EXHIBIT 99.1
NTELOS Inc.
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. The pro forma adjustments give effect to:
o the proposed issuance of 3.7 million shares of common stock for 100%
of the stock of R&B Communications. This merger will be accounted
for using the purchase method of accounting.
o the resulting increase in our common ownership in the WV Alliance
and the subsequent consolidation (our 45% common ownership was
previously accounted for on the equity method; the consolidation
will be accounted for as a step transaction) due to our proposed
merger with R&B Communications, which owns approximately 34.3% of
the common interests of the WV Alliance.
o 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.
In addition, the pro forma consolidated statements of operations give
effect to the following additional transactions, as if they had occurred as of
January 1, 1999. All of the following transactions were consummated during the
quarter ended September 30, 2000:
o 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.
o the increase in our common ownership in the VA Alliance and the
subsequent consolidation (our 21% ownership interest was previously
accounted for on the equity method) due to:
- the VA Alliance's redemption of the Series A preferred
membership interests for $16.7 million.
- the conversion by us of our Series B preferred membership
interests in the VA Alliance into common interests.
o the increase in our common ownership interests in the VA Alliance
has been accounted for as a step acquisition.
o the sale of the capital stock of CFW Information Services Inc., a
provider of directory assistance services.
o the adjustment to rental expense, depreciation expense and the
amortization of deferred gain associated with the sale and leaseback
of certain tower assets.
o the sale of $375 million of debt securities in a private placement
and the closing of a new senior credit facility.
o the sale of our Series B, Series C and Series D Preferred Stock for
gross proceeds of $250.0 million. The preferred stock has been
presented to reflect the conversion of the Series D to Series C
based on shareholder approval granted on December 4, 2000.
o the repayment of substantially all of our existing indebtedness and
that of the Alliances.
o the payment of fees and expenses related to the Transactions.
Our unaudited pro forma Consolidated balance sheet of as of September
30, 2000 has been prepared as if the R&B Communications merger and the
consolidation of the WV Alliance transactions had occurred on that date. The
remainder of the Transactions occurred prior to this date and thus are currently
reflected in the historical balance sheet as of September 30, 2000. The
unaudited pro forma consolidated statements of operations for the periods
presented give effect to all of 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 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.
2
NTELOS Inc.
Unaudited Pro Forma Consolidated Balance Sheet
As of September 30, 2000
(in thousands)
Acquisitions
--------------------------
NTELOS R&B WV Alliance Pro Forma Pro Forma
Historical Historical Historical Adjustments(a) As Adjusted
------------- ------------ ------------- -------------- --------------
Current assets
Cash and cash equivalents................. $ 39,319 $ 7,122 $ 10 $ (1,300) $ 45,151
Accounts receivable, net.................. 25,492 3,024 3,391 - 31,907
Other receivables......................... 58,046 2,681 - (57,458) 3,269
Inventories, materials and supplies....... 5,552 502 1,020 - 7,074
Prepaid expenses and other................ 2,807 120 68 - 2,995
------------- ------------ ------------- -------------- --------------
Total current assets.................. 131,216 13,449 4,489 (58,758) 90,396
Restricted cash............................. 70,258 - - - 70,258
Securities and investments.................. 24,830 12,448 - 4,774 42,052
Property and equipment, net................. 679,372 27,587 53,862 - 760,821
Other assets
Cost in excess of net assets of business
acquired................................ 135,303 - - 40,351 175,654
Other..................................... 28,947 2,480 3,205 - 34,632
------------- ------------ ------------- -------------- --------------
Total other assets................... 164,250 2,480 3,205 40,351 210,286
------------- ------------ ------------- -------------- --------------
Total assets......................... $1,069,926 $ 55,964 $ 61,556 $ (13,633) $ 1,173,813
============= ============ ============= ============== ==============
Current liabilities
Accounts payable......................... $ 35,743 $ 1,494 $ 3,112 $ - $ 40,349
Current portion of long-term debt and
capital lease obligations............ 4,090 401 - - 4,491
Current portion of recognized losses in PCS
ventures............................. - 3,076 - (3,076) -
Other accrued liabilities................ 29,921 1,546 322 1,250 33,039
------------- ------------ ------------- -------------- --------------
Total current liabilities.......... 69,754 6,517 3,434 (1,826) 77,879
Long-term debt.............................. 514,409 7,254 57,458 (57,458) 521,663
Capital lease obligations................... 12,054 - - - 12,054
Long-term liabilities
Deferred income taxes.................... 46,631 4,178 - - 50,809
Retirement benefits...................... 11,863 1,997 - - 13,860
Long-term portion of recognized losses in PCS
ventures......................... 9,837 (9,837) -
Other.................................... 12,704 75 12,836 - 25,615
------------- ------------ ------------- -------------- --------------
Total long-term liabilities.......... 71,198 16,087 12,836 (9,837) 90,284
------------- ------------ ------------- -------------- --------------
Minority Interests.......................... 1,258 - - (959) 299
Series B redeemable preferred stock......... 107,308 - - - 107,308
Series C redeemable preferred stock......... 137,115 - - - 137,115
Shareholders' equity (deficit)/members'
interests/(deficit) 156,830 26,106 (12,172) 56,447 227,211
------------- ------------ ------------- -------------- --------------
Total liabilities and shareholders'
equity (deficiency) $ 1,069,926 $ 55,964 $ 61,556 $ (13,633) $ 1,173,813
============= ============ ============= ============== ==============
3
Notes to Pro Forma Consolidated Balance Sheet
(in thousands)
The pro forma financial data have been derived by the application of pro forma
adjustments to the Company's 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.
Merger with Alliance Total Net
R&B (1) Step Acquisition (2) Adjustment
---------------------------------------------------------
Cash and cash equivalents........................ $ (1,300) $ - $ (1,300)
Other receivables................................ - (57,458) (57,458)
Securities and investments....................... (959) 5,733 4,774
Cost in excess of net assets of business
acquired....................................... 46,825 (6,474) 40,351
Current portion of recognized losses in PCS
ventures....................................... - (3,076) (3,076)
Other accrued liabilities........................ 1,250 - 1,250
Long-term debt................................... - (57,458) (57,458)
Long-term portion of recognized losses in PCS
ventures....................................... - (9,837) (9,837)
Minority interests............................... (959) - (959)
Shareholders' equity (deficit)/members' interests
(deficit)...................................... 44,275 12,172 56,447
(1) Represents the merger with R&B Communications for 3.7 million common
shares of NTELOS Inc. at $18.94 per share (the average of our 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 NTELOS shares to one R&B share. The
following represents the adjustment to common equity and the excess of the
estimated purchase price over the estimated fair value of the net
identifiable assets acquired (in thousands):
Fair value of NTELOS common stock issued.............. $ 70,381
Less: R&B Communications net assets................... 26,106
---------------
Net adjustment to common equity.................... 44,275
Transaction expenses.................................. 1,300
Covenant not to compete............................... 1,250
---------------
Net adjustment to goodwill......................... $ 46,825
===============
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 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 twenty years for
goodwill for illustration purposes.
The adjustment also eliminates the $959,000 investment held by NTELOS in certain
R&B PCS licenses.
(2) Represents the purchase accounting adjustments necessary to reflect the
consolidation of the WV Alliance. A controlling interest in the WV Alliance
will be obtained through the merger with R&B Communications. Following this
transaction, we will own approximately 79% of the WV Alliance. The
following represents the adjustment to the excess of the estimated purchase
price over the estimated fair value of the net identifiable assets acquired
relating to the WV Alliance and the elimination of R&B Communications'
investment in the VA Alliance, which we currently report on a consolidated
basis (in thousands):
4
Elimination of negative investment balance................ $ (18,646)
Elimination of historical net equity deficit of Alliances. 12,172
-----------------
Net adjustment to goodwill............................. $ (6,474)
=================
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 twenty years for
goodwill for illustration purposes.
5
NTELOS Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands)
For the year ending December 31, 1999
Acquisitions
------------------------------------------------------------------
Richmond -
NTELOS R&B Norfolk PCS VA Alliance WV Alliance Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments As Adjusted
---------- ---------- ---------- ---------- ---------- ----------- -----------
Operating revenues
Wireless communications..... $ 21,692 $ 1,257 $ 50,456 $ 13,377 $ 2,989 $ (14,986) (a) $ 74,785
Wireline communications..... 44,110 14,500 - - - - 58,610
Other communication services 4,028 1,012 - - - - 5,040
---------- --------- ---------- ---------- ---------- ---------- ----------
69,830 16,769 50,456 13,377 2,989 (14,986) 138,435
---------- --------- ---------- ---------- ---------- ---------- ----------
Operating expenses
Cost of goods sold........... 8,142 - 15,137 5,864 3,065 (5,660) (a) 26,548
Maintenance and support...... 15,212 4,917 10,498 6,638 4,130 (1,099) (a) 40,296
Depreciation and amortization 11,323 2,808 13,866 7,770 2,068 20,051 (b) 57,886
Asset impairment charge...... 3,951 - - - - - 3,951
Customer operations.......... 11,685 2,031 25,705 8,685 4,094 - 52,200
Corporate operations......... 6,846 2,356 7,315 2,517 1,743 - 20,777
---------- --------- ---------- ---------- ---------- ---------- ----------
57,159 12,112 72,521 31,474 15,100 13,292 201,658
---------- --------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)......... 12,671 4,657 (22,065) (18,097) (12,111) (28,278) (63,223)
Other income (expenses)
Interest expense, net........ (900) (348) (1,462) (8,042) (1,176) (61,348) (c) (73,276)
Net Equity income (loss)
from PCS and other
wireless investees....... (11,187) (9,652) - - - 21,358 (d) 519
Gain/(loss) on sale of assets 8,318 252 (806) - - - 7,764
Other income (expense)....... - - (171) - - 2,291 (e) 2,120
---------- --------- ---------- ---------- ---------- ---------- ----------
(3,769) (9,748) (2,439) (8,042) (1,176) (37,699) (62,873)
---------- --------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income
taxes and minority interests. 8,902 (5,091) (24,504) (26,139) (13,287) (65,977) (126,096)
Income taxes (benefit).......... 2,622 (917) - - - (48,013) (f) (46,308)
---------- --------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before minority
interests.................... 6,280 (4,174) (24,504) (26,139) (13,287) (17,964) (79,788)
Minority interests.............. (389) - - - - 389 (a) -
---------- --------- ---------- ------------ ------------ ---------- ----------
Net income (loss)............... $ 5,891 $ (4,174) $ (24,504) $ (26,139) $ (13,287) $ (17,575) $ (79,788)
========== ========== =========== ============ ============ =========== ===========
Dividend requirement on $ 18,598 (g) $ 18,598
preferred stock =========== ===========
Income (loss) applicable to
common shares................. $ (98,386)
===========
Net loss per common shares-
basic and diluted ........... $ (5.88)
===========
Average shares outstanding -
basic and diluted............ 16,742
Other data:
EBITDA (h).................... 27,945 7,465 (8,199) (10,327) (10,043) (8,227) (1,386)
Depreciation and amortization. 11,323 2,808 13,866 7,770 2,068 20,051 57,886
Interest expense paid or
payable in cash............ 900 685 1,462 8,304 1,176 56,398 68,925
Cash flows provided (used in):
Operating activities..... 31,547 7,680 (6,955) (22,926) (12,478) (64,876) (68,008)
Investing activities..... (42,843) (5,804) (12,455) (23,202) (26,306) - (110,610)
Financing activities..... 11,452 (568) 19,832 46,132 38,781 - 115,629
Pro forma deficiency of
earnings to fixed charges.. (126,615)
6
NTELOS Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
(in thousands)
For the nine months ending September 30, 2000 for
NTELOS, R&B and WV Alliance
For the period from January 1, 2000 to July 26, 2000
for Richmond-Norfolk PCS and VA Alliance
Acquisitions
-----------------------------------------------------------------
Richmond -
NTELOS R&B Norfolk PCS VA Alliance WV Alliance Pro Forma Pro Forma
Historical Historical Historical Historical Historical Adjustments As Adjusted
---------- ---------- ---------- ---------- ---------- ----------- -----------
Operating revenues
Wireless communications... $ 29,159 $ 1,112 $ 30,812 $ 11,902 $ 9,870 $ (8,650) (a) $ 74,205
Wireline communications... 43,860 11,783 - - - 55,643
----------- ------------ ------------ -------------- -------------- ------------- ------------
75,552 13,631 30,812 11,902 9,870 (8,650) 133,117
----------- ------------ ------------ -------------- -------------- ------------- ------------
Operating expenses
Cost of goods sold......... 10,687 - 8,505 5,419 6,470 (3,669) (a) 27,412
Maintenance and support.... 20,488 3,917 7,402 4,392 4,818 (1,468) (a) 39,549
Depreciation and amortization 18,975 2,557 8,079 4,461 1,713 14,711 (b) 50,496
Asset impairment charge.... 5,625 - - - - 5,625
Customer operations........ 18,369 2,338 12,560 5,520 5,104 - 43,891
Corporate operations....... 7,521 2,604 3,291 2,031 1,526 - 16,973
----------- ------------ ------------ -------------- -------------- ------------- ------------
81,665 11,416 39,837 21,823 19,631 9,574 183,946
----------- ------------ ------------ -------------- -------------- ------------- ------------
Operating income (loss)....... (6,113) 2,215 (9,025) (9,921) (9,761) (18,224) (50,829)
Other income (expenses)
Interest expense, net...... (10,249) (86) (806) (7,770) (3,128) (32,328) (c) (54,367)
Net Equity income (loss)
from PCS and other
wireless investees..... (9,318) (10,819) - - - 20,485 (d) 348
Gain/(loss) on sale of assets 62,633 - - - - (62,633) (a) -
Other income (expense)..... (6,276) - (44) - - 7,994 (a) (e) 1,674
----------- ------------ ------------ -------------- -------------- ------------- ------------
36,790 (10,905) (850) (7,770) (3,128) (66,482) (52,345)
----------- ------------ ------------ -------------- -------------- ------------- ------------
Income (loss) from continuing
operations before income
taxes and minority interests 30,677 (8,690) (9,875) (17,691) (12,889) (84,706) (103,174)
Income taxes (benefit)........ 12,229 (3,350) - - - (46,796) (f) (37,917)
----------- ------------ ------------ -------------- -------------- ------------- ------------
Income (loss) from continuing
operations before minority
interests.................. 18,448 (5,340) (9,875) (17,691) (12,889) (37,910) (65,257)
Minority interests............ (105) - - - - 105 (a) -
----------- ------------ ------------ -------------- -------------- ------------- ------------
Net income (loss)............. 18,343 (5,340) (9,875) (17,691) (12,889) (37,805) (65,257)
Dividend requirement on
preferred stock 5,670 - - - - 9,153 (g) 14,823
----------- ------------ ------------ -------------- -------------- ------------- ------------
Income (loss) applicable to
common shares............... $ 12,673 $ (5,340) $ (9,875) $ (17,691) $ (12,889) $ (46,958) $ (80,080)
=========== ============ ============ ============== ============== ============= ============
Net loss per common shares -
basic and diluted ......... $ (4.76)
============
Average shares outstanding -
basic and diluted.......... 16,815
Other data:
EBITDA (h).................. 18,487 4,772 (946) (5,460) (8,048) (3,513) 5,292
Depreciation and amortization 18,975 2,557 8,079 4,461 1,713 14,711 50,496
Interest expense paid or
payable in cash.......... 13,748 337 806 7,770 3,128 25,315 51,104
Cash flows provided (used in):
Operating activities... 13,015 5,575 (2,846) (11,942) (11,879) (29,017) (37,094)
Investing activities... (563,936) (6,200) (7,352) 11,884 2,489 - (565,115)
Financing activities... 590,042 (471) 9,776 59 9,391 - 608,797
Pro forma deficiency of
earnings to fixed charges (103,522)
7
The pro forma financial data have been derived by the application of pro forma
adjustments to the Company's historical financial statements for the periods
noted.(1)
(a) The pro forma adjustments to revenue, cost of goods sold, operating
expenses, and minority interest represent (i) the elimination of operating
results and gain associated with the disposition of the analog assets and
operations of RSA6, (ii) the elimination of certain intercompany revenues
and expenses between combining companies, (iii) elimination of bridge
commitment fees, and (iv) incremental rent expense associated with the sale
of certain tower assets which 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 which occurred in the first quarter of 2000,
the disposition of RSA6 which occurred in the third quarter of 2000 and
(ii) the application of purchase accounting (A) to R&B Communications and
the WV Alliance and (B) to Richmond-Norfolk PCS and the VA Alliance (which
was effectively recorded during the third quarter of 2000).
Year Ended Nine Months Ended
December 31, 1999 September 30, 2000
----------------- ------------------
Historical depreciation elimination:
Tower asset sales................................. $ (759) $ (928)
RSA6.............................................. (316) (207)
--------------- ---------------
$ (1,075) $ (1,135)
--------------- ---------------
Purchase accounting:
R&B Communications................................ $ 2,341 $ 1,756
Richmond-Norfolk PCS.............................. 16,717 12,538
Transaction expenses.............................. 225 170
Alliances......................................... 1,843 1,382
--------------- ---------------
$ 21,126 $ 15,846
--------------- ---------------
Total depreciation and amortization expense adjustment $ 20,051 $ 14,711
=============== ===============
The merger with R&B Communications, the acquisition of Richmond-Norfolk PCS and
the consolidation of the Alliances will be or have been 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 offering memorandum. For pro
forma purposes, the preliminary goodwill balance is being amortized over twenty
years.
(c) Represents the pro forma adjustment to interest expense for the senior
credit facility, senior 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 0.125% increase or decrease in the assumed interest rate applicable to
the 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 $493,000 for the nine months ended September 30,
2000.
(d) Represents the elimination of the equity losses related to the Alliances,
previously recorded by NTELOS and R&B Communications. After the
transactions are complete, we will control the Alliances. As such, the
Alliances' income statements have been consolidated with ours. See note (2)
to unaudited pro forma balance sheet for further explanation.
(e) Represents (1) rental income earned on the excluded assets from the
disposition of the directory assistance operations, and (2) amortization of
the deferred gain from the sale and leaseback of certain tower assets.
- --------
/1/ Results of operations from July 27, 2000 to September 30, 2000 for
Richmond-Norfolk PCS and VA Alliance have been consolidated with NTELOS'
historical operations.
8
(f) Represents 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 8.5% per annum dividend on the Series B preferred stock and
the 5.5% 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 transactions expenses related to the preferred equity
placements.
(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 charge. EBITDA is presented because it
is a widely accepted financial indicator of a company's ability to service
and/or incur indebtedness. 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, the presentation herein may not be strictly
comparable to other similarly titled measures of other companies.
Pro forma EDITDA is calculated as follows:
Twelve Months Ended Nine Months Ended
December 31, 1999 September 30, 2000
----------------- ------------------
Pro forma net loss income taxes and minority $ (126,096) $ (103,203)
interest.........................................
Adjustments:.....................................
Other (income) / expense.................... (2,120) (1,674)
Gain on sale of fixed assets................ (7,764) -
Net equity income from other wireless investees (519) (348)
Interest expense, net....................... 73,276 54,367
Asset impairment charge..................... 3,951 5,625
Depreciation and amortization............... 57,886 50,525
---------------- --------------
Pro forma EDITDA................................. $ (1,386) $ 5,292
================ ==============
9