EX-99.1 3 a2110943zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

        [LOGO]

FOR IMMEDIATE RELEASE   CONTACT: Timothy W. Henry
Telephone: (704) 344.8150
Email: Thenry@fairpoint.com


FAIRPOINT ANNOUNCES FIRST QUARTER
OPERATING RESULTS AND DIVESTITURE OF SOUTH DAKOTA RURAL LOCAL
EXCHANGE COMPANIES

        CHARLOTTE, N.C. (May 12, 2003)—FairPoint Communications, Inc. ("FairPoint") today announced its first-quarter financial results. Also, today FairPoint announced it had executed a definitive stock purchase agreement to divest its South Dakota rural local exchange companies (RLECs). The announcement comes three weeks after FairPoint announced the execution of an asset purchase agreement for a Maine RLEC.

        Highlights of FairPoint's financial results from continuing operations for the quarter ended March 31, 2003, compared with a year ago, include:

    •
    Consolidated revenues decreased 2.2 percent to $57.1 million.

    •
    RLEC revenues increased 1.3 percent to $55.7 million.

    •
    Adjusted consolidated 2003 earnings before interest, taxes, depreciation and amortization (EBITDA) decreased 2.9 percent to $33.8 million.

    •
    Adjusted RLEC EBITDA decreased 1.9 percent to $33.6 million.

    •
    Access line equivalents (voice plus DSL) increased 0.7 percent from the previous quarter.

Results for the first-quarter ended March 31, 2003

        FairPoint reported first-quarter consolidated revenues from continuing operations of $57.1 million, a 2.2 percent decrease compared to $58.4 million for the three months ended March 31, 2002. The RLEC companies reported revenues of $55.7 million, an increase of 1.3 percent compared to $55.0 million for the same period in 2002. FairPoint's wholesale long distance subsidiary, FairPoint Carrier Services, Inc. (Carrier Services), reported revenues of $1.4 million, a 59.0 percent decrease compared to $3.4 million for the first-quarter of 2002.

        Adjusted consolidated EBITDA (excluding non-cash items) from continuing operations was $33.8 million in the first-quarter 2003, a 2.9 percent decrease from $34.9 million for the same period in 2002. This year over year decrease is attributed to a decline in revenues at the company's Carrier Services subsidiary and a 5.4 percent increase in cash operating expenses. Adjusted RLEC EBITDA (excluding non-cash items) was $33.6 million, a 1.9 percent decrease from $34.3 million for the same period in 2002. Carrier Services reported EBITDA of $0.2 million in the first quarter of 2003, a decrease of $0.3 million from last year.

        FairPoint reported consolidated net income after taxes of $1.3 million in the first-quarter of 2003 compared to $5.5 million for the same period in 2002. This year over year change was attributed to reasons explained in the previous paragraph.

Divestiture in South Dakota and RLEC Acquisition in Maine

        Today, FairPoint announced the signing of a definitive stock purchase agreement to sell the stock of FairPoint's three RLECs and cable television operations in South Dakota to Golden West Telephone Properties, Inc. for approximately $24.0 million. These RLEC    properties serve over 4,100 access lines in six exchanges in central and southeastern South Dakota and are adjacent to Golden West's current operations. Pending regulatory approvals, this transaction is expected to close by Sept. 30, 2003.


        On April 21, FairPoint and Community Service Communications, Inc. announced the signing of a definitive asset purchase agreement for FairPoint to acquire substantially all of the assets and operations of Community Service Telephone Co. ("CST") and Commtel Communications, Inc. ("CCI") for approximately $31.2 million. CST, located in Winthrop, Maine, is an RLEC providing voice and data communication services to more than 12,600 access lines in 16 towns near Augusta and Lewiston. Pending regulatory approvals, FairPoint expects the transaction to be concluded by Dec. 31, 2003. Upon acquiring CST, FairPoint will serve over 64,000 access lines within Maine.

        "These transactions are important to our future growth and consistent with our objectives to acquire strategically located companies and rationalize our footprint," said Gene Johnson, FairPoint's Chief Executive Officer. "Community Service Telephone's service area is located adjacent to several of our FairPoint exchanges. FairPoint and CST will be able to enhance their product offerings, marketing, customer service and other areas of their operations, all of which are consistent with our mission and strategic imperatives."

        "To FairPoint, because the South Dakota properties were isolated from our other properties, it became increasingly difficult to realize additional operating efficiencies," Johnson said. "To Golden West, these properties are adjacent to its operations and offer numerous operational synergies. The sale of the South Dakota properties helps fund the CST acquisition and enhances both our operational efficiencies and shareholder value."

About FairPoint

        FairPoint Communications, Inc. is one of the leading providers of telecommunications services to rural communities across the country. Incorporated in 1991, FairPoint's mission is to acquire and operate telecommunications companies that set the standard of excellence for the delivery of service to rural communities. Today, FairPoint owns and operates 29 rural local exchange companies located in 18 states. FairPoint serves customers with approximately 243,000 access lines and offers an array of services including local voice, long distance, data and Internet.

Forward Looking Statement

        The statements in this news release that are not historical facts are forward-looking statements that are subject to material risks and uncertainties. Investors are cautioned that any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties, and that actual results or developments may differ materially from those in the forward-looking statements as a result of various factors which are discussed in previous FairPoint Communications, Inc., filings with the Securities and Exchange Commission. These risks and uncertainties include, but are not limited to, uncertainties relating to economic conditions, acquisitions and divestitures, growth and expansion risks, the availability of equipment, materials, inventories and programming, product acceptance, and the ability to construct, expand and upgrade its services and facilities. FairPoint does not undertake to update any forward-looking statements in this news release or with respect to matters described herein.

#  #  #

Attachments


FairPoint Communications, Inc.

Consolidated and Rural Local Exchange Financial Information

For the Three Months Ended March 31, 2003 and 2002

($ million)
   Three-Months Ended
3/31/03
   Three-Months Ended
3/31/02
  
Consolidated Results from Continuing Operations:              
  Revenues   $ 57,112   $ 58,425  
  Operating expenses     38,402     38,110  
   
 
 
  Income from operations     18,710     20,315  
  Other expense     (17,278 )(1)(2)(3)(4)   (14,603 )(5)
   
 
 
  Income from continuing operations before income taxes     1,432     5,712  
  Income taxes     (137 )   (211 )
  Minority Interest in income of subsidiaries     (1 )   —  
   
 
 
  Net income (loss)   $ 1,294   $ 5,501  
   
 
 
  Adjusted Consolidated EBITDA   $ 33,803   $ 34,835  
  Free Cash Flow     9,441     10,548  
 
Other information:
 
 
 
 
 
 
 
  Gross property, plant and equipment   $ 635,915   $ 611,953  
  Capital expenditures     3,542     4,036  
  Interest expense (excluding amortization)     19,758     18,679  

Rural Local Exchange Operations:
 
 
 
 
 
 
 
  Revenues   $ 55,722   $ 55,004  
  Operating expenses     37,210     35,253  
   
 
 
  Income from operations     18,512     19,751  
  Other income (expense)     (17,330 )(3)(4)(6)   (14,597 )(5)
   
 
 
  Earnings (Loss) before income taxes     1,182     5,154  
  Income taxes     (47 )   (211 )
  Minority Interest in income of subsidiaries     (1 )   —  
   
 
 
  Net income (loss)   $ 1,134   $ 4,943  
   
 
 
  Adjusted RLEC EBITDA   $ 33,635   $ 34,274  
  Free Cash Flow     9,943     9,987  
 
Other information:
 
 
 
 
 
 
 
  Gross property, plant and equipment   $ 635,834   $ 611,878  
  Capital expenditures     3,536     4,036  
  Interest expense (excluding amortization)     19,184     18,679  

Footnotes:

(1)
Includes $0.6 million interest expense on Carrier Services long term debt for the three months ended March 31, 2003.

(2)
Includes $3.5 million gain on extinguishment of debt for the three months ended March 31, 2003.

(3)
Includes $5.0 million write off of loan origination costs for the three months ended March 31, 2003.

(4)
Includes FASB 133 expense reduction of $2.1 million for the three months ended March 31, 2003.

(5)
Includes FASB 133 expense reduction of $1.9 million for the three months ended March 31, 2002.

(6)
Includes $2.8 million gain on extinguishment of debt for the three months ended March 31, 2003.


FairPoint Communications, Inc.

Sequential Financial Information for the Quarters ending March 31, 3002, December 31, September 30, June 30 and March 31, 2002

($ million)
   Three-Months Ended
3/31/03
   Three-Months Ended
12/31/02
   Three-Months Ended
09/30/02
   Three-Months Ended
06/30/02
   Three-Months Ended
03/31/02
  
Consolidated Results:                                
  Revenues:                                
    Local calling services   $ 13,890   $ 13,893   $ 14,087   $ 13,847   $ 13,469  
    USF—high cost loop support     5,054     6,314     6,012     5,276     4,999  
    Interstate access revenue     15,967     19,205     16,693     16,352     15,705  
    Intrastate access revenue     11,034     11,147     11,225     10,918     11,398  
    Long distance services     3,890     3,811     4,079     3,574     5,806  
    Data and internet services     2,815     2,553     2,421     2,410     2,215  
    Other services     4,462     4,664     4,551     4,403     4,833  
   
 
 
 
 
 
  Total revenues     57,112     61,587     59,068     56,780     58,425  
  Operating expenses     38,402     44,442     38,323     39,381     38,110  
   
 
 
 
 
 
  Income from operations     18,710     17,145     20,745     17,399     20,315  
  Other income (expense)     (17,278 )   (20,794 )   (21,469 )   (24,479 )   (14,603 )
   
 
 
 
 
 
  Earnings (loss) from continuing operations before income taxes     1,432     (3,649 )   (724 )   (7,080 )   5,712  
  Income (loss) from discontinued operations     —     (534 )   1,726     18,308     —  
  Income taxes     (137 )   (94 )   (69 )   (144 )   (211 )
  Minority interest in income of subsidiaries     (1 )   (1 )   —     (1 )   —  
   
 
 
 
 
 
  Net income (loss)   $ 1,294   $ (4,278 ) $ 933   $ 11,083   $ 5,501  
   
 
 
 
 
 
 
Adjusted Consolidated EBITDA
 
$
33,803
 
$
33,505
 
$
34,487
 
$
31,080
 
$
34,835
 
  Free Cash Flow     9,441     (6,644 )   3,950     4,488     10,548  
 
Other information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Gross property, plant and equipment   $ 635,915   $ 635,575   $ 624,732   $ 616,298   $ 611,953  
  Capital expenditures     3,542     19,780     9,722     5,916     4,036  
  Interest expense (exluding amortization)     19,758     18,905     19,392     19,155     18,679  
($ million)
   Three-Months Ended
03/31/02
   Three-Months Ended
12/31/02
   Three-Months Ended
09/30/02
   Three-Months Ended
06/30/02
   Three-Months Ended
03/31/03
  
Rural Local Exchange Operations:                                
  Revenues:                                
    Local calling services   $ 13,892   $ 13,895   $ 14,089   $ 13,851   $ 13,474  
    USF—high cost loop support     5,054     6,314     6,012     5,276     4,999  
    Interstate access revenue     15,967     19,205     16,693     16,352     15,705  
    Intrastate access revenue     11,034     11,147     11,225     10,918     11,398  
    Long distance services     2,489     2,401     2,682     2,500     2,379  
    Data and internet services     2,815     2,553     2,421     2,410     2,215  
    Other services     4,471     4,666     4,552     4,376     4,834  
   
 
 
 
 
 
  Total revenues     55,722     60,181     57,674     55,683     55,004  
  Operating expenses     37,210     43,420     37,159     38,343     35,253  
   
 
 
 
 
 
  Income from operations     18,512     16,761     20,515     17,340     19,751  
  Other income (expense)     (17,330 )   (19,464 )   (19,064 )   (18,534 )   (14,597 )
   
 
 
 
 
 
  Earnings (loss) before income taxes     1,182     (2,703 )   1,451     (1,194 )   5,154  
  Income taxes     (47 )   (94 )   (69 )   (144 )   (211 )
  Minority inerest in income of subsidiaries     (1 )   (1 )   0     (1 )   0  
   
 
 
 
 
 
  Net income (loss)   $ 1,134   $ (2,798 ) $ 1,382   $ (1,339 ) $ 4,943  
   
 
 
 
 
 
 
Adjusted RLEC EBITDA
 
$
33,635
 
$
33,126
 
$
34,261
 
$
31,024
 
$
34,274
 
  Free Cash Flow     9,943     (6,437 )   4,303     4,749     9,987  
 
Other information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  Gross property, plant and equipment   $ 635,834   $ 635,500   $ 624,657   $ 616,223   $ 611,878  
  Capital expenditures     3,536     19,780     9,722     5,916     4,036  
  Interest expense (excluding amortization)     19,184     18,319     18,813     18,838     18,679  
  Access Lines     242,891     242,703     245,075     245,996     245,051  


FairPoint Communications, Inc.

EBITDA
RECONCILIATION

For the Three Months Ended March 31, 2003 and 2002

 
   Three-Months Ended
03/31/03
   Three-Months Ended
03/31/02
  
Net cash provided by operating activities of continuing operations   $ 17,034   $ 24,977  
Adjustments:              
  Depreciation and amortization     (12,258 )   (11,784 )
  Other non-cash items     2,084     3,733  
  Changes in assets and liabilities arising from continuing operations, net of acquisitions     (5,566 )   (11,425 )
   
 
 
Income from continuing operations     1,294     5,501  
Adjustments:              
  Interest expense     20,704     19,410  
  Provision for income taxes     137     211  
  Depreciation and amortization     12,258     11,784  
   
 
 
EBITDA     34,393     36,906  
Adjustments:              
  Stock-based compensation, net of forfeitures     —     (197 )
  FASB 133     (2,093 )   (1,874 )
  Gain on extinguishment of debt     (3,464 )   —  
  Write off loan origination costs     4,967     —  
   
 
 
Adjusted Consolidated EBITDA     33,803     34,835  
  Carrier Services EBITDA     (168 )   (561 )
Adjusted RLEC EBITDA   $ 33,635   $ 34,274  
   
 
 

        "EBITDA" means net income (loss) from continuing operations before interest expense, income taxes, and depreciation and amortization. We believe EBITDA is useful to investors because EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, leverage and liquidity. We believe EBITDA allows a standardized comparison between companies in the industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies. EBITDA is also used in covenants in credit facilities and high yield debt indentures to measure a borrower's ability to incur debt and for other purposes, and may be the preferred measure for these purposes. Covenants in our credit facility and in the indentures for our senior subordinated notes and the senior notes that limit our ability to incur debt are based upon EBITDA. While providing useful information, EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations and cash flows data prepared in accordance with generally accepted accounting princples. Adjusted EBITDA is EBITDA as adjusted for the items noted in the above reconciliation.


FairPoint Communications, Inc.

Sequential QTR/QTR Free Cash Flow

 
   Three-Months Ended
03/31/03
   Three-Months Ended
12/31/02
   Three-Months Ended
09/30/02
   Three-Months Ended
06/30/02
   Three-Months Ended
03/31/02
Consolidated Results:                              
Adjusted Consolidated EBITDA   $ 33,803   $ 33,505   $ 34,487   $ 31,080   $ 34,835
Less:                              
  Scheduled principal payments     925     1,370     1,354     1,377     1,361
  Interest Expense (excluding amortization)     19,758     18,905     19,392     19,155     18,679
  Capital expenditures     3,542     19,780     9,722     5,916     4,036
  Income taxes     137     94     69     144     211
   
 
 
 
 
Consolidated Free Cash Flow   $ 9,441   $ (6,644 ) $ 3,950   $ 4,488   $ 10,548
   
 
 
 
 

Rural Local Exchange Operations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted RLEC EBITDA   $ 33,635   $ 33,126   $ 34,261   $ 31,024   $ 34,274
Less:                              
  Scheduled principal payments     925     1,370     1,354     1,377     1,361
  Interest Expense (excluding amortization)     19,184     18,319     18,813     18,838     18,679
  Capital expenditures     3,536     19,780     9,722     5,916     4,036
  Income taxes     47     94     69     144     211
   
 
 
 
 
Rural Local Exchange Free Cash Flow   $ 9,943   $ (6,437 ) $ 4,303   $ 4,749   $ 9,987
   
 
 
 
 


Financial Statements

FairPoint Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

 
   March 31,
2003
   December 31,
2002
  
 
   (unaudited)
    
  
 
   (Dollars in thousands)

  
Assets            
Current assets:            
  Cash   $ 11,665   5,572  
  Accounts receivable     24,618   25,454  
  Other     6,752   5,554  
  Assets of discontinued operations     833   806  
   
 
 
Total current assets     43,868   37,386  
   
 
 
Property, plant, and equipment, net     268,271   276,717  
   
 
 
Other assets:            
  Investments     43,966   44,022  
  Goodwill, net of accumulated amortization     454,306   454,306  
  Deferred charges and other assets     24,715   16,822  
   
 
 
Total other assets     522,987   515,150  
   
 
 
Total assets   $ 835,126   829,253  
   
 
 
Liabilities and Stockholders' Deficit            
Current liabilities:            
  Accounts payable   $ 12,679   21,011  
  Current portion of long-term debt and other long-term liabilities     8,805   6,240  
  Demand notes payable     422   427  
  Accrued interest payable     21,890   10,501  
  Other accrued liabilities     21,795   21,500  
  Liabilities of discontinued operations     3,923   5,065  
   
 
 
Total current liabilities     69,514   64,744  
   
 
 
Long-term liabilities:            
  Long-term debt, net of current portion     807,731   798,486  
  Liabilities of discontinued operations     5,433   5,265  
  Deferred credits and other long-term liabilities     12,504   13,449  
   
 
 
Total long-term liabilities     825,668   817,200  
   
 
 
Minority interest     17   16  
   
 
 
Common stock subject to put options     2,136   3,136  
   
 
 
Redeemable preferred stock     83,447   90,307  
   
 
 
Stockholders' deficit:            
  Common stock     499   499  
  Additional paid-in capital     202,252   206,942  
  Accumulated other comprehensive loss     (147 ) (1,132 )
  Accumulated deficit     (348,260 ) (352,459 )
   
 
 
Total stockholders' deficit     (145,656 ) (146,150 )
   
 
 
Total liabilities and stockholders' deficit   $ 835,126   829,253  
   
 
 


FairPoint Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)

 
   Three months ended
March 31,
  
 
  
2003
   2002
  
 
   (Dollars in thousands)

  
Revenues   $ 57,112   58,425  
   
 
 
Operating expenses:            
  Operating expenses, excluding depreciation and amortization and stock-based compensation     26,144   26,523  
  Depreciation and amortization     12,258   11,784  
  Stock-based compensation     —   (197 )
   
 
 
Total operating expenses     38,402   38,110  
   
 
 
Income from operations     18,710   20,315  
   
 
 
Other income (expense):            
  Net gain on sale of investments and other assets     5   355  
  Interest and dividend income     459   613  
  Interest expense     (20,704 ) (19,410 )
  Equity in net earnings of investees     2,371   1,951  
  Other nonoperating, net     591   1,888  
   
 
 
Total other expense     (17,278 ) (14,603 )
   
 
 
Income from continuing operations before income taxes     1,432   5,712  
Income tax expense     (137 ) (211 )
Minority interest in income of subsidiaries     (1 ) —  
   
 
 
Income from continuing operations     1,294   5,501  
Discontinued operations     —   —  
   
 
 
Net income     1,294   5,501  
Redeemable preferred stock dividends and accretion     (4,690 ) —  
Gain on repurchase of redeemable preferred stock     2,905      
   
 
 
Net income (loss) attributed to common shareholders   $ (491 ) 5,501  
   
 
 


FairPoint Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

 
   Three months ended
March 31,
  
 
   2003
   2002
  
 
   (Dollars in thousands)

  
Cash flows from operating activities:            
  Net income   $ 1,294   5,501  
   
 
 
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:            
  Amortization of debt issue costs     946   730  
  Depreciation and amortization     12,258   11,784  
  Gain on early retirement of debt     (3,466 ) —  
  Write-off of debt issue costs     4,967   —  
  Other non cash items     (4,531 ) (4,463 )
  Changes in assets and liabilities arising from operations:            
    Accounts receivable and other current assets     266   1,745  
    Accounts payable and accrued expenses     5,879   9,631  
    Income taxes     (184 ) —  
    Other assets/liabilities     (395 ) 49  
   
 
 
      Total adjustments     15,740   19,476  
   
 
 
        Net cash provided by operating activities of continuing operations     17,034   24,977  
   
 
 
Cash flows from investing activities of continuing operations:            
  Net capital additions     (3,466 ) (4,014 )
  Distributions from investments     2,435   2,862  
  Other, net     (356 ) (134 )
   
 
 
    Net cash used in investing activities of continuing operations     (1,387 ) (1,286 )
   
 
 
Cash flows from financing activities of continuing operations:            
  Loan origination costs     (14,003 ) (42 )
  Proceeds from issuance of long-term debt     274,680   11,630  
  Repayments of long-term debt     (259,586 ) (30,987 )
  Repurchase of preferred and common stock     (9,645 ) (1,001 )
   
 
 
        Net cash used in financing activities of continuing operations     (8,554 ) (20,400 )
   
 
 
        Net cash contributed from continuing operations to discontinued operations     (1,000 ) (57 )
   
 
 
        Net increase in cash     6,093   3,234  
Cash, beginning of period     5,572   3,063  
   
 
 
Cash, end of period   $ 11,665   6,297  
   
 
 
Supplemental disclosures of noncash financing activities:            
  Redeemable preferred stock dividends paid in kind   $ 4,309   —  
   
 
 
  Gain on repurchase of redeemable preferred stock   $ 2,905   —  
   
 
 
  Accretion of redeemable preferred stock   $ 381   —  
   
 
 
  Long-term debt issued in connection with Carrier Services'            
    Tranche B interest payment   $ 431   —  
   
 
 


QuickLinks

FAIRPOINT ANNOUNCES FIRST QUARTER OPERATING RESULTS AND DIVESTITURE OF SOUTH DAKOTA RURAL LOCAL EXCHANGE COMPANIES
FairPoint Communications, Inc. Consolidated and Rural Local Exchange Financial Information For the Three Months Ended March 31, 2003 and 2002
FairPoint Communications, Inc. Sequential Financial Information for the Quarters ending March 31, 3002, December 31, September 30, June 30 and March 31, 2002
FairPoint Communications, Inc. EBITDA RECONCILIATION For the Three Months Ended March 31, 2003 and 2002
FairPoint Communications, Inc. Sequential QTR/QTR Free Cash Flow
Financial Statements FairPoint Communications, Inc. and Subsidiaries Condensed Consolidated Balance Sheets
FairPoint Communications, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (Unaudited)
FairPoint Communications, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)