-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IAUa2G/G/+PgI70LQbEHRSre4VhqClT8DRoJoLEuOec33l5FJpQhODzcDZ4XiFMr IQdE8psYh3Qa5Y+UuLTfxQ== 0001047469-03-002904.txt : 20030128 0001047469-03-002904.hdr.sgml : 20030128 20030128150130 ACCESSION NUMBER: 0001047469-03-002904 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030128 ITEM INFORMATION: Financial statements and exhibits ITEM INFORMATION: FILED AS OF DATE: 20030128 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAIRPOINT COMMUNICATIONS INC CENTRAL INDEX KEY: 0001062613 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 133725229 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-56365 FILM NUMBER: 03527717 BUSINESS ADDRESS: STREET 1: 521 EAST MOREHEAD ST STREET 2: STE 250 CITY: CHARLOTTE STATE: NC ZIP: 28202 BUSINESS PHONE: 7043448150 FORMER COMPANY: FORMER CONFORMED NAME: MJD COMMUNICATIONS INC DATE OF NAME CHANGE: 19980527 8-K 1 a2101815z8-k.txt FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): JANUARY 28, 2003 FAIRPOINT COMMUNICATIONS, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as specified in its charter) DELAWARE 333-56365 13-3725229 ---------------- ----------------- --------------------- (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 521 EAST MOREHEAD STREET, SUITE 250, CHARLOTTE, NORTH CAROLINA 28202 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (704) 344-8150 N/A__ ------------------------------------------------------------- (Former name or former address, if changed since last report): Item 7. Financial Statements and Exhibits (c) Exhibits *99.1 High Yield Presentation, dated January 28, 2003. Item 9. Regulation FD Disclosure On January 28, 2003, Walter E. Leach, an executive officer of FairPoint Communications, Inc. (the "Company"), participated in a high yield conference sponsored by JPMorgan. The presentation is attached hereto as Exhibit 99.1. - -------- * Filed herewith. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. FAIRPOINT COMMUNICATIONS, INC. By: /s/ WALTER E. LEACH, JR. --------------------------------------- Name: Walter E. Leach, Jr. Title: Senior Vice President and Chief Financial Officer Date: January 28, 2003 EX-99.1 3 a2101815zex-99_1.txt EXHIBIT 99.1 Exhibit 99.1 [LOGO FAIRPOINT COMMUNICATIONS, INC.] JPMORGAN ANNUAL HIGH YIELD CONFERENCE JANUARY 28, 2003 FairPoint Communications, Inc. FAIRPOINT LOGO FAIRPOINT COMMUNICATIONS, INC. ---------- Walter E. Leach, Jr. Chief Financial Officer & Senior Vice President FAIRPOINT LOGO TOPICS FOR DISCUSSION O COMPANY PROFILE O INDUSTRY CHALLENGES & FAIRPOINT RESPONSE O FINANCIAL REVIEW FAIRPOINT LOGO COMPANY PROFILE o Established in 1991 to acquire Rural Local Exchange Carriers (RLECs) o Currently, operate 29 RLECs in 18 states serving over 245,000 access lines o Consolidated revenues of $174.3 million and EBITDA of $100.4 million for the 9 months ended 09/30/02 o Proven operational and merger & acquisition performance o Strong equity sponsorship FAIRPOINT LOGO COMPANY PROFILE SERVICE OFFERINGS Intra/Inter Local Enhanced Access Dial Tone Features Long- FAIRPOINT Carrier distance COMMUNICATIONS, INC. Services Internet Broadband Dial-up, Artera DSL, Wireless FAIRPOINT LOGO COMPANY PROFILE: RLECS RLECS............................. 29 LOCAL EXCHANGES................... 142 SQUARE MILES...................... 18,940 ACCESS LINES...................... 500-56,000 PER TELCO RESIDENTIAL SHARE OF ACCESS LINES ................. 78% AVERAGE DENSITY (LINES/SQ MILES).................. 12.9 FAIRPOINT LOGO ACCESS LINES BY STATE As of 9/30/02 --------------- Florida 54,710 Maine 51,443 New York 42,549 Washington 39,479 Ohio 9,470 [MAP] Virginia 7,862 Illinois 7,573 Kansas 6,310 Vermont 6,270 Idaho 6,177 South Dakota 4,146 Oklahoma 3,577 Pennsylvania 2,830 Colorado 2,679 ------ TOTAL: 245,075 - - FIVE REGION MANAGEMENT STRUCTURE - - 841 EMPLOYEES DEPLOYED FROM 38 WORK CENTERS AND BUSINESS OFFICES FAIRPOINT LOGO ACCESS LINES BY STATE As of 9/30/02 ------------- Florida 54,710 [MAP] Maine 51,443 New York 42,549 Washington 39,479 ------- TOTAL: 188,181 - - AREAS OF CUSTOMER CONCENTRATION, BEST OPPORTUNITIES TO RATIONALIZE FOOTPRINT FAIRPOINT LOGO STRONG POST ACQUISITION PERFORMANCE (PROPERTIES OWNED > 2 YEARS) ($ IN MILLIONS) 1993 1994 1996 1997 1998 1999 ---------- ----------- ------------ ---------- ------------ ----------- $3.0 $3.3 $9.4 $11.1 $2.9 $3.7 $6.2 $7.2 $36.6 $41.4 $9.2 $11.9 -- 2 YR PROJECTED EBITDA AT ACQUISITION -- 2 YR FORWARD ACTUAL EBITDA FAIRPOINT LOGO WHY RURAL? [PICTURE] ECONOMIC BARRIERS TO ENTRY BY COMPETITORS Low subscriber density High percentage of residential lines Capital intensive FAIRPOINT LOGO WHY RURAL? REGULATORY ENVIRONMENT Rate of Return business Support mechanisms promote universal service Gradual change likely FAIRPOINT LOGO WHY RURAL? STABLE REVENUE & EBITDA STATE-OF-THE-ART NETWORKS SYNERGIES AND COST SAVING OPPORTUNITIES ATTRACTIVE ACQUISITION OPPORTUNITIES FAIRPOINT LOGO "RURAL" MEANS: SERVING VERY SMALL NON-SUBURBAN COMMUNITIES COMMUNITIES SERVED BY FAIRPOINT IN EACH POPULATION RANGE 2 5 11 31 111 MORE THAN 10,000 MORE THAN 7,500 MORE THAN 5,000 MORE THAN 2,500 LESS THAN 2,500
FAIRPOINT LOGO INDUSTRY CHALLENGES & RESPONSES ---------------------------------------------------------------- Regulation o Competition o Growth FAIRPOINT LOGO Current RLEC Challenges REGULATION | TOP LINE REVENUE GROWTH | o Interstate Access Reform | o Regulated Revenues | o Intrastate Access Reform | o Non-regulated Revenues | o Pressure on Universal | o Edge Out CLEC Services Fund (USF) | | o Other Services | COMPETITION | | o UNEP or Overbuild | | o CATV | | o Internet Connectivity | | o Wireless -- Voice & Data | FAIRPOINT LOGO REGULATION CHALLENGES & OPPORTUNITIES +------------------------------------------------------------------------------+ | INTERSTATE ACCESS REFORM | +------------------------------------------------------------------------------+ +------------------------------------------------------------------------------+ | CHALLENGE | | | | o Ensure adequate cost recovery as access rates decline during | | shift from implicit to explicit funding | | | | -- Increased SLC charge | | | | -- Some components moving to USF | +------------------------------------------------------------------------------+ +------------------------------------------------------------------------------+ | RESPONSE | | | | o FairPoint is NECA participant -- no impact under current | | settlement processes | | | | o Multi Association Group Plan (MAG Plan) in place through 2006 | | | | o Change gradual and historically revenue neutral | | | | o Non-usage sensitive revenues | +------------------------------------------------------------------------------+ FAIRPOINT LOGO REGULATION CHALLENGES & OPPORTUNITIES +------------------------------------------------------------------------------+ | INTRASTATE ACCESS REFORM | +------------------------------------------------------------------------------+ +------------------------------------------------------------------------------+ | CHALLENGE | | | | o Lower Intrastate access rates to "mirror" Interstate access rates | | | | o Minutes of Use sensitive revenue streams | | | +------------------------------------------------------------------------------+ +------------------------------------------------------------------------------+ | RESPONSE | | | | o Rate rebalancing via a local rate increase and/or State USF | | | | o Continuation of Rate of Return Regulation | | | | o Three consecutive quarters of positive year over year | | MOU Growth | +------------------------------------------------------------------------------+ FAIRPOINT LOGO REGULATION CHALLENGES & OPPORTUNITIES Pressure on Universal Service Fund (USF) CHALLENGE o Increasing number of eligible participants -- Wireless carriers getting ETC status o Increasing funding requirements will lead to USF cap or portability RESPONSE o FairPoint taking leadership role in developing legislative and regulatory policies to rationalize USF funding o New contributors to USF o New contribution methodology FAIRPOINT LOGO COMPETITION CHALLENGES & OPPORTUNITIES OVERBUILD OR UNEP COMPETITORS CHALLENGE o Alternative carrier(s) entering our markets RESPONSE o Rural demorgraphics create natural economic barrier to entry o Introduce vertical and horizontal services to capture greater wallet share and customer loyalty o No such competition in any FairPoint market today FAIRPOINT LOGO COMPETITION CHALLENGES & OPPORTUNITIES CABLE TV CHALLENGE o Alternative carrier(s) (VOICE AND DATA) entering our markets RESPONSE o Rural CATV demographics discourage capital investment required to effectively offer voice and data services o Developing technology will facilitate entertainment services over copper o Convergence technology continues to be a barrier for voice offering FAIRPOINT LOGO COMPETITION CHALLENGES & OPPORTUNITIES INTERNET CONNECTIVITY CHALLENGE o Voice Over Internet Protocol (VOIP) o Instant Messaging and E-mail replacing voice calls RESPONSE o FairPoint to become dominant ISP in its markets - Q1 2003 -- broadband offering in all its exchanges - Become dominant VOIP provider in our markets o Instant Messaging -- affects only Intrastate revenues FAIRPOINT LOGO COMPETITION CHALLENGES & OPPORTUNITIES WIRELESS -- VOICE CHALLENGE o Wire line replacement RESPONSE o Impact on Intrastate MOU growth, not access line replacement o Poor coverage limits access line replacement o Resale of wireless service WIRELESS -- DATA CHALLENGE o Competitive Wireless ISP offerings RESPONSE o FairPoint Broadband product offering technology in field trials and will deploy during 2003 o No competitior in any FairPoint market today FAIRPOINT LOGO TOP LINE REVENUE GROWTH CHALLENGE o Slower economic growth has impacted access line growth and end user purchases of additional telecommunications services RESPONSE o Regulated Revenues -- Bundling local, Internet, long distance, wireless -- Feature Penetration ($8.9MM EBITDA OPPORTUNITY) o Non-Regulated Revenues -- Broadband Services -- Wireless Broadband -- Virtual Broadband (ARTERA) -- Localized ISP Portal (SYNACORE) -- Other communications technology product offerings FAIRPOINT LOGO NEW REVENUE SOURCES 4.21% 4.1% REVENUES FROM NON-TRADITIONAL SOURCES HAVE NEARLY $7.25 $7.07 QUADRUPLED IN 4 YEARS million million / / Percentage of Total Revenue 2.39% $2.04 million 1% $855,707 ---------------------------------------------------------------------- 12 months ended 12/31/98 9 months ended 9/30/02 / / Internet/Broadband / / Long Distance FAIRPOINT LOGO FINANCIAL REVIEW ---------- FAIRPOINT LOGO HISTORICAL GROWTH: 1994-2001 REVENUE EBITDA (MILLIONS) ACCESS LINES (THOUSANDS) 330.........................................................................440 300.........................................................................400 270.........................................................................360 240.........................................................................320 210.........................................................................280 180.........................................................................240 150.........................................................................200 120.........................................................................160 90..........................................................................120 60...........................................................................80 30...........................................................................40 1994 1995 1996 1997 1998 1999 2000 2001 -ILEC REVENUES -ILEC EBITDA -ILEC ACCESS LINES FAIRPOINT LOGO CREDIT STRUCTURE - -BORROWER UNDER FAIRPOINT FAIRPOINT LOGO SENIOR SECURED CREDIT FACILITY - -ISSUER OF NEW NOTES - -ISSUER OF EXISTING NOTES
TRADITIONAL COMPETITIVE TELEPHONE BUSINESS COMMUNICATIONS BUSINESS (RESTRICTED SUBSIDIARIES) (UNRESTRICTED SUBSIDIARIES) FAIRPOINT BORROWER UNDER MJD FAIRPOINT MJD MJD COMMUNICATIONS SENIOR SECURED STE VENTURES BROADBAND SERVICES CAPITAL SOLUTIONS, CORP. CREDIT FACILITY
FAIRPOINT LOGO NINE MONTHS OPERATING RESULTS FOR THE PERIOD ENDED SEPTEMBER 30, 2002 (YEAR OVER YEAR COMPARISON) - --------------------------------------------------------------------- CONSOLIDATED REVENUES..................Down 1.7% to $174.3 million - --------------------------------------------------------------------- CONSOLIDATED OPERATING.................Down 10.8% to $115.8 million EXPENSES - --------------------------------------------------------------------- CONSOLIDATED OPERATING.................Down 0.7% to $93.0 million (1) CASH FLOW (EBITDA) - --------------------------------------------------------------------- RLEC OPERATING CASH....................Up 7.6% to $99.6 million FLOW (EBITDA) - --------------------------------------------------------------------- ACCESS LINES SERVED....................Down 0.4% to 245,075 - --------------------------------------------------------------------- (1) INCLUDES A NON-CASH $7.4 MILLION ASSET WRITE DOWN AND MCI/WORLDCOM BAD DEBT RESERVE OF $1.9 MILLION. ADJUSTED FOR THE NON-CASH ASSET WRITE DOWN, EBITDA INCREASED 7.2% TO $100.4 MILLION FAIRPOINT LOGO RESTRICTED GROUP DEBT CAPITALIZATION ($ in Millions) 9/30/02 ------- DEMAND NOTES $0.4 CURRENT PORTION OF LONG-TERM DEBT 6.1 SENIOR LONG-TERM DEBT(1) 348.9 ------- TOTAL SENIOR DEBT 355.4 SENIOR SUBORDINATED DEBT 400.0 OTHER SUBORDINATED DEBT 7.0 ------- TOTAL DEBT $762.4 ======= (1) EXCLUDES $28.0 MILLION OF SOLUTIONS DEBT FAIRPOINT LOGO CREDIT STATISTICS ($000 Omitted) 9/30/2002 --------- INTEREST COVERAGE RATIO INTEREST EXPENSE $ 75,065 TOTAL COVENANT EBITDA 132,437 RATIO 1.76x COVENANT 1.50x LEVERAGE RATIO CONSOLIDATED NET DEBT $ 759,375 TOTAL COVENANT EBITDA 132,437 RATIO 5.73x COVENANT 6.50x SENIOR LEVERAGE RATIO SENIOR CONSOLIDATED DEBT $ 350,144 TOTAL COVENANT EBITDA 132,437 RATIO 2.64x COVENANT 4.00x FAIRPOINT LOGO COMMON EQUITY OWNERSHIP SUMMARY T.H. LEE 38.8% KELSO & COMPANY 32.9% FOUNDERS/MGT 20.7% BANK GROUP 7.6% FAIRPOINT LOGO BUSINESS ATTRIBUTES ECONOMIC AND FINANCIAL BARRIERS TO ENTRY: LOW-DENSITY, RESIDENTIAL ----------------------------- REGULATORY ENVIRONMENT ----------------------------- RELATIVELY STABLE REVENUE AND EBITDA ----------------------------- ESTABLISHED ACQUISITION PLATFORM AND DEMONSTRATED INTEGRATION EXPERTISE ----------------------------- SUBSTANTIAL EQUITY BASE PROVIDED BY THOMAS H. LEE AND KELSO FAIRPOINT LOGO -----END PRIVACY-ENHANCED MESSAGE-----