ABIZ, sound like the morning after good bye kiss to me, LOL: "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[good money after bad:} may provide
up to $100 million of additional credit support to the Company's subsidiaries.
Results of Operations
COUDERSPORT, Pa., Nov. 12 /PRNewswire/ --
Adelphia Business Solutions, Inc. (Nasdaq: ABIZ) ("the Company") 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.
(Photo: newscom.com )
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 an $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 (Nasdaq: ADLAC) ("Adelphia") 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 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 Ended Nine Months 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
(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 September 30, 2001
Original Markets Expansion Markets Total
(dollars in Class of Class of Class of Class of Operating
thousands) 1996 1997/98 1999 2000 Results(a)
Revenue $88,281 $20,374 $25,144 $2,835 $136,634
Direct Operating
Expenses 22,475 5,339 24,422 3,701 55,937
Gross Margin 65,806 15,035 722 (866) 80,697
Gross Margin
Percentage 74.5% 73.8% 2.9% (30.5%) 59.1%
Sales, General and
Administrative
Expenses 29,752 6,854 18,465 3,890 58,961
EBITDA before
allocation of
Corporate
Overhead (b) $36,054 $8,181 $(17,743) $(4,756) $21,736
EBITDA as a
Percentage of
Revenues 40.8% 40.2% (70.6%) (167.8%) 15.9%
Quarter Ended June 30, 2001
(dollars in Original Markets Expansion Markets Total
thousands) Class of Class of Class of Class of Operating
1996 1997/98 1999 2000 Results(a)
Revenue $90,775 $18,101 $24,710 $3,768 $137,354
Direct Operating
Expenses 27,127 6,405 27,319 3,336 64,187
Gross Margin 63,648 11,696 (2,609) 432 73,167
Gross Margin
Percentage 70.1% 64.6% (10.6%) 11.5% 53.3%
Sales, General and
Administrative
Expenses 26,076 5,054 19,217 4,590 54,937
EBITDA before
allocation of
Corporate
Overhead(b) $37,572 $6,642 $(21,826) $(4,158) $18,230
EBITDA as a
Percentage
of Revenues 41.4% 36.7% (88.3%) (110.4%) 13.3%
September 2001 Quarter vs. June 2001 Quarter
Percentage Change Comparison
Original Markets Expansion Markets Total
Percent Change
Comparison Class of Class of Class of Class 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%
(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.
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
(dollars in Original Markets Expansion Markets Total
thousands) Class of Class of Class of Class of Operating
1996 1997/98 1999 2000 Results(a)
Revenue $88,281 $20,374 $25,144 $2,835 $136,634
Direct Operating
Expenses 22,475 5,339 24,422 3,701 55,937
Gross Margin 65,806 15,035 722 (866) 80,697
Gross Margin
Percentage 74.5% 73.8% 2.9% (30.5%) 59.1%
Sales, General and
Administrative
Expenses 29,752 6,854 18,465 3,890 58,961
EBITDA before
allocation of
Corporate
Overhead(b) $36,054 $8,181 $(17,743) $(4,756) $21,736
EBITDA Percentage
of Revenues 40.8% 40.2% (70.6%) (167.8%) 15.9%
Quarter Ended September 30, 2000
(dollars in
thousands) Original Markets Expansion Markets Total
Class of Class of Class of Class of Operating
1996 1997/98 1999 2000 Results(a)
Revenue $77,261 $14,061 $18,829 $105 $110,256
Direct Operating
Expenses 20,933 6,575 23,986 879 52,373
Gross Margin 56,328 7,486 (5,157) (724) 57,883
Gross Margin
Percentage 72.9% 53.2% (27.4%) NM(c) 52.5%
Sales, General and
Administrative
Expenses 29,665 4,921 21,689 3,519 59,794
EBITDA before
allocation of
Corporate
Overhead(b) $26,663 $2,565 $(26,846) $(4,293) $(1,911)
EBITDA Percentage
of Revenues 34.5% 18.2% (142.6%) NM(c) (1.7%) |
