM HOLDCO, INC.

August 4, 2015	/s/ Scott K. Barber
	Scott K. Barber
	Chief Executive Officer


August 4, 2015	/s/ Dan T. Bessey
	Dan T. Bessey
	Chief Financial Officer

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EXHIBIT INDEX

3.2		Amended and Restated Bylaws of Hawaiian Telcom Holdco, Inc. effective May 1, 2015 (incorporated by reference to Exhibit 3.2 of the Registrant’s Form 10-Q, File No. 01-34686, filed with the SEC on May 4, 2015).
10.9*		Amended and Restated Employment Offer Letter, effective as of June 12, 2015, by and between Scott K. Barber and Hawaiian Telcom Holdco, Inc.
10.22*		Hawaiian Telcom Holdco, Inc. Amended and Restated Executive Severance Plan, effective June 12, 2015.
10.25		Third Amendment to Amended and Restated Revolving Line of Credit Agreement, dated as of April 9, 2015, by and among Hawaiian Telcom Communications, Inc., First Hawaiian Bank, as agent, and each of the lenders from time to time party thereto (incorporated by reference to Exhibit 10.25 of the Registrant’s Form 10-Q, File No. 01-34686, filed with the SEC on May 4, 2015).
10.26*		Employment Offer Letter, effective as of May 1, 2015, by and between Dan T. Bessey and Hawaiian Telcom Holdco, Inc (incorporated by reference to Exhibit 10.26 of the Registrant’s Form 10-Q, File No. 01-34686, filed with the SEC on May 4, 2015).
31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1		Press Release dated August 4, 2015 announcing second quarter earnings.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Label Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

* Identifies each management contract or compensatory plan or arrangement

Exhibit 10.9

June 12, 2015

Mr. Scott K. Barber

1177 Bishop Street

Honolulu, HI 96813

Dear Scott:

This letter confirms our discussions regarding your employment with Hawaiian Telcom Holdco, Inc. and any of its subsidiaries and affiliates as may employ you from time to time (collectively, and together with any successor thereto, the “ Company “). You and the Company are parties to the Offer Letter dated December 12, 2012 (the “Prior Letter”). The parties desire to amend and restate the Prior Letter in its entirety, effective as of June 22, 2015 (the “Effective Date”), as set forth herein. Notwithstanding anything herein to the contrary, you will be continue to be an at-will employee of the Company.

1. Position: President and Chief Executive Officer.

2. Base Salary: $485,000 per year (the “Base Salary”), payable in accordance with the Company’s customary payroll practices. Paydays are expected to be every other Friday (total of 26 pay days a year). Your paycheck will be delivered to you or made available to you on such dates. If a payday falls on a holiday or weekend, you may pick up your paycheck on the weekday immediately preceding the payday.

3. Annual Performance Award: You will be eligible to participate in an annual performance compensation plan (“Performance Compensation Plan”) established by the Company’s Board of Directors (the “Board”) or Compensation Committee thereof, at a target level that is specified by the Compensation Committee (currently specified as 100% of your eligible salary) as it may be amended from time to time by the Board or Compensation Committee. The actual performance award, if any, shall be pursuant to the terms and conditions set forth in the Performance Compensation Plan and shall be payable at such time as performance awards are paid to other senior executive officers who participate therein. Payment of any annual performance award will be subject to your continued employment with the Company through the date the performance award is paid pursuant to the Performance Compensation Plan.

4. Equity Award: Subject to approval by the Board or the Compensation Committee, you will be eligible to receive equity awards from time to time pursuant to the Company’s 2010 Equity Incentive Plan (beginning with a restricted stock unit (“RSU”) award representing 120% of your annual Base Salary scheduled to be granted in March 2016) with such terms and conditions as determined by the Board or the Compensation Committee, in its sole discretion. In addition, you will receive, effective as of the Effective Date, an RSU award under the Company’s 2010 Equity Incentive Plan of the number of RSUs equal to (i) $351,161 divided by the closing price of the Company’s common stock on the trading day immediately prior to the date in which your position as the Company’s new President and Chief Executive Officer is

effective, which shall be deemed the grant date, minus (ii) 9,841 RSUs, that will have a grant date that is the Effective Date and will be governed by the terms of the Restricted Stock Unit Agreement attached hereto as Exhibit A. It is expressly understood that your entitlement to participation in the 2010 Equity Incentive Plan is not a guarantee that the award referenced herein will attain any particular value in the future.

5. Employee Benefits: You will continue to be eligible to participate in Company employee benefit plans and programs commensurate with your position and seniority. This currently includes five (5) weeks’ vacation for each completed twelve (12) month period of service with a maximum carryover of ten (10) weeks. Please note that the Company reserves the right to change its benefits package at its sole discretion.

6. Severance Benefits: You will continue to be eligible to participate and receive the severance benefits provided in the Company’s Executive Severance Plan (as revised and in effect as of the date hereof—a copy of which is available upon request), subject to all of the terms and conditions thereof. You hereby acknowledge and agree that the only severance benefits you are eligible to receive from the Company will be pursuant to the Executive Severance Plan.

7. Certain Restrictions: You will continue to be bound by the terms of the Hawaiian Telcom Business Protection Agreement (attached as Exhibit B to the Prior Letter) and the Arbitration Agreement (attached as Exhibit C to the Prior Letter). Additionally, you will continue to be subject to the policies, practices and procedures maintained by the Company as set forth in the Company’s Code of Business Conduct, employee handbook and other Company policies, which may be modified from time to time.

8. Interpretation and Severability: The words of this letter will be interpreted according to their common meaning. If any provision of this letter is deemed unenforceable for any reason, said provision will not affect the remaining terms of this letter and a court, upon motion by the Company, may amend said provision so as to render it valid and enforceable while providing to the Company the maximum protections permitted by law. Hawaii law will govern the interpretation and enforcement of this letter.

If you agree with the terms of employment set forth in this letter, please indicate your understanding and agreement by executing in the space provided and returning this letter to me by June 15, 2015. By executing in the space provided, you acknowledge that no promises, representations, understandings or agreements, either oral or in writing, were made with you that are inconsistent with the terms of this letter and that this letter will, in any event, supersede any such prior or contemporaneous promises, representations, understandings, or agreements, including the Prior Agreement.

I look forward to continuing to work with you in building, developing and integrating the Company into a strong business with a positive community presence.

		Sincerely,


		/s/ Richard A. Jalkut
		Richard A. Jalkut
		Chairman of the Board of Directors

Understood, accepted and agreed to effective as of this 12th day of June, 2015


/s/ Scott K. Barber
Signature

Scott K. Barber
Print Name

EXHIBIT A

RSU GRANT AGREEMENT

RESTRICTED STOCK UNIT AGREEMENT FOR EXECUTIVES

PURSUANT TO THE

HAWAIIAN TELCOM 2010 EQUITY INCENTIVE PLAN

* * * * *

Participant:	Scott K. Barber

Grant Date:	June 20, 2015

Total Maximum Number of Restricted Stock Units granted:	5,387 (the “Total Maximum RSUs”)

Total Target Number of Restricted Stock Units:	4,205 (the “Total Target RSUs”)

* * * * *

THIS RESTRICTED STOCK UNIT AWARD AGREEMENT (this “Agreement”), dated as of the Grant Date specified above, is entered into by and between Hawaiian Telcom Holdco, Inc., a Delaware corporation (the “Company”), and the Participant specified above, pursuant to the Hawaiian Telcom 2010 Equity Incentive Plan (the “Plan”), which is administered by the Compensation Committee of the Board of Directors of the Company (the “Committee”); and

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the Restricted Stock Units (“RSUs”) provided herein to the Participant, each of which is a bookkeeping entry representing the equivalent in value of one (1) Share.

NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt. This Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the grant of the RSUs hereunder), all of which terms and provisions are made a part of and incorporated in this Agreement as if they were each expressly set forth herein. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of any conflict between the terms of this Agreement and the terms of the Plan, the terms of the Plan shall control. Any capitalized term not defined in this Agreement shall have the same meaning as is ascribed thereto in the Plan.

2. Grant of Restricted Stock Unit Award. The Company hereby grants to the Participant, as of the Grant Date specified above, the Total Maximum RSUs specified above. The Total Maximum RSUs is determined by adding the Time-Based RSUs and the Maximum Performance-Based RSUs as defined in Section 3(a) below. Except as otherwise provided by the

Plan, the Participant agrees and understands that nothing contained in this Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s interest in the Company for any reason. The Participant shall not have the rights of a stockholder in respect of the Shares underlying this Award until such Shares are delivered to the Participant in accordance with Section 4.

3. Vesting.

(a) General. Except as otherwise provided in this Section 3, RSUs subject to this Award shall vest as follows:

(i) Time-Based RSUs. Fifty percent (50%) of the Total Target RSUs (the “Time-Based RSUs”) shall vest in equal installments of twelve and one-half percent (12.5%) of the Total Target RSUs on March 12, 2016, March 12, 2017, March 12, 2018, and March 12, 2019, (or if the Company’s shares are not traded such day on an established national or regional securities exchange, the vesting date shall be the immediately prior day on which the Company’s shares are traded on an established national or regional securities exchange), subject to the Participant’s continued employment by the Company or one of its Subsidiaries through each such vesting date; and

(ii) Performance-Based RSUs. An amount of RSUs equal to the Target PBRSUs (as defined below) multiplied by 1.5625 (the “Maximum Performance-Based RSUs” or “Maximum PBRSUs”) shall vest on the vesting dates and in the amounts set forth in this Section 3(a)(ii) based upon the Company’s performance over one year for revenue and Adjusted EBITDA and over two years for total shareholder return of the Company in comparison to the NASDAQ Telecommunications Index (the “Index”), subject to the Participant’s continued employment with the Company or one of its Subsidiaries through each vesting date, and provided further, in no event may the Participant vest in any of the PBRSUs pursuant to this Section 3(a)(ii) in the event the FY2015 Adjusted EBITDA performance is below Threshold (as shown in the table below). “Target PBRSUs” shall mean the Total Target RSUs less the Time-Based RSUs. The Committee shall determine the extent to which the performance goals set forth herein are achieved and the total number of PBRSUs that will vest pursuant to this Section 3(a)(ii) in its sole and absolute discretion. For purposes of clarity, in no event may Participant vest in more than the Maximum PBRSUs pursuant to this Section 3(a)(ii).

On the Determination Date (as defined below) and on each of the first two annual anniversaries of the Determination Date, an amount of PBRSUs shall vest equal to the product of A times B times C, where:

A = Total Base Percentage of Target PBRSUs Vested (as defined below);

B = TSR Award Modifier (as defined below); and

C = Sixteen and two-thirds percent (16 2/3%) of the Total Target RSUs.

Notwithstanding the foregoing, the Committee in its sole discretion, after consideration of such factors as it deems appropriate, may reduce the number of Performance-Based RSUs that otherwise would vest pursuant to this Section 3(a)(ii).

For purposes of this Section 3(a)(ii), “Total Base Percentage of Target PBRSUs Vested” shall mean (1) Weighted % Vested from Revenue Performance, plus (2) Weighted % Vested from Adjusted EBITDA Performance, each of which shall be determined as follows:

Weighted % Vested from Revenue Performance

Measurement	Weighting		Factor		Amount ($ in mils)		Base % of Target PBRSUs Vested
FY2015 Revenue	40	%
Threshold			95	%	$	381.4	75	%
Target			100	%	$	401.5	100	%
Maximum			105	%	$	421.6	125	%

Weighted % Vested from Adjusted EBITDA Performance

Measurement	Weighting		Factor		Amount ($ in mils)		Base % of Target PBRSUs Vested
FY2015 Adjusted EBITDA	60	%
Threshold			95	%	$	114.4	75	%
Target			100	%	$	120.4	100	%
Maximum			105	%	$	126.4	125	%

In the event of performance between Threshold and Target or between Target and Maximum, straight-line interpolation will determine the weighted percentages set forth above. If performance is below Threshold, the applicable weighted percentage will equal zero percent (0%). In no event may the Weighted % Vested from Revenue Performance or the Weighted % Vested from Adjusted EBITDA Performance exceed 125%.

For purposes of this Section 3(a)(ii), “TSR Award Modifier” shall have the meaning set forth below based on the Company’s TSR relative performance which shall be equal to the Company TSR, minus the Index TSR (each, as defined below), multiplied by 100%:

Level	TSR Relative Performance (Company TSR minus Index TSR)	TSR Award Modifier
High	+15% and higher	125	%
Target	0%	100	%
Low	-15% and lower	75	%

In the event of TSR relative performance between levels, straight-line interpolation will determine the TSR Award Modifier. The TSR Award Modifier shall never exceed 125% or go below 75%.

For purposes of this Section 3(a)(ii), “TSR” shall mean the aggregate total shareholder return on Shares over the two-year period beginning January 1, 2015 and ending on December 31, 2016 (the “TSR Performance Period”) against the total shareholder return over the same two-year period for the Index. TSR shall be calculated for the Company and Index using:

· A beginning price for the Shares and the Index equal to the trading volume weighted average price over the first 5 trading days in January 2015, and accounting for the reinvestment of dividends over this period (“Beginning Price”), and

· An ending price for the Shares and the Index equal to the trading volume weighted average price over the last 5 trading days in December 2016, and accounting for the reinvestment of dividends over this period (“Ending Price”).

TSR shall be calculated for the Company and the Index as follows:

Company TSR = (Share Ending Price/Share Beginning Price) — 1

Index TSR = (Index Ending Price/ Index Beginning Price) — 1

The “Determination Date” for the Performance-Based RSUs shall be March 12, 2017 or, if later, the date in fiscal year 2017 on which the Committee determines the Total Base Percentage of PBRSUs Vested, the TSR Award Modifier and the total number of RSUs that will be eligible to vest pursuant to this Section 3(a)(ii), if any; provided, however, the Determination Date shall not be later than the earlier of (i) thirty (30) days following the completion of the Company’s final audited financial statement for fiscal year 2016, and (ii) April 30, 2017.

EXAMPLE: Executive is awarded a grant of 10,000 Total Target RSUs (i.e., 5,000 Target PBRSUs). The FY2015 Revenue and FY2015 Adjusted EBITDA both equal or exceed their respective Maximum levels, and the Company TSR outperforms the Index TSR by more than 15%. Accordingly, on the Determination Date and on each of the first two annual anniversaries of the Determination Date, the following amount of PBRSUs (equal to one-third of Executive’s Maximum Performance-Based RSUs) would vest, as follows:

No. of Target PBRSUs				Total Base Percentage of Target PBRSUs Vested				TSR Award Modifier
1,666.66		x		125	%	x		125	%	=		2,604		(rounded down to nearest whole share)

The Shares delivered in respect of PBRSUs that vest pursuant to this Section 3(a)(ii) shall be non-transferable, provided such transfer restrictions shall lapse in equal installments on each of the first three (3) annual anniversaries of the date on which such PBRSUs became vested, except as provided in Sections 3(b) and 3(c) below.

Any determinations made pursuant to Section 3 by the Committee shall be made in the sole and absolute discretion of the Committee and shall be conclusive and binding on the parties for all purposes.

(b) Certain Terminations.

(i) Upon a Participant’s Termination due to the Participant’s death or Disability, unvested RSUs on the date of death or Disability (as determined by the Committee in its sole discretion) shall become vested at the time specified in, and in the pro-rated amount determined pursuant to, Section 3(b)(iii) below. Any such vested RSUs shall be paid as provided in Section 4 and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs shall immediately lapse upon the Participant’s Termination.

(ii) Upon a Participant’s Termination due to the Participant’s Termination by the Company without Cause or Termination by the Participant for Good Reason, unvested RSUs on the date of Termination shall become vested at the time specified in, and in the pro-rated amount determined pursuant to, Section 3(b)(iii) below. Any such vested RSUs shall be paid as provided in Section 4 and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs shall immediately lapse upon the Participant’s Termination.

(iii) For purposes of Sections 3(b)(i) and 3(b)(ii) above, (I) the following number of Time-Based RSUs shall become vested immediately upon Termination (and any remaining unvested Time-Based RSUs shall be forfeited immediately upon Termination): (x) the number of Time-Based RSUs scheduled to vest on the next annual anniversary of the Grant Date, multiplied by (y) the ratio, the numerator of which is the number of days that have elapsed from the immediately preceding anniversary of the Grant Date (or the applicable Grant Date, in the event the date of Termination is less than one year following the Grant Date) to the date of Termination and the denominator of which is 365, and (II) the following number of Performance-Based RSUs shall become vested upon the regularly scheduled vesting date (e.g., the Determination Date or the first or second annual anniversary thereof) next to occur on or after the Termination (and any remaining unvested Performance-Based RSUs shall be forfeited immediately following such Determination Date): (x) the number of Performance-Based RSUs that would otherwise vest on such vesting date based on actual performance as determined pursuant to the provisions of Section 3(a)(ii) above, multiplied by (y) the ratio (A) if the Termination occurs on or before December 31, 2016, the numerator of which is the number of days that elapsed between January 1, 2015 and the Termination and the denominator of which is 730, or (B) if the Termination occurs on or after January 1, 2017, the numerator of which is the number of days that elapsed between the first day of the fiscal year in which the Termination occurred and the Termination and the denominator of which is 365.

(c) Change in Control. Upon the occurrence of a Change in Control while the Participant is employed by the Company or its Subsidiaries, all unvested Time-Based RSUs on the date of the Change in Control shall immediately become vested and be paid as provided in Section 4, and all unvested Maximum Performance-Based RSUs on the date of the Change in Control shall immediately become vested based upon performance as of the date of the Change in Control and be paid as provided in Section 4, and any transfer restrictions applicable to any Shares previously issued upon vesting of Performance-Based RSUs or issued pursuant to this Section 3(c) shall immediately lapse upon the Change in Control.

(d) Leaves of Absence. Notwithstanding anything stated herein or the Plan to the contrary, if the Participant takes a leave of absence, the Company may, at its discretion, suspend vesting during the period of leave to the extent permitted under applicable local law.

(e) Forfeiture. Except as set forth in Section 3(b) above, all unvested RSUs shall be immediately forfeited upon the Participant’s Termination for any reason.

4. Delivery of Shares. Subject to Sections 10 and 13, RSUs shall be automatically settled in Shares upon vesting of such RSUs. In connection with the delivery of the Shares pursuant to this Agreement, the Participant agrees to execute any documents reasonably requested by the Company. In no event shall a Participant be entitled to receive any Shares with respect to any unvested or forfeited portion of the RSU award.

5. Dividends and Other Distributions. The Participant shall be entitled to receive all dividends and other distributions paid with respect to the Shares underlying the RSUs, provided that any such dividends or other distributions will be subject to the same vesting requirements as the underlying RSUs and shall be paid at the time the Shares are delivered pursuant to Section 4.

6. Non-transferability.

(a) Restriction on Transfers. All RSUs, and any rights or interests therein, (i) shall not be sold, exchanged, transferred, assigned or otherwise disposed of in any way at any time by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or by the laws of descent and distribution, (ii) shall not be pledged or encumbered in any way at any time by the Participant (or any beneficiary(ies) of the Participant) and (iii) shall not be subject to execution, attachment or similar legal process. Any attempt to sell, exchange, pledge, transfer, assign, encumber or otherwise dispose of these RSUs, or the levy of any execution, attachment or similar legal process upon these RSUs, contrary to the terms of this Agreement and/or the Plan, shall be null and void and without legal force or effect.

(b) Other Rights. Notwithstanding anything herein to the contrary, the Participant, and any permitted transferee, shall not, directly or indirectly, Transfer any Shares acquired by the Participant or permitted transferee (or his or her estate or legal representative), unless in each such instance the Participant or permitted transferee (or his or her estate or legal representative) shall have first offered to the Company the Shares proposed to be Transferred pursuant to a bona fide offer from a third party. The right of first refusal must be exercised by the Company by delivering to the Participant or permitted transferee (or his or her estate or legal representative) written notice of such exercise within twenty (20) business days of the Company’s receipt of written notification of the proposed sale. Upon the exercise of a right of first refusal, the Shares proposed to be sold shall be purchased by the Company at the price per share offered to be paid by the prospective transferee. The notice of exercise of the right of first refusal shall specify the date and location for the closing of such purchase. This right of first refusal shall expire immediately upon the effectiveness of the filing of a Form 10 with the Securities and Exchange Committee or, if later, the date that the Company’s shares otherwise become registered with the Securities and Exchange Commission.

7. Code Section 409A. For purposes of Code Section 409A, the regulations and other guidance there under and any state law of similar effect (collectively “Section 409A”), each distribution that is made pursuant to this Agreement is hereby designated as a separate payment. The Participant and the Company intend that all distributions made or to be made under this Agreement comply with, or are exempt from, the requirements of Section 409A so that none of the distributions will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be so exempt. Specifically, any distribution made in connection with the Participant’s Termination and paid on or before the 15th day of the 3rd month following the end of the Participant’s first tax year in which the Participant’s Termination occurs or, if later, the 15th day of the 3rd month following the end of the Company’s first tax year in which the Participant’s Termination occurs, shall be exempt from Section 409A to the maximum extent

permitted pursuant to Treasury Regulation Section 1.409A-1(b)(4) and any additional distribution made in connection with the Participant’s Termination under this Agreement shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) (to the extent it is exempt pursuant to such section it will in any event be paid no later than the last day of the Participant’s 2nd taxable year following the taxable year in which the Participant’s Termination occurs). Notwithstanding the foregoing, if any of the distributions provided in connection with the Participant’s Termination do not qualify for any reason to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A- 1(b)(4), Treasury Regulation Section 1.409A-1(b)(9)(iii), or any other applicable exemption and the Participant is, at the time of the Participant’s Termination, a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i), each such distribution will not be made until the first regularly scheduled payroll date of the 7th month after the Participant’s Termination and, on such date (or, if earlier, the date of the Participant’s death), the Participant will receive all distributions that would have been made during such period in a single distribution. Any remaining distributions due under this Agreement shall be made as otherwise provided herein. The determination of whether the Participant is a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i) as of the time of such Termination shall made by the Committee in accordance with the terms of Section 409A.

8. Entire Agreement; Amendment. This Agreement, together with the Plan contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The Committee shall have the right, in its sole discretion, to modify or amend this Agreement from time to time in accordance with and as provided in the Plan. This Agreement may also be modified or amended by a writing signed by both the Company and the Participant. The Company shall give written notice to the Participant of any such modification or amendment of this Agreement as soon as practicable after the adoption thereof.

9. Acknowledgment of Employee. This award of RSUs does not entitle Participant to any benefit other than that granted under this Agreement. Any benefits granted under this Agreement are not part of the Participant’s ordinary salary, and shall not be considered as part of such salary in the event of severance, redundancy or resignation. Participant understands and accepts that the benefits granted under this Agreement are entirely at the discretion of the Company and that the Company retains the right to amend or terminate this Agreement and the Plan at any time, at its sole discretion and without notice.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Hawaii, without reference to the principles of conflict of laws thereof.

11. Withholdings and Required Deductions. Prior to any relevant tax, withholding or required deduction event, as applicable, the Participant agrees to make arrangements satisfactory to the Company for the satisfaction of any applicable tax, withholding, required deduction and payment on account obligations of the Company and/or any Affiliate that arise in connection with the RSUs. In this regard, the Participant authorizes the Company and/or any Affiliate, or their respective agents, at their discretion, to satisfy any obligations related to any taxes or other required deductions applicable to the RSUs by one or a combination of the following: (1) withholding from the Participant’s wages or other cash compensation payable to the Participant

by the Company or any Affiliate; (2) withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on the Participant’s behalf pursuant to this authorization); (3) withholding of Shares that otherwise would be issued upon settlement of the RSUs; or (4) any other arrangement approved by the Company. Unless the tax obligations or other required deductions described herein are satisfied, the Company shall have no obligation to issue a certificate or book-entry transfer for such Shares.

12. No Right to Employment. Any questions as to whether and when there has been a termination of such employment and the cause of such termination shall be determined in the sole discretion of the Committee. Nothing in this Agreement or in the Plan shall interfere with or restrict in any way the rights of the Company or its Subsidiaries to terminate the Participant’s employment or service at any time, for any reason and with or without cause.

13. Notices. Any notice which may be required or permitted under this Agreement shall be in writing, and shall be delivered in person or via facsimile transmission, overnight courier service or certified mail, return receipt requested, postage prepaid, properly addressed as follows:

(a) If such notice is to the Company, to the attention of the General Counsel of the Company or at such other address as the Company, by notice to the Participant, shall designate in writing from time to time.

(b) If such notice is to the Participant, at his/her address as shown on the Company’s records, or at such other address as the Participant, by notice to the Company, shall designate in writing from time to time.

14. Compliance with Laws. This issuance of RSUs (and the Shares underlying the RSUs) pursuant to this Agreement shall be subject to, and shall comply with, any applicable requirements of any foreign and U.S. federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, as amended, the 1934 Act and in each case any respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue these RSUs or any of the Shares pursuant to this Agreement if any such issuance would violate any such requirements.

15. Binding Agreement; Assignment. This Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. The Participant shall not assign (except as provided by Section 6 hereof) any part of this Agreement without the prior express written consent of the Company.

16. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same instrument.

17. Headings. The titles and headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Agreement.

18. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments and documents as either party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement and the Plan and the consummation of the transactions contemplated thereunder.

19. Severability. The invalidity or unenforceability of any provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of any provision of this Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

	HAWAIIAN TELCOM HOLDCO, INC.


	By:	/s/ Dan T. Bessey

	Name:	Dan T. Bessey

	Title:	Senior Vice President and CFO


	PARTICIPANT


	/s/ Scott K. Barber
	Name: Scott K. Barber

Exhibit 10.22

HAWAIIAN TELCOM HOLDCO, INC.
EXECUTIVE SEVERANCE PLAN

(amended and restated effective June 12, 2015)

INTRODUCTION

The purpose of the Hawaiian Telcom Holdco, Inc. Executive Severance Plan (the “Plan”) is to retain key employees and to encourage such employees to use their best business judgment in managing the affairs of Hawaiian Telcom Holdco, Inc. and its subsidiaries and affiliates (the “Company”). Therefore, Hawaiian Telcom Holdco, Inc. is willing to provide the severance benefits described below to protect these employees in the event of an involuntary termination. It is further intended that this Plan will complement other compensation program components to assure a sound basis upon which the Company will retain key employees.

Article 1
Definitions and Exclusions

Whenever used in this Plan, the following words and phrases shall have the meanings set forth below. When the defined meaning is intended, the term is capitalized:

1.1. “Base Salary” means the total amount of base salary payable to a participant at the salary rate in effect immediately prior to the participant’s Separation from Service with the Company. Base Salary does not include bonuses, reimbursed expenses, credits or benefits under any plan of deferred compensation, to which the Company contributes, or any additional cash compensation or compensation payable in a form other than cash.

1.2. “Board of Directors” shall mean the Board of Directors of Hawaiian Telcom Holdco, Inc..

1.3. “Cause” to terminate a participant’s employment shall include any of the following facts or circumstances:

(a) the participant’s failure to follow a legal order of the Board of Directors, other than any such failure resulting from the participant’s Disability, and such failure is not remedied within 30 days after receipt of written notice;

(b) the participant’s gross or willful misconduct in the performance of duties that causes or is reasonably likely to cause damage to the Company;

(d) the participant’s fraud or, other than with respect to a de minimis amount, personal dishonesty involving the Company’s assets; or

(e) the participant’s unlawful use (including being under the influence) or possession of illegal drugs on the Company’s premises or while performing the participant’s duties and responsibilities to the Company.

Prior to a termination pursuant to subsection 1.3(c) above, the Company shall conduct a reasonable investigation to determine, based on the information reasonably available to the Company, whether Cause for termination exists.

1.4. “Compensation Committee” means the Compensation Committee of the Board of Directors.

1.5. “Disability” shall mean the absence of a participant from the participant’s duties to the Company on a full-time basis for a total of 6 months during any 12-month period as a result of incapacity due to mental or physical illness, which determination is made by a physician selected by the Company and acceptable to the participant or the participant’s legal representative (such agreement as to acceptability not to be withheld unreasonably). Notwithstanding the foregoing, a Disability shall not be “incurred” hereunder until, at the earliest, the last day of the 6th month of such absence and in no event shall the participant be determined to be Disabled unless such physician determines that such illness can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

1.6. “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

1.7. “General Release” means a full and complete general waiver and release of all claims that a participant may have against the Company or persons affiliated with the Company in the form provided by the Company.

1.8. “Good Reason” means a participant’s resignation due to the occurrence of any of the following conditions which occurs without the participant’s written consent, provided that the requirements regarding advance notice and an opportunity to cure set forth below are satisfied:

(a) a material diminution in the authority, duties or responsibilities of the participant or the supervisor to whom the participant is required to report;

(b) the Company’s material breach of this Plan or the participant’s employment offer letter or employment agreement (including, without limitation, the Company’s material failure to provide payments or benefits required under this Plan or the participant’s employment offer letter or employment agreement); or

(c) the relocation of the participant’s principal office, without his or her consent, to a location that is in excess of 100 miles from Honolulu, Hawaii.

In order for a participant to resign for Good Reason, the participant must provide written notice to Hawaiian Telcom Holdco, Inc. of the existence of the Good Reason condition within 90 days of the initial existence of such Good Reason condition. Upon receipt of such notice, Hawaiian Telcom Holdco, Inc. will have 30 days during which it may remedy the Good Reason condition. If the Good Reason condition is not remedied within such 30 day period, the participant may resign based on the Good Reason condition specified in the notice effective no later than 30 days following the expiration of Hawaiian Telcom Holdco, Inc.’s 30-day cure period.

1.9. “Involuntary Separation from Service” shall have the meaning set forth in Treasury Regulation 1.409A-1(n).

1.10. “Separation from Service” shall have the meaning set forth in Treasury Regulation 1.409A-1(h).

Article 2
Eligibility for Benefits

2.1. Eligibility. The Company’s executives at the Senior Vice President and higher level, hired by the Company after December 7, 2012, are eligible for Plan benefits. Exceptions (additions or deletions) to the eligibility requirements can be made only by Hawaiian Telcom Holdco, Inc.’s Chief Executive Officer (“CEO”), with the approval of the Compensation Committee.

2.2. Benefits. If a participant experiences (a) a Separation from Service as a result of the participant’s death or Disability or (b) an Involuntary Separation from Service by the Company without Cause or as a result of the participant’s resignation for Good Reason, the Company shall pay to the participant the severance benefits described in Section 3.2. Notwithstanding anything stated herein or in any other plan, program, arrangement or agreement otherwise, a participant receiving benefits under this Plan shall not be eligible for severance benefits under any other severance plan, policy or arrangement sponsored by the Company or any other written agreement by and between the Company and the participant, including without limitation, any employment offer letter or employment agreement, whether entered into before or after this Plan is adopted by the Company.

2.3. Notice of Termination. Any termination of a participant’s employment by the Company or by the participant (other than termination that occurs as a result of the participant’s death) shall be communicated by a written notice to the other party indicating the specific basis for the termination, referencing the applicable provisions of this Plan, and specifying a termination date. Any notice of termination submitted by a participant shall specify a termination date that is at least 30 days following the date of such notice; provided, however, the Company may, in its sole discretion, change the termination date to any date following the Company’s receipt of the notice of termination. Except as set forth below with respect to a termination as a result of a participant’s Disability, any notice of termination submitted by the Company may provide for any termination date (e.g., the date the participant receives the notice of termination, or any date thereafter specified by the Company in its sole discretion). Any notice of termination submitted by the Company where the basis for the termination is a participant’s Disability shall specify a termination date that is 30 days after receipt of such notice by the participant, and participant’s termination shall be effective as of such date,

provided that, within the 30 days after such receipt, the participant shall not have returned to the full-time performance of his or her duties. This Section 2.3 shall be construed in a manner consistent with the requirements of the Americans with Disabilities Act and Hawaii Employment Practices law. The failure by a participant or the Company to set forth in the notice of termination any fact or circumstance that contributes to a showing of Cause or Good Reason shall not waive any right of the participant or the Company or preclude the participant or the Company from asserting such fact or circumstance in enforcing the participant’s or the Company’s rights.

2.4. Plan Administration. The Compensation Committee, or such other committee as may be appointed by the Board of Directors from time to time, shall administer this Plan (the “Plan Administrator”). The Plan Administrator is responsible for the general administration and management of this Plan and shall have all powers and duties necessary to fulfill its responsibilities, including, but not limited to, the discretion to interpret and apply this Plan and to determine all questions relating to eligibility for benefits. This Plan shall be interpreted in accordance with its terms and their intended meanings. However, the Plan Administrator and all plan fiduciaries shall have the discretion to interpret or construe ambiguous, unclear, or implied (but omitted) terms in any fashion they deem to be appropriate in their sole discretion, and to make any findings of fact needed in the administration of this Plan. The validity of any such interpretation, construction, decision, or finding of fact shall not be given de novo review if challenged in court, by arbitration, or in any other forum, and shall be upheld unless clearly arbitrary or capricious.

Article 3
Severance Benefits

3.1. Termination for Cause or Resignation without Good Reason. If a participant’s employment is terminated by the Company for Cause, or by participant without Good Reason, the participant shall not be entitled to any severance payments or benefits.

3.2. Termination.

(a) Termination upon Death or Disability. If a participant experiences a Separation from Service as a result of such participant’s death or Disability, such participant (or the participant’s estate) will receive the following severance payments and benefits from the Company:

(i) Severance Pay. The Company will continue to pay, in separate and distinct equal installment payments in accordance with the Company’s regular payroll practice at the time of the participant’s Separation from Service, the participant’s Base Salary for the period beginning on the date of such Separation from Service and ending, (a) for the CEO, on the twelve (12) month anniversary of the date of the CEO’s Separation from Service, and (b) for participants other than the CEO, on the six (6) month anniversary of the date of the participant’s Separation from Service.

(ii) Performance Compensation Plan Award Severance. The Company will pay the participant a pro-rated amount of his or her annual award under the Company’s Performance Compensation Plan for the year of termination, with such prorated amount equal to the award the participant would have received had he or she continued to be employed by the Company until the date such awards are paid multiplied by a fraction, the numerator of which is the total number of days the participant was employed by the Company during the calendar year and the denominator of which is 365, based on actual performance in relation to the performance targets set forth in the Performance Compensation Plan (such amount to be determined in good faith by the Compensation Committee and paid in the calendar year following the calendar year in which the participant’s Separation from Service occurs at such time as awards are paid to other executive officers who participate in the Performance Compensation Plan).

(b) Termination without Cause or Resignation for Good Reason. If a participant experiences an Involuntary Separation from Service by the Company without Cause or as a result of the participant’s resignation for Good Reason, the participant will receive the following severance payments and benefits from the Company:

(i) Severance Pay.

(A) The Company will continue to pay, in separate and distinct equal installment payments in accordance with Company’s standard payroll procedures at the time of the participant’s Separation from Service, (1) to the CEO, 150% of the CEO’s Base Salary, and (2) to participants other than the CEO, the participant’s Base Salary, in each case for the period beginning on the date of such Separation from Service and ending on the earliest to occur of (a)(i) for the CEO, the eighteen (18) month anniversary of the date of the CEO’s Separation from Service, and (ii) for participants other than the CEO, the twelve (12) month anniversary of the date of the participant’s Separation from Service, (b) the first date the participant violates any restrictive covenant that may be described in his or her employment offer letter or employment agreement, including, without limitation, any non-competition, non-solicitation, non-disparagement or confidentiality covenant, (c) the fifth day following the date of the participant’s termination in the event the Company has not received by that date a General Release executed by the participant and the participant’s voluntary waiver of any review period, or (d) the first date of the participant’s revocation of the General Release (such period ending on the earliest of such dates, the “Severance Period”).

(ii) Health Insurance. Continued coverage (at the Company’s expense), for the Severance Period, for the participant and any dependents under the Company group health plan in which the participant and any dependents were entitled to participate immediately prior to the Separation from Service, excluding Exec-U-Care or similar supplemental coverage policies for senior executives. If the foregoing coverage is not available, and if the participant elects to continue his or her health insurance coverage (excluding Exec-U-Care or similar supplemental coverage policies for senior executives) under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), then the Company will pay 100% of the participant’s monthly premiums due for such COBRA coverage from the first date on which the participant loses health coverage as an employee of the Company (with any payments commencing after such date being made retroactively to such date) through the date the Company has paid for COBRA premiums for a length of time equal to the Severance Period or, if earlier, the expiration of the participant’s coverage under COBRA or the date when the participant receives substantially equivalent health insurance coverage in connection with new employment or self-employment.

(iii) Performance Compensation Plan Award Severance. The Company will pay the participant a pro-rated amount of his or her annual award under the Company’s Performance Compensation Plan for the year of termination, with such prorated amount equal to the award the participant would have received had he or she continued to be employed by the Company until the date such awards are paid multiplied by a fraction, the numerator of which is the total number of days the participant was employed by the Company during the calendar year and the denominator of which is 365, based on actual performance in relation to the performance targets set forth in the Performance Compensation Plan (such amount to be determined in good faith by the Compensation Committee and paid in the calendar year following the calendar year in which the participant’s Separation from Service occurs at such time as awards are paid to other executive officers who participate in the Performance Compensation Plan).

3.3. Code Section 409A. For purposes of Section 409A of the Internal Revenue Code of 1986, as amended, the regulations and other guidance there under and any state law of similar effect (collectively “Section 409A”), each payment that is paid pursuant to this Plan is hereby designated as a separate payment. The parties intend that all payments made or to be made under this Plan comply with, or are exempt from, the requirements of Section 409A so that none of the payments or benefits will be subject to the adverse tax penalties imposed under Section 409A, and any ambiguities herein will be interpreted to so comply or be so exempt. Specifically, any severance payments made in connection with the participant’s Separation from Service under this Plan and paid on or before the 15th day of the 3rd month following the end of the participant’s first tax year in which the participant’s Separation from Service occurs or, if later, the 15th day of the 3rd month following the end of the Company’s first tax year in which the participant’s Separation from Service occurs, shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(4) and any additional severance provided in connection with the participant’s Separation from Service under this Plan shall be exempt from Section 409A to the maximum extent permitted pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) (to the extent it is exempt pursuant to such section it will in any event be paid no later than the last day of the participant’s 2nd taxable year following the taxable year in which the participant’s Separation from Service occurs). Notwithstanding the foregoing, if any of the payments provided in connection with the participant’s Separation from Service do not qualify for any reason to be exempt from Section 409A pursuant to Treasury Regulation Section 1.409A-1(b)(4), Treasury Regulation Section 1.409A-1(b)(9)(iii), or any other applicable exemption and the participant is, at the time of the participant’s Separation from Service, a “specified employee,” as defined in Treasury Regulation Section 1.409A-1(i), each such payment will not be made until the first regularly scheduled payroll date of the 7th month after the participant’s Separation from Service and, on such date (or, if earlier, the date of the participant’s death), the participant will receive all payments that would have been paid during such period in a single lump sum. Any lump sum payment of delayed payments pursuant to the preceding sentence shall be paid with interest to reflect the period of delay, with such interest to accrue at the prime rate in effect at Citibank,

N.A. at the time of the participant’s Separation from Service. Any remaining payments due under the Plan shall be paid as otherwise provided herein. The determination of whether the participant is a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i) as of the time of such Separation from Service shall made by the Company in accordance with the terms of Section 409A.

Article 4
Employment Status

4.1. Right to Terminate Employment. This Plan shall not be deemed to constitute an employment contract between the Company and any participant. Nothing contained herein shall give any participant the right to be retained in the employ of the Company or to interfere with the right of the Company to discharge the participant at any time, nor shall it give the Company the right to require the participant to remain in its employ or to interfere with the participant’s right to terminate employment at any time.

4.2. Status During Benefit Period. Commencing upon the date of the participant’s Separation from Service, the participant shall cease to be an employee of the Company for any purpose. The payment of severance benefits under this Plan shall be payments to a former employee.

Article 5
Claims and Review Procedures

5.1. Claims Procedure. Severance benefits will be provided to each participant in the amount determined hereunder by Hawaiian Telcom Holdco, Inc. If a participant believes he or she has not been provided with the severance pay benefits to which he or she is entitled under this Plan, then the participant may file a request for review within 90 days after the date he or she should have received such benefits according to the Plan. The request for review must be submitted to the Plan Administrator. The Plan Administrator will respond to the request for review within 90 days after it is received, setting forth the reasons for its determination in writing. If the participant’s request for review is denied, the participant or the participant’s duly authorized representative may, within 60 days after receiving written notice of such denial, file a written appeal with the Plan Administrator setting forth the reasons for disagreeing with the initial determination including any documents or records which support the participant’s appeal. The Plan Administrator shall respond to this appeal within 60 days after it is received, setting forth the reasons for its determination in writing. The participant may review pertinent Plan documents and his or her employment records, and as part of the written request for review may submit issues and comments concerning the claim.

5.2. Authority. In determining whether to approve or deny any claim or any appeal from a denied claim, the Plan Administrator shall exercise its discretionary authority to interpret the Plan and the facts presented with respect to the claim, and its discretionary authority to determine eligibility for benefits under the Plan. Any approval or denial shall be final and conclusive upon all persons.

5.3. Exhaustion of Remedies. Except as required by applicable law, no action at law or equity shall be brought to recover a benefit under the Plan unless and until the claimant has: (a) submitted a claim for benefits, (b) been notified by the Plan Administrator that the benefits (or a portion thereof) are denied, (c) filed a written request for a review of denial with the Plan Administrator, and (d) been notified in writing that the denial has been affirmed.

Article 6
Information Required by ERISA

6.1. Plan Information. The Plan is administered by Hawaiian Telcom Holdco, Inc. The Plan sponsor’s and Plan Administrator’s name, address, telephone number, employer identification number and Plan number are as follows:

Plan Name:	Hawaiian Telcom Holdco, Inc. Executive Severance Plan

Plan Sponsor/	Hawaiian Telcom Holdco, Inc.
Administrator:	c/o Compensation Committee
	1177 Bishop Street
	Honolulu, Hawaii 96813

Telephone No.:	(808) 546-4511
Employer I.D. No.:	16-1710376

Plan No.:	507
Plan Year:	January 1 through December 31
Effective Date:	December 17, 2012

6.2. Type of Plan. This is an unfunded welfare benefit severance plan. The Company provides benefits from its general assets.

6.3. Agent for Service of Legal Process. The name and address of the person designated as agent for service of legal process is the same as the name and address of the Plan Administrator.

6.4. Statement of ERISA Rights. Participants in this Plan are entitled to certain rights and protections under ERISA. ERISA provides that all Plan participants shall be entitled to:

(a) Examine, without charge, at the Plan Administrator’s office, all Plan documents, including the Plan instrument (which is this document) and copies of all documents filed by the Plan Administrator with the Department of Labor.

(b) Copies of all Plan documents and other Plan information may also be obtained upon written request to the Plan Administrator; provided, however, that a reasonable charge may be made for copies.

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of this Plan. The people who operate the Plan have a duty to do so prudently and in the interest of Plan participants and beneficiaries. However, employees and agents of the Company carrying out their responsibilities with respect to the Plan are acting as representatives of the Company and not as fiduciaries in their own right. No one, including a participant’s employer or any other person, may fire a participant or otherwise discriminate against a participant in any way to prevent a participant from obtaining benefits or exercising the participant’s rights under ERISA. If a participant’s claim for benefits is denied in whole or in part, the participant must receive a written explanation of the reason for this denial. A participant has the right to have the Plan Administrator review and reconsider the participant’s claim, as described elsewhere in this document.

Under ERISA, there are several steps a participant can take to enforce the above rights. For instance, if a participant requests certain materials required to be furnished by the Plan and the participant does not receive them within 30 days, a participant may file suit in federal court. In such a case, the court may require that the participant be provided with the materials and may fine the Company up to $100 a day until the participant receives them, unless the materials were not sent because of reasons beyond the Plan Administrator’s control. If a participant has a claim for benefits which is denied or ignored in whole or in part, the participant may file suit in a state or federal court. If a participant is discriminated against for asserting the participant’s rights, the participant may seek assistance from the United States Department of Labor or the participant may file suit in federal court. The court will decide who should pay the court costs and legal fees. If a participant is successful, the court may order the person the participant has sued to pay these costs and fees. If a participant loses, the court may order the participant to pay these costs and fees if, for example, it finds the participant’s claim is frivolous.

If any participant has any questions about this Plan, the participant should contact the Plan Administrator. If any participant has any questions about this statement or about the participant’s rights under ERISA, the participant should contact the nearest office of the Labor-Management Services Administration, United States Department of Labor.

6.5. Plan Administration and Interpretations. Hawaiian Telcom Holdco, Inc. is the named fiduciary, which has the authority to control and manage the operation and administration of the Plan. Hawaiian Telcom Holdco, Inc. shall make such rules, regulations and computations and shall take such other actions to administer the Plan as it may deem appropriate. Hawaiian Telcom Holdco, Inc. shall have sole and complete discretion to interpret and administer the terms of the Plan and to determine eligibility for benefits and the amount of any such benefits pursuant to the terms of the Plan. In administering the Plan, Hawaiian Telcom Holdco, Inc. shall act in a nondiscriminatory manner to the extent legally required and shall at all times discharge its duties with respect to the Plan in accordance with the standards set forth in Section 404(a)(1) and other applicable sections of ERISA.

Article 7
Amendment and Termination

It is intended that the Plan shall continue from year to year, subject to an annual review by the Board of Directors or the Compensation Committee. However, the Board of Directors and the Compensation Committee reserves the right to modify, amend or terminate the Plan at any time; provided, that no amendment or termination shall be made that would materially and adversely affect the rights of any participant without his or her consent.

Article 8
Miscellaneous

8.1. Benefits Non-Assignable. No right or interest of a participant in this Plan shall be assignable or transferable, in whole or in part, either directly or by operation of law or otherwise, including but not by way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy, assignments for the benefit of creditors, receiverships, or in any other manner, excluding transfer by operation of law as a result solely of mental incompetency.

8.2. Withholding and Required Deductions. The severance benefits payable under this Plan are subject to all withholding and any other deductions required by applicable law.

8.3. Applicable Law. This Plan is a welfare plan subject to ERISA and it shall be interpreted, administered, and enforced in accordance with that law.

8.4. Severability. If any provision of this Plan is held invalid or unenforceable by a court of competent jurisdiction, all remaining provisions shall continue to be fully effective.

8.5. Binding Agreement. This Plan shall be binding upon and inure to the benefit of the Company, its successors and assigns, and the participants and their heirs, executors, administrators and legal representatives.

IN WITNESS WHEREOF, Hawaiian Telcom Holdco, Inc. has caused this amended and restated Plan to be executed by its duly authorized officer effective as of the 12th day of June, 2014.

	HAWAIIAN TELCOM HOLDCO, INC.


	By:	/s/ Eric K. Yeaman
		Eric K. Yeaman
		Its President and Chief Executive Officer

Exhibit 31.1

Certification Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

I, Scott K. Barber, Chief Executive Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hawaiian Telcom Holdco, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 4, 2015	/s/ Scott K. Barber
	Scott K. Barber
	Chief Executive Officer

Exhibit 31.2

Certification Pursuant To Section 302 of the Sarbanes-Oxley Act of 2002

I, Dan T. Bessey, Chief Financial Officer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Hawaiian Telcom Holdco, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 4, 2015	/s/ Dan T. Bessey
	Dan T. Bessey
	Chief Financial Officer

Exhibit 32.1

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hawaiian Telcom Holdco, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Scott K. Barber, Chief Executive Officer, certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 4, 2015	/s/ Scott K. Barber
	Scott K. Barber
	Chief Executive Officer

Exhibit 32.2

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Hawaiian Telcom Holdco, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Dan T. Bessey, Chief Financial Officer, certify, pursuant to 18 U.S.C.§1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 4, 2015	/s/ Dan T. Bessey
	Dan T. Bessey
	Chief Financial Officer

Exhibit 99.1

Investor Relations Contact:

Ngoc Nguyen

(808) 546-3475

ngoc.nguyen@hawaiiantel.com

Media Contact:

Su Shin

(808) 546-2344

su.shin@hawaiiantel.com

For Immediate Release

Hawaiian Telcom Reports Second Quarter 2015 Results

Achieved consumer revenue growth of 4.2 percent

Strong Hawaiian Telcom TV subscriber growth of 2,200

Delivered data center growth of 19.8 percent

Launched Hawai‘i’s only 1 Gbps Internet service

Nearly $30 million of trans-Pacific submarine cable capacity sales to date

HONOLULU (Tuesday, August 4, 2015) — Hawaiian Telcom Holdco, Inc. (NASDAQ: HCOM) reported financial results for its second quarter ended June 30. The highlights are as follows:

· Consumer revenue increased 4.2 percent year-over-year to $37.9 million, driven by growth in video and high-speed Internet (HSI) revenue of $2.8 million and $0.6 million, respectively.

· Added 2,200 Hawaiian Telcom TV subscribers during the second quarter, ending the quarter with approximately 31,900 subscribers, resulting in penetration of 18.2 percent of households enabled.

· Data center revenue increased 19.8 percent year-over-year to $2.8 million, driven by growth in colocation services and data security related sales.

· Revenue totaled $96.2 million, compared to $96.8 million in the second quarter of 2014.

· Adjusted EBITDA(1) of $29.8 million, up 2.6 percent year-over-year.

· Generated net income of $0.5 million, or $0.04 per diluted share for the quarter, compared to $2.2 million or $0.20 per diluted share in the same period a year ago. The decrease was primarily due to an anticipated $3.1 million year-over-year increase in depreciation and amortization as a result of significant investments to expand the Company’s next-generation broadband fiber network.

· Enabled 9,000 households in the quarter, increasing enabled households on O‘ahu to 175,000.

· Launched Hawai‘i’s fastest Internet service featuring 1 Gbps download speed, further leveraging the capability of the Company’s next-generation fiber network.

· Nearly $30 million of total capacity sales on the Southeast Asia — United States (SEA-US) trans-Pacific submarine fiber cable system to date, with additional capacity available to monetize further.

“Our second quarter operating fundamentals are strong, laying a firm foundation for future revenue growth,” said Scott Barber, Hawaiian Telcom’s president and CEO. “We continued to see industry leading growth in our consumer channel with healthy demand for our Hawaiian Telcom TV and high-speed Internet services, now up to 1 Gig, made possible by our next-generation fiber optic network.

“In the business channel, high-speed Internet and data center revenue showed solid growth, resulting from Hawaiian Telcom’s well-earned reputation in the marketplace as not just a service provider but, more importantly, as a strategic and trusted business partner, helping our customers transform their businesses with our integrated end-to-end solutions.

“In the wholesale channel, in less than four months after starting construction on the SEA-US trans-Pacific submarine fiber cable project, we have secured capacity sales totaling nearly $30 million. With robust interest in this capacity, we are confident that we will further monetize this asset.

“As Hawai‘i’s technology leader and the only local full-service communications company in the marketplace, we are in a unique position to provide our customers with exceptional customer service coupled with products and services tailored to meet their needs. We are confident in our ability to continue to execute on our strategic plan and fully committed to increasing long-term value for our shareholders,” concluded Barber.

Second Quarter 2015 Results

Second quarter revenue was $96.2 million, compared to $96.8 million in the second quarter of 2014. Revenue growth in the quarter, driven by video, HSI, and data center and cloud services was offset by the impact from a 6 percent decline in access lines and a $0.5 million decrease in wholesale carrier data revenue, primarily due to special one-time customer charges in 2014. Adjusted EBITDA was $29.8 million, up 2.6 percent year-over-year from our growth and cost saving initiatives.

The Company generated net income of $0.5 million, or $0.04 per diluted share for the quarter, compared to $2.2 million or $0.20 per diluted share in the second quarter of 2014. The decrease was primarily due to a $3.1 million expected increase in depreciation and amortization as a result of significant investments made to the Company’s broadband fiber network.

Consumer Revenue

Second quarter consumer revenue totaled $37.9 million, up 4.2 percent year-over-year driven by revenue growth from the Company’s Hawaiian Telcom TV and HSI services. Revenue growth in video and HSI services continues to more than offset lower revenue from legacy services, and combined video and HSI services now represent 43 percent of consumer revenue, up from 36 percent in the same period a year ago, and 28 percent in the same period two years ago.

Video service revenue grew to $8.3 million for the quarter, up from $5.5 million in the same period a year ago, driven by the addition of approximately 8,800 subscribers for a total of approximately 31,900 subscribers at the end of the second quarter. Hawaiian Telcom TV average revenue per user (ARPU) was up approximately 6.5 percent year-over-year. During the quarter, 9,000 additional households were enabled, increasing the total number of households enabled to 175,000 with approximately 58 percent of those households capable of utilizing fiber-to-the-premise technology. Hawaiian Telcom TV penetration of households enabled was approximately 18.2 percent at the end of the second quarter.

Consumer HSI revenue also improved from the same period a year ago, led by a 2.1 percent year-over-year increase in consumer HSI subscribers to approximately 93,300 and a 4.3 percent increase in consumer HSI ARPU due to increased adoption of higher speed offerings. As of June 30, 2015, approximately 93 percent of all video subscribers had double- or triple-play bundles with HSI. Revenue increases from video and HSI more than offset legacy revenue declines related to consumer voice access and long distance line losses of 9.6 percent and 9.4 percent year-over-year, respectively.

Business Revenue

Second quarter business revenue totaled $41.2 million, compared to $42.1 million in the second quarter of 2014. Growth from next-generation services, primarily from a 19.8 percent year-over-year increase in data center revenue and the impact from a 1.5 percent increase in business HSI customers, was more than offset by the year-over-year decline in legacy business access and long distance revenues. Driven by increasing customer demand for higher bandwidth services and integrated communications solutions, next-generation services now represent 31 percent of business revenue, up from 29 percent in the same period a year ago, and 22 percent in the same period two years ago.

Wholesale Revenue

Second quarter wholesale revenue totaled $15.0 million, compared to $15.8 million in the second quarter of 2014. Wholesale carrier data revenue was $13.8 million, compared to $14.3 million in the same period a year ago, primarily due to special one-time customer charges in the second quarter of 2014. Switched carrier access revenue declined $0.3 million year-over-year to $1.2 million, attributable to both the overall decline in voice access lines and minutes of use and the impact of intercarrier compensation reform.

Operating Expenses, Capital Expenditures and Liquidity

Operating expenses, exclusive of depreciation and amortization, non-cash stock compensation, SystemMetrics earn-out and other non-recurring charges, decreased 2.0 percent to $66.4 million. The increase in direct cost of services related to video was more than offset by lower utilities costs, decreased contracted services costs, and a decline in costs related to employee benefits.

Capital expenditures totaled $52.9 million in the six months ended June 30, 2015, up from $51.3 million for the six-month period a year ago primarily due to the first SEA-US payment of $2.3 million, as well as higher success-based spending to support the growth of our next-generation services. Overall, total capital expenditures for 2015 are expected to be in the high- $90 million range, consistent with the level of capital spending in 2014.

At the end of second quarter 2015, the Company had $28.2 million in cash and cash equivalents compared to $39.9 million at the end of 2014. The use of cash is primarily related to higher levels of success-based capital expenditures and temporary uses of working capital. Net Debt(2) was $263.1 million, resulting in a Net Leverage Ratio(3) as of June 30, 2015 of 2.2x.

Conference Call

The Company will host a conference call to discuss its second quarter 2015 results at 8:00 a.m. (Hawai‘i Time), or 2:00 p.m. (Eastern Time) on Tuesday, August 4, 2015.

To access the call, participants should dial (866) 953-6857 (US/Canada), or (617) 399-3481 (International) ten minutes prior to the start of the call and enter passcode 70422802.

A live webcast of the conference call, including a slide presentation, will be available from the Investor Relations section of the Company’s website at http://hawaiiantel.com. The webcast will be archived at the same location.

A telephonic replay of the conference call will be available three hours after the conclusion of the call until 11:59 p.m. (Eastern Time) August 11, 2015. Access the replay by dialing (888) 286-8010 and entering passcode 87278942. Alternatively, the replay can be accessed by dialing (617) 801-6888 and entering passcode 87278942.

Use of Non-GAAP Financial Measures

This press release contains information about adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) and Net Debt. These are non-GAAP financial measures used by Hawaiian Telcom management when evaluating results of operations. Management believes these measures also provide users of the financial statements with additional and useful comparisons of current results of operations with past and future periods. Non-GAAP financial measures should not be construed as being more important than comparable GAAP measures. Detailed reconciliations of Adjusted EBITDA and Net Debt to comparable GAAP financial measures have been included in the tables distributed with this release and are available in the Investor Relations section of www.hawaiiantel.com.

Forward-Looking Statements

In addition to historical information, this release includes certain statements and predictions that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, any statement, projection or estimate that includes or references the words “believes”, “anticipates”, “intends”, “expected”, or any similar expression falls within the safe harbor of forward-looking statements contained in the Reform Act. Actual results or outcomes may differ materially from those indicated or suggested by any such forward-looking statement for a variety of reasons, including, but not limited to: failures in Hawaiian Telcom’s critical back office systems and IT infrastructure; breach of the our data security systems; increases in the amount of capital expenditures required to execute our business plan; the loss of certain outsourcing agreements, or the failure of any third party to perform under these agreements; our ability to sell capacity on the new submarine fiber cable project; adverse changes to applicable laws and regulations; the failure to adequately adapt to technological changes in the telecommunications industry, including changes in consumer technology preferences; adverse economic conditions in Hawai‘i; the availability of lump sum distributions under our union pension plan; limitations on the ability to utilize net operating losses due to an ownership change under Internal Revenue Code Section 382; the inability to service our indebtedness; limitations imposed on our business from restrictive covenants in the credit agreements; and severe weather conditions and natural disasters. More information on potential risks and uncertainties is available in recent filings with the Securities and Exchange Commission, including Hawaiian Telcom’s 2014 Annual Report on Form 10-K. The information contained in this release is as of August 4, 2015. It is anticipated that subsequent events and developments may cause estimates to change, and the Company undertakes no duty to update forward-looking statements.

About Hawaiian Telcom

Hawaiian Telcom (Nasdaq: HCOM), headquartered in Honolulu, is Hawai‘i’s technology leader, providing integrated communications, broadband, data center and entertainment solutions for business and residential customers. With roots in Hawai‘i beginning in 1883, the Company offers a full range of services including Internet, video, voice, wireless, data network solutions and security, colocation, and managed and cloud services supported by the reach and reliability of its next generation fiber network and a 24/7 state-of-the-art network operations center. With employees statewide sharing a commitment to innovation and a passion for delivering superior service, Hawaiian Telcom provides an Always OnSM customer experience. For more information, visit www.hawaiiantel.com.

(1) Adjusted EBITDA is EBITDA plus non-cash stock compensation, SystemMetrics earn-out and other non-recurring costs not expected to occur regularly in the ordinary course of business. EBITDA is defined as net income plus interest expense (net of interest income and other), income taxes, depreciation and amortization and gain on sale of property. The Company believes both of these non-GAAP measures, Adjusted EBITDA and EBITDA, are meaningful performance measures for investors because they are used by our Board and management to evaluate performance, enhance comparability between periods and make operating decisions. Our use of Adjusted EBITDA and EBITDA may not be comparable to similarly titled measures used by other companies in the telecommunications industry. A detailed reconciliation of adjusted Adjusted EBITDA and EBITDA to comparable GAAP financial measures has been included in the tables distributed with this release.

(2) Net Debt provides a useful measure of liquidity and financial health. The Company defines Net Debt as the sum of the face amount of short-term and long-term debt and unamortized premium and/or discount, offset by cash and cash equivalents. A detailed reconciliation of Net Debt has been included in the tables distributed with this release.

(3) Net Leverage Ratio is defined by the Company as Net Debt divided by Last Twelve Months Adjusted EBITDA. A detailed reconciliation of Net Leverage Ratio has been included in the tables distributed with this release.

(4) Levered Free Cash Flow provides a useful measure of operational performance and liquidity. The Company defines Levered Free Cash Flow as Adjusted EBITDA less cash interest expense and capital expenditures. A detailed reconciliation of Levered Free Cash Flow has been included in the tables distributed with this release.

Hawaiian Telcom Holdco, Inc.

Consolidated Statements of Income

(Unaudited, dollars in thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2015			2014			2015			2014

Operating revenues	$	96,187		$	96,784		$	193,303		$	193,856

Operating expenses:
Cost of revenues (exclusive of depreciation and amortization)	39,219			41,288			79,402			82,236
Selling, general and administrative	29,767			28,720			59,499			57,986
Depreciation and amortization	21,941			18,884			43,221			37,604

Total operating expenses	90,927			88,892			182,122			177,826

Operating income	5,260			7,892			11,181			16,030

Other income (expense):
Interest expense	(4,166		)	(4,109		)	(8,503		)	(8,298		)
Interest income and other	4			5			11			13

Total other expense	(4,162		)	(4,104		)	(8,492		)	(8,285		)

Income before income tax provision	1,098			3,788			2,689			7,745

Income tax provision	643			1,549			1,257			3,141

Net income	$	455		$	2,239		$	1,432		$	4,604

Net income per common share -
Basic	$	0.04		$	0.21		$	0.13		$	0.44
Diluted	$	0.04		$	0.20		$	0.13		$	0.41

Weighted average shares used to compute net income per common share -
Basic	10,797,111			10,585,736			10,744,944			10,557,047
Diluted	11,258,178			11,263,618			11,261,535			11,300,608

Hawaiian Telcom Holdco, Inc.

Consolidated Balance Sheets

(Unaudited, dollars in thousands, except per share amounts)

	June 30,			December 31,
	2015			2014

Assets

Current assets
Cash and cash equivalents	$	28,228		$	39,885
Receivables, net	34,053			32,662
Material and supplies	9,792			9,337
Prepaid expenses	5,334			3,598
Deferred income taxes	6,840			6,840
Other current assets	3,289			3,481
Total current assets	87,536			95,803
Property, plant and equipment, net	570,667			565,956
Intangible assets, net	36,079			37,328
Goodwill	12,104			12,104
Deferred income taxes	79,213			81,626
Other assets	10,513			9,151

Total assets	$	796,112		$	801,968

Liabilities and Stockholders’ Equity

Current liabilities
Current portion of long-term debt	$	3,000		$	3,000
Accounts payable	45,797			50,499
Accrued expenses	16,102			19,399
Advance billings and customer deposits	15,354			14,686
Other current liabilities	7,488			6,790
Total current liabilities	87,741			94,374
Long-term debt	288,307			289,423
Employee benefit obligations	93,728			99,366
Other liabilities	15,774			14,271
Total liabilities	485,550			497,434

Commitments and contingencies (Note 11)

Stockholders’ equity
Common stock, par value of $0.01 per share, 245,000,000 shares authorized and 11,005,434 and 10,673,292 shares issued and outstanding at June 30, 2015 and December 31, 2014, respectively	110			107
Additional paid-in capital	173,831			170,521
Accumulated other comprehensive loss	(22,664		)	(23,947		)
Retained earnings	159,285			157,853
Total stockholders’ equity	310,562			304,534

Total liabilities and stockholders’ equity	$	796,112		$	801,968

Hawaiian Telcom Holdco, Inc.

Consolidated Statements of Cash Flows

(Unaudited, dollars in thousands)

	Six Months Ended
	June 30,
	2015			2014

Cash flows from operating activities:
Net income	$	1,432		$	4,604
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	43,221			37,604
Employee retirement benefits	(3,565		)	(6,494		)
Provision for uncollectibles	1,634			1,478
Stock based compensation	900			2,099
Deferred income taxes	1,621			3,544
Changes in operating assets and liabilities:
Receivables	(3,025		)	979
Material and supplies	(92		)	121
Prepaid expenses and other current assets	(1,944		)	(2,090		)
Accounts payable and accrued expenses	(2,037		)	(3,896		)
Advance billings and customer deposits	668			(181		)
Other current liabilities	(465		)	113
Other	1,445			758
Net cash provided by operating activities	39,793			38,639

Cash flows from investing activities:
Capital expenditures	(52,916		)	(51,315		)
Funds released from restricted cash account	400			—
Net cash used in investing activities	(52,516		)	(51,315		)

Cash flows from financing activities:
Proceeds from stock issuance	3,341			—
Proceeds from installment financing	2,279			2,085
Repayment of capital lease and installment financing	(1,976		)	(856		)
Repayment of debt	(1,500		)	(1,500		)
Refinancing costs	(150		)	—
Taxes paid related to net share settlement of equity awards	(928		)	(1,005		)
Net cash provided by (used in) financing activities	1,066			(1,276		)

Net change in cash and cash equivalents	(11,657		)	(13,952		)
Cash and cash equivalents, beginning of period	39,885			49,551

Cash and cash equivalents, end of period	$	28,228		$	35,599

Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	7,604		$	7,433

Hawaiian Telcom Holdco, Inc.

Revenue by Category and Channel

(Unaudited, dollars in thousands)

For Three Months

	Three Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Wireline Services
Local voice services	$	30,864	$	33,077	$	(2,213	)	-6.7	%
Network access services
Business data	6,704		6,712		(8		)	-0.1	%
Wholesale carrier data	13,789		14,280		(491		)	-3.4	%
Subscriber line access charge	8,562		9,030		(468		)	-5.2	%
Switched carrier access	1,206		1,488		(282		)	-19.0	%
	30,261		31,510		(1,249		)	-4.0	%
High-Speed Internet	11,342		10,753		589			5.5	%
Video	8,280		5,474		2,806			51.3	%
Long distance services	5,104		5,716		(612		)	-10.7	%
Equipment and managed services	4,779		4,723		56			1.2	%
Wireless	427		539		(112		)	-20.8	%
Other	2,346		2,669		(323		)	-12.1	%
	93,403		94,461		(1,058		)	-1.1	%
Data center colocation	2,784		2,323		461			19.8	%
	$	96,187	$	96,784	$	(597	)	-0.6	%

Channel
Business	$	41,181	$	42,068	$	(887	)	-2.1	%
Consumer	37,881		36,349		1,532			4.2	%
Wholesale	14,995		15,768		(773		)	-4.9	%
Other	2,130		2,599		(469		)	-18.0	%
	$	96,187	$	96,784	$	(597	)	-0.6	%

For Six Months

	Six Months Ended
	June 30,				Change
	2015		2014		Amount			Percentage

Wireline Services
Local voice services	$	62,633	$	66,852	$	(4,219	)	-6.3	%
Network access services
Business data	13,710		13,336		374			2.8	%
Wholesale carrier data	28,122		28,666		(544		)	-1.9	%
Subscriber line access charge	17,218		18,199		(981		)	-5.4	%
Switched carrier access	2,518		3,040		(522		)	-17.2	%
	61,568		63,241		(1,673		)	-2.6	%
High-Speed Internet	22,670		21,297		1,373			6.4	%
Video	15,802		10,228		5,574			54.5	%
Long distance services	10,412		11,622		(1,210		)	-10.4	%
Equipment and managed services	9,043		9,212		(169		)	-1.8	%
Wireless	877		1,132		(255		)	-22.5	%
Other	4,917		5,544		(627		)	-11.3	%
	187,922		189,128		(1,206		)	-0.6	%
Data center colocation	5,381		4,728		653			13.8	%
	$	193,303	$	193,856	$	(553	)	-0.3	%

Channel
Business	$	82,757	$	84,579	$	(1,822	)	-2.2	%
Consumer	75,414		72,171		3,243			4.5	%
Wholesale	30,640		31,706		(1,066		)	-3.4	%
Other	4,492		5,400		(908		)	-16.8	%
	$	193,303	$	193,856	$	(553	)	-0.3	%

Hawaiian Telcom Holdco, Inc.

Schedule of Adjusted EBITDA Calculation

(Unaudited, dollars in thousands)

	Three Months Ended				Six Months Ended				LTM Ended
	June 30,				June 30,				June 30,
	2015		2014		2015		2014		2015

Net income	$	455	$	2,239	$	1,432	$	4,604	$	4,927
Income tax provision	643		1,549		1,257		3,141		4,026
Interest expense and other income and expense, net	4,162		4,104		8,492		8,285		16,669
Depreciation and amortization	21,941		18,884		43,221		37,604		83,631
EBITDA	27,201		26,776		54,402		53,634		109,253
Non-cash stock compensation	525		1,025		900		2,099		2,975
SystemMetrics earn-out	272		272		544		544		1,087
Non-recurring costs	394		969		869		1,644		1,673
Pension settlement loss	1,397		—		2,248		—		2,248
Severance costs	—		—		—		—		197
Wavecom integration costs	—		—		—		178		161
Storm Iselle costs	—		—		—		—		1,077

Adjusted EBITDA	$	29,789	$	29,042	$	58,963	$	58,099	$	118,671

Hawaiian Telcom Holdco, Inc.

Schedule of Net Leverage Ratio Calculation

(Unaudited, dollars in thousands)

Long-term debt as of June 30, 2015	$	291,307
Less cash on hand	(28,228		)
Total Net Debt as of June 30, 2015	$	263,079

LTM Adjusted EBITDA as of June 30, 2015	$	118,671

Net Leverage Ratio as of June 30, 2015	2.2		x

Hawaiian Telcom Holdco, Inc.

Schedule of Levered Free Cash Flow(4) Calculation

(Unaudited, dollars in thousands)

	Three Months Ended						Six Months Ended						LTM Ended
	June 30,						June 30,						June 30,
	2015			2014			2015			2014			2015

Adjusted EBITDA	$	29,789		$	29,042		$	58,963		$	58,099		$	118,671
Cash interest expense	(3,651		)	(3,609		)	(7,604		)	(7,433		)	(14,838		)
Capital expenditures	(23,744		)	(27,376		)	(52,916		)	(51,315		)	(98,307		)

Levered Free Cash Flow	$	2,394		$	(1,943	)	$	(1,557	)	$	(649	)	$	5,526

Hawaiian Telcom Holdco, Inc.

Volume Information

(Unaudited)

	June 30,	June 30,	Change
	2015	2014	Number		Percentage

Voice access lines
Residential	160,819	177,953	(17,134	)	-9.6	%
Business	185,975	190,754	(4,779	)	-2.5	%
Public	3,638	4,028	(390	)	-9.7	%
	350,432	372,735	(22,303	)	-6.0	%

High-Speed Internet lines
Residential	93,338	91,405	1,933		2.1	%
Business	19,759	19,465	294		1.5	%
Wholesale	749	866	(117	)	-13.5	%
	113,846	111,736	2,110		1.9	%

Long distance lines
Residential	101,648	112,231	(10,583	)	-9.4	%
Business	75,719	78,522	(2,803	)	-3.6	%
	177,367	190,753	(13,386	)	-7.0	%

Video services
Subscribers	31,921	23,101	8,820		38.2	%
Homes Enabled	175,000	142,000	33,000		23.2	%

	June 30,	March 31,	Change
	2015	2015	Number		Percentage

Voice access lines
Residential	160,819	165,074	(4,255	)	-2.6	%
Business	185,975	187,300	(1,325	)	-0.7	%
Public	3,638	3,733	(95	)	-2.5	%
	350,432	356,107	(5,675	)	-1.6	%

High-Speed Internet lines
Residential	93,338	93,090	248		0.3	%
Business	19,759	19,624	135		0.7	%
Wholesale	749	796	(47	)	-5.9	%
	113,846	113,510	336		0.3	%

Long distance lines
Residential	101,648	104,527	(2,879	)	-2.8	%
Business	75,719	76,916	(1,197	)	-1.6	%
	177,367	181,443	(4,076	)	-2.2	%

Video services
Subscribers	31,921	29,721	2,200		7.4	%
Homes Enabled	175,000	166,000	9,000		5.4	%