<PAGE>
NEWS RELEASE
FOR IMMEDIATE RELEASE
November 10, 2000
Media Contact: Investor Relations Contact:
Arthur Parks Nancy McCullough
(816) 300-3541 (816) 300-3797
BIRCH TELECOM REPORTS OPERATING RESULTS
FOR 3RD QUARTER 2000
KANSAS CITY, MO - Birch Telecom, Inc. today reported unaudited results for the
quarter ended September 30, 2000, including a 90% increase in quarterly revenue
over the past 12 months, an improvement in gross margin from 22% in the third
quarter 1999 to 33% in the third quarter 2000, and measures to accelerate
earnings improvements in a difficult financial market.
Revenue for the third quarter increased to $32.4 million from $27.7 million for
the second quarter 2000, and from $17.0 million for the third quarter 1999. For
the third quarter, EBITDA was a $30.8 million loss, up from a $22.9 million loss
for the second quarter of this year and up from a third quarter 1999 loss of
$10.9 million.
During the third quarter, Birch surpassed the 200,000-line milestone, more than
doubling its number of access lines in less than one year. Access lines
increased 140% to 214,218 at September 30, 2000 from 89,108 at September 30,
1999 and an 18% increase from 181,991 lines at June 30, 2000.
Despite a tightening capital market, the company was recently able to expand its
senior credit facility by $70 million to a total commitment of $195 million.
"Obviously, we're pleased that during a difficult financial market, we were able
to raise money to underwrite Birch's continued rapid growth," said David E.
Scott, Birch president and chief executive officer. "This was possible because
of our consistent performance, strong gains in market share, and dramatic
improvements in gross margins. However, we have responded to the market
conditions by modifying our plan to contain our costs of doing business and
therefore expedite earnings improvement."
In a major move to contain costs and improve earnings performance, Birch will
reduce its workforce by approximately 7%. "The layoff of 138 employees was a
difficult and painful decision, especially because they have made valued
contributions to our development." Scott said. "After implementing other
cost-saving initiatives, regrettably this staff reduction was required to align
our costs with the company's earnings objectives." Scott said the layoffs,
primarily affecting employees in Kansas City, Missouri and Emporia, Kansas, will
include severance packages containing outplacement assistance, extension of some
benefits and a broadened rehire policy. Impacted employees were notified by the
company's management this afternoon. After this reduction in jobs, Birch will
employ a total of 1,736, up from 935 at the beginning of the year.
<PAGE>
(More)
BIRCH THIRD QUARTER RESULTS - 2
ABOUT BIRCH
Birch Telecom Inc. offers state-of-the-art telecommunications services for small
and mid-sized businesses that are currently located throughout Kansas, Missouri,
Oklahoma and Texas. These simplified packages for voice and high-speed data
services, including local and long distance telephone service, Internet access,
web hosting, integrated voice and data transmission over broadband lines and the
sale and service of customer premise equipment. Conveniently billed on a single
invoice, these services are offered through a combination of leased and owned
network facilities. Birch currently deploys collocations and transmission
equipment to deliver DSL service supporting dedicated high-speed Internet access
and eventually voice services. The company's web site is available at
WWW.BIRCH.COM.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this release constitute forward-looking
statements. These statements discuss, among other things, expected growth and
expenditures, expansion strategy, debt refinancing and equity offerings. The
forward-looking statements are subject to risks, uncertainties and assumptions,
and actual results may differ materially from anticipated results described in
these forward-looking statements. The factors that could cause actual results to
differ materially include, but are not limited to, revision of expansion plans,
availability of financing, changes in laws and regulations, the number of
potential customers in a target market, the existence of strategic alliances or
relationships, technological or other developments in our business, changes in
the competitive climate in which we operate, overall economic trends including
interest rate and foreign currency trends, stock market activity, litigation,
the emergence of future opportunities and other factors more fully described
under the caption "Risk Factors" in our Annual Report on Form 10-K for the
fiscal year ended December 31, 1999, filed with the SEC on March 30, 2000. We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
Readers should review and consider the various disclosures made by the Company
in its public reports.
CONFERENCE CALL INFORMATION
Birch will host a conference call to discuss these results at 1:00 p.m. ET on
Monday, November 13, 2000. A live audio webcast in association with the
conference call may be viewed via the Internet. In addition, replay of the
webcast will be available through November 16, 2000. No password is necessary to
access the webcast. Simply click on the webcast button on the Investor
Relations' section of the company's web site at HTTP://WWW.BIRCH.COM.
SEE PAGE THREE FOR SELECTED OPERATIONAL RESULTS AND STATISTICS
<PAGE>
(More)
SELECTED OPERATIONAL RESULTS AND STATISTICS
(In thousands, except per share and operating data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-----------------------------------------------------------
2000 1999 2000 1999
-----------------------------------------------------------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Communication services $30,110 $ 14,564 $ 76,880 $ 35,461
Equipment sales 2,261 2,458 6,989 6,172
-----------------------------------------------------------
Total revenue 32,371 17,022 83,869 41,633
Cost of services:
Cost of communication services 20,097 11,905 54,746 28,077
Cost of equipment sales 1,470 1,364 4,543 3,518
-----------------------------------------------------------
Total cost of services 21,567 13,269 59,289 31,595
------------- -------------- ---------------- --------------
Gross margin 10,804 3,753 24,580 10,038
Selling, general and administrative expenses 41,576 14,649 92,941 34,013
Depreciation and amortization expense 6,703 2,814 16,586 6,388
-----------------------------------------------------------
Loss from operations (37,475) (13,710) (84,947) (30,363)
Interest expense (5,463) (3,705) (15,439) (11,189)
Interest income 405 725 1,682 2,287
-----------------------------------------------------------
Net loss (42,533) (16,690) (98,704) (39,265)
Preferred stock dividends (4,125) (491) (10,000) (1,477)
Amortization of preferred stock issuance costs (269) (61) (712) (77)
-----------------------------------------------------------
Loss applicable to common stock $(46,927) $ (17,242) $(109,416) $(40,819)
============================================================
Loss per share - basic and diluted $(5.49) $ (1.91) $ (13.17) $ (4.51)
Weighted average number of common shares
outstanding 8,548 9,012 8,307 9,058
OPERATING DATA:
Local customers at end of period 59,899 39,518
Access lines at end of period 214,218 89,108
Average lines per business customer 4.8 5.6
Average lines per residential customer 1.2 1.4
Employees at end of period 1,891 817
September 30, December 31,
2000 1999
------------------------------
BALANCE SHEET AND OTHER DATA:
Cash and cash equivalents $ 17,174 $ 5,673
Pledged securities 15,809 23,410
Property and equipment 139,322 70,192
Total assets 222,896 146,971
Long-term debt and capital lease 232,116 125,785
obligations
Redeemable preferred stock 123,550 63,550
Total stockholders' deficit (173,635) (67,757)
Purchases of property and equipment 69,711 43,459
</TABLE>
