PRESS RELEASE
FOR IMMEDIATE RELEASE
CONTACT INFORMATION:
Karen Chrosniak, Director of Investor Relations
Ed Babcock, VP of Finance
Adelphia Business Solutions
877-496-6704
ADELPHIA BUSINESS SOLUTIONS, INC ANNOUNCES FOURTH QUARTER AND
FULL YEAR RESULTS OF OPERATIONS
Coudersport, PA - April 1, 2001
John J. Rigas, Chairman of Adelphia Communications Corporation ("Adelphia")
(NASDAQ: ADLAC) and Adelphia Business Solutions, Inc. ("the Company") (NASDAQ:
ABIZ) reported results of operations for the Company for the fourth quarter and
year which ended on December 31, 2000. Fourth quarter results saw record levels
of consolidated operating revenues of $108.9 million. For the year 2000,
consolidated operating revenues were a record $352.0 million, or 128% higher
than the previous year. Net loss applicable to common stockholders for the
fourth quarter totaled $137.3 million, or $1.94 per share, compared with $60.8
million, or $1.01 per share, for the same period in the prior year. Summarized
financial results are included in Tables 1, 2, and 3 below.
As presented in Table 1, consolidated revenues increased by 96% to $108.9
million in the December 2000 quarter, from $55.6 million in the December 1999
quarter and were 17% higher than the consolidated revenues of $93.5 million for
the September 2000 quarter. Consolidated revenues were comprised of voice
revenue (includes local, long-distance and other revenues) of $88.5 million in
the December 2000 quarter as compared with $43.8 million in the December 1999
quarter and data revenue (includes internet, dedicated access and data services)
of $20.4 million in the December 2000 quarter as compared with $11.8 million in
the December 1999 quarter. Average revenue per installed access line in the
December 2000 quarter was approximately $50 per month, in line with $51 per
month in the prior quarter. Consolidated revenues in the December 2000 quarter
included $9.5 million of reciprocal compensation revenue, or 8.7% of revenues.
The Company continues to expect calendar 2001 revenues to be approximately $500
million, with first quarter 2001 revenue at approximately the same level as
December 2000 quarterly revenue.
Consolidated gross margin as a percent of sales was 47.6% in the December 2000
quarter as compared with 45.6% of sales in the September 2000 quarter.
Consolidated EBITDA losses for the December 2000 quarter were $34.2 million
versus a $25.2 million EBITDA loss for the September 2000 quarter. Consolidated
EBITDA losses were greater than expected due to an additional $15 million charge
related to potentially uncollectible accounts receivable associated primarily
with internet service providers.
In addition to the Company's EBITDA loss for the December 2000 quarter, the
Company recorded a restructuring charge totaling $5.4 million comprised
primarily of direct costs associated with the previously announced revision of
the Company's business plan from 200 markets to its current 80 market business
plan. The Company will record an additional $3.6 million charge to earnings in
the first quarter of calendar 2001 for severance costs associated with the
related layoff of approximately 210 employees in January 2001.
As a result of continued revenue growth combined with cost reduction efforts
associated with the revised business plan, the Company expects EBITDA losses to
decrease to approximately $15-17 million for the first quarter of calendar 2001
and to approximately $20-25 million for calendar 2001.
As shown in Table 2, the Company's fourteen Class of 1996 markets continue to
demonstrate strong financial results with sequential quarterly revenue growth of
4.8% in the December 2000 quarter and gross margin as a percentage of sales of
72.6%. Revenue for the Class of 1996 markets has increased 56.2% as compared
with the December 1999 quarter, with gross margins in excess of 72.5% of
revenues for each of the past five quarters. As such, EBITDA for these markets
before allocation of corporate overhead has increased 71.8% from an annualized
$73.4 million for the December 1999 quarter to an annualized $126.1 million for
the December 2000 quarter. Furthermore, from the December 1999 quarter to the
December 2000 quarter, the eight Class of 1997/1998 markets' revenues increased
82.6% from $8.1 million to $14.8 million. Gross margins for these markets
increased 105.7% during the same period and annualized EBITDA before allocation
of corporate overhead increased from $3.4 million to $11.3 million, or to 19.0%
of revenues in the December 2000 quarter.
With all nine of the Company's regional Class 5 switches operational in the
Class of 1999 markets, the Company's total service resale conversion effort
contributed to the improvement of these markets' negative gross margin from a
negative 27.4% of revenues in the September 2000 quarter to a negative 17.0% of
revenues in the December 2000 quarter on sequential quarterly revenue growth of
18.3%. As such, EBITDA losses before allocation of corporate overhead in these
markets were relatively unchanged at negative $26.6 million from the September
2000 quarter to the December 2000 quarter. The Company expects this to be these
markets' peak EBITDA loss period, and that EBITDA losses will decrease
throughout calendar 2001. The Company believes the results in all of its Class
market categories continue to validate its business plan model as a facilities
based integrated communications provider.
The Company's focus on collection efforts and accounts receivable during the
December 2000 quarter resulted in an improvement in days sales outstanding in
accounts receivable from 105 days as of September 30, 2000 to 78 days as of
December 31, 2000.
During the December 2000 quarter, the Company and its consolidated subsidiaries
invested approximately $233.8 million in capital expenditures related primarily
to local market construction, regional network ring activations, and the central
office build-out for the Class of 1999 and 2000 markets. Capital expenditures
for calendar 2000 totaled $712.8 million. As of December 31, 2000, total gross
property, plant and equipment of the Company and its consolidated subsidiaries,
was approximately $1.7 billion. The Company's condensed consolidated balance
sheets are attached on Table 3.
During the December 2000 quarter, the Company funded a portion of its free cash
flow deficit with draws of approximately $150.3 million under a $500.0 million
bank credit commitment, $87.5 million in proceeds from the sale to Adelphia of
assets in six markets the Company has decided not to pursue in its revised
business plan, and increases in working capital. As of December 31, 2000, $500.0
million was drawn on the bank credit facility. The Company expects to fund its
projected future cash flow deficits through a combination of additional bank or
institutional indebtedness and proceeds from the recently completed common stock
rights offering in which Adelphia exercised rights providing the Company with
$460.9 million in proceeds.
A summary of the Company's non-financial statistical information as of
December 31, 2000 follows:
Active
---------
Local Route Miles 8,976
Fiber Strand Miles 479,223
Long-Haul Route Miles 7,879
Buildings Connected
on-network with owned facilities 3,173
Central Offices Connect on-network 299
Lucent 5ESS Voice Switches 30
Data Switches 26
Sales Employees 763
Total Employees 2,774
Average Lines per Customer 18
Adelphia Business Solutions provides integrated communications services to
business customers through its state-of-the-art fiber optic communications
network, including local and long distance voice services, messaging, high-speed
data and internet services. For more information on Adelphia Business Solutions,
or to review an electronic version of this press release visit the Company's web
site at http://www.adelphia.com.
The Company will hold its quarterly conference call with investors on Monday,
April 2, 2001 at 3:00 p.m. Eastern Standard Time (EST). The conference call can
be accessed by dialing 800-521-5439 or 303-267-1006 internationally (passcode
980826). A telephone replay of the conference call will be available immediately
following the call and through Friday, April 6, 2001. To access the replay,
please dial 800-625-5288 (passcode 980826). In addition, the conference call
will be rebroadcast live via the Internet at www.adelphia-abs.com. A recording
of the conference call will also be available on the Company's website from
April 2, 2001 through April 16, 2001.
The statements in this press release that are not historical facts are
forward-looking statements that are subject to material risks and uncertainties.
Actual results could differ materially from those stated or implied by such
forward-looking statements due to risks and uncertainties associated with the
Company's business, which include among others, general economic and business
conditions, competitive developments, risks associated with the Company's growth
and financings, the cost and availability of capital, the development of the
Company's markets, regulatory risks, risks associated with reliance on the
performance and financial condition of vendors and customers, dependence on its
customers and their spending patterns, the ability of the Company to execute on
its business plan and to design and construct fiber optic networks and related
facilities, and other risks which are discussed in the Company's filings with
the Securities and Exchange Commission. Additional information regarding factors
that may affect the business and financial results of Adelphia Business
Solutions can be found in the Company's filings with the Securities and Exchange
Commission, including the prospectus and most recent prospectus supplement under
Registration Statement File No. 333-11142 (formerly No. 333-88927), under the
caption "Risk Factors," and the Company's filings under the Securities Exchange
Act of 1934. The Company does not undertake to update any forward looking
statements in this press release or with respect to matters described herein.
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
TABLE 1 - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(Unaudited)
Three Months
Ended Year Ended
December 31, December 31,
---------------------- ----------------------
1999 2000 1999 2000
--------- --------- --------- ---------
Revenues ............................ $ 55,575 $ 108,908 $ 154,575 $ 351,974
Operating expenses:
Network operations ................ 22,488 57,028 58,525 183,314
Selling, general and administrative 47,269 86,078 140,183 274,890
--------- --------- --------- ---------
EBITDA (a) ........................ (14,182) (34,198) (44,133) (106,230)
Restructuring charges ............. -- 5,420 -- 5,420
Non-cash stock compensation ....... 1,728 1,721 2,432 2,308
Depreciation and amortization ..... 19,955 41,384 65,244 114,614
--------- --------- --------- ---------
Operating loss ...................... (35,865) (82,723) (111,809) (228,572)
Other income (expense):
Interest income ................... 288 1,229 19,933 3,900
Interest income-affiliate ......... 1,540 -- 8,483 6,282
Interest expense .................. (17,931) (38,822) (74,314) (81,573)
Interest expense - affiliate ...... -- (4,812) -- (7,003)
--------- --------- --------- ---------
Loss before income taxes and
equity in net loss of joint ventures (51,968) (125,128) (157,707) (306,966)
Income tax benefit (expense) ........ 3 -- (1) --
--------- --------- --------- ---------
Loss before equity in net loss
of joint ventures ................. (51,965) (125,128) (157,708) (306,966)
Equity in net loss of joint ventures (418) (2,788) (7,758) (2,858)
--------- --------- --------- ---------
Net loss ............................ (52,383) (127,916) (165,466) (309,824)
Dividend requirements applicable
to preferred stock ................. (8,450) (9,344) (31,618) (35,665)
--------- --------- --------- ---------
Net loss applicable to common
stockholders ....................... $ (60,833) $(137,260) $(197,084) $(345,489)
========= ========= ========= =========
Basic and diluted net loss per
weighted average share of
common stock ....................... $ (1.01) $ (1.94) $ (3.47) $ (4.93)
========= ========= ========= =========
Weighted average shares of
common stock outstanding .......... 60,453 70,683 56,739 70,088
========= ========= ========= =========
<FN>
(a) Earnings before interest, income taxes, depreciation and amortization,
restructuring charges, other income/expense and non-cash stock compensation
("EBITDA") and similar measures of cash flow are commonly used in the
telecommunications industry to analyze and compare telecommunications
companies on the basis of operating performance, leverage, and liquidity.
While EBITDA is not an alternative to operating income as an indicator of
operating performance or an alternative to cash flows from operating
activities as a measure of liquidity as defined by GAAP, and while EBITDA may
not be comparable to other similarly titled measures of other companies,
management of Adelphia Business Solutions believes that EBITDA is a
meaningful measure of performance.
</FN>
Adelphia Business Solutions, Inc.
Table 2 - Unaudited Combined Results of Original and Expansion Markets
Before allocation of Corporate Overhead (a)
Quarter Ended December 31, 2000 Quarter Ended September 30, 2000
---------------------------------------------------- ---------------------------------------------------
Original Expansion Original Expansion
Markets Markets Markets Markets
------------------ ----------------- ------------------ -----------------
(dollars in Class Class Class Class Total Class Class Class Class Total
thousands) of of of of Operating of of of of Operating
1996 1997/98 1999 2000 Results(a) 1996 1997/98 1999 2000 Results(a)
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Revenue ........... $ 81,936 $ 14,825 $ 22,275 $ 2,005 $ 121,041 $ 78,168 $ 14,061 $ 18,829 $ 105 $ 111,163
Direct Operating
Expenses ......... 22,440 6,365 26,060 2,370 57,235 20,933 6,575 23,986 879 52,373
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ---------
Gross Margin ...... 59,496 8,460 (3,785) (365) 63,806 57,235 7,486 (5,157) (774) 58,790
Gross Margin
Percentage ....... 72.6% 57.1% (17.0%) (18.2%) 52.7% 73.2% 53.2% (27.4%) NM 52.9%
Sales, General
and Administrative
Expenses ......... 27,970 5,644 22,781 6,031 62,426 30,171 5,296 21,689 3,519 60,675
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 31,526 $ 2,816 $(26,566) $ (6,396) $ 1,380 $ 27,064 $ 2,190 $(26,846) $(4,293) $ (1,885)
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ----------
EBITDA as a
Percentage of
Revenues ......... 38.5% 19.0% (119.3%) NM 1.1% 34.6% 15.6% (142.6%) NM (1.7%)
December 2000 Quarter vs. September 2000 Quarter
Percentage Change Comparison
---------------------------------------------------
Original Expansion
Markets Markets
------------------ -----------------
Percent Change Class Class Class Class Total
Comparison of of of of Operating
1996 1997/98 1999 2000 Results(a)
-------- -------- -------- -------- ----------
Revenue ........... 4.8% 5.4% 18.3% NM 8.9%
Direct Operating
Expenses ......... 7.2% (3.2%) 8.6% NM 9.3%
-------- -------- -------- -------- ----------
Gross Margin ...... 4.0% 13.0% (26.6%) NM 8.5%
Sales, General
and Administrative
Expenses ......... (7.5%) 6.6% 5.0% NM 2.9%
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 16.5% 28.6% 1.0% NM NM
-------- -------- -------- -------- ----------
<FN>
(a) Table 2 summarizes operating results before the allocation of corporate
overhead for Adelphia Business Solutions' Original and Expansion Markets,
grouped by the year or years in which operations commenced. Operating Results
are presented before an allocation of Corporate Overhead for network operating
control center, engineering and other administrative support functions totaling
$23.7 million in the December 2000 quarter and $17.1 million in the September
2000 quarter and before a bad debt provision for previously recorded revenues of
$15 million in the December 2000 quarter. The Original Markets include fourteen
markets in the Class of 1996 and eight markets in the Class of 1997/1998. The
Expansion Markets include thirty markets in the Class of 1999 and twenty-nine
markets in the Class of 2000. Amounts presented include results for the six
markets sold to Adelphia in December 2000, which markets will not be included in
results for subsequent quarters.
(b) Earnings before interest, income taxes, depreciation and amortization,
restructuring charges, other income/expense and noncash stock compensation
("EBITDA") and similar measures of cash flow are commonly used in the
telecommunications industry to analyze and compare telecommunications companies
on the basis of operating performance, leverage, and liquidity. While EBITDA is
not an alternative indicator of operating performance or an alternative to cash
flows from operating activities as a measure of liquidity as defined by GAAP,
and while EBITDA may not be comparable to other similarly titled measure of
other companies, management of Adelphia Business Solutions believes that EBITDA
is a meaningful measure of performance.
</FN>
Adelphia Business Solutions, Inc.
Table 2 (Cont.) - Unaudited Combined Results of Original and Expansion Markets
Before allocation of Corporate Overhead (a)
Quarter Ended December 31, 2000 Quarter Ended December 31, 1999
---------------------------------------------------- ---------------------------------------------------
Original Expansion Original Expansion
Markets Markets Markets Markets
------------------ ----------------- ------------------ -----------------
(dollars in Class Class Class Class Total Class Class Class Class Total
thousands) of of of of Operating of of of of Operating
1996 1997/98 1999 2000 Results(a) 1996 1997/98 1999 2000 Results(a)
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Revenue ........... $ 81,936 $ 14,825 $ 22,275 $ 2,005 $ 121,041 $ 52,740 $ 8,121 $ 6,462 $ --- $ 67,053
Direct Operating
Expenses ......... 22,440 6,365 26,060 2,370 57,235 11,221 4,009 7,743 --- 23,073
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ---------
Gross Margin ...... 59,496 8,460 (3,785) (365) 63,806 41,249 4,112 (1,381) --- 43,980
Gross Margin
Percentage ....... 72.6% 57.1% (17.0%) (18.2%) 52.7% 78.6% 50.6% (21.4%) --- 65.6%
Sales, General
and Administrative
Expenses ......... 27,970 5,644 22,781 6,031 62,426 22,911 3,264 14,508 420 41,103
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 31,526 $ 2,816 $(26,566) $ (6,396) $ 1,380 $ 18,338 $ 848 $(15,890) $ (420) $ 2,877
-------- -------- -------- -------- ---------- --------- -------- -------- ------- ----------
EBITDA as a
Percentage of
Revenues ......... 38.5% 19.0% (119.3%) NM 1.1% 34.9% 10.4% (245.9%) --- 4.3%
December 2000 Quarter vs. December 1999 Quarter
Percentage Change Comparison
---------------------------------------------------
Original Expansion
Markets Markets
------------------ -----------------
Percent Change Class Class Class Class Total
Comparison of of of of Operating
1996 1997/98 1999 2000 Results(a)
-------- -------- -------- -------- ----------
Revenue ........... 56.2% 82.6% 244.7% NM 80.5%
Direct Operating
Expenses ......... 100.0% 58.8% 232.2% NM 148.1%
-------- -------- -------- -------- ----------
Gross Margin ...... 44.2% 105.7% NM NM 45.1%
Sales, General
and Administrative
Expenses ......... 22.1% 72.9% 57.0% NM 51.9%
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 71.9% 232.1% NM NM (52.0%)
-------- -------- -------- -------- ----------
<FN>
(a) Table 2 summarizes operating results before the allocation of corporate
overhead for Adelphia Business Solutions' Original and Expansion Markets,
grouped by the year or years in which operations commenced. Operating Results
are presented before an allocation of Corporate Overhead for network
operating control center, engineering and other administrative support
functions totaling $23.7 million in the December 2000 quarter and $14.4
million in the December 1999 quarter and before a bad debt provision for
previously recorded revenues of $15 million in the December 2000 quarter. The
Original Markets include fourteen markets in the Class of 1996 and eight
markets in the Class of 1997/1998. The Expansion Markets include thirty
markets in the Class of 1999 and twenty-nine markets in the Class of 2000.
Amounts presented include results from the six markets sold to Adelphia in
December 2000, which markets will not be included in results for subsequent
quarters.
(b) Earnings before interest, income taxes, depreciation and amortization
restructuring charges, other income/expense and noncash stock compensation
("EBITDA") and similar measures of cash flow are commonly used in the
telecommunications industry to analyze and compare telecommunications
companies on the basis of operating performance, leverage, and liquidity.
While EBITDA is not an alternative indicator of operating performance or an
alternative to cash flows from operating activities as a measure of liquidity
as defined by GAAP, and while EBITDA may not be comparable to other similarly
titled measure of other companies, management of Adelphia Business Solutions
believes that EBITDA is a meaningful measure of performance.
</FN>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
TABLE 3 - CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
December December
31, 31,
1999 2000
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents ............... $ 2,133 $ 3,543
Due from parent - net ................... 392,629 --
Due from affiliates - net ............... 6,230 --
Accounts receivable - net ............... 68,075 79,650
Other current assets .................... 9,852 14,936
----------- -----------
Total current assets ............... 478,919 98,129
U.S. government securities - pledged ......... 29,899 --
Restricted cash .............................. -- 54,178
Investments .................................. 44,066 48,409
Property, plant and equipment - net .......... 943,756 1,534,612
Other assets - net ........................... 67,063 154,138
----------- -----------
Total .............................. $ 1,563,703 $ 1,889,446
=========== ===========
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY (DEFICIENCY):
Current liabilities:
Accounts payable ....................... $ 150,151 $ 158,249
Due to parent-net ...................... -- 1,544
Due to affiliates-net .................. -- 8,067
Accrued interest ....................... 16,566 31,011
Accrued interest-parent ................ -- 7,003
Other current liabilities .............. 11,029 13,339
----------- -----------
Total current liabilities .......... 177,746 219,213
13% Senior discount notes due 2003 ........... 253,860 291,891
12 1/4% Senior secured notes due 2004 ........ 250,000 250,000
12% Senior subordinated notes due 2007 ....... 300,000 300,000
Note payable ................................. -- 500,000
Other debt ................................... 41,318 48,565
----------- -----------
Total liabilities .................. 1,022,924 1,609,669
----------- -----------
12 7/8% Senior exchangeable redeemable
preferred stock ............................. 260,848 297,067
----------- -----------
Common stock and other stockholders' equity (deficiency):
Class A common stock, $0.01 par value,
800,000,000 shares authorized,
34,066,587 and 35,848,366 shares
outstanding, respectively ................. 341 358
Class B common stock, $0.01 par value,
400,000,000 shares authorized,
35,371,458 and 35,143,859 shares
outstanding, respectively ................. 354 351
Additional paid in capital ................. 666,021 678,140
Class B common stock warrants .............. 2,177 1,022
Unearned stock compensation ................ (5,715) (4,070)
Accumulated deficit ........................ (383,247) (693,071)
----------- -----------
Total common stock and other
stockholders' equity (deficiency) . 279,931 (17,270)
----------- -----------
Total .............................. $ 1,563,703 $ 1,889,466
=========== ===========