Exhibit 99.2
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated financial information has
been derived by the application of pro forma adjustments to our historical
consolidated financial statements included elsewhere in this document. The pro
forma adjustments give effect to:
. the issuance of 3.7 million shares of our common stock for all of the
stock of R&B Communications. This merger has been accounted for using the
purchase method of accounting.
. the acquisition of Richmond-Norfolk PCS for cash of $407.3 million, our
22% limited partnership interest in RSA 5, the analog assets and
operations of RSA 6 and the assumption of $20.0 million of lease
obligations. This acquisition has been accounted for using the purchase
method of accounting.
. the increase in our common ownership in the Virginia Alliance and West
Virginia Alliance of 70.3% and 34.3%, respectively, and the subsequent
consolidation (entities were previously accounted for on the equity
method) due to:
-- our merger with R&B Communications, which owns approximately 20.8% and
34.3% of the common interests of the Virginia Alliance and the West
Virginia Alliance, respectively;
-- the Virginia Alliance's redemption of its Series A preferred
membership interests for $16.8 million; and
-- the conversion by us and R&B Communications of our respective Series B
preferred membership interests in the Virginia Alliance into common
interests.
The increase in our common ownership interests in the Alliances has been
accounted for as a step acquisition.
. the sale of the capital stock of CFW Information Services Inc., the
provider of our directory assistance services.
. the adjustment to rental expense, depreciation expense and the
amortization of deferred gain associated with the sale and leaseback of
certain communications tower sites.
. the like-kind exchange of certain WCS licenses for certain AT&T PCS
licenses, which has no effect on the pro forma balance sheet or statement
of operations.
. the sale of $375 million of debt securities in a private placement and the
closing of a new senior credit facility.
. the sale of our Series B, Series C and Series D Preferred Stock for gross
proceeds of $225.0 million.
. the repayment of substantially all of our existing indebtedness and that
of the Alliances.
. the payment of fees and expenses related to the Transactions (as defined
below).
The term "Transactions" refers to:
. the issuance and sale of $375 million of debt securities in a private
placement;
. the anticipated borrowings under the new senior credit facility;
. the repayment of our existing senior indebtedness;
. the sale and issuance of our Series B, Series C and Series D Preferred
Stock;
. our acquisition of Richmond-Norfolk, PCS;
. our merger with R&B Communications;
. our acquisition of PCS licenses from AT&T and disposition of WCS licenses
to AT&T;
1
. our consolidation of the Virginia Alliance and the West Virginia
Alliance;
. our dispositions of RSA 5 and RSA 6; and
. our disposition of our directory assistance operations.
Our unaudited pro forma consolidated balance sheet as of March 31, 2000 has
been prepared as if the Transactions had occurred on that date. The unaudited
pro forma consolidated statements of operations for the periods presented give
effect to the Transactions as if they had occurred January 1, 1999. The
adjustments, which are based upon available information and upon certain
assumptions that we believe are reasonable, are described in the accompanying
notes. The actual allocation of these adjustments will be different and the
difference may be material.
The unaudited pro forma consolidated financial statements should not be
considered indicative of actual results that would have been achieved had the
Transactions been consummated on the date or for the periods indicated and do
not purport to indicate balance sheet data or results of operations as of any
future date or for any future period.
The unaudited pro forma consolidated financial information should be read in
conjunction with the historical financial statements and the notes thereto
included elsewhere in this document.
2
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
as of March 31, 2000
(in thousands)
Acquisitions
-------------------------------------------
Richmond - West
Norfolk Virginia Virginia Pro Forma
CFW PCS R&B Alliance Alliance Pro Forma As
Historical Historical Historical Historical Historical Adjustments (a) Adjusted
---------- ---------- ---------- ---------- ---------- --------------- ----------
ASSETS
Current assets
Cash and cash
equivalents........... $ 311 $ 269 $ 9,421 $ 65 $15,071 $ (9,767) $ 15,370
Accounts receivable,
net................... 14,091 4,568 2,389 2,032 1,601 (3,230) 21,451
Other receivables...... 5,841 316 2,681 -- -- 6,031 14,869
Inventories, materials
and supplies.......... 960 94 266 9,098 767 (57) 11,128
Prepaid expenses and
other................. 882 859 176 429 55 -- 2,401
-------- -------- ------- -------- ------- -------- ----------
Total current assets... 22,085 6,106 14,933 11,624 17,494 (7,023) 65,219
Restricted cash......... -- -- -- -- -- 91,000 91,000
Securities and
investments............ 36,949 -- 17,583 -- -- 2,123 56,655
Subordinated capital
certificates........... -- -- -- 4,529 2,518 (7,047) --
Property and equipment,
net.................... 129,148 133,659 25,125 99,382 42,975 (8,556) 421,733
Other assets
Cost in excess of net
assets of business
acquired.............. 23,956 -- -- -- -- 528,220 552,176
Other.................. 8,471 559 2,435 837 3,271 19,453 35,026
-------- -------- ------- -------- ------- -------- ----------
Total other assets..... 32,427 559 2,435 837 3,271 547,673 587,202
-------- -------- ------- -------- ------- -------- ----------
Total assets........... $220,609 $140,324 $60,076 $116,372 $66,258 $618,170 $1,221,809
======== ======== ======= ======== ======= ======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFIT)
Current liabilities
Accounts payable....... $ 8,601 $ 2,645 $ 559 $ 5,659 $ 6,353 $ (216) $ 23,601
Current portion of
long-term debt and
capital lease
obligations........... -- 3,857 312 -- -- -- 4,169
Current portion of
recognized losses in
PCS ventures.......... -- -- 1,318 -- -- (1,318) --
Other accrued
liabilities........... 11,294 6,688 1,004 5,607 1,600 (679) 25,514
-------- -------- ------- -------- ------- -------- ----------
Total current
liabilities........... 19,895 13,190 3,193 11,266 7,953 (2,213) 53,284
Long-term debt.......... 44,362 -- 7,466 116,119 51,547 325,741 545,235
Capital lease
obligations............ -- 18,838 -- -- -- -- 18,838
Long-term liabilities
Deferred income taxes.. 27,684 -- 8,737 -- -- 5,297 41,718
Retirement benefits.... 11,155 -- -- -- -- (195) 10,960
Long-term portion of
recognized losses in
PCS ventures.......... -- -- 5,130 -- -- (5,130) --
Other.................. 2,962 2,933 1,945 9,363 10,847 -- 28,050
-------- -------- ------- -------- ------- -------- ----------
Total long-term
liabilities........... 41,801 2,933 15,812 9,363 10,847 (28) 80,728
-------- -------- ------- -------- ------- -------- ----------
Minority interests...... 1,847 -- -- -- -- (1,543) 304
Series A preferred
redeemable membership
interests.............. -- -- -- 15,410 -- (15,410) --
Series B redeemable
preferred stock........ -- -- -- -- -- 106,670 106,670
Series C redeemable
preferred stock........ -- -- -- -- -- 106,670 106,670
Shareholders' equity
(deficit)/members'
equity (deficit)....... 112,704 105,363 33,605 (35,786) (4,089) 98,283 310,080
-------- -------- ------- -------- ------- -------- ----------
Total liabilities and
shareholders' equity.. $220,609 $140,324 $60,076 $116,372 $66,258 $618,170 $1,221,809
======== ======== ======= ======== ======= ======== ==========
3
CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
The pro forma financial data have been derived by the application of pro
forma adjustments to our historical financial statements as of the date noted.
(a) Pro forma adjustments to the Pro Forma Consolidated Balance Sheet are
summarized in the following table (in thousands) and are described in the
notes that follow.
Repayment
Transaction of Alliance Acquisition of Disposition of
Fees and Existing Merger with Step Richmond - Directory Total Net
Financing(1) Expenses(2) Debt(3) R&B(4) Acquisition(5) Norfolk PCS(6) Assistance(7) Adjustment
------------ ----------- --------- ----------- ------------- -------------- -------------- ----------
Cash and cash
equivalents..... $659,000 $(41,000) $(192,486) $ (1,300) $(16,848) $(436,937) $19,804 $ (9,767)
Accounts
receivable,
net............. -- -- -- -- -- (1,212) (2,018) (3,230)
Other
receivables..... -- 4,804 143 -- -- -- 1,084 6,031
Inventories,
materials and
supplies........ -- -- -- -- -- -- (57) (57)
Restricted cash.. 91,000 -- -- -- -- -- -- 91,000
Securities and
investments..... -- -- -- (959) 1,182 (596) 2,496 2,123
Subordinated
capital
certificates.... -- -- (7,047) -- -- -- -- (7,047)
Property and
equipment, net.. -- -- -- -- -- (2,724) (5,832) (8,556)
Cost in excess of
net assets of
business
acquired........ -- 4,500 -- 109,650 33,683 380,387 -- 528,220
Debt issuance
costs........... -- 19,825 (368) -- -- -- (4) 19,453
Accounts
payable......... -- -- -- -- -- (125) (91) (216)
Current portion
of recognized
losses in PCS
ventures........ -- -- -- -- (1,318) -- -- (1,318)
Other accrued
liabilities..... -- -- (274) 1,250 -- (274) (1,381) (679)
Long-term debt... 525,000 -- (199,259) -- -- -- -- 325,741
Deferred income
taxes........... -- -- -- -- -- 5,835 (538) 5,297
Retirement
benefits........ -- -- -- -- -- -- (195) (195)
Long-term portion
of recognized
losses in PCS
ventures........ -- -- -- -- (5,130) -- -- (5,130)
Minority
interests....... -- -- -- (959) -- (584) -- (1,543)
Redeemable Series
A preferred
membership
interests....... -- -- -- -- (15,410) -- -- (15,410)
Series B
redeemable
preferred
stock........... 110,608 (3,938) -- -- -- -- -- 106,670
Series C
redeemable
preferred
stock........... 110,607 (3,937) -- -- -- -- -- 106,670
Shareholders'
equity
(deficit)/members'
interests/(deficit).. 3,785 (3,996) (225) 107,100 39,875 (65,934) 17,678 98,283
4
CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET, Continued
(1) The adjustments relate to our proposed sale of debt securities in a private
placment, the new senior credit facility and the sale of our preferred stock
as follows (in thousands):
New senior secured Term Loan B..................................... $150,000
Debt securities(i)................................................. 375,000
New preferred stock(ii)............................................ 225,000
--------
Total financing.................................................. $750,000
========
--------
(i) $91.0 million will be placed in escrow and will be used to fund the first
four interest payments on the debt securities.
(ii) The issuance of our preferred stock and 500,000 warrants for $225.0
million in cash will be allocated as $221.2 million preferred equity
and $3.8 million common equity.
(2) The portion of estimated cash expenses attributable to our new senior
credit facility and the notes totals $19.8 million and will be recorded as
deferred financing costs and will be amortized over the expected life of
the debt to be issued. Such estimated debt issuance costs include
estimated fees and expenses payable to banks, placement agents, outside
professionals and related advisors. Additionally, $4.5 million of
estimated transaction expenses have been recorded as goodwill related to
the merger with R&B Communications and the acquisition of Richmond-Norfolk
PCS. The remaining $16.7 million of estimated cash expenses represent $7.9
million of costs associated with the sale of our preferred stock, $5.6
million ($3.4 million, net of $2.2 million tax) of costs associated with a
bridge commitment fee, $2.4 million ($1.5 million, net of $.9 million tax)
of costs associated with one-time transaction expenses and $.8 million
($.5 million, net of $.3 million tax) of costs associated with the debt
prepayment premium. Additionally, we will incur $3.5 million ($2.1
million, net of $1.4 million tax) in non-cash transaction expense related
to 100,000 warrants issued to Welsh Carson in connection with its bridge
commitment.
(3) The adjustments include the repayment of existing indebtedness and related
accrued interest and the write-off of capitalized debt issuance costs of
the combined companies as follows (in thousands):
CFW................................................................ $ 42,972
Virginia Alliance.................................................. 104,740
West Virginia Alliance............................................. 51,547
--------
Debt to be refinanced............................................ 199,259
Subordinated capital certificates.................................. (7,047)
Accrued interest................................................... 274
--------
Total use of cash................................................ $192,486
========
The related unamortized deferred loan costs of $368,000 ($225,000, net of
$143,000 tax) related to the existing indebtedness of the combined
companies will be written off as an extraordinary charge upon the repayment
of existing indebtedness.
5
CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET, Continued
(4) Represents the merger with R&B Communications for 3.7 million of our
common shares at $37.86 per share (the average of our closing common stock
price for the two days prior to announcement and two days subsequent to
announcement). The actual number of shares to be issued in the merger is
based on the exchange ratio of 60.27 of our shares to one share of R&B
Communications. The adjustment to common equity and the excess of the
estimated purchase price over the estimated fair value of the net
identifiable assets acquired is as follows (in thousands):
Fair value of CFW common stock issued.............................. $140,705
Less: R&B Communications, net assets............................... 33,605
--------
Net adjustment to common equity.................................. 107,100
Transaction expenses............................................... 1,300
Covenant not to compete............................................ 1,250
--------
Net adjustment to goodwill....................................... $109,650
========
We have preliminarily referred to the excess of the estimated purchase price
over the estimated fair value of the net identifiable assets acquired as
goodwill. The final allocation of the excess purchase price over net
identifiable assets, to be determined by an independent appraiser
subsequent to close, will include, if applicable, recognition of
adjustments of the tangible assets and liabilities to their fair values,
the fair value of identifiable intangible assets, including FCC licenses,
intellectual property and residual goodwill. We have assumed an average
amortization period of 20 years for goodwill for illustrative purposes.
The adjustment also eliminates the $959,000 investment held by us in certain
R&B PCS licenses.
(5) Represents the purchase accounting adjustments necessary to reflect the
consolidation of the Virginia and West Virginia Alliances. A controlling
interest in the Alliances will be obtained through (i) the merger with
R&B Communications, (ii) the contribution of additional common equity
capital to the Virginia Alliance and the related redemption of Series A
preferred membership interests, and (iii) the conversion of our and R&B
Communications' Series B preferred membership interests into common
membership interests. Following these transactions, we will own
approximately 91.1% and 78.9% of the Virginia Alliance and the West
Virginia Alliance, respectively. The adjustment to the excess of the
estimated purchase price over the estimated fair value of the net
identifiable assets acquired is as follows (in thousands):
Cash paid for redemption of Series A preferred stock............... $ 16,848
Less: Carrying value of Series A preferred stock................... (15,410)
Elimination of negative investment balance......................... (7,630)
Elimination of historical net equity deficit of Alliances.......... 39,875
--------
Net adjustment to goodwill....................................... $ 33,683
========
We have preliminarily referred to the excess of the estimated purchase price
over the estimated fair value of the net identifiable assets acquired as
goodwill. The final allocation of the excess purchase price over net
identifiable assets, to be determined by an independent appraiser
subsequent to close, will include, if applicable, recognition of
adjustments of the tangible assets and liabilities to their fair values,
the fair value of identifiable intangible assets, including FCC licenses,
intellectual property and residual goodwill. We have assumed an average
amortization period of 20 years for goodwill for illustrative purposes.
(6) Represents the purchase of Richmond-Norfolk PCS for (i) $407.3 million in
cash, (ii) the assumption of $20.0 million of lease obligations, (iii) the
disposition of our 22% interest in RSA 5 and (iv) the disposition of the
analog assets and operations of RSA 6. Prior to consummation of the
Transactions, we will purchase
6
CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET, Continued
the 15.9% of the RSA 6 membership interest that we do not own for $10.8
million. The adjustment to the excess of the estimated purchase price over
the estimated fair value of the net identifiable assets acquired and common
equity is as follows (in thousands):
Cash paid to PrimeCo............................................. $ 407,250
Fair value of RSA 6 analog assets and operations................. 75,000
Fair value of 22% of RSA 5....................................... 3,500
---------
Total purchase consideration................................... 485,750
Less:
Historical net equity of Richmond-Norfolk PCS.................... (105,363)
---------
Net adjustment to goodwill..................................... $ 380,387
=========
Fair value of RSA 6 analog assets and operations................. $ 75,000
Fair value of 22% of RSA 5....................................... 3,500
Less: Book value of RSA 6 and RSA 5.............................. (14,340)
---------
Pre-tax gain on disposition of RSA 6 and RSA 5................. 64,160
Cash taxes on gain............................................... (18,896)
Deferred tax liability........................................... (5,835)
Historical net equity of Richmond-Norfolk PCS.................... (105,363)
---------
Net adjustment to common equity................................ $ (65,934)
=========
We have preliminarily referred to the excess of the estimated purchase
price over the estimated fair value of the net identifiable assets acquired
as goodwill. The final allocation of the excess purchase price over net
identifiable assets, to be determined by an independent appraiser
subsequent to close, will include, if applicable, recognition of
adjustments of the tangible assets and liabilities to their fair values,
the fair value of identifiable intangible assets, including FCC licenses,
intellectual property and residual goodwill. We have assumed an average
amortization period of 20 years for goodwill for illustrative purposes.
The net adjustment to cash includes the sum of (i) $407.3 million cash paid
to PrimeCo, (ii) $10.8 million paid to acquire the minority interest in RSA
6, and (iii) $18.9 million of cash taxes paid on the gains from disposition
of RSA 6 and RSA 5. The remaining adjustments include the elimination of
the historical assets and liabilities of RSA 6 and the equity interest in
RSA 5.
(7) Includes the disposition of the directory assistance operations to
telegate AG for $35.5 million, consisting of $32.0 million in cash and
common stock of telegate AG with a fair value of $3.5 million.
Substantially all of the assets and liabilities of the business, with the
exception of certain land and buildings, will be sold in the transaction.
The net adjustment to common equity for the gain on the related
disposition is as follows (in thousands):
Cash proceeds...................................................... $ 32,000
Fair value of stock consideration.................................. 3,500
--------
Total consideration.............................................. 35,500
Cash taxes on gain................................................. (12,196)
Net book value of assets sold...................................... (5,626)
--------
Net adjustment to common equity.................................. $ 17,678
========
The net adjustment to cash includes the cash proceeds of $32.0 million,
less $12.2 million of cash taxes paid on the gain on disposition of the
directory assistance operations. The remaining adjustments include the
elimination of the historical assets and liabilities of the directory
assistance operations and the receipt of $3.5 million in stock
consideration.
7
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Year Ended December 31, 1999
(in thousands, except per share amounts)
Acquisitions
-------------------------------------------
Richmond- West
Norfolk Virginia Virginia
CFW PCS R&B Alliance Alliance Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments As Adjusted
---------- ---------- ---------- ---------- ---------- ----------- -----------
Operating revenues:
Wireless
communications........ $ 21,692 $ 50,456 $ 1,257 $ 13,377 $ 2,989 $(14,986)(a) $ 74,785
Wireline
communications........ 44,110 -- 14,500 -- -- -- 58,610
Directory assistance... 12,104 -- -- -- -- (12,104)(a) --
Other communications
services.............. 4,028 -- 1,012 -- -- -- 5,040
-------- -------- ------- -------- -------- -------- ---------
81,934 50,456 16,769 13,377 2,989 (27,090) 138,435
-------- -------- ------- -------- -------- -------- ---------
Operating expenses:
Cost of sales.......... 8,143 15,137 -- 5,864 3,065 (5,660)(a) 26,549
Maintenance and
support............... 16,609 10,498 4,917 6,638 4,130 (1,099)(a) 41,693
Depreciation and
amortization.......... 12,623 13,866 2,808 7,770 2,068 24,477 (b) 63,612
Asset impairment
charge................ 3,951 -- -- -- -- -- 3,951
Customer operations.... 19,870 25,705 2,031 8,685 4,094 (10,576)(a) 49,809
Corporate operations... 7,216 7,315 2,356 2,517 1,743 (981)(a) 20,166
-------- -------- ------- -------- -------- -------- ---------
68,412 72,521 12,112 31,474 15,100 6,161 205,780
-------- -------- ------- -------- -------- -------- ---------
Operating income
(loss)................. 13,522 (22,065) 4,657 (18,097) (12,111) (33,251) (67,345)
Other income (expenses):
Interest expense, net.. (905) (1,462) (348) (8,042) (1,176) (58,840)(c) (70,773)
Net equity income
(loss) from PCS and
other wireless
investees............. (11,186) -- (9,652) -- -- 21,357 (d) 519
Gain/(loss) on sale of
assets................ 8,318 (806) 252 -- -- -- 7,764
Other income
(expense)............. -- (171) -- -- -- 2,291 (e) 2,120
-------- -------- ------- -------- -------- -------- ---------
(3,773) (2,439) (9,748) (8,042) (1,176) (35,192) (60,370)
-------- -------- ------- -------- -------- -------- ---------
Income (loss) before
income taxes and
minority interest...... 9,749 (24,504) (5,091) (26,139) (13,287) (68,443) (127,715)
Income taxes (benefit).. 2,868 -- (917) -- -- (40,398)(f) (38,447)
-------- -------- ------- -------- -------- -------- ---------
Income (loss) before
minority interests..... 6,881 (24,504) (4,174) (26,139) (13,287) (28,045) (89,268)
Minority interests...... (388) -- -- -- -- 388 (a) --
-------- -------- ------- -------- -------- -------- ---------
Net income (loss)....... $ 6,493 $(24,504) $(4,174) $(26,139) $(13,287) $(27,657) $ (89,268)
======== ======== ======= ======== ======== ======== =========
Dividend requirements on
preferred stock........ $ 17,205 (g) $ 17,205
======== =========
Income (loss) applicable
to common shares....... $(106,473)
=========
Net loss per common
share--basic........... $ (6.36)
=========
Average shares
outstanding--basic..... 16,742
Other Data:
EBITDA(h).............. 30,096 (8,199) 7,465 (10,327) (10,043) (8,774) 218
Depreciation and
amortization.......... 12,623 13,866 2,808 7,770 2,068 24,477 63,612
Interest expense paid
or payable in cash.... 905 1,462 685 8,304 1,176 56,006 68,538
Cash flows provided
(used in):
Operating activities... 31,547 (6,955) 7,680 (22,926) (12,478) (65,031) (68,163)
Investing activities... (42,843) (12,455) (5,804) (23,202) (26,306) -- (110,610)
Financing activities... 11,452 19,832 (568) 46,132 38,781 -- 115,629
Pro forma deficiency of
earnings to fixed
charges............... (128,234)
8
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Three Months Ended March 31, 1999
(in thousands, except per share amounts)
Acquisitions
-----------------------------------------------
Richmond- Virginia West Virginia
CFW Norfolk PCS R&B Alliance Alliance Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments As Adjusted
---------- ----------- ---------- ---------- ------------- ----------- -----------
Operating revenues:
Wireless
communications........ $ 5,049 $11,981 $ 344 $ 2,785 $ 233 $ (3,596)(a) $ 16,796
Wireline
communications........ 9,802 -- 3,455 -- -- -- 13,257
Directory assistance... 2,874 -- -- -- -- (2,874)(a) --
Other communications
services.............. 1,044 -- 127 -- -- -- 1,171
-------- ------- ------- ------- ------- -------- --------
18,769 11,981 3,926 2,785 233 (6,470) 31,224
-------- ------- ------- ------- ------- -------- --------
Operating expenses:
Cost of sales.......... 1,752 4,163 -- 1,726 251 (1,230)(a) 6,662
Maintenance and
support............... 3,296 2,689 693 1,341 785 (264)(a) 8,540
Depreciation and
amortization.......... 2,811 3,348 670 2,168 268 6,122 (b) 15,387
Asset impairment
charge................ -- -- -- -- -- -- --
Customer operations.... 4,567 7,080 626 1,719 692 (2,549)(a) 12,135
Corporate operations... 1,650 2,052 577 641 408 (238)(a) 5,090
-------- ------- ------- ------- ------- -------- --------
14,076 19,332 2,566 7,595 2,404 1,841 47,814
-------- ------- ------- ------- ------- -------- --------
Operating income
(loss)................. 4,693 (7,351) 1,360 (4,810) (2,171) (8,311) (16,590)
Other income (expenses):
Interest expense, net.. (212) (372) (52) (1,723) (8) (15,334)(c) (17,701)
Net equity income
(loss) from PCS and
other wireless
investees............. (2,278) -- (2,045) -- -- 4,453 (d) 130
Gain/(loss) on sale of
assets................ -- (169) -- -- -- -- (169)
Other income
(expense)............. -- -- -- -- -- 573 (e) 573
-------- ------- ------- ------- ------- -------- --------
(2,490) (541) (2,097) (1,723) (8) (10,308) (17,167)
-------- ------- ------- ------- ------- -------- --------
Income (loss) before
income taxes and
minority interest...... 2,203 (7,892) (737) (6,533) (2,179) (18,619) (33,757)
Income taxes (benefit).. 774 -- (298) -- -- (11,272)(f) (10,796)
-------- ------- ------- ------- ------- -------- --------
Income (loss) before
minority interests..... 1,429 (7,892) (439) (6,533) (2,179) (7,347) (22,961)
Minority interests...... (89) -- -- -- -- 89 (a) --
-------- ------- ------- ------- ------- -------- --------
Net income (loss)....... $ 1,340 $(7,892) $ (439) $(6,533) $(2,179) $ (7,258) $(22,961)
======== ======= ======= ======= ======= ======== ========
Dividend requirements on
preferred stock........ $ 4,230 (g) $ 4,230
======== ========
Income (loss) applicable
to common shares....... $(27,191)
========
Net loss per common
share--basic........... $ (1.63)
========
Average shares
outstanding--basic..... 16,722
Other Data:
EBITDA(h).............. 7,504 (4,003) 2,030 (2,642) (1,903) (2,189) (1,203)
Depreciation and
amortization.......... 2,811 3,348 670 2,168 268 6,122 15,387
Interest expense paid
or payable in cash.... 212 372 112 1,723 162 14,562 17,143
Cash flows provided
(used in):
Operating activities... 6,260 (4,049) 621 (7,106) (2,550) (16,813) (23,637)
Investing activities... (13,659) (607) (2,522) (7,326) (4,485) -- (28,599)
Financing activities... 7,398 4,799 (324) 14,434 7,035 -- 33,342
Pro forma deficiency of
earnings to fixed
charges............... (33,887)
9
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Three Months Ended March 31, 2000
(in thousands, except per share amounts)
Acquisitions
-------------------------------------------
Richmond- West
Norfolk Virginia Virginia Pro
CFW PCS R&B Alliance Alliance Pro Forma Forma As
Historical Historical Historical Historical Historical Adjustments Adjusted
---------- ---------- ---------- ---------- ---------- ----------- --------
Operating revenues:
Wireless
communications........ $ 5,880 $13,330 $ 355 $ 4,789 $ 2,458 $ (3,853)(a) $ 22,959
Wireline
communications........ 13,875 -- 3,990 -- -- -- 17,865
Directory assistance... 3,332 -- -- -- -- (3,332)(a) --
Other communications
services.............. 856 -- 199 -- -- -- 1,055
-------- ------- ------- ------- ------- -------- --------
23,943 13,330 4,544 4,789 2,458 (7,185) 41,879
-------- ------- ------- ------- ------- -------- --------
Operating expenses:
Cost of sales.......... 2,367 4,242 -- 2,210 2,167 (1,551)(a) 9,435
Maintenance and
support............... 5,877 2,637 1,208 1,981 1,405 (342)(a) 12,766
Depreciation and
amortization.......... 3,706 3,111 817 2,075 702 5,872 (b) 16,283
Asset impairment
charge................ -- -- -- -- -- -- --
Customer operations.... 5,361 6,886 777 2,392 1,682 (2,572)(a) 14,526
Corporate operations... 2,359 1,709 689 775 459 (247)(a) 5,744
-------- ------- ------- ------- ------- -------- --------
19,670 18,585 3,491 9,433 6,415 1,160 58,754
-------- ------- ------- ------- ------- -------- --------
Operating income
(loss)................. 4,273 (5,255) 1,053 (4,644) (3,957) (8,345) (16,875)
Other income (expenses):
Interest expense, net.. (482) (359) (41) (2,681) (848) (13,284)(c) (17,695)
Net equity income
(loss) from PCS and
other wireless
investees............. (3,625) -- (3,080) -- -- 6,838 (d) 133
Gain/(loss) on sale of
assets................ -- 24 -- -- -- -- 24
Other income
(expense)............. -- -- -- -- -- 573 (e) 573
-------- ------- ------- ------- ------- -------- --------
(4,107) (335) (3,121) (2,681) (848) (5,873) (16,965)
-------- ------- ------- ------- ------- -------- --------
Income (loss) before
income taxes and
minority interest...... 166 (5,590) (2,068) (7,325) (4,805) (14,218) (33,840)
Income taxes (benefit).. 44 -- (842) -- -- (9,067)(f) (9,865)
-------- ------- ------- ------- ------- -------- --------
Income (loss) before
minority interests..... 122 (5,590) (1,226) (7,325) (4,805) (5,151) (23,975)
Minority interests...... (74) -- -- -- -- 74 (a) --
-------- ------- ------- ------- ------- -------- --------
Net income (loss)....... $ 48 $(5,590) $(1,226) $(7,325) $(4,805) $ (5,077) $(23,975)
======== ======= ======= ======= ======= ======== ========
Dividend requirements on
preferred stock........ $ 4,523 (g) $ 4,523
======== ========
Income (loss) applicable
to common shares....... $(28,498)
========
Net loss per common
share--basic........... $ (1.70)
========
Average shares
outstanding--basic..... 16,767
========
Other Data:
EBITDA(h).............. 7,979 (2,144) 1,870 (2,569) (3,255) (2,473) (592)
Depreciation and
amortization.......... 3,706 3,111 817 2,075 702 5,872 16,283
Interest expense paid
or payable in cash.... 482 359 108 2,681 896 12,610 17,136
Cash flows provided
(used in):
Operating activities... 5,712 (4,024) 2,025 (5,808) (1,433) (15,146) (18,674)
Investing activities... (11,157) (1,544) (474) 14,724 14,301 -- 15,850
Financing activities... 5,558 5,415 (348) (8,915) 2,195 -- 3,905
Pro forma deficiency of
earnings to fixed
charges............... (33,973)
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CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The pro forma adjustments to the Statement of Operations exclude $5.6
million ($3.4 million, net of $2.2 million tax) related to a bridge commitment
fee, $368,000 ($225,000, net of $143,000 tax) write-off of deferred loan costs
associated with existing indebtedness, $64.1 million ($39.4 million, net of
$24.7 million tax) gain on disposition of RSA 5 and the analog assets and
operations of RSA 6, $29.9 million ($17.7 million, net of $12.2 million tax)
gain on disposition of the directory assistance operations, $2.4 million ($1.5
million, net of $.9 million tax) of costs associated with one-time transaction
expenses, $.8 million ($.5 million, net of $.3 million tax) of costs
associated with the debt prepayment premium and $3.5 million ($2.1 million,
net of $1.4 million tax) of non-cash transaction expense related to the
100,000 warrants issued to Welsh Carson in connection with their bridge
commitment. Such amounts represent non-recurring items that we anticipate will
be recorded in our Consolidated Statement of Operations primarily during the
third and fourth quarters of 2000.
(a) The pro forma adjustments to revenue, cost of goods sold, operating
expenses and minority interest represent (i) the elimination of operating
results associated with the disposition of the analog assets and
operations of RSA 6 and the disposition of the directory assistance
operations, (ii) the elimination of certain intercompany revenues and
expenses between combining companies, and (iii) incremental rent expense
associated with the sale of certain tower assets that occurred in the
first quarter of 2000 and the subsequent leaseback of such tower assets.
(b) The pro forma adjustment to depreciation and amortization expense reflects
(i) the elimination of historical depreciation expense associated with the
sale of certain tower assets that occurred in the first quarter of 2000,
the disposition of RSA 6 and the directory assistance operations, and (ii)
the application of purchase accounting to R&B Communications, Richmond-
Norfolk PCS and the Alliances.
Three Months Ended
Year Ended -----------------------------
December 31, 1999 March 31, 1999 March 31, 2000
----------------- -------------- --------------
(in thousands)
Historical depreciation
elimination:
Tower asset sales........ $ (759) $ (223) $ (403)
RSA 6.................... (316) (77) (84)
Directory assistance
operations.............. (859) (181) (244)
------- ------ ------
$(1,934) $ (481) $ (731)
------- ------ ------
Purchase accounting(1):
R&B Communications....... $ 5,483 $1,371 $1,371
Richmond-Norfolk PCS..... 19,019 4,755 4,755
Transaction expenses..... 225 56 56
Alliances................ 1,684 421 421
------- ------ ------
$26,411 $6,603 $6,603
------- ------ ------
Total depreciation and
amortization expense
adjustment................ $24,477 $6,122 $5,872
======= ====== ======
- --------
(1) The merger with R&B Communications, the acquisition of Richmond-Norfolk
PCS and the consolidation of the Alliances will be accounted for as
purchases. Under purchase accounting, the total purchase cost will be
allocated to the assets acquired and liabilities assumed, based on
valuations and other studies, as of the date of acquisition. The actual
allocation of purchase cost and the resulting effect on income from
operations may differ significantly from the estimated pro forma
amounts included in this document. For pro forma purposes, the
preliminary goodwill balance is being amortized over 20 years.
(c) The pro forma adjustment to interest expense reflects our new senior
credit facility, senior notes, retained indebtedness and amortization of
related debt issuance costs less the historical interest expense on debt
repaid.
11
CFW COMMUNICATIONS COMPANY
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS, Continued
A .125% increase or decrease in the assumed interest rate applicable to our
new senior credit facility and senior notes would change the pro forma
interest expense and income before taxes by $657,000 for the year ended
December 31, 1999 and $164,000 for the three months ended March 31, 2000
and 1999.
(d) Represents the elimination of the equity losses related to the Alliances,
previously recorded by us and R&B Communications. After the transactions
are complete, we will control the Alliances. The Alliances' income
statements will therefore be consolidated with us. See note (5) to
unaudited pro forma balance sheet for further explanation.
(e) Includes (i) rental income earned on the assets excluded from the
disposition of the directory assistance operations, and (ii) amortization
of the deferred gain from the sale and leaseback of certain tower assets.
(f) Includes the tax effect of the pro forma adjustments and the consolidation
of the Alliances and Richmond-Norfolk PCS at the applicable effective tax
rate.
(g) Represents the 8 1/2% per annum dividend on the Series B preferred stock
and the 5 1/2% per annum dividend on the Series C preferred stock, which
both accrete semi-annually, plus the accretion of the discount related to
the 500,000 warrants and transaction expenses related to the sale of our
preferred stock. This calculation assumes shareholder approval. In the
absence of shareholder approval, our Series D preferred stock will remain
outstanding, which would result in total preferred dividends of $32.7
million for the year ended December 31, 1999 and $9.1 million and $7.9
million for the three months ended March 31, 2000 and 1999, respectively.
(h) EBITDA is defined, for any period, as earnings before income taxes and
minority interest, interest expense, interest income, depreciation and
amortization, gain (loss) on sale of fixed assets, net equity income (loss)
from investees and asset impairment charges. EBITDA should not be construed
as an alternative to operating income or cash flows from operating
activities, both of which are determined in accordance with generally
accepted accounting principles, or as a measure of liquidity. Because it is
not calculated under generally accepted accounting principles, our EBITDA
may not be comparable to similarly titled measures used by other companies.
Pro forma EBITDA is calculated as follows:
Three Months
Ended
------------------
Year Ended March March
December 31, 1999 31, 1999 31, 2000
----------------- -------- --------
(in thousands)
Pro forma net loss before income
taxes and minority interest........ $(127,715) $(33,757) $(33,840)
Adjustments:
Other income...................... (2,120) (573) (573)
(Gain) loss on sale of fixed
assets........................... (7,764) 169 (24)
Net equity income from other
wireless investees............... (519) (130) (133)
Interest expense, net............. 70,773 17,701 17,695
Asset impairment charge........... 3,951 -- --
Depreciation and amortization..... 63,612 15,387 16,283
--------- -------- --------
Pro forma EBITDA.................... $ 218 $ (1,203) $ (592)
========= ======== ========
12