Madison River Capital, LLC Announces 2005 Third Quarter and Nine Months Unaudited Financial and Operating Results.MEBANE, N.C. -- Madison River Madison River A river of southwest Montana flowing about 294 km (183 mi) generally northward to join the Jefferson and Gallatin rivers and form the Missouri River. Capital, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control today announced its unaudited financial and operating results for the third quarter and nine months ended September 30, 2005. Highlights of the third quarter of 2005 include: --Net operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of $15.8 million in the third quarter, a 13.8% increase over the same period last year; --Broadband connections increased to 44,403, an increase of 19.8% from a year ago; --Residential 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). penetration of 35.7%; and --Refinancing of secured long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. and $102.0 million redemption of 13.25% senior notes decreases cost of long-term debt and increases cash flow. 2005 Third Quarter Financial and Operating Results The Company reported an increase in net operating income of $1.9 million, or 13.8%, to $15.8 million in the third quarter ended September 30, 2005 from $13.9 million in the third quarter ended September 30, 2004. Total revenues in the third quarter ended September 30, 2005 were $49.2 million compared to $50.5 million in the third quarter ended September 30, 2004, a decrease of $1.3 million, or 2.5%. In addition, the Company reported a net loss of $3.3 million in the third quarter of 2005 compared to net income of $1.2 million in the third quarter of 2004, a change of $4.5 million. Adjusted Operating Income (1) is computed as net operating income (loss) before depreciation, amortization and non-cash long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. incentive plan, or LTIP LTIP Long Term Incentive Plan LTIP Laughing Till I Puke LTIP Local Transportation Improvement Program LTIP Long Term Instrument Plan LTIP Long Term Infrastructure Program LTIP Long Term Independent Project , expenses. Please refer to Footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." 1 - "Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating Income to net operating income (loss). For the third quarter ended September 30, 2005, Adjusted Operating Income was $23.5 million, a decrease of $1.4 million, or 5.6%, from Adjusted Operating Income of $24.9 million reported in the third quarter ended September 30, 2004. The decrease can be attributed primarily to the writeoff writeoff A reduction to zero in the value of an asset carried on a firm's financial statement. Companies often hesitate to make writeoffs because profits reported to stockholders are reduced. of $1.7 million in professional service fees and other expenses related to a registration statement filed by Madison River Communications Corp. The increase in net operating income is attributed primarily to a $2.4 million change in the Company's non-cash LTIP expenses. The reversal of LTIP accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. for employees no longer with the Company resulted in a benefit of approximately $1.5 million being recognized in the third quarter of 2005 compared to LTIP expenses of $0.9 million being recognized in the third quarter of 2004. In addition, in the third quarter of 2004, the Company had accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. approximately $1.7 million for repairs and restoration work at its Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). rural telephone company related to damages from a hurricane. A similar charge for hurricane related expenses of $0.8 million was recognized in the third quarter of 2005 for damages at its Alabama rural telephone company and its edge-out operations in New Orleans New Orleans (ôr`lēənz –lənz, ôrlēnz`), city (2006 pop. 187,525), coextensive with Orleans parish, SE La., between the Mississippi River and Lake Pontchartrain, 107 mi (172 km) by water from the river mouth; founded , Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. . The difference between the two
charges resulted in an increase of approximately $0.9 million in net
operating income in 2005 compared to 2004. Partially offsetting these
increases was the recognition of a $1.7 million charge for professional
fees and other related expenses for the filing of a registration
statement by Madison River Communications Corp. The Form S-1 has not yet
become effective. These fees and expenses were deferred pending
completion of the initial public offering at which time they would have
been netted against the proceeds of the offering. Based on guidance in
the Securities and Exchange Commission's Staff Accounting Bulletin
Topic 5, the Company expensed these deferred costs in the third quarter
of 2005 as the result of its decision to delay the initial public
offering pending improvement in market conditions. The Company intends
to keep the Form S-1 in the registration process.The decrease in revenues includes a $1.5 million decrease in local service revenues in the third quarter of 2005 compared to the same period in 2004, primarily from a decrease in network access revenues. Network access revenues in the third quarter of 2004 included nonrecurring revenues from certain one-time wireless settlements and other carrier access revenues in addition to settlements for updated cost study filings which included filings to reflect the impact of the $1.7 million in hurricane-related expenses recorded in the third quarter of 2004. In the third quarter of 2005, the Company also recognized certain nonrecurring revenues for settlements of updated cost study filings and other carrier access revenues, but not to the extent of the nonrecurring revenues recognized in the third quarter of 2004 resulting in a decrease in network access revenues. Excluding these nonrecurring amounts from each of the third quarter of 2005 and the third quarter of 2004, local service revenues in the third quarter of 2005 would have decreased slightly. Revenues from edge-out services and miscellaneous telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. revenues each decreased $0.3 million, respectively. Partially offsetting these decreases, 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 and enhanced data revenues increased $0.7 million as the result of an increase in the number of broadband connections See broadband and wireless broadband. in service and long distance revenues increased $0.2 million. The Company's net loss in the third quarter of 2005 is attributed to approximately $10.0 million in losses on extinguishment The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of long-term debt being realized. On July 29, 2005, the Company completed a new $550.0 million credit facility consisting of a $475.0 million, seven-year term loan provided by a syndicate Syndicate organized crime unit throughout major cities of the United States. [Am. Hist.: NCE, 2018] See : Gangsterism of banks and a $75.0 million, seven-year revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility provided by the Rural Telephone Finance Cooperative, or RTFC RTFC Rural Telephone Finance Cooperative RTFC Real Time Fiber Communications RTFC Read The Flipping Code (polite form) RTFC Read The Film Credits RTFC Read the Freaking Card (polite form; Magic, the Gathering) . The new credit facility decreased the Company's cost of long-term debt, providing for reduced interest payments in future periods. The Company used proceeds from the term loan of approximately $375.0 million, together with the RTFC's redemption of the $42.2 million in RTFC subordinated stock certificates the Company held, to repay the $417.2 million in term loans outstanding to the RTFC. In addition, the RTFC cancelled the two lines of credit at Madison River LTD LTD 1 Laron-type dwarfism 2 Leukotriene D 3 Long-term depression, see there 4. Long-term disability Funding Corp. and Coastal Utilities, Inc. that previously existed. As part of the final payoff to the RTFC, the Company paid approximately $4.8 million for accrued interest Accrued Interest The interest that has accumulated on a bond since the last interest payment up to but not including the settlement date. There are two methods for calculating accrued interest: 1) 360-day year method, used for corporate and municipal bonds. on the term loans and $0.8 million for a fee for early repayment of certain fixed rate term loans which was recognized as a loss on extinguishment of debt. On August 29, 2005, using the remaining proceeds of the new term loan and cash on hand, the Company voluntarily redeemed re·deem tr.v. re·deemed, re·deem·ing, re·deems 1. To recover ownership of by paying a specified sum. 2. To pay off (a promissory note, for example). 3. $102.0 million of its outstanding 13.25% senior notes due 2010 for a redemption price Redemption price See: Call price redemption price 1. The price at which an open-end investment company will buy back its shares from the owners. In most cases, the redemption price is the net asset value per share. 2. of 106.625% of the aggregate principal value redeemed plus accrued interest. The Company recognized the $6.8 million premium paid to 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. the senior notes, plus writeoffs of $0.8 million in unamortized discount and $1.7 million in unamortized debt issuance costs related to the redeemed notes, as a realized loss Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. on extinguishment of long-term debt. The Company paid approximately $2.9 million in origination fees A charge imposed by a lending institution or a bank for the service of processing a loan. For example, a bank might charge an individual who has applied for a student loan an origination fee of one percent for processing the application and granting the loan. for the new term loan and the new revolving line of credit Revolving line of credit A bank line of credit on which the customer pays a commitment fee and can take and repay funds at will. Normally a revolving LOC involves a firm commitment from the bank for a period of several years. and $1.3 million in legal, accounting and other loan related expenses which have been capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. as debt issuance costs and will be amortized over seven years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time life of the credit facility. The new credit agreement also required the Company to enter into interest rate hedge agreements within six months of the closing date of the transaction that cover a minimum of 50% of the combined principal amount of the Company's long-term debt and the long-term debt of its parent, Madison River Telephone Company, for a period of two years from the closing date of the new credit facility. During October 2005, the Company entered into three interest rate swap 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. agreements to fix the interest rate on $350.0 million of its new term loan at an effective rate of approximately 7.22% for a period of four years. With these swaps, the Company has effectively fixed the interest rate on 73.7% of its new term loan and 78.1% of its total long-term debt including the senior notes. The interest rate on the $125.0 million variable portion of its term loan that is effective until January 6, 2006 is 6.59%. Accordingly, as of October 21, 2005, the weighted average interest rate on the new term loan was 7.06% and the weighted average interest rate on all of the Company's long-term debt was 8.10%. The Company's interest expense decreased approximately $1.8 in the third quarter of 2005 compared to the third quarter of 2004 primarily as a result of the refinancing Refinancing An extension and/or increase in amount of existing debt. . Under the terms of its new credit agreement, the Company has the ability to purchase its senior notes on the open market or voluntarily redeem its senior notes in amounts that are limited to the gross excess cash flow, as defined in the credit agreement, that is generated by the Company. Accordingly, on October 12, 2005, the Company issued a notice of redemption to its noteholders of its intent to voluntarily redeem an additional $12.0 million in senior notes on November 11, 2005 for a redemption price of 106.625% of the aggregate principal value redeemed plus accrued interest. Upon completion of this redemption, the Company will have $84.0 million in senior notes outstanding. The Company also announced its estimates of the financial impact on its rural telephone company in Alabama and its edge-out service operations in New Orleans, Louisiana from damages related to Hurricane Katrina  Editing of this page by unregistered or newly registered users is currently disabled due to vandalism. in August 2005. The impact on the Company's Adjusted
Operating Income was approximately $1.0 million in the third quarter.The Company's rural telephone company in Alabama provides service to the Gulf Coast area of Alabama from the western border of the Florida panhandle The Florida Panhandle is the region of the state of Florida which includes the westernmost 16 counties in the state. It is a narrow strip lying between Alabama and Georgia to the north and the Gulf of Mexico to the south. to the East side of Mobile Bay. The Company reported some damage was sustained as a result of this hurricane in certain outside plant facilities, primarily its transmission and distribution plant, in the coastal areas. However, the extent of the damage from this hurricane was not as significant as the damages incurred from Hurricane Ivan This article is about the Atlantic hurricane of 2004. For other storms of the same name, see Tropical Storm Ivan (disambiguation). Hurricane Ivan was the strongest hurricane of the 2004 Atlantic hurricane season. in September 2004. Disconnections in voice access lines, DSL connections DSL connection n (Comput) → DSL-Anschluss m and other services were minimal and, accordingly, the impact on revenues from these hurricane-related disconnections will be immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. . Based on its evaluation of the expenses to perform the necessary repairs and restoration, the Company has accrued approximately $0.7 million in the third quarter of 2005. In the third quarter of 2004, the Company took a similar charge of $1.7 million to cover repairs and restoration for damages from Hurricane Ivan. In addition, the Company anticipates making additional capital expenditures of approximately $4.0 million in the fourth quarter of 2005 to add significantly more high-capacity fiber optic transport lines using a network architecture that will enhance network survivability sur·viv·a·ble adj. 1. Capable of surviving: survivable organisms in a hostile environment. 2. That can be survived: a survivable, but very serious, illness. and to repair storm damage to its network sustained as a result of the hurricane. The additional fiber will strengthen the Company's ability to sustain service to its customers through catastrophic storms and will also create a dynamic network platform for providing high bandwidth services to its customers in Alabama. The fiber deployment will include "intelligent" electronics and the network will be designed with "ring" architecture so that if a portion of the network is damaged, the network will immediately sense the damage and automatically route traffic in another direction. These enhancements will make the network highly resistant to outages from storms or other network disruptions. The Company has received authorization The right or permission to use a system resource; the process of granting access. See access control. from the Alabama Public Service Commission The Alabama Public Service Commission is a body of three elected members, a President and two Commissioners, who each serve 4-year terms. The President is elected during Presidential elections and the Commissioners are elected during midterm elections. to accelerate depreciation of its capital expenditures related to this plan completely into the fourth quarter of 2005. In its edge-out services operations in New Orleans, Louisiana, the Company is continuing to assess the impact on its business from the devastation of Hurricane Katrina and the subsequent flooding. During the third quarter, the Company estimates that its revenues were approximately $0.2 million lower from credits issued to customers and lower usage. In addition, the Company incurred approximately $0.1 million in expenses for assistance given to its employees in this market. The Company's facilities in this market suffered some minor damage but are operational. Based on its evaluation of the customers served in its New Orleans market, the Company estimates that it may lose 15% to 20% of its customer base in New Orleans in the near term. However, the Company is uncertain at this time what the long-term impact on its remaining customers will be as this region recovers from the impact of the hurricane. At September 30, 2005, the Company had 237,661 voice access and broadband connections in service compared to 234,204 connections in service at September 30, 2004. The RLEC RLEC Rural Local Exchange Carrier RLEC Report Log Exception Condition operations had 180,827 voice access lines in service at September 30, 2005 compared to 183,960 voice access lines in service at September 30, 2004, a decrease of 3,133 voice access lines, or 1.7%, attributable primarily to disconnections as a result of hurricane-related damages in Alabama, the loss of primary voice access lines at Gallatin River Gallatin River A river rising in the Gallatin Range of northwest Wyoming and flowing about 201 km (125 mi) generally northwest to join the Jefferson and Madison rivers and form the Missouri River in southwest Montana. Communications, the impact of a full troop deployment from the military bases served by the Company's rural telephone company in Georgia Georgia, country, Asia Georgia (jôr`jə), Georgian Sakartvelo, Rus. Gruziya, officially Republic of Georgia, republic (2005 est. pop. 4,677,000), c.26,900 sq mi (69,700 sq km), in W Transcaucasia. and a decrease in second lines served. This decrease was partially offset by 3,549 lines from two exchanges in North Carolina North Carolina, state in the SE United States. It is bordered by the Atlantic Ocean (E), South Carolina and Georgia (S), Tennessee (W), and Virginia (N). Facts and Figures Area, 52,586 sq mi (136,198 sq km). Pop. acquired in April 2005. The estimated voice access lines disconnected in Alabama as a result of the hurricanes is 2,502 at September 30, 2005, an increase of 1,501 from the 1,001 voice access lines disconnected at September 30, 2004. Predominantly pre·dom·i·nant adj. 1. Having greatest ascendancy, importance, influence, authority, or force. See Synonyms at dominant. 2. all of the disconnects are the result of Hurricane Ivan in September 2004. Primary voice access lines at Gallatin River Communications decreased by 3,518 voice access lines while the troop deployment from Fort Stewart Fort Stewart is a census-designated place and U.S. Army post primarily in Liberty County, Georgia, but also occupying significant portions of Bryan County, Georgia. The population was 11,205 at the 2000 census. and Hunter Army Airfield Hunter Army Airfield (IATA: SVN, ICAO: KSVN), along with Fort Stewart, is a military complex located near Savannah, Georgia, United States. It is the home of the 3rd Infantry Division of the United States Army. in Georgia accounted for 1,328 voice access lines lost. Finally, second lines decreased by 708 lines from 6,846 second lines in service at September 30, 2004 to 6,138 second lines in service at September 30, 2005. The decrease in second lines is attributed primarily to customers who remove second lines when upgrading to the Company's broadband service See broadband and broadband service provider. . Excluding the voice access lines from the two exchanges acquired by the Company and adjusting for voice access lines lost due to damages from hurricanes in Alabama and the full deployment of troops from the military bases in Georgia, losses which the Company believes are temporary, and the loss of second lines, the decrease in RLEC voice access lines was approximately 3,145 lines, or 1.7%. At September 30, 2005, broadband connections in service were 44,403 connections, an increase of 7,339 connections, or 19.8%, from 37,064 broadband connections at September 30, 2004. Excluding the broadband connections lost as a result of the hurricane damages and the troop deployment, the increase in broadband connections would have been approximately 8,452 connections, or 22.8%. The Company's residential penetration rate for its broadband service as a percentage of primary residential access lines reached 35.7% at September 30, 2005 compared to 29.4% at September 30, 2004. As expected, the Company continues to add new broadband connections on a quarterly basis but the rate of increase in new connections has slowed. As of September 30, 2005, the edge-out services had 11,753 voice access lines and 678 high-speed data connections in service compared to 12,519 voice access lines and 661 high-speed data connections in service as of September 30, 2004. This is a decrease of 766 voice access lines, or 6.1%, and an increase of 17 high-speed data connections, or 2.6%. 2005 Nine Month Financial and Operating Results Net operating income in the nine months ended September 30, 2005 was $47.2 million, an increase of $6.7 million, or 16.5%, compared to net operating income in the nine months ended September 30, 2004 of $40.5 million. For the first nine months of 2005 and 2004, revenues were $144.9 million and $146.9 million, respectively, a decrease of $2.0 million or 1.4%. The Company reported a net loss of $0.6 million in the first nine months of 2005 and a net loss of $2.6 million in the first nine months of 2004, an improvement of $2.0 million. The change in net operating income is attributed primarily to a $5.0 million decrease in depreciation and amortization expenses in 2005 compared to 2004. In addition, reversals of accrued LTIP expenses were the primary reason for a benefit of $1.4 million in LTIP expenses in the first nine months of 2005 compared to LTIP expense of $2.8 million in the first nine months of 2004, a change resulting in an increase to net operating income of $4.2 million. These increases to net operating income were partially offset by the $2.0 million decrease in total revenues and the $1.7 million writeoff of registration expenses. The decrease in revenues is attributed to a $3.6 million decrease in local service revenues from the impact of certain nonrecurring revenues in 2004 and from a decrease in voice access lines and access minutes of use. Partially offsetting this decrease was a $2.7 million increase in Internet and enhanced data revenues from the growth in broadband connections. The Company's net loss in the first nine months of 2005 includes the $10.0 million realized loss from the extinguishment of long-term debt. Adjusted Operating Income (1) was $73.8 million in the nine months ended September 30, 2005, a decrease of $2.5 million, or 3.3%, from Adjusted Operating Income of $76.3 million in the nine months ended September 30, 2004. For the nine month period ended September 30, 2005, the RLEC operations reported Adjusted Operating Income of $73.9 million compared to $74.8 million for the nine month period ended September 30, 2004. Adjusted Operating income margin for the RLEC operations was 53.9% in the first nine months of 2005 compared to 54.3% in the first nine months of 2004. The edge-out services had an Adjusted Operating Loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $0.1 for the first nine months of 2005 compared to Adjusted Operating Income of $1.5 million for the first nine months of 2004. Please refer to Footnote 1 - "Non-GAAP Financial Measures" for a reconciliation of Adjusted Operating Income and Adjusted Operating Income margin to net operating income (loss) and net operating income margin, respectively. At September 30, 2005, the Company had total liquidity of $96.2 million, which consisted of cash and cash equivalents of $21.2 million and available borrowings under its revolving line of credit of $75.0 million. Capital expenditures for the nine months ended September 30, 2005 were approximately $7.6 million. The Company expects total capital expenditures to be approximately $17.3 million for the year which includes approximately $4.0 million in additional capital expenditures to enhance the survivability of its network and repair hurricane-related damages at its rural telephone company in Alabama and $0.6 million in capital expenditures related to the acquisition of the two exchanges in North Carolina. On April 28, 2005, the Company completed a new collective bargaining agreement The contractual agreement between an employer and a Labor Union that governs wages, hours, and working conditions for employees and which can be enforced against both the employer and the union for failure to comply with its terms. with the Communications Workers of America Communications Workers of America (CWA) is the largest communications and media labor union in the United States (the union also has locals in Canada), representing over 700,000 workers in both the private and public sectors. , covering 56 employees of Gallatin River Communications located in Galesburg, Illinois Galesburg is a city in Knox County, Illinois, in the United States. As of the 2000 census, the city population was 33,706. It is the county seat of Knox County.GR6 . On October 6, 2005, the Company completed a new collective bargaining agreement with the International Brotherhood of Electrical Workers The International Brotherhood of Electrical Workers (IBEW) is a labor union which represents workers in the electrical industry in the United States and Canada, particularly electricians, or Inside Wiremen, in the construction industry and linemen and other employees of public , or IBEW IBEW n abbr (US) (= International Brotherhood of Electrical Workers) → sindicato internacional de electricistas IBEW n abbr (US) (= International Brotherhood of Electrical Workers , covering 52 employees of Gallatin River Communications in Pekin, Illinois Pekin is a city in Tazewell County, Illinois. The population was 33,857 at the 2000 census. It is the county seat of Tazewell County.GR6 Pekin is an important, large suburb of Peoria and is a key part of the Peoria-Pekin MSA area. . Both agreements are for five years. As part of these agreements, the Company froze froze v. Past tense of freeze. froze Verb the past tense of freeze froze, frozen freeze the further accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of benefits under its defined benefit pension plan for these employees effective January 1, 2006 in exchange for an enhancement to their defined contribution 401(K) plan. The remaining collective bargaining agreement with the IBEW covers 28 employees in Dixon, Illinois Dixon is a city in Lee County, Illinois, USA. Named for its founder John Dixon (Dixon's Ferry) It is the county seat of Lee CountyGR6. Located on the Rock River, Dixon was the boyhood home of the 40th president of the USA, Ronald Reagan. . This agreement expires on November 30, 2005 and the Company initiated formal union negotiations for this contract in late October 2005. Earnings Release Conference Call The Company will be conducting a conference call to report its 2005 third quarter and nine month financial and operating results on Friday, November 4, 2005 at 11:00 AM Eastern Standard Time. Those interested in listening to the call are invited to access the call via a webcast that can be linked to from the Company's website at www.madisonriver.net. Because the Company is in a quiet period due to the filing of a Form S-1 Registration Statement by Madison River Communications Corp. with the Securities and Exchange Commission, the Company will not conduct a question and answer session after it concludes its remarks. (1) Non-GAAP Financial Measures Adjusted Operating Income, which is a non-GAAP financial measure, is net operating income (loss) before depreciation and amortization expenses and non-cash long-term incentive plan expenses. Adjusted Operating Income margin is Adjusted Operating Income divided by total revenues. Management uses Adjusted Operating Income and Adjusted Operating Income margin to measure its operating performance. You should be aware that these metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. for measuring the Company's financial results will be different from comparable information provided by other companies and should not be used as an alternative to the operating and other financial information of the Company as determined under accounting principles generally accepted in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . The computation Computation is a general term for any type of information processing that can be represented mathematically. This includes phenomena ranging from simple calculations to human thinking. of Adjusted Operating Income and Adjusted Operating Income margin and a reconciliation of those measures to net operating income (loss) and net operating income margin are as follows:
Reconciliation of Non-GAAP Measures to Most Directly Comparable GAAP
Measures (dollars in thousands):
---------------------------------------------------------------------
RLEC Operations
---------------
Dollars Margin EOS Consolidated
--------- ------ -------- ------------
For the third quarter ended
September 30, 2005:
Net operating income (loss) $ 18,649 40.0% $(2,858) $ 15,791
Add back:Depreciation and
amortization 6,713 14.4% 2,553 9,266
Long-term incentive
plan (benefit)
expenses (1,503) (3.3%) (15) (1,518)
-------- ------ ------- ---------
Adjusted Operating Income $ 23,859 51.1% $ (320) $ 23,539
======== ====== ======= =========
For the third quarter ended
September 30, 2004:
Net operating income (loss) $ 16,445 34.6% $(2,564) $ 13,881
Add back:Depreciation and
amortization 7,451 15.6% 2,722 10,173
Long-term incentive
plan expenses 806 1.7% 74 880
-------- ------ ------- ---------
Adjusted Operating Income $ 24,702 51.9% $ 232 $ 24,934
======== ====== ======= =========
For the nine months ended
September 30, 2005:
Net operating income (loss) $ 54,999 40.2% $(7,769) $ 47,230
Add back:Depreciation and
amortization 20,279 14.8% 7,683 27,962
Long-term incentive
plan (benefit)
expenses (1,426) (1.1%) (6) (1,432)
-------- ------ ------- ---------
Adjusted Operating Income $ 73,852 53.9% $ (92) $ 73,760
======== ====== ======= =========
For the nine months ended
September 30, 2004:
Net operating income (loss) $ 48,228 35.0% $(7,698) $ 40,530
Add back:Depreciation and
amortization 23,968 17.4% 9,021 32,989
Long-term incentive
plan expenses 2,611 1.9% 175 2,786
-------- ------ ------- ---------
Adjusted Operating Income $ 74,807 54.3% $ 1,498 $ 76,305
======== ====== ======= =========
Selected Unaudited Financial Results and Operating Data
Selected unaudited financial and operating results for the third
quarter and nine months ended September 30, 2005 and 2004 were as
follows:
Third Quarter Ended Nine Months Ended
------------------- -------------------
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
2005 2004 2005 2004
-------- -------- -------- --------
Selected Financial Results
(dollars in millions):
-----------------------------
Net revenues $ 49.2 $ 50.5 $ 144.9 $ 146.9
RLEC operations 46.6 47.6 136.9 137.8
Edge-out services 2.6 2.9 8.0 9.1
Operating expenses 33.4 36.6 97.7 106.4
RLEC operations 28.0 31.2 81.9 89.6
Edge-out services 5.4 5.4 15.8 16.8
Net operating income (loss) 15.8 13.9 47.2 40.5
RLEC operations 18.6 16.4 55.0 48.2
Edge-out services (2.8) (2.5) (7.8) (7.7)
Net income (loss) (3.3) 1.2 (0.6) (2.6)
RLEC operations 17.1 10.4 32.0 24.9
Edge-out services (20.4) (9.2) (32.6) (27.5)
Adjusted Operating Income
(Loss) (a) 23.5 24.9 73.8 76.3
RLEC operations 23.8 24.7 73.9 74.8
Edge-out services (0.3) 0.2 (0.1) 1.5
Cash and cash equivalents $ 21.2 $ 22.7 (b) (b)
Net telephone plant and
equipment 279.0 300.6 (b) (b)
Total assets 714.7 777.9 (b) (b)
Long-term debt 570.2 620.8 (b) (b)
Member's interest 251.7 251.3 (b) (b)
Accumulated deficit (203.5) (210.9) (b) (b)
Accumulated other comprehensive
loss (4.2) (3.5) (b) (b)
Selected Operating Data:
------------------------------
September 30, June 30, September 30,
2005 2005 2004
------------- ------------ -------------
RLEC operations:
Residential voice access
lines 119,499 (c) 121,028 (c) 123,052
Business voice access lines 61,328 (c) 60,976 (c) 60,908
Total voice access lines 180,827 (c) 182,004 (c) 183,960
Broadband connections 44,403 42,827 37,064
Second lines 6,138 6,575 6,846
Long distance accounts 107,603 106,004 100,931
Dial-up Internet accounts 12,337 13,297 16,653
Edge-out services:
Voice access lines 11,753 11,812 12,519
Broadband connections 678 653 661
Total connections in service
(d) 237,661 237,296 234,204
Employees 620 619 625
(a) Please refer to footnote 1 - "Non-GAAP Financial Measures" above
for a reconciliation of Adjusted Operating Income (Loss) to net
operating income (loss).
(b) Nine month results are the same as those presented for third
quarter results.
(c) September 30, 2005 includes 3,549 voice access lines and June 30,
2005 includes 3,587 voice access lines from the acquisition of two
exchanges in April 2005.
(d) Connections are defined as voice access lines plus broadband
connections.
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. The statements, other than statements of historical fact, included in this press release are forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as ''may,'' ''will,'' ''expect,'' ''intend,'' ''estimate,'' ''anticipate,'' ''plan,'' ''seek'' or ''believe.'' We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that such expectations will occur. Our actual future performance could differ materially from such statements. Factors that could cause or contribute to such differences include, but are not limited to, the following: --our ability to service our significant amount of indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. ; --our inability to sustain profitability; --our ability to sustain our revenues; --our dependence on economic conditions in the local markets we serve; --significant and growing competition in the telecommunications industry; --the advent of new technology that may force us to expand or adapt our network in the future; --our dependence on market acceptance of broadband-based services; --the success of efforts to expand our service offerings and grow our business; --our ability to execute our acquisition strategy, including successfully integrating acquired businesses; --our ability to implement our business plan for our edge-out services successfully; --unanticipated network disruptions; --our ability to obtain and maintain the necessary rights-of-way for our networks; --the financial difficulties of other companies in the telecommunications industry with which we have material relationships; --our ability to compete effectively with the Regional Bell Operating Companies The Regional Bell Operating Companies (RBOC) are the result of the U.S. Department of Justice antitrust suit against American Telephone & Telegraph. History , cable television, wireless, VOIP (Voice Over IP) A digital telephone service that uses the public Internet as well as private backbones instead of the traditional telephone network. Many companies, including Vonage, 8x8 and AT&T (CallVantage), typically offer calling within the country for a and other telecommunications competitors, which may have greater resources than us; --our dependence on our key personnel; --our ability to raise additional capital on acceptable terms and on a timely basis; --a reduction in universal service fund payments; and --our regulatory environment. For more information, see the "Risk Factors" section of our 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. for the fiscal year ended December 31, 2004 (File No. 333-36804) filed with the Securities and Exchange Commission. You should not unduly rely on these forward-looking statements, which speak only as of the date of this press release. Except as required by law, we are not obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to publicly release any revisions to these forward-looking statements to reflect events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or occurring after the date of this press release or to reflect the occurrence of unanticipated events. Madison River Capital, LLC operates as Madison River Communications and is a wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. of Madison River Telephone Company, LLC. Madison River Communications operates and enhances rural telephone companies and uses advanced technology to provide competitive communications services in its edge-out markets. Madison River Telephone Company, LLC is owned by affiliates of Madison Dearborn Madison Dearborn Partners (MDP) is a private equity firm specializing in buyouts of private or publicly held companies, or divisions of larger companies; recapitalizations of family-owned or closely held companies; balance sheet restructurings; acquisition financings; and growth Partners Inc., Goldman, Sachs & Co. and Providence Equity Partners Providence Equity Partners is a private equity firm headquartered in Providence, Rhode Island that focuses on investments in media and telecommunications. It is one of the largest private investment firms specializing in equity investments in media and communications companies. , the former shareholders of Coastal Utilities, Inc. and members of management.
MADISON RIVER CAPITAL, LLC
Condensed Consolidated Statements of Operations
(Dollars in thousands)
(Unaudited)
Third Quarter Ended Nine Months Ended
September September September September
30, 30, 30, 30,
2005 2004 2005 2004
------------------ ------------------
Operating revenues:
Local services $ 32,786 34,347 $ 95,442 99,014
Long distance services 3,990 3,783 11,825 11,299
Internet and enhanced
data services 6,112 5,361 17,824 15,146
Edge-out services 2,574 2,883 7,944 9,084
Miscellaneous
telecommunications
service and equipment 3,767 4,113 11,828 12,327
-------- --------- -------- ---------
Total operating revenues 49,229 50,487 144,863 146,870
-------- --------- -------- ---------
Operating expenses:
Cost of services and sales
(exclusive of
depreciation and
amortization expenses) 15,100 16,176 42,407 43,038
Depreciation and
amortization 9,266 10,173 27,962 32,989
Selling, general and
administrative expenses 9,072 10,257 27,264 30,313
-------- --------- -------- ---------
Total operating expenses 33,438 36,606 97,633 106,340
-------- --------- -------- ---------
Net operating income 15,791 13,881 47,230 40,530
Interest expense (13,193) (14,971) (41,735) (45,258)
Realized loss on
extinguishment of long-term
debt (10,037) - (10,037) (212)
Other income, net 1,402 779 3,433 2,583
-------- --------- -------- ---------
Loss before income taxes (6,037) (311) (1,109) (2,357)
Income tax benefit (expense) 2,785 1,513 522 (215)
-------- --------- -------- ---------
Net (loss) income $ (3,252) 1,202 $ (587) (2,572)
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