Exhibit 99.1
CORECOMM LIMITED
UNAUDITED PRO FORMA FINANCIAL DATA
In May 1999, we acquired MegsINet Inc. in exchange for cash and common
stock and acquired certain assets of USN Communications, Inc. in exchange for
cash and warrants to purchase common stock. In September 2000, we acquired ATX
in exchange for cash, notes, convertible preferred stock and common stock and we
acquired Voyager in exchange for cash and common stock. The unaudited pro forma
financial data presented below gives effect to the completed acquisitions of
MegsINet, USN, ATX and Voyager.
The pro forma financial data is based on our historical financial
statements and the historical financial statements of MegsINet, USN, ATX and
Voyager. We are treated as the acquiring company for purposes of these pro forma
financial data. Certain amounts in these historical financial statements have
been reclassified to conform to our presentation.
We expect to incur negative cash flow from operations at least until we
establish an adequate customer base for our services. We will require a
significant amount of cash to develop our business, fund our capital commitments
and service our indebtedness and other obligations. We expect to be able to meet
our cash requirements through December 31, 2001 with cash and securities on hand
of approximately $40.0 million as of September 30, 2000, the remaining $75.0
million commitment under our $150.0 million senior secured credit facility
provided by The Chase Manhattan Bank and the $50.0 million available under our
commitment for a senior unsecured credit facility from The Chase Manhattan Bank
and Chase Securities Inc. The $125.0 million in additional financing remains
subject to various conditions, including, but not limited to, the ongoing
satisfaction of financial covenants related to the Company's operations. In
addition, the $50.0 million senior unsecured credit facility is available only
on or after January 31, 2001. Thus, we have to manage our cash and securities on
hand to ensure they are adequate to meet our cash requirements until the amounts
committed under the two facilities become available. In general, we cannot give
any assurance that we will have sufficient resources available to meet our
expected cash requirements and obligations.
The MegsINet and USN acquisitions have been accounted for using the
purchase method of accounting, in which the assets acquired and liabilities
assumed have been recorded at their fair values. The ATX and Voyager
acquisitions have been accounted for using the purchase method of accounting, in
which the assets acquired and liabilities assumed have been recorded at their
estimated fair values. We are unaware of events other than those disclosed in
the notes to the unaudited pro forma financial data that would require a
material change to the preliminary purchase price allocation. However, a final
determination of necessary purchase accounting adjustments will be made upon the
completion of a study to be undertaken to determine the fair value of certain
assets and liabilities, including intangible assets. The actual financial
position and results of operations will differ, perhaps significantly, from the
unaudited pro forma amounts reflected in this prospectus because of a variety of
factors, including access to additional information, changes in value not
currently identified and changes in operating results between the dates of the
unaudited pro forma financial data and the dates on which the acquisitions take
place.
The unaudited pro forma condensed statements of operations for the six
months ended June 30, 2000 and the year ended December 31, 1999 give effect to
the MegsINet, USN, ATX and Voyager acquisitions as if they had been consummated
on January 1, 1999. The unaudited pro forma condensed balance sheet at June 30,
2000 give the effect to the ATX and Voyager mergers as if they had been
consummated on June 30, 2000.
ATX provided for bonuses and certain other compensation to its partners.
Upon the merger with CoreComm, the compensation of these individuals either
ceased or has been reduced to be more consistent with compensation levels of
other members of management. Approximately $4.2 million and $8.5 million of
expense in the six months ended June 30, 2000 and the year ended December 31,
1999, respectively, would not have been incurred had the merger been consummated
on January 1, 1999.
<PAGE>
The pro forma adjustments are based upon available information and
assumptions that we believe were reasonable at the time made. We believe that
any variations from the available information and assumptions applied will not
have a material effect on the pro forma financial data presented. The unaudited
pro forma condensed statements of operations do not purport to present our
results of operations had the acquisitions occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future. The unaudited pro forma condensed statements of
operations do not reflect any adjustments for synergies that we expect to
realize. We cannot assure you as to the amounts of, or that any, cost savings or
revenue enhancements will be realized.
A significant component of the revenues included in the pro forma results
is the historical revenues of USN from January 1, 1999 through the date we
acquired the wireline assets of USN. Although USN quickly developed a large
customer list and revenue base in 1997 and 1998, it had difficulties under its
previous management providing services, including billing, customer care and
other operational areas, and filed for bankruptcy in February 1999. Since the
acquisition, we have been focusing on improving these operations, and have been
successful in many areas. However, we did not actively continue to sell
additional lines in these markets because we were not fully satisfied with the
quality of the operations. Consequently, and consistent with our due diligence,
transaction structure and purchase price, revenues associated with the USN
assets have declined significantly since the acquisition, and additional
declines may continue as customers leave or "churn" off the service. However, we
anticipate that the future operating results derived from the USN assets will
improve, although we have no way of assuring this. Please refer to the section
entitled "Special Note Regarding Forward-Looking Statements."
The unaudited pro forma financial statements should be read in conjunction
with our financial statements and related notes, and with the financial
statements and related notes of USN, MegsINet, ATX and Voyager appearing
elsewhere in this prospectus.
<PAGE>
CORECOMM LIMITED
PRO FORMA CONDENSED BALANCE SHEET
(UNAUDITED)
JUNE 30, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
CORECOMM ATX VOYAGER
(HISTORICAL) (HISTORICAL) (HISTORICAL) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets:
Cash, cash equivalents
and securities..... $ 84,220 $ 3,531 $ 12,330 $ 1,197A,B,C,D,I $ 101,278
Other current
assets............. 17,794 26,414 9,567 -- 53,775
--------- ------- -------- -------- ----------
Total current assets.... 102,014 29,945 21,897 1,197 155,053
Fixed assets, net....... 109,739 13,311 25,525 24,914A 173,489
Local multipoint
distribution service
license costs......... 25,366 -- -- -- 25,366
Intangibles and other
assets, net........... 75,796 900 56,665 648,286A,C 781,647
Affiliate receivable,
net................... -- -- -- 12,210H 12,210
--------- ------- -------- -------- ----------
Total assets............ $ 312,915 $44,156 $104,087 $686,607 $1,147,765
========= ======= ======== ======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Current liabilities:
Other current
liabilities........ $ 61,563 $36,444 $ 15,974 $ -- $ 113,981
Current portion of
debt and capital
leases............. 17,726 -- 3,158 2,740A 23,624
Due to affiliates..... -- 1,445 -- -- 1,445
--------- ------- -------- -------- ----------
Total current
liabilities........... 79,289 37,889 19,132 2,740 139,050
Debt and capital
leases................ 185,255 -- 25,866 157,179A,C,I 368,300
Deferred income taxes... -- -- -- 8,720A 8,720
Shareholders' equity:
Preferred stock,
common stock and
additional paid-in
capital............ 319,315 -- -- 593,898A,B,D 913,213
Deferred non-cash
compensation....... (28,104) -- -- -- (28,104)
Acquired company
equity............. -- 6,267 59,089 (65,356) --
Deficit............... (242,840) -- -- -- (242,840)
--------- ------- -------- -------- ----------
48,371 6,267 59,089 528,542 642,269
Treasury stock at
cost.................. -- -- -- (10,574)B (10,574)
--------- ------- -------- -------- ----------
48,371 6,267 59,089 517,968 631,695
--------- ------- -------- -------- ----------
Total liabilities and
shareholders'
equity................ $ 312,915 $44,156 $104,087 $686,607 $1,147,765
========= ======= ======== ======== ==========
</TABLE>
<PAGE>
CORECOMM LIMITED
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORECOMM ATX VOYAGER
(HISTORICAL) (HISTORICAL) (PRO FORMA) ADJUSTMENTS PRO FORMA
------------ ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES....................... $ 38,356 $76,566 $ 37,060 $ -- $ 151,982
COSTS AND EXPENSES
Operating...................... 51,700 51,338 14,751 -- 117,789
Selling, general and
administrative............... 48,921 30,730 16,336 (4,235)J 91,752
Corporate...................... 5,196 -- -- -- 5,196
Nonrecurring charges........... 1,018 -- -- -- 1,018
Non-cash compensation.......... 32,186 -- 50 -- 32,236
Depreciation and
amortization................. 18,440 1,445 18,575 57,256E 95,716
--------- ------- -------- -------- ---------
157,461 83,513 49,712 53,021 343,707
--------- ------- -------- -------- ---------
Operating (loss)............... (119,105) (6,947) (12,652) (53,021) (191,725)
OTHER INCOME/EXPENSE
Interest and other income...... 3,850 51 (1,248) -- 2,653
Interest expense............... (7,534) -- -- (6,889)F (14,423)
--------- ------- -------- -------- ---------
(Loss) before income taxes..... (122,789) (6,896) (13,900) (59,910) (203,495)
Income tax provision........... (272) -- -- -- (272)
--------- ------- -------- -------- ---------
Net (loss)..................... (123,061) (6,896) (13,900) (59,910) (203,767)
Preferred stock dividends...... -- -- -- (8,788)G (8,788)
--------- ------- -------- -------- ---------
Net (loss) available to common
shareholders................. $(123,061) $(6,896) $(13,900) $(68,698) $(212,555)
========= ======= ======== ======== =========
Net (loss) per common stock --
basic and fully diluted...... $ (3.12) $ (2.98)
========= =========
Weighted average shares
outstanding.................. 39,501 31,829A 71,330
========= ======== =========
</TABLE>
<PAGE>
CORECOMM LIMITED
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS)
FOR THE SIX MONTHS ENDED AND AS OF JUNE 30, 2000
A. PURCHASE PRICE AND ALLOCATION OF PURCHASE PRICE:
<TABLE>
<CAPTION>
ATX VOYAGER TOTAL
-------- -------- --------
<S> <C> <C> <C>
Shares of CoreComm common stock issued................. 12,398 19,431 31,829
CoreComm common stock price............................ $14.4125 $ 7.9583
-------- -------- --------
178,686 154,638 333,324
Series B Preferred stock............................... 200,000 -- 200,000
Senior Unsecured Notes................................. 108,669 -- 108,669
Estimated merger related costs......................... 11,014 8,501 19,515
Cash consideration..................................... 39,360 36,130 75,490
-------- -------- --------
Purchase price......................................... 537,729 199,269 736,998
Net assets at June 30, 2000, after reclassification of
Voyager related party receivables (see Adjustment
H)................................................... 6,267 71,299 77,566
Less: Intangible assets................................ (638) (56,665) (57,303)
-------- -------- --------
5,629 14,634 20,263
-------- -------- --------
Excess of purchase price over net assets acquired...... $532,100 $184,635 $716,735
======== ======== ========
Preliminary allocation to:
Fixed assets........................................... $ 14,542 $ 10,372 $ 24,914
Deferred tax liability................................. (5,090) (3,630) (8,720)
Intangible assets...................................... 522,648 177,893 700,541
-------- -------- --------
$532,100 $184,635 $716,735
======== ======== ========
</TABLE>
The intangible assets arising from the ATX merger and the Voyager merger
may include customer lists, other intangibles and goodwill. The amount of each
individual intangible is not currently determinable. The amounts of each
intangible will be determined based on appraisals and other analyses. The
amortization period for each may vary, although it is assumed in Pro Forma
Adjustment E below, that 5 years is a representative blended amortization
period.
B. PHANTOM UNIT PAYMENT
We agreed to satisfy a former ATX shareholder's liability for payouts under
the ATX Phantom Unit plan. The shareholder contributed shares of CoreComm common
stock and in exchange we issued stock and options to the Phantom Unit holders.
<PAGE>
CORECOMM LIMITED
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL DATA -- (CONTINUED)
(IN THOUSANDS)
Shares issued to an ATX shareholder and returned for Phantom
Unit obligation (1,684,779 shares) recorded as treasury
stock..................................................... $13,408
Shares to be issued for Phantom Unit obligation (356,097
shares) from treasury stock............................... (2,834)
-------
Net treasury stock.......................................... 10,574
Options issued for Phantom Unit obligation (options for
1,663,464 shares)......................................... (10,574)
-------
Net purchase price effect................................... $ 0
=======
Cash paid to an ATX shareholder and returned for Phantom
Unit obligation........................................... $ 1,732
Cash to be paid for Phantom Unit obligation................. (1,732)
-------
Net cash effect............................................. $ 0
=======
C. BANK FINANCING
Term Loan................................................... $ 50,000
Revolving Loan.............................................. 25,000
--------
75,000
Less: Financing Costs....................................... (5,048)
--------
Net cash received........................................... $ 69,952
========
D. ISSUANCE OF PREFERRED STOCK
Cash received for issuance of Series A preferred stock...... $ 50,000
========
E. DEPRECIATION AND AMORTIZATION
Depreciation of fixed asset allocation (over 5 years)....... $ 2,491
Amortization of intangibles (over 5 years).................. 70,054
Historical amortization of intangibles...................... (15,289)
--------
$ 57,256
========
F. INTEREST EXPENSE
Interest on bank financing.................................. $ 4,140
Amortization of fees on borrowings recorded as deferred
financing costs (8 year term)............................. 316
Interest on the senior unsecured notes at 6.47%............. 3,515
Historical interest expense on Voyager debt (1)............. (1,082)
--------
$ 6,889
========
G. PREFERRED STOCK DIVIDENDS
Dividends on the Series B preferred stock................... $ 6,663
Dividends at 8.5% on the Series A preferred stock........... 2,125
--------
$ 8,788
========
H. RELATED PARTY TRANSACTIONS
Reclassification of related party receivables and payable... $ 12,210
========
<PAGE>
CORECOMM LIMITED
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL DATA -- (CONTINUED)
(IN THOUSANDS)
I. LONG-TERM DEBT
Payment of Voyager debt (1)................................. $ 23,750
========
J. HISTORICAL PARTNER BONUSES
ATX provided for bonuses and certain other compensation to
its partners. Upon the merger with CoreComm, the
compensation to these individuals ceased or has been
reduced to be more consistent with compensation levels of
other members of management............................... $ (4,235)
========
---------------
(1) This facility was repaid at the closing of the Voyager merger.
<PAGE>
CORECOMM LIMITED
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORECOMM MEGSINET USN ATX VOYAGER
(HISTORICAL) (HISTORICAL) (HISTORICAL) (HISTORICAL) (PRO FORMA) ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------ ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES.................. $ 58,151 $ 2,785 $ 36,919 $135,021 $ 64,997 $ 297,873
COSTS AND EXPENSES
Operating................. 58,561 3,740 33,784 85,477 22,570 204,132
Selling, general and
administrative.......... 74,185 3,489 23,330 49,393 27,475 $ (8,459)F 169,413
Corporate................. 7,996 -- -- -- -- -- 7,996
Non-cash compensation..... 1,056 -- -- -- -- -- 1,056
Depreciation and
amortization............ 19,578 1,679 4,883 1,820 36,873 128,586A,C 193,419
--------- ------- -------- -------- -------- --------- ---------
161,376 8,908 61,997 136,690 86,918 120,127 576,016
--------- ------- -------- -------- -------- --------- ---------
Operating (loss).......... (103,225) (6,123) (25,078) (1,669) (21,921) (120,127) (278,143)
OTHER INCOME/EXPENSE
Interest and other
income.................. 5,773 27 (646) 119 914 -- 6,187
Interest expense.......... (5,341) (814) (5,405) (47) (5,478) (8,211)B,D (25,296)
--------- ------- -------- -------- -------- --------- ---------
(Loss) before income
taxes................... (102,793) (6,910) (31,129) (1,597) (26,485) (128,338) (297,252)
Income tax provision...... (731) -- -- -- -- -- (731)
--------- ------- -------- -------- -------- --------- ---------
Net (loss)................ (103,524) (6,910) (31,129) (1,597) (26,485) (128,338) (297,983)
Preferred stock
dividends............... -- -- -- -- -- (17,575)E (17,575)
--------- ------- -------- -------- -------- --------- ---------
Net (loss) available to
common shareholders..... $(103,524) $(6,910) $(31,129) $ (1,597) $(26,485) $(145,913) $(315,558)
========= ======= ======== ======== ======== ========= =========
Net (loss) per common
stock -- basic and fully
diluted................. $ (3.03) $ (4.78)
========= =========
Weighted average shares
outstanding............. 34,189 31,829 66,018
========= ========= =========
</TABLE>
<PAGE>
CORECOMM LIMITED
NOTES TO THE UNAUDITED PRO FORMA FINANCIAL DATA
(IN THOUSANDS)
PRO FORMA ADJUSTMENTS FOR THE USN AND MEGSINET ACQUISITIONS -- FOR THE YEAR
ENDED DECEMBER 31, 1999
A. DEPRECIATION AND AMORTIZATION
Amortization of intangibles................................. $ 5,053
To adjust USN depreciation for fixed assets not acquired and
for the write down of the fixed assets acquired to fair
value..................................................... (2,753)
--------
$ 2,300
========
B. DEBT NOT ASSUMED
To eliminate USN interest expense from debt not assumed..... $ 5,405
========
PRO FORMA ADJUSTMENTS FOR THE ATX AND VOYAGER MERGERS -- FOR THE YEAR ENDED
DECEMBER 31, 1999
The intangible assets arising from the ATX merger and the Voyager merger
may include customer lists, other intangibles and goodwill. The amount of each
individual intangible is not currently determinable. The amounts of each
intangible will be determined based on appraisals and other analyses. The
amortization period for each may vary, although it is assumed in Pro Forma
Adjustment C below, that 5 years is a representative blended amortization
period.
C. DEPRECIATION AND AMORTIZATION
Depreciation of fixed asset allocation (over 5 years)....... $ 4,983
Amortization of intangibles (over 5 years).................. 140,108
Historical amortization of intangibles...................... (18,805)
--------
$126,286
========
D. INTEREST EXPENSE
Interest on bank financing.................................. $ 8,280
Amortization of fees on borrowings recorded as deferred
financing costs (8 year term)............................. 631
Interest on the senior unsecured notes at 6.47%............. 7,030
Historical interest expense on Voyager debt (1)............. (2,325)
--------
$ 13,616
========
E. PREFERRED STOCK DIVIDENDS
Dividends on the Series B preferred stock................... $ 13,325
Dividends at 8.5% on the Series A preferred stock........... 4,250
--------
$ 17,575
========
F. HISTORICAL PARTNER BONUSES
ATX provided for bonuses and certain other compensation to
its partners. Upon the merger with CoreComm, the
compensation to these individuals ceased or has been
reduced to be more consistent with compensation levels of
other members of management............................... $ (8,459)
---------------
(1) This facility was repaid at the closing of the Voyager merger.
