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 FIRST QUARTER
RESULTS OF OPERATIONS
Coudersport, PA - May 14, 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 first quarter which
ended on March 31, 2001. First quarter results saw record levels of consolidated
operating revenues of $110.3 million. Net loss applicable to common stockholders
for the first quarter totaled $103.0 million, or $1.33 per share, compared with
$58.8 million, or $0.85 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 59% to $110.3
million in the March 2001 quarter, from $69.3 million in the March 2000 quarter
and were at approximately the same level as the December 2000 quarter.
Consolidated revenues were comprised of voice revenue (includes local,
long-distance and other revenues) of $87.5 million in the March 2001 quarter as
compared with $57.0 million in the March 2000 quarter and data revenue (includes
internet, dedicated access and data services) of $22.8 million in the March 2001
quarter as compared with $12.3 million in the March 2000 quarter. Average
revenue per installed access line in the March 2001 quarter was approximately
$49 per month, in line with $50 per month in the prior quarter. Consolidated
revenues in the March 2001 quarter included $10.8 million of reciprocal
compensation revenue, or 9.8% of revenues. The Company expects calendar 2001
revenues to be approximately $485 million to $500 million, with second quarter
2001 revenues slightly higher than the March 2001 quarter. 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 $10 million for the second quarter of calendar 2001 and to
approximately $20 million for the full year of calendar 2001.
Consolidated gross margin as a percent of sales was 44.9% in the March 2001
quarter as compared with 47.6% of sales in the December 2000 quarter. Gross
margins were somewhat lower in the current quarter as the Company continues to
review non-paying customers, and where necessary, disconnect customers from its
networks. The Company expects gross margin as a percent of sales will improve
during the second quarter and throughout the remainder of calendar 2001.
Consolidated EBITDA losses for the March 2001 quarter were better than expected
at $15.3 million versus a $34.2 million EBITDA loss for the December 2000
quarter. The Company achieved its goal of reducing selling, general and
administrative costs associated with previous market expansion efforts, as well
as controlling other discretionary spending.
In addition to the Company's EBITDA loss for the March 2001 quarter, the Company
recorded a restructuring charge totaling $5.0 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 and
severance costs associated with the related layoff of approximately 210
employees in January 2001.
As shown in Table 2, the Company's thirteen Class of 1996 markets continue to
demonstrate strong financial results with sequential quarterly revenue growth of
5.8% in the March 2001 quarter and gross margin as a percentage of sales of
70.9%. Revenue for the Class of 1996 markets increased 39.6% as compared with
the March 2000 quarter, with gross margins in excess of 70.0% of revenues for
each of the past six quarters. As such, EBITDA for these markets before
allocation of corporate overhead increased 64.5% from an annualized $79.4
million for the March 2000 quarter to an annualized $130.6 million for the March
2001 quarter. Furthermore, from the March 2000 quarter to the March 2001
quarter, the eight Class of 1997/1998 markets' revenues increased 73.6% from
$9.4 million to $16.3 million. Gross margins for these markets increased 145.1%
during the same period and annualized EBITDA before allocation of corporate
overhead increased from $(0.4) million to $19.5 million, or to 29.9% of revenues
in the March 2001 quarter.
The Class of 1999 markets also contributed to the Company's improved financial
performance with revenue growth of 112.7% as compared to the March 2000 quarter.
Furthermore, EBITDA losses before allocation of corporate overhead decreased to
$23.8 million for the March 2001 quarter compared to $26.6 million in the
December 2000 quarter. The Class of 2000 markets also had EBITDA losses before
allocation of corporate overhead which decreased from $6.4 million in the
December 2000 quarter to $4.3 million in the March 2001 quarter. As such, in the
March 2001 quarter, each of the Company's Class market groupings demonstrated
improved EBITDA performance for the first time, with overall EBITDA before
allocation of corporate overhead of positive $9.4 million as compared to
positive $1.4 million in the December 2000 quarter.
Days sales outstanding in accounts receivable increased somewhat to 83 days as
of March 31, 2001 from 78 days at December 31, 2000. The Company expects days
sales outstanding to decrease to the mid-seventies by June 30, 2001.
During the March 2001 quarter, the Company and its consolidated subsidiaries
invested approximately $136.3 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. The Company continues
to expect full year calendar 2001 capital expenditures to be approximately
$470-$500 million. As of March 31, 2001, total gross property, plant and
equipment of the Company and its consolidated subsidiaries, was approximately
$1.9 billion. The Company's condensed consolidated balance sheets are attached
on Table 3.
During the March 2001 quarter, the Company funded its free cash flow deficit
with draws from the proceeds from a common stock rights offering. Proceeds from
the rights offering not needed to fund the quarter's free cash flow deficit were
used to pay down the Company's bank credit facility. The Company expects to fund
its projected future deficits through mid-2002 through a combination of
additional draws under the credit facility and additional bank or institutional
indebtedness.
A summary of the Company's non-financial statistical information as of
March 31, 2001 follows:
Active
-----------
Local Route Miles 9,095
Fiber Strand Miles 500,389
Long-Haul Route Miles 7,879
Buildings Connected
on-network with owned
facilities 3,294
Central Offices Connected
on-network 309
Lucent 5ESS Voice Switches 30
Data Switches 26
Sales Employees 573
Total Employees 2,387
Customers, including joint
ventures 41,883
Average monthly revenue per
customer $1,018
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 May
14, 2001 at 1:00 p.m. Eastern Standard Time. The conference call can be accessed
by dialing 800-482-5567 or 303-267-1002 internationally (passcode 1032906). A
telephone replay of the conference call will be available immediately following
the call and through Friday May 18, 2001. To access the replay, please dial
800-625-5288 or 303-804-1855 internationally (passcode 1032906). 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 May 14, 2001 through May 25, 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
March 31,
----------------------
2000 2001
---------- ----------
Revenues $ 69,301 $ 110,343
Operating expenses:
Network operations 33,732 60,764
Selling, general and administrative 58,046 64,830
---------- ----------
EBITDA (a) (22,477) (15,251)
Restructuring charges --- 4,979
Non-cash stock compensation 800 662
Depreciation and amortization 19,438 36,550
---------- ----------
Operating loss (42,715) (57,442)
Other income (expense):
Interest income 404 761
Interest income - affiliate 5,023 ---
Interest expense (12,930) (29,822)
Interest expense - affiliate --- (6,772)
---------- ----------
Loss before income taxes and equity in
net loss of joint ventures (50,218) (93,275)
Income tax benefit (expense) --- ---
---------- ----------
Loss before equity in net loss
of joint ventures (50,218) (93,275)
Equity in net loss of joint ventures (105) (106)
---------- ----------
Net loss (50,323) (93,381)
Dividend requirements applicable to
preferred stock (8,497) (9,645)
---------- ----------
Net loss applicable to common stockholders $ (58,820) $ (103,026)
Basic and diluted net loss per
weighted average share of common stock $ (0.85) $ (1.33)
========== ==========
Weighted average shares of
common stock outstanding 69,431 77,523
========== ==========
(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.
Adelphia Business Solutions, Inc.
Table 2 - Unaudited Combined Results of Original and Expansion Markets
Before allocation of Corporate Overhead (a)
Quarter Ended March 31, 2001 Quarter Ended December 31, 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 ........... $ 86,654 $ 16,322 $ 22,518 $ 2,386 $ 127,880 $ 81,936 $ 14,825 $ 22,275 $ 2,005 $ 121,041
Direct Operating
Expenses ......... 25,247 5,827 28,280 2,326 61,680 22,440 6,365 26,060 2,370 57,235
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 61,407 10,495 (5,762) 60 66,200 59,496 8,460 (3,785) (365) 63,806
Gross Margin
Percentage ....... 70.9% 64.3% (25.6%) 2.5% 51.8% 72.6% 57.1% (17.0%) (18.2%) 52.7%
Sales, General
and Administrative
Expenses ......... 28,766 5,614 18,082 4,330 56,792 27,970 5,644 22,781 6,031 62,426
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 32,641 $ 4,881 $(23,844) $ (4,270) $9,408 $ 31,526 $ 2,816 $(26,566) $ (6,396) $ 1,380
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA as a
Percentage
of Revenues ...... 37.7% 29.9% (105.9%) (179.0%) 7.4% 38.5% 19.0% (119.3%) NM 1.1%
March 2001 Quarter vs. December 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)
-------- -------- -------- -------- ----------
Revenues .......... 5.8% 10.1% 1.1% 19.0% 5.7%
Direct Operating
Expenses ......... 12.5% (8.5%) 8.5% (1.9%) 7.8%
-------- -------- -------- -------- ----------
Gross Margin ...... 3.2% 24.1% (52.2%) NM 3.8%
Sales, General
and Administrative
Expenses ......... 2.8% (0.5%) (20.6%) (28.2%) (9.0%)
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 3.5% 73.3% 10.2% 33.2% 681.7%
-------- -------- -------- -------- ----------
<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 $22.2 million in the March 2001 quarter and $23.7 million
in the December 2000 quarter and before a bad debt provision for previously
recorded revenues of $15 million in the December 2000 quarter.
(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 March 31, 2001 Quarter Ended March, 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 ........... $ 86,654 $ 16,322 $ 22,518 $ 2,386 $ 127,880 $ 62,086 $ 9,403 $ 10,587 $ --- $ 82,076
Direct Operating
Expenses ......... 25,247 5,827 28,280 2,326 61,680 15,641 5,121 13,873 24 34,659
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 61,407 10,495 (5,762) 60 66,200 46,445 4,282 (3,286) (24) 47,417
Gross Margin
Percentage ....... 70.9% 64.3% (25.6%) 2.5% 51.8% 74.8% 45.5% (31.0%) --- 57.8%
Sales, General
and Administrative
Expenses ......... 28,766 5,614 18,082 4,330 56,792 26,607 4,379 16,672 735 48,393
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation
of Corporate
Overhead (b) ..... $ 32,641 $ 4,881 $(23,844) $ (4,270) $ 9,408 $ 19,838 $ (97) $(19,958) $ (759) $ (976)
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA as a
Percentage
of Revenues ...... 37.7% 29.9% (105.9%) (179.0%) 7.4% 32.0% (1.0%) (188.5%) --- (1.2%)
March 2001 Quarter vs. March 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)
-------- -------- -------- -------- ----------
Revenues .......... 39.6% 73.6% 112.7% NM 55.8%
Direct Operating
Expenses ......... 61.4% 13.8% 103.8% NM 78.0%
-------- -------- -------- -------- ----------
Gross Margin ...... 32.2% 145.1% 75.3% NM 39.6%
Sales, General
and Administrative
Expenses ......... 8.1% 28.2% 8.5% NM 17.4%
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 64.5% NM (19.5%) 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 $22.2 million in the March 2001 quarter and $17.0 million
in the March 2000 quarter.
(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 31, March 31,
2000 2001
------------ -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 3,543 $ 17,048
Accounts receivable - net 79,650 89,323
Other current assets 14,936 22,960
----------- -----------
Total current assets 98,129 129,731
Restricted cash 54,178 37,462
Investments 48,409 48,303
Property, plant and equipment - net 1,534,612 1,640,528
Other assets - net 154,138 150,636
----------- -----------
Total $ 1,889,466 $ 2,006,260
=========== ===========
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' (DEFICIENCY) EQUITY:
Current liabilities:
Accounts payable $ 158,249 $ 82,840
Due to parent-net 1,544 7,262
Due to affiliates-net 8,067 2,161
Accrued interest 31,011 42,711
Accrued interest-parent 7,003 13,775
Other current liabilities 13,339 23,002
----------- -----------
Total current liabilities 219,213 171,751
13% Senior discount notes due 2003 291,891 302,133
12 1/4% Senior secured notes due 2004 250,000 250,000
12% Senior subordinated notes due 2007 300,000 300,000
Note payable 500,000 286,808
Other debt 48,565 47,992
----------- -----------
Total liabilities 1,609,669 1,358,684
----------- -----------
12 7/8% Senior exchangeable redeemable preferred stock 297,067 306,851
----------- -----------
Common stock and other stockholders' (deficiency) equity:
Class A common stock, $0.01 par value, 800,000,000
shares authorized, 35,848,366 and 47,742,608 shares
outstanding, respectively 358 477
Class B common stock, $0.01 par value, 400,000,000
shares authorized, 35,143,859 and 86,624,693 shares
outstanding, respectively 351 866
Additional paid in capital 678,140 1,128,587
Class B common stock warrants 1,022 904
Unearned stock compensation (4,070) (3,658)
Accumulated deficit (693,071) (781,451)
----------- -----------
Total common stock and other stockholders'
(deficiency) equity (17,270) 340,725
----------- -----------
Total $ 1,889,466 $ 2,006,260
=========== ===========