[Metromedia Fiber Network, Inc. Reports Third Quarter 1999 Results]
-- Company Completes Merger With AboveNet, Adding Internet
Infrastructure to MFN's End-to-End Optical Networks
-- Revenues Increase 137% for the Nine-Month Period
-- Total Contracts Signed To-Date Exceed $1.6 Billion
-- Fiber Miles Surpass 540,000 Milestone as of 3Q99
NEW YORK--(BUSINESS WIRE)--Nov. 8, 1999--Metromedia Fiber Network, Inc., an international provider of dedicated fiber optic networks within major metropolitan areas, today reported third quarter and nine month 1999 results. As a direct result of the Financial Accounting Standards Board's issuance of FASB Interpretation No. 43 "Real Estate Sales" (FIN 43), which became effective June 30, 1999, revenues for the three months ended September 30, 1999 were $10.7 million or 8.5% less than revenues of $11.7 million for the third quarter of 1998. In accordance with this interpretation, MFN elected to recognize revenues on certain sales contracts entered into after July 1, 1999 over the term of the contract rather than under the percentage of completion method. This change in the accounting for sales contracts does not change any of the economics of those contracts or the timing of cash received by MFN. Under the prior accounting method, revenues would have been approximately $32.7 million for the three months ending September 30, 1999, or an increase of 179% compared with the three months ending September 30, 1998. Revenues also include $2.1 million of revenues of AboveNet Communications Inc., acquired by MFN on September 8, 1999, for the period from September 9 through September 30.
Revenues for the nine months ended September 30, 1999 were $49.4 million or 137% greater than revenues of $20.8 million for the same period in 1998. Nine months revenues were also impacted by the change in accounting method for certain sales contracts entered into during the three months ended September 30, 1999. If MFN recognized revenues for certain sales contracts entered into after July 1, 1999 under the prior accounting method, revenues would have been approximately $71.4 million for the nine months ended September 30, 1999, or and increase of 243% compared with the nine months ending September 30, 1998.
"In today's bandwidth-hungry environment, our strong fundamentals underscore the ever-increasing viability of our strategy with both our carrier and enterprise customers. We have increased the value of our total contracts signed almost four-fold since the start of the year to over $1.6 billion and have far surpassed the number of planned fiber miles." said Howard Finkelstein, Metromedia Fiber Network's President and Chief Operating Officer.
"This has also been an extremely important quarter for Metromedia Fiber Network in bringing our infrastructure business model to the Internet," Mr. Finkelstein continued, "and extending our potential universe by completing the acquisition of AboveNet. As part of its ongoing expansion, AboveNet's network capacity increased over 650% from 3.8 Gbps as of September 30, 1998 to 24.7 Gbps as of September 30, 1999, while increasing the number of peering relationships at the end of those periods from 171 to over 300."
"Although the accounting method change affects way in which certain revenues are recognized, the more important element to remember is that it has no impact on our actual cash position, cash flow or the economics of our business," concluded Mr. Finkelstein.
For the three months ended September 30, 1999, the Company recognized a loss before interest, taxes, depreciation and amortization of $12.4 million compared with EBITDA (earnings before interest, taxes, depreciation and amortization) of $2.8 million for the three months ended September 30, 1998. Under the prior accounting method, EBITDA would have been $2.6 million or $15.0 million higher than recorded, or $4.5 million higher than recorded for the same period last year.
For the nine months ended September 30, 1999, the Company recognized a loss before interest, taxes, depreciation and amortization of $2.4 million compared with a loss before interest, taxes, depreciation and amortization for the nine months ended September 30, 1998 of $2.1 million. If the Company recognized revenues for certain sales contracts entered into after July 1, 1999 under the prior accounting method, EBITDA would have been $12.6 million or $15.0 million higher than recorded, or $14.7 million higher than recorded for the same period last year.
For the three months ended September 30, 1999, cost of sales was $9.6 million compared with $4.9 million for the three months ended September 30, 1998. Cost of sales increased primarily due to costs associated with the commencement of service to customers and higher fixed costs associated with the operation of the Company's network in service.
Depreciation and amortization expense was $10.6 million for the three months ended September 30, 1999 compared with $0.3 million during the comparable period in 1998, increasing as a result of increased investment in the Company's completed fiber optic network and additional property and equipment acquired.
Interest income, derived from investment of certain of the proceeds from the Company's $650 million senior note issuance in November 1998, increased to $5.6 million for the three months ended September 30, 1999 from $1.5 million for the three months ended September 30, 1998. Interest expense increased to $14.5 million from $4,000 for the respective periods, reflecting the issuance and sale of the Company's 10% senior notes in November 1998.
Net loss for the three months ended September 30, 1999 was $32.0 million compared with net income of $3.1 million for the comparable period in 1998. The net loss was primarily attributable to the increase in net interest expense related to the issuance and sale of the Company's 10% senior notes in November 1998. The loss was greater as a direct result of the aforementioned accounting change. Under the prior accounting method, the loss would have been approximately $15 million ($0.08 per share) less for the three months ending September 30, 1999.
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
(in 000's, except per share amounts)
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
1999 1998 1999 1998
Revenue $ 10,723 $ 11,707 $ 49,397 $ 20,840
Expenses:
Cost of sales 9,595 4,945 24,414 9,499
Selling, general and
administrative 13,581 3,898 27,369 9,811
Consulting and
employment incentives -- 53 -- 248
Settlement agreement -- -- -- 3,400
Depreciation and
amortization 10,588 298 15,645 738
Income (loss) from
operations (23,041) 2,513 (18,031) (2,856)
Other income (expenses):
Interest income 5,615 1,452 19,127 5,028
Interest expense (14,504) (4) (44,911) (16)
Loss from joint venture (82) (13) (475) (264)
Income (loss) before income
taxes (32,012) 3,948 (44,290) 1,892
Income taxes -- 825 -- 825
Net income (loss) $(32,012) $ 3,123 $(44,290) $ 1,067
Net income (loss) per
share, basic $ (0.16) $ 0.02 $ (0.23) $ 0.01
Net income (loss) per
share, diluted N/A $ 0.01 N/A $ 0.00
Weighted average number of
shares outstanding, basic 199,789 187,860 190,639 186,392
Weighted average number of
shares outstanding, diluted N/A 221,328 N/A 217,208
METROMEDIA FIBER NETWORK, INC. & SUBSIDIARIES
Consolidated Balance Sheets
(in 000's, except share amounts)
Sept. 30, Dec. 31,
1999 1998
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 352,900 $ 569,319
Marketable securities 29,628 --
Pledged securities, current portion 63,864 61,384
Accounts receivable 105,934 30,910
Prepaid expenses and other current assets 6,311 2,210
Total current assets 558,637 663,823
Fiber optic transmission network and
related equipment, net 489,365 244,276
Property and equipment, net 75,433 2,716
Pledged securities -- 30,512
Restricted cash 94,234 --
Investment in/advances to joint ventures 20,014 4,156
Other assets 1,680,718 28,934
Total assets $2,918,401 $ 974,417
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 31,680 $ 6,106
Accrued liabilities 112,382 96,512
Notes payable, current portion 5,607 --
Deferred revenue, current portion 15,863 8,100
Capital lease obligations, current
portion 569 55
Total current liabilities 166,101 110,773
Senior notes payable 650,000 650,000
Notes payable 14,720 --
Capital lease obligations 24,316 22,675
Deferred revenue 83,271 33,455
Commitments and contingencies (see notes)
Stockholders' equity:
Preferred stock, $.01 par value; 20,000,000
shares authorized; none issued and
outstanding -- --
Class A common stock, $.01 par value;
2,404,031,241 shares authorized;
198,822,053 and 155,210,220 shares
issued and outstanding, respectively 1,988 1,552
Class B common stock, $.01 par value;
522,254,782 shares authorized;
33,769,272 shares issued and
outstanding 338 338
Additional paid-in capital 2,065,316 197,861
Accumulated deficit (86,526) (42,237)
Cumulative comprehensive loss (1,123) --
Total stockholders' equity 1,979,993 157,514
Total liabilities and
stockholders' equity $2,918,401 $ 974,417
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