SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report under Section 13 or 15(d) of the Securities Exchange
- -------
Act of 1934
For the quarterly period ended March 31, 2000
- ------- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______________ to _____________
Commission File Number: 000-21605
ADELPHIA BUSINESS SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 25-1669404
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One North Main Street
Coudersport, PA 16915-1141
(Address of principal (Zip code)
executive offices)
814-274-9830
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ___
----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
At May 10, 2000, 34,406,873 shares of Class A Common Stock, par value
$0.01 per share, and 35,172,364 shares of Class B Common Stock, par
value $0.01 per share, of the registrant were outstanding.
<PAGE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
Page Number
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C>
Condensed Consolidated Balance Sheets - December 31, 1999 and March 31, 2000.....................3
Condensed Consolidated Statements of Operations - Three Months Ended
March 31, 1999 and 2000........................................................................4
Condensed Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1999 and 2000........................................................................5
Notes to Condensed Consolidated Financial Statements.............................................6
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations....................................................................................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk.....................................21
PART II - OTHER INFORMATION
Item 1. Legal Proceedings..............................................................................22
Item 2. Changes in Securities..........................................................................22
Item 3. Defaults Upon Senior Securities...............................................................22
Item 4. Submission of Matters to a Vote of Security Holders...........................................22
Item 5. Other Information.............................................................................22
Item 6. Exhibits and Reports on Form 8-K...............................................................23
SIGNATURES..............................................................................................24
INDEX TO EXHIBITS.......................................................................................25
</TABLE>
<PAGE>
Item 1. Financial Statements
<TABLE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(Dollars in thousands, except per share amounts)
December 31, March 31,
1999 2000
---------------- -----------------
ASSETS:
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 2,133 $ 4,283
Due from parent - net 392,629 163,201
Due from affiliates - net 6,230 8,859
Accounts receivable - net 68,075 84,148
Other current assets 9,852 17,079
---------------- -----------------
Total current assets 478,919 277,570
U.S. government securities - pledged 29,899 14,941
Investments 44,066 45,336
Property, plant and equipment - net 943,756 1,093,352
Other assets - net 67,063 81,234
---------------- -----------------
Total $ 1,563,703 $ 1,512,433
================ =================
LIABILITIES, PREFERRED STOCK, COMMON STOCK AND (DEFICIENCY):
OTHER STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 150,151 $ 138,094
Accrued interest and other current liabilities 27,595 30,874
--------------- -----------------
Total current liabilities 177,746 168,968
13% Senior Discount Notes due 2003 253,860 262,767
12 1/4% Senior Secured Notes due 2004 250,000 250,000
12% Senior Subordinated Notes due 2007 300,000 300,000
Other debt 41,318 39,830
--------------- -----------------
Total liabilities 1,022,924 1,021,565
--------------- -----------------
12 7/8% Senior exchangeable redeemable preferred stock 260,848 269,483
--------------- -----------------
Commitments and contingencies (Note 3)
Common stock and other stockholders' equity:
Class A common stock, $0.01 par value, 800,000,000
shares authorized, 34,066,587 and 34,266,008 shares
outstanding, respectively 341 343
Class B common stock, $0.01 par value, 400,000,000
shares authorized, 35,371,458 and 35,311,737 shares
outstanding, respectively 354 353
Additional paid in capital 666,021 658,192
Class B common stock warrants 2,177 1,370
Unearned stock compensation (5,715) (5,303)
Accumulated deficit (383,247) (433,570)
--------------- -----------------
Total common stock and other stockholders' equity 279,931 221,385
--------------- -----------------
Total $ 1,563,703 $ 1,512,433
=============== =================
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended
March 31,
----------------------------
1999 2000
------------- -------------
<S> <C> <C>
Revenues $ 21,438 $ 69,301
------------- --------------
Operating expenses:
Network operations 8,504 33,732
Selling, general and administrative 21,009 58,846
Depreciation and amortization 13,535 19,438
------------- --------------
Total 43,048 112,016
------------- --------------
Operating loss (21,610) (42,715)
Other income (expense):
Interest income 1,998 404
Interest income-affiliate 2,828 5,023
Interest expense (15,533) (12,930)
------------- --------------
Loss before equity in net loss of joint ventures (32,317) (50,218)
Equity in net loss of joint ventures (3,803) (105)
------------- --------------
Net loss (36,120) (50,323)
Dividend requirements applicable to preferred stock (7,479) (8,497)
------------- --------------
Net loss applicable to common stockholders $ (43,599) $ (58,820)
============= ==============
Basic and diluted net loss per weighted average
share of common stock $ (0.79) $ (0.85)
============= ==============
Weighted average shares of
common stock outstanding 55,497 69,431
============= ==============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Dollars in thousands)
Three Months
Ended March 31,
--------------------------------
1999 2000
--------------- ---------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (36,120) $ (50,323)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 11,978 18,248
Amortization 1,557 1,190
Noncash interest expense 7,747 8,907
Equity in net loss of joint ventures 3,803 105
Non-cash stock compensation --- 799
Change in operating assets and liabilities net of effects of acquisitions:
Other assets - net (8,131) (39,014)
Accounts payable (9,649) (12,057)
Accrued interest and other liabilities (2,252) 2,891
--------------- ---------------
Net cash used in operating activities (31,067) (69,254)
--------------- ---------------
Cash flows from investing activities:
Expenditures for property, plant and equipment (39,684) (167,709)
Investments in joint ventures (18,572) (1,375)
Net cash used for acquisitions (89,750) ---
Sale of U.S. government securities - pledged 15,322 15,312
--------------- ---------------
Net cash used in investing activities (132,684) (153,772)
--------------- ---------------
Cash flows from financing activities:
Repayments of debt (342) (1,622)
Advances (to) from related parties (230,943) 226,798
Proceeds from debt 300,000 ---
Costs associated with financing (5,148) ---
--------------- ---------------
Net cash provided by financing activities 63,567 225,176
--------------- ---------------
Increase (decrease) in cash and cash equivalents (101,184) 2,150
Cash and cash equivalents, beginning of period 242,570 2,133
--------------- ---------------
Cash and cash equivalents, end of period $ 142,386 $ 4,283
=============== ===============
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
Adelphia Business Solutions, Inc. is a majority owned subsidiary of
Adelphia Communications Corporation ("Adelphia"). The accompanying unaudited
condensed consolidated financial statements of Adelphia Business Solutions, Inc.
and its majority owned subsidiaries ("Adelphia Business Solutions" or the
"Company") have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission.
These condensed consolidated financial statements should be read in
conjunction with the Company's consolidated financial statements included in its
Annual Report on Form 10-K for the year ended December 31, 1999.
In the opinion of management, all adjustments, consisting of only
normal recurring adjustments necessary for a fair presentation of the financial
position of Adelphia Business Solutions at March 31, 2000, and the unaudited
results of operations for the three months ended March 31, 1999 and 2000, have
been included. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results to be expected for the year
ending December 31, 2000.
1. Significant Events Subsequent to December 31, 1999:
On January 7, 2000, the Company entered into an agreement with
Allegheny Communications Connect, Inc. ("Allegheny") to purchase an indefeasible
right of use ("IRU") for a total of approximately 600 long-haul and metro route
miles from western Pennsylvania through West Virginia, and in Maryland and
Virginia.
On January 10, 2000, the Company entered into an agreement with
Williams Communications, Inc. ("Williams") to purchase an IRU for a total of
4,543 route miles of fiber in the western United States at a cost of
approximately $23 million.
During January 2000, the Company entered into an IRU agreement with
Level 3 Communications ("Level 3") for approximately 3,100 long-haul route miles
throughout much of the western United States. In addition, the Company entered
into an agreement with Level 3 to acquire access to approximately 750 miles of
metro duct in the following central business districts: Chicago, Cincinnati,
Dallas, Denver, Detroit, Los Angeles, Orlando, Phoenix, San Diego, San
Francisco, San Jose and Seattle. The total cost of the agreement is
approximately $54.6 million.
During January 2000, the Company entered into an agreement with
Metromedia Fiber Network ("Metromedia") which allows the Company to acquire
access to fiber strand miles across any of Metromedia's North American markets.
On March 21, 2000, the Company entered into a purchase agreement with
Allegheny to acquire its 50% interest in the jointly owned network in State
College, Pennsylvania, and to make certain changes to the fiber lease agreement
with Allegheny for this network. The consideration to be paid to Allegheny under
the purchase agreement is 330,000 shares of the Company's Class A common stock.
The consummation of this transaction is subject to certain regulatory approvals
and customary closing conditions.
<PAGE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
Subsequent to March 31, 2000, the Company was the successful bidder, in
the Federal Communications Commission ("FCC") auction, for 177 licenses covering
the 39 Ghz spectrum for approximately 164 million POPS. The Company has
deposited $15,000 of the total $77,605 purchase price with the remaining balance
due at the time the licenses are granted, which the Company believes will be
during the second or third quarter of 2000.
Subsequent to March 31, 2000, the Company and Bell Atlantic reached a
proposed settlement for outstanding amounts due to the Company from Bell
Atlantic. As a result of the proposed settlement, the Company increased its bad
debt reserve $6,981 during the quarter ended March 31, 2000.
During the three months ended March 31, 2000, the Company made demand
advances to Adelphia which, as of March 31, 2000, had an outstanding balance of
$163,201. The Company received interest on the advances at a rate of 6.33%.
2. Investments:
The equity method of accounting is used to account for investments in
joint ventures in which the Company holds less than a majority interest. Under
this method, the Company's initial investment is recorded at cost and
subsequently adjusted for the amount of its equity in the net income or losses
of its joint ventures. Dividends or other distributions are recorded as a
reduction of the Company's investment. Investments in joint ventures accounted
for using the equity method reflect the Company's equity in their underlying net
assets.
<TABLE>
The Company's non-consolidated investments are as follows:
Ownership December 31, March 31,
Percentage 1999 2000
-------------- ------------------ ------------------
<S> <C> <C> <C>
PECO-Hyperion (Philadelphia) 50.0% $ 42,475 $ 42,975
PECO-Hyperion (Allentown, Bethlehem, Easton, Reading) 50.0 7,425 8,300
Hyperion of York 50.0 6,525 6,525
Allegheny Hyperion Telecommunications (1) 50.0 4,975 4,975
------------------ ------------------
61,400 62,775
Cumulative equity in net loss (17,334) (17,439)
------------------ ------------------
Total $ 44,066 $ 45,336
================== ==================
<FN>
(1) As discussed in Note 1, the Company has entered into an agreement to
increase its ownership to 100% in this market.
</FN>
</TABLE>
<PAGE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
Summarized combined unaudited financial information for the Company's
investments being accounted for using the equity method of accounting follows:
December 31, March 31,
1999 2000
------------- ------------
Current assets $ 21,645 $ 20,214
Property, plant and equipment - net 112,210 114,346
Other non-current assets 55 51
Current liabilities 10,175 9,159
Non current liabilities 35,104 34,705
Three Months Ended March 31,
1999 2000
------------- ------------
Revenues $ 6,732 $ 12,775
Net loss (2,222) (636)
3. Commitments and Contingencies:
Reference is made to Management's Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of material commitments and
contingencies.
4. Net Loss Per Weighted Average Share of Common Stock:
Net loss per weighted average share of common stock is computed based on
the weighted average number of common shares outstanding after giving effect to
dividend requirements on the Company's preferred stock. Diluted net loss per
common share is equal to basic net loss per common share because additional
warrants outstanding had an anti-dilutive effect for the periods presented;
however, these warrants could have a dilutive effect on earnings per share in
the future.
5. Supplemental Financial Information:
For the three months ended March 31, 1999 and 2000, the Company paid
interest of $15,322 and $15,312, respectively.
Accumulated depreciation of property, plant and equipment amounted to
$97,518 and $115,766 December 31, 1999 and March 31, 2000, respectively.
-------------------------------------------------
<PAGE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(Dollars in thousands)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction
with the Company's unaudited Condensed Consolidated Financial Statements and the
Notes thereto appearing elsewhere in this Form 10-Q and the Company's audited
Consolidated Financial Statements and Notes thereto included in its Form 10-K
for the year ended December 31, 1999.
Overview
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information or statements
included in this Form 10-Q, including Management's Discussion and Analysis of
Financial Condition and Results of Operations is forward-looking, such as
information relating to future growth, expansion of operations or the effect of
future regulation or competition. These "forward-looking statements" include
statements regarding the intent, belief and current expectations of Adelphia
Business Solutions and its directors and officers, and can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "intends" or anticipates" or the negative thereof or other variations
thereon or comparable terminology or by discussions of strategy that involve
risks and uncertainties. Any such forward-looking information involves important
risks and uncertainties that could significantly affect expected results in the
future from those expressed in any forward-looking statements made by, or on
behalf of, the Company.
These risks and uncertainties include, but are not limited to,
uncertainties relating to our ability to successfully market our services to
current and new customers, access markets on a nondiscriminatory basis,
identify, design and construct fiber optic networks, install cable and
facilities (including switching electronics) and obtain rights of way, access
rights to buildings and any required governmental authorizations, franchises and
permits, all in a timely manner, at reasonable costs and on satisfactory terms
and conditions, as well as risks and uncertainties relating to general economic
conditions, the availability and cost of capital, acquisitions and divestitures,
government and regulatory policies, the pricing and availability of equipment,
materials, inventories and programming, technological developments, the costs
and other effects of rapid growth and changes in the competitive environment in
which the Company operates. Readers of this Form 10-Q are cautioned that such
statements are only predictions, that no assurance can be given that any
particular future results will be achieved, and that actual events or results
may differ materially. In evaluating such statements, readers should
specifically consider the various factors which could cause actual events or
results to differ materially from those indicated by such forward looking
statements. Unless otherwise stated, the information contained in this Form 10-Q
is as of and for the three months ended March 31, 1999 and 2000. Additional
information regarding factors that may affect the business and financial results
of Adelphia Business Solutions can be found in the Company's filings with the
Securities and Exchange Commission, including the prospectus and most recent
prospectus supplement under Registration Statement 333-11142 (formerly No.
333-88927), under the caption "Risk Factors."
The "Company" or "Adelphia Business Solutions" means Adelphia Business
Solutions, Inc. together with its majority-owned subsidiaries, except where the
context otherwise requires. Unless the context otherwise requires, references
herein to the networks mean (i) the 22 telecommunications networks in operation
or under construction as of May 8, 1998, the date of the Company's initial
<PAGE>
public offering (the "Original Markets"), which are wholly and majority owned
subsidiaries or are joint venture partnerships, limited liability companies or
corporations managed by the Company and in which the Company holds 50% equity
interest with one or more other partners, and (ii) the additional networks
operational or under development subsequent to May 8, 1998 (the "New Markets").
Adelphia Business Solutions is a leading national provider of
facilities-based integrated communications services to customers that include
businesses, governmental and educational end users and other communications
services providers throughout the United States. The Company currently offers a
full range of communications services in 58 markets and expects by the end of
the year 2000 to be offering services in approximately 115 markets nationwide,
including substantially all of the top 40 metropolitan statistical areas in the
United States. To serve the Company's customers' broad and expanding
communications needs, the Company has assembled a diverse collection of
high-bandwidth, local and national network assets. The Company intends to
integrate these assets with advanced communications technologies and services in
order to provide comprehensive end-to-end communications services over its
national network. The Company provides customers with communications services
such as local switch dial tone (also known as local phone service), long
distance service, high-speed data transmission, and Internet connectivity. The
customers have a choice of receiving these services separately or as bundled
packages which are typically priced at discount when compared to the price of
the separate services.
In order to take advantage of the improved economic returns and better
customer service from providing services "on-net," or over the Company's own
network, the Company is in the process of further expanding the reach of its
network system nationwide. The Company's Original Markets are principally
located in the eastern half of the United States; however, due to the Company's
success in operating and expanding these markets the Company is pursuing an
aggressive nationwide growth plan. The Company intends to serve 200 total
markets nationwide by the end of the year 2001, leveraging the Company's
existing and planned switching platforms and inter-city fiber networks. The
Company believes that this nationwide footprint will position it to address
approximately 65% of the 60 million business access lines nationwide, which
currently represent approximately $75 billion in annual revenues. This network
system expansion includes the purchase, lease or construction of local fiber
optic network facilities and the interconnection of all of the Company's
existing and new markets with its own fiber optic facilities. The Company will
also implement various technologies including Dense Wave Division Multiplexing
to provide greater bandwidth capacity on its local and long-haul network system.
Once fully installed, the 30,000 route mile fiber optic backbone will connect
each of the Company's local markets. This fully redundant network system will
support the Company's full line of communication service offerings.
The Company has experienced success in the sale of business access
lines with approximately 432,777 access lines sold as of March 31, 2000, of
which approximately 412,172 lines were installed at such date. This represents
an addition of 72,572 access lines sold and 81,165 access lines installed during
the quarter ended March 31, 2000. As of March 31, 2000, approximately 52% of
these access lines are provisioned on Company owned switches.
Recent Developments
On January 7, 2000, the Company entered into an agreement with
Allegheny Communications Connect, Inc. ("Allegheny") to purchase an indefeasible
right of use ("IRU") for a total of approximately 600 long-haul and metro route
miles from western Pennsylvania through West Virginia, and in Maryland and
Virginia.
On January 10, 2000, the Company entered into an agreement with
Williams Communications, Inc. ("Williams") to purchase an IRU for a total of
4,543 route miles of fiber in the western United States at a cost of
approximately $23 million.
<PAGE>
During January 2000, the Company entered into an IRU agreement with
Level 3 Communications ("Level 3") for approximately 3,100 long-haul route miles
throughout much of the western United States. In addition, the Company entered
into an agreement with Level 3 to acquire access to approximately 750 miles of
metro duct in the following central business districts: Chicago, Cincinnati,
Dallas, Denver, Detroit, Los Angeles, Orlando, Phoenix, San Diego, San
Francisco, San Jose and Seattle. The total cost of the agreements are
approximately $54.6 million.
During January 2000, the Company entered into an agreement with
Metromedia Fiber Network ("Metromedia") which allows the Company to acquire
access to fiber strand miles across any of Metromedia's North American markets.
On March 21, 2000, the Company entered into a purchase agreement with
Allegheny to acquire its 50% interest in the jointly owned network in State
College, Pennsylvania, and to make certain changes to the fiber lease agreement
with Allegheny for this network. The consideration to be paid to Allegheny under
the purchase agreement is 330,000 shares of the Company's Class A common stock.
The consummation of this transaction is subject to certain regulatory approvals
and customary closing conditions.
Subsequent to March 31, 2000, the Company was the successful bidder, in
the Federal Communications Commission ("FCC") auction, for 177 licenses covering
the 39 Ghz spectrum for approximately 164 million POPS. The Company has
deposited $15,000 of the total $77,605 purchase price with the remaining balance
due at the time the licenses are granted, which the Company believes will be
during the second or third quarter of 2000.
Subsequent to March 31, 2000, the Company and Bell Atlantic reached a
proposed settlement for outstanding amounts due to the Company from Bell
Atlantic. As a result of the proposed settlement, the Company increased its bad
debt reserve $6,981 during the quarter ended March 31, 2000.
During the three months ended March 31, 2000, the Company made demand
advances to Adelphia Communications Corporation ("Adelphia") which, as of March
31, 2000, had an outstanding balance of $163,201. The Company received interest
on the advances at a rate of 6.33%.
Results of Operations
Three Months Ended March 31, 2000 in Comparison with Three Months Ended
March 31, 1999
Revenues increased 223% to $69,301 for the three months ended
March 31, 2000, from $21,438 for the same quarter in the prior year.
Amounts
The change is attributable to the following: (in thousands)
----------------
Growth in Original Markets $ 25,168
Acquisition of local partner interests 13,055
New Markets 10,118
Management fees (478)
<PAGE>
The primary sources of revenues, reflected as a percentage of total
revenue were as follows:
Three Months
Ended
March 31,
1999 2000
---------- -----------
Local Service 64.1% 73.8%
Dedicated Access 23.5% 12.7%
Management Fees 7.4% 1.6%
Enhanced Services --- 5.1%
Long Distance 0.3% 1.6%
Other 4.7% 5.2%
Network operations expense increased 297% to $33,732 for the three
months ended March 31, 2000 from $8,504 for the same quarter in the prior year.
Amounts
The increase is attributable to the following: (in thousands)
----------------
Growth in Original Markets $ 5,473
Acquisition of local partner interests 4,948
New Markets 13,193
Network Operations Control Center ("NOCC") 1,614
The increase in network operations expense was due to start up costs in
the Company's New Markets as regional switches and network rings are activated,
combined with higher start up costs in the Company's Original Markets associated
with the Company data and internet access products. The increased number and
size of the operations of the networks resulted in increased employee related
costs, equipment maintenance costs and expansion costs.
Selling, general and administrative expense increased 179% to $58,846
for the three months ended March 31, 2000 from $21,009 for the same quarter in
the prior year
Amounts
The increase is attributable to the following: (in thousands)
----------------
Growth in Original Markets $ 3,673
Acquisition of local partner interests 6,071
New Markets 11,601
Sales and marketing activities 3,762
Corporate overhead charges 4,950
Proposed Bell Atlantic settlement charges 6,981
Non-cash stock compensation 799
Depreciation and amortization expense increased 44% to $19,438 during
the three months ended March 31, 2000 from $13,535 for the same quarter in the
prior year primarily as a result of increased depreciation resulting from the
higher depreciable asset base at the NOCC and the networks, amortization of
deferred financing costs and the acquisition of local partner interests.
<PAGE>
Interest income for the three months ended March 31, 2000 decreased 80%
to $404 from $1,998 for the same quarter in the prior year as a result of
decreases in interest income from lower amounts of cash and cash equivalents and
U.S. Government securities.
Interest income-affiliate for the three months ended March 31, 2000
increased to $5,023 from $2,828 as a result of an increase in the amount of
demand advances made to Adelphia during the period.
Interest expense decreased 17% to $12,930 during the three months ended
March 31, 2000 from $15,533 for the same period in the prior year. The decrease
was primarily attributable to an increase in the amount of interest capitalized
as a result of the Company's network expansion.
Equity in net loss of joint ventures decreased by 97% to $105 during
the three months ended March 31, 2000 from $3,803 for the same quarter in the
prior year as a result of the consolidation of several joint ventures resulting
from the purchase of the local partners' interests, and the maturing of the
remaining joint venture networks.
The number of joint ventures paying management fees to the Company
decreased from seven at March 31, 1999 to four at March 31, 2000 due to the
Company's increased ownership in several joint ventures as a result of the
previously mentioned acquisitions. These non-consolidated joint ventures and
networks under construction paid management and monitoring fees to the Company,
which are included in revenues, aggregating approximately $1,099 for the three
months ended March 31, 2000, as compared with $1,578 for the same quarter in the
prior fiscal year. The nonconsolidated joint ventures' net losses, including
networks under construction, for the three months ended March 31, 1999 and 2000,
aggregated approximately $2,222 and $636, respectively.
Preferred stock dividends increased by 14% to $8,497 for the three
months ended March 31, 2000 from $7,479 for the same period in the prior year.
The increase was due to a higher outstanding preferred stock base resulting from
the payments of dividends in additional shares of preferred stock.
Supplementary Network Financial Analysis
The Company currently has joint ventures covering four networks with
Local Partners where the Company owns 50% of each joint venture. As a result of
the Company's historic ownership position in these and other joint ventures, a
substantial portion of the networks' historic results has been reported by the
Company on the equity method of accounting for investments which only reflects
the Company's pro rata share of net income or loss of the networks. Because of
the recently completed partner roll-ups, management of the Company believes this
historical presentation of the assets, liabilities and results of operations of
the Company does not represent a complete measure of the financial position,
growth or operations of the Company.
In order to provide an additional measure of the financial position,
growth and performance of the Company and its networks, management of the
Company analyzes financial information of the consolidated networks and the
nonconsolidated joint venture networks on a combined basis. This combined
financial presentation in the table below reflects Adelphia Business Solutions'
consolidated financial position and results of operations adjusted for the
inclusion of certain networks (Richmond, Jacksonville and Wichita) which were
purchased in March 1999 (the "Adjusted Consolidated Operating Results") combined
with these non-consolidated joint ventures' results of operations. All combined
results of operations in the table below are presented as if Adelphia Business
Solutions consolidated all networks which were involved in the partnership
roll-ups during the entire period presented. This financial information,
however, is not indicative of the Company's overall historical financial
position or results of operations.
<PAGE>
<TABLE>
Quarter ended March 31, 1999 Quarter ended March 31, 2000
--------------------------------------- ---------------------------------------
(dollars in thousands) (dollars in thousands)
Adjusted Adjusted Joint
Consolidated Joint Venture Combined Consolidated Venture Combined
Operating Operating Operating Operating Operating Operating
Results Results Results Results Results Results
--------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $26,667 $7,798 $34,465 $69,301 $12,775 $82,076
Direct Operating Expenses 10,324 3,374 13,698 33,732 3,601 37,333
--------------------------------------- ---------------------------------------
Gross Margin 16,343 4,424 20,767 35,569 9,174 44,743
Gross Margin Percentage 61.3% 56.7% 60.3% 51.3% 71.8% 54.5%
Selling, General and Administrative Expenses(a) 22,925 5,203 28,128 58,047 4,972 63,019
--------------------------------------- ---------------------------------------
EBITDA (b) (6,582) (779) (7,361) (22,478) 4,202 (18,276)
--------------------------------------- ---------------------------------------
EBITDA Percentage of Revenues (24.7%) (10.0%) (21.4%) (32.4%) 32.9% (22.3%)
March 2000 Quarter vs.
March 1999 Quarter
---------------------------------------------------
% Change Comparison Consolidated Joint Venture Combined
Operating Operating Operating
Results Results Results
---------------------------------------------------
Revenues 159.9% 63.8% 138.1%
Direct Operating Expenses 226.7% 6.7% 172.5%
---------------------------------------------------
Gross Margin 117.6% 107.4% 115.5%
Selling, General and Administrative Expenses(a) 153.2% (4.4%) 124.0%
---------------------------------------------------
EBITDA (b) (241.5%) NM(c) (148.3%)
---------------------------------------------------
<FN>
(a) Excludes non-cash stock compensation
(b) Earnings before interest, income taxes, depreciation and amortization,
non-cash stock compensation and other income/expense ("EBITDA") and similar
measures of cash flow are commonly used in the telecommunications industry
to analyze and compare telecommunications companies on the basis of
operating performance, leverage, and liquidity. While EBITDA is not an
alternative indicator of operating performance or an alternative to cash
flows from operating activities as a measure of liquidity as defined by
generally accepted accounting principles, and while EBITDA may not be
comparable to other similarly titled measures of other companies,
management of Adelphia Business Solutions believes that EBITDA is a
meaningful measure of performance.
(c) Not meaningful
</FN>
</TABLE>
Liquidity and Capital Resources
The development of the Company's business and the installation and
expansion of the networks, as well as the development of new markets, combined
with the construction and expansion of the Company's NOCC, have resulted in
substantial capital expenditures and investments during the past several years.
Capital expenditures by the Company were $39,684 and $167,709 for the three
months ended March 31, 1999 and 2000, respectively. Further, investments made by
the Company in nonconsolidated joint ventures were $18,572 and $1,375 for the
three months ended March 31, 1999 and 2000, respectively. The increase in
capital expenditures for the three months ended March 31, 2000 as compared with
the same period in the prior fiscal year is largely attributable to the capital
expenditures necessary to develop the Original Markets and the New Markets as
well as the fiber purchases and electronics to interconnect the networks. The
Company expects that it will continue to incur substantial capital expenditures
in this development effort. The Company also expects to continue to fund
operating losses as the Company develops and grows its business. For information
regarding recent transactions affecting the Company's liquidity and capital
resources, see "Recent Developments."
<PAGE>
The Company has experienced negative operating and investing cash flow
since its inception. A combination of operating losses, substantial capital
investments required to build the Company's networks and NOCC, and incremental
investments in the joint ventures has resulted in substantial negative cash
flow.
Expansion of the Company's Original Markets and services and the
development of New Markets and additional networks and services will require
significant capital expenditures. The Company's operations have required and
will continue to require substantial capital investment for (i) the installation
of electronics for voice and data services in the Company's networks, (ii) the
expansion and improvement of the Company's NOCC and Original Markets, (iii) the
design, construction and development of the New Markets and (iv) the acquisition
of additional ownership interests in the Original Markets. The Company has made
substantial capital investments and investments in joint ventures in connection
with the installation of 5ESS switches or remote switching modules in all of its
Original Markets and plans to install regional 5ESS switches in certain key New
Markets when such New Markets are operational. To date, the Company has
installed switches in all of its Original Markets and plans to provide such
services in all of its New Markets on a standard switching platform based on
Lucent 5 switch technology. In addition, the Company intends to continue to
increase spending on marketing and sales significantly in the foreseeable future
in connection with the expansion of its sales force and marketing efforts
generally. The Company also plans to continue to purchase its partners'
interests in the joint ventures when it can do so on attractive economic terms.
The Company estimates that, in addition to the cash and cash equivalents on
hand, demand loans to Adelphia and the U.S. government securities pledged as of
March 31, 2000, a total of approximately $600,000 will be required to fund the
Company's capital expenditures, working capital requirements, operating losses
and pro rata investments in the joint ventures from April 1, 2000 through the
quarter ending March 31, 2001. This amount includes the $62,605 due on the 177
39 Ghz licenses which the Company believes will be paid during the second or
third quarter of 2000. On April 14, 2000, certain subsidiaries and affiliates of
Adelphia closed on a new $2,250,000 bank credit facility. As part of this
facility, other subsidiaries of Adelphia which are currently not party to this
agreement, including the Company and its subsidiaries, have the ability to
borrow up to an aggregate of $500,000 as unrestricted borrowers, subject to
compliance by the entire borrowing group with certain covenants and financial
tests. Adelphia has informed the Company that it intends to provide the Company
with the ability to borrow under these new credit facility provisions.
There can be no assurance (i) that the Company's future cash
requirements will not vary significantly from those presently planned due to a
variety of factors including acquisition of additional networks, continued
acquisition of increased ownership in its networks, material variance from
expected capital expenditure requirements for the Original Markets and the New
Markets and development of the LMDS spectrum or (ii) that anticipated
financings, Local Partner investments and other sources of capital will become
available to the Company on economically attractive terms or at all. In
addition, it is possible that expansion of the Company's networks may include
the geographic expansion of the Company's existing clusters and the development
or acquisition of other new networks not currently planned.
The Company will need substantial additional funds to fully fund its
business plan. The Company expects to fund its capital requirements through
existing resources, credit facilities and vendor financings at the Company and
joint ventures levels, internally generated funds, equity invested by Local
Partners in the joint ventures and additional debt or equity financings, as
appropriate, and expects to fund any potential additional purchase of
partnership interests of Local Partners through existing resources, internally
generated funds and additional debt or equity financings, as appropriate. There
can be no assurances, however, that the Company will be successful in generating
sufficient cash flow or in raising sufficient debt or equity capital on terms
that it will consider acceptable, or at all.
<PAGE>
Recent Accounting Pronouncements
Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities," establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. Management of the Company has not completed its
evaluation of the impact of the impact of SFAS No. 133 on the Company's
financial statements. In July 1999, SFAS No. 137 was issued to delay the
effective date of SFAS No. 133 to fiscal quarters of fiscal years beginning
after June 15, 2000.
Competition
The Company faces competition from many competitors with significantly
greater financial resources, well-established brand names and large, existing
installed customer bases. Moreover, we expect the level of competition to
intensify in the future.
In each of the markets served by the Company's networks, the services
offered by the Company compete principally with the services offered by the
incumbent local exchange carrier ("ILEC") serving that area. ILECs have
long-standing relationships with their customers, have the potential to
subsidize competitive services from monopoly service revenues, and benefit from
favorable state and federal regulations. In light of the passage of the
Telecommunications Act of 1996 (the "Telecommunications Act"), federal and state
regulatory initiatives provide increased business opportunities to competitive
local exchange carriers ("CLECs") such as the Company, but regulators may
provide ILECs with increased pricing flexibility for their services as
competition increases. Further, if a Regional Bell Operating Company ("RBOC") is
authorized to provide long distance service originating in one or more states by
fulfilling the market opening provisions of the Telecommunications Act, the RBOC
may be able to offer "one stop shopping" that would be competitive with the
Company's offerings. To date, the only RBOC to gain such approval from the FCC
is Bell Atlantic, for New York State. A petition by Southwestern Bell for
approval to provide long distance service in Texas is pending before the FCC,
and additional petitions are expected to be filed in the coming months.
Additional entry by the RBOCs into long distance markets could result in
decreased market share for the major IXCs, which are among the operating
companies' significant customers. Any of these results could have an adverse
effect on the Company.
There has been significant merger activity among the RBOCs in
anticipation of entry into the long distance market, including the completed
merger of Ameritech and SBC, whose combined territory covers a substantial
portion of the Company's markets. Other combinations have occurred in the
industry, which may have an effect on the Company, such as the combination of
AT&T Corp. and MediaOne and the proposed mergers between Bell Atlantic and GTE,
Qwest and US West, and MCIWorldCom and Sprint. The effects of these combinations
are unknown at this time. The Company believes that combinations of RBOCs and
others will pose a greater competitive threat to the Company's strategy of
originating and terminating a significant proportion of its customers'
communications traffic over its own networks, rather than relying on the network
of the ILEC.
The Company also faces, and will continue to face, competition from
other current and potential market entrants, including other CLECs and
data-centric local providers, incumbent LECs which are not subject to RBOC
restrictions on long distance, AT&T, MCIWorldCom, Sprint and other IXCs, cable
television companies, electric utilities, microwave carriers, wireless
<PAGE>
telecommunications providers and private networks built by large end users. In
addition, new carriers, such as Global Crossing, Williams, Qwest and Level 3 are
building and managing nationwide networks which, in some cases, are designed to
provide local services. Further, AT&T's acquisition of various cable companies
will exploit ubiquitous local cable infrastructure for telecommunications and
other services provided by the operating companies. Finally, although the
Company has generally good relationships with the other existing IXCs, there are
no assurances that any of these IXCs will not build their own facilities,
purchase other carriers or their facilities, or resell the services of other
carriers rather than use the Company's services when entering the market for
local exchange services.
Regulation
Government Overview
A significant portion of the services provided by the Company and its
networks are subject to regulation by federal, state and local government
agencies. Future federal or state regulations and legislation may be less
favorable to the Company than current regulation and legislation and therefore
may have a material and adverse impact on its business and financial prospects.
In addition, the Company may expend significant financial and managerial
resources to participate in proceedings setting rules at either the federal or
state level, without achieving a favorable result.
Federal Legislation and Regulation
The Telecommunications Act enacted in 1996 establishes local exchange
competition as a national policy. This act removes state regulatory barriers to
competition, and imposes numerous requirements to facilitate the provision of
local telecommunications services by multiple providers. For instance, carriers
must provide to each other services for resale, number portability, dialing
parity, access to rights of way, and compensation for traffic they exchange.
ILECs must also provide competitors with network interconnection, access to
unbundled network elements, and collocation at ILEC premises, among other
things. Finally, the FCC is responsible for implementing and presiding over
rules relating to these requirements as well as universal service subsidies,
charges for access to long distance carriers, access to buildings, customer
privacy, and services for the disabled.
The Telecommunications Act prohibits state and local governments from
enforcing any law, rule or legal requirement that prohibits or has the effect of
prohibiting any entity from providing interstate or intrastate
telecommunications services. States retain jurisdiction under the
Telecommunications Act to adopt laws necessary to preserve universal service,
protect public safety and welfare, ensure the continued quality of
telecommunications services and safeguard the rights of consumers. The Company
has successfully challenged states' attempts to limit competition in certain
rural areas, and is continuing such challenges in other states. Some of these
challenges are subject to further administrative and court appeals; if the
states succeed in delaying competitive entry into rural areas, the Company's
expansion plans may be adversely affected.
The FCC is charged with the broad responsibility of implementing the
local competition provisions of the Telecommunications Act. It has done so by
promulgating rules which encourage increased local competition. In 1997, a
federal appeals court for the Eighth Circuit vacated some of these rules. In
January 1999, the United States Supreme Court reversed the majority of the
Eighth Circuit's ruling, finding that the FCC has broad authority to interpret
the Telecommunications Act and issue rules for its implementation. Specifically,
the Court stated that the FCC has authority to set pricing guidelines for
unbundled network elements, to prevent ILECs from dismantling existing
combinations of network elements, and to establish rules allowing competitors to
"pick and choose" among provisions of existing interconnection agreements.
However, the Court vacated the FCC's rules that identified the unbundled network
elements that ILECs must provide to CLECs, and the FCC has issued an order
explaining which unbundled network elements ILECs must provide. In addition,
because the Eighth Circuit had only ruled on the FCC's jurisdiction to set a
pricing methodology, the ILECs have renewed their opposition to the actual
methodology, though most states have already adopted pricing rules, if not
interim prices, which are for the most part consistent with the FCC's related
pricing provisions.
Many new carriers have experienced difficulties in working with the
ILECs, with respect to provisioning, interconnection, rights-of-way, collocation
and implementing the systems used by these new carriers to order and receive
unbundled network elements and wholesale service from the ILECs. Coordination
with ILECs is necessary for new carriers such as the Company to provide local
service to customers on a timely and competitive basis. The Telecommunications
<PAGE>
Act created incentives for RBOCs to cooperate with new carriers, allowing the
RBOCs to offer long distance services originating in their region, if the RBOC
satisfies statutory conditions designed to open their local markets to
competition. The Company cannot be assured that RBOCs will be accommodating to
the Company's networks once they are permitted to offer long distance service.
If the Company's networks are unable to obtain the cooperation of an RBOC in a
region, whether or not such RBOC has been authorized to offer long distance
service, the Company's networks' ability to offer local services in such region
on a timely and cost effective basis would be adversely affected.
On December 9, 1999 the FCC released an order requiring the incumbent
carriers to offer "line sharing" arrangements that will permit CLECs to offer
DSL service and other advanced services over the same copper wires used by
incumbent local exchange carriers to provide voice service. The specific prices
and terms of these arrangements will be determined by future decisions of state
utility commissions, and cannot be predicted at this time. The FCCs ruling may
also be challenged in court. We expect that this order, if implemented, will
allow CLECs to offer DSL services at a significantly lower cost than is now
possible.
On March 17, 2000, the U.S. Court of Appeals for the District of
Columbia Circuit vacated certain FCC rules relating to collocation of
competitors' equipment in ILEC central offices. This decision requires the FCC
to limit collocation to equipment that is "necessary" for interconnection with
the ILEC or access to the ILECs unbundled network elements. Any disputes over
the "necessary" status of particular items of equipment may have to be resolved
by the FCC or by state commissions, and such disputes could result in delays or
changes to the Company's collocation plans.
A number of ILECs around the country have been contesting whether the
obligation to pay reciprocal compensation to CLECs should apply to local
telephone calls terminating to Internet service providers ("ISPs"). The ILECs
claim that this traffic is interstate in nature and therefore should be exempt
from compensation arrangements applicable to local, intrastate calls. Most
states have required ILECs to pay ISPs reciprocal compensation. In addition, on
March 24, 2000, the DC Circuit Court vacated the FCC's ruling in which the FCC
determined that calls to ISPs are interstate in nature. The FCC ruling, however,
was not in any case intended to dislodge previous state decision interpreting
interconnection agreements between ILECs and CLECs to require reciprocal
compensation between local tow carriers jointly delivering dial-up traffic to
ISPs. Although the FCC does not intend to require ISPs to pay access charges or
contribute to universal service funds, the FCC's order and subsequent state
rulings could affect the costs incurred by ISPs and the demand for their
offerings. An unfavorable outcome could materially affect the Company's
potential future revenues.
<PAGE>
Several ILECs have filed petitions at the FCC and have initiated
legislative efforts to effect a waiver of certain obligations imposed on ILECs
in the Telecommunications Act with respect to RBOC-provisioned high-speed data
services, including, among other things, the obligation to unbundle and offer
for resale such services. In addition, the ILECs are seeking to provide
high-speed data services on an interLATA basis without complying with the market
opening provisions of the competitive checklist set forth in the
Telecommunications Act, which would be otherwise required of them. The FCC has
determined that such services are subject to interstate jurisdiction and to the
resale and unbundling obligation of the Telecommunications Act. However, the FCC
has initiated a proceeding to determine whether ILECs can create separate
affiliates for their high-speed data services that would be free from these
obligations. In addition, there are numerous bills being considered by Congress
which would deregulate advanced services. These outcomes could have a material
adverse effect on the Company.
Any of the regulatory changes discussed above could require
renegotiation of relevant portions of existing interconnection agreements, or
subject them to additional court and regulatory proceedings. It remains to be
seen whether the networks can continue to obtain and maintain interconnection
agreements on terms acceptable to them in every state, though most states have
already adopted pricing rules, if not interim prices, which are for the most
part consistent with the FCC's related pricing provisions.
The FCC also manages universal service subsidies for rural, high-cost,
and low-income markets, qualifying schools and libraries and services provided
to rural health care providers. It currently assesses the Company's networks for
such payments and other subsidies on the basis of certain revenue for the
previous year. Various states also implement their own universal service
programs to which the Company is subject.
To the extent that the Company's networks provide interexchange
telecommunications service, access charges are required to be paid to ILECs when
the facilities of those companies are used to originate or terminate
interexchange calls. Also, as CLECs, the Company's networks provide access
service to other interexchange service providers. The interstate access charges
of ILECs are subject to extensive regulation by the FCC, while those of CLECs
are subject to a lesser degree of FCC regulation but remain subject to the
requirement that all charges be just, reasonable, and not unreasonably
discriminatory. Some of the interexchange providers to whom the Company's
networks provide access services, including AT&T and Sprint, have announced
plans to resist paying access charges that exceed the access charges of the ILEC
in any given geographic area. While the Company's networks have not experienced
any such challenges to their rights to collect access charges, they could
experience them in the future. The FCC has initiated a proceeding to investigate
whether CLEC access charges should be subjected to more stringent regulation.
The manner in which the FCC regulates or lowers access charge levels could have
a material effect on the ability of the Company's networks to compete in
providing interstate access services and terminating and originating long
distance traffic.
In an exercise of its "forbearance authority," the FCC has ruled that
following a transition period non-dominant IXCs will no longer be able to file
tariffs with the FCC concerning their interexchange long distance services (the
"IXC Detariffing Order"). Tariffs set forth the terms and conditions under which
the operating companies provide services. This would deprive the Company of the
advantages of being able to rely on terms and conditions contained in a filed
tariff, requiring instead reliance on individual contracts. The FCC's transition
period will expire on January 31, 2001, by which date the Company will have to
cancel its interexchange service tariffs. It is also likely that the FCC may
impose a similar detariffing requirement on interstate access services, which
could make it more difficult for the Company to obtain payment of its access
charges from interexchange providers.
<PAGE>
The FCC also presides over ongoing proceedings addressing a variety of
other matters, including number portability, Internet, telephony, slamming,
rights of way, building access, pole attachments, customer privacy, and services
to the disabled. The outcome of any such proceedings may adversely affect the
Company and its ability to offer service in competition with LECs.
State Regulation
Most State Public Utility Commissions ("PUCs") require companies that
wish to provide intrastate common carrier services to be certified to provide
such services. These certifications generally require a showing that the carrier
has adequate financial, managerial and technical resources to offer the proposed
services in a manner consistent with the public interest. The certificates or
other authorizations held by the Company permit it to provide a full range of
local telecommunications services, including basic local exchange service. In
certain states, each of the Company, its subsidiaries and the Company's networks
may be subject to additional state regulatory requirements, including tariff
filing requirements, to begin offering the telecommunications services for which
such entities have been certificated. In some states, the Company network tariff
lists a rate range or sets prices on an individual case basis. Many states also
may have additional regulatory requirements such as reporting and customer
service and quality requirements, Y2K compliance, unbundling and universal
service contributions all of which are subject to change and may adversely
affect the Company. In addition, in virtually every state, the Company's
certificate or other authorization is subject to the outcome of proceedings by
the state commission that address regulation of LECs and CLECs, competition,
geographic build-out, mandatory detariffing, service requirements, and universal
service issues.
In addition to obtaining certification, a Company network must
negotiate terms of interconnection with the ILEC before it can begin providing
switched services. To date, the Company's networks have negotiated
interconnection agreements with one or more of the ILECs, in each state in which
they are currently operating. Agreements are subject to State PUC approval.
The Company is subject to requirements in some states to obtain prior
approval for, or notify the commission of any transfers of control, sales of
assets, corporate reorganizations, issuance of stock or debt instruments, name
changes and other transactions that may effect a change in the way that the
Company does business. Although the Company believes such authorization could be
obtained, there can be no assurance that the state commissions would grant the
Company authority to complete any transactions.
Local Government Authorizations
A Company network may be required to obtain from municipal authorities
street opening and construction permits, or operating franchises, to install and
expand its fiber optic networks in certain cities. In some cities, the Local
Partners or subcontractors may already possess the requisite authorizations to
construct or expand the Company's networks. A Company network or its Local
Partners also may be required to obtain a license to attach facilities to
utility poles in order to build and expand facilities. Because utilities that
are owned by a cooperative or municipality are not subject to federal pole
attachment regulation, there are no assurances that a Company network or its
Local Partners will be able to obtain pole attachments from these utilities at
reasonable rates, terms and conditions.
In some of the areas where the Company's networks provide service,
their Local Partners pay license or franchise fees based on a percent of fiber
lease payment revenues. In addition, in areas where the Company does not use
facilities constructed by a Local Partner, the Company's networks may be
required to pay such fees. There are no assurances that certain municipalities
that do not currently impose fees will not seek to impose fees in the future,
<PAGE>
nor is there any assurance that, following the expiration of existing
franchises, fees will remain at their current levels. In addition, some
municipalities may seek to impose requirements or fees on users of transmission
facilities, even though they do not own such facilities.
In many markets, other companies providing local telecommunications
services, particularly the ILECs, currently are excused from paying license or
franchise fees or pay fees that are materially lower than those required to be
paid by the Company network or Local Partner. The Telecommunications Act
requires municipalities to charge nondiscriminatory fees to all
telecommunications providers, but it is uncertain how quickly this requirement
will be implemented by particular municipalities in which the Company operates
or plans to operate or whether it will be implemented without a legal challenge
initiated by the Company or another CLEC.
If any of the existing local partner agreements or fiber lease
agreements held by a Local Partner or a Company network for a particular market
were terminated prior to its expiration date, such termination could have a
material adverse effect on the Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
The Company uses fixed rate debt and redeemable preferred stock to fund
its working capital requirements, capital expenditures and acquisitions. These
financing arrangements expose the Company to market risk related to changes in
interest rates. The table below summarizes the fair values and contract terms of
the Company's financial instruments subject to interest rate risk as of March
31, 2000.
<TABLE>
Expected Maturity
----------------------------------------------------
Fair
2000 2001 2002 2003 2004 Thereafter Total Value
--------- --------- ---------- ---------- ---------- ----------- ------------ ------------
Fixed Rate Debt and
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Redeemable Preferred Stock: --- --- --- $303,840 $250,000 $569,483 $1,123,323 $1,105,552
Average Interest Rate 12.53% 12.53% 12.53% 12.42% 12.61% 12.61% --- ---
</TABLE>
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In February 2000, the Company settled all disputes and claims arising out
of a summons and complaint filed in the United States District Court for the
Northern District of New York, Case Number 99-CV-268, against the Company by
Hyperion Solutions Corporation ("Solutions"), which is described in the
complaint as a company in the business of developing, marketing and supporting
comprehensive computer software tools, executive information systems and
applications that companies use to improve their business performance. The
complaint alleged, among other matters, that the Company's use of the name
"Hyperion" in its business infringed upon various trademarks and service marks
of Solutions in violation of federal trademark laws and violates various New
York business practices, advertising and business reputation laws. Management of
the Company believes that the Company had meritorious defenses to the complaint
and has vigorously defended this lawsuit including filing a counterclaim against
Solutions. As part of the settlement, Solutions' complaint and the Company's
counterclaim were dismissed with prejudice and both the Company and Solutions
entered into mutual releases regarding the complaint and counterclaim.
Management believes that this matter will not have a material adverse effect
upon the Company
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
The attached Exhibit 99.01 provides certain financial and business
information of the Company for the three months ended March 31, 2000, pursuant
to Section 4.03(a)(iii) of the Indenture dated April 15, 1996 with respect to
the 13% Senior Discount Notes.
The attached Exhibit 99.02 provides certain financial and business
information of the Company for the three months ended March 31, 2000, pursuant
to Section 4.03(a)(iii) of the Indenture dated August 27, 1997 with respect to
the 12 1/4% Senior Secured Notes.
The attached Exhibit 99.03 provides certain financial and business
information of the Company for the three months ended March 31, 2000.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27.01 Financial Data Schedule (supplied for the
information of the Commission).
Exhibit 99.01 "Schedule E - Form of Financial Information and
Operating Data of the Subsidiaries and the Joint
Venture Presented by Cluster".
Exhibit 99.02 "Schedule F - Form of Financial Information and
Operating Data of the Pledged Subsidiaries and the
Joint Ventures".
Exhibit 99.03 Press Release dated May 9, 2000
(b) Reports on Form 8-K:
None
<PAGE>
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 thereunto duly authorized.
ADELPHIA BUSINESS SOLUTIONS, INC.
(Registrant)
Date: May 15, 2000 By: /s/ Timothy J. Rigas
----------------------
Timothy J. Rigas
Vice Chairman, Chief Financial Officer
(authorized officer), Chief Accounting
Officer and Treasurer
<PAGE>
Index of Exhibits
Exhibit 27.01 Financial Data Schedule (supplied for the information
of the Commission).
Exhibit 99.01 "Schedule E - Form of Financial Information and
Operating Data of the Subsidiaries and the Joint Ventures
Presented by Cluster".
Exhibit 99.02 "Schedule F - Form of Financial Information and
Operating Data of the Pledged Subsidiaries and the Joint
Ventures".
Exhibit 99.03 Press Release dated May 9, 2000
<PAGE>
<TABLE>
Exhibit 99.01
SCHEDULE E
Adelphia Business Solutions, Inc.
Form of Financial Information and Operating Data
Of the Subsidiaries and the Joint Ventures Presented by Cluster
Data presented for the quarter ended: 3/31/00
***
Unaudited Other
North East Mid-Atlantic Mid-South Markets Total
FINANCIAL DATA (dollars in thousands):
<S> <C> <C> <C> <C> <C>
Total Revenue $ 19,499.3 $ 31,062.0 $ 15,736.9 $ 10,859.0 $ 77,157.2
Total Capital Expenditures $ 11,770.9 $ 56,599.8 $ 21,768.6 $ 83,904.0 $ 174,043.3
Total EBITDA $ 1,702.6 $ (198.7) $ (3,408.2) $ (3,833.8) $ (5,738.1)
Gross PP&E $ 140,666.1 $ 619,524.2 $ 219,254.0 $ 372,082.6 $ 1,351,526.9
Proportional Revenue* $ 19,499.3 $ 24,778.4 $ 15,736.9 $ 10,859.0 $ 70,873.6
Proportional Capital Expenditures* $ 11,770.9 $ 53,487.3 $ 21,768.6 $ 83,904.0 $ 170,930.8
Proportional EBITDA* $ 1,702.6 $ (2,198.5) $ (3,408.2) $ (3,833.8) $ (7,737.9)
Proportional Gross PP&E $ 140,666.1 $ 548,319.9 $ 219,254.0 $ 372,082.6 $ 1,280,322.6
STATISTICAL DATA
Increase for March 31, 2000:
Markets in Operation 3 2 - - 5
Route Miles 31 131 1 187 350
Fiber Miles 1,488 4,632 48 4,787 10,955
Buildings connected 82 70 283 37 472
Buildings with Customers 53 679 1,467 753 2,952
LEC-Cos collocated** - 2 5 18 25
Voice Grade Equivalent Circuits 34,272 161,280 61,824 79,968 337,344
As of December 31, 1999:
Markets in Operation*** 7 25 13 8 53
Route Miles 3,339 4,630 3,983 4,108 16,060
Fiber Miles 100,082 168,223 84,794 59,655 412,754
Buildings connected 420 838 479 457 2,194
Buildings with Customers 2,205 8,034 6,463 3,523 20,225
LEC-Cos collocated** 16 85 47 19 167
Voice Grade Equivalent Circuits 303,744 1,084,608 592,704 272,160 2,253,216
As of March 31, 2000:
Markets in Operation 10 27 13 8 58
Route Miles 3,370 4,761 3,984 4,295 16,410
Fiber Miles 101,570 172,855 84,842 64,442 423,709
Buildings connected 502 908 762 494 2,666
Buildings with Customers 2,258 8,713 7,930 4,276 23,177
LEC-Cos collocated** 16 87 52 37 192
Voice Grade Equivalent Circuits 338,016 1,245,888 654,528 352,128 2,590,560
Access Lines Sold 60,722 213,762 95,919 62,374 432,777
Access Lines Installed 56,521 200,791 94,792 60,068 412,172
<FN>
* Represents portion attributable to the Company.
** Local Exchange Carrier's central office
*** Other Markets amounts include, among other things, Network Control Centers
and Corporate Capital Expenditures and Gross Property, Plant and Equipment
**** Previously reported amounts have been restated to reflect Metropolitan
Statistical Areas.
</FN>
</TABLE>
<PAGE>
Exhibit 99.02
SCHEDULE F
Adelphia Business Solutions, Inc.
Form of Financial Information and Operating Data
of the Pledged Subsidiaries and the Joint Ventures
Data presented for the quarter ended: 3/31/00
Unaudited
Total
FINANCIAL DATA (dollars in thousands)(a):
Total Revenue $ 32,955.8
Total Capital Expenditures $ 19,294.4
Total EBITDA $ 7,100.0
Gross Property, Plant & Equipment $ 319,884.0
STATISTICAL DATA(b):
As of March 31, 2000:
Markets in Operation 7
Route Miles 3,507
Fiber Miles 160,580
Buildings connected 1,362
LEC-COs collocated 63
Voice Grade Equivalent Circuits 1,041,600
Access Lines Sold 120,344
Access Lines Installed 115,524
(a) Financial Data represents 100% of the operations of all entities except
Adelphia Business Solutions of Florida, which is reflected at its ownership
in the Jacksonville network, which is 20%.
(b) Statistical Data represents 100% of operating data for all entities.
<PAGE>
Exhibit 99.03
PRESS RELEASE
Contact Information
Ed Babcock
Adelphia Business Solutions
814-274-9830
FOR IMMEDIATE RELEASE:
- ---------------------
ADELPHIA BUSINESS SOLUTIONS, INC ANNOUNCES FIRST QUARTER RESULTS OF OPERATIONS
Coudersport, PA - May 9, 2000
John J. Rigas, Chairman of Adelphia Communications Corporation
("Adelphia") (NASDAQ NNM: ADLAC) and Adelphia Business Solutions, Inc. ("the
Company") (NASDAQ NNM: ABIZ) reported results of operations for the Company and
its Operating Companies (defined in footnote) for the first quarter which ended
on March 31, 2000. First quarter results saw record levels of consolidated
operating revenues of $69.3 million, and record access line installations of
81,165. Net loss applicable to common shareholders for the first quarter totaled
$58.8 million, or $0.85 per share, compared with $43.6 million, or $0.79 per
share, for the same period in the prior year. The Company now offers
communications services in 58 markets in the eastern half of the United States
with plans to expand to a total of 200 markets throughout the United States by
the end of 2001. Summarized financial results are included in Tables 1, 2 and 3
below.
As presented in Table 1, on a sequential quarterly basis, consolidated
revenues increased 24.7% to $69.3 million in the March 2000 quarter, from $55.6
million in the December 1999 quarter and were 159.9% higher than the comparable
period in the prior year. Gross margin as a percent of sales was 51.3% in the
March 2000 quarter as compared with 59.5% of sales in the December 1999 quarter.
The lower gross margin was due to start up costs in the Company's New Markets as
regional switches and network rings are activated, combined with higher start up
costs in the Company's Original Markets associated with the Company's data and
internet access products. EBITDA losses for the March 2000 quarter were somewhat
higher at $22.5 million versus a $14.2 million EBITDA loss in the December 1999
quarter. The higher EBITDA losses were due to a $7.0 million charge to earnings
in the March 2000 quarter associated with a proposed resolution of billing
disputes with Bell Atlantic regarding previously billed reciprocal compensation
and other interconnection billing matters. This proposed settlement, if
finalized, will establish billing rates and guidelines with Bell Atlantic in New
York and Vermont, going forward. Excluding this charge, EBITDA losses would have
been approximately $15.5 million.
Table 2 presents the Company's financial results of operations for the
22 Original Markets and the Company's current expansion into its New Markets
(defined in Table 2). The Original Markets' sequential quarterly revenue growth
remained very strong, to $71.5 million in the March 2000 quarter, or 18.0%
higher than the December 1999 quarter. Gross margin as a percent of sales in the
Original Markets remained a strong 68.5% in the March 2000 quarter, but was
somewhat lower than the December 1999 quarter as the Company aggressively
expands its data and internet access product offerings. After including the
<PAGE>
effect of the previously mentioned $7.0 million billing dispute charge, the
Original Markets' EBITDA of $12.3 million, or 17.2% of revenues in the March
2000 quarter, was at approximately the same level as the December 1999 quarter.
New Markets' revenues increased by 63.8% to $10.6 million in the March 2000
quarter from $6.5 million in the December 1999 quarter as these markets continue
to expand operations. New Markets' EBITDA losses increased to $30.6 million for
the March 2000 quarter from a loss of $23.5 million in the December 1999 quarter
as the markets prepare to commence operations on the Company's own regional
switches and network, which are being activated over the next several months.
Access lines installed increased by 81,165 resulting in an installed
access line base of 412,172 as of March 31, 2000, 52% of which are serviced on
the Company's switches. Access lines sold as of March 31, 2000 totaled 432,777,
an increase of 72,572 in the quarter.
During the March 2000 quarter, the Company and its consolidated
subsidiaries invested approximately $167.7 million in capital expenditures which
was in line with expectations and relates primarily to the nationwide network
development efforts for fiber, dense wave division multiplexing and DSL
equipment. As of March 31, 2000, total gross property, plant and equipment of
the Company and its consolidated subsidiaries was approximately $1.2 billion.
As of March 31, 2000, the Operating Companies had approximately 7,438
local route miles and 331,405 local fiber miles operational. The Company also
has 29,000 route miles of long haul fiber and over 3,000 route miles of local
fiber network under construction or being purchased under several fiber and
conduit contracts. As of March 31, 2000, the Company had customers located in
approximately 23,177 buildings, of which approximately 2,600 buildings were
connected with Company-owned fiber, and was collocated in 192 local exchange
carrier central offices. The Company will be significantly expanding its
collocation efforts during calendar 2000 through the deployment of DSL equipment
in over 500 central offices, all of which will be connected with Company owned
fiber. Additionally, to date, 24 Lucent 5ESS switches or remote switching
modules have been installed to provide local telephone service with seven
additional regional switches planned for operation during 2000.
Adelphia Business Solutions is a majority owned subsidiary of Adelphia
Communications Corporation that provides integrated communications services to
business customers through its state-of-the-art fiber optic communications
network. As a result of its consolidation efforts, the Company now owns 100% of
the interests in 54 of 58 markets in which it currently offers communications
services, with the remaining four markets operating as 50% owned joint ventures
with a local partner. By the end of 2001, the Company expects to serve 200
markets throughout the United States including substantially all major Tier I
and Tier II cities, through the interconnection of these markets, creating a
single fiber optic backbone network. This fully redundant, 33,000-mile long-haul
fiber optic network, combined with an estimated 15,000 local fiber route miles,
will support the Company's full line of communication service offerings,
including local and long distance voice services, messaging, high-speed data and
internet services. For more information on Adelphia Business Solutions, or to
review an electronic version of this press release visit the Company's web site
at http://www.adelphia-abs.com
Footnote: The Company's Operating Companies represent four partnerships
or limited liability companies with local partners, and all wholly or majority
owned subsidiaries of the Company (collectively, the "Operating Companies").
Certain statements in this release are forward-looking statements that
are subject to material risks and uncertainties. Actual results could differ
materially from those stated or implied by such forward-looking statements due
to risks and uncertainties associated with the Company's business, which include
among others, competitive developments, risks associated with the Company's
growth and financings, the development of the Company's markets, regulatory
risks, dependence on its customers and their spending patterns and other risks
which are discussed in the Company's filings with the Securities and Exchange
Commission. Additional information regarding factors that may affect the
business and financial results of Adelphia Business Solutions can be found in
the Company's filings with the Securities and Exchange Commission, including the
prospectus under Registration Statement File No. 333-11142 (formerly No.
333-88927), under the caption "Risk Factors."
<PAGE>
<TABLE>
Adelphia Business Solutions, Inc.
Table 1 - Unaudited Proforma Consolidated and
Joint Venture Operating Results
Quarter Ended March 31, 2000 Quarter ended December 31, 1999 Quarter Ended March 31, 1999
--------------------------------------------------------------------------------------------
Joint Joint Pro-forma Joint
Consolidated Venture Total Consolidated Venture Total Consolidated Venture Total
(dollars in thousands) Operating Operating Operating Operating Operating Operating Operating Operating Operating
Results Results Results Results Results Results Results Results Results
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 69,301 $ 12,775 $ 82,076 $ 55,575 $ 11,479 $ 67,054 $ 26,667 $ 7,798 $ 34,465
Direct Operating Expenses 33,732 3,601 37,333 22,488 2,243 24,731 10,324 3,374 13,698
--------------------------------------------------------------------------------------------
Gross Margin 35,569 9,174 44,743 33,087 9,236 42,323 16,343 4,424 20,767
Gross Margin Percentage 51.3% 71.8% 54.5% 59.5% 80.5% 63.1% 61.3% 56.7% 60.3%
Sales, General and Administrative Expenses 58,047 4,972 63,019 47,269 4,737 52,006 22,925 5,203 28,128
--------------------------------------------------------------------------------------------
EBITDA (a) (22,478) 4,202 (18,276) (14,182) 4,499 (9,683) (6,582) (779) (7,361)
--------------------------------------------------------------------------------------------
EBITDA Percentage of Revenues (32.4%) 32.9% (22.3%) (25.5%) 39.2% (14.4%) (24.7%) (10.0%) (21.4%)
</TABLE>
<TABLE>
March 31, 2000 Quarter vs. March 31, 2000 Quarter vs.
December 31, 1999 Quarter March 31,1999 Quarter
-------------------------------------------------------------------------
Joint Pro-forma Joint
Percent Change Comparison Consolidated Venture Total Consolidated Venture Total
Operating Operating Operating Operating Operating Operating
Results Results Results Results Results Results
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 24.7% 11.3% 22.4% 159.9% 63.8% 138.1%
Direct Operating Expenses 50.0% 60.5% 51.0% 226.7% 6.7% 172.5%
-------------------------------------------------------------------------
Gross Margin 7.5% (0.7%) 5.7% 117.6% 107.4% 115.5%
Sales, General and Administrative Expenses 22.8% 5.0% 21.2% 153.2% (4.4%) 124.0%
-------------------------------------------------------------------------
EBITDA (a) (58.5%) (6.6%) (88.7%) (241.5%) NM (148.3%)
-------------------------------------------------------------------------
<FN>
Table 1 summarizes operating results for (i) Adelphia Business Solutions and its
consolidated subsidiaries and (ii) its non-consolidated joint ventures. All
prior period operating results have been presented on a pro-forma basis,
adjusted for the consolidation of the Richmond, Jacksonville and Wichita markets
as if Adelphia Business Solutions' purchase of its partners' interests in these
markets had occurred at the beginning of each period presented.
(a) Earnings before interest, income taxes, depreciation and amortization,
non-cash stock compensation and other income/expense ("EBITDA") and similar
measures of cash flow are commonly used in the telecommunications industry to
analyze and compare telecommunications companies on the basis of operating
performance, leverage, and liquidity. While EBITDA is not an alternative
indicator of operating performance or an alternative to cash flows from
operating activities as a measure of liquidity as defined by GAAP, and while
EBITDA may not be comparable to other similarly titled measures of other
companies, management of Adelphia Business Solutions believes that EBITDA is a
meaningful measure of performance
</FN>
</TABLE>
<PAGE>
<TABLE>
Adelphia Business Solutions, Inc.
Table 2 - Unaudited Original Markets
and New Markets Operating Results Quarter ended March 31, 2000 Quarter Ended December 31, 1999 Quarter Ended March 31, 1999
(dollars in thousands) --------------------------------------------------------------------------------------------
Original New Total Original New Total Original New Total
Markets Markets Operating Markets Markets Operating Markets Markets Operating
Results Results Results Results Results Results Results Results Results
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 71,489 $ 10,587 $ 82,076 $ 60,590 $ 6,464 $ 67,054 $ 34,215 $ 250 $ 34,465
Direct Operating Expenses 22,525 14,808 37,333 16,348 8,383 24,731 13,054 644 13,698
--------------------------------------------------------------------------------------------
Gross Margin 48,964 (4,221) 44,743 44,242 (1,919) 42,323 21,161 (394) 20,767
Gross Margin Percentage 68.5% (39.9%) 54.5% 73.0% (29.7%) 63.1% 61.8% (157.6%) 60.3%
Sales, General and Administrative Expenses 29,656 17,450 47,106 24,763 14,373 39,136 16,299 5,871 22,170
Allocated Corporate Overhead Expense 7,002 8,911 15,913 5,663 7,207 12,870 5,362 596 5,958
--------------------------------------------------------------------------------------------
EBITDA (a) 12,306 (30,582) (18,276) 13,816 (23,499) (9,683) (500) (6,861) (7,361)
--------------------------------------------------------------------------------------------
EBITDA Percentage of Revenues 17.2% (288.9%) (22.3%) 22.8% (363.5%) (14.4%) (1.5%)(2744.3%) (21.4%)
</TABLE>
<TABLE>
March 31, 2000 Quarter vs. March 31, 2000 Quarter vs.
December 31, 1999 Quarter March 31, 1999 Quarter
------------------------------------------------------------------------
Original New Total Original New Total
Percent Change Comparison Markets Markets Operating Markets Markets Operating
Results Results Results Results Results Results
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues 18.0% 63.8% 22.4% 108.9% NM 138.1%
Direct Operating Expenses 37.8% 76.6% 51.0% 72.6% NM 172.5%
------------------------------------------------------------------------
Gross Margin 10.7% 120.0% 5.7% 131.4% NM 115.5%
Sales, General and Administrative Expenses 19.8% 21.4% 20.4% 81.9% NM 112.5%
Allocated Corporate Overhead 23.6% 23.6% 23.6% 30.6% NM 167.1%
------------------------------------------------------------------------
EBITDA (a) (10.9%) (30.1%) (88.7%) NM NM (148.3%)
------------------------------------------------------------------------
<FN>
Table 2 summarizes operating results for (i) Adelphia Business Solutions' 22
Original Markets which were in operation or under construction when Adelphia
Business Solutions completed its initial public offering in May 1998 and (ii)
the additional markets in operation or under development subsequent to May 1998,
as a result of Adelphia Business Solutions' geographic expansion (the "New
Markets"). Corporate overhead has been allocated primarily on the basis of the
number of markets in service or under development for each period presented.
(a) Earnings before interest, income taxes, depreciation and amortization, non-
cash stock compensation and other income/expense ("EBITDA") and similar measures
of cash flow are commonly used in the telecommunications industry to analyze and
compare telecommunications companies on the basis of operating performance,
leverage, and liquidity. While EBITDA is not an alternative indicator of
operating performance or an alternative to cash flows from operating activities
as a measure of liquidity as defined by GAAP, and while EBITDA may not be
comparable to other similarly titled measures of other companies, management of
Adelphia Business Solutions believes that EBITDA is ameaningful measure of
performance.
</FN>
</TABLE>
<PAGE>
<TABLE>
ADELPHIA BUSINESS SOLUTIONS, INC. AND SUBSIDIARIES
TABLE 3 - CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(Amounts in thousands, except per share amounts)
Three Months Ended
March 31,
--------------------------------
1999 2000
---------------- ---------------
<S> <C> <C>
Revenues $ 21,438 $ 69,301
---------------- ---------------
Operating expenses:
Network operations 8,504 33,732
Selling, general and administrative 21,009 58,047
Noncash stock compensation --- 799
Depreciation and amortization 13,535 19,438
---------------- ---------------
Total 43,048 112,016
---------------- ---------------
Operating loss (21,610) (42,715)
Other income (expense):
Interest income 1,998 404
Interest income-affiliate 2,828 5,023
Interest expense (15,533) (12,930)
---------------- ---------------
Loss before equity in net loss of joint ventures (32,317) (50,218)
Equity in net loss of joint ventures (3,803) (105)
---------------- ---------------
Net loss (36,120) (50,323)
Dividend requirements applicable to preferred stock (7,479) (8,497)
---------------- ---------------
Net loss applicable to common stockholders $ (43,599) $ (58,820)
================ ===============
Basic and diluted net loss per weighted average
share of common stock $ (0.79) $ (0.85)
================ ===============
Weighted average shares of
common stock outstanding 55,497 69,431
================ ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL DATA SCHEDULE FOR ADELPHIA BUSINESS SOLUTIONS, INC. FOR THE THREE
MONTHS ENDED MARCH 31, 2000
</LEGEND>
<CIK> 0001017648
<NAME> ADELPHIA BUSINESS SOLUTIONS, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,283
<SECURITIES> 0
<RECEIVABLES> 256,208
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,093,352
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,512,433
<CURRENT-LIABILITIES> 168,968
<BONDS> 812,767
0
269,483
<COMMON> 696
<OTHER-SE> 220,689
<TOTAL-LIABILITY-AND-EQUITY> 1,512,433
<SALES> 0
<TOTAL-REVENUES> 69,301
<CGS> 0
<TOTAL-COSTS> 112,016
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,503
<INCOME-PRETAX> (50,218)
<INCOME-TAX> 0
<INCOME-CONTINUING> (50,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (58,820)
<EPS-BASIC> (0.85)
<EPS-DILUTED> (0.85)
</TABLE>
