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:
. the issuance of 3.7 million shares of common stock for 100% of the stock
of R&B Communications. This merger has been accounted for using the
purchase method of accounting;
. the increase in our common ownership in the West Virginia Alliance of
34.3% and the subsequent consolidation (entity was previously accounted
for on the equity method), due to the merger, as R&B Communications owns
approximately 34.3% of the common interests of the West Virginia Alliance;
and
. the like kind exchange of certain NTELOS WCS licenses for certain AT&T PCS
licenses which has no effect on the pro forma balance sheet.
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 (the "Transactions") were
consummated during the quarter ended September 30, 2000:
. 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 approximately $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 the
subsequent consolidation (our 21% ownership interest was previously
accounted for on the equity method) due to:
- the Virginia 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 Virginia Alliance into common interests.
The increase in our common ownership interests in the Virginia Alliance
has been accounted for as a step acquisition.
. the sale of the capital stock of CFW Information Services Inc., a provider
of directory assistance services;
. the adjustment to rental expense, depreciation expense and the
amortization of deferred gain associated with the sale and leaseback of
certain tower assets;
. 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 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;
. the repayment of substantially all of our indebtedness and that of the
Alliances existing prior to the Transactions; and
. the payment of fees and expenses related to the Transactions.
Our unaudited pro forma consolidated balance sheet of as of December 31,
2000 has been prepared as if the R&B Communications merger and the consolidation
of the West Virginia 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 December 31, 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.
NTELOS Inc.
Unaudited Pro Forma Consolidated
Balance Sheet
As of December 31, 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 $ 1,637 $ 5,066 $ 9 $ (1,300) $ 5,412
Accounts receivable, net 24,268 3,616 2,844 -- 30,728
Other receivables 80,640 3,235 693 (66,423) 18,145
Inventories, materials and supplies 7,896 551 1,124 -- 9,571
Prepaid expenses and other 3,178 305 195 -- 3,678
------------- ------------- -------------- --------------- -------------
Total current assets 117,619 12,773 4,865 (67,723) 67,534
Restricted Cash 71,024 -- -- -- 71,024
Securities and investments 17,405 7,833 -- 7,599 32,837
Property and equipment, net 745,793 29,466 59,925 -- 835,184
Other assets
Cost in excess of net assets of business
acquired 45,861 -- -- 58,625 104,486
Other 78,503 2,438 2,097 -- 83,038
------------- ------------- -------------- --------------- -------------
Total other assets 124,364 2,438 2,097 58,625 187,524
------------- ------------- -------------- --------------- -------------
Total assets $ 1,076,205 $ 52,510 $ 66,887 $ (1,499) $ 1,194,103
============= ============= ============== =============== =============
Current liabilities
Accounts payable $ 33,119 $ 2,309 $ 4,417 $ -- $ 39,845
Current portion of long-term debt and
capital lease obligations -- 406 -- -- 406
Current portion of recognized losses in PCS
ventures -- 3,100 -- (3,100) --
Other accrued liabilities 42,216 1,591 1,018 1,250 46,075
------------- ------------- --------------- ---------------- --------------
Total current liabilities 75,335 7,406 5,435 (1,850) 86,326
Long-term debt and capital lease obligations 556,287 7,115 66,423 (66,423) 563,402
Long-term liabilities
Deferred income taxes 36,380 1,878 -- -- 38,208
Retirement benefits 12,017 2,012 -- -- 14,029
Long-term portion of recognized losses in
PCS ventures -- 13,069 -- (13,069) --
Other 13,750 79 13,678 -- 27,507
------------- ------------- -------------- --------------- -------------
Total long-term liabilities 62,147 16,988 13,678 (13,069) 79,744
------------- ------------- -------------- --------------- -------------
Minority interests 1,258 -- -- (959) 299
Preferred stock 246,906 -- -- -- 246,906
Shareholders' equity/members' (deficit) 134,272 21,001 (18,649) 80,802 217,426
------------- ------------- -------------- --------------- -------------
Total liabilities and shareholders'
equity (deficiency) $ 1,076,205 $ 52,510 $ 66,887 $ (1,499) $ 1,194,103
============= ============= ============== =============== =============
NTELOS Inc.
Notes to Pro Forma Consolidated Balance Sheet
(a) Pro forma adjustments to the Pro Forma Combined Balance Sheet are
summarized in the following table (in thousands) and are described in the
notes that follow.
Merger with Alliance Total
R&B (1) Step Acquisition (2) Net Adjustment
--------------------- ---------------------- ----------------
Cash and cash equivalents $ (1,300) $ -- $ (1,300)
Other receivables -- (66,423) (66,423)
Securities and investments (959) 8,558 7,599
Cost in excess of net assets of business acquired 64,703 (6,078) 58,625
Current portion of recognized losses in PCS ventures -- (3,100) (3,100)
Other accrued liabilities 1,250 - 1,250
Long-term debt -- (66,423) (66,423)
Long-term portion of recognized losses in PCS ventures -- (13,069) (13,069)
Minority interests (959) -- (959)
Shareholders' equity (deficit)/members' interests (deficit) 62,153 18,649 80,802
(1) Represents the merger with R&B Communications, Inc. for 3.7 million common
shares of NTELOS Inc. at $22.38 per share (the average of our common stock
price for the two days prior to closing and two days subsequent to
closing). 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 Communications
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 $ 83,154
Less: R&B Communications net assets 21,001
--------------
Net adjustment to common equity 62,153
Transaction expenses 1,300
Covenant not to compete 1,250
--------------
Net adjustment to goodwill $ 64,703
==============
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, 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 Communications PCS licenses.
(2) Represents the purchase accounting adjustments necessary to reflect the
consolidation of the West Virginia Alliance. A controlling interest in the
West Virginia Alliance will be obtained through the merger with R&B
Communications. As a result of this transaction, NTELOS will own
approximately 79% of the West Virginia Alliance. The following represents
the adjustment to the excess of the estimated purchase price over the
estimated fair value of the identifiable assets acquired relating to the
West Virginia Alliance and the elimination of R&B Communications investment
in the Virginia Alliance, which NTELOS reports on a consolidated basis:
(in thousands)
Elimination of negative investment balance $ (24,727)
Elimination of historical net equity deficit of West Virginia Alliance 18,649
-----------------
Net adjustment to goodwill $ (6,078)
=================
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, 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.
NTELOS Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
For the year ended December 31, 1999
(in thousands)
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 21,230(b) 59,065
Asset impairment charge 3,951 -- -- -- -- -- 3,951
Customer operations 11,685 2,031 25,705 8,685 4,094 --(a) 52,200
Coporate operations 6,846 2,356 7,315 2,517 1,743 --(a) 20,777
-------- ----------- ------------ ----------- ------------ ----------- -------------
57,159 12,112 72,521 31,474 15,100 14,471 202,837
-------- ----------- ------------ ----------- ------------ ----------- -------------
Operating income (loss) 12,671 4,657 (22,065) (18,097) (12,111) (29,457) (64,402)
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) (67,156) (127,275)
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) (19,143) (80,967)
Minority interests (389) -- -- -- -- 389(a) --
-------- ----------- ------------ ----------- ------------ ----------- -------------
Net income (loss) $ 5,891 $ (4,174) $ (24,504) $ (26,139) $ (13,287) $ (18,754) $ (80,967)
======== =========== ============ =========== ============ =========== =============
Dividend requirements on
preferred stock $ 18,598(g) $ 18,598
=========== =============
Income (loss) applicable to
common shares $ (99,565)
=============
Net loss per common share -
basic and diluted $ (5.95)
=============
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 21,230 59,065
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 (127,794)
NTELOS Inc.
Unaudited Pro Forma Consolidated
Statement of Operations
For the year ended December 31, 2000 for NTELOS,
R&B, West Virginia Alliance
For the period from January 1, 2000 to July 26, 2000
for Richmond-Norfolk PCS and Virginia Alliance
(in thousands)
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 $ 50,218 $ 1,279 $ 30,812 $ 11,902 $ 13,223 $ (8,650) (a) $ 98,784
Wireline communications 59,877 16,464 -- -- -- -- 76,341
Other communication services 3,424 1,081 -- -- -- -- 4,505
------------ ----------- ------------ ----------- ------------ ----------- -------------
113,519 18,824 30,812 11,902 13,223 (8,650) 179,630
------------ ----------- ------------ ----------- ------------ ----------- -------------
Operating expenses
Cost of goods sold 18,657 -- 8,505 5,419 9,075 (3,669) (a) 37,987
Maintenance and support 31,177 6,304 7,402 4,392 6,647 (1,468) (a) 54,454
Depreciation and amortization 34,865 3,506 8,079 4,461 2,316 13,098 (b) 66,325
Asset impairment charge 5,625 -- -- -- -- -- 5,625
Customer operations 31,992 2,432 12,560 5,520 7,534 -- 60,038
Corporate operations 11,441 3,174 3,291 2,031 2,130 -- 22,067
------------ ----------- ------------ ----------- ------------ ----------- -------------
133,757 15,416 39,837 21,823 27,702 7,961 246,496
------------ ----------- ------------ ----------- ------------ ----------- -------------
Operating income (loss) (20,238) 3,408 (9,025) (9,921) (14,479) (16,611) (66,866)
Other income (expenses)
Interest expense, net (24,437) (29) (806) (7,770) (4,216) (34,325) (71,583)
Net Equity income (loss) from
PCS and other wireless
investees (12,259) (15,196) -- -- -- 27,866 (d) 411
Gain/(loss) on sale of assets 62,616 194 -- -- -- (62,616) (a) 194
Other income (expense) (6,536) - (44) -- (671) 8,440 (a)(e) 1,189
------------ ----------- ------------ ----------- ------------ ----------- -------------
19,384 (15,031) (850) (7,770) (4,887) (60,635) (69,789)
------------ ----------- ------------ ----------- ------------ ----------- -------------
Income (loss) from continuing
operations before income
taxes and minority interests (854) (11,623) (9,875) (17,691) (19,366) (77,246) (136,655)
Income taxes (benefit) 201 (3,992) -- -- -- (45,719) (f) (49,510)
------------ ----------- ------------ ----------- ------------ ----------- -------------
Income (loss) from continuing
operations before minority
interests (1,055) (7,631) (9,875) (17,691) (19,366) (31,527) (87,145)
Minority interests 1,638 -- -- -- -- (1,638) (a) --
------------ ----------- ------------ ----------- ------------ ----------- -------------
Net income (loss) 583 (7,631) (9,875) (17,691) (19,366) (33,165) (87,145)
Dividend requirements on
preferred stock 8,168 -- -- -- -- 11,414 (g) 19,582
------------ ----------- ------------ ----------- ------------ ----------- -------------
Income (loss) from continuing
operations applicable to common
shares $ (7,585) $ (7,631) $ (9,875) $(17,691) $ (19,366) $ (44,579) $ (106,727)
=========== =========== ============ ========== =========== ========== =============
Net loss per common share -
basic and diluted $ (6.35)
=============
Average shares outstanding -
basic and diluted 16,815
Other data
EBITDA (h) 20,252 6,914 (946) (5,460) (12,163) (3,513) 5,084
Depreciation and amortization 34,865 3,506 8,079 4,461 2,316 13,098 66,325
Interest expense paid or
payable in cash 31,407 439 806 7,770 4,216 23,108 67,746
Cash flows provided (used in):
Operating activities 10,838 7,427 (2,846) (11,942) (16,964) (26,810) (40,297)
Investing activities (623,364) (9,710) (7,352) 11,884 (1,391) -- (629,933)
Financing activities 613,965 (869) 9,776 59 18,356 -- 641,287
Pro forma deficiency of
earnings to fixed charges (137,066)
Notes to Combined Pro Forma Statements of Operations
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.
(a) The pro forma adjustments of 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
to R&B and the WV Alliance, Richmond-Norfolk PCS and the VA Alliance
which was effectively recorded during the third quarter of 2000.
Year Ended Year Ended
December 31, 1999 December 31, 2000
------------------ ---------------------
Historical depreciation elimination:
Tower asset sales $ (759) $ (928)
RSA6 (316) (207)
---------------- ------------------
$ (1,075) $ (1,135)
---------------- ------------------
Purchase accounting (1):
R&B $ 3,235 $ 3,235
Richmond-Norfolk PCS 16,717 9,752
Transaction expenses 225 131
Alliances 2,128 1,115
---------------- ------------------
$ 22,305 $ 14,233
---------------- ------------------
Total depreciation and amortization expense
adjustment $ 21,230 $ 13,098
================ ==================
(1) The merger with R&B, the acquisition of Richmond-Norfolk PCS and the
consolidation of the Alliances 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
years ended December 31, 1999 and 2000.
(d) Represents the elimination of the equity losses related to the
Alliances, previously recorded by NTELOS and R&B. NTELOS controls the
Alliances following completion of the Transactions.
8
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.
(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 transaction expenses related to the
preferred equity placements. See "Certain Transactions" section for
further explanation.
(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 the
Company's 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 EBITDA is calculated as follows:
Twelve Months Ended Twelve Months Ended
December 31, 1999 December 31, 2000
------------------- -------------------
Pro forma net loss before income taxes and $ (127,275) $ (136,655)
minority interest
Adjustments:
Other (income) / expense (2,120) (1,189)
Gain on sale of fixed assets (7,764) (194)
Net Equity income from other wireless
investees (519) (411)
Interest expense, net 73,276 71,583
Asset Impairment Charge 3,951 5,625
Depreciation and amortization 59,065 66,325
------------------- --------------------
Pro Forma EBITDA $ (1,386) $ 5,084
=================== ====================
9