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 THIRD QUARTER
RESULTS OF OPERATIONS
Coudersport, PA - November 12, 2001
Adelphia Business Solutions, Inc. ("the Company") (NASDAQ: ABIZ) reported
results of operations for the Company for the third quarter which ended on
September 30, 2001. Third quarter results saw consolidated operating revenues of
$116.3 million. Net loss applicable to common stockholders for the third quarter
totaled $114.9 million, or $0.85 per share, compared with $75.8 million, or
$1.08 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 24% to $116.3
million in the September 2001 quarter, from $93.6 million in the September 2000
quarter and were relatively flat with the June 2001 quarter. Consolidated
revenues were comprised of voice revenue (includes local, long-distance and
other revenues) of $86.8 million in the September 2001 quarter as compared with
$76.3 million in the September 2000 quarter and data revenue (includes internet,
dedicated access and data services) of $29.5 million in the September 2001
quarter as compared with $17.3 million in the September 2000 quarter. Average
revenue per installed access line in the September 2001 quarter was
approximately $49 per month, or the same as the prior quarter. Consolidated
revenues in the September 2001 quarter included $11.4 million of reciprocal
compensation revenue, or 9.8% of revenues. The Company expects reciprocal
compensation revenues going forward to decrease by approximately 50% to 70% as a
result of the FCCs recent ruling.
Consolidated gross margin as a percent of sales was 52.9% in the September 2001
quarter as compared with 47.0% of sales in the June 2001 quarter. Consolidated
EBITDA losses for the September 2001 quarter were slightly higher than Company
expectations at $5.3 million versus a $8.7 million EBITDA loss for the June 2001
quarter. While overall higher gross margins contributed positively to the
current quarter's financial results, increased bad debts contributed to the
slightly higher than expected EBITDA losses.
As shown in Table 2, the Company's thirteen Class of 1996 markets had gross
margin as a percentage of sales of 74.5%. Revenue for the Class of 1996 markets
increased 14.3% as compared with the September 2000 quarter, with gross margins
in excess of 70.0% of revenues for each of the past eight quarters. As such,
EBITDA for these markets before allocation of corporate overhead increased 35.2%
from an annualized $106.7 million for the September 2000 quarter to an
annualized $144.2 million for the September 2001 quarter. Furthermore, from the
September 2000 quarter to the September 2001 quarter, the eight Class of
1997/1998 markets' revenues increased 44.9% from $14.1 million to $20.4 million.
Gross margins for these markets increased 100.8% or from $7.5 million to $15.0
million, from the September 2000 quarter to the September 2001 quarter and
EBITDA before allocation of corporate overhead increased from $10.3 million to
$32.7 million on an annualized basis and to 40.2% of revenues in the 2001
quarter.
The Class of 1999 markets also contributed to the Company's improved financial
performance with revenue growth of 33.5% in the September 2001 quarter as
compared to the September 2000 quarter. Gross margins in the September 2001
quarter also improved by $3.3 million when compared to the June 2001 quarter, to
a positive $0.7 million 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 $17.7 million
for the September 2001 quarter compared to $21.8 million in the June 2001
quarter. The Class of 2000 markets had EBITDA losses before allocation of
corporate overhead of $4.8 million in the September 2001 quarter, about $0.6
million higher than the June 2001 quarter. Overall EBITDA before allocation of
corporate overhead was positive $21.7 million, a 19.2% improvement, compared to
positive $18.2 million in the June 2001 quarter. In addition, the September 2001
quarter with positive combined EBITDA after corporate overhead of approximately
$7.0 million represented the second consecutive quarter in which the Company's
combined financial performance of all of its class markets after corporate
overhead resulted in positive EBITDA.
Days sales outstanding in accounts receivable increased to 89 days as of
September 30, 2001 as compared with 84 days at June 30, 2001 due primarily to
slow payment from the ILECs for reciprocal compensation. As of September 30,
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 September 2001 quarter, the Company and its consolidated subsidiaries
invested approximately $113.4 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.
On October 1, 2001, subsidiaries of the Company sold certain network and
telecommunication assets to subsidiaries of Adelphia Communications Corporation
("Adelphia") (NASDAQ: ADLAC) for approximately $141 million in cash and the
assumption of approximately $9.0 million in liabilities. After excluding the
results of the networks associated with the asset sales, the Company would have
had revenues and an EBITDA loss on a consolidated basis of $104.3 million and
$9.9 million, respectively, for the September 2001 quarter. As the network and
telecommunication assets sold to Adelphia constitute businesses contained within
separate legal entities under common control, the sales will be reported as a
change in reporting entity. As a result, the Company expects to be recasting its
financial statements for the year ended December 31, 2001 to reflect these asset
sales for all applicable periods that the network and telecommunication assets
were under the common control of Adelphia. After giving effect to these asset
sales, the Company expects consolidated revenue and positive EBITDA for the
quarter ended December 31, 2001 to be approximately $115 to $120 million and
approximately $2 to $5 million, respectively. Unless otherwise stated, all
historical amounts presented in this press release for the periods ending on or
before September 30, 2001 include results for the assets sold to Adelphia on
October 1, 2001.
During the September 2001 quarter, the Company funded its free cash flow deficit
with draws from the $500 million bank credit facility as well as deposits made
on sales of certain assets to Adelphia. Under its current business plan, the
Company estimates that a total of approximately $395 million will be required to
fund the Company's capital expenditures, working capital requirements, operating
losses and pro rata investments in joint ventures from October 1, 2001 through
September 30, 2002, of which approximately $85 million will be required through
December 31, 2001. As of September 30, 2001, approximately $5.9 million was
available under the bank credit facility with approximately $19.4 million in
cash on hand, including restricted cash, and on October 1, 2001 an additional
$80.0 million in cash was paid by Adelphia to close its purchase of network
assets from the Company. The Company believes it has the resources to meet its
funding requirements for the quarter ending December 31, 2001. To fund its
projected future deficits, the Company is exploring additional sources of
financing. The Company currently does not expect to obtain the additional $300
to $500 million bank credit facility previously discussed. 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, additional sales of assets or other alternatives if
necessary funding is not obtained.
On November 9, 2001, Adelphia announced that its Board of Directors had
authorized in principle the distribution of Adelphia's 79% common equity
interest in the Company to the common stockholders of Adelphia, that the
spin-off of Adelphia's equity interests was expected to occur no later than
March 31, 2002, and that in connection with the spin-off Adelphia may provide up
to $100 million of additional credit support to the Company's subsidiaries.
A summary of the Company's non-financial statistical information as of
September 30, 2001 follows:
Active
---------
Local Route Miles 9,536
Fiber Strand Miles 562,188
Long-Haul Route Miles 7,879
Buildings Connected on-network
With owned facilities 3,135
Central Offices
Connected on-network 309
Lucent 5ESS Voice Switches 27
Data Switches 26
Sales Employees 493
Total Employees 2,523
Customers, including joint ventures 39,264
Average monthly revenue per customer $1,071
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 November
13, 2001 at 10 a.m. Eastern Standard Time. The conference call can be accessed
by dialing 1-973-633-3010. A telephone replay of the conference call will be
available immediately following the call and through November 20, 2001. To
access the replay, please dial 1-973-341-3080 (passcode 2957726). 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 November 13, 2001 through November 20, 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, the cost and availability of
capital (including short term capital), the ability of the Company to execute on
and fund its business plan and to design and construct fiber optic networks and
related facilities, general economic and business conditions, competitive
developments, risks associated with the Company's growth and financings, 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, 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 Nine Months
Ended Ended
September 30, September 30,
---------------------- ----------------------
2000 2001 2000 2001
--------- --------- --------- ---------
Revenues ....................... $ 93,551 $ 116,278 $ 243,066 $ 343,562
Operating expenses:
Network operations ........... 50,893 54,765 126,286 177,390
Selling, general
and administrative .......... 67,845 66,837 188,814 195,490
--------- --------- --------- ---------
EBITDA (a) ................... (25,187) (5,324) (72,034) (29,318)
Restructuring charges ........ -- -- -- 4,979
Non-cash stock compensation .. (640) 275 585 1,420
Depreciation and amortization 27,103 59,368 73,230 131,062
--------- --------- --------- ---------
Operating loss ................. (51,650) (64,967) (145,849) (166,779)
Other income (expense):
Interest income .............. 1,247 238 2,671 1,381
Interest income - affiliate .. -- -- 6,282 --
Interest expense ............. (16,748) (33,450) (44,942) (88,709)
Interest expense - affiliate . -- (9,442) -- (22,250)
--------- --------- --------- ---------
Loss before equity in net (loss)
income of joint ventures ..... (67,151) (107,621) (181,838) (276,357)
Equity in net income (loss)
of joint ventures ............ 381 2,985 (70) 6,121
--------- --------- --------- ---------
Net loss ....................... (66,770) (104,636) (181,908) (270,236)
Dividend requirements applicable
to preferred stock ........... (9,053) (10,276) (26,321) (29,877)
--------- --------- --------- ---------
Net loss applicable to common
stockholders ................. $ (75,823) $(114,912) $(208,229) $(300,113)
========= ========= ========= =========
Basic and diluted net loss per
weighted average share of
common stock ................. $ (1.08) $ (0.85) $ (2.98) $ (2.60)
========= ========= ========= =========
Weighted average shares of
common stock outstanding ..... 70,531 134,517 69,788 115,523
========= ========= ========= =========
<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 September 30, 2001 Quarter Ended June 30, 2001
---------------------------------------------------- ---------------------------------------------------
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 ........... $ 88,281 $ 20,374 $ 25,144 $ 2,835 $ 136,634 $ 90,775 $ 18,101 $ 24,710 $ 3,768 $ 137,354
Direct Operating
Expenses ......... 22,475 5,339 24,422 3,701 55,937 27,127 6,405 27,319 3,336 64,187
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 65,806 15,035 722 (866) 80,697 63,648 11,696 (2,609) 432 73,167
Gross Margin
Percentage ....... 74.5% 73.8% 2.9% (30.5%) 59.1% 70.1% 64.6% (10.6%) 11.5% 53.3%
Sales, General
and Administrative
Expenses ......... 29,752 6,854 18,465 3,890 58,961 26,076 5,054 19,217 4,590 54,937
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 36,054 $ 8,181 $(17,743) $ (4,756) $ 21,736 $ 37,572 $ 6,642 $(21,826) $ (4,158) $ 18,230
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA as a
Percentage
of Revenues ...... 40.8% 40.2% (70.6%) (167.8%) 15.9% 41.4% 36.7% (88.3%) (110.4%) 13.3%
September 2001 Quarter vs. June 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 ........... (2.7%) 12.6% 1.8% (24.8%) (0.5%)
Direct Operating
Expenses .......... (17.2%) (16.6%) (10.6%) 11.0% (12.9%)
-------- -------- -------- -------- ----------
Gross Margin ....... 3.4% 28.6% NM(c) NM(c) 10.3%
Sales, General
and Administrative
Expenses ......... 14.1% 35.6% (3.9%) (15.3%) 7.3%
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ...... (4.0%) 23.2% 18.7% (14.4%) 19.2%
-------- -------- -------- -------- ----------
<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 $14.8
million in the September 2001 quarter and $14.4 million in the June 2001
quarter. Amounts presented include results for the networks sold to Adelphia
on October 1, 2001.
(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 September 30, 2001 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 ........... $ 88,281 $ 20,374 $ 25,144 $ 2,835 $ 136,634 $ 77,261 $ 14,061 $ 18,829 $ 105 $ 110,256
Direct Operating
Expenses ......... 22,475 5,339 24,422 3,701 55,937 20,933 6,575 23,986 879 52,373
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
Gross Margin ...... 65,806 15,035 722 (866) 80,697 56,328 7,486 (5,157) (774) 57,883
Gross Margin
Percentage ....... 74.5% 73.8% 2.9% (30.5%) 59.1% 72.9% 53.2% (27.4%) NM(c) 52.5%
Sales, General
and Administrative
Expenses ......... 29,752 6,854 18,465 3,890 58,961 29,665 4,921 21,689 3,519 59,794
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA before
allocation of
Corporate
Overhead (b) ..... $ 36,054 $ 8,181 $(17,743) $ (4,756) $ 21,736 $ 26,663 $ 2,565 $(26,846) $ (4,293) $ (1,911)
-------- -------- -------- -------- ---------- --------- -------- -------- -------- ----------
EBITDA
Percentage
of Revenues ...... 40.8% 40.2% (70.6%) (167.8%) 15.9% 34.5% 18.2% (142.6%) NM(c) (1.7%)
September 2001 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)
-------- -------- -------- -------- ----------
Revenues .......... 14.3% 44.9% 33.5% NM(c) 23.9%
Direct Operating
Expenses ......... 7.4% (18.8%) 1.8% NM(c) 6.8%
-------- -------- -------- -------- ----------
Gross Margin ...... 16.8% 100.8% NM(c) NM(c) 39.4%
Sales, General
and Administrative
Expenses ......... 0.3% 39.3% (14.9%) NM(c) (1.4%)
-------- -------- -------- -------- ----------
EDITDA before
allocation of
Corporate
Overhead (b) ..... 35.2% 218.9% 33.9% 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 $14.8 million
in the September 2001 quarter and $18.1 million in the September 2000
quarter. Amounts presented include results for the networks sold to Adelphia
on October 1, 2001.
(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, September 30,
2000 2001
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents ............... $ 3,543 $ 506
Assets held for sale .................... -- 100,490
Accounts receivable - net ............... 79,650 102,197
Other current assets .................... 14,936 33,385
----------- -----------
Total current assets ............... 98,129 236,578
Restricted cash .............................. 54,178 18,900
Investments .................................. 48,409 54,829
Property, plant and equipment - net .......... 1,534,612 1,671,529
Other assets - net ........................... 154,138 144,498
----------- -----------
Total .............................. $ 1,889,466 $ 2,126,334
=========== ===========
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' (DEFICIENCY)EQUITY:
Current liabilities:
Accounts payable ....................... $ 158,249 $ 86,408
Deposits on assets held for sale ....... -- 61,225
Due to parent-net ...................... 1,544 --
Due to affiliates-net .................. 8,067 27,747
Accrued interest ....................... 31,011 50,005
Accrued interest-parent ................ 7,003 9,442
Other current liabilities .............. 13,339 30,169
----------- -----------
Total current liabilities .......... 219,213 264,996
13% Senior discount notes due 2003 ........... 291,891 303,840
12 1/4% Senior secured notes due 2004 ........ 250,000 250,000
12% Senior subordinated notes due 2007 ....... 300,000 300,000
Note payable ................................. 500,000 494,085
Other debt ................................... 48,565 41,422
----------- -----------
Total liabilities .................. 1,609,669 1,654,343
----------- -----------
12 7/8% Senior exchangeable redeemable
preferred stock ............................. 297,067 327,360
----------- -----------
Common stock and other stockholders'
(deficiency) equity:
Class A common stock, $0.01 par value,
800,000,000 shares authorized,
35,848,366 and 47,772,906 shares
outstanding, respectively ................. 358 478
Class B common stock, $0.01 par value,
400,000,000 shares authorized,
35,143,859 and 86,744,378 shares
outstanding, respectively ................ 351 867
Additional paid in capital ................. 678,140 1,109,430
Class B common stock warrants .............. 1,022 --
Unearned stock compensation ................ (4,070) (2,836)
Accumulated deficit ........................ (693,071) (963,308)
----------- -----------
Total common stock and other
stockholders' (deficiency) equity . (17,270) 144,631
----------- -----------
Total .............................. $ 1,889,466 $ 2,126,334
=========== ===========