FairPoint Reports Operating Results for the First Quarter Ended March 31, 2005; FairPoint Reports Consolidated EPS of $0.32 Against Prior Period Loss.CHARLOTTE, N.C. -- FairPoint Communications Fairpoint Communications is an American holding company, specializing in acquiring, operating, and selling telecommunications companies [1] [2] that provide DSL, telephone, and cable TV services to customers in 18 states through 31 subsidiaries. , Inc. (NYSE NYSE See: New York Stock Exchange :FRP FRP Fremskrittspartiet (Norwegian: Progress Party; political party) FRP Fiberglass-Reinforced Plastic FRP Fiber Reinforced Polymer FRP Fibre Reinforced Polymer FRP Fleet Response Plan (US Navy) ) ("FairPoint") today announced its financial results for the first quarter ended March 31, 2005. Highlights include: --Successfully closing a $462.5 million initial public offering and obtaining a $688.5 million credit facility to complete a recapitalization Recapitalization Restructuring a company's debt and equity mixture often with the aim of making a company's capital structure more stable. Notes: Companies often want to diversify their debt-to-equity ratio to improve liquidity. and de-leveraging of the company. --Earnings per share for the first quarter of $0.32 compared to a loss per share of $0.49 for the same period in 2004. --Operating revenues for the period of $61.7 million, up 1.1% over the first quarter 2004 on gains in data/Internet and long distance revenues. --Consolidated net income of $11.0 million versus the prior year period net loss of $4.6 million. --Excluding a $2.5 million one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. distribution received in the 2004 first quarter, Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become (as defined herein) was down 1.8% to $32.4 million from the same period in 2004. --Sequential growth of total access line equivalents by 1,233 to 276,167, a 0.4% increase over the prior quarter as a result of increased business and high-speed high-speed adj. 1. Operated or designed for operation at high speed: a high-speed food processor. 2. Taking place at high speed: a high-speed chase. 3. data customers that more than offset voice access line decreases of 0.4%. --Closing of the Berkshire Berkshire (bärk`shĭr, –shər, bûrk`–) or Berks (bärks, bûrks), former county, S central England. Telephone Corporation acquisition on May 2nd and the signing of a definitive agreement and plan of merger to acquire Bentleyville Bentleyville may refer to:
"We are pleased with the performance of our business this quarter and are on track with our business plan. We are seeing the benefits from real growth in key areas of our business, careful cost control and our new, strengthened capital structure," said Eugene Eugene, city (1990 pop. 112,669), seat of Lane co., W Oregon, on the Willamette River; inc. 1862. A processing and shipping center in a farming area, the "Emerald City" has lumbering, food-processing, and microchip and other electronics industries. Johnson, Chairman and Chief Executive Officer. "Although the benefits of interest savings from our recapitalization won't won't Contraction of will not. won't will not won't will be fully realized until the third quarter of this year, there has already been a significant benefit to net income." "We also continue to deliver on our acquisition strategy and are pleased to announce that we completed the acquisition of Berkshire Telephone on May 2, 2005 and that we signed an agreement on April 22, 2005 to acquire Bentleyville Communications in Southwestern south·west n. 1. Abbr. SW The direction or point on the mariner's compass halfway between due south and due west, or 135° west of due north. 2. An area or region lying in the southwest. 3. Pennsylvania. The Bentleyville Communications transaction is smaller than the completed Berkshire transaction, but we expect both transactions to add to our Cash Available for Dividends this year," continued Mr. Johnson. "We will continue to seek acquisitions with limited integration risk and attractive cash returns." Results for the first quarter ended March 31, 2005 FairPoint reported consolidated con·sol·i·date v. con·sol·i·dat·ed, con·sol·i·dat·ing, con·sol·i·dates v.tr. 1. To unite into one system or whole; combine: revenues from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the three months ended March 31, 2005 of $61.7 million, an increase of 1.1% or $0.7 million compared to the three months ended March 31, 2004 of $61.0 million. Revenue growth was the result of increases in data/Internet and long distance revenues, which more than offset expected decreases in Universal Service (USF USF University of South Florida USF Universal Service Fund (often part of phone bill in US) USF University of San Francisco USF University of Sioux Falls USF University of St. ) and access revenues. Income from continuing operations was $16.2 million for the three months ended March 31, 2005 compared to $18.5 million for the three months ended March 31, 2004, a 12.4% decrease driven principally by the increased percentage of lower margin unregulated Adj. 1. unregulated - not regulated; not subject to rule or discipline; "unregulated off-shore fishing" regulated - controlled or governed according to rule or principle or law; "well regulated industries"; "houses with regulated temperature" 2. revenues in the total business mix due to DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary and long distance revenue growth. Excluding the higher cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold of $1.3 million related to growth in unregulated revenues, comparable cash expenses were up only 2.2% from the 2004 first quarter. Total operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. (including depreciation and amortization and stock based compensation) increased $2.9 million or 6.9% for the three months ended March 31, 2005 compared to the same period in the prior year. Depreciation and amortization expense increased $0.6 million and stock based compensation increased $0.4 million for the three months ended March 31, 2005 compared to 2004 first quarter. FairPoint reported earnings per share of $0.32 for the three months ended March 31, 2005, compared to a loss per share of $0.49 for the same period in 2004. This improvement is the result of the company's recapitalization completed on February February: see month. 8, 2005 associated with the company's initial public offering, which substantially de-leveraged the company and provided a decrease in interest expense and consequently an improvement in earnings. The repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of the company's series A preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. and high yield debt resulted in significant one-time charges that are reflected in the financial statements. The company recognized income tax benefits of $28.9 million due to the taxable loss in the quarter driven primarily by the expenses incurred from the recapitalization. In addition, the company recognized income tax benefits of $66.0 million from the recognition of deferred tax benefits from the reversal reversal n. the decision of a court of appeal ruling that the judgment of a lower court was incorrect and is reversed. The result is that the lower court which tried the case is instructed to dismiss the original action, retry the case, or is ordered to change its of the deferred tax valuation allowance resulting from the company's expectation of generating future taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. following the recapitalization. Adjusted EBITDA for the three months ended March 31, 2005 was $32.4 million, excluding one-time transaction expenses of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $86.2 million incurred in connection with the company's recapitalization, compared to Adjusted EBITDA of $35.5 million for the same period in the prior year. In the first quarter 2004, the company received a one-time distribution of $2.5 million related to the sale of a cellular partnership interest. Cash Available for Dividends (as defined herein) was approximately $12.8 million for the three months ended March 31, 2005 compared to a negative $3.1 million in the first quarter of 2004. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis assuming the recapitalization was completed on January January: see month. 1, 2005, Cash Available for Dividends was $18.2 million. First quarter March 31, 2005 operational highlights --Total access line equivalents (voice access lines and high speed data lines, which include DSL, cable modem cable modem Modem used to convert analog data signals to digital form and vise versa, for transmission or receipt over cable television lines, especially for connecting to the Internet. and wireless broadband High-speed wireless transmission of data. What is "high" speed is always a changing number. Wireless systems are typically slower than land-based, wireline networks. In the past, wireless broadband started at 250 Kbps, whereas land-based broadband was generally considered to start at T1 ) were 276,167 as of March 31, 2005, representing an increase of 1,233 over the quarter ended December December: see month. 31, 2004 and an increase of 2.1% over the first quarter last year. High-speed data access lines, or HSD HSD Human Services Department HSD High Speed Data HSD Hillsboro School District (Hillsboro, OR) HSD Hybrid Synergy Drive (Toyota/Lexus) HSD High School Diploma HSD Historical Society of Delaware , increased sequentially se·quen·tial adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen by 2,093 lines and were up by more than 47.4% over the first quarter of 2004. The company slightly increased its previously disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). access line equivalents for the 2004 quarterly periods to include cable modem and wireless broadband in access line equivalents and an additional 836 voice access lines which the audit processes determined were not properly included in the 2004 data. --Voice access lines decreased by 2.5% to 239,250 year over year primarily as a result of a decrease in residential voice access lines. Sequentially, voice access lines decreased 0.4%, lower than the rate of decline experienced in either the same period in 2004 or the end of 2004. --At the end of the first quarter, DSL penetration The successful unauthorized breach of a security perimeter. See penetration test. was 14.2% of voice access lines, compared to 9.5% in the first quarter last year and 13.3% at December 31, 2004. --Total HSD penetration utilizing DSL, cable and wireless technologies was 15.4% of voice access lines, compared to 10.2% for the same quarter in the prior year and 14.5% at the end of the fourth quarter 2004 --Interstate long distance penetration as of March 31, 2005 was 40.9% of voice access lines compared to 32.3% for the first quarter 2004, as a result of the company's continuing efforts to aggressively sell a voice bundled bun·dle n. 1. A group of objects held together, as by tying or wrapping. 2. Something wrapped or tied up for carrying; a package. 3. Biology A cluster or strand of closely bound muscle or nerve fibers. offering consisting of local voice, long distance and enhanced calling services. --The following table illustrates the Cash Available for Dividends generated during the three months ended March 31, 2005 on an actual basis and on a pro forma basis to give effect to the recapitalization as if it had occurred on January 1, 2005. Dividends are subject to declaration by FairPoint's board of directors and compliance with Delaware Delaware, state, United States Delaware (dĕl`əwâr, –wər), one of the Middle Atlantic states of the United States, the country's second smallest state (after Rhode Island). law and the terms of FairPoint's credit facility.
Three Months Ended
March 31, 2005
($ in millions)
Actual Pro Forma
----------- -----------
Adjusted EBITDA (1) $ 32,419 $ 32,419
Less:
Scheduled principal repayments 422 422
Cash interest expense 13,901 8,554
Capital expenditures and other
expenditures (2) 5,034 5,034
Cash taxes 238 238
----------- -----------
Cash Available for Dividends (1) $ 12,824 $ 18,171
(1) Adjusted EBITDA and Cash Available for Dividends are non-GAAP
financial measures (i.e., they are not measures of financial
performance under generally accepted accounting principles) and should
not be considered in isolation or as a substitute for consolidated
statement of operations and cash flows data prepared in accordance
with GAAP. For additional information regarding Adjusted EBITDA and
Cash Available for Dividends, and a reconciliation of such measures to
the most comparable financial measures calculated in accordance with
GAAP, please see Non-GAAP Financial Measures below and the attachments
to this press release.
(2) Represents non-cash items excluded from Adjusted EBITDA and paid
in cash.
Proposed Bentleyville Communications Corporation Acquisition FairPoint has entered into a definitive agreement and plan of merger under which Bentleyville Communications would become a wholly-owned subsidiary of FairPoint. Bentleyville Communications provides telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , cable and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the services to rural areas of Southwestern Pennsylvania and has approximately 3,586 access line equivalents currently in operation, which are adjacent to the company's existing operations in Pennsylvania. Through the Bentleyville Communications acquisition, FairPoint will double the number of access lines it serves in this region. The transaction is expected to contribute to FairPoint's Cash Available for Dividends, and is expected to close during the third quarter of 2005. Other Highlights --On May 2, 2005, FairPoint successfully completed its acquisition of Berkshire Telephone Corporation for approximately $19.2 million before adjustments. Berkshire, established in 1926 and headquartered in Kinderhook Kinderhook (kĭn`dərh  k'), village (1990 pop. 1,293), Columbia co., SE N.Y.; settled before the Revolution, inc. 1838. Richard Upjohn designed St. Paul's Church (1851) there. , NY, provides service to approximately 7,300 access line
equivalents serving five communities. Berkshire is adjacent to
FairPoint's Taconic Ta`con´ica. 1. (Geol.) Designating, or pertaining to, the series of rocks forming the New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State --On February 8, 2005, FairPoint completed an initial public offering of 25,000,000 shares of its common stock at a price to the public of $18.50 per share. In connection with the IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. , the company obtained a new senior secured credit facility consisting of a $100 million revolving facility and a $588.5 million B-Term loan facility. FairPoint used the proceeds from the IPO and borrowings under its new credit facility primarily to refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. its existing credit facility, consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. tender offers for its outstanding high yield debt, redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. its series A preferred stock, repay operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. debt and pay related fees and expenses. Outlook "We are extremely confident in our business model and our ability to deliver consistent dividends to our shareholders," said Mr. Johnson. "We expect our growth will come from a combination of predictable and stable revenues from our regulated reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. business, organic growth from our high-speed data and long distance products and contributions from acquisitions. The rural nature of most of our markets offers us unique advantages to grow our business with reasonable investment and allows us to enjoy different wireline trends than most providers." Capital expenditures in the first quarter were $4.8 million. This amount was lower than anticipated and revised full year capital expenditures are estimated at $27 to $28 million versus the prior estimate of $31 million. 2005 interest expense is estimated at $41 to $43 million taking into account our capital structure costs pre and post recapitalization. This estimate also takes into account the increased debt to fund the Berkshire acquisition and the two additional fixed interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. totaling $100 million announced in April 2005, but does not take into account the pending Bentleyville Communications acquisition or any other potential acquisitions in 2005. Non-GAAP Financial Measures EBITDA, Adjusted EBITDA and Cash Available for Dividends are non-GAAP financial measures (i.e., they are not measures of financial performance under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ) and should not be considered in isolation or as a substitute for consolidated statement of operations See Income statement. and cash flows data prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . In addition, the non-GAAP financial measures used by FairPoint may not be comparable to similarly titled measures of other companies. For additional information regarding EBITDA, Adjusted EBITDA and Cash Available for Dividends, and a reconciliation of such measures to the most comparable financial measures calculated in accordance with GAAP, please see the attachments to this press release. We believe EBITDA is useful to investors because EBITDA is commonly used in the communications industry communications industry, broadly defined, the business of conveying information. Although communication by means of symbols and gestures dates to the beginning of human history, the term generally refers to mass communications. to analyze an·a·lyze v. 1. To examine methodically by separating into parts and studying their interrelations. 2. To separate a chemical substance into its constituent elements to determine their nature or proportions. 3. companies on the basis of operating performance, liquidity and leverage. We believe EBITDA allows a standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. comparison between companies in the industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies. Certain covenants in our credit facility contain ratios based on Adjusted EBITDA and the restricted payment covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the in our credit facility regulating reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. the payment of dividends on our common stock is based on Adjusted EBITDA. If our Adjusted EBITDA were to decline below certain levels, covenants our credit facility that are based on Adjusted EBITDA may be violated vi·o·late tr.v. vi·o·lat·ed, vi·o·lat·ing, vi·o·lates 1. To break or disregard (a law or promise, for example). 2. To assault (a person) sexually. 3. and could cause, among other things, a default under our credit facility, or result in our inability to pay dividends. We believe Cash Available for Dividends is useful to investors as a means to evaluate our ability to pay dividends on our common stock. However, we are not required to use such cash to pay dividends and any dividends are subject to declaration by our board of directors and compliance with Delaware law and the terms of our credit facility. The information in this press release should be read in conjunction conjunction, in astronomy conjunction, in astronomy, alignment of two celestial bodies as seen from the earth. Conjunction of the moon and the planets is often determined by reference to the sun. with the financial statements and footnotes contained in our documents to be filed with the Securities and Exchange Commission. Conference Call and Webcast FairPoint will host a conference call and webcast to discuss its first quarter 2005 earnings on Wednesday Wednesday: see week. , May 4, 2005, at 9:00 am EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . Participants should call (866) 252-6943 (US/Canada) or (706) 679-0621 (International) and request the FairPoint call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (800) 642-1687 and enter confirmation code 5580084. The recording will be available from Wednesday, May 4, 2005 at 12:00 p.m. through Wednesday May 11, 2005 at 11:59 p.m. (EDT). A live broadcast of the earnings conference call will be available via the Internet at www.fairpoint.com under our Investor Relations Investor relations The process by which the corporation communicates with its investors. section. An online replay will be available beginning at 8:00 a.m. (EDT) on May 5, 2005 and remain available for one year. About FairPoint FairPoint is a leading provider of communications services to rural communities across the country. Incorporated in 1991, FairPoint's mission is to acquire and operate telecommunications companies See telecom company. that set the standard of excellence for the delivery of service to rural communities. Today, FairPoint owns and operates 27 rural local exchange companies (RLECs) located in 17 states. FairPoint serves customers with approximately 276,167 access line equivalents (voice access lines and high speed data lines, which include DSL, cable modem and wireless broadband) as of March 31, 2005 and offers an array of services, including local and long distance voice, data, Internet and broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). offerings. Forward Looking Statements This press release may contain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that are not based on historical fact, including without limitation, statements containing the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," "indicated" and similar expressions. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by these forward-looking statements. Such factors include those risks described in FairPoint's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. on file with the Securities and Exchange Commission. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and FairPoint undertakes no duty to update this information. FairPoint's results for the first quarter ended March 31, 2005 are subject to the completion and filing with the Securities and Exchange Commission of its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for such quarter.
FairPoint Communications, Inc.
Consolidated and Rural Local Exchange
Comparative Financial Information
For the Three Months Ended March 31, 2005 and 2004
($ thousands) Three-Months Three-Months
Ended Ended
03/31/05 03/31/04
------------- -------------
Consolidated Results from Continuing
Operations:
Revenues $ 61,665 $ 60,985
Operating expenses 45,453 42,524
------------- -------------
Income from operations 16,212 18,461
Other expense (100,104)(1) (22,845)
------------- -------------
Income from continuing operations
before income taxes (83,892) (4,384)
Income taxes 94,934 (2) (223)
Minority Interest in income of
subsidiaries - (1)
------------- -------------
Net income (loss) $ 11,042 $ (4,608)
============= =============
Adjusted EBITDA $ 32,419 $ 35,487
Cash Available for Dividends 12,824 (3,087)
Other information:
------------------------------------
Gross property, plant and equipment $ 706,848 $ 680,859
Capital expenditures 4,819 6,957
Cash interest expense (adjusted for
amortization, swap interest and
accretion on series A preferred
stock) 13,901 20,454
Access line equivalents (3) 276,167 270,360
Residential access lines 186,640 192,243
Business access lines 52,610 53,075
High Speed Data subcribers 36,917 25,042
======================================================================
Footnotes:
(1) Other expense includes 1st quarter $76.3 million loss on early
retirement of debt, and $9.9 million loss on repurchase of
preferred stock.
(2) Income tax benefit includes $28.9 million associated with current
period loss and $66.0 due to the recognition of deferred tax
benefits from the reversal of the valuation allowance.
(3) Access line equivalents have been restated to include wireless and
cable modems. In addition, previous periods have been restated to
reflect an additional 836 voice lines which our audit processes
determined were not properly included in the 2004 reports.
FairPoint Communications, Inc.
Sequential Financial Information for the Quarters ending
March 31, 2005, December 31, September 30, June 30 and March 31, 2004
($ thousands) Three- Three- Three- Three- Three-
Months Months Months Months Months
Ended Ended Ended Ended Ended
3/31/2005 12/31/04 9/30/04 6/30/04 3/31/04
---------- --------- -------- -------- --------
Consolidated
Results:
Revenues:
Local calling
services $ 15,617 $ 15,828 $ 15,974 $ 15,767 $ 15,581
USF -- high cost
loop support 4,796 5,042 5,807 5,850 5,452
Interstate access
revenue 16,880 18,236 17,382 17,772 16,907
Intrastate access
revenue 10,083 10,509 10,844 10,325 10,711
Long distance
services 4,682 4,508 5,009 4,205 4,044
Data and internet
services 5,592 5,504 5,064 4,459 4,027
Other services 4,015 4,180 5,357 4,038 4,263
---------- --------- -------- -------- --------
Total revenues 61,665 63,807 65,437 62,416 60,985
Operating expenses 45,453 45,727 46,405 44,436 42,524
---------- --------- -------- -------- --------
Income from
operations 16,212 18,080 19,032 17,980 18,461
Other income
(expense) (100,104)(1) (28,598) (23,152) (22,794) (22,845)
---------- --------- -------- -------- --------
Earnings (loss)
from continuing
operations before
income taxes (83,892) (10,518) (4,120) (4,814) (4,384)
Income taxes 94,934 (2) (237) (105) 49 (223)
Minority interest
in income of
subsidiaries - (1) - - (1)
Gain on disposal
of assets of
discontinued
operations - - - 671 -
---------- --------- -------- -------- --------
Net income (loss) $ 11,042 $ (10,756)$ (4,225)$ (4,094)$ (4,608)
========== ========= ======== ======== ========
Cash Available for
Dividends
Adjusted EBITDA $ 32,419 $ 35,578 $ 34,796 $ 35,295 $ 35,487
Less:
Scheduled
principal
payments -- (4) 422 4,873 5,149 5,326 10,524
Cash interest
expense (adjusted
for amortization,
swap interest and
dividend and
accretion on
series A
preferred stock) 13,901 20,221 19,859 20,045 20,454
Capital
expenditures and
other 5,034 13,915 8,071 9,649 7,373
Income taxes 238 237 105 (49) 223
---------- --------- -------- -------- --------
Cash Available for
Dividends $ 12,824 $ (3,668)$ 1,612 $ 324 $ (3,087)
========== ========= ======== ======== ========
Other information:
------------------
Gross property,
plant and
equipment $ 706,848 $ 702,995 $695,537 $690,021 $680,859
Capital
expenditures 4,819 12,100 7,767 9,668 6,957
Interest expense
(adjusted for
amortization
and swap
interest) 13,901 20,221 19,859 20,045 20,454
Access line
equivalents (3) 276,167 274,934 276,114 275,436 270,360
Residential
access lines 186,640 187,526 190,211 192,127 192,243
Business access
lines 52,610 52,584 52,896 52,808 53,075
High Speed Data
subscribers: 36,917 34,824 33,007 30,501 25,042
DSL subscribers 33,889 31,876 30,420 28,351 23,308
Other HSD
subscribers
(Wireless and
Cable modems) 3,028 2,948 2,587 2,150 1,734
Footnotes:
(1) Other expense includes 1st quarter $76.3 million loss on early
retirement of debt, and $9.9 million loss on repurchase of
preferred stock.
(2) Income tax benefit includes $28.9 million associated with current
period loss and $66.0 due to the recognition of deferred tax
benefits from the reversal of the valuation allowance.
(3) Access line equivalents have been restated to include wireless and
cable modems. In addition, previous periods have been restated to
reflect an additional 836 voice lines which our audit processes
determined were not properly included in the 2004 reports.
(4) Scheduled principal payments do not include repayment of long term
debt associated with bank refinancing completed on February 8,
2005.
FairPoint Communications, Inc.
EBITDA, Adjusted EBITDA and Cash Available for Dividends Reconcilation
For the Three Months Ended March 31, 2005 and 2004
Three- Three-
Months Months
Ended Ended
03/31/05 03/31/04
---------- ----------
(Dollars in Thousands)
Net cash provided by (used in) operating
activities from continuing operations $ (1,424) $ 13,630
Adjustments:
Depreciation and amortization (13,010) (12,401)
Other non-cash items 8,538 (2,789)
Changes in assets and liabilities arising from
continuing operations, net of acquisitions 16,938 (3,048)
---------- ----------
Income from continuing operations 11,042 (4,608)
Adjustments:
Interest expense 16,970 25,662
Provision for income taxes (94,934) 223
Depreciation and amortization 13,010 12,401
---------- ----------
EBITDA $ (53,912) $ 33,678
Adjustments:
Net (gain) loss on sale of investments and
other assets 178 (184)
Equity in earnings of investee (2,656) (2,415)
Distributions from investments 2,240 4,241
Realized and unrealized losses on interest
rate swaps - 86
Loss on early retirement of debt 76,265 -
Loss on redemption of preferred stock 9,899 -
Non-cash stock based compensation 407 44
Deferred patronage dividends (2) 37
---------- ----------
Adjusted EBITDA $ 32,419 $ 35,487
Less:
Scheduled principal payments 422 10,524
Cash interest expense (adjusted for
amortization, swap interest and dividend and
accretion on series A preferred stock) 13,901 20,454
Capital expenditures and other 5,034 7,373
Income taxes 238 223
---------- ----------
Cash Available for Dividends $ 12,824 $ (3,087)
========== ==========
"EBITDA" means net income (loss) before income (loss) from
discontinued operations, interest expense, income taxes, and
depreciation and amortization.
"Adjusted EBITDA" for any period is defined in our credit facility as
(1) the sum of Consolidated Net Income (which is defined in our credit
facility and includes distributions from investments), plus the
following to the extent deducted from Consolidated Net Income;
provision for taxes, consolidated interest expense, depreciation,
amortization, losses on sales of assets and other extraordinary
losses, and certain other non-cash items, each as defined, minus (2)
gains on sales of assets and other extraordinary gains and all
non-cash items increasing Consolidated Net Income for the period.
"Cash Available for Dividends" means Adjusted EBITDA less scheduled
principal payments on indebtedness, cash interest expense (adjusted
for amortization, swap interest and dividends and accretion on series
A preferred stock), capital expenditures, non-cash items excluded from
Adjusted EBITDA and paid in cash and income taxes.
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
March 31, December 31,
2005 2004
------------ ------------
(unaudited)
(Dollars in thousands)
Assets
Current assets:
Cash $ 6,492 3,595
Accounts receivable, net 27,079 30,203
Other 6,300 6,805
Deferred income tax, net 714 -
Assets of discontinued operations 90 102
------------ ------------
Total current assets 40,675 40,705
------------ ------------
Property, plant, and equipment, net 243,888 252,262
------------ ------------
Other assets:
Investments 38,068 37,749
Goodwill 468,508 468,508
Deferred income tax, net 92,459 -
Deferred charges and other assets 17,043 19,912
------------ ------------
Total other assets 616,078 526,169
------------ ------------
Total assets $ 900,641 819,136
============ ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 10,535 14,184
Current portion of long-term debt and other
long-term liabilities 531 624
Demand notes payable 377 382
Accrued interest payable 1,129 16,582
Other accrued liabilities 16,237 15,872
Dividends payable 7,788 -
Liabilities of discontinued operations 2,246 2,262
------------ ------------
Total current liabilities 38,843 49,906
------------ ------------
Long-term liabilities:
Long-term debt, net of current portion 589,599 809,908
Preferred shares subject to mandatory
redemption - 116,880
Liabilities of discontinued operations 1,369 1,580
Deferred credits and other long-term
liabilities 4,122 12,667
------------ ------------
Total long-term liabilities 595,090 941,035
------------ ------------
Commitments and contingencies
Minority interest 10 11
------------ ------------
Common stock subject to put options - 1,136
------------ ------------
Stockholders' equity (deficit):
Common stock 350 94
Additional paid-in capital 631,560 198,519
Unearned compensation (8,402) -
Accumulated other comprehensive income 3,713 -
Accumulated deficit (360,523) (371,565)
------------ ------------
Total stockholders' equity (deficit) 266,698 (172,952)
------------ ------------
Total liabilities and stockholders' equity
(deficit) $ 900,641 819,136
============ ============
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended
March 31,
-----------------------
2005 2004
----------- ----------
(Dollars in thousands)
Revenues $ 61,665 60,985
----------- ----------
Operating expenses:
Operating expenses, excluding depreciation and
amortization and stock-based compensation 32,036 30,079
Depreciation and amortization 13,010 12,401
Stock-based compensation 407 44
----------- ----------
Total operating expenses 45,453 42,524
----------- ----------
Income from operations 16,212 18,461
----------- ----------
Other income (expense):
Net gain (loss) on sale of investments and
other assets (178) 184
Interest and dividend income 552 304
Interest expense (16,970) (25,662)
Equity in net earnings of investees 2,656 2,415
Realized and unrealized losses on interest
rate swaps - (86)
Other nonoperating, net (86,164) -
----------- ----------
Total other expense (100,104) (22,845)
----------- ----------
Loss before income taxes (83,892) (4,384)
Income tax (expense) benefit 94,934 (223)
Minority interest in income of subsidiaries - (1)
----------- ----------
Net income (loss) $ 11,042 (4,608)
=========== ==========
Weighted average shares outstanding:
Basic 34,549 9,468
========== ==========
Diluted 34,566 9,468
========== ==========
Earnings (loss) per share
Basic $ 0.32 $ (0.49)
========== ==========
Diluted $ 0.32 $ (0.49)
========== ==========
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
---------------------
2005 2004
---------- ----------
(Dollars in thousands)
Cash flows from operating activities:
Net income (loss) $ 11,042 (4,608)
---------- ----------
Adjustments to reconcile net income (loss) to net
cash provided by operating activities of
continuing operations:
Dividends and accretion on shares subject to
mandatory redemption 2,362 4,739
Loss of preferred stock subject to mandatory
redemption 9,899 -
Deferred income taxes (95,694) -
Amortization of debt issue costs 711 1,151
Depreciation and amortization 13,010 12,401
Loss on early retirement of debt 76,265 -
Income from equity method investments (2,656) (2,415)
Other non cash items 575 (686)
Changes in assets and liabilities arising from
operations:
Accounts receivable and other current assets 2,742 1,266
Accounts payable and accrued expenses (19,028) 2,045
Income taxes (666) (317)
Other assets/liabilities 14 54
---------- ----------
Total adjustments (12,466) 18,238
---------- ----------
Net cash provided by (used in) operating
activities of continuing operations (1,424) 13,630
---------- ----------
Cash flows from investing activities of
continuing operations:
Acquisitions of telephone properties - 45
Net capital additions (4,660) (6,939)
Distributions from investments 2,240 4,241
Net proceeds from sales of investments and other
assets 175 230
Other, net (181) (183)
---------- ----------
Net cash used in investing activities of
continuing operations (2,426) (2,606)
---------- ----------
Cash flows from financing activities of
continuing operations:
Net proceeds from issuance of common stock 432,092 -
Debt issue costs paid (7,488) (1,284)
Proceeds from issuance of long-term debt 573,409 64,010
Repayments of long-term debt (793,690) (72,349)
Payment of fees and penalities associated with
early retirement of long term debt (59,754) -
Payment of deferred transaction fee (8,445) -
Proceeds from exercise of stock options 184 -
Repurchase of preferred and common stock (129,278) (1,001)
---------- ----------
Net cash provided by (used in) financing
activities of continuing operations 7,030 (10,624)
---------- ----------
Net cash contributed from continuing
operations to discontinued operations (283) (415)
---------- ----------
Net increase (decrease) in cash 2,897 (15)
Cash, beginning of period 3,595 5,603
---------- ----------
Cash, end of period $ 6,492 5,588
========== ==========
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