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 SECOND QUARTER
RESULTS OF OPERATIONS
Coudersport, PA - August 10, 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 second quarter
which ended on June 30, 2001. Second quarter results saw record levels of
consolidated operating revenues of $116.9 million. Net loss applicable to common
stockholders for the second quarter totaled $82.2 million, or $0.61 per share,
compared with $73.6 million, or $1.06 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 46% to $116.9
million in the June 2001 quarter, from $80.2 million in the June 2000 quarter
and were approximately 6% higher than the March 2001 quarter, from $110.3
million. Consolidated revenues were comprised of voice revenue (includes local,
long-distance and other revenues) of $90.5 million in the June 2001 quarter as
compared with $64.5 million in the June 2000 quarter and data revenue (includes
internet, dedicated access and data services) of $26.4 million in the June 2001
quarter as compared with $15.7 million in the June 2000 quarter. Average revenue
per installed access line in the June 2001 quarter was approximately $49 per
month, or the same as the prior quarter. Consolidated revenues in the June 2001
quarter included $10.7 million of reciprocal compensation revenue, or 9.2% of
revenues. The Company continues to expect calendar 2001 revenues to be
approximately $475 million to $500 million. As a result of continued execution
of its revised business plan, the Company expects EBITDA losses to decrease to
approximately $2 to $5 million for the third quarter of calendar 2001 and to a
total of approximately $20 million for the full year of calendar 2001.
Consolidated gross margin as a percent of sales was 47.0% in the June 2001
quarter as compared with 44.9% of sales in the March 2001 quarter, a 200 basis
point improvement. The Company expects gross margin as a percent of sales will
continue to improve during the third quarter and throughout the remainder of
calendar 2001 as the Class of 1999 and 2000 markets become operational and
customers are moved to our own network. Consolidated EBITDA losses for the June
2001 quarter were in line with Company expectations at $8.7 million versus a
$15.3 million EBITDA loss for the March 2001 quarter. Contribution of higher
gross margin in each of its Class market results, combined with the Company
achieving its goal of reducing selling, general and administrative costs
associated with previous market expansion efforts, contributed to the improved
financial performance. Also, the Company's TSR access line count has been
reduced by over 62,000 lines as a result of the Company's TSR conversion
efforts, further contributing to the positive gross margin contributions during
the June 2001 quarter. The Company expects TSR lines will represent less than
25% of its installed access lines by year end.
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
4.8% in the June 2001 quarter and gross margin as a percentage of sales of
70.1%. Revenue for the Class of 1996 markets increased 34.8% as compared with
the June 2000 quarter, with gross margins in excess of 70.0% of revenues for
each of the past seven quarters. As such, EBITDA for these markets before
allocation of corporate overhead increased 108.4% from an annualized $72.1
million for the June 2000 quarter to an annualized $150.3 million for the June
2001 quarter. Furthermore, from the June 2000 quarter to the June 2001 quarter,
the eight Class of 1997/1998 markets' revenues increased 51.7% from $11.9
million to $18.1 million. Gross margins for these markets increased 96.2% from
the June 2000 quarter to the June 2001 quarter and EBITDA before allocation of
corporate overhead increased from $6.4 million to $26.6 million on an annualized
basis and to 36.7% of revenues in the June 2001 quarter.
The Class of 1999 markets also contributed to the Company's improved financial
performance with revenue growth of 58.6% as compared to the June 2000 quarter.
Gross margins in the June 2001 quarter also improved by $3.2 million, a 54.7%
improvement as compared with the March 2001 quarter as a result of a greater
percentage of the Company's customers being served on the newly lit fiber-optic
networks in these markets. EBITDA losses before allocation of corporate overhead
decreased to $21.8 million for the June 2001 quarter compared to $23.8 million
in the March 2001 quarter. The Class of 2000 markets had EBITDA losses before
allocation of corporate overhead which decreased from $4.3 million in the March
2001 quarter to $4.2 million in the June 2001 quarter. As such, in the June 2001
quarter, each of the Company's Class market groupings demonstrated improved
EBITDA performance for the second consecutive quarter, with overall EBITDA
before allocation of corporate overhead of positive $18.2 million, an almost
100% improvement, compared to positive $9.4 million in the March 2001 quarter.
In addition, the June 2001 quarter represented the first quarter in which the
Company's combined financial performance of all of its class markets after
corporate overhead resulted in positive EBITDA of approximately $4 million.
Days sales outstanding in accounts receivable was at about the same level at 84
days as of June 30, 2001 as compared with 83 days at March 31, 2001. The Company
expects days sales outstanding will decrease during the remainder of the year.
As of June 30, 2001, total gross property, plant and equipment of the Company
and its consolidated subsidiaries, was approximately $2.0 billion. The Company's
condensed consolidated balance sheets are attached on Table 3.
During the June 2001 quarter, the Company and its consolidated subsidiaries
invested approximately $120.5 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
$450-$470 million. During the past several months, the Company has evaluated its
capital spending needs to complete its current 75-80 market business plan. As a
result of a combination of factors, including; (i) lower costs of customer
premise and central office electronics, (ii) lower capital costs to activate the
Company's regional long-haul fiber rings, (iii) the ability to purchase
long-haul transport capacity at much lower costs than originally forecasted and
(iv) the successful completion of several metro transport fiber swaps to add
network capacity to new markets at lower than originally forecasted levels, the
Company now believes that the total amount of capital expenditures required to
complete its current business plan over the next 3-4 years will be lower than
originally projected by approximately $350 million, or 20%.
During the June 2001 quarter, the Company funded its free cash flow deficit with
draws from the $500 million bank credit facility. Under its current business
plan, the Company estimates that, in addition to the cash and cash equivalents
on hand and remaining availability under the $500 million bank credit facility
as of June 30, 2001, a total of an additional approximately $500 million will be
required to fund the Company's capital expenditures, working capital
requirements, operating losses and pro rata investments in joint ventures from
July 1, 2001 through June 30, 2002, of which approximately $260 million will be
required through December 31, 2001. As of June 30, 2001, approximately $54,261
was available under the bank credit facility. To fund its projected short term
cash needs, as well as future deficits through mid-2002, the Company is
exploring additional sources of financing including additional bank or
institutional credit facilities and additional funding from Adelphia. There is
no assurance that the Company will obtain any additional short term or long term
funding or that the terms of any new financing would not be materially adverse
to the Company, or that the Company will not be required to consider further
revisions to its business plan, the sale of assets or other alternatives.
A summary of the Company's non-financial statistical information as of
June 30, 2001 follows:
Active
---------
Local Route Miles 10,142
Fiber Strand Miles 586,183
Long-Haul Route Miles 8,214
Buildings Connected on-network
with owned facilities 3,369
Central Offices Connected on-network 321
Lucent 5ESS Voice Switches 30
Data Switches 26
Sales Employees 518
Total Employees 2,533
Customers, including joint ventures 42,370
Average monthly revenue per customer $ 988
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
August 13, 2001 at 2:00 p.m. Eastern Standard Time. The conference call can be
accessed by dialing 800-553-2165 or 303-224-6999 internationally (passcode
1165814). A telephone replay of the conference call will be available
immediately following the call and through Friday, August 17, 2001. To access
the replay, please dial 800-625-5288 or 303-804-1855 internationally (passcode
1165814). In addition, the conference call will be rebroadcast live via the
Internet at www.adelphia.com. A recording of the conference call will also be
available on the Company's website from August 13, 2001 through August 27, 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 Six Months
Ended Ended
June 30, June 30,
---------------------- ----------------------
2000 2001 2000 2001
--------- --------- --------- ---------
Revenues ....................... $ 80,214 $ 116,941 $ 149,515 $ 227,284
Operating expenses:
Network operations ........... 41,661 61,861 75,393 122,625
Selling, general
and administrative .......... 62,922 63,823 120,969 128,653
--------- --------- --------- ---------
EBITDA (a) ................... (24,369) (8,743) (46,847) (23,994)
Restructuring charges ........ -- -- -- 4,979
Non-cash stock compensation .. 426 483 1,225 1,145
Depreciation and amortization 26,689 35,144 46,127 71,694
--------- --------- --------- ---------
Operating loss ................. (51,484) (44,370) (94,199) (101,812)
Other income (expense):
Interest income .............. 1,020 382 1,424 1,143
Interest income-affiliate .... 1,259 -- 6,282 --
Interest expense ............. (15,264) (25,437) (28,194) (55,258)
Interest expense - affiliate . -- (6,036) -- (12,808)
--------- --------- --------- ---------
Loss before equity in net (loss)
income of joint ventures ..... (64,469) (75,461) (114,687) (168,735)
Equity in net (loss) income of
joint ventures ............... (346) 3,242 (451) 3,135
--------- --------- --------- ---------
Net loss ....................... (64,815) (72,219) (115,138) (165,600)
Dividend requirements applicable
to preferred stock ........... (8,771) (9,956) (17,268) (19,601)
--------- --------- --------- ---------
Net loss applicable to common
stockholders .................. $ (73,586) $ (82,175) $(132,406) $(185,201)
========= ========= ========= =========
Basic and diluted net loss per
weighted average share
of common stock ............... $ (1.06) $ (0.61) $ (1.91) $ (1.75)
========= ========= ========= =========
Weighted average shares of
common stock outstanding ..... 69,503 134,530 69,417 106,026
========= ========= ========= =========
<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 June 30, 2001 Quarter Ended March 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 ........... $ 90,775 $ 18,101 $ 24,710 $ 3,768 $ 137,354 $ 86,654 $ 16,322 $ 22,518 $ 2,386 $ 127,880
Direct Operating
Expenses ......... 27,127 6,405 27,319 3,336 64,187 25,247 5,827 28,280 2,326 61,680
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 63,648 11,696 (2,609) 432 73,167 61,407 10,495 (5,762) 60 66,200
Gross Margin
Percentage ....... 70.1% 64.6% (10.6%) 11.5% 53.3% 70.9% 64.3% (25.6%) 2.5% 51.8%
Sales, General
and Administrative
Expenses ......... 26,076 5,054 19,217 4,590 54,937 28,766 5,614 18,082 4,330 56,792
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 37,572 $ 6,642 $(21,826) $ (4,158) $ 18,230 $ 32,641 $ 4,881 $(23,844) $ (4,270) $ 9,408
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA as a
Percentage
of Revenues ...... 41.4% 36.7% (88.3%) (110.4%) 13.3% 37.7% 29.9% (105.9%) (179.0%) 7.4%
June 2001 Quarter vs. March 2001 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 .......... 4.8% 10.9% 9.7% 57.9% 7.4%
Direct Operating
Expenses ......... 7.4% 9.9% (3.4%) 43.4% 4.1%
-------- -------- -------- -------- ----------
Gross Margin ...... 3.6% 11.4% 54.7% NM(c) 10.5%
Sales, General
and Administrative
Expenses ......... (9.4%) (10.0%) 6.3% 6.0% (3.3%)
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 15.1% 36.1% 8.5% 2.6% 93.8%
-------- -------- -------- -------- ----------
<FN>
(a) Table 2 summarizes operating results before the allocation of corporate
overhead for Adelphia Business Solutions' Original and Expansion Markets,
which includes non-consolidated joint ventures, 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 $14.4 million
in the June 2001 quarter and $17.2 million in the March 2001 quarter and
before a restructuring charge of $5 million in the March 2001 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.
(c) Not meaningful.
</FN>
Adelphia Business Solutions, Inc.
Table 2 (Cont.) - Unaudited Combined Results of Original and Expansion Markets
Before allocation of Corporate Overhead (a)
Quarter Ended June 30, 2001 Quarter Ended June 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 ........... $ 90,775 $ 18,101 $ 24,710 $ 3,768 $ 137,354 $ 67,338 $ 11,931 $ 15,576 $ 6 $ 94,851
Direct Operating
Expenses ......... 27,127 6,405 27,319 3,336 64,187 17,998 5,971 18,997 155 43,121
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 63,648 11,696 (2,609) 432 73,167 49,340 5,960 (3,421) (149) 51,730
Gross Margin
Percentage ....... 70.1% 64.6% (10.6%) 11.5% 53.3% 73.3% 50.0% (22.0%) NM(c) 54.5%
Sales, General
and Administrative
Expenses ......... 26,076 5,054 19,217 4,590 54,937 31,315 4,354 18,545 1,910 56,124
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 37,572 $ 6,642 $(21,826) $ (4,158) $ 18,230 $ 18,025 $ 1,606 $(21,966) $ (2,059) $ (4,394)
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA as a
Percentage
of Revenues ...... 41.4% 36.7% (88.3%) (110.4%) 13.3% 26.8% 13.5% (141.0%) NM(c) (4.6%)
June 2001 Quarter vs. June 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 .......... 34.8% 51.7% 58.6% NM(c) 44.8%
Direct Operating
Expenses ......... 50.7% 7.3% 43.8% NM(c) 48.9%
-------- -------- -------- -------- ----------
Gross Margin ...... 29.0% 96.2% 23.7% NM(c) 41.4%
Sales, General
and Administrative
Expenses ......... (16.7%) 16.1% 3.6% NM(c) (2.1%)
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 108.4% NM(c) (0.6%) NM(c) NM(c)
-------- -------- -------- -------- ----------
<FN>
(a) Table 2 summarizes operating results before the allocation of corporate
overhead for Adelphia Business Solutions' Original and Expansion Markets,
which includes non-consolidated joint ventures, 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 $14.4 million
in the June 2001 quarter and $14.8 million in the June 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.
(c) Not meaningful.
</FN>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
TABLE 3 - CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
December 31, June 30,
2000 2001
------------ -----------
ASSETS:
Current assets:
Cash and cash equivalents ................... $ 3,543 $ 2,153
Accounts receivable - net ................... 79,650 97,554
Other current assets ........................ 14,936 27,893
----------- -----------
Total current assets ................... 98,129 127,600
Restricted cash .................................. 54,178 28,443
Investments ...................................... 48,409 51,544
Property, plant and equipment - net .............. 1,534,612 1,721,196
Other assets - net ............................... 154,138 148,838
----------- -----------
Total .................................. $ 1,889,466 $ 2,077,621
=========== ===========
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' (DEFICIENCY)EQUITY:
Current liabilities:
Accounts payable ........................... $ 158,249 $ 70,551
Due to parent-net .......................... 1,544 --
Due to affiliates-net ...................... 8,067 11,894
Accrued interest ........................... 31,011 31,173
Accrued interest-parent .................... 7,003 6,036
Other current liabilities .................. 13,339 35,556
----------- -----------
Total current liabilities .............. 219,213 155,210
13% Senior discount notes due 2003 ............... 291,891 303,840
12 1/2% Senior secured notes due 2004 ............ 250,000 250,000
12% Senior subordinated notes due 2007 ........... 300,000 300,000
Note payable ..................................... 500,000 445,739
Other debt ....................................... 48,565 47,172
----------- -----------
Total liabilities ...................... 1,609,669 1,501,961
----------- -----------
12 7/8% Senior exchangeable redeemable
preferred stock ................................. 297,067 316,945
----------- -----------
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 86,774,676 shares outstanding, respectively 351 868
Additional paid in capital ..................... 678,140 1,119,218
Class B common stock warrants .................. 1,022 70
Unearned stock compensation .................... (4,070) (3,247)
Accumulated deficit ............................ (693,071) (858,671)
----------- -----------
Total common stock and other stockholders'
(deficiency) equity .......................... (17,270) 258,715
----------- -----------
Total .................................. $ 1,889,466 $ 2,077,621
=========== ===========