-----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, Jj1/8sXqxdRQHkNEA83EqRGeh+I9953cqTrePzRfGoKdWlSY4ycwb7GXaKjlHiof 5uaY09hdQotUmeimwMfncA== 0001116679-04-001130.txt : 20040505 0001116679-04-001130.hdr.sgml : 20040505 20040505150706 ACCESSION NUMBER: 0001116679-04-001130 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040505 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20040505 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: 04781255 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 fair8k.txt 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): May 5, 2004 ------------ 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 Press release issued May 5, 2004 entitled "FairPoint Reports Solid Operating Results for the Three-Months Ended March 31, 2004." Item 12. Results of Operations and Financial Condition On May 5, 2004, FairPoint Communications, Inc. (the "Company") issued a press release announcing operating results for the three months ended March 31, 2004, a copy of which is furnished as Exhibit 99.1 to this Current Report. The Company has presented its EBITDA and Adjusted Consolidated EBITDA for such period, which are "non-GAAP" financial measures under Regulation G promulgated by the Securities and Exchange Commission. "EBITDA" means net income (loss) before income (loss) from discontinued operations, interest expense, income taxes and depreciation and amortization. "Adjusted Consolidated EBITDA" is EBITDA as adjusted for the items disclosed in the attached exhibit. The Company believes that EBITDA and Adjusted Consolidated EBITDA are useful to investors because they are commonly used in the communications industry to analyze companies on the basis of operating performance and leverage. The Company believes that EBITDA and Adjusted Consolidated EBITDA allow for a standardized comparison between companies in the communications industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies. EBITDA and Adjusted Consolidated EBITDA are 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 the Company's credit facility and in the indentures governing the Company's senior subordinated notes and senior notes that limit its ability to incur debt are based on EBITDA and Adjusted Consolidated EBITDA. In addition, Adjusted Consolidated EBITDA is one of the primary measures the Company's management uses for its planning and budgeting processes and to monitor and evaluate the Company's financial and operating results. While providing useful information, EBITDA and Adjusted Consolidated EBITDA should not be considered in isolation or as a substitute for consolidated statement of operations and cash flow data prepared in accordance with generally accepted accounting principles. The information set forth under this "Item 12. Results of Operations and Financial Condition" shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 ("Exchange Act"), as amended, nor shall it be incorporated by reference in any filing made by the Company pursuant to the Securities Act of 1933 (the "Securities Act"), as amended, other than to the extent that such filing incorporates by reference any or all of such information by express reference thereto. - -------- * Filed herewith. + This Exhibit 99.1 to this Current Report shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. 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: May 5, 2004 EX-99 2 ex99-1.txt EX. 99.1 - PRESS RELEASE [GRAPHIC OMITTED] FOR IMMEDIATE RELEASE CONTACT: Timothy W. Henry Telephone: (704) 344.8150 Email: Thenry@fairpoint.com FAIRPOINT REPORTS SOLID OPERATING RESULTS FOR THE THREE-MONTHS ENDED MARCH 31, 2004 CHARLOTTE, N.C. (May 5, 2004) - FairPoint Communications, Inc. ("FairPoint") today announced its financial results for the three-months ended March 31, 2004. Highlights of FairPoint's three-months financial results were: o Consolidated revenues increased 9.3 percent to $61.0 million as compared with the same period last year. o Adjusted consolidated 2004 earnings from continuing operations before interest, taxes, depreciation and amortization increased 7.4 percent to $35.5 million. o Access line equivalents (voice access lines plus DSL served over those access lines) increased 1.3 percent to 267,790 compared to Dec. 31, 2003. o DSL customers grew sequentially from Dec. 31, 2003 to 23,308, an increase of 29.9%. Results for the three-month period ended March 31, 2004 FairPoint reported three-months consolidated revenues from continuing operations of $61.0 million, a 9.3 percent or $5.2 million increase, compared to $55.8 million for the three-months ended March 31, 2003. Revenues of our existing operations increased $3.0 million from the same period in 2003 and $2.2 million is attributable to the Maine acquisition completed in December 2003. Adjusted Consolidated EBITDA (excluding non-cash items and including cash distributions from investments) was $35.5 million in the three-month period ended March 31, 2004, a 7.4 percent increase from $33.1 million for the same period in 2003. Cash operating expenses increased by $4.5 million to $30.1 million for the period ended March 31, 2004. Cash operating expenses from our existing operations (excluding the Maine acquisition) increased $3.5 million, a 13.7% increase compared to the same period last year. This increase was primarily attributable to increases in compensation, training and network related expenses. Also in this period, one of our subsidiary companies, Chouteau Telephone Company, received a non-recurring $2.5 million FairPoint Communications, Inc. May 5, 2004 distribution indirectly from Independent Cellular Telephone L.L.C. resulting from the sale of its membership interest in an operating cellular limited liability company. FairPoint reported a consolidated net loss of $4.6 million for the three-month period compared to net income of $1.3 million for the same period in 2003. 2003 consolidated net income included income from discontinued operations of the South Dakota properties of $0.6 million. Also, effective July 1, 2003, FairPoint adopted SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity" which requires that FairPoint report the dividends and accretion associated with its series a preferred stock subject to mandatory redemption as interest expense. In the first quarter ended March 31, 2004, this non-cash interest expense was $4.7 million while in 2003 these dividends and accretion were recorded as a reduction in stockholders' equity and net income attributed to common shareholders. Total access line equivalents (voice access lines plus digital subscriber lines ("DSL") served over those access lines) were 267,790 on March 31, 2004, an increase of 1.3 percent from 264,308 on Dec. 31, 2003. Voice access lines were 244,482 and DSL totaled 23,308. Sequential quarter over quarter DSL net line adds was 5,371 while voice access lines decreased by 1,889. See the attached "EBITDA Reconciliation" table for an explanation of our calculation of EBITDA, Adjusted Consolidated EBITDA and a reconciliation of such items to net income (loss). Recent Developments On March 25, 2004, FairPoint filed a registration statement with the Securities and Exchange Commission ("SEC") for a $750 million initial public offering of Income Deposit Securities ("IDSs"), representing shares of FairPoint's Class A Common Stock and senior subordinated notes. The registration statement also relates to an offering of a separate issue of senior subordinated notes having the same terms as the senior subordinated notes represented by the IDSs. In connection with this offering, FairPoint expects to (i) repay all outstanding loans under its existing credit facility and (ii) offer to repurchase all of its outstanding senior notes and senior subordinated notes through tender offers and consent solicitations with respect to such notes. A registration statement relating to the IDSs and separate senior subordinated notes has been filed with the SEC but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This press release shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any State in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such State. FairPoint Communications, Inc. May 5, 2004 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 26 rural local exchange companies located in 17 states. FairPoint serves customers who represent 267,790 access line equivalents (voice access lines plus DSL served over those access lines) and offers an array of services including local voice, long distance, DSL, 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 Comparative Financial Information For the Three Months Ended March 31, 2004 and 2003
($ million) (Unaudited) Three-Months Ended Three-Months Ended 03/31/04 03/31/03 -------------------- ------------------- Consolidated Results from Continuing Operations: Revenues $ 60,985 $ 55,812 Operating expenses 42,524 37,684 -------------------- ------------------- Income from operations 18,461 18,128 Other expense (22,845)(1)(2) (17,322)(3)(4)(5) -------------------- ------------------- Income (loss) from continuing operations before income taxes (4,384) 806 Income taxes (223) (137) Minority Interest in income of subsidiaries (1) (1) Income from discontinued operations - 626 -------------------- ------------------- Net income (loss) $ (4,608) $ 1,294 ==================== =================== Adjusted Consolidated EBITDA $ 35,487 $ 33,055 Free Cash Flow (2,671) 8,763 Other information: ----------------- Gross property, plant and equipment $ 680,859 $ 635,915 Capital expenditures 6,957 3,441 Interest expense (adjusted for amortization and swap interest) 20,454 19,789 Access line equivalents 267,790 247,961 Residential access lines 194,385 191,626 Business access lines 50,097 47,892 DSL lines 23,308 8,443
Footnotes: (1) Includes realized and unrealized losses on interest rate swaps of $0.1 million for the three months ended March 31, 2004. (2) Includes $4.7 million dividends and accretion on preferred shares subject to mandatory redemption for the three months ended March 31, 2004. (3) Includes realized and unrealized losses on interest rate swaps of $0.6 million for the three months ended March 31, 2003. (4) Includes $3.5 million gain on extinguishment of debt for the three months ended March 31, 2003. (5) Includes $5.0 million write off of loan origination costs for the three months ended March 31, 2003. 1 FairPoint Communications, Inc. Sequential Financial Information for the Quarters ending March 31, 2004, December 31, September 30, June 30 and March 31, 2003
($ million) (Unaudited) Three-Months Three-Months Three-Months Three-Months Three-Months Ended Ended Ended Ended Ended 3/31/04 12/31/03 9/30/03 6/30/03 3/31/03 ----------------- ---------------- ---------------- ---------------- ---------------- Consolidated Results: Revenues: Local calling services $ 15,581 $ 14,343 $ 14,311 $ 14,007 $ 13,416 USF - high cost loop support 5,452 4,642 4,394 4,866 5,001 Interstate access revenue 16,907 17,527 17,194 16,364 15,479 Intrastate access revenue 10,711 11,344 10,959 10,857 10,808 Long distance services 4,044 3,767 4,052 3,853 3,769 Data and internet services 4,027 3,847 3,344 3,205 3,036 Other services 4,263 4,299 4,312 4,133 4,303 ----------------- ---------------- ---------------- ---------------- ---------------- Total revenues 60,985 59,769 58,566 57,285 55,812 Operating expenses 42,524 41,487 40,738 39,383 37,684 ----------------- ---------------- ---------------- ---------------- ---------------- Income from operations 18,461 18,282 17,828 17,902 18,128 Other income (expense) (22,845) (22,364) (22,055) (18,883) (17,322) ----------------- ---------------- ---------------- ---------------- ---------------- Earnings (loss) from continuing operations before income taxes (4,384) (4,082) (4,227) (981) 806 Income taxes (223) 486 18 (131) (137) Minority interest in income of subsidiaries (1) (1) - - (1) Income from discontinued operations - - 695 608 626 Gain on disposal of assets of discontinued operations - 195 7,797 - - ----------------- ---------------- ---------------- ---------------- ---------------- Net income (loss) $ (4,608) $ (3,402) $ 4,283 $ (504) $ 1,294 ================= ================ ================ ================ ================ Free Cash Flow: Adjusted Consolidated EBITDA $ 35,487 $ 32,796 $ 32,709 $ 34,014 $ 33,055 Less: Scheduled principal payments 10,524 1,017 1,045 1,231 925 Interest expense (adjusted for amortization and swap interest) 20,454 21,053 22,031 22,264 19,789 Capital expenditures 6,957 13,982 9,261 6,911 3,441 Income taxes 223 (486) (18) 131 137 ----------------- ---------------- ---------------- ---------------- ---------------- Consolidated Free Cash Flow $ (2,671) $ (2,770) $ 390 $ 3,477 $ 8,763 ================= ================ ================ ================ ================ Other information: ----------------- Gross property, plant and equipment $ 680,859 $ 674,554 $ 636,844 $ 630,671 $ 635,915 Capital expenditures 6,957 13,982 9,261 6,911 3,441 Interest expense (adjusted for amortization and swap interest) 20,454 21,053 22,031 22,264 19,789 Access line equivalents 267,790 264,308 248,589 251,597 249,717 Residential access lines 194,385 196,145 187,523 191,089 191,626 Business access lines 50,097 50,226 48,795 50,312 49,648 DSL lines 23,308 17,937 12,271 10,196 8,443
2 FairPoint Communications, Inc. EBITDA RECONCILIATION For the Three Months Ended March 31, 2004 and 2003
Three-Months Ended Three-Months Ended ($ million) (Unaudited) 03/31/04 03/31/03 ------------------------- ------------------------- Net income (loss) $ (4,608) $ 1,294 (Income) loss from discontinued operations - (626) ------------------------- ------------------------- Loss from continuing operations (4,608) 668 Adjustments: Interest expense 25,662 17,965 Provision for income tax expense (benefit) 223 137 Depreciation and amortization 12,401 12,087 ------------------------- ------------------------- EBITDA 33,678 30,857 Net gain (loss) on sale of investments and other assets (184) (5) Equity in net earnings of investees (2,415) (2,328) Distributions from investments 4,241 2,436 Realized and unrealized (gains) losses on interest rate swaps 86 646 Loss on early retirement of debt - 1,502 Stock based compensation 44 - Non-cash dividend income 37 (53) ------------------------- ------------------------- Adjusted Consolidated EBITDA $ 35,487 $ 33,055 ========================= =========================
"EBITDA" means net income (loss) before income (loss) from discontinued operations, interest expense, income taxes, and depreciation and amortization. "Adjusted Consolidated EBITDA" is EBITDA as adjusted for the items noted in the above reconciliation. We believe EBITDA and Adjusted Consolidated EBITDA are useful to investors because they are commonly used in the communications industry to analyze companies on the basis of operating performance and leverage. We believe EBITDA and Adjusted Consolidated EBITDA allow for a standardized comparison between companies in the communications industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies. EBITDA and Adjusted Consolidated EBITDA are 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 governing our senior subordinated notes and senior notes that limit our ability to incur debt are based on EBITDA and Adjusted Consolidated EBITDA. In addition, Adjusted Consolidated EBITDA is one of the primary measures our management uses for its planning and budgeting processes and to monitor and evaluate financial and operating results. While providing useful information, EBITDA and Adjusted Consolidated 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 principles. 3 FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets
March 31, December 31, 2004 2003 ----------------------- -------------------- (unaudited) (Dollars in thousands) Assets Current assets: Cash $ 5,588 5,603 Accounts receivable, net 27,294 28,845 Other 8,467 7,545 Assets of discontinued operations 105 105 ----------------------- -------------------- Total current assets 41,454 42,098 ----------------------- -------------------- Property, plant, and equipment, net 261,258 266,706 ----------------------- -------------------- Other assets: Investments 39,977 41,792 Goodwill, net of accumulated amortization 468,808 468,845 Deferred charges and other assets 22,724 23,627 ----------------------- -------------------- Total other assets 531,509 534,264 ----------------------- -------------------- Total assets $ 834,221 843,068 ======================= ==================== Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 12,089 14,671 Current portion of long-term debt and other long-term liabilities 22,103 22,127 Demand notes payable 397 407 Accrued interest payable 20,133 16,739 Other accrued liabilities 15,577 15,154 Liabilities of discontinued operations 4,174 4,461 ----------------------- -------------------- Total current liabilities 74,473 73,559 ----------------------- -------------------- Long-term liabilities: Long-term debt, net of current portion 795,343 803,578 Preferred shares subject to mandatory redemption 101,438 96,699 Liabilities of discontinued operations 2,442 2,571 Deferred credits and other long-term liabilities 12,398 12,463 ----------------------- -------------------- Total long-term liabilities 911,621 915,311 ----------------------- -------------------- Commitments and contingencies ----------------------- -------------------- Minority interest 14 15 ----------------------- -------------------- Common stock subject to put options 1,136 2,136 ----------------------- -------------------- Stockholders' deficit: Common stock 499 499 Additional paid-in capital 198,109 198,065 Accumulated other comprehensive loss 860 1,366 Accumulated deficit (352,491) (347,883) ----------------------- -------------------- Total stockholders' deficit (153,023) (147,953) ----------------------- -------------------- Total liabilities and stockholders' deficit $ 834,221 843,068 ======================= ====================
4 FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited)
Three months ended March 31, ------------------------------ 2004 2003 --------------- ------------ (Dollars in thousands) Revenues $ 60,985 55,812 --------------- ------------ Operating expenses: Operating expenses, excluding depreciation and amortization and stock-based compensation 30,079 25,597 Depreciation and amortization 12,401 12,087 Stock-based compensation 44 -- --------------- ------------ Total operating expenses 42,524 37,684 --------------- ------------ Income from operations 18,461 18,128 --------------- ------------ Other income (expense): Net gain on sale of investments and other assets 184 5 Interest and dividend income 304 459 Interest expense (25,662) (17,965) Equity in net earnings of investees 2,415 2,328 Realized and unrealized gains (losses) on interest rate swaps (86) (646) Other nonoperating, net -- (1,503) --------------- ------------ Total other expense (22,845) (17,322) --------------- ------------ Income (loss) from continuing operations before income taxes (4,384) 806 Income tax expense (223) (137) Minority interest in income of subsidiaries (1) (1) --------------- ------------ Income (loss) from continuing operations (4,608) 668 --------------- ------------ Discontinued operations: Income from discontinued operations -- 626 --------------- ------------ Net income (loss) (4,608) 1,294 Redeemable preferred stock dividends and accretion -- (4,690) Gain on repurchase of redeemable preferred stock -- 2,905 --------------- ------------ Net loss attributed to common shareholders $ (4,608) (491) =============== ============
5 FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, ----------------------------------- 2004 2003 ------------------ --------------- (Dollars in thousands) Cash flows from operating activities: Net income (loss) $ (4,608) 1,294 ------------------ --------------- Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations: Income from discontinued operations -- (626) Dividends and accretion on shares subject to mandatory redemption 4,739 -- Amortization of debt issue costs 1,151 946 Depreciation and amortization 12,401 12,087 Gain on early retirement of debt -- (3,466) Write-off of debt issue costs -- 4,967 Income from equity method investments (2,415) (2,328) Other non cash items (686) (2,161) Changes in assets and liabilities arising from operations: Accounts receivable and other current assets 1,266 198 Accounts payable and accrued expenses 2,045 5,871 Income taxes (317) (232) Other assets/liabilities 54 (395) ------------------ --------------- Total adjustments 18,238 14,861 ------------------ --------------- Net cash provided by operating activities of continuing operations 13,630 16,155 ------------------ --------------- Cash flows from investing activities of continuing operations: Acquisitions of telephone properties 45 -- Net capital additions (6,939) (3,366) Distributions from investments 4,241 2,436 Net proceeds from sales of investments and other assets 230 -- Other, net (183) (356) ------------------ --------------- Net cash used in investing activities of continuing operations (2,606) (1,286) ------------------ --------------- Cash flows from financing activities of continuing operations: Debt issue costs (1,284) (14,003) Proceeds from issuance of long-term debt 64,010 274,680 Repayments of long-term debt (72,349) (259,586) Repurchase of preferred and common stock (1,001) (9,645) ------------------ --------------- Net cash used in financing activities of continuing operations (10,624) (8,554) ------------------ --------------- Net cash contributed from continuing operations to discontinued operations (415) (191) ------------------ --------------- Net increase (decrease) in cash (15) 6,124 Cash, beginning of period 5,603 5,394 ------------------ --------------- Cash, end of period $ 5,588 11,518 ================== =============== 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 $ 115 431 ================== ===============
See accompanying notes to condensed consolidated financial statements. 6 -----END PRIVACY-ENHANCED MESSAGE-----