EXHIBIT 99.1
CFW COMMUNICATIONS COMPANY
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 CFW's historical
consolidated financial statements included elsewhere herein. The pro forma
adjustments give effect to:
. the merger;
. the acquisition of Richmond-Norfolk PCS for cash of $408.6 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:
.. the merger, as R&B 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 $16.7 million; and
.. the conversion by us and R&B 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 various communications tower sites;
. the like-kind exchange of various wireless communications services,
which we refer to herein as WCS, licenses for various 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 $250.0 million;
. the repayment of substantially all of our existing indebtedness and
that of the Alliances; and
. the payment of fees and expenses related to the recent transactions
(as defined below).
The term recent transactions refers to:
. the merger with R&B Communications, Inc.;
. 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 acquisition of PCS licenses from AT&T and disposition of WCS
licenses to AT&T;
. 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 June 30, 2000 has
been prepared as if the recent transactions had occurred on that date. The
unaudited pro forma consolidated statements of operations for the periods
presented give effect to the recent transactions as if they had occurred January
1, 1999. The adjustments, which are based upon available information and upon
various 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
recent 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
together with the historical financial statements and the notes thereto included
elsewhere herein with respect to R&B and as incorporated by reference with
respect to CFW, Richmond-Norfolk PCS and the Alliances.
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
as of June 30, 2000
(in thousands)
Acquisitions
-------------------------------------------------
Richmond- West
Norfolk Virginia Virginia
CFW PCS R&B Alliance Alliance Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments (a) As Adjusted
---------- ---------- ---------- ---------- ---------- --------------- -----------
ASSETS
Current assets
Cash and cash equivalents............ $ 249 $ 188 $ 8,937 $ 65 $ 10,053 $ 13,731 $ 33,223
Accounts receivable, net............. 13,836 4,507 3,578 2,154 2,235 (1,243) 25,067
Other receivables.................... 1,725 671 2,681 792 271 3,564 9,704
Inventories, materials and supplies.. 1,095 792 356 5,427 1,512 -- 9,182
Prepaid expenses and other........... 977 1,104 48 173 141 -- 2,443
Assets of discontinued segment....... 9,764 -- -- -- -- (9,764) --
--------- --------- --------- --------- --------- ------------ ----------
Total current assets............... 27,646 7,262 15,600 8,611 14,212 6,288 79,619
--------- --------- --------- --------- --------- ------------ ----------
Restricted cash......................... -- -- -- -- -- 67,994 67,994
Securities and investments.............. 35,101 -- 17,983 -- -- 5,225 58,309
Subordinated capital certificates....... -- -- -- 4,529 2,554 (7,083) --
Property and equipment, net............. 129,605 140,420 25,640 101,746 46,534 (2,792) 441,153
Other assets
Cost in excess of net assets of
business acquired.................. 31,040 -- -- -- -- 525,457 556,497
Other................................ 19,871 596 2,413 1,024 3,405 17,663 44,972
--------- --------- --------- --------- --------- ------------ ----------
Total other assets................. 50,911 596 2,413 1,024 3,405 543,120 601,469
--------- --------- --------- --------- --------- ------------ ----------
Total assets....................... $ 243,263 $ 148,278 $ 61,636 $ 115,910 $ 66,705 $ 612,752 $1,248,544
========= ========= ========= ========= ========= ============ ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
(DEFICIT)
Current liabilities
Accounts payable..................... $ 20,318 $ 5,122 $ 833 $ 3,860 $ 6,494 $ (11) $ 36,616
Current portion of long-term debt
and capital lease obligations...... -- 3,874 394 -- -- -- 4,268
Current portion of recognized
losses in PCS ventures............. -- -- 3,322 -- -- (3,322) --
Liabilities of discontinued
business........................... 3,275 -- -- -- -- (3,275) --
Other accrued liabilities............ 9,745 2,748 1,284 (699) 3,873 730 17,681
--------- --------- --------- --------- --------- ------------ ----------
Total current liabilities.......... 33,338 11,744 5,833 3,161 10,367 (5,878) 58,565
--------- --------- --------- --------- --------- ------------ ----------
Long-term debt.......................... 51,567 -- 7,289 129,654 51,136 282,393 522,039
Capital lease obligations............... -- 18,773 -- -- -- -- 18,773
Long-term liabilities
Deferred income taxes................ 29,568 -- 8,069 -- -- 5,835 43,472
Retirement benefits.................. 10,427 -- -- -- -- -- 10,427
Long-term portion of recognized
losses in PCS ventures............. -- -- 6,007 -- -- (6,007) --
Other................................ 2,795 3,182 2,008 9,572 13,040 -- 30,597
--------- --------- --------- --------- --------- ------------ ----------
Total long-term liabilities........ 42,790 3,182 16,084 9,572 13,040 (172) 84,496
--------- --------- --------- --------- --------- ------------ ----------
Minority interests...................... 1,419 -- -- -- -- (1,138) 281
Series A preferred redeemable
membership interests................. -- -- -- 15,632 -- (15,632) --
Series B redeemable preferred stock..... -- -- -- -- -- 106,670 106,670
Series C redeemable preferred stock..... -- -- -- -- -- 130,795 130,795
Shareholders' equity (deficit)/
members' equity (deficit)............ 114,149 114,579 32,430 (42,109) (7,838) 115,714 326,925
--------- --------- --------- --------- --------- ------------ ----------
Total liabilities and
shareholders' equity............ $ 243,263 $ 148,278 $ 61,636 $ 115,910 $ 66,705 $ 612,752 $ 1,248,544
========= ========= ========= ========= ========= ============ ============
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.
Acquisition
Transaction Repayment Merger of Richmond Disposition
Fees and of with Alliance Step Norfolk of Directory
Financing/(1)/ Expenses/(2)/ Debt/(3)/ R&B/(4)/ Acquisition/(5)/ PCS/(6)/ Assistance/(7)/
-------------- ------------- --------- -------- ---------------- --------- ---------------
Cash and cash equivalents............ $ 703,114 $ (40,075) $ (212,759) $ (1,300) $ (16,748) $ (438,305) $ 19,804
Accounts receivable, net............. -- -- -- -- -- (1,243) --
Other receivables.................... -- 3,423 141 -- -- -- --
Inventories, materials and
supplies.......................... -- -- -- -- -- -- --
Restricted cash...................... 67,994 -- -- -- -- -- --
Assets of discontinued business...... (9,764)
Securities and investments........... -- -- -- (959) 4,166 (478) 2,496
Subordinated capital
certificates...................... -- -- (7,083) -- -- -- --
Property and equipment, net.......... -- -- -- -- -- (2,792)
Cost in excess of net assets
of business acquired.............. -- 4,500 -- 110,825 37,568 372,564 --
Debt issuance costs.................. -- 18,025 (362) -- -- -- --
Accounts payable..................... -- -- -- -- -- (11) --
Current portion of recognized losses
in PCS ventures................... -- -- -- -- (3,322) -- --
Liabilities of discontinued
business.......................... -- -- -- -- -- -- (3,275)
Other accrued liabilities............ -- -- (216) 1,250 -- (304) --
Long-term debt....................... 502,019 -- (219,626) -- -- -- --
Deferred income taxes................ -- -- -- -- -- 5,835 --
Retirement benefits.................. -- -- -- -- -- -- --
Long-term portion of recognized
losses in PCS ventures............ -- -- -- -- (6,007) -- --
Minority interests................... -- -- -- (959) -- (179) --
Redeemable Series A
preferred membership interests.... -- -- -- -- (15,632) -- --
Series B redeemable
preferred stock................... 110,608 (3,938) -- -- -- -- --
Series C redeemable
preferred stock................... 135,607 (4,812) -- -- -- -- --
Shareholders' equity
(deficit)/members'
interests/(deficit)............... 22,874 (5,377) (221) 108,275 49,947 (75,595) 15,811
Total Net
Adjustment
----------
Cash and cash equivalents............... $ 13,731
Accounts receivable, net................ (1,243)
Other receivables....................... 3,564
Inventories, materials and
supplies............................. --
Restricted cash......................... 67,994
Assets of discontinued business......... (9,764)
Securities and investments.............. 5,225
Subordinated capital
certificates......................... (7,083)
Property and equipment, net............. (2,792)
Cost in excess of net assets
of business acquired................. 525,457
Debt issuance costs..................... 17,663
Accounts payable........................ (11)
Current portion of recognized losses in
PCS ventures......................... (3,322)
Liabilities of discontinued
business............................. (3,275)
Other accrued liabilities............... 730
Long-term debt.......................... 282,393
Deferred income taxes................... 5,835
Retirement benefits..................... --
Long-term portion of recognized losses
in PCS ventures...................... (6,007)
Minority interests...................... (1,138)
Redeemable Series A
preferred membership interests....... (15,632)
Series B redeemable
preferred stock...................... 106,670
Series C redeemable
preferred stock...................... 130,795
Shareholders' equity
(deficit)/members'
interests/(deficit).................. 115,714
(1) The adjustments relate to our sale of senior and subordinated notes and the
sale of our preferred stock as follows (in thousands):
New senior secured term loan B................... $100,000
New senior secured term loan C................... 50,000
Senior notes due 2010(i)......................... 276,108
Subordinated notes due 2011(ii).................. 95,000
New preferred stock(iii)......................... 250,000
--------
Total financing.................................. $771,108
========
(i) $68 million of proceeds will be placed in escrow and will be
used to pay the first four interest payments on the senior
notes. The issuance of $276.1 million principal amount of
senior notes, net of $3.9 million debt discount, and warrants
to purchase 504,000 shares of common stock for $276.1 million
in cash will be allocated as $269.2 million debt and $6.9
million common equity.
(ii) The issuance of $95.0 million principal amount of subordinated
notes and warrants to purchase 300,000 shares of common stock
for $95.0 million in cash will be allocated as $82.8 million
debt and $12.2 million common equity.
(iii) The issuance of $250.0 million of our preferred stock and
warrants to purchase 500,000 shares of common stock for $250
million cash will be allocated as $246.2 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 senior and subordinated notes totals $18.0
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 and the
acquisition of Richmond-Norfolk PCS. The remaining $17.6 million of
estimated cash expenses represent $8.8 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.
(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..................................... $ 50,216
Virginia Alliance....................... 118,274
West Virginia Alliance.................. 51,136
--------
Debt to be refinanced................... 219,626
Subordinated capital certificates....... (7,083)
Accrued interest........................ 216
--------
Total use of cash.................. $212,759
========
The related unamortized deferred loan costs of $362,000 ($221,000, net
of $141,000 tax) related to the existing indebtedness of the combined
companies will be written off as an extraordinary charge upon the
repayment of existing indebtedness.
(4) Represents the merger with R&B for 3,716,400 of our common shares at
$37.86 per share (the average of our closing common stock price for the
two days before announcement and two days after 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. 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, net assets.......................... 32,430
--------
Net adjustment to common equity........... 108,275
Transaction expenses........................... 1,300
Covenant not to compete........................ 1,250
--------
Net adjustment to goodwill................ $110,825
========
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 after closing, 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
various 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, (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's 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........ $ 16,748
Less: Carrying value of series A preferred stock............ (15,632)
Elimination of negative investment balance.................. (13,495)
Elimination of historical net equity deficit of Alliances... 49,947
--------
Net adjustment to goodwill............................. $ 37,568
========
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 after closing of the merger, 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) $408.6 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. Before
completion of our recent transactions, we purchased the 15.9% of the
RSA 6 membership interest that we did not previously 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................................ $ 408,643
Fair value of RSA 6 analog assets and operations.... 75,000
Fair value of 22% of RSA 5.......................... 3,500
----------
Total purchase consideration................... 487,143
Less:
Historical net equity of Richmond-Norfolk PCS....... (114,579)
----------
Net adjustment to goodwill.......................... $ 372,564
==========
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................. (14,810)
----------
Pre-tax gain on disposition of RSA 6 and RSA 5...... 63,690
Cash taxes on gain.................................. (18,871)
Deferred tax liability.............................. (5,835)
Historical net equity of Richmond-Norfolk PCS....... (114,579)
----------
Net adjustment to common equity................ $ (75,595)
==========
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 after closing of the merger, 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) $408.6 million
estimate of 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 market value of $3.5 million.
Substantially all of the assets and liabilities of the business, with
the exception of various land and buildings, were 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....................... (7,493)
----------
Net adjustment to common equity................ $ 15,811
==========
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.
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
Other communications services.... 4,028 -- 1,012 -- -- -- 5,040
-------- --------- --------- --------- -------- ----------- --------
69,830 50,456 16,769 13,377 2,989 (14,986) 138,435
-------- --------- --------- --------- -------- ----------- --------
Operating expenses:
Cost of sales.................... 8,142 15,137 -- 5,864 3,065 (5,660)(a) 26,548
Maintenance and support.......... 15,212 10,498 4,917 6,638 4,130 (1,099)(a) 40,296
Depreciation and amortization.... 11,323 13,866 2,808 7,770 2,068 25,197 (b) 63,032
Asset impairment charge.......... 3,951 -- -- -- -- -- 3,951
Customer operations.............. 11,685 25,705 2,031 8,685 4,094 -- 52,200
Corporate operations............. 6,846 7,315 2,356 2,517 1,744 20,778
-------- --------- --------- --------- -------- ----------- --------
57,159 72,521 12,112 31,474 15,101 18,438 206,805
-------- --------- --------- --------- -------- ----------- --------
Operating income (loss)............ 12,671 (22,065) 4,657 (18,097) (12,112) (33,424) (68,370)
Other income (expenses):
Interest expense, net............ (900) (1,462) (348) (8,042) (1,175) (61,348)(c) (73,275)
Net equity income (loss) from PCS
and other wireless investees... (11,187) -- (9,652) -- -- 21,358 (d) 519
Gain/(loss) on sale of assets.... 8,318 (806) 252 -- -- -- 7,764
Other income (expense)........... -- (171) -- -- -- 2,291 (e) 2,120
-------- --------- --------- --------- -------- ----------- --------
(3,769) (2,439) (9,748) (8,042) (1,175) (37,699) (62,872)
-------- --------- --------- --------- -------- ----------- --------
Income (loss) from continuing
operations before income taxes
and minority interest............ 8,902 (24,504) (5,091) (26,139) (13,287) (71,123) (131,242)
Income taxes (benefit)............. 2,622 -- (917) -- -- (40,448)(f) (38,743)
-------- --------- --------- -------- -------- ---------- --------
Income (loss) from continuing
operations before minority
interests. ...................... 6,280 (24,504) (4,174) (26,139) (13,287) (30,675) (92,499)
Minority interests................. (389) -- -- -- -- 389 (a) --
-------- --------- --------- -------- -------- ---------- ---------
Income from continuing operations.. $ 5,891 $ (24,504) $ (4,174) $(26,139) $(13,287) $(30,286) $ (92,499)
======== ========= ========= ======== ======== =========== =========
Dividend requirements on preferred
stock............................ $ 18,598 (g) $ 18,598
=========== =========
Income (loss) from continuing
operations applicable to common.... $(111,097)
=========
shares.............................
Net loss from continuing operations
per common share--basic............ $ (6.64)
=========
Average shares outstanding--basic.. 16,742
Other Data:
EBITDA(h)........................ 27,945 (8,199) 7,465 (10,327) (10,044) (8,227) (1,387)
Depreciation and amortization.... 11,323 13,866 2,808 7,770 2,068 25,197 63,032
Interest expense paid or payable
in cash........................ 900 1,462 685 8,304 1,176 56,398 68,925
Cash flows provided (used in):
Operating activities............. 31,547 (6,955) 7,680 (22,926) (12,478) (64,876) (68,008)
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.................... (131,761)
CFW COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
for the Six Months Ended June 30, 2000
(in thousands, except per share amounts)
Acquisitions
----------------------------------------
Richmond- West
Norfolk Virginia Virginia
CFW PCS R&B Alliance Alliance Pro Forma Pro Forma As
Historical Historical Historical Historical Historical Adjustments Adjusted
---------- ---------- ---------- ---------- ---------- ----------- ------------
Operating revenues:
Wireless communications............. $ 11,698 $ 23,454 $ 830 $ 9,628 $ 5,145 $ (7,321) (a) $ 43,434
Wireline communications............. 28,572 -- 7,826 -- -- -- 36,398
Other communications services....... 1,858 3,537 468 799 769 -- 7,431
---------- ---------- ---------- ---------- ---------- ----------- ----------
42,128 26,991 9,124 10,427 5,914 (7,321) 87,263
---------- ---------- ---------- ---------- ---------- ----------- ----------
Operating expenses:
Cost of sales....................... 4,857 7,427 -- 4,465 4,273 (3,088) (a) 17,934
Maintenance and support............. 11,687 5,144 2,457 4,054 3,015 (1,240) (a) 25,117
Depreciation and amortization....... 6,751 6,925 1,663 3,855 1,164 12,032 (b) 32,390
Customer operations................. 7,391 12,559 1,525 4,770 3,505 -- 29,750
Corporate operations................ 4,158 3,292 1,790 1,623 1,027 -- 11,890
---------- ---------- ---------- ---------- ---------- ----------- ----------
34,844 35,347 7,435 18,767 12,984 7,704 117,081
---------- ---------- ---------- ---------- ---------- ----------- ----------
Operating income (loss).............. 7,284 (8,356) 1,689 (8,340) (7,070) (15,025) (29,818)
Other income (expenses):
Interest expense, net............... (1,010) (688) (66) (5,308) (1,485) (27,991) (c) (36,548)
Net equity income (loss) from PCS
and other wireless investees....... (6,557) -- (5,779) -- -- 12,587 (d) 251
Gain/(loss) on sale of assets....... -- (43) -- -- -- -- (43)
Other income (expense).............. -- -- -- -- -- 1,146 (e) 1,146
---------- ---------- ---------- ---------- ---------- ----------- ----------
(7,567) (731) (5,845) (5,308) (1,485) (14,258) (35,194)
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income (loss) from continuing
operations before income taxes and
minority interest.................. (283) (9,087) (4,156) (13,648) (8,555) (29,283) (65,012)
Income taxes (benefit)............... (87) -- (1,610) -- -- (16,776) (f) (18,473)
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income (loss) from continuing
operations before minority
interests.......................... (196) (9,087) (2,546) (13,648) (8,555) (12,507) (46,539)
Minority interests................... (105) -- -- -- -- 105 (a) --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income from continuing operations.... $ (301) $ (9,087) $ (2,546) $ (13,648) $ (8,555) $ (12,402) $ (46,539)
========== ========== ========== ========== ========== =========== ==========
Dividend requirements on preferred
stock.............................. $ 9,772 (g) $ 9,772
=========== ==========
Income (loss) from continuing
operations applicable to common
shares............................. $ (56,310)
==========
Net loss from continuing operations
per common share-basic............. $ (3.35)
==========
Average shares outstanding-basic..... 16,784
Other Data:
EBITDA(h)........................... 14,035 (1,431) 3,352 (4,485) (5,906) (2,993) 2,572
Depreciation and amortization....... 6,751 6,925 1,663 3,855 1,164 12,032 32,390
Interest expense paid or payable
in cash.......................... 1,010 688 228 5,308 1,824 25,405 34,463
Cash flows provided (used in):
Operating activities............. 11,499 (6,525) 2,926 (8,923) (6,565) (28,524) (35,396)
Investing activities............. (24,634) (11,928) (1,763) 10,666 12,622 -- (15,753)
Financing activities............. 13,185 18,219 (444) (1,741) 3,987 -- 33,206
Pro forma deficiency of earnings
to fixed charges................ (65,264)
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, $362,000 ($221,000, net of $141,000 tax) write-off of deferred loan costs
associated with existing indebtedness, $63.5 million ($38.8 million, net of
$24.7 million tax) gain on disposition of RSA 5 and the analog assets and
operations of RSA 6, $28.0 million ($15.8 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 and $.8 million ($.5 million, net of $.3 million tax) of costs
associated with the debt prepayment premium. 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 and income from discontinued operations
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 various intercompany revenues and expenses between
combining companies, and (iii) incremental rent expense associated with
the sale of various 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 various tower assets that occurred in the
first quarter of 2000, the disposition of RSA 6 and (ii) the
application of purchase accounting to R&B, Richmond-Norfolk PCS and the
Alliances.
Year Ended Six Months Ended
----------- ----------------
December 31, 1999 June 30, 2000
----------------- -------------
(in thousands)
Historical depreciation elimination:
Tower asset sales............... $ (759) $ (928)
RSA 6........................... (316) (177)
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(1,075) (1,105)
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Purchase accounting 1:
R&B Communications.............. 5,541 2,771
Richmond-Norfolk PCS............ 18,628 9,314
Transaction expenses............ 225 113
Alliances....................... 1,878 939
---------- ----------
26,272 13,137
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Total depreciation and amortization
expense adjustment.............. $ 25,197 $ 12,032
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(1) The merger with R&B, 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
herein. 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, subordinated notes, retained
indebtedness, amortization of debt discount for issuance of warrants
and amortization of related debt issuance costs less the historical
interest expense on debt repaid.
A .125% increase or decrease in the assumed interest rate applicable to
our new senior credit facility, senior notes and subordinated notes
would change the pro forma interest expense and income before taxes by
$657,000 for the year ended December 31, 1999 and $328,000 for the six
months ended June 30, 2000.
(d) Represents the elimination of the equity losses related to the
Alliances, previously recorded by us and R&B. 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 (1) rental income earned on the assets excluded from the
disposition of the directory assistance operations, and (2)
amortization of the deferred gain from the sale and leaseback of
various 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 dividend 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 $30.8 million for the year ended December
31, 1999, and $16.8 million for the six months ended June 30, 2000.
(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 is presented
because it is a widely accepted financial indicator of a company's
ability to service and/or incur debt. EBITDA should not be considered
as an alternative to net income as a measure of our operating results
or to cash flow as a measure of liquidity. Because EBITDA is not
calculated identically by all companies, our EBITDA calculation may not
be strictly comparable to other similarly titled measures used by other
companies.
Pro forma EBITDA is calculated as follows:
Year Ended Six Months Ended
---------- ----------------
December 31, 1999 June 30, 2000
----------------- -------------
(in thousands)
Pro forma net loss before income taxes and minority interest..... $ (131,242) $ (65,012)
Adjustments:
Other income................................................ (2,120) (1,146)
(Gain) loss on sale of fixed assets......................... (7,764) 43
Net equity income from other wireless investees............. (519) (251)
Interest expense, net....................................... 73,275 36,548
Asset impairment charge..................................... 3,951 --
Depreciation and amortization............................... 63,032 32,390
---------- ---------
Pro forma EBITDA................................................. $ (1,387) $ 2,572
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