PRESS RELEASE
Contact Information
Karen Chrosniak
Jim Brown
Adelphia Communications
Karen Chrosniak
Ed Babcock
Adelphia Business Solutions
877-496-6704
FOR IMMEDIATE RELEASE:
ADELPHIA BUSINESS SOLUTIONS ANNOUNCES SIGNIFICANT CAPITAL SPENDING
REDUCTIONS, $125 MILLION PLANNED ASSET SALES TO ADELPHIA COMMUNICATIONS, ITS
PARENT COMPANY, AND REVISED FINANCIAL GUIDANCE
- - Company announces capital spending reductions of $210 million through 2002
with additional annual capital spending reductions of $120 million per year
thereafter;
- - Adelphia expected to buy $125 million in CLEC assets during 2001;
- - Company estimates reduction in unfunded free cash flow deficit to a pro forma
range of $80 million to $280 million for period 7/01/01 through 12/31/03.
Coudersport, PA - September 5, 2001
John J. Rigas, Chairman of Adelphia Communications Corporation ('Adelphia')
(NASDAQ NNM: ADLAC) and Adelphia Business Solutions, Inc. ('ABS') (NASDAQ NNM:
ABIZ) announced today revised guidance based on several changes to the ABS
business plan. Mr. Rigas announced that ABS will further reduce capital
spending. ABS is now planning to reduce capital spending for the remainder of
2001 by $25 million, during 2002 from $420 million to $235 million and during
2003 and thereafter from $320 million per year to $200 million per year. The
planned reduction in capital spending results from decreased spending on long
haul fiber, eliminating further investment in approximately 10 of its markets
and redeploying existing assets in those markets to its other markets,
reductions in the further expansion of local fiber rings, decreases in prices
for equipment purchases and the impact of the sale of assets to Adelphia. Table
1 details these reductions:
Table 1
($ in millions)
Second Half 2003 and
2001 2002 Thereafter
---------------------------------
Reduction in Long Haul Fiber $ - $ (40) $ (25)
Discontinued Markets (10) (70) (35)
Local Fiber Rings - (40) (30)
Price Reductions (10) (25) (20)
Asset Sales (5) (10) (10)
---------------------------------
Total Reductions $ (25) $ (185) $ (120)
=================================
Mr. Rigas also announced that ABS and Adelphia intend to complete sales by ABS
of $125 million of assets to Adelphia. These sales will be subject to definitive
documentation and the receipt of a fairness opinion by the Board of Directors of
ABS. The companies expect to complete these sales by or shortly after September
30, 2001.
Mr. Rigas commented "We believe that the ABS facilities based business plan is
substantially differentiated from the broad category of CLECs generally. Even
with the planned reductions, we also believe Adelphia Business Solutions has
more local fiber deployed in the aggregate than virtually any non-incumbent LEC,
which we continue to feel is a significant competitive advantage as compared to
other CLECs.
It is also fortunate that virtually all of our core infrastructure capital has
been deployed in the markets in which we are proceeding and that the capital
spending savings associated with our new business plan are for activities that
were not expected to generate meaningful EBITDA until after 2003. Furthermore,
ABS now expects to be free cash flow positive in the first half of 2004. These
cuts, combined with the $125 million to be raised from the announced asset sales
plus the expected completion of a $300 million to $500 million bank credit
facility will cut our previously expected unfunded free cash flow deficit from
June 30, 2001 through the end of 2003 from approximately $1.1 billion to
approximately $80 million to $280 million. We expect our continued success in
increasing EBITDA will allow us to secure additional funding during 2002, either
through additional assets sales or bank debt to finance the remaining unfunded
deficit."
Table 2 below compares Adelphia Business Solutions' previously announced forward
financial guidance with new guidance reflecting the activity associated with
today's announcements:
Table 2
($ in millions, except for EBITDA margin)
Second Half
2001 2002 2003 Total
-------------------------------------------
Previous Guidance
- -----------------
Gross Revenue 251 725 1,085 2,061
EBITDA 7 107 285 399
EBITDA Margin 2.8% 14.8% 26.3% 19.4%
Capital Spending 220 420 320 960
Cash Interest Expense 100 205 240 545
Free Cash Flow (313) (518) (275) (1,106)
Estimated Impact of Capital Spending Reductions
- -----------------------------------------------
Gross Revenue - (95) (180) (275)
EBITDA - (15) (18) (33)
EBITDA Margin 15.8% 10.0% 12.0%
Capital Spending (20) (175) (110) (305)
Cash Interest Expense - (10) (25) (35)
Free Cash Flow 20 170 117 307
Estimated Impact of Asset Sales Pro Forma as of 7/1/2001
- --------------------------------------------------------
Gross Revenue (18) (43) (55) (116)
EBITDA (6) (17) (23) (46)
EBITDA Margin 33.3% 39.0% 41.0% 39.7%
Capital Spending (5) (10) (10) (25)
Cash Interest Expense (4) (14) (12) (30)
Free Cash Flow 3 7 (1) 9
Revised Guidance
- ----------------
Gross Revenue 233 587 850 1,670
EBITDA 1 75 244 320
EBITDA Margin 0.5% 12.8% 28.7% 19.2%
Capital Spending 195 235 200 630
Cash Interest Expense 96 181 203 480
Free Cash Flow (290) (341) (159) (790)
Liquidity at June 30, 2001 85
Proceeds from Anticipated Bank Financing 300 to 500
Proceeds from Asset Sales to Adelphia 125
Unfunded Free Cash Flow (280) to (80)
Note: Free cash flow as discussed in this press release is defined as earnings
before interest, taxes, depreciation and amortization ('EBITDA') minus cash
interest expense and capital expenditures.
Adelphia Communications Corporation, with headquarters in Coudersport,
Pennsylvania, is the sixth largest cable television company in the country. For
more information on Adelphia Communications Corporation, or to review an
electronic version of this press release, please visit Adelphia's web site at
http://www.adelphia.com. Adelphia Business Solutions is a majority owned
subsidiary of Adelphia Communications Corporation that provides integrated
communications services to business customers through its state-of-the-art fiber
optic communications network. ABS has substantially completed the construction
of its fully redundant, 14,000-mile long-haul fiber optic network in the
eastern-half of the United States which, combined with an estimated 10,000 local
fiber route miles in its operating markets, will support ABS's full line of
communication service offerings, 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, please visit its web site at http://www.adelphia-abs.com.
The statements in this press release that are not historical facts are
forward-looking statements that are subject to material risks and uncertainties.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance or results and involve risks and uncertainties,
and that actual results or developments may differ materially from those in the
forward-looking statements as a result of various factors which are discussed in
Adelphia's and Adelphia Business Solution's filings with the Securities and
Exchange Commission. These risks and uncertainties include, but are not limited
to, uncertainties relating to general economic and business conditions,
acquisitions and divestitures, growth and expansion risks, the availability and
cost of capital, government and regulatory policies and developments, the
pricing and availability of equipment, materials, inventories and programming,
product acceptance, the ability to construct, expand and upgrade cable systems,
fiber optic networks and related facilities, risks associated with reliance on
the performance and financial condition of vendors and customers, the ability of
the companies to execute on their business plans and to market services to
existing and new customers, dependence on customers and their spending patterns,
technological developments and changes in the competitive environment in which
we operate. Additional information regarding factors that may affect the
business and financial results of Adelphia and Adelphia Business Solutions can
be found in their most recent Quarterly Reports on Form 10-Q filed with the
Securities Exchange Commission and their respective Form 10-Ks for the year
ended December 31, 2000, as well as in the prospectus and most recent prospectus
supplement filed under Registration Statement Nos. 333-64224 and 333-11142
(formerly No. 333-88927), under the sections entitled "Risk Factors" contained
therein. Neither company undertakes to update any forward-looking statements in
this press release or with respect to matters described herein.